Myanmar’s banking sector is not yet prepared for a flood of foreign investment, the deputy chairman at the country’s largest commercial bank has said.
A landslide victory by opposition leader Aung San Suu Kyi’s National League for Democracy party in last week’s by-elections as well as a series of political and economic reforms, led the US, EU, Japan and Australia to announce plans to relax sanctions in the Southeast Asian country. This prompted a rush of foreigner investors eager to profit from the opening up of the country.
But KBZ Bank’s U Than Lwin told that IFLR foriegners should wait a few months before taking advantage of the investment opportunities available in Myanmar.
“I advise potential investors to wait for the various regulatory revisions currently being enacted to be finalized,” he said.
The country’s new Foreign Investment Law was due to be released within the next couple of weeks, he said. But work was also under way to revise outdated banking laws ahead of Myanmar’s integration with ASEAN in 2015, and discussions were being held as to whether updates should be made to foreign exchange control laws.
“There’s a lot of change on the cards,” he said. “Wait for these to regulatory amendments and the incentives provided under these reforms to come clear.”
The floating of the Myanmar currency kyat on April 1 after 35 years pegged to the International Monetary Fund’s special drawing rights, unified seven different rates used by business, government and consumers to a new reference rate, set at 818 kyat per US dollar.
As the most dramatic economic reform yet by the country’s one-year-old civilian government, it is hoped it will transform trade, banking and public finances.
According to presidential economist Set Aung it marked the first step towards the full internationalisation of Myanmar’s banking sector. He expected foreign banks to be allowed into Myanmar by 2018, but he said joint ventures between foreign and domestic banks were likely much sooner.
U Than Lwin said the domestic banking sector would struggle to compete with their larger international counterparts once the market fully opened up. It would be better for global banks interested in entering the market to consider joint ventures with local financial institutions instead, he said.
Myanmar has a basic banking system in place, he said. But work was underway to train domestic banking staff in international practices and technology. Senior staff at KBZ Bank had been participating in training with global banks such as Japan’s Bank of Tokyo-Mitsubishi UFJ and Sumitomo Mitsui.
Standard Chartered and Singapore’s United Overseas Bank (UOB) have also been providing a similar service for Myanmar banks, training staff in currency trading and risk management.
Market participants have branded the country’s banking sector “a huge problem”.