Interview: U Win Shein
How will regional integration under the ASEAN Economic Community (AEC) assist in the development of the local banking sector?
U WIN SHEIN: Myanmar can benefit in many ways from regional integration under the AEC process. In pursuit of financial integration, a sound regulatory and supervisory framework will be incorporated in the Myanmar banking system. This will help foster financial and macroeconomic stability, as well as the healthy development of banking and financial services. Coordinated policies in the region can help reduce risks to banking activities, while regional integration is expected to promote investment potential through the freer flow of financial capital and lower capital costs.
For these reasons, ASEAN members, including Myanmar, will have easier and greater access to finance and investment. This will facilitate infrastructure development and sustainable growth. Myanmar can also enjoy technical cooperation from the region’s banking integration schemes and this will help enhance Myanmar’s human resource development, which is much needed. Regional integration will also grant ASEAN members a larger potential share of global commerce. Since small and medium-sized enterprise (SME) financing and financial inclusion are on the agenda of the regional integration process, SME development in Myanmar will be enhanced, while financial inclusion will help increase poverty reduction and social stability.
The banking sector is a key driver in the financial integration process, and certain policy measures must be in place. Monetary policy will need to focus on capital flows, exchange rate flexibility, interest rates and crossborder lending activities, while fiscal policy will need to consider the channels for external financing and the development of a government treasury bills auction.
What role will the mortgage lending industry play in the development of Myanmar’s banking sector?
WIN SHEIN: Mortgage lending is an almost untapped frontier for Myanmar’s banks. With the sizeable and growing population in the country, there is great potential for mortgage lending to grow, particularly considering the existing emphasis on urban development. The share of mortgage lending in the total loan portfolio of Myanmar’s banks can grow rapidly and it will probably become a major source of income for banks in the country in the future.
A well-functioning mortgage market allows small and medium-scale industries to attain better access to the financial sector. SMEs would be able to access mortgage financing and, if this happens, it will support SME development, job creation and poverty alleviation in the country. However, prudent regulation over mortgage lending and sound monitoring of activities should be put in place to ensure that excessive mortgage lending, which can be a source of destabilising factors in the financial sector, can be safely avoided.
The local stock exchange is set to be established in 2015. What impact will this have on attracting foreign direct investment (FDI) into Myanmar?
WIN SHEIN: There will be very limited impact on foreign investment inflows within a few years after the stock exchange is opened in 2015. No matter how well planned it is, it will take a minimum of two or three years for a newly established stock exchange to become a well-functioning market.
In this early stage, most investors participating in the market are likely to be short-term investors, who will be interested only in making a quick return on their investment and withdrawing their money. Attracting long-term investors will take some time, as they are likely to wait and watch the markets potential before making their long-term investments.
In order to protect local investors, there is also the possibility that foreign investors will not be allowed to participate in the stock exchange during its early years. We will also need to ensure that companies listed on the stock exchange have strong fundamentals, so that they can attract high-quality institutional investors.
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