News / Economy

Myanmar Prepares for Return of Foreign Banks

FILE - Employees work at the Central Bank's headquarters in Naypyitaw, Myanmar.
FILE - Employees work at the Central Bank's headquarters in Naypyitaw, Myanmar.
Ron Corben

After more than five decades, foreign banks are set to fully return to Myanmar later this year as part of the government’s policy reforms aimed at developing the economy and infrastructure.

The foreign banks will also provide a key source of funding in a country hungry for capital for development.

Foreign banks that were present in Myanmar, also known as Burma, in 1963 were nationalized after the military took power.

Years of isolation from the international community as well as economic and trade sanctions undermined development of the banking sector.

Since Myanmar's political opening in 2011, about 40 international banks have opened representative offices, offering limited advisory services.

Beginning in September

Central Bank of Myanmar Deputy Governor Set Aung said up to 10 foreign banks will be granted licenses and will be open for limited banking services beginning in September. 

By July 6, a licensing panel, including the Ministry of Finance, Central Bank, Attorney General's Office, representatives from the International Monetary Fund (IMF), and a German consulting team, will complete a review of applications.

The World Bank recommends the new banks have a paid up capital base of $75 million.

Sean Turnell, a professor of economics at Macquarie University in Australia, said, given the lack of development in Myanmar’s banking sector, foreign banks could play a key role in providing much needed capital and access to international trading links.

"What does Myanmar need? What it needs desperately is capital -- it's got none.

"Essentially the banking system that's there at the moment is smaller than one medium-sized bank in the U.S. [So] you need capital. Where are you going to get it? Well you are going to get it from foreign banks - the local banks firstly at the moment are not big enough," Turnell said.

Burma's banking sector remains vastly underdeveloped.

A United Nations report found just 4 percent of the country’s estimated 61 million people have a banking or savings account.

Many rely on "informal banking," including borrowing from so-called loan sharks, with exorbitant interest payments.

Faces challenges

Myanmar is one of the poorest nations in Asia with about 43 percent of people living on less than $2 a day and about 80 percent getting by on $5 a day.

Banking sector development is vital to support the economic reforms but faces challenges due to the lack of progress in recent decades, said Kobsak Pootrakool, an executive vice president at Thailand's Bangkok Bank.

"In the banking sector the main challenges for Myanmar is how to develop their own banking system so they can support the development of its own small medium enterprises (SMEs) and its own local corporate so that later on it will compete with these multinational corporations that are coming into the country," Kobsak said.

Local banks and their supporters tried to derail the reform legislation for fear of competition from the foreign banks. But President Thein Sein resisted the calls, insisting the reforms go ahead.

Macquarie University's Turnell said the local banks are concerned about competing against well-funded international banks, which could also poach their local staff. 

But Turnell said the fears are overplayed.

"The local banks talked themselves into a panic about foreign banks. Most foreign bank lending is going to be to the foreign multinationals anyway," Turnell said. "A lack of a functioning financial sector is being really high on their list of why they don't go ahead and invest. So foreign banks in a sense deliver that. But in doing that they deliver something that the local banks don't do anyway. "

The foreign banks will still face restrictions.

The banks are limited to just one branch offering limited services including loans to foreign corporations. To lend to local companies will require cooperation with local banks.

You May Like

How to Safeguard Your Mobile Privacy

As the digital world becomes more mobile, so too do concerns about eroding privacy and increased hacking More

'Desert Dancer' Chronicles Iranian Underground Dance Troupe

Film by Richard Raymond is based on true story of Afshin Ghaffarian and his friends More

Obesity Poses Complex Problem

Professor warns of obesity’s worldwide health impact More

This forum has been closed.
Comments
     
There are no comments in this forum. Be first and add one

Featured Videos

Your JavaScript is turned off or you have an old version of Adobe's Flash Player. Get the latest Flash player.
Rolling Thunder Run Reveals Changed Attitudes Towards Vietnam Wari
X
Katherine Gypson
May 25, 2015 1:32 AM
For many US war veterans, the Memorial Day holiday is an opportunity to look back at a divisive conflict in the nation’s history and to remember those who did not make it home.
Video

Video Rolling Thunder Run Reveals Changed Attitudes Towards Vietnam War

For many US war veterans, the Memorial Day holiday is an opportunity to look back at a divisive conflict in the nation’s history and to remember those who did not make it home.
Video

Video Female American Soldiers: Healing Through Filmmaking

According to the United States Defense Department, there are more than 200-thousand women serving in the U.S. Armed Forces.  Like their male counterparts, females have experiences that can be very traumatic.  VOA's Bernard Shusman tells us about a program that is helping some American women in the military heal through filmmaking.
Video

Video Iowa Family's Sacrifice Shaped US Military Service for Generations

Few places in America have experienced war like Waterloo. This small town in the Midwest state of Iowa became famous during World War II not for what it accomplished, but what it lost. As VOA’s Kane Farabaugh reports, the legacy of one family’s sacrifice is still a reminder today of the real cost of war for all families on the homefront.
Video

Video On Film: How Dance Defies Iran's Political Oppression

'Desert Dancer' by filmmaker Richard Raymond is based on the true story of a group of young Iranians, who form an underground dance troupe in the Islamic Republic of Iran. This is the latest in a genre of films that focus on dance as a form of freedom of expression against political oppression and social injustice. VOA’s Penelope Poulou has more.
Video

Video Turkey's Ruling Party Trying to Lure Voters in Opposition Stronghold

Turkey’s AK (Justice and Development) Party is seeking a fourth successive general election victory, with the goal of securing two-thirds of the seats in Parliament to rewrite the constitution and change the country's parliamentary system into a presidential one. To achieve that, the party will need to win seats in opposition strongholds like the western city of Izmir. Dorian Jones reports.
Video

Video Millions Flock to Ethiopia Polls

Millions of Ethiopians cast their votes Sunday in the first national election since the 2012 death of longtime leader Meles Zenawi. Mr. Meles' party, the Ethiopian People's Revolutionary Democratic Front, is almost certain of victory again. VOA's Anita Powell reports from Addis Ababa.
Video

Video Scientists Testing Space Propulsion by Light

Can the sun - the heart of our solar system - power a spacecraft to the edge of our solar system? The answer may come from a just-launched small satellite designed to test the efficiency of solar sail propulsion. Once deployed, its large sail will catch the so-called solar wind and slowly reach what scientists hope to be substantial speed. VOA’s George Putic reports.
Video

Video FIFA Trains Somali Referees

As stability returns to the once lawless nation of Somalia, the world football governing body, FIFA, is helping to rebuild the country’s sport sector by training referees as well as its young footballers. Abdulaziz Billow has more from Mogadishu.
Video

Video With US Child Obesity Rates on the Rise, Program Promotes Health Eating

In its fifth year, FoodCorps puts more than 180 young Americans into 500 schools across the United States, where they focus on teaching students about nutrition, engaging them with hands-on activities, and improving their access to healthy foods whether in the cafeteria or the greater community. Aru Pande has more.
Video

Video Virginia Neighborhood Draws People to Nostalgic Main Street

In the U.S., people used to grow up in small towns with a main street lined by family-owned shops and restaurants. Today, however, many main streets are worn down and empty because shoppers have been lured away by shopping malls. But in the Del Ray neighborhood of Alexandria, Virginia, main street is thriving. VOA’s Deborah Block reports it has a nostalgic feel with its small restaurants and unique stores.

VOA Blogs

World Currencies

EUR
USD
0.9109
JPY
USD
121.50
GBP
USD
0.6467
CAD
USD
1.2293
INR
USD
63.559

Rates may not be current.