OBG talks to Andrew Géczy, CEO of International and Institutional Banking, ANZ Bank; Chartsiri Sophonpanich, President, Bangkok Bank; and Abdul Farid Alias, Group President and CEO, Maybank

Interview: Andrew Géczy, Chartsiri Sophonpanich, Abdul Farid Alias

What were the key factors behind the decision to apply for an operating licence in Myanmar?

ANDREW GÉCZY: Myanmar is a natural fit with our regional strategy, which focuses on connecting our customers across Asia Pacific with opportunities in our core markets of Australia and New Zealand. Myanmar’s population has both scale and favourable demographics. In this Asian century, there are not many more strategic locations than Myanmar, which is situated between India and China and close to Thailand, which combined account for about 80% of Myanmar’s imports. The country is also linked directly to our Greater Mekong strategy across Laos, Cambodia, Vietnam and Thailand. Myanmar will require significant investment in new infrastructure, especially in areas of natural resources, utilities, infrastructure and agribusiness, sectors that align with our existing strength and expertise.

The improvement of basic infrastructure such as roads, rails and telecoms, as well as resource-industry growth, is highly capital-intensive and Myanmar will need to attract outside capital and expertise to develop and service this. Our customers are also showing strong interest in establishing positions in Myanmar and our licence will help us to connect them with banking services that domestic banks are not yet able to offer.

If you look at the progress already made and the size of the opportunity ahead, it is clear that there will be a need for significant foreign direct investment (FDI) to fund the necessary infrastructure. In 2013 approved FDI was at $4.1bn, in 2014 it is expected to exceed $5bn. Myanmar is at a much earlier stage than other ASEAN economies, but the way forward will be similar. It requires the same deepening in equity markets, debt capital market, infrastructure financing and payments.

CHARTSIRI SOPHONPANICH: We have believed in Myanmar’s great economic potential for many years. With the recent opening up of Myanmar we are seeing significantly more business activity and strong interest from our international and Thai customers. Now that we have obtained preliminary approval for a foreign banking licence, we will be able to provide a wider range of services, give more support to the local banking industry and, in general, be more effective in Myanmar.

Over the years we have been tremendously impressed by the local people with whom we have worked. It helps that there is a natural connection between Thailand and Myanmar, and that our interests are closely aligned. We are close neighbours with a common border of more than 2000 km; we share many cultural traditions; we learn from each other; and our businesspeople have worked well together and developed many long-term relationships. The country has an abundance of natural resources, a skilled and growing workforce, and a rapidly growing consumer market.

Meanwhile, the government’s recent reforms in areas such as the exchange rate system, foreign investment legislation, the independence of the central bank and liberalisation of key industries, as well as political reforms, have inspired great optimism about Myanmar’s future. FDI, trade and capital flows are all expected to sharply accelerate. Many businesses are keen to come to Myanmar to participate in these exciting opportunities and help local businesses prosper, and Bangkok Bank is looking forward to supporting this process.

ABDUL FARID ALIAS: Myanmar is strategically located at the crossroads of China, India and South-east Asia, with access to a combined population of 3bn and GDP of $13trn. The positive political and economic developments over the past few years, backed by Myanmar’s rich natural resources and large workforce, make Myanmar an attractive investment destination. With a population of over 50m and an economy set to expand at about 7.8% for both FY 2014 and FY 2015, Myanmar will see increasing demand for banking and financial services.

Also, given the impending formalisation of the ASEAN Economic Community in 2015, we believe there will be a greater flow of trade, investments and people to and from Myanmar. Hence, we see significant opportunities for Maybank to support the anticipated demand in financial services as well as the trade and investment flows in and out of the country. Maybank believes in Myanmar's long-term growth potential and we are excited to be part of its growth journey. Our presence in Myanmar also strengthens our footprint in ASEAN and within the Greater Mekong sub-region. Our upcoming Kunming branch in South China, coupled with our presence in Indochina, positions us as one of the few regional banks that can also facilitate cross-border trade and investment growth in the region.

In your opinion what role will foreign banks play in the evolution of Myanmar’s financial sector?

SOPHONPANICH: Foreign banks, including Bangkok Bank, can share their expertise with domestic institutions in areas such as credit assessment, risk management, product innovation and cultivating long-term customer relationships. This will help Myanmar’s banks better serve their local customers, both large and small. Over the long run – as our experience in Thailand shows – the emergence of such a vibrant entrepreneurial base is critical to successful economic development. GÉCZY: While there is little doubt about Myanmar’s growth potential, financing the necessary infrastructure to support growth will be the key to achieving it. This growth will need significant support from the financial services industries. Right now, the local banking sector requires further development and there remains considerable demand for higher-quality banking support. There is a strong commitment and resolve by the Myanmar government and the Central Bank of Myanmar to develop the financial sector in the near to medium term. This is accompanied by a realisation that Myanmar’s growth and the opportunity for its sizeable population will benefit from bringing in foreign capital and expertise alongside local operations.

We see our role as not just being a commercial enterprise but contributing to social capital as well. Our Mon-eyMinded financial literacy programme is regarded as a market leader in this space. Already successfully rolled-out across Australia, the Pacific and parts of Asia, our Myanmar pilot was the biggest to date. This programme is not just tailored to be culturally appropriate. In each country where we offer MoneyMinded, it is completely overhauled to address that country’s needs. While we currently have no intentions of offering retail banking services, introducing MoneyMinded to an influential group of civil servants, local non-governmental organisations, members of the chamber of commerce and central bank staff demonstrated our commitment to working as a partner to Myanmar.

In banking terms, our opportunity is in relation to servicing multinational clients and providing products such as term and export credit debt; funded and non-funded trade finance; payment and cash services; advisory; foreign exchange; and other market products. Local financial institutions have limited capacity to lend, as they currently rely exclusively on local deposits as their source of funding. Their capital bases are also low which means they will not be able to service such significant FDI and trade flows on their own.

The country needs to be supported by the entire financial ecosystem including local and foreign banks, debt capital markets, pension funds, infrastructure funds and equity capital markets. Hence, the award of foreign bank licences is a milestone step in the right direction. In 2014 the government gave licences to foreign banks and again ran a transparent, efficient and timely process. Moreover, Myanmar is chairing ASEAN and that is a good signal that has provided additional momentum to the reform agenda of the government.

FARID: We believe foreign banks will play a key role in the growth of Myanmar’s financial sector and we are encouraged by the strong support provided by the central bank in terms of foreign banks taking an active role in building and shaping the financial services sector. Foreign banks will not only be able to offer financial services and products, they can share their experience and knowledge with local banks and establish smart partnerships for mutual benefit. There is also the aspect of talent development in which these banks can play a role – through providing training opportunities as well as enabling cross-border movement of talent where people from both sides can learn from one another.

For Maybank specifically, in line with our mission to humanise financial services, we intend to partner with Myanmar in the development of the financial services sector through various channels, ranging from knowledge-sharing to training across the various areas of banking. We also see opportunities to work with the local Myanmar banks in the development of new products and services, structuring of deals, the interbank markets and many more. There are plenty of opportunities for local and foreign banks to collaborate and contribute to the growth of Myanmar's financial sector and we intend to be at the forefront in this aspect.

The growth of small and medium-sized enterprises (SMEs) is vital for job creation. How will the banking community accelerate credit flows to the SME sector within Myanmar?

FARID: We are strong believers of the role of SMEs in the country's economy. Whilst our banking licence does not permit Maybank to cater to local SMEs for the time being, we are able to share our experiences in these areas, as well as other aspects of consumer banking, to local banks as part of our knowledge-sharing initiatives. We are ready to offer advisory services and support for SMEs, including those that have businesses in other ASEAN countries or global financial centres, through our extensive experience and branch network. Maybank has a strong record with SME business across our key ASEAN markets and believe that our expertise in the region will be beneficial to Myanmar.

SOPHONPANICH: SMEs make up more than 95% of businesses in Myanmar, so the sector needs to be strong in order for Myanmar to reap the full benefits of economic development and ensure that growth is balanced and sustainable. However, many lack access to the technology and knowledge needed to raise productivity and grow. To that end, Bangkok Bank will partner with local banks to cultivate entrepreneurship and increase productivity among SMEs. We have a lot of experience doing this in Thailand, where our capability-building programmes have helped thousands of SME clients accelerate growth.

We have sponsored TV shows, training and study tours to share sector-specific best practices, including manufacturing processes, supply-chain and market networks. The bank already has plans to implement some of these applicable capability-building programmes for SMEs in Myanmar.

What role will your bank play in the development of Myanmar’s talent pool?

SOPHONPANICH: We are dedicated to investing heavily in local talent – we are convinced that in the long run Myanmar will live up to its full potential, powered by its own people. For our new branch, we will employ local staff and repatriates, and up-skill them by providing training programmes tailored to local needs. We will be recruiting from local universities and offering scholarships to promising Myanmar students.

We will also be providing structured intra-bank mentoring programmes that pair promising local hires with experienced managers that can help groom them into the company’s future leaders. In addition, we will continue to share our knowledge and expertise with Myanmar banking executives and personnel, and continue our long-standing exchange programmes to support the development of the local industry.

FARID: The development of Myanmar’s talent pool is central to our growth plans. We have already conducted various training sessions in the country to share our knowledge on banking areas such as transaction banking, global markets, risk management, human resources and business excellence.

In September 2014, we launched the Maybank Internship Programme to train and develop young Myanmar talents. As we move forward, we see plenty of other opportunities to develop the country’s talent pool.