1 Financial Sector Development in Myanmar Presented by Mr. Nyo Aye Mr. Win Hteik Assistant Director Board Secretary Ministry of Finance Central Bank of Myanmar & Revenue July, 2009

2 Contents (1) Introduction (2) Financial Sector Reform in Myanmar (3) The Structure of the Financial System (4) Financial Sector Development (5) Banking Sector Development (6) Non-bank Financial sector Development (7) The Role of the Central Bank of Myanmar (8) The Role of the State –owned Banks (9) The Role of the Private Banks and Foreign Representative Offices (10) The Future Prospect of Financial System in Myanmar (11) Conclusion

3 (1) Introduction  The Government has begun to embark on restructuring the market oriented economic system since  Then, the Government of Myanmar has been formulating and implementing economic short term plans with a view to achieve balanced economic development in all the economic sectors since the financial year (FY) 1992/93.  The previous three consecutive economic short-term plans ; 1992/93 to 1995/96, 1996/97 to 2000/2001, 2001/02 to 2004/2005, achieved with high growth rates.  The fourth five-year economic short-term plan has been formulated from 2006/07 to 2010/2011.

4 (2) Financial Sector Reform  Financial sector reform is very important for the economic development in Myanmar.  Therefore, the Myanmar government is trying to achieve improvement in financial sector development that would support the changing needs of the economy.  The existing financial system has been restructured to accommodate the new economic system since the introduction of the a market- oriented system in late  The following liberalization measures are taken; (1) enactment of new banking laws (2) granting the private sector to perform the domestic business (3) allowing foreign banks to open their representative offices (4) issuing a new commercial tax law (5) enactment of the Myanma Insurance Law (6) forming Myanma Security Exchange Centre

5 (3) The Structure of the Financial System  The financial sector in Myanmar consists essentially of the banking sector and to a much lesser extent the non-bank sector.  The financial system consists of the followings; (1) Banking Sector (a) The Central Bank of Myanmar (b) State Owned Banks (1) Myanma Foreign Trade Bank (2) Myanma Investment and Commercial Bank (3) Myanma Economic Bank (4) Myanma agricultural Rural Development Bank (c) Domestic Private Banks (d) Foreign Representative Offices (e) Myanmar Securities Exchange Centre Company Co; Ltd

6 (3) The Structure of the Financial System (Cont’d) (2) Non-bank Financial Institutions (a) Myanma Insurance Cooperation (b) Myanma Small Loan Enterprise (c) Myanma Oriental Leasing

7 (4) Financial Sector Developments  The following new laws were enacted to enable the financial system to assume the appropriate responsibilities; (1) The Central Bank of Myanmar Law 1990 (2) The Financial Institutions of Myanmar Law 1990 (3) The Foreign Investment Law 1988 (4) The Myanmar Agricultural and Rural Development Law 1990 (5) The New Saving Bank Law 1992 (6) Myanmar Insurance Law 1993

8 (5) Banking Sector Developments  Under the Financial Institutions of Myanmar Law 1990, privately owned banks were permitted to operate for the first time in 27 years since all banks were nationalized in  They provide commercial and development domestic banking services for the private sector.  The banking institutions are headed by the Central Bank of Myanmar.  The banking system- (1) strives to achieve and maintain the monetary stability by keeping track of the development of the banking sector of the financial system. (2) undertakes regulatory functions by inspection and supervision financial institutions to find out whether they are operating on sound financial principles.  The role of the banking sector is to effectively mobilize and allocate the financial resources and to promote the economic development.

9 (5) Banking Sector Developments (Cont’d) Myanmar: People’s Saving

10 (6) Non-bank Financial Sector Development  Myanma Insurance Cooperation, the state owned organization, is the only insurance company.  It is operating in Myanmar country wide.  It underwrites different classes of insurance including life and non-life insurance activities.  Myanma small Loan Enterprise, a finance company, facilities and craters to the financial needs of private individuals and small scale enterprise.

11 (7) The Role of the Central Bank of Myanmar  The Central Bank of Myanmar (CBM) is authority to formulate and implement monetary policy.  CBM uses such monetary policy instruments as interest rates and reserve requirements, to some extent open market operations.  The CBM currently keeps prudential policy in order to maintain macroeconomic stability in the economy and to promote savings.  The CBM sets the maximum lending rates, minimum interest rates on different kinds of deposit and saving certificates, and sets the maximum interest rate on loans and overdrafts.

12 (7) The Role of the Central Bank of Myanmar (Cont’d)  The Central Bank rate was raised from 11% to 12.5% in January 1, 1995 and 12.5% to 15% in April, 1996 to promote domestic saving and efficient allocation of financial resources.  The discount rate was lowered from 15% to 12% in April, 1999 and again to 10% in April, 2000 to stimulate bank lending and boost economic growth.  The Central Bank rate was raised from 10% to 12% since April 1, 2006 to encourage the monetary stability.  Accordingly, the deposit rate and lending rate of commercial banks are increased from 10% to 12% and 15% to 17% respectively.

13 (8) The Role of the Stated- owned Banks  The State-owned Banks in Myanmar includes Myanma Economic Bank, Myanma Foreign Trade Bank, Myanma Investment and Commercial Bank and Myanma Agricultural Development Bank.  The Myanmar Economic Bank is the largest state-owned bank and it provides nationwide commercial / investment banking services through its network of over 300 branches.  The Myanmar Foreign Trade Bank specializes in foreign banking business and conducts most commercial foreign exchange transaction for the state as well as for the co-operative and private sector.

14 (8) The Role of the Stated- owned Banks (Cont’d)  The Myanmar Investment and Commercial Bank provides a as a commercial, investment and development bank for local and foreign investor, joint venture companies, local and foreign business enterprises.  The Myanma Agricultural Development Bank provides seasonal short term credit to farmers through village banks over 200 branches.

15 (9) The Role of the Private Banks & Foreign Representative Offices  The CBM has granted licenses to open private banks since  At present, 15 local private banks are operating domestic commercial and investment banking services all over the country.  The private banks introduced new banking services.  Foreign banks have been permitted to open representative offices.  At present, (13) foreign banks have been opened representative offices in Myanmar as of June, 2009.

16 (10) Future Prospects of Financial System in Myanmar  Myanmar Financial Sector has been liberalized gradually for competition, efficiency and integration into the regional financial system.  Myanmar is a member of the ASEAN and Myanmar is trying to comply with the recommendations of the ASEAN.  To full fill their recommendations, the Ministry of Finance and Revenue organized the Capital Market Development Committee on July 1,  Under this committee, there are six sub-committees to implement the objectives of the main committee.  In order to establish a securities market, Myanmar Securities Exchange Center (MSEC), between the Myanma Economic Bank and Daiwa Institute of Research co., Ltd (Japan) was formed in 1996.

17 (10) Future Prospects of Financial System in Myanmar (Cont’d)  One of the main responsibilities of the CBM is to develop an efficient, fast, safe and reliable national payment system.  In line with this purpose, the CBM has been implementing payment system upgrading activities since 2007 by organizing payment system committee and Banking Network Committee.

18 (11) Conclusion  The Financial system in Myanmar has not yet developed to the stage comparable to some of our neighboring countries.  Myanmar is trying to develop stage by stage in the financial sector.  It is expected that the financial sector in Myanmar will be more supportive in implementing the economic objectives of the state in the near future.

19 Thank you for your attention.