Executive Summary of Monthly Financial Sector Discussions 08/2018

Executive Summary of Monthly Economic Development & Outlook Discussions

Tuesday, August 7th , 2018

Trade and Investment plays a pivotal role to the health and growth all economies globally. Recognizing that well informed economic policy can help accelerate Trade and Investment flows in any economy, we have instituted a new segment called “Update: Trade & Investment” in our monthly Discussions, wherein we provide the opportunity for any Ministry, Departments, Agencies, Missions or Senior Economic / Commercial / Trade Officers in sharing with us their Trade & Investment data points.

Additionally, the diversity of ideas provided at this month’s Discussions can also be attributed to the very thoughtful engagement of a number of global stakeholders who contributed to the ancillary discussions that included Financial Education for Sustainable Growth and on how to provide forward momentum and relatively easy policy fixes to one of the most important areas of Myanmar’s foreign exchange earning potentials i.e. Tourism.

A brief overview of all the subject matters discussed.

Update: “American Trade & Investment into Myanmar”

With the expressed permission of disclosure granted by the Senior Commercial Officer at the U.S. Embassy, we reproduce some of the salient points discussed:

  • The role of the Commercial Section at the U.S. Embassy is to help U.S. companies enter the Myanmar market and also promote the United States as an investment destination.
  • Given the crisis in Rakhine, reputational risk has grown; some U.S. firms have pulled out, while others are hesitating. A message that has continued to emanate from the U.S. investment community has been along the lines off “The Myanmar that was promised has disappeared.”
  • Recently, however, there has been an uptick in interest from U.S. companies as measured by fee-based commercial programs undertaken in recent quarters as compared with comparable periods of the last 12 months and particularly in this last quarter.
  • Conversely the data points on the outbound side of the Investment spectrum is a more positive story as demonstrated by a recent Delegation to the U.S. Investment Summit in Washington which was dramatically increased to accommodate 13 Myanmar entrepreneur / investors (the original quota for the delegation was 2). The message about the potential for private investments in the U.S. has clearly been well received by Myanmar investors.
  • To increase trade flows into Myanmar the Commercial Section at the US Embassy under its current leadership has taken a more “regional” centric approach to get U.S. companies to meet with potential Myanmar partners. If U.S. companies are hesitant to enter the “Myanmar” market, then perhaps they are yet opportunities to facilitate valuable trade introductions and discussions for these US businesses to meet Myanmar businesses at regional trade events.
  • The Commercial Section at the US Embassy has successfully taken Myanmar Delegates to the Fintech Festival in Singapore, the Singapore Air Show, the Arab Health show in Dubai and is in the process for taking delegates to the upcoming U.S. Franchise trade mission in Bangkok.

In conclusion a cautiously optimistic message that captured the mood was the quote: “The Myanmar that was promised may have disappeared but a Myanmar that still holds promise can still be found.”

Financial Education for Sustainable Growth

With the expressed permission of disclosure granted by the Country Manager for Myanmar operations at VISA, we reproduce some of the salient features of their White Paper on Financial Education for Sustainable Growth titled: “Myanmar Financial and Payment Attitudes Study“. This White Paper studies the attitudes and behaviors of Myanmar consumers towards financial services.

The White Paper was based on Surveys conducted amongst 1,044 consumers in five major cities in Myanmar to represent the urban population.  In addition, 8 one-on-one in-depth interviews were conducted in Yangon and Mandalay. The White Paper findings included:

  • Optimism on Myanmar’s near term economic direction, job opportunities and financial security.
  • Majority of respondents see banks as safe, trustworthy and transparent. However only 36% felt that banks products and services are easy to understand and use. Additionally 36% did not see a need for banks as they can procure basic financial services through informal channels.
  • Not surprisingly, financial literacy is low and the majority of financial information and advice on such matters comes from family, friends, and colleagues (not formal sources).
  • Subpar financial literacy along with a low perceived utility of bank products and services were yet the primary hurdles to the adoption of formal financial services and NOT a lack of trust by the findings of this survey.

In conclusion the good news for the Banking industry was that even though usage of financial products and services is low, interest in such services is high. As an example, ownership of payment cards is currently negligible but 11% of people surveyed plan to get a card in the next 12 months. Also, 49% of respondents intend to get a bank account within the next 12 months citing eagerness to earn interest on their money and keeping up with the times as the primary motivators.

Economic Assessment of Tourism/ Hotel Sector & implications on GDP growth

From glimmer of hope on a Trade and Investment discussion to an uplifting report on rising financial literacy by global stakeholders, the morning discussions took a dramatic turns as industry leaders and practitioners from the Tourism & Hotel sector provided a grim assessment of their personal stories of the downturn of the inbound Tourism sector and the devastating results that the loss of revenues has had on their own businesses but also on the various service providers throughout the industry.

The humanitarian crisis of Rakhine and the global acceptance of these events were uniformly accepted as the direct linkages between cause and effect when looking at the sharp drop of inbound tourists especially Western tourists who choose to remain away from Myanmar in large numbers on moral grounds. There was a humble understanding and acknowledgement by the industry stakeholders without assigning blame on any segment of the larger global traveler that decided not to visit Myanmar during these challenging times.

Some policy conversations also centered on potential easy fixes on the taxation policy of aviation fuel which makes internal travel in Myanmar uncompetitive as compared to relatively longer distances to regional ASEAN destinations from Yangon. Industry stakeholders also spoke about the need for a more pragmatic and long term Myanmar branding exercise to be undertaken by the relevant Ministries.

The Discussions thereafter adjourned, with the next monthly Discussion date confirmed for Tuesday, September 04th, 2018 and October Discussions differed for the Annual Conference on Wednesday, October 10th, 2018.