“Myanmar has embarked on a momentous journey to strengthen and develop its financial sector. But it must do this in a progressive and calibrated manner … making sure the fundamentals and preconditions are in place.”

Ravi Menon, Managing Director of the Monetary Authority of Singapore, projects great confidence in Myanmar’s latest financial reforms, but calls for caution in terms of implementation. Central Bank officials in the country have announced that 2014 will mark the opening of Myanmar’s finance sector, whereby the government will, for the first time, permit the independent operation of foreign financial institutions. The exact selection process and the affected banking services have yet to be determined, but the government aims to embrace the advised incremental approach: Foreign investors will be properly regulated to avoid sudden capital flight in case of crises or cannibalisation of market share of domestic banks.

Thirty four foreign banks are currently present in Myanmar with representative offices, and the lifting of economic sanctions by the U.S. and the EU is expected to ease their licensing processes. Their full-fledged entry in the Myanmar market would grant access to much-needed funding for prospective investors and knowledge transfer to domestic banks in terms of innovation, risk management and fair competition.

Myanmar has already embarked on a series of financial reforms, including the new Central Bank Law, setting in stone an independent mechanism for the formulation of monetary and exchange rate policy.  The new Financial Institution Law is currently being drafted with the guidance of key multilateral organisations including the World Bank. A 2013 McKinsey study estimates that Myanmar will need to invest $320 billion up to 2030 to keep up an annual growth of 8 percent and financial liberalisation is key to reaching this ambitious target.

Find out more about the latest regulatory developments since the 2012 Foreign Investment Law at ALB’s Myanmar Masterclass, to be held on March 27 in Singapore.

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