[Feature] The ambition of Korean banks in Myanmar shattered by mounting political unrest

Worsening unrest in Myanmar casts a shadow over the optimistic view of South Korean banks to gain a foothold in the Southeast Asian region as ongoing political turmoil has wholly or partially suspended operations.

South Korean banks have been preparing to start operations in the Burmese market since 2012, as the quasi-civilian government embarked on economic and political reforms. The administration that took power in 2011 institutionalized a new foreign investment law to allow financial firms around the world to conduct market research in the country and provide financial services such as loans and savings. .

As of December last year, 11 Korean banks had launched branches or banking units in Myanmar, according to data from the Financial Supervisory Service.

However, the protracted crisis in Myanmar, including the decision of major economies to impose sanctions on military-related companies, now poses challenges for the ambitious goals of Korean lenders to expand their presence in the emerging market of South East Asia.

KB Kookmin, the first foreign bank to set up a local branch there in January, recently decided to suspend operations due to escalating violence.

“We have repeated the closing and opening of business in accordance with market conditions. Meanwhile, the default rate at the lender’s 20 branches and microfinance institutions has yet to experience a remarkable increase. We will continue to closely monitor the risks of a military coup in Myanmar, ”an official said in Seoul.

Woori Finance Myanmar, a microfinance subsidiary established in November 2015, has temporarily closed its doors, an official from Woori Bank said.

“It is too early to decide to resume operations. (Woori Bank) will make related decisions by closely monitoring the protracted political crisis in Myanmar. “

In addition, the branch of NH NongHyup based in Yangon, launched in October last year, has been closed for the time being, making it difficult for the lender to call for loans.

Despite the resumption of normal operations, Shinhan and Hana Bank keep most of their employees working from home.

“The Shinhan Bank branch in Yangon is currently operating, but it has ordered telecommuting for its employees,” a Shinhan Bank official said.

“In view of possible secondary boycott sanctions imposed by the United States and its allies on Myanmar military companies, (Shinhan Bank) will intensify monitoring of the situation to implement preventive measures against the international community’s regulations on Myanmar military companies, ”he added. .

Shinhan Bank opened an office in Myanmar in 2013 and a branch in Yangon in 2016, as Korea’s first commercial bank there. Hana Bank operates a microfinance institution in Hlegu Township, a rural community northeast of Yangon, which was established in 2014.

Myanmar has gained attention as the “next Vietnam”, largely due to its abundant natural resources, labor force, and geographic advantage for economic development.

Since 2012, the country has recorded an average economic growth of 7% per year, driven by its economic and political reforms, according to World Bank reports.

However, after the Myanmar military overthrew the democratically elected government on February 1 and declared a state of emergency for a year last month, phone and internet access was restricted in many areas. many parts of the country, leading to bank closures across the country.

Korean residents who use some of their microfinance institutions in Yangon have suffered inconvenience, said Lee Byung-soo, head of the Korean Association in Myanmar.

“Korean residents here tend to feel more comfortable with microfinance services from Korean lenders than those from local Myanmar banks in terms of speed and efficiency,” Lee said.

“Not only residents, but also entrepreneurs here, who had high expectations for Korean lenders’ business banking services, have expressed concern about the prolonged impact of the military coup on Korean lenders.”

Meanwhile, Lee added that Myanmar Sameul Geumgo – a financial cooperative established in 2017 by the government of Myanmar through support for the management of its financial systems and business models by the Korea Federation of Community Credit Unions – could face a problem in its management, as government officials boycotted the work as part of Myanmar’s civil disobedience movement, led by officials to reject the government’s military takeover.

Myanmar government officials are responsible for providing training on business operations to Myanmar member Sameul Geumgo and overseeing their management system. The CDM halted such activities, ”said a KFCC official.

“(The KFCC) is also struggling to reach Myanmar members Sameul Geumgo to virtually provide management support – the military has blocked the internet.”

The KFCC did not invest in Myanmar Sameul Geumgo, but previously signed a business partnership with the Myanmar government in 2019 and pledged to help the cooperative with educational programs, the official added.

The entry of local financial institutions into the country is expected to accelerate due to a growing number of infrastructure projects between the two countries as part of the Moon Jae-in administration’s diplomatic initiative focused on South East Asia.

For example, the state-owned Korea Land & Housing Corp. started construction of the Korea-Myanmar industrial complex by establishing a joint venture for the development project, 40% owned by LH, 40% by the Myanmar government and 20% by Global Sae-A, the Land Ministry said, of Infrastructures and Transport.

While major economies, including the European Union and the United States, and international organizations like the United Nations step up sanctions against individuals and groups linked to last month’s military coup in Myanmar, financial institutions Locals might consider withdrawing or scaling back their operations there in the worst-case scenario. case scenario, according to market watchers. Currently, around 300 Korean companies run businesses across Myanmar, according to the Foreign Ministry.

By Choi Jae-hee ([email protected])

Source link

About William Moorhead

Check Also

Mobile payment options for your digital wallet

Credit and debit cards have started a revolution. You no longer have to carry a …

Leave a Reply

Your email address will not be published. Required fields are marked *