Foreign banks can 'accelerate FDI, help jump start key sectors

The entry of foreign banks into Myanmar will help accelerate much needed foreign direct investment (FDI) as well as the development of small and medium sized enterprises (SMEs) in Myanmar, a senior executive with a Thai lender vying for a license to operate in the country said.
“A lot of local companies have expressed concerns about their ability to manage their finance and funding. So basically, to have foreign banks come in and support foreign companies in Myanmar will be a good contribution,” Kobsak Pootrakool, executive vice president of Bangkok Bank, told Myanmar Eleven in an exclusive interview last week.
He discussed in detail Bangkok Bank plans to cooperate with local banks to facilitate border trade between the two countries, as well as provide assistance to Myanmar SMEs. Bangkok Bank already has a strong presence along the border and plans to beef this up, Kobsak said. “We have about 14 branches along the border of Thailand and Myanmar. For example, Mae Sot, Mae Sariang, Kanchanaburi, and Ranong are very active. We see a lot more border trade happening [as a result],” he said, adding that he expected border trade in Mae Sot to double in the next two-three years.
“What we are doing essentially is to set up a branch, even in Mae Sot alone. That can help facilitate border trade between the two sides. So we will do this in all [border trade zones],” he explained. “In each of these important points, there are different types of businesses. For example, Kanchanaburi is vital to manufacturing. Mae Sot is a gateway to export Thai consumer products to Myanmar. Mae Sariang is another location for border trading in the northern part of Myanmar. So basically I think we are using all locations to help support bilateral trade,” he added.
The banker also saw the entry of foreign business as an opportunity for collaborations with local firms, and said such tie-ups would accelerate growth. FDI can also bring expertise in overcoming infrastructure hurdles, skills deficits and technological sophistication.
Partnerships with foreign firms can be a possible boon to both the public and private sectors in Myanmar, and could jump start some sectors. He cautioned, however, that FDI was not a panacea, saying local partners were vital. “FDI cannot stand alone. It needs local suppliers. A good local supplier knows how to bring in foreign investors,” he Kobsak said.
He identified the major challenges facing the economy as a lack of energy and inadequate infrastructure. “If the government can solve these problems, another engine of growth can be created,” he said, predicting that energy shortages would be solved within three years, but other infrastructural needs would take more time. He mentioned roads, in particular. Road networks are being upgraded and more companies are working on these, but the task would not be completed “overnight”.
“Do not be in too much of a hurry because all cannot be done overnight. You should take time to build the key components. From what I have seen so far, the situation is improving and getting better every year. What has been achieved in the past three years has already been very outstanding,” he said.
“You need to be more patient. I think things will change even more rapidly within the next two years,” Kobsak said. Growth will accelerate based on three developments:  increased electricity generation, improved roads, especially those linking Myanmar to neighbouring countries, and the launch of Thilawa special economic zone.
He said the three major concerns of Thai investors were energy constraints, the cost of doing business in Yangon – especially land prices – and regulatory uncertainty. “Some laws need to be amended. They are still not quite clear,” he said.
Still, despite some uncertainties he said there was immense interest in Myanmar. “Companies want to come here despite these concerns because they see a great potential,” Kobsak said.
The entry of foreign banks will help facilitate much-needed FDI, he added. Bangkok Bank is among the 25 banks in the final process vying for a licence to operate in Myanmar. Three other Thai banks – Kasikorn, KrungThai, and Siam Commercial – are also in the running.
Kobsak made a point of stressing the importance of SMEs for Myanmar’s development. “This is very critical. First of all, you will need very strong local banks. SMEs will be able to develop only with support from the banking system. Local banks can also support training programmes for SMEs in collaboration with foreign banks. Basically, you have to put the right package together – funding, management, and technology. If you can drive them, SMEs will improve,” he said.
Bangkok Bank will provide training and capacity building programmes for SMEs in the months ahead in order to improve their managerial ability as well as their ability to innovate and jump ahead.