Htet Tayza examines the news that foreign lenders have showed interest in obtaining licenses which would allow them to provide banking services in Myanmar.
Figures I’ve previously quoted suggest that there are four state-owned banks and 25 local banks currently operating in Myanmar. Financial services companies must obtain special licenses to operate wholesale banking and lend funds to foreign investment firms and local banks in Myanmar.
Myanmar’s banking sector has typically been closed off to foreign firms. However, in 2014 Yangon provided licenses to nine international banking companies including the Industrial and Commercial Bank of China (ICBC); the first Chinese-invested commercial bank operating in Myanmar. This was the first time the government handed out licenses in more than 50 years.
Answering the call
The government recently announced that it would hand out a second round of licenses. News portal Yahoo Finance reported that 13 foreign banks have shown interest in obtaining the licenses necessary to operate within Myanmar’s borders.
Banks from countries which saw some of its financial institutions win licenses in the first round were barred from entering the second round. Therefore, no banks from Australia, Japan, Malaysia, China, Singapore or Thailand – some of Myanmar’s biggest trading partners – were allowed to put themselves forward, meaning that most of the winners were from Taiwan.
Taiwanese banks that have applied for licenses include Cathay United Bank Co, E. Sun Commercial Bank, the Taiwan Business Bank and the Taiwan Cooperative Bank. Financial institutions which applied for service licenses from other nations included South Korea’s Shinhan Bank, the State Bank of India, the Bank for Investment and Development of Vietnam and the State Bank of Mauritius.
Htet Tayza’s commentary
Figures quoted by Eleven Myanmar, a regional news agency, suggest that Myanmar attracted over US$8 billion in foreign direct investment (FDI) in the 2014-2015 fiscal year. According to Aung Naing Oo, secretary of the Myanmar Investment Commission “this financial year FDI is estimated to reach US$6 billion, mainly into manufacturing, telecommunications and the hotels and tourism sectors.”
In other words FDI is falling and Myanmar needs international investment to boost economic activity. Evidence suggests that banking services for Myanmar’s 51 million-strong population are fairly limited and the sector is dominated by domestic financial institutions. Yangon’s decision to offer more banking licenses indicates Myanmar has decided to open its banking sector up to international institutions to bolster FDI and promote economic growth.
A senior official at The Association of Southeast Asian Nations (ASEAN)-Korea Centre, recently said: “the overall atmosphere is quite positive at the moment, so now is the right time [for Myanmar] to increase communication with the international community – including Korea.” The fact that banking institutions from countries such as South Korea are showing interest in obtaining Myanmar banking licenses shows that that Myanmar has the means to strengthen FDI and boost economic activity.