MYANMAR EASES RESTRICTIONS ON FOREIGN BANK LENDING

Source: Thomson Reuters, November 9, 2018


NEWS
Myanmar’s central bank on Thursday announced new rules allowing foreign banks to lend to local businesses, bringing further reforms to the country’s stunted banking sector. In a letter signed by deputy governor Soe Thein, the bank said the decision was made to give local businesses more access to financing. Representatives of the bank could not be reached for comment. “Finally, the old system of restrictive access to finance is being stripped away. Bit by bit…,” said Sean Turnell, an economic advisor to Myanmar leader Aung San Suu Kyi. Banking and business leaders have been urging the government to speed up reforms in the sector, which suffered decades of mismanagement under the former ruling military junta.

 

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RESEARCH VIEW
While progress has been made, the banking system needs continued modernizing and liberalization. Higher standards reflecting the adoption of a new regulatory framework that is in line with international standards would help to improve the soundness of the banking system. Going forward, Colliers thinks that the demand for credit will remain strong, and banks could deliver more diversified products to serve their customers. According to the Central Bank of Myanmar, due to a restriction on loan terms, credit to the private sector has mainly gone to agriculture, trade and service activities, which accounted for 59.0 percent of total outstanding loans, while loans to manufacturing stood at just 10.0 percent of the total loans as of October 2017. The introduction of term loans helps the banking sector to play a more important role in channeling savings to longer-term loan demand from the manufacturing sector. On the retail banking side, diversification is still at a very early stage, and a few banks have just started to provide mortgage loans to finance affordable housing projects, which could potentially be a fast-growing market.

NEW DAWN FOR REMOTE ANDAMAN SEA ISLAND TOURISM

Source: Asia Times, November 11, 2018

NEWS
Regarded as the ‘last island paradise’ in Asia, the archipelago is now opening up to small-scale tourism. The first foreign visitors over the last two decades were divers aboard chartered live boards out of Phuket in Thailand, who came for the coveted dive spots teeming with manta rays and sharks, but were not allowed to stay on any of the islands. The expense and need for permits and marine entry fees still present barriers to an invasion by tourist hordes, though the opportunity for island day-trips and a weekly arrival of a cruise ship from Malaysia suggest things are changing fast.

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RESEARCH VIEW
Colliers believes that the region as a whole holds great potential for tourism development. The prevailing view of Myeik city is as one of two jumping points (the other being Kawthaung) for exploration of the Myeik archipelago which contains a wide range of islands with pristine beaches. At present, there are very limited options for staying overnight in the archipelago and therefore Myeik city should remain as a popular place to stay for a few nights. Even with the development of upscale resorts over the coming years this will still mean that many visitors will find the high rates prohibitive, supporting further demand for hotel rooms in Myeik city. There is some potential for development of tourism in Myeik itself with a picturesque lake in the centre of the city as well as a number of streets that contain colonial buildings where some could be refurbished as restaurants, boutique hotels and shops. A walking tour consisting of around 40 properties has been created.


THREADING THE NEEDLE: THE RISE OF MYANMAR AS A GARMENT MANUFACTURING ALTERNATIVE

Source: ASEAN Briefing, November 12, 2018

NEWS
After reopening its economy in 2012 following several political reforms beginning the year before, Myanmar has been receiving significant increases in foreign direct investment, reaching a high of US$9.5 billion in the 2015/2016 fiscal year ending in March. To put this in perspective, the total amount of FDI added up to only US$329.6 million in 2009/2010, the year before the military ceded power. While oil, gas, and energy remain the sectors with the highest FDI inflows, investments into Myanmar’s manufacturing industry are rapidly gaining traction, having risen from just US$33.2 million to over US$1 billion in the same period, and hitting a high of US$1.8 billion in 2014. As China strives to move up the value chain and focus more on high-end manufacturing, the country’s wages have risen to the point where many garment manufacturers are looking to invest elsewhere.

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RESEARCH VIEW
The Burmese export value of textiles and garments has increased drastically since the economy reopened. With the exponential increase in garment exports since 2010, they now account for 10% of Myanmar’s total export revenues. This fiscal year, the country is poised to reach new heights. During the first five months of the 2017/2018 fiscal year starting in April, garments sector exports have already reached US$745.5 million, up from US$232.8 million during the same period last year. Looking ahead, the Myanmar Garment Entrepreneurs Association has set an export revenue target of US$12 billion in 2020. Accordingly, the number of jobs in the industry is projected to increase drastically from around 230,000 in mid-2015 to 1.5 million in 2020. Overall, the country’s trajectory is encouraging. The government is actively seeking foreign investment, and with wage levels standing below those in competing ASEAN countries such as Vietnam and Cambodia, several large retailers have already entered the country. More retailers are expected to follow in the coming years, thereby confirming the emergence of Myanmar as a new competitor in Southeast Asia’s garment manufacturing industry.