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

At Khmer Rouge Court, Long-Awaited Verdict Approaches

First phase of trial, which is coming to an end, has focused on forced exodus of Phnom Penh in 1975 - and now many are hopeful justice will be served More

Video When Fighting Eases, Gazans Line Up at Bakeries

When there is a lull in the conflict, residents who have been hunkered down in their apartments rush out to stock up on food and other necessities More

Video Information War Rages Alongside Real One in Ukraine

Downing of Malaysian airliner, allegations of cross-border shelling move information war in war-torn country to a new level 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.
Information War Rages Alongside Real One in Ukrainei
X
Al Pessin
July 31, 2014 8:13 PM
The downing of the Malaysian airliner two weeks ago, and allegations that Russians are shelling Ukrainian troops across the border, have moved the information war swirling around the Ukrainian conflict to a new level. VOA's Al Pessin reports from Kyiv.
Video

Video Information War Rages Alongside Real One in Ukraine

The downing of the Malaysian airliner two weeks ago, and allegations that Russians are shelling Ukrainian troops across the border, have moved the information war swirling around the Ukrainian conflict to a new level. VOA's Al Pessin reports from Kyiv.
Video

Video When Fighting Eases, Gazans Line Up at Bakeries

When there is a lull in the conflict in Gaza, residents who have been hunkered down in their apartments rush out to stock up on food and other necessities. Probably the most important destination is the local bakery. VOA’s Scott Bobb reports from Gaza City.
Video

Video US-Funded Program Offers Honduran Children Alternative to Illegal Immigration

President Obama and Central American leaders recently agreed to come up with a plan to address poverty and crime in the region that is fueling the surge of young migrants trying to illegally enter the United States. VOA’s Brian Padden looks at one such program in Honduras - funded in part by the United States - which gives street kids not only food and safety but a chance for a better life without, crossing the border.
Video

Video 'Fab Lab' Igniting Revolution in Kenya

The University of Nairobi’s Science and Technology Park is banking on 3-D prototyping to spark a manufacturing revolution in the country. Lenny Ruvaga has more for from Nairobi's so-called “FabLab” for VOA.
Video

Video Gazans in Shelled School Sought Shelter

Israel's air and ground assault against Hamas-led fighters in Gaza has forced many Palestinians to flee their homes, seeking safety. But safe places are hard to find, as VOA’s Scott Bobb reports from Jabaliya.
Video

Video Rapid Spread of Ebola in West Africa Prompts Global Alert

Across West Africa, health officials are struggling to keep up with what the World Health Organization describes as the worst ebola outbreak on record. The virus has killed hundreds of people this year. U.S. President Barack Obama and other world leaders are watching the developments closely as they weigh what actions, if any, are needed to help contain the disease.
Video

Video Michelle Obama: Young Africans Need to Embrace Women's Rights

U.S. first lady Michelle Obama urged some of Africa's best and brightest to advocate for women's rights in their home countries. As VOA's Pam Dockins explains, Obama spoke to some 500 participants of the Young African Leaders Initiative, a six-week U.S.-based training and development program.
Video

Video Immigrant Influx on Texas Border Heats Up Political Debate

Immigrants from Central America continue to cross the U.S.-Mexico border in south Texas, seeking asylum in the United States, as officials grapple with ways to deal with the problem and provide shelter for thousands of minors among the illegal border crossers. As VOA's Greg Flakus reports from Houston, the issue is complicated by internal U.S. politics and U.S. relations with the troubled nations that immigrants are fleeing.
Video

Video Study: Latino Students Most Segregated in California

Even though legal school segregation ended in the United States 60 years ago, one study finds segregation still occurs in the U.S. based on income and race. The University of California Los Angeles Civil Rights Project finds that students in California are more segregated by race than ever before, especially Latinos. Elizabeth Lee reports for VOA from Los Angeles.

AppleAndroid

World Currencies

EUR
USD
0.7305
JPY
USD
101.53
GBP
USD
0.5830
CAD
USD
1.0656
INR
USD
60.075

Rates may not be current.