The first of three foreign banks to open branches in Myanmar this week – Bank of Tokyo-Mitsubishi UFJ (BTMU) – says there is no turning back for economic reforms and that patience is the key for success.
“If we look at the long term, Myanmar has lots of potential. The liberalisation of the country and its economy has started and once you get this momentum, it cannot stop, despite short-term fluctuations,” Go Watanabe, BTMU chief executive for Asia and Oceania, told reporters yesterday at the bank’s launch in Yangon.
Myanmar’s economy is at a very early stage in terms of financial market reforms compared with other countries and banks must take a long-term view, he said.
U Kyaw Kyaw Maung, governor of the Central Bank of Myanmar, said in an opening ceremony speech that the event marked “a new milestone in the history of the banking industry in Myanmar”.
“Business in Myanmar needs a very long term perspective,” Mr Watanabe said. “So at this time we are not very strict in our budget numbers or targets,” he said, setting as the priority winning business with foreign companies since direct dealing with Myanmar companies is excluded by Central Bank regulations. Foreign banks are also presently barred from conducting retail banking.
Collaboration with local banks would be important to support small and medium enterprises, Mr Watanabe said.
“In Myanmar, there are not so many big companies and most of the companies are SMEs. Form the foreign bank point of view, we are not so familiar with the SMEs but we understand that SMEs are vital and very important to the market. So we support SMEs indirectly via the transfer of knowledge and technology with collaboration with local banks and the Central Bank,” he said.
Japan’s Sumitomo Mitsui Banking Corporation and Singapore’s OCBC are scheduled to open their first Yangon branches today. Together with BTMU they received notices on April 2, giving them the green light to open their doors.
A total of nine foreign banks won provisional licences on October 1, 2014, following a heated race with a number of large banks. The winners – from Singapore, Japan, Thailand, Malaysia, China and Australia – have since been busy preparing their operations to meet the approval of the Central Bank of Myanmar.
Myanmar has not allowed onshore banking by foreign institutions since 1963, when 14 foreign banks were nationalised. The Central Bank of Myanmar’s website shows there are currently 43 foreign banks operating in the country. Many of them competed in last year’s contest for licences, though ultimately nine were selected.
BTMU, with a network spanning 40 countries, is part of Mitsubishi UFJ Financial Group with 258 trillion yen (US$2.5 trillion) in assets.
International institutions see an overhaul of Myanmar’s banking sector as key to attracting investment and driving economic growth. Local banks have expressed concern that they risk being marginalised if international banks are allowed to operate freely.
Mr Watanabe said compliance was an important issue. “The numbers of the businesses or companies we can deal with would be limited due to regulations that we understand. We have to be in compliance with that,” he said.
At the same time some banking regulations have not been decided on, meaning that good communication with the Central Bank was essential, he said. Building trust between people and their banks was important and required stable infrastructure, he added.
The Central Bank governor said that strengthened collaboration between domestic banks and Japanese banks would promote investment and drive economic growth.
“I am confident that BTMU would engage in major sectors to develop Special Economic Zones in Myanmar. And I encourage BTMU to support areas in trade financing, SME finance and project financing,” U Kyaw Kyaw Maung said.
Source: Myanmar Times