State banks shares eyed

Amid re­struc­tur­ing Myan­mar Agri­cul­tural De­vel­op­ment Bank, the govern­ment is in­ves­ti­gat­ing share sales in sev­eral state-owned lenders as a way to raise their cap­i­tal.

The Myanmar Times - - Front Page - STEVE GILMORE s.gilmore@mm­

THE govern­ment ex­pects to have a re­struc­tur­ing plan for the strug­gling Myan­mar Agri­cul­tural De­vel­op­ment Bank (MADB) drawn up by the mid­dle of next year, and is in­ves­ti­gat­ing the pos­si­bil­ity of is­su­ing shares in other state-owned lenders to the gen­eral public, a se­nior of­fi­cial at the Min­istry of Fi­nance and Plan­ning told The Myan­mar Times.

MADB is be­ing placed un­der fi­nance min­istry con­trol as part of a plan to cor­po­ra­tise the bank, which the agri­cul­tural in­dus­try and some MPs say is fail­ing in its man­date to pro­vide ad­e­quate fi­nanc­ing to the coun­try’s farm­ers. The lender strug­gles to stay prof­itable and re­lies on loans from state-owned en­ter­prise Myan­mar Eco­nomic Bank (MEB), while com­ing un­der fire from par­lia­ment for lend­ing too lit­tle money, too late.

A govern­ment com­mit­tee tasked with car­ry­ing out a four­month cor­po­rati­sa­tion fea­si­bil­ity study starts work this month, deputy plan­ning and fi­nance min­is­ter U Maung Maung Win told The Myan­mar Times. That study will be fol­lowed by an­other four-month pe­riod dur­ing which the com­mit­tee will draw up a for­mal re­struc­tur­ing plan, he added.

MADB is the first bank to be tack­led as part of the govern­ment’s re­view of state-owned en­ter­prises. But the au­thor­i­ties are also look­ing into how to re­form the other state-owned lenders – MEB, Myan­mar In­vest­ment and Com­mer­cial Bank (MICB) and Myan­mar For­eign Trade Bank (MFTB), U Maung Maung Win said. The World Bank is help­ing the govern­ment with a fi­nan­cial sec­tor de­vel­op­ment plan that in­cludes all the state banks, the deputy min­is­ter added.

A re­port from Ger­man in­ter­na­tional co­op­er­a­tion agency GIZ last year said the state-owned banks faced sev­eral is­sues, par­tic­u­larly around in­for­ma­tion tech­nol­ogy, pol­icy frame­work and cap­i­tal­i­sa­tion. MEB, the largest of the state-owned banks, pro­vides sub­sidised loans to other banks to help serve spe­cific tar­get groups, and had not made a profit since 1990, ac­cord­ing to the GIZ re­port.

MEB, MICB and MFTB will re­main state-owned and “not be fully cor­po­ra­tised”, said U Maung Maung Win. But in or­der to help them raise more cap­i­tal the govern­ment is con­sid­er­ing how it might sell shares in the three lenders, he added.

Fur­ther down the line, the state banks could con­sider list­ing on the Yan­gon Stock Ex­change. “But first we have to con­sider the man­age­ment and func­tions of th­ese banks,” said U Maung Maung Win. Some ser­vices the banks cur­rently pro­vide will be al­tered, and oth­ers im­proved and ex­tended, he said.

In a re­port on Myan­mar’s bank­ing sec­tor pub­lished in Septem­ber, strat­egy and con­sul­tancy firm Roland Berger said, “State-owned banks are still op­er­at­ing un­der their ini­tial man­dates, putting them in di­rect com­pe­ti­tion with pri­vate banks.” Un­til 2011, only state-owned banks could of­fer for­eign cur­rency ser­vices and ac­counts, and they still have a dis­pro­por­tion­ate share of that mar­ket.

The govern­ment has made ef­forts this year to level the play­ing field be­tween the state-owned and com­mer­cial banks, promis­ing to en­force the same rules on cap­i­tal and for­eign ex­change hold­ings across the two groups, and end­ing state banks’ mo­nop­oly on pro­vid­ing for­eign cur­rency ac­counts to state owned lenders.

State banks’ share of to­tal bank­ing as­sets has fallen from 67 per­cent in March 2013 to 46pc in March this year, but state lenders still have too large a share of the bank­ing mar­ket, the Roland Berger re­port said.

Their com­mer­cial bank­ing op­er­a­tions should be wound down, or at least forced to com­pete on a level play­ing field, the re­port said. Roland Berger also rec­om­mended con­sid­er­ing merg­ers among the state-owned banks, some­thing the IMF and the World Bank have raised in the past.

Photo: Staff

Peo­ple walk past the head of­fices of Myan­mar Agri­cul­tural De­vel­op­ment Bank in down­town Yan­gon .

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