Business community ‘shocked’ to see central bank chief stay

The re-appointment of the long-time Central Bank of Myanmar (CBM) governor U Kyaw Kyaw Maung has caused widespread disbelief and disappointment among the business community.

The incumbent was re-appointed governor on July 31. On July 26, President U Win Myint sent the nomination to Pyidaungsu Hluttaw. U Mahn Win Khaing Than, speaker of Pyidaungsu Hluttaw, announced that the legislature confirmed the nomination on Tuesday.

Born before the start of World War II, U Kyaw Kyaw Maung has been the governor for a total of 15 years. He led the institution between 1997 and 2007, when the country was under military rule and the banking system was hit by several crises. U Thein Sein’s administration brought him back as governor in 2013 and the National League for Democracy-led executive did not replace him when they took power. According to his CV, one of his sons works for Asia Green Development (AGD) Bank.

Despite being born before World War II, U Kyaw Kyaw Maung is in fact younger than the latest ministerial appointee – 80-year-old former banker U Soe Win who joined the cabinet in May. But while the ministerial change was well-received by domestic and foreign investors, this re-appointment sparked the opposite reaction.

A western business leader, who requested to speak anonymously because the subject matter is sensitive, said the international business community was “shocked” to see the incumbent staying for another term. Asian business executives have, in the meantime, expressed their strong disapproval privately. Reforms and liberalisation under his leadership have been limited and slow. For example, it took the CBM 18 months to issue the rules accompanying the 2016 Financial Institutions Law and local banks to this day still cannot set their own interest rates. Foreign players which have a presence in the country remain virtual outsiders in most areas.

On the home front, domestic businesses are “surprised” by the choice of the government, according to Mandalay Technology managing director U Zaw Naing.

“By extending the incumbent for another tenure, we feel that the fiscal and monetary policy direction will remain very conservative and even contractionary,” he said.

One rumour is that Nay Pyi Taw is not too bothered because, for them, the governor position is not as critical as critics claimed. This is due to the political reality that the CBM is expected to follow the government’s leadership despite the institution’s nominal independence. The Myanmar Times asked the businessman whether this could be a solution to break the stagnation.

“That is possible, but the governor is at the helm and manages the financial and monetary sectors from his desk. The government leaders cannot be involved in all the nitty-gritty in every regulatory and administrative regime. Reforms still depend on the governor,” U Zaw Naing went on.

He noted that, just yesterday, two business executives shared the same frustration over the appointee. “I just talked to a managing director of a leading insurance firm and a CEO of a local bank earlier. They were also frustrated with the decision – we think reforms will continue to be blocked or stalled.”

U Maung Maung Lay, the Union of Myanmar Federation of Chambers of Commerce and Industry’s vice chair, was quoted by the Irrawaddy on Tuesday saying the government “missed a chance to improve the country’s economy.”

“This is nothing personal. Everybody longs for a new face. We had hoped that new people would mean new policies. But we are faced with the status quo,” he remarked.

Economist Dr Naing Ko Ko said the CBM did not “harmonise well” with the government’s economic priorities.

Not everyone is critical. Dr Aung Ko Ko, another economist, said the institution has to align its monetary policy with Nay Pyi Taw’s financial policy and hence it’s “difficult to comment on the CBM’s performance in itself.”

Regardless of the views, the governor has a lot to deliver, according to an advocacy group of the European chamber.

U Kyaw Kyaw Maung needs to expand the banking sector and related services, scale up trade financing and through relevant ministry resolve impediments such as prohibitive stamp duty requirement on financing, Nishant Choudhary from law firm DFDL, who’s also the legal affairs advocacy group co-chair, commented.

The lawyer urged the CBM to allow foreign investments to register as non-banking financial institutions (NBFIs), grant them mobile financial service licences and incentivise the banking systems’ digitalisation. Another priority is allowing Myanmar companies to borrow from international banking branches in Myanmar and liberalising retail banking.

Source: Myanmar Times

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