Executive Summary of Monthly Financial Sector Discussions 07/2018

Executive Summary of Monthly Economic Development & Outlook Discussions

Tuesday, July 3rd, 2018

Industry leaders from the Housing / Construction sector representing various associations initiated the discussions by making a competitive assessment of the Yangon marketplace as compared to other South East Asian regional capital cities however were somber in their forecast assessment on the demand side of the marketplace. Various factors were cited for the pessimism amongst stakeholders.

A brief overview of all the subject matters discussed.

1. Housing / construction sector economic assessment & banking sector exposure.

Industry leaders from the Housing / Construction sector representing various association were unanimous in their assessment that the sector is undergoing a sharp slowdown as compared to last year. The speculative buying and selling boom have declined significantly as the volumes suggest and the speculation is that traditional home buyers are sitting on the side-lines until market prices adjust.

Industry leaders also cited high interest rates and an unfavorable tax policy as hurdles for further investments by local investors.

A healthy recognition that the local Yangon property market appears to have currently reached a saturation point (local investor / speculator fatigue) seemed to beg the question, where will the next wave of investments come from if there is no increased impetus to foreign direct investments.

Local banking stakeholders were quick to point out that they are in the process in launching new retail mortgage products that could help ease the liquidity pressures for first time buyers and help stimulate new housing and construction activity, especially in the low-income housing sector which represents the largest unserved section of the population.

2. Ancillary Policy Considerations

It was suggested that in the short-term, in order to reverse the current downturn within the housing and thereby the construction sector, the government should encourage coordinated market participation through the banking sector.  Although banks are offering new mortgage products, they are regarded only as a last resort for home buyers, as terms are fixed by the Central Bank of Myanmar lending rate and allowed only up to maximum 3-year term, making conditions very unfavorable, especially when compared to informal lending arrangements.

Allowing banks to price mortgage products at market rates and engage longer terms would go a long way to increasing access to financing and spur growth to this critical sector of the economy.

Long-term focused policies such as creating of Logistics hubs, Sovereign backed Infrastructure bonds & emphasis on creating infrastructure to facilitate better supply chains for Agriculture were discussed as potential enablers to help accelerate GDP growth and thereby help revive the Construction sector.

3. Low hanging fruit

Additionally, a stakeholder shared the preliminary results of a Myanmar banking sector ‘needs assessment’ survey that was recently performed. The survey targeted three (3) levels of banking; employees-staff, middle management and C-Level.  The results showed a significant deviation from most emerging market and developed country banking norms i.e. that banking skills (like credit risk management and financial accounting) were not perceived as being the most important skill set for

4. Focus on “Ease of Doing Business”

The Discussions concluded with a unanimous consensus amongst all Stakeholders that there should be a special emphasis by the Government on getting Myanmar more competitive and a singular focus on enacting Policy to get Myanmar considerably higher in ranking thank its current #171 of 190 rank on “Ease of Doing Business” as last published in 2017 by the World Bank Group.

5. White Paper on Financial Education for Sustainable Growth

Due to the robust nature of the earlier topic discussion and the time constraints the discussion centered around this White Paper on Financial Education for Sustainable Growth titled: “Myanmar Financial and Payment Attitudes Study” was differed to the next monthly Discussion.

The Discussions thereafter adjourned, with the next monthly Discussion date confirmed for Tuesday, August 07th and Tuesday, September 04th, 2018 respectively.