OBG talks to U Win Shein, Minister of Finance, and Chairman, Myanmar Investment Commission

Interview: U Win Shein

What type of new risks is Myanmar’s economy facing during its current transition period? How have these risks been managed?

U WIN SHEIN: Being a country in transition, there are both opportunities and challenges in many areas of the economy. Since Myanmar started opening up a couple of years ago, it has been taking various levels of necessary and calculated risk to achieve significant reforms in various sectors. There are a few groups, mainly international organisations, that are concerned about Myanmar’s pace of development, which is perceived to be too fast in their eyes. However, at the same time, some groups perceive the current pace as still too slow to achieve significant results. Myanmar perceives that it should keep up with the existing regional development. There are risks involved in many ways.

In financial services, we are facing significant changes, including the unification of the multiple exchange rate system and application of the daily exchange rate auctions to set the daily reference rates, the recent development of the interbank market, and the change in authority that made the Central Bank of Myanmar independent from the Ministry of Finance, among others. Future plans include allowing the participation of foreign financial institutions in the market in the form of joint ventures or as local subsidiaries when the new financial institutions law is enacted, developing fully computerised core banking and financial systems that include a real-time gross settlement system as a part of the digital leapfrogging strategy and developing the Myanmar Securities Exchange in 2015 when the country joins the ASEAN Economic Community. With a view to reducing the possible risks, Myanmar has been learning from the experience of other countries through south-south cooperation.

In addition, Myanmar has been collaborating with international organisations in the process of such reforms, including the IMF, World Bank, Asian Development Bank, Japan International Cooperation Agency and German Society for International Cooperation.

These organisations provide short-term consultants to give advice on specific matters as well as long-term resident advisers to enhance capacity, to walk through the process of development and to help the existing systems meet international standards.

Bank loans in Myanmar usually have short maturity whereas demand is for longer-term financing.

How can this mismatch be addressed?

WIN SHEIN: The demand for longer-term financing has not been met by banks with shorter-term deposits.

As in many countries where the financial sector is still underdeveloped or developing, the banks make a decision based only on the type and size of collateral for shorter-term loans. The central bank has indicated the possibility of making longer-term loans available under some specific conditions.

Myanmar’s existing banks are not yet fully matured in asset and liability management and liquidity forecasting. Due to the existing lack of efficient asset and liability management, allowing longer-term lending with shorter-term deposits could pose risks in the whole financial sector. The country’s banks are being nurtured in areas of asset and liability management through capacity-building and training programmes with the help of various partners. Going forward, we expect banks will be able to provide more financial services such as longer-term project financing and trade financing.

What role will infrastructure play in the country’s future economic growth?

WIN SHEIN: Hard and soft infrastructure is playing a key role in the country’s transition. It could serve as a catalyst for economic and social development, contributing towards one of Myanmar’s key goals, which is inclusive, equitable and sustainable development.

Better infrastructure can enhance the connectivity (both from hardware and software aspects), which in turn could narrow the rural-urban development gap, strengthening inclusiveness and equity country-wide.