Myanmar Investment Climate

“How Thai banks can support investors to do businesses”

Oct 2013

Yangon Representative Office

Global Business Development Department

Agenda

• Quick Fact - Myanmar

• Myanmar Financial System: Structure & Products

• Investment: Initial Capital Injection & Source of Fund

• International Trade: Letter of Credit, Remittance & Guarantee

• Opportunities for Investors

• KBank: AEC Plus Strategy & Yangon Representative Office

Quick Fact

MYANMAR

Country Overview Name Republic of the Union of Myanmar

Capital Nay Pyi Taw

Area 676,578 km2 (ranked 40th in the world)

Population 54.6 million

Ethnic Group

Burma 68%, Shan 9%, Karen 7%, Rakhine 4%, Chinese 3%, Indian 2%,

Mon 2%, Others 5%

Language Burmese (Official), Numerous minority languages

Religions Buddhist 89%, Christian 5%, Muslim 4%, Animist 1%, Others 2%

Administrative

7 Regions: Ayeyarwady, Bago, Magway, Mandalay, Sagaing, Taninthayi,

Yangon

Division 7 States: Chin, Kachin, Kayah, Kayin, Mon, Rakhine, Shan

Government Unitary Presidential Constitutional Republic

• President THEIN SEIN (since February 4, 2011)

• Vice President SAI M0UK KHAM (since February 3, 2011)

• Vice President NYAN HTUN (since August 15, 2012)

Timezone 6.5 hours ahead of GMT

Fiscal Year April 1 - March 31

Currency Kyat ( MMK) – MMK970 = USD1

Membership ASEAN, BIMSTEC, WTO, UNCTAD, UNESCO, UN, WHO, WIPO, IMF

6.7% Change (YoY)

GDP Growth Forecast

• In 2012, GDP grew 6.0%, valued at more than $54 billion while GDP per capita reached $855

• Growth is forecasted to rise gradually to 6.5% in 2013 and 6.7% in 2014

• Economy will grow as the country continue to reform its policy and improve investment & business climate

5.35.5

6.06.5

Source: ADB

-1000

0

1000

2000

3000

4000

5000

6000

7000

8000

9000

10000

2008 - 2009 2009 - 2010 2010 - 2011 2011 - 2012 2012 - 2013 2013 - 2014

(A pr - May)

Overall International Trade Performance

USD Million

Source: Ministry of National Planning and Economic Development, Myanmar

4,5

43.3

4, 1

31

.4

6,4

12.7

9,0

35.1

9,0

68.9

1,8

87.4

6,7

79.1

7,5

86.9 8,8

61

9,1

35.6

8.9

77

1,4

74.3

2,2

35.8

3,4

05.5

2,4

48.3

10

0.5

-9

1.9

-4

13

.1

Import

Export

Trade Balance

1• Natural Gas

2• Beans and Pulses

3• Jade

4

• Marine Products

5

• Garment

Top 5 Export Items

1• Petroleum Products

2• Vehicles & Spare Parts

3• Construction Materials

4

• Iron & Steel

5

• Machinery & Spare Parts

Top 5 Import Items

By Country & By Products

USD MillionUSD Million

Foreign Direct Investment 2008 - 2013

Total FDI = USD 27,794 Million

By Country By Sector

2,500.26

Myanmar Financial System

“Structure & Products”

Private-owned Banks

(12)

Semi Private Banks

(7)

Central Bank of Myanmar

State-owned Banks

(4)

Domestic Private Banks

(19)

Source : Central bank of Myanmar & Deloitte

Foreign Representatives

(33)

FX

FX

(15)

Myanma Investment and Commercial Bank (MICB)

Myanma Foreign Trade Bank (MFTB)

Myanma Economic Bank (MEB)

Myanma Agriculture and Development Bank (MADB)

Structure

System• Still in an early stage, contributing a mere 0.08% of total GDP.

• Underdeveloped computerized system; Running on deposit service based.

Myanmar Financial Institutions

Foreign Currency Exchange

Myanmar Currency: Kyat

Foreign Currency Exchange: Change system

from Dual Exchange Rate (1 USD = 6 MMK) to

Managed Float System (1 USD = 800 MMK) on Apr 12

(Before: 7 rates from 6 – 1,200 MMK per 1 USD)

Foreign Exchange Certificate (FEC): FEC has NO

longer used since end of June 2013

Cross Border Payment: CBM allows to settle in 3

currencies: USD, THB & MMK

Retail Banking

• Deposit

Current Account: MMK, USD, EUR or SGD Saving Account: MMK (8% interest rate – Foreign is NOT allowed)

Fixed Account: MMK (8.5-10% interest rate – Foreign is NOT allowed)

• Lending Overdraft (13% interest rate, 1% service charges & 1% commission fees)

Hire Purchase (1% service charges, 30% down & 3-yr progressive rate)

• Cards MPU Card (Debit Card)

• Remittance International Remittance

Worker Remittance

Wholesale Banking

• Trade Finance

Letter of Credit (L/C): Import and Export

Collection

Remittance

Guarantee: Issuance and Advising

• FX Services Exchange Counter

FX Arrangement (Today ONLY)

Investment

“Initial Capital Injection & Source of Fund”

Investment: Initial Capital Injection

Private-owned Banks

(12)

Semi Private Banks

(7)

Central Bank of Myanmar

State-owned Banks

(4)

Domestic Private Banks

(19)

Foreign Representatives

(28)

Myanma Investment and Commercial Bank (MICB)

Myanma Foreign Trade Bank (MFTB)

Myanma Economic Bank (MEB)

Myanma Agriculture and Development Bank (MADB)

Which Financial Institutions are allowed to do?

Allowed by

DICA

Stated-Owned Bank

• Myanma Foreign Trade Bank (MFTB)

• Myanma Investment & Commercial Bank (MICB)

Private Bank

Focused on top private banks named:

• Kanbawza Bank (KBZ)

• Asia Green Development Bank (AGD)

• Co-Operative Bank (CB)

• Ayeyarwaddy Bank (AYA)

Investment: Initial Capital Injection (Who?)

Thailand Myanmar

MM Bank

- Submit application for

money transfer (USD)

- Deal FX Rate & Fee with

RM/Dealer

- Send MT103 to MM

Bank stating for initial

capital

- Prepare Credit Advice

for Investor to submit

with DICA

- Put money on central

account & transfer to

Investor’s account when

it is opened

- Receive Credit Advice

& apply with DICA

- Open account with the

bank as soon as receive

temporally Permit to

Trade from DICA

TH InvestorTH Investor TH Bank

Investment: Initial Capital Injection (How?)

Investment: Source of Fund

Option 1: Domestic Fund

Key Fact

- Interest rate = 13%

- ONLY 1-year term

- Need BG from foreign banks

- Can NOT do with all local banks

Option 2: International Fund

Key Fact

- Credit from main bank in TH

- Need to submit proposal to MIC/

Authorities

International Trade

“Letter of Credit, Remittance & Bank Guarantee”

International Trade: Which Bank?

Before 2012, ONLY two state-owned banks:• Myanma Foreign Trade Bank (MFTB)

• Myanma Investment & Commercial Bank (MICB)

NOW, 18 state-owned & private banksFocused on top private banks named:

• Kanbawza Bank (KBZ)

• Asia Green Development Bank (AGD)

• Co-Operative Bank (CB)

• Ayeyarwaddy Bank (AYA)

• Myanma Apex Bank (MAB)

• Myanma Oriental Bank (MOB)

• United Amara Bank (UAB)

International Trade: Standard Fee in MM

Opportunities for Investors

“Which sector would be fit for Thai investors”

Opportunities for Investors:

Manufacturing

Garment &

Apparel

Consumer

Products

Processed

Agro -Product

• Myanmar Foreign Investment Law 2012

- Corporate income tax exemption up to 5 years (from 3 years)

- Long lease for land 50 + 10 + 10 years ( from 30 + 15 + 15 years)

• Relatively competitive labor cost

- Minimum wage is around $58 – 70 per month

- Compared with monthly wage of TH@ $300, VN@$112, LA@$100, KH@$68

- Minimum wage bill has passed, awaiting details

• Export base to gain market access to India & China and to take advantage of favorable tax scheme

i.e. GSP from EU

Opportunities for Investors:

Services

Hotel, Travel,

& TourismTelecommunicationHealthcare

• “Global Hotspot” for both business and tourism

- Number of arrivals reached over 1 million mark last year

- Projected to reach 3 million in 2015

• Host of major international events e.g. WEF, SEA Games, ASEAN Summit

• Development of Hotel Zone in Yangon, Mandalay, Nay Pyi Taw, Mawlamyine

• Quality healthcare is in demand

• Major overhaul of telecommunication infrastructure and development: Telenor & Ooredoo

- Mobile phone penetration rate is 9%,

- Compared to KH@70%, LA@87%, TH@125%

Opportunities for Investors:

Trading

White GoodsConstruction

MaterialsFood & Beverage

• Growing demand for consumption

• Changing consumer behavior and lifestyle

• Positive perception toward Thai brands/products

• Ongoing infrastructure development projects for both government and private

• Influx of FDI drives the needs for construction materials

Opportunities for Investors:

Natural Resources

Oil & Gas MiningPower

• Untapped exploration fields

- 7.8 trillion cubic feet of proven natural gas reserves; worth $75 billion

- 30 exploration licenses will be offered, 1Q 2014

• Inadequate electricity capacity

- ADB estimates demand will grow 13% per year

- Production will need to increase 42% to this year’s demand

• Mineral rich including gold, copper, lead, zinc, nickel, tin, antimony, chromites

- Awaiting Mining Law, expected improved incentives for investors

KASIKORNBANK

“AEC Plus Strategy & Yangon Representative Office”

KBank – Strategy

We aim to be “Asian Bank”

We will serve :

• Outbound business customer, both Corporate & SME, through out Asia by our well established

network and partner banks.

• Inbound customer through our strong domestic network.

Outbound Inbound

KBank – Strategy

35 Partner Banks with

32 Bilateral MOUs

2 Banks

(2 MOUs)

2 Banks

(1 MOU)

1 Bank 2 Banks

(1 MOU)

2 Banks

(2 MOUs)

ASEAN

1 Banks

(1 MOU)

E.ASIA

2 Banks

(2 MOUs)

1 Rep

1 Branch

1 Rep

EU & US

23 JRBs

(23 MOUs)

24 JRBs

Under JBIC Scheme

KBank – Yangon Representative Office

KBank – Myanmar Team

Chief Representative - Yangon Office

Mr. Nuttaphong Visitkitchakarn

E-mail: nuttaphong.v@kasikornbank.com

Tel: +959 421074478

Senior ASEAN Country Business Manager

Ms. Orin Chaturabatara

E-mail: orin.c@kasikornbank.com

Tel: + 662 5626554

Senior Global Business Advisory Specialist

Mr. Ritthiwut Watthanachai

E-mail: ritthiwut.w@kasikornbank.com

Tel: + 662 562 6899

KASIKORNBANKYangon Representative Office

313/315 U Wisara Road Sanchaung T/S

Yangon Union of the Republic of Myanmar

Tel: +95 (0) 1 524285, 1 514868Fax: +95 (0) 1 516713