Thursday, 3 April 2014

Joint venture deals no easy task in Myanmar, say experts

The process of collecting monthly accounting data, creating clear business units and traceable asset ownership are lengthy and complex – and a must for joint venture deals with international partnerships, experts said at a KPMG business forum on March 25.

The forum, titled “Creating Positive Business Partnerships”, focused on how local Myanmar companies can look at restructuring accounts, company business units and operating systems to pave the way for joint ventures with international investors.

U Win Aung, chair of the UMFCCI, said in his opening remarks that Myanmar was entering a “new era of economic development” and that the rapid progress in the country is “new Myanmar blooming into its full potential”.

“But,” U Win Aung said, “there is a recognition that Myanmar can become more competitive through international joint ventures with locally-based companies.”

Bangkok-based KPMG executive director Ian Thornhill addressed the forum on common international investor concerns they had managed in Myanmar joint ventures.

These concerns pertained to accounting practices, asset management and legal obligations.

One of the challenges was the desire of international investors to review monthly accounting reports of a potential local joint venture partner, Mr Thornhill said.

“Statutory requirements are to submit an audited balance sheet of profit and loss every year, but even if those sets of accounts are 100-percent accurate and perfect, what happens if the joint venture partner wants to do a deal in November or December. That information is already six months out of date,” he said.

“The international investor likes to see monthly data so they can see trends and seasonality within the business,” he said, adding the water festival was a good example of seasonal impacts on a business’s profitability.

U Kyaw Soe Han, director at Shwe Taung Group and a member panellist of the forum, said that while the prospect of restructuring accounting practices and opening a company’s books to the inspection of potential foreign investors, the undertaking had long-term benefits for Myanmar companies.

“By opening our bookes it means that we are very much open for the verification and clarification,” U Kyaw So Han said. “Pretty much if we are going for a joint venture and looking to go on the stock market, we have to be transparent.”

Mr Thornhill agreed with this approach and stressed the benefits of preparing in advance for possible by joint venture deals by “zeroing out uncertainties and restructuring accounting practices” along international standards.

source: The Myanmar Times
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