Domestic banks are preparing for joint ventures with foreign lenders, several banks reported last week, even though they will not be allowed until the Central Bank of Myanmar is made independent.
A spokesperson at the deputy director general level of the Central Bank in Nay Pyi Taw said joint ventures would be allowed once the Central Bank Law was enacted by parliament and the bank is made autonomous. However, parliament will not sit again until late June. The spokesperson added that bank officials are already writing the rules and regulations for when the law, which was returned to parliament by the President’s Office for review, is passed by parliament.
“Our rules and regulations need to protect domestic banks but at the same time we need to open up to international banking because our banking sector has been left behind for 50 years,” he said. The Central Bank will approve foreign banks in four stages, he said: representative offices, joint ventures, subsidiaries and wholly owned branches.
The Foreign Investment Law enacted in November 2012 November – and later supplemented by rules and regulation – allows foreign companies in some sectors up to 80 percent.
“When the Central Bank approves joint ventures, the ownership ratio will be up to the companies to determine,” the spokesperson said.
Cooperative Bank (CB) managing director U Pe Myint said some banks, mostly from Asia, have already approached CB to seek joint ventures in preparation for when they are allowed.
A spokesperson for Myanma Apex Bank’s foreign banking department confirmed that the bank has also been approached by foreign partners interested in a tieup but added that no decisions had been made regarding partners as yet.
“The readiness for joint-venture banking and preparations will be subject to each bank’s needs,” he said.
Kanbawza Bank’s vice chairman, U Than Lwin, said domestic banks must prepare to either cooperate or compete with foreign banks because foreign banks will be allowed into the market soon.
“Foreign banks entering Myanmar is not a shock. In the past few years we have seen an expansion in the number of banks and domestic banks will still be able to do some services, such as retail banking, even when foreign banks arrive,” he said.
He added that while domestic banks cannot compete in terms of technology or capital, being able to offer services such as retail banking are methods that will allow them to survive. However, he said said the Central Bank should also relax some requirements, such as the amount of paid up capital required to open each new branch, to allow domestic banks to expand more quickly.
U Than Lwin said the leading banks have from 40 to 103 branches, while smaller domestic lenders have as few as two branches and cannot expand further because they lack the capital.
“But we want to have foreign banks working here too and can cooperate through joint ventures or partnerships, which can bring many benefits to both parties,” he added.
There are 24 representative offices registered with the Central Bank, mostly from Southeast Asian nations but including Japan, South Korea and India.
Korea Trade Investment Promotion Agency’s commercial officer Ko Tun Tun said there are four South Korean banks with representative offices in Myanmar, adding that a fifth – Korea Exchange Bank – was likely to join soon.
“As far as I know, they will likely to come to Myanmar through a joint venture in 2014.”
Source: Myanmar Times