Myanmar to open banking sector
Myanmar, the secluded state in Southeast Asia, is showing first signs of easing its tight regulations for foreign investors in a bid to catch up to the world economy before the establishment of the ASEAN Economic Community by 2015.
According to a senior Myanmar bank official, the country is planning a new policy of allowing international banks to operate in Myanmar by 2015. The country’s Central Bank will amend laws and regulations on banking, insurance, and foreign exchange operations in a few months, the official said.
U Than Lwin, deputy chairman of KBZ Bank, one of the biggest semi-private banks in Myanmar, and a former deputy governor of the Central Bank of Myanmar, told the audience at an investment seminar held in Bangkok on Friday, March 23, that the Myanmar government is also planning a new investment law which includes incentives and tax holidays for investors modelled on the investment promotions of other Southeast Asian countries, namely Thailand and Malaysia.
KZB Bank of Myanmar is one of the few banks that have been granted a license for operating internationally and will utilise the new law to expand its branch network in the region, U Than Lwin said. This includes installing Swift systems to commence communication and enable electronic transfer with international banks, mainly in the ASEAN region and in Japan, which was not in use before. Also, other Myanmar banks will be allowed to start such international operations.
Myanmar’s banking system is, however, still quite underdeveloped. Private deposits are not very popular, and commercial banking in the Western sense does not exits as the economy has been state-controlled over the last decades. Furthermore, Myanmar until recently used a dual-exchange rate system similar to Cuba where the official rate of $1 was artificially set at 6.40 kyat, which was 125 times stronger than the street rate.
Effective April 2012, Myanmar has dismantled the fixed rate and introduced a floating exchange rate to allow the country to reconnect to global commerce. The instalment of the new rate was done in cooperation with the International Monetary Fund.
The single currency system is a prerequisite for foreign investors to undertake economically viable ventures in the country. Accordingly, the Myanmar Central Bank will also reduce interbank lending rates, currently as high as 13 per cent, to bring them more in line with other countries in Southeast Asia, said U Than Lwin.
He added that to cover liquidity needs for investors, Myanmar will likely let offshore banks operate in the country.
Myanmar’s steps to open itself for investors is widely seen as a move by the military rulers to end the decade-old economic isolation of the country, which has made it the poorest country in Southeast Asia due to an economic scheme called “Burmese Way of Socialism”, a mixture of Buddhist, Humanist, and Marxist ideas that include the complete nationalisation of the country’s businesses and a state-led economy based on price controls.
U Than Lwin said that “there is really a will from the government for change.”
Thailand’s banks have already signalled interest to venture into Myanmar, the Bangkok Post reported on Sunday, March 25. According to the report, Kasikornbank and Siam Commercial Bank said they would want to open representative offices in Myanmar but will, however, wait for the upcoming national elections and conduct feasibility studies on rules, regulations, and business culture.
Hotel plots on auction
In a different step, Myanmar will also open its tourism industry by offering foreign investors to bid for land plots in Yangon for hotel developments. The plots can be purchased by joint venture vehicles with local companies. Foreign shareholding in such joint ventures can be up to 99 per cent.
Myanmar is in dire need especially for four to five star hotels to push its tourism industry. No new hotel rooms have been added in Yangon since 1998.
Apart from hotels, there will also be land auctions to develop industrial estates and office buildings, according to Myanmar-based Universal Link Service, a business consultant.
Myanmar will be the site of the Southeast Asia Games 2013 and the Asean Summit 2014, creating even more demand for hotels and touristic infrastructure.
[caption id="attachment_2654" align="alignleft" width="199"] A KZB branch in Yangon, Myanmar[/caption] Myanmar, the secluded state in Southeast Asia, is showing first signs of easing its tight regulations for foreign investors in a bid to catch up to the world economy before the establishment of the ASEAN Economic Community by 2015. According to a senior Myanmar bank official, the country is planning a new policy of allowing international banks to operate in Myanmar by 2015. The country's Central Bank will amend laws and regulations on banking, insurance, and foreign exchange operations in a few months, the official said. U Than Lwin, deputy...
Myanmar, the secluded state in Southeast Asia, is showing first signs of easing its tight regulations for foreign investors in a bid to catch up to the world economy before the establishment of the ASEAN Economic Community by 2015.
According to a senior Myanmar bank official, the country is planning a new policy of allowing international banks to operate in Myanmar by 2015. The country’s Central Bank will amend laws and regulations on banking, insurance, and foreign exchange operations in a few months, the official said.
U Than Lwin, deputy chairman of KBZ Bank, one of the biggest semi-private banks in Myanmar, and a former deputy governor of the Central Bank of Myanmar, told the audience at an investment seminar held in Bangkok on Friday, March 23, that the Myanmar government is also planning a new investment law which includes incentives and tax holidays for investors modelled on the investment promotions of other Southeast Asian countries, namely Thailand and Malaysia.
KZB Bank of Myanmar is one of the few banks that have been granted a license for operating internationally and will utilise the new law to expand its branch network in the region, U Than Lwin said. This includes installing Swift systems to commence communication and enable electronic transfer with international banks, mainly in the ASEAN region and in Japan, which was not in use before. Also, other Myanmar banks will be allowed to start such international operations.
Myanmar’s banking system is, however, still quite underdeveloped. Private deposits are not very popular, and commercial banking in the Western sense does not exits as the economy has been state-controlled over the last decades. Furthermore, Myanmar until recently used a dual-exchange rate system similar to Cuba where the official rate of $1 was artificially set at 6.40 kyat, which was 125 times stronger than the street rate.
Effective April 2012, Myanmar has dismantled the fixed rate and introduced a floating exchange rate to allow the country to reconnect to global commerce. The instalment of the new rate was done in cooperation with the International Monetary Fund.
The single currency system is a prerequisite for foreign investors to undertake economically viable ventures in the country. Accordingly, the Myanmar Central Bank will also reduce interbank lending rates, currently as high as 13 per cent, to bring them more in line with other countries in Southeast Asia, said U Than Lwin.
He added that to cover liquidity needs for investors, Myanmar will likely let offshore banks operate in the country.
Myanmar’s steps to open itself for investors is widely seen as a move by the military rulers to end the decade-old economic isolation of the country, which has made it the poorest country in Southeast Asia due to an economic scheme called “Burmese Way of Socialism”, a mixture of Buddhist, Humanist, and Marxist ideas that include the complete nationalisation of the country’s businesses and a state-led economy based on price controls.
U Than Lwin said that “there is really a will from the government for change.”
Thailand’s banks have already signalled interest to venture into Myanmar, the Bangkok Post reported on Sunday, March 25. According to the report, Kasikornbank and Siam Commercial Bank said they would want to open representative offices in Myanmar but will, however, wait for the upcoming national elections and conduct feasibility studies on rules, regulations, and business culture.
Hotel plots on auction
In a different step, Myanmar will also open its tourism industry by offering foreign investors to bid for land plots in Yangon for hotel developments. The plots can be purchased by joint venture vehicles with local companies. Foreign shareholding in such joint ventures can be up to 99 per cent.
Myanmar is in dire need especially for four to five star hotels to push its tourism industry. No new hotel rooms have been added in Yangon since 1998.
Apart from hotels, there will also be land auctions to develop industrial estates and office buildings, according to Myanmar-based Universal Link Service, a business consultant.
Myanmar will be the site of the Southeast Asia Games 2013 and the Asean Summit 2014, creating even more demand for hotels and touristic infrastructure.
