Just a few short years ago Burma was considered a rogue state, largely cut off from the world in the same vein as Cuba and North Korea. Now, so-called Myanmar is racing headlong into the 21st century. After a series of democratic and economic reforms, trade and diplomatic relations with numerous countries have been normalized. Apparently Myanmar is about ready to take another step forward by granting up to 10 foreign banks licenses to operate in the country.
Burma’s Financial Sector Has Been Cut Off For Years
Foreign banks have been frozen out of the Myanmar market by both their own domestic governments and the Myanmar government. For decades Western countries and others placed financial embargoes on the government of Myanmar, refusing to allow the country to interact with the global financial community.
The most severe sanctions came against Burma in the late 1980’s after the government, then a communist style dictatorship, began locking up thousands of political dissidents and cracking down on pro-democracy movements. Even before this, however, the country had been economically isolated.
Even after these embargoes were lifted, the Burmese government was slow to allow foreign banks to set up shop on domestic soil. At least for now, however, these foreign banks will be limited to servicing international companies operating in the country and for handling foreign exchange needs and other related international services.
Burma: Reforms Limited For Now To Protect Domestic Market
For the time being, the Burmese government is looking to protect domestic banks, most of whom likely couldn’t compete with foreign banks. The government has already admitted that it doesn’t want the local market to become too competitive. Regardless, it may only be a matter of time before foreign banks are granted more access to Myanmar’s domestic companies and domestic markets.
The government supports four state owned banks, while private lenders account for an additions 22. The government will be looking to protect these banks and as such foreign banks won’t be able to engage in retail banking. They also won’t be allowed to lend in the local currencies but will instead have to lend in foreign currencies. They will only be allowed on branch and will serve foreign investors.
At the moment, some 42 banks have representative offices in the country, though their operations are minuscule due to government regulations. Thirty foreign banks applied to receive the license and 25 were short listed. So far a wide mix of banks have been shortlisted. Banks shortlisted include large regional banks, such as CIMB from Malaysia, banks from India, South Korea, and elsewhere.