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Process of financial Reform in Myanmar

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  • 1. 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. 1
  • 2. " An Anatomy of Fast Changes in Myanmar " Historical Perspective (I) 2
  • 3. • Myanmar wedge between two economic giants, China and India• 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 3
  • 4. 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
  • 5. Strong and Sincere political will of democratic government for change Fast Changes in Myanmar Since March 2011Myanmar people full Opposition partiesof vigour for change keen for changedue to painful past 5
  • 6. Sequencing of Reform Process• Inauguration of new democratically elected government: March 2011 Initiating of Reform Process Political Reform Economic and Agenda (priority) Social Reform Agenda (Secondary) Political Stability enhanced 6
  • 7. Chronology of Earlier Financial Reform Process that FailedPolitical Crisis, 1988 Change to military government Adoption of Market – oriented Economic System FDI Law, 1988 New Banking Laws; 1990 7
  • 8. Implementation of Financial Reform (B) FEC Introduced as Alternative FX rate (1993) (C) (A) Acceptance of Emergence of Rep. Offices of Private Banks Foreign Bank (1992) (1993) Financial Sector Reform (1990-1998) (F) Introduction (D) of new products in private banks: Some Private credit card/ Bank given AD: FX ATMs/ on line licence (1996- system (E) MOU bet. 8 1998) Myanmar private banks & foreign counterpart (JV initiative) (1996-98) 8
  • 9. • All financial reform measures were totally withdrawn except existence of private banks left with basic banking structure• 1 private banks deregistered due to mismanagement• 3 private banks deregistered under AML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. 10
  • 11. 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 Opposition NLD Party enters Pyithu- Signing of Peace Agreements withincluding Daw Aung San Suu Kyi Hluttaw (Parliament) through by election Ethnic Minorities Opposition NLD Party enter Pyithu Hulttaw headed by Daw Aung San Suu Kyi Political objectives largely achieved/ On-going democratic process 11
  • 12. 12
  • 13. 1st stage of Reform Strategy for NationalDevelopment (March 2011 - April2012) (C) Introduction of FX Auction Market (B) (D) Solutions seek thru Private Banks granted Workshop/ Discussions AD Licences/ Money etc. Economic Change Licences Reform including financial reform (A) (E) Institutional Build-up Unification of Exchange (MDRI/Advisory Groups/ Rates (April 1, 2012) Parliamentary first time Since 1977 Commissions) 13
  • 14. Laws Governing in Myanmar New Foreign New SEZ Law New Banking and FXInvestment Law (May Tavoy Investment Laws be approved in July Zone Law 2012 by Parliament) (Now in Parliament) (Redrafting) 14
  • 15. Entry Possibilities for Foreign Banks in Myanmar Strategic PartnershipJoint Venture Offshore Full branch (ownership of Banks Banks (or) Subsidiary Shares in local banks) 15
  • 16. 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 16
  • 17. 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 17
  • 18. 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
  • 19. Risk Management• Weakness in installing Risk Management/ System• The need for Highly trained professionals in loans committee of banks• Due to Central Banks strict regulation, high liquidity is now maintained 19
  • 20. 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 20
  • 21. 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 21
  • 22. Prospects Computerization of Central Bank Central Bank Setting up (MPU) later to deal with Visa/ Master China Union Pay Cards Present measures Central Bank Agreement with Tokyo Stock Exchange & taken by Daiwa Research to Set Up Stock Market in MyanmarGovernment Foreign Investment Law & FX Law it be approved Banking Laws revised & soon be approved Laws on Intellectual Property Rights are now drafted 22
  • 23. THANK YOU 23