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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.
New Myanmar Investment Summit 20-21 June 2012
Park Royal, Yangon
1
" An Anatomy of Fast Changes in Myanmar "
Historical Perspective (I)
2
• 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 infrastructure
and adoption of "beggar thy neighbour"
policy by some neighbouring countries
• Also partly due to sanctions imposed by
US and EU
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
Fast Changes in Myanmar
Since March 2011
Strong and Sincere political will of
democratic government for
change
Opposition parties keen for change
Myanmar people full of vigour for change due to painful past
5
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
6
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
7
Implementation of Financial Reform
Financial Sector
Reform (1990-1998)
(B)
FEC Introduced as Alternative FX
rate (1993)(C)
Acceptance of Rep. Offices of Foreign Bank
(1993)
(D)
Some Private Bank given AD: FX
licence (1996-1998)(E) MOU bet. 8
Myanmar private banks & foreign counterpart (JV
initiative)
(1996-98)
(F) Introduction of new products in private banks:
credit card/ ATMs/ on line
system
(A)
Emergence of Private Banks
(1992)
8
• 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totally withdrawn except existence of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
9
10
Emergence of democratic civilian government first time in (50) years (Nov 2010 April 2012)
1st 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 Pyithu-Hluttaw (Parliament) through by election
Opposition NLD Party enter Pyithu Hulttawheaded by Daw Aung San Suu Kyi
Political objectives largely achieved/ On-going democratic process
Signing of Peace Agreements with Ethnic Minorities
11
12
1st stage of Reform Strategy for National
Development (March 2011 - April2012)
Economic Reform
including financial reform
(C)
Introduction of FX Auction Market
(D)
Private Banks granted AD Licences/ Money
Change Licences
(E)
Unification of Exchange Rates (April 1, 2012) first time Since 1977
(A)
Institutional Build-up (MDRI/Advisory Groups/
Parliamentary Commissions)
(B)
Solutions seek thru' Workshop/ Discussions
etc.
13
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)
14
Entry Possibilities for Foreign Banks in Myanmar
Joint Venture Banks
Offshore Banks
Strategic
Partnership (ownership of
Shares in local banks)
Full branch (or) Subsidiary
15
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
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 present17
Governance Structure
• The need for more independent
bank management
• The need for Myanmar banks to go
public as only very few had done so
18
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
maintained19
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 MOFR20
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
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 measures taken by
Government
Prospects
22
THANK YOU
23