Feb 7, 2013

Standard Chartered First In Line As Myanmar Mulls Foreign Bank Licenses

Foreign banks may be permitted to own majority shares in joint-venture banks in Myanmar (Burma) under new legislation that could be passed by April. Officials have said foreign banks could later apply for licenses for wholly-owned subsidiaries in a country with an antiquated banking system that only recently added interlinked ATMs. Many people stash money in safes or buy gold and jade rather than trust local banks, which last suffered a run in 2003. The proposed changes are part of legislation on central bank independence, the Financial Times reports. Foreign banks would be permitted to own 80% of joint ventures. Some banks in Myanmar are owned by prominent cronies of the former military regime covered by U.S. financial sanctions, which may dim their prospects of finding a foreign partner. But it may only be a matter of time before these curbs are removed, given the thaw in relations with the U.S.

Standard Chartered has just reopened its representative office in Yangon, the commercial capital, after a gap of several years. It’s the first Western bank to take this step since the reformist government took power in 2011, though other Asian banks such as Thailand‘s Siam Commercial Bank and China‘s ICBC are already doing business there. Standard Chartered has a strong presence in Southeast Asia and its regional headquarters in Singapore been keeping a close eye on Myanmar’s reforms, so it could be first in line for any JV licenses. Its history in Myanmar, then called Burma, stretches back to 1862 when the country was under British colonial rule. Japanese banks are also likely to take part, as Japan is Myanmar’s largest bilateral lender and its companies are increasingly focused on Southeast Asia as a hedge against Chinese nationalism that impacts operations there. Expect to see Japanese banks courting local partners.

Myanmar has begun opening up to increased foreign investment and a new law passed late last year after months of debate has codified some of the rules for foreign capital. Some sectors of the economy, one of the poorest in Asia, remain off-limits to foreign ownership, including fishing and farming. Rural industries have long been starved of credit, though their needs are better met by microcredit lenders than private banks. For their part, foreign banks are more likely to finance multinationals and try to build a customer base among wealthier urbanites in Myanmar, which is decades behind countries like Indonesia and Thailand in financial services.

Source: Forbes