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

Video Experts Warn World Losing Ebola Fight

Doctors Without Borders says world is losing battle against Ebola, unless wealthy nations dispatch specialized biological disaster response teams More

Video Experts: Rise of Islamic State Significant Development in Jihadism

Many analysts contend the group - which grew out of al-Qaida in Iraq - has been rebuilding for years More

US-Based Hong Kongers Pledge Support for Pro-Democracy Activists

Democracy advocates call on Chinese living abroad to join them in opposing new election rules for their home territory 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.
Larger Than Life Chinese Lanterns Make Southern California Appearancei
X
Elizabeth Lee
September 02, 2014 8:57 PM
Chinese lanterns with a long history are lighting up in 21st century style at the Los Angeles County Fair in southern California. Visitors can see traditional lanterns that hang, but also lanterns in the shape of animals, iconic landmarks and many other objects, all created by artisans from a place in China known for its lanterns. Elizabeth Lee has the details from the fair in the city of Pomona.
Video

Video Larger Than Life Chinese Lanterns Make Southern California Appearance

Chinese lanterns with a long history are lighting up in 21st century style at the Los Angeles County Fair in southern California. Visitors can see traditional lanterns that hang, but also lanterns in the shape of animals, iconic landmarks and many other objects, all created by artisans from a place in China known for its lanterns. Elizabeth Lee has the details from the fair in the city of Pomona.
Video

Video Experts See Rise of ISIS as Significant Development

The Islamic State’s rise seems sudden. It caught the U.S. by surprise this summer when it captured large portions of northern Iraq and spread its wings in neighboring Syria. But many analysts contend that the group - which grew out of al-Qaida in Iraq - has been rebuilding for years. VOA's Jela de Franceschi takes a closer look at the rise of ISIS and its implications for the Middle East and beyond.
Video

Video Israel Concerned Over Syrian Rebels in Golan

Israeli officials are following with concern the recent fighting between Syrian rebels and government forces near the contested Golan Heights. Forty-four U.N. peacekeepers from Fiji have been seized by Syrian Islamist rebels and the clashes occasionally have spilled into Israel. VOA’s Scott Bobb reports from Jerusalem.
Video

Video Ukraine Schools Resume Classes, Donate to Government Forces

A new school year has started in Ukraine but thousands of children in the war-torn east are unable to attend because of ongoing clashes with pro-Russia rebels. In Ukraine's capital, patriotic education has become the norm along with donations to support injured security forces fighting to take back rebel-held areas. VOA's Daniel Schearf reports from Kyiv.
Video

Video US Detainees Want Negotiators for Freedom in North Korea

The three U.S. detainees held in North Korea were permitted to speak with foreign media Monday. The government of Kim Jong Un restricted the topics of the questions, and the interviews in Pyongyang were limited to five minutes. Each of the men asked Washington to send a representative to Pyongyang to secure his release. VOA’s Carolyn Presutti has our story.
Video

Video Turkmen From Amerli Describe Survival of IS Siege

Over the past few weeks, hundreds of Shi'ite Turkmen have fled the town of Amerli seeking refuge in the northern city of Kirkuk. Despite recent military gains after U.S. airstrikes that were coordinated with Iraqi and Kurdish forces, the situation remains dire for Amerli’s residents. Sebastian Meyer went to Kirkuk for VOA to speak to those who managed to escape.
Video

Video West Africa Ebola Vaccine Trials Possible by Early 2015

A U.S. health agency is speeding up clinical trials of a possible vaccine against the deadly Ebola virus that so far has killed more than 1,500 people in West Africa. If successful, the next step would be a larger trial in countries where the outbreak is occurring. VOA's Carol Pearson has more.
Video

Video Survivors Commemorate 70th Anniversary of Nazi Liquidation of Jewish Ghetto

When the German Nazi army occupied the Polish city of Lodz in 1939, it marked the beginning of a long nightmare for the Jewish community that once made up one third of the population. Roughly 200,000 people were forced into the Lodz Ghetto. Less than 7,000 survived. As VOA’s Kane Farabaugh reports, some survivors gathered at the Union League Club in Chicago on the 70th anniversary of the liquidation of the Lodz Ghetto to remember those who suffered at the hands of the Nazi regime.

AppleAndroid

World Currencies

EUR
USD
0.7537
JPY
USD
103.79
GBP
USD
0.6032
CAD
USD
1.0957
INR
USD
60.522

Rates may not be current.