The Myanmar Times
Saturday, 01 November 2014
The Myanmar Times
The Myanmar Times

Foreign banks get gradual access to market

Though foreign banks are hoping to enter the banking market in Myanmar as quickly as possible, more regulation and infrastructure – and a number of intermediary arrangements – are needed before that can happen, officials told an international banking and finance conference in Yangon on July 16.

Daw Naw Eh Hpaw, deputy director general of the Central Bank of Myanmar, said the central bank’s recently adopted strategy for developing the banking sector will be incremental. Foreign banks will eventually be allowed to open branches here, but this will be a gradual process. The first step will be to allow domestic banks to operate joint ventures with foreign banks, after which foreign banks will be allowed to establish locally incorporated, 100-percent-owned subsidiaries, she said. After that, foreign banks will be allowed to open local bank branches without local partners, she added.

“At present, foreign banks are not yet allowed to operate in Myanmar, and when they are allowed in initially they will only be able to operate joint ventures with local banks,” Daw Naw Eh Hpaw said.

The central bank, however, encourages foreign assistance for the newly privatised banking industry. “We invite foreign investment, particularly in the areas of infrastructure and the technology sector,” Daw Naw Eh Hpaw said.

A spokesperson for the central bank said it hopes regulations allowing joint ventures will be finalised within two months and that several domestic banks have already forged links with foreign partners.

“Even though some foreign banks do not want [to be limited to] joint ventures, we have to make the changes step by step because this is the most appropriate way for the country,” the spokesperson said.

New regulations will set the ratio of investment between foreign and domestic banks in joint ventures, he added.

The conference was attended by executives from 25 representative offices of banks from Southeast Asia, Japan, South Korea and India. Most are eager to sidestep the joint-venture process and invest directly.

David Proctor, chairman of the financial-services consultancy Consilium, said domestic bankers need more training in international banking processes, better infrastructure, more capital and more foreign direct investment. Myanmar should follow the example of the other ASEAN members that restricted foreign bank entry until local banks could compete, he said.

Daw Khine Khine Nwe, a member of the Myanmar Investment Commission, said the country has made great progress by implementing a floating exchange rate and preparing for the opening of a stock exchange.

The development of the banking and finance sector is crucial for continued economic development and it is necessary to sustain the momentum already achieved in economic reforms, she added.

U Maung Maung Thein, deputy minister of finance, said the biggest challenge for the banking and finance sector is to establish the capital market, though a draft of a new securities exchange law is before parliament and is expected to be enacted this month.

“We now face some issues in the banking sector,” he said. “The first is to modernise and strengthen the local banks. Another concerns regulatory issues … the last issue is the entry of foreign banks into the domestic market.”

Toshiyuki Mori, chief representative of Sumitomo Mitsui Banking Corporation, summed up the interest of foreign investors. “Many Japanese customers want to be involved more and more [in Myanmar] because of the Thilawa industrial zone and other projects,” he said.