Three months ago, Bank of Tokyo Mitsubishi UFJ (BTMU) won a race by hours to become the first foreign bank to have a branch in Yangon on April 22 this year. In the three months since, the financial behemoth has struggled with the kyat, but has overall found workarounds to the country’s schizophrenic economy.
Like all foreign banks which were permitted to operate in Myanmar this year, BTMU is operating under heavy restrictions. Most notably, they cannot provide services directly to Myanmar citizens or locally owned companies, and are only allowed to open one branch. In order to get around these restrictions, BTMU partnered up with locally-owned CB Bank to lend money indirectly in the country.
Even with a local partner, it has been difficult to attract Kyat deposits. According to BTMU Yangon branch general manager Mitsuhiro Kimura, “It is necessary to build interbank market, because we have regulations against the liquidity of Myanmar Kyat and US dollars.
“We cannot arrange the flow of Myanmar Kyat in Myanmar, so this is one of our issues.”
Dollar cash flow has been an issue for the bank in its first three months. For legal and practical reasons, the movement of dollars in the country has been quite low. Part of this has been intentional by the government; in an attempt to stop the depreciation of the Kyat, the government in June restricted the use of dollars for payments inside Myanmar, even by foreign countries.
Additionally, moving dollars between banks is not popular among locals. Most remittances to Myanmar are done by wire transfer, not through banks, and few people and even businesses hold bank accounts, so the flow of the currency is relatively low. According to UN Capital Development Fund statistics, only four percent of families have bank accounts in their own names.
Another large problem for the company is the difficulty dealing in Kyat by banks, said Kimura. Furthermore, banks must deal in the Central Bank of Myanmar’s official exchange rate, which often differs from actual market rate. According to Kimura, “Kyat use is restricted by this gap, and we can’t currently meet our customer’s expectations.”
Infrastructure development has been an area of interest for MUFG, particularly in power generation, communications, roads, port services, and water supply. According to Kimura, “Infrastructure is a bit challenging as a business category. However, now many project financing firms would like to start the challenge of the infrastructure business. As you know, there are huge infrastructure needs around the world and in Myanmar. If necessary and appropriate, we would like to do infrastructure business as well in Myanmar.”
Mitsubishi has also invested in Thilawa Special Economic Zone along with two other firms as part of MMS Development Co Ltd. The Japanese International Cooperation Agency (JICA) also owns ten percent of the project.
To attract investment to the country, ostensibly through their bank, they held a business matching fair last week in Yangon, in an effort to attract large corporations in industries ranging from fast food to industrial chemicals to construction materials.
According to Forbes 2015 list, Mitsubishi UFJ Financial Group (MUFG) is the eleventh largest bank in the world, with $2.3 trillion in assets. For comparison, the Central Bank of Myanmar holds $15 billion in assets, according to official statistics.
Bank of Tokyo-Mitsubishi UFJ Ltd is a subsidiary of Mitsubishi UFJ Financial Group, which is itself a part of Mitsubishi Group.
Source: Myanmar Business Today