Pacific Money

The Next Step in Burma’s Economic Opening

While much about the country’s future remains uncertain, banks and accounting firms are moving in.

Burma’s fate continues to draw a lot of attention and a lot of economic interest.  The country’s strategic location, combined with its tumultuous recent past, guarantee that its reform and opening-up process is bound to be wrapped up with both hope and controversy. Following the recent passage of a foreign investment law, the trailblazers of globalization — banks and accounting firms — have begun a surge into the country.

The latest economic news from Burma has seen various foreign banks begin the process of moving into the country.  ANZ, Australia’s fourth largest bank, became the first “western” bank to be granted approval to open a representative office in Burma since sanctions on the Southeast Asian country began to be relaxed earlier this year. Standard Chartered Bank, whose developing market operations are perhaps unrivalled amongst global competitors, will likely be the second (Standard Chartered has already received pre-approval).   

Both institutions are expected to open representative offices in early 2013.  These western institutions will not be the first foreign banks to open representative offices in the country.  Various Asian banks have already established representative offices in the country, most notably, significant Japanese lenders like Bank of Tokyo-Mitsubishi, Mizuho and Sumitomo Mitsui Banking Corporation (SMBC).

In international banking, the opening of a representative office is not equivalent to beginning normal investment or commercial banking operations.  The next stage for the international players will be to seek full branch licenses, a process in which the banks’ enthusiasm is running ahead of the current status of legislation. New IMF-sponsored banking laws are due to be discussed by the Burmese legislature next year, but the process of obtaining such a license could take months if not years.

Already though, another key piece of establishing an economy integrated with the global system is coming into position. Like their banking counterparts, international accounting/audit firms have begun a similar process of moving into Burma. Two of the “Big 4” Service firms – KPMG and PwC (PricewaterhouseCoopers) have opened up offices in the former capital and ongoing economic center, Yangon. A third firm, Deloitte, is rumored to be hunting for office locations in the same city, and could well soon announce the opening of operations there too. 

These professional services firms are vital in providing the accounting, audit and due diligence processes necessary to facilitate confidence and thus international investment and corporate entry into Burma.  In the past, these firms have paved the way for “globalization” in other opening markets, and Burma is on course to follow in others’ footsteps. Tellingly, PwC’s recently published Myanmar Business Guide begins with a description of the country’s natural resource wealth, and goes on to predict 6.3% GDP growth for next year.

While there are still some doubts as to the sincerity of Burma’s reforms and the prospects for the country to hold together socially during the opening up process, one thing that is clear is that decades of isolation and sanctions failed. Burma’s reentry into the global economy is set to continue, even if the road may not always be smooth.