UOB extends reach into Myanmar
Singapore
MYANMAR is set to be the "next frontier" in South-east Asia for United Overseas Bank (UOB) clients as the bank opened its new branch there this week - extending the reach via its current foreign direct investment (FDI) unit, a senior bank executive said.
UOB has on Wednesday said that that it will offer an onshore loan in Myanmar - making it the first foreign bank to do so. The loan, the size of which is undisclosed, will be given to Rangoon Excelsior Company, a French-Myanmar joint venture company. The loan for Rangoon Excelsior will finance the refurbishment of a former colonial building in downtown Yangon into a five-storey hotel.
The hospitality sector in Myanmar will be a key industry for the bank, said Ian Wong, head of strategy and international management at UOB.
At a press briefing this week, Mr Wong said the bank sees a strong FDI pipeline into the country, and that the deal momentum will carry through over the next few weeks. He declined to say how big these loans would be. "(Clients) are telling us that Myanmar, to them, is the next frontier within South-east Asia."
UOB said it was the first foreign bank in 2013 to establish an FDI advisory unit in Myanmar to help its clients tap opportunities there. It set up its representative office in Yangon in 1994.
The bank advises clients on issues such as forex exposure. Since foreign investors in Myanmar are likely to fund their business expansion using US dollars for a start, they need to be mindful of the exchange rate if their expenses and receivables are in local currency, noted Mr Wong.
"Taking a long-term view is important as Myanmar is just opening up its economy," he added.
Mr Wong cited numbers from the Myanmar Investment Commission that showed global FDI into the country is expected to exceed US$5 billion this financial year. "While still relatively modest, it's still probably about double of what you've seen in the last few years."
The bank remains guided by the central bank on issues such as the development on the financial sector.
"There is a clear roadmap by the central bank and the local stakeholders to develop the financial sector a lot more. We remain guided by the central bank in that respect. Right now, what we're really doing is to focus on bringing our clients into the country, and enabling them to do business," said Mr Wong. He added that the bank is now working with both state-owned and private banks in Myanmar to cultivate interbank activities through trade collaboration. It is understood that UOB has links with more than a dozen local banks there.
Working with the domestic banks would be critical, not only in creating club loans for larger deals later, but also in tapping on their branch network to create more complex cash management services for larger companies that have operations in various parts of the country, said Mr Wong. And as it is, all foreign banks in Myanmar can only make loans to foreign investors and foreign joint-ventures with Myanmar companies, for now.
UOB will also be "guided" on its eventual size branch network, he said. The current licence allows foreign banks to have one branch, at this point. But Mr Wong added: "We have enough ingredients to be busy."
