New Myanmar Investment Summit 20-21 June 2012 Park Royal, Yangon

The Process of Financial Sector Reform in Myanmar

(Retrospect and Prospects with special reference to Banking Sector Reform)
An Analytical Review by U Than Lwin Deputy Chairman (2) Kanbawza Bank Ltd.
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" An Anatomy of Fast Changes in Myanmar " Historical Perspective (I)

 Myanmar wedge between two economic giants, China and India Should benefits the people from spillover effects People never enjoy these benefits partly due to corruption lack of infrastructure and 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.
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Strong and Sincere political will of democratic government for change

Fast Changes in Myanmar Since March 2011

Myanmar people full of vigour for change due to painful past

Opposition parties keen for change

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Sequencing of Reform Process

Inauguration of new democratically elected government: March 2011
Initiating of Reform Process

Political Reform Agenda (priority)

Economic and Social Reform Agenda (Secondary)

Political Stability enhanced

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Chronology of Earlier Financial Reform Process that Failed

Political Crisis, 1988
Change to military government Adoption of Market oriented Economic System FDI Law, 1988

New Banking Laws; 1990

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Implementation of Financial Reform

(B) FEC Introduced as Alternative FX rate (1993) (A) Emergence of Private Banks (1992) (C) Acceptance of Rep. Offices of Foreign Bank (1993)

(F) Introduction of new products in private banks: credit card/ ATMs/ on line system

Financial Sector Reform (1990-1998)

(D) Some Private Bank given AD: FX licence (19961998)

(E) MOU bet. 8 Myanmar private banks & foreign counterpart (JV initiative) (1996-98)

 All financial reform measures were totally withdrawn except existence of private banks left with basic banking structure 1 private banks deregistered due to mismanagement 3 private banks deregistered under AML infringement
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Emergence of democratic civilian government first time in (50) years (Nov 2010 April 2012)

1 st stage of Reform Strategy for National Development

Political Reform Process (Priority)

All politaical prisoners released including Daw Aung San Suu Kyi

Opposition NLD Party enters PyithuHluttaw (Parliament) through by election

Signing of Peace Agreements with Ethnic Minorities

Opposition NLD Party enter Pyithu Hulttaw headed by Daw Aung San Suu Kyi

Political objectives largely achieved/ On-going democratic process

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1st stage of Reform Strategy for National Development (March 2011 - April2012)
(C) Introduction of FX Auction Market

(B) Solutions seek thru' Workshop/ Discussions etc.

Economic Reform including financial reform

(D) Private Banks granted AD Licences/ Money Change Licences

(A) Institutional Build-up (MDRI/Advisory Groups/ Parliamentary Commissions)

(E) Unification of Exchange Rates (April 1, 2012) first time Since 1977
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Laws Governing in Myanmar

New Foreign Investment Law (May be approved in July 2012 by Parliament)

New SEZ Law Tavoy Investment Zone Law (Redrafting)

New Banking and FX Laws (Now in Parliament)

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Entry Possibilities for Foreign Banks in Myanmar Strategic Joint Venture Banks Offshore Banks Partnership (ownership of Shares in local banks) 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 felt
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Compliance and Sound Banking

a) Weakness in international accounting standards needs to be addressed in Myanmar banks b) Conformity to Basel I & II essential 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 of banks Due to Central Bank's strict regulation, high liquidity is now maintained
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Independency of Central Bank

Central Bank of Myanmar abide by decisions of Ministry of Finance and Revenue (MOFR)since 1963 No check & balance between fiscal policy and monetary policy Authorities now working for Central Bank to enjoy independent status away from MOFR
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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 permit

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Prospects
Computerization of Central Bank

Central Bank Setting up (MPU) later to deal with Visa/ Master China Union Pay Cards

Present measures taken by Government

Central Bank Agreement with Tokyo Stock Exchange & Daiwa Research to Set Up Stock Market in Myanmar

Foreign Investment Law & FX Law it be approved Banking Laws revised & soon be approved

Laws on Intellectual Property Rights are now drafted

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THANK YOU

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