Neighbour will allow foreign banks by 2015
Thai banks are welcoming Myanmar's new policy of allowing international banks to operate there by 2015 as it tries to attract foreign investment, saying they are ready to run operations there.
Than Lwin, deputy chairman of Kanbawza Bank Ltd, yesterday said Myanmar authorities plan to amend laws on banking, insurance and foreign exchange operations in a few months.
The move will coincide with the advent of the Asean Economic Community (AEC), which will attempt to integrate Southeast Asian markets by 2015, he said, adding that if international banks are allowed in Myanmar, then foreign investors could fulfil their foreign exchange needs.
Pattanapong Tansomboon, a first senior vice-president of Kasikornbank, said this is a positive trend but noted that KBank will wait for the national election, as the results will affect the UN's sanction policy.
Thailand's third-largest bank by asset size wants to open a representative office there but will conduct a study on rules, regulations and culture before deciding.
KBank has set a goal of 5,000 outlets throughout Southeast Asia including Myanmar using a partnership strategy.
Siam Commercial Bank (SCB) is to date the sole Thai bank to have gained Bank of Thailand permission to have an operating office in Myanmar.
President Kannikar Chalitaporn said SCB is keen on servicing Dawei industrial projects.
Myanmar's moves to liberalise the economy have lagged political reforms since President Thein Sein took office last year after an election that ended five decades of military rule. The US and European nations have pledged to review sanctions after April 1 by-elections involving dissident leader Aung San Suu Kyi.
Myanmar is nearing a decision to dismantle its fixed exchange rate, which would lay the groundwork for reconnecting the country to global commerce.
The change may take place within a month or two, said Than Lwin, adding that reports it will take place on April 1 are just rumours.
He said it partially depends on the International Monetary Fund's formula for the single-currency system, as an IMF team is advising officials now.
The move to a managed float would end a 35-year official peg to the IMF's special drawing rights, under which US$1 fetches 6.40 kyat, about 125 times stronger than the informal market rate.
Restrictions on capital flows have left a legacy of seven unique exchange rates in Myanmar.
"The central bank needs one rate in order to manage the economy properly" said Than Lwin, adding that the government may see the deficit widen in the first year after the currency is floated.
He said monetary policy now follows fiscal policy, meaning the central bank is not yet independent.
The new banking law is designed to change this.
The Myanmar central bank may further reduce deposit and lending rates, currently as high as 13%, to bring them more in line with countries in Asean, said Than Lwin.
Existing laws restrict foreign banks from conducting transactions in Myanmar, a provision that must change for the AEC.
