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Banking on Private Support

Banks are essential in promoting economic growth, development and stability. Changes in economic systems, following changes in political system, usually involve reorganizing the financial systems, including the banking system. The Myanmar banking system, therefore, has also lately, undergone changes according to the requirements of the changes in its political and economic systems.

In 2014 Myanmar’s banking sector has seen the launch of a number of smaller privately and publicly-owned local banks and both local and foreign microfinance institutions. The launch of two major telecoms operators has also made way for the beginnings of mo- bile money operations in the country. In De- cember 2013, the country published its first

Mobile Banking Directive, which adopted the “bank-led” model for mobile money. Besides, in 2011, The Myanmar Payment Union expanded its debit card network and nationwide ATM network which allows ATM card holders to withdraw cash from ATMs operated by all member banks, rather than being restricted to a single bank. The electronic banking network now covers 80% of all banks’ existing workloads.

The financial institutions in Myanmar are overseen by the Central Bank of Myanmar. The State-owned banks are Myanmar Economic Bank (MEB), Myanmar For- eign Trade Bank (MFTB), Myanmar In- vestment and Commercial Bank (MICB), and Myanmar Agricultural Development Bank (MADB). There are over 1,000 bank branches (state owned, semi-government, and private banks) of which almost 50% be- long to state-owned banks. All local banks are members of the Myanmar Banks Association (MBA) which was formed on April 1st, 1999 to handle banking industry issues.

“Myanmar has tremendous potential for enormous growth. To realize this potential it is essential to create space for entrepreneur- ship. A vibrant private sector can generate jobs, and spur growth,” said Kaushik Basu, the World Bank’s Chief Economist and Senior Vice President. “Creating a level-playing field for the private sector will help unleash its potential. Government’s role is to provide an efficient regulatory system that encourages and facilitates individual creativity.”

Myanmar’s banking industry is also seeing the growing presence of foreign banks, particularly those from Asia-Pacific. According to International Monetary Fund, Myan- mar’s economy is expected to grow 7.75 % in the financial year 2014-2015. This marked a new horizon in Myanmar’s banking industry as it had previously restricted foreign banks’ operations.

Last year, The Central Bank of Myanmar awarded nine foreign banks the licenses to operate in Burma. It was seen as the government’s biggest move to bring in much-need- ed foreign capital into a fast growing economy. Before Myanmar’s military junta nationalized the banks in 1963, 14 foreign banks operated in the country—more than anywhere else in South-East Asia. Among 25 contending foreign banks, all nine of the license winners were based in the Asia Pa- cific, including the world’s largest bank, Bei- jing-based Industrial & Commercial Bank of China, ANZ Bank from Australia and three Japanese lenders – Bank of Tokyo-Mitsub- ishi UFJ Ltd., Sumitomo Mitsui Banking Corp. and Mizuho Bank Ltd.

Other license winners included Thailand’s Bangkok Bank, Public Industrial & Commercial Bank of China Ltd, Malayan Banking Bhd., and two Singapore banks – United Overseas Bank Ltd. and Overseas Chinese Banking Corp.

After winning the license to operate in Myanmar, Grant Knuckey, CEO of Cambo- dia, Laos and Myanmar for ANZ Banking Group, said the firm will benefit from going through the process of setting up in both Thailand and Myanmar at roughly the same time.

“Myanmar is still at an early stage of its eco- nomic transformation, though is trying to compress reforms that would normally take decades into only a few years, he said. “It means the opportunities arrive a little earlier and they need to be seized earlier, and it also means accelerated waves of investment and infrastructure is required”.

Myanmar, before the 1997 Asian crisis, had more than 40 representative offces of foreign banks. However, due to the crisis and the fact that they can only collect information and data, most banks either closed or streamlined their offces. However, as Myanmar becomes more open, foreign representative offces have increased and it is certain that more will appear in the future.

On winning the foreign license, Malayan Banking Bhd. (Maybank) group president and chief executive offcer Datuk Abdul Farid Alias had also said, “The new development is a signifcant milestone in the bank’s partnership with Myanmar. It will further strengthen the group’s regional footprint as “well as its capabilities in serving customers”. While the introduction of foreign banks to

Myanmar has been one of the more visible signs of the transformation, it has also proved controversial. Many of Myanmar’s local banks have opposed the granting of licenses, worrying that allowing foreign banks to operate in the country would erode their market share. “Foreign banks are giants, but we are still very small,” said Sein Maung, chairman of Myanmar First Private Bank and vice chairman of the Myanmar Banking Association. “We are not ready to compete with them, not in terms of technology or experience.”

Expressing his fears, Pe Myint, managing director of Myanmar’s Co-operative Bank Ltd. also said his frm is preparing to upgrade services and has hired consultants to respond to the added competition but we will still face shortage of human resources and skills, because some of our talented staff will move to foreign banks”.

The World Bank Group is supporting reforms in Myanmar to strengthen the private sector and create jobs to reduce poverty and boost shared prosperity. The Myanmar Investment Climate Assessment is supported by the United Kingdom’s Department for International Development (DFID) and has been carried out in close collaboration with the Ministry of National Planning and Economic Development.

As a true daughter of Asia, Myanmar has come a long way in a short period. Though the country still needs a lot many fnancial reforms to take place but a solid foundation has already been laid for a bright fnancial future.