OCBC, UOB make breakthrough in Myanmar with granting of licences

SINGAPORE — Oversea-Chinese Banking Corp and United Overseas Bank notched a breakthrough yesterday by receiving preliminary approval for a coveted licence to operate in Myanmar. The green light underscores the influence and competency of Singapore’s financial sector as the two banks wedge their way into one of Myanmar’s most critical and rigid industries.

The approval — announced by the Central Bank of Myanmar (CBM) yesterday — puts the two Singapore banks among nine regional financial institutions that were granted licences, at a time when Myanmar continues its economic opening to become one of Asia’s key growth markets. Twenty-five banks had applied for the licence, Reuters reported.

Yesterday’s announcement marks a major breakthrough in the Singapore banks’ push to cement their foothold in Myanmar after setting up respective representative offices there in the early 1990s.

With Singapore banks receiving two licences — the second-most after Japan’s three — it is also a sign of Myanmar’s confidence in Singapore’s banking system, analysts told TODAY. Although the Republic is the sixth-largest investor in Myanmar, Singapore firms have tendered but missed out so far recently on large-scale projects in certain industries — Yongnam Holdings’ bid for the new airport failed last year, as did SingTel for a telco licence.

“Myanmar likely views our compliance and regulatory frameworks as some of the most robust in the region, so they will want our presence there to help shape their banking structure,” said Mr Desmond Chua, a market analyst at CMC Markets.

Barclays’ senior economist Leong Wai Ho added: “It’s also an important signal that Myanmar is seeking further engagement with regional economies, particularly ASEAN. And this is where Singapore stands out as one of the country’s most familiar partners and a natural choice to replicate systems and expertise from.”

The banks now have up to 12 months to fulfil subsequent due diligence before their licences can be finalised and a branch can be formally set up. They will then be allowed to offer banking products and services to foreign companies, joint ventures and domestic banks in the country.

“Since the opening up of the Myanmar economy in 2011, we have witnessed a steady increase in foreign interest across several key sectors,” said OCBC’s head of global commercial banking, Mr Linus Goh. “(The licence) will enable us to contribute to the growth and development of the economy in Myanmar through the financial services that we will offer our corporate and institutional customers.”

UOB chief executive Wee Ee Cheong is similarly upbeat, saying: “We hope to work even more closely with the CBM and local banks to provide financial solutions for the banking community and multinational companies that invest in the country.”

Although the preliminary approval is a boost for the two Singapore banks, it could take some time for them to reap any benefits, Voyage Research CEO Roger Tan said.

“It’s a positive move, but I don’t see much immediate impact. With nine licences being granted, there will be competition from the get-go, so much will depend on how well they develop their client relationships on the ground,” he said.

Meanwhile, even though DBS was left out of CBM’s approval, it is hardly an issue for South-east Asia’s biggest bank, CMC Markets’ Mr Chua noted. “I don’t think it’s any sort of major blow for DBS’ regional ambition — keep in mind that its biggest overseas focus is on Greater China, so it already has a lot on its plate,” he said.

In a statement, a DBS spokesperson said the bank remains committed to growing in Myanmar despite the setback, adding: “DBS welcomes the opening up of Myanmar to foreign banks and remains keen to tap banking opportunities there.”