Although Myanmar is still closed to foreign banks, major Japanese financial institutions have stepped up their involvement in the country, preparing themselves for the time when the government will give the long-awaited green light to their full-fledged operations.
“Currently we are limited to collecting and providing information in Myanmar, but as a medium-term goal we will certainly be aiming to launch our core financial businesses,” said Tetsuya Akutsu, deputy general manager in the international coordination division of Mizuho Corporate Bank.
The bank reopened a representative office in Yangon in early April for the first time since 2003 to help Japanese corporate clients set up business bases in the country.
At present, foreign banks are under strict rules by Myanmar. They can only set up a representative office and are not licensed to do primary operations such as lending, financing, opening bank accounts, accepting deposits or foreign exchange dealings.
“Personally, I think what’s most worrying in Myanmar is that its financial sector is extremely slow in development,” said Daikichi Monma, deputy director general at the Finance Ministry’s International Bureau.
“I hope that relevant authorities in Myanmar, including its central bank, will soon set a course for the financial sector” and decide on the easing of regulations on the banking sector, Monma said.
He said that in other Southeast Asian countries, Japanese banks have played an advisory role in promoting investments by firms there, leading to the creation of jobs.
Despite the adverse circumstances, Mizuho and other major Japanese banks, including Sumitomo Mitsui Banking Corp. and Bank of Tokyo-Mitsubishi UFJ, see that having locally based human-to-human contact in the form of a representative office helps them foresee developments in regulatory reforms of the investment environment.
“If we have a representative in Myanmar, we may be able to see firsthand signs of new reforms coming. Although it isn’t our core business, the local representative could also act as a guide to our clients when they visit Myanmar,” Akutsu said.
Sumitomo Mitsui Banking said in late May that it has agreed with Kanbawza Bank of Myanmar, the country’s largest commercial bank, which was established in 1994, to provide banking expertise and management knowhow with an eye to a broader business tieup. The move is the first by a Japanese bank during the recent democratization progress in the country, it said.
The agreement is seen as increasing the Japanese bank’s presence as Kanbawza Bank late last year was among the first commercial banks in Myanmar to launch foreign exchange operations, after the country’s central bank granted approval for such operations.
In a related move in the securities sector, Daiwa Research Institute, the research arm of Daiwa Securities Group Inc., and Tokyo Stock Exchange Group Inc. have agreed with Myanmar to help it set up its first stock exchange and cultivate a capital market, in the hope that they will gain a competitive edge in expanding there when the market actually develops in the future.
Under a memorandum of understanding Daiwa and TSE signed with the Central Bank of Myanmar last month, for the time being, they will provide technical assistance on the design of securities exchange markets and the enactment of stock exchange rules, as well as support human resource development and hold seminars on finance and capital markets.
“Our communication with Myanmar is currently going extremely smoothly,” TSE President Atsushi Saito told a recent press conference. “The project (to develop a stock exchange) is something that requires years to accomplish, such as in the year 2015 or 2016. We are just at the start line.”
But while such expectations are high for Myanmar, the country is still mired in day-to-day business difficulties. The new investment laws are likely to improve Myanmar’s business climate significantly but it will not immediately solve its massive infrastructure deficits.
“There is high interest in Japanese firms about making forays into Myanmar, but I doubt that most can actually make moves,” Akutsu said. “It is said that labor costs are cheap in Myanmar and that its people are hardworking, but its social infrastructure is extremely poor.”
In that respect, he said the Japanese government’s recent decision to restart full-fledged financial assistance for the first time in a quarter of a century would help develop social infrastructure in the Southeast Asian nation, allowing it to attract more investors.
Mitsui sets up shop
Trading house Mitsui & Co. has held a ceremony to inaugurate a new office in Naypyitaw amid growing expectations over Myanmar’s economic development.
The ceremony Thursday was attended by Mitsui President Masami Iijima, Japanese Ambassador to Myanmar Takashi Saito, government leaders including Commerce Minister Win Myint, and local business chiefs.
Japanese companies are swiftly moving to gain a foothold in Myanmar in anticipation that a reform drive launched in March last year will rapidly boost economic growth.