Economist calls for caution on pace of banking reforms

Prominent economist U Myint has argued that Myanmar should take more time to weigh up the potential consequences before allowing “big” foreign banks, institutional investors and finance firms into Myanmar.

In a presentation to the National Defense University earlier this month, U Myint, an economic adviser to President U Thein Sein, told the audience that the Central Bank of Myanmar was still too weak to properly supervise a liberalised financial sector.

“The Central Bank of Myanmar got independence only a few weeks ago. Its hands are full trying to get the exchange rate right and supervising banks in the country that are still in the rudimentary stage of development,” said U Myint, who is also the head of the Centre for Economic and Social Development at the Myanmar Development Resource Institute.

“So if the big players at the gate, such as big banks that even the United State’s Federal Reserve could not properly supervise, are invited to come in, the costs and benefits of such a move to the country and its people will need to be carefully weighed and given serious thought and consideration,” U Myint said.

“To do this we need time. Time is needed for the CBM to get its act together. Time is needed to enable our banks to engage more fruitfully with the big players from abroad for mutual and equitable benefit.

“Only by engaging with them will our banks be able to acquire knowledge and experience and will be able to operate and provide services at international standards.”

His comments come following reports that the government is considering allowing several foreign banks to establish 100-percent foreign-owned subsidiaries in Myanmar, a move seen as threatening to the country’s nascent domestic banking sector.

Showing his trademark sense of humour, U Myint suggested Myanmar look to China, which waited decades after initiating reforms to open up its banking sector, for guidance on sequencing financial sector liberalisation.

Noting that Deng Xiaoping once described the reforms that he initiated in 1979 as “groping for stones to cross a river”, U Myint argued that “perhaps it will be wise for us to do some groping for stones at this stage, instead of jumping into the river and rushing to swim across to the other side”.

source: The Myanmar Times

http://www.mmtimes.com/index.php/national-news/9130-economist-calls-for-caution-on-pace-of-banking-reforms.html