10/8/2012 1

CENTER FOR MANAGEMENT TECHNOLOGY

2ND MYANMAR INVESTMENT SUMMIT

FINANCIAL AND BANKING REFORMS IN MYANMAR

YANGON, UNION OF THE REPUBLIC OF MYANMAR

OCTOBER 17, 2012

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FINANCIAL AND BANKING REFORMS IN MYANMAR

Presented by

Naw Eh Hpaw

Deputy Director General

Central Bank of Myanmar

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Myanmar

Myanmar is situated in South East Asia.

An area of 676,577 sq km with a coast line of 2,832 km and the Estimated Population is about 59.13 million.

The terrain ranges from the arid plains to cool, sprawling

hills, snow-capped mountains, white-sand beaches, lush

farmland, hidden valleys and thick virgin forest.

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Geographical Proximity and Strategic Location

Demographic Bonus

On the Track for Economic Recovery and Development

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Macroeconomic Indicator The growth rate of the real GDP

5.3 % in FY 2011/12 and projected at

6.25% in FY 2012/13

Total exports by 28.1 % to US $ 8.42 billion

Inflation declined to 4 % in FY 2011/12 and is projected to 5.75 % in FY 2012/13

The national poverty incidence

fallen from 32 % to 26 %

four million people escaped from poverty

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Macroeconomic Policy Priority It is said that A historic opportunity to jump-

start the development process and to boost the living standards but …….A long way to go

The government has adopted appropriate policies and plans in the areas which call for top priority

The five-year short-term plan starting from FY 2011/12 to FY 2015/16

Modernization of the financial system

Monetary Policy

Fiscal Policy

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Liberalization in the Financial Sector

CBM encouraged the establishment of the four new private banks as well as the activities of the existing private commercial banks

19 domestic private banks with more than 300 branches all over the country and all the banks are in full swing now

Reintroduced an interbank foreign exchange market although it has been about 50 years since this market was last allowed to exist

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Liberalization in the Financial Sector

( Continued )

Local private banks have been allowed to perform both at home and abroad

The remittance of currency from Myanmar citizens working overseas becomes much easier and more reliable than before

Upgrading the payment system and introduction of online banking system

Unifying the exchange rates while easing the exchange-rate restrictions on current payments and transfers

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A well-defined legal framework Amendments to the existing laws

Central Bank of Myanmar Law 1990

Financial Institutions of Myanmar Law 1990,

All these amended laws and regulations concerned are to be enacted by the parliament

The Foreign Exchange Management Law was enacted by the Parliament on August 10, 2012

Establishment of foreign exchange business and also the realistic managed float exchange rate

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Monetary policy CBM has implemented a prudent monetary

policy framework

CBM is to be given the full operational autonomy

Interest rate policy Reduced the central bank discount rate from 12 % to

10 % starting since January 1, 2012.

Moderated the interest rates for Government Treasury bonds

An incentive for the purchases of treasury bonds, which is the essential to phase out deficit monetization and to reduce inflation further

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Fiscal Policy • Reduce the unproductive expenditure but also

prioritize the policy toward social responsibility such as education, health and social protection

• Fiscal decentralization process and sub-national budgets was first separated from the Union budget

• Appropriate reforms to tax policy and tax administration

• Fiscal deficit was 4.8 % in FY 2011/12 and is also projected at 3.8 % for FY 2012/13

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Threats and Challenges

1) Special Interest Groups

2) Imbalance in the Community

3) Transparency, Accountability and Reliability

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Economic Outlook • Modernizing Myanmar’s economy has been looked

upon as a process of removing impediments to growth

• By encouraging all inclusive political process as well as enabling economic environment

• Reassuring the financial system development and liberalizing trade and foreign direct investment further

• Delivering the expectations with sustainable development by consolidating the macroeconomic stability measures such as the exchange rate unification scheme, the attempt to fiscal discipline and a series of liberalizing policies.

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Inflation

GDP (FY 2011-12) US$ 54.03 billion (MMK 45,928,000 million )

GDP (PPP) US$ 82.72 billion (MMK 45,928,000 million )

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-10

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% p

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Consumer Price Index

Lending Rate

Deposit Rate

Spread

Trends of Interest Rates in Myanmar: Spread Reduced to 3% from 5% in Sep 2011

Source: IMF, International Financial Statistics

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Trade Balance in Myanmar (FY 1991-2001)

Fiscal Year Export Imports Trade Balance

1991-92 430.6 842.3 -411.7

1992-93 590.7 1,010.2 -419.5

1993-94 695.6 1,301.7 -606.1

1994-95 917.4 1,487.8 -570.4

1995-96 934.4 1,830.8 -896.4

1996-97 929.9 1,945.8 -1,015.9

1997-98 1,010.8 2,160.4 -1,149.6

1998-99 1,113.1 2,431.4 -1,318.3

1999-00 1,353.4 2,365.7 -1,012.3

2000-01 1,838.2 2,064.6 -226.4

2001-02 2,484.8 2,304.4 180.4

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Trade Balance in Myanmar (FY 2002-2010)

Fiscal Year Export Imports Trade Balance

2002-03 2,727.5 2,101.5 626.0

2003-04 2,780.8 1,998.7 782.1

2004-05 2,902.4 1,805.0 1,097.4

2005-06 3,531.1 1,815.1 1,716.0

2006-07 5,202.7 2,687.6 2,515.1

2007-08 6,363.4 3,076.3 3,287.1

2008-09 6,735.8 4,089.0 2,646.8

2009-10 7,568.6 4,186.3 3,382.3

2010-11 8,856.0 6,403.7 2,452.3

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0.0

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Export

Imports

Trade Balance

Trade Balance in Myanmar (FY 2002-2010)

(Kyats in million )

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• System of National Accounts

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0.0

10.0

20.0

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၁၅-၁၉ ၂၀-၂၄ ၂၅-၂၉ ၃၀-၃၄ ၃၅-၃၉ ၄၀-၄၄ ၄၅-၄၉ ၅၀-၅၄ ၅၅-၅၉ ၆၀-၆၄ ၆၅+

ရာခငနနး

အသက

၁၉၇၃

၁၉၈၃

၂၀၀၁

၂၀၀၇

အသက (၁၅) နစနငအထက လပသားအငအားပါဝငမနနး (၁၉၇၃ ခနစ- ၂၀၀၇ ခနစ)

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62.8 64 63.9

58.2

12.9 11.1

8.9 9.3

24.3 24.9 27.2

32.5

0

10

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1973 1983 2001 2007 1973 1983 2001 2007 1973 1983 2001 2007

လယယာသားငါးကဏဍ စကမကဏဍ ဝနဆောငမကဏဍ

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၂၀၁၁ ခနစ၊ ဇလငလကနအထ နငငပပါငး(၃၁) နငငမလပငနး စစပပါငး (၄၅၄)ခ ရငးနးမ ပနလျကရရာ အပမရကန ပေါလာ သနးပပါငး (၃၆,၀၇၁.၈၈၈) ရပါ သည။

ရငးနးမ ပနမကဏဍ(၁၂)ခတင လျပစစကဏဍမ ၄၀.၂၈%၊ ပရနနငသဘာဝ ဓါတပငကဏဍမ ၃၈.၃%၊ သတတ ကဏဍ မ ၇.၇၅% တဖ င ဦးပောငလျက ရပါ သည။

နငငအပနဖ င တရတပ ညသသမမတနငငသည ၂၆.၆၂% ဖ င ပထမ၊ ထငး နငငသည ၂၆.၅၃% ဖ င ေတယ၊ ပောငပကာငသည ၁၇.၄၉% ဖ င တတယ ပနရာတငရပါသည။

အာေယနငငများမ ရငးနးမ ပနမပမာဏမာ အပမရကနပေါလာ သနးပပါငး (၁၂၇၇၅.၆၅၆) ရပါသည။