Further liberalisation of the Myanmar banking and financial services sector

The Central Bank of Myanmar (“CBM”) is making significant strides towards opening up Myanmar’s banking and finance sector.  In the past few months, it has taken steps towards expanding the range of financing services that foreign banks could potentially offer and allowed foreign equity investment in local private banks.  In June 2019 the International Finance Corporation converted a loan to Yoma Bank Limited into a 5 percent equity shareholding – an important milestone marking the first international investment in a commercial bank in Myanmar.

At a press conference held on 17 May 2019, U Soe Thein, Deputy Governor of CBM, announced that:

    (a)    there are plans to award additional foreign bank branch licences in the near future (at present, there are 13 foreign banks that have been permitted to open branches in Myanmar); and

    (b)    to allow foreign banks to apply for and operate as a foreign bank subsidiary.

The latter is significant as foreign bank subsidiaries would likely be allowed to function akin to a domestic bank and offer retail banking services. 

These are part of CBM’s ongoing efforts to liberalise Myanmar’s banking and financial services sector in the hope of creating a more competitive market, increasing the pool of funds available to support the country’s growth and benefiting the developing market through the transfer of knowledge and technology.

As a result of the proposed changes, local banks are likely to consolidate in order to cope with competition from foreign banks.  Moreover, local banks will face challenges stemming from their lack of expertise and experience in providing technology-related services as compared with their foreign counterparts.

Of course, local banks have the advantage when it comes to their knowledge of the domestic market and their collection of data obtained over the years, which may be leveraged on to attract tie-ups with foreign banks. Without data, such as the borrower’s credit history, foreign banks face obstacles when looking to offer low-interest loans or large loans.  However, eventually, as foreign banks find their footing in the Myanmar market and collate data on consumers’ credit history, we expect that they will be able to issue loans with better interest rates and increase their market share.

Inaugural Myanmar Business Environment index

The Asia Foundation has published Myanmar’s first “Myanmar Business Environment Index 2019” (“MBEI”), with support from the UK’s Department for International Development (“DFID”), through the DaNa Facility (an innovative private sector development programme in Myanmar, funded with GBP25 million from the DFID, established in 2016 and running until December 2020).

The rationale behind the MBEI is to facilitate the government’s and the private sector’s understanding of the local business environment, allowing policymakers, investors and citizens to better understand the strengths and weaknesses of Myanmar’s economic governance. The MBEI is based on a nationwide survey of 4874 businesses in the services and manufacturing sectors.

Key findings that came out of the survey include the following:

    (a)    85 percent of Myanmar businesses have at least one documented proof of formalisation; with;

  • 65 percent having only an operating license from the township;
  • 17 percent possessing a licence from the City Development Committee; and
  • only 6 percent holding a registration certificate from the Directorate of Investment and Company Administration.

The remaining 15 percent of businesses were established without any formal recognition, possessing neither documentation of registration nor an operating licence.

    (b)    The government must substantially improve transparency. Only 3.6 percent of businesses reported having access to the state or region budget.

    (c)    The business environment in Myanmar remains biased in favour of businesses with connections to elite decision makers. For example, 64 percent of businesses claimed that the government had shown favouritism in land access for businesses with strong connections, and 44.6 percent believed that there was a bias in access to loans.

    (d)    Recruitment of qualified workers, particularly technicians and managers, is a major challenge and expensive for businesses in Myanmar. The median firm spends 5.4 percent of its operating budget on labour recruitment.

    (e)    Quality of infrastructure is a severe concern for businesses.  In particular, 51 percent of businesses revealed that they were dissatisfied with road and electrical infrastructure. The median firm claimed to have lost 7 days of transport activity due to flooded roads, and to have experienced 20 hours of lost telecommunication and internet coverage, together with 20 hours of lost electrical power last month.

A link to the MBEI can be found on the Asia Foundation Website.

Change to the Income Year of Private and Co-operative sectors

On 28 May 2019, the Internal Revenue Department (“IRD”) of the Ministry of Planning and Finance (“MOPF”) announced a change to the income year of private and co-operative sectors.  The change is aimed at bringing the income year of private and co-operative sectors in line with the change to the financial year for government ministries, organisations and state-owned enterprises, which was implemented in 2018 with the enactment of the 2018 Union Tax Law.

Formerly, the income year for taxpayers was from 1 April to 31 March.  The ‘new’ income year will be from 1 October to 30 September, effective from 1 October 2019.  As a result, there will be a six-month transition period from 1 April to 30 September 2019 (the “Transition Period”), which will be treated as a separate income year for the purpose of tax assessment.  

The changes are summarised in the table below.

Income Year


1 April 2018 to 31 March 2019 (12 months)


1 April 2019 to 30 September 2019 (6 months)

Assessment Year


1 April 2019 to 30 September 2019 (6 months)


1 October 2019 to 30 September 2020 (12 months)

 The IRD has not yet issued detailed instructions on how companies should calculate their taxes during the Transition Period. 

As the provisions under tax laws and regulations require the annual tax returns for the relevant income year to be submitted within three months after the income year-end, the annual tax returns for the year ended 30 September 2019 will be due on 31 December 2019.

Myanmar Construction Entrepreneurs Federation plans to set up loan programme for the construction sector

The Myanmar Construction Entrepreneurs Federation (“MCEF”) is planning to set up a loan programme for its members who are in need of capital to start their construction projects.   

U Shein Win, the current chair of MCEF, confirmed that MCEF will start the programme in the Yangon, Sagaing and Ayeyarwaddy regions.

U Myo Myint, the acting general secretary of MCEF, confirmed that his organisation would offer its own assets as temporary collateral with the Construction, Housing and Infrastructure Development Bank and would also act as a guarantor as well as loan provider for its members.  

U Myo Myint stated that the maximum amount of the loan would be capped at 30 percent of the asset value and that the maximum term for the loan is one year.

A key point to note for potential borrowers is that the interest rate is proposed to be 16 percent, which is 3 percent higher than loans offered to businesses by local banks.

The initial requirements set out for potential applicants include:

    (a)    membership with MCEF for at least six months;

    (b)    proof of successful government tender;

    (c)     recommendations from Central Executive Committee (“CEC”) members; and

    (d)     the applicants’ track record.

U Myo Myint confirmed that he expects the programme to be rolled out in the next two months.  The framework policy is reportedly being drafted to ensure that the loans would be distributed equally among the states.

Plans for New Industrial Zone in northwest of Yangon

The Golden Myanmar Investment Consortium, formed by investors from China, Hong Kong, Taiwan and Myanmar, is in the process of planning a new industrial zone in Htantabin township, northwest of Yangon. The new zone will cover some 404 hectares of land.

The proposal is estimated to require investments in the region of US$500 million, and is anticipated to create 100,000 jobs.

The rationale behind the new zone is to aid the Yangon regional government in creating industrial spaces in what are currently rural areas. It is anticipated that this will help create job opportunities, whilst simultaneously facilitating the reduction in population and traffic density in more developed urban areas.

The regional government is expected to sign a Memorandum of Understanding with the consortium this month. The Htantabin Industrial Zone will be the first to be implemented among 11 other zones planned in other undeveloped, rural areas of Yangon.