Aung comes to Myanmar’s central bank with a wealth of
experience, having been the deputy minister for national planning and
development and, before that, economic advisor to the president. Prior to that,
he worked in Thailand, Japan, China and other markets as a consultant. Sandar
has been with the central bank for 19 years and is now focusing specifically on
payments and settlement.
Aung believes that the sovereign state also
known as Burma has been “asleep” for many decades, and every attempt in recent
years to open up to the rest of the world has faced problems, from the 2008
global financial near-meltdown to the subsequent sovereign debt crisis in
Europe. At the same time, he admits “we have internal problems – sanctions
imposed by the West. We ignored the social development and environmental
complications.” As a result, “we need to emphasise social, economic and
environmental development.” While previous governments came up with quick fixes
that created problems, Aung says the new government is working on
multi-dimensional policies in investment, trade, labor, environment and other
While the government concentrated on political development
and national reconciliation in the first year after Myanmar began to open up in
2010, Aung reports that over the past 18 months a parallel priority has been
economic, social, institutional and administrative development. What is
difficult, is dealing with the hopes and wishes of all the stakeholders. “We
have to bring along all the stakeholders. We don’t have much [experience with]
democratic practices. We have to go through that evolution. We are hoping that
the evolution is going to be shortened.”
A key objective is to come up with reliable
and inclusive plans for sustainable development. Along with developing a master
plan for rural development and poverty reduction, Aung says the government is
working on rules and regulations for trade, labour and finance that are
transparent and predictable to encourage a favourable investment and business
climate. The government is also trying to develop liberally-regulated areas that
include three special economic zones (SEZ), which he expects will be the biggest
in the whole region. While funds are clearly needed for development, Myanmar is
not borrowing from the International Monetary Fund (IMF), so that it can avoid
coming under the monitoring programme.
While agriculture is very
strong and accounts for more than 40% of Myanmar’s gross domestic product (GDP),
the government hopes to have more labour-intensive industries soon, especially
in manufacturing, so it can open up more jobs. “We have had a 400-500 percent
increase in investment,” says Aung. The SEZs will be a core part of that
development and he expects them to include a variety of export processing and
export-oriented industries as well as supermarkets, hotels international schools
and international hospitals.
‘Hard infrastructure’, such as
electricity and telecoms systems, is a critical need. The government selected
two telecoms operators, and set a target of growing telecoms density from 9% now
to 86% within five years. To improve electrical power delivery, the government
plans to work with independent power producers and is also looking at power
purchase agreements with foreign companies. While it is stuck with agreements
negotiated by the previous government with neighboring countries for natural gas
production, Myanmar will be able to use extra gas for its own needs after
Aung reports that the Asian Development Bank (ADB) had devised
the concept of an east-west greater Mekong corridor connecting the Pacific and
Indian Ocean. These plans have never been realized because Myanmar has always
been “the missing link,” but are now finally progressing. The government is also
discussing the SEZs with the Thai and Japanese governments, and once they are
developed they be connected to the southern corridor through Bangkok, Siam Reap
and Ho Chi Minh City to the Pacific.
The legal structure has been a
particular challenge and, for example, Myanmar is still using a Companies Act
enacted more than a century ago. Since these antiquated laws cannot simply be
amended, the government is working to repeal them and replace them with an
updated Act and laws for the central bank law, payments and foreign investment.
The Financial Service Sector
Aung reports that foreign
financial institutions can open up representative offices in Myanmar for
information collection and to offer more extended services, as well as to give
recommendations to their clients, facilitate trade and engage with domestic
financial institutions (FIs) for equity participation or joint ventures. The
financial institutions law is being revised, and “we hope the law will be up and
running by the end of this year,” at which time foreign FIs can enter the
While there are US sanctions still apply to three banks,
there are no US sanctions on the country itself and European Union (EU)
sanctions were lifted in April 2013 so “we don’t have any sanctions problem.” US
treasury officials have told Aung to report any problems to them so they can
Domestic banks have been in existence for more than 20
years, and of the current total of 24 nineteen have now installed SWIFT.
Capacity-building is underway, with larger banks often working with foreign
experts and with the Myanmar Bank Association (MBA) providing funding for
training for smaller banks.
We are hoping for the financial
institutions law by the end of this year,” says Aung and the guidelines for
licensing are being drafted. “We hope by the end of this year or early next year
we will be able to go through this process for foreign financial institutions to
come in.” At the same time, he tells gtnews, “we don’t want to get existing
banks to be marginalised. We have to come up with a modality, to make the
existing banks and foreign financial institutions to be complementary.”
Aung notes that Myanmar is still a cash society and doesn’t use debit cards,
“so that is a difficulty for going abroad, checking in at the hotel, as the
deputy governor doesn’t have a credit card.” However, automated teller machine
(ATM) networks are now being set up, MasterCard and Visa are coming in, cash can
be withdrawn from ATMS and point-of-sale (POS) terminals are under discussion.
Mobile financial services is one area where Myanmar may leapfrog technology.
Sandar adds that payments systems include both retail and large
value payments. For large value payments systems, Myanmar has electronic
payments, and fund transfers are provided by a local service provider. While the
clearing system is still manual, there are plans to update to real-time gross
settlement (RTGS). For retail payments, the Myanmar Payments Union (MPU) has
already set up a switch and the three-stage roadmap is to issue domestic cards,
acquire international cards, and issue international debit cards or prepaid
cards. Over time, she adds, Myanmar intends to access the Association of
Southeast Asian Nations (ASEAN) region through the MPU, and it is inviting
overseas service providers to upgrade the MPU.
Aung also expects
the capital market to be up and running in 2015, building upon the Myanmar
Securities Exchange committee that was set up some 20 years ago, and says that
hundreds of public companies are excited by the prospect of getting listed. “We
signed a memorandum of understanding [MOU] with the Tokyo Stock Exchange [TSE]
and Daiwa to go ahead in 2015.”
Although Myanmar does not have
developed markets, it is working very hard on monetary policy including the
money supply, interest rates, government debt securities or other channels.
Myanmar has set a target for the secondary bond market and it is developing
building blocks, for example with a plan to start treasury bill auctions
“probably in early 2014,” says Aung and that “by law, we are more autonomous
than any other central bank in the region. Even licensing power lies with the
For trade, most traders rely on telegraphic
transfers (TT) rather than letters of credit (LC). While only state-owned banks
had SWIFT connections and other private banks are not authorised to conduct
foreign banking services, these private banks now all have a license to include
foreign banking so they have to come up with policies and infrastructure.
While it has been just a few short years since
Myanmar began to open up, it has made significant progress. Even so, the pace so
far is nothing like what is expected over the coming years. As Aung observes:
“We want to be an Asian elephant, not an Asian tiger, which is too vicious. We
will enjoy sustainable development.”
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