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Myanmar Prepares to Liberalize Capital Markets

Central bank governor tells Institutional Investor that “revolutionary” reform is on the way.

Myanmar’s opposition leader Aung San Suu Kyi’s efforts to reform her nation’s still-oppressive political system have not only impressed foreign leaders but also are gaining support within certain circles of the government.

So says the nation’s central banker, who adds that Myanmar is ready to accelerate the opening up of its markets to foreign investors. Central Bank governor U Than Nyein says Myanmar will begin allowing global banks to set up joint ventures within the country as early as 2013.

“We are preparing to open our doors to foreign partners,” Than Nyein, who has been the bank governor for more than five years, told Institutional Investor on the sidelines of the International Monetary Fund-World Bank annual summit being held this week in Tokyo. “The government is opening up the economy and inviting foreign visitors to come to our country. We also are preparing a new foreign investment law to attract global investors. We have begun communicating with foreign bankers and are preparing them on how to do business in Myanmar.”

The nation, which was been led by an anti-Western military regime, has in the past few years been accepting proposals for reform by Aun San Suu Kyi, who was released from house arrest in 2010 after almost two decades of incarceration. Since her release, Myanmar’s foreign exchange reserves have surged, rising 58 percent to the current level of $6 billion.

Still, foreign banks are only allowed to set up representative offices in Myanmar, and so far only 22 — mostly from Asia — have done so. Of them, up to ten have expressed an interest in forming a joint venture with a domestic partner, says Than Nyein, 60, who has worked in the central bank for most of his career and was deputy central banker for five years before his promotion in 2008.

Asian banks with offices in Myanmar include Development Bank of Singapore, Overseas Chinese Banking Corp. of Singapore and Siam Commercial Bank of Thailand. Than Nyein says a number of global banks, among them Standard Chartered, have expressed an interest to enter the market.

“We are ready to hand out foreign banking joint ventures licenses,” he said, though he noted a new foreign investment law has yet to be passed by parliament. Than Nyein says that could happen by year’s end.

Parliament enacted a new foreign exchange management law in August that will liberalize the market for foreign investors. Legislators also are working on drafting a securities exchange law that will lead to the formation of a Securities Exchange Commission.

“Our expectation is to have before 2015 a Yangon Stock Exchange,” Than Nyein said, adding that dozens of local companies are in the process of preparing to be in the first batch of initial public offerings. “The next few years will be revolutionary years in Myanmar,” he predicted.

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