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The Process of FinancialSector Reform in Myanmar
(Retrospect and Prospects with specialreference to Banking
Sector Reform)
An Analytical Review byU Than Lwin
Deputy Chairman (2)
Kanbawza Bank Ltd.
New Myanmar Investment Summit 20-21 June 2012
Park Royal, Yangon
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" An Anatomy of Fast Changes in Myanmar "
Historical Perspective (I)
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Myanmar wedge between two
economic giants, China and India
3
Should benefits the people from spill-
over effects People never enjoy these benefits partly
due to corruption lack of infrastructureand adoption of "beggar
thy neighbour"
policy by some neighbouring countries Also partly due to
sanctions imposed by
US and EU
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Historical Perspective (II)
Government Release all political prisoners,
including Daw Aung San Suu Kyi
Later brought NLD into political process to and
create creditable opposition in Phuthu-Hluttaw
(parliament) through free and fair by-election. Signed peace
agreements with almost all ethnic
minorities armed groups paving the way for
national reconciliation.
New labour laws were enacted to restore more
basic rights to workers. 4
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Fast Changes in
MyanmarSince March
2011
Strong and Sincere
political will ofdemocratic
government forchange
Opposition partieskeen for change
Myanmar people fullof vigour for changedue to painful past
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Sequencing of Reform Process
Inauguration of new democratically elected
government: March 2011
Initiating of Reform Process
Political ReformAgenda (priority)
Economic andSocial Reform
Agenda
(Secondary)
Political Stability
enhanced6
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Chronology of Earlier Financial Reform
Process that Failed
Political Crisis, 1988
Change to military government
Adoption of Market oriented EconomicSystem
FDI Law, 1988
New Banking Laws; 1990
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Implementation of Financial Reform
Financial
SectorReform
(1990-1998)
(B)
FEC Introduced asAlternative FX
rate (1993)
(C)Acceptance ofRep. Offices ofForeign Bank
(1993)
(D)
Some PrivateBank given AD: FX
licence (1996-1998)(E) MOU bet. 8
Myanmar privatebanks & foreigncounterpart (JV
initiative)
(1996-98)
(F) Introductionof new productsin private banks:
credit card/ATMs/ on linesystem
(A)
Emergence ofPrivate Banks
(1992)
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All financial reform measures weretotally withdrawn except
existence of
private banks left with basic bankingstructure
1 private banks deregistered due tomismanagement
3 private banks deregistered underAML infringement
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Emergence of democratic civilian government first time in
(50)
years (Nov 2010 Apri l 2012)
1st stage of Reform Strategy for NationalDevelopment
Pol itical Reform Process (Priority)
All poli taicalprisoners releasedincluding Daw Aung San Suu
Kyi
Opposition NLD Party enters Pyithu-Hluttaw (Parliament) through
by election
Opposition NLD Party enter Pyithu Hulttawheaded by Daw Aung San
Suu Kyi
Political objectives largely achieved/ On-goingdemocratic
process
Signing of Peace Agreements withEthnic Minori ties
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1st stage of Reform Strategy for National
Development (March 2011 - April2012)
EconomicReform
includingfinancialreform
(C)
Introduction of FXAuction Market
(D)
Private Banks grantedAD Licences/ Money
Change Licences
(E)
Unification of ExchangeRates (April 1, 2012)
first time Since 1977
(A)
Institutional Build-up(MDRI/Advisory Groups/
ParliamentaryCommissions)
(B)
Solutions seek thru'Workshop/ Discussions
etc.
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Laws Governing in
Myanmar
New ForeignInvestment Law (May
be approved in July2012 by Parliament)
New SEZ Law
Tavoy InvestmentZone Law
(Redrafting)
New Banking and FXLaws
(Now in Parliament)
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Entry Possibilities forForeign Banks in Myanmar
Joint VentureBanks
OffshoreBanks
Strategic
Partnership(ownership of
Shares in localbanks)
Full branch(or) Subsidiary
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Challenges Facing Myanmar Banks
Need for some banks that are given
AD FX licences
(a) Highly trained bank professionals
are in dire needs.
(b) Some banks have hired ex-foreign
banks but the need to build up
capacity at all levels keenly felt16
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Compliance and Sound Banking
a) Weakness in international
accounting standards needs
to be addressed in Myanmarbanks
b) Conformity to Basel I & IIessential for present
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Governance Structure The need for more independent
bank management
The need for Myanmar banks to go
public as only very few had done so
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Risk Management Weakness in installing Risk
Management/ System The need for Highly trained
professionals in loans committee ofbanks
Due to Central Bank's strictregulation, high liquidity is
now
maintained 19
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Independency of Central Bank Central Bank of Myanmar abide
by
decisions of Ministry of Finance andRevenue (MOFR)since 1963
No check & balance between fiscalpolicy and monetary
policy
Authorities now working for CentralBank to enjoy independent
status
away from MOFR 20
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Insurance Business in Myanmar
(governed by the Insurance Business Law 1996 )
Now monopolised by Govt. solely owned Myanmar Insurance
Will soon permit (6) domestic private insurance cos.
Initial capital K 46 billion required each (about $ 55
million)
Entry of Foreign Insurance Cos. (need to consider before
2015)
May select class of insurance to permit21
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Laws on Intellectual Property Rights are now drafted
Foreign Investment Law & FX Law it be approved
Banking Laws revised & soon be approved
Central Bank Agreement with Tokyo Stock Exchange &Daiwa
Research to Set Up Stock Market in Myanmar
Central Bank Setting up (MPU) later to deal with Visa/
Master China Union Pay Cards
Computerization of
Central Bank
Present
measurestaken byGovernment
Prospects
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THANK YOU
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