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The Burmese junta is preparing to allow major business cronies free reign to open banks, with the new entrants into the sector all industry leaders in other fields.
The move would appear to open the potential for huge power among new bank owners, and comes as part of the government’s mass privatisation of the Burmese economy.
Among the companies listed is Htoo Trading Company, owned by the sanctions-listed Tay Za, who is known to be close to the ruling junta. Another company, IGE, is owned by Nay Aung, the son of a government minister, while Ayedin Company is owned by Chit Khine, a renegade of the former opposition National League for Democracy party.
Max Myanmar, also tabled to enter the banking sector, is owned by business tycoon Zaw Zaw, who is also president of the Myanmar Football Federation.
Htoo Trading, along with Asia World Company, is regarded as one of Burma’s leading conglomerates, with interests in construction and gems. It owns an airline and, according to its website, a “customs authorised clearing agency” service.
IGE meanwhile is in construction and has been involved in building gas terminals, whilst Max Myanmar follows in a similar mould with interests in mining construction and hotels. Analysts suggest that the groups would have been given “special privileges” by the regime.
The move to open new banks has been questioned by Burmese economic analyst Aung Thu Nyein, who told DVB that most Burmese banks are currently not profitable because “of high inflation and negative interest rates, so I don’t know why they opened new banks at this moment”.
The government has had difficulty controlling the economy and has enacted strict controls since the 2003 financial crisis in the country, including limiting bank withdrawals and other anti-inflation measures. These are aimed at further limiting liquidity, which is essential for the emergence of new enterprise and economic growth.
More recently, however, the surge in gold price, although partly in line with global commodity trends, is indicative of mistrust in the banking sector.
This sector is considered archaic in the country, despite a liberalisation with the Financial Institutions of Myanmar Law 1990 that allowed the emergence of some private banks with certain “backward” elements, such as interest rate ceilings on deposits and loans considerably below Burma’s inflation rate.
Aung Thu Nyein corroborated this long-held sentiment by saying that the banking sector “urgently needs reform”.
Transparency and a respect of property rights and other legal provisions are high on a list of urgent needs in Burma, with banks being viewed as money laundering hot spots due to a lack of viable anti-laundering enforcement or scrutiny. The lack of such a provision is often viewed as necessary for the country’s vast narcotic profits.
Whether these private companies who are intimately linked to the military regime will affect any change remains to be seen, but the creep towards megaliths within the Burmese economy continues with worrying implications for the further polarisation of the economy.
Concerns abound that certain entities or companies will have vast vertical control of the economic supply chains, thus limiting competition and stimulating the possibility for economic bubbles and greater fraud.