From COVID-19 to the Myanmar Crisis... Overseas Business Challenges for Banks Since Early Year

Business Resumed but Tense Due to Escalating Clashes Between Myanmar Military and Protesters
Local Companies' Project Disruptions Raise Concerns for Banking Sector

[Asia Economy Reporter Park Sun-mi] As the Myanmar coup d'?tat shows signs of prolonged instability, domestic banks have encountered difficulties from the early stages of market entry. Following a year in which overseas operations failed to yield significant results due to the spread of COVID-19, ambitious plans for Myanmar business are now unable to proceed at pace for the time being. Banks that invested heavily in Myanmar as a strategic hub in response to the government's New Southern Policy are inevitably facing setbacks in their global strategies.

According to the Financial Supervisory Service on the 19th, as of the end of September last year, 11 domestic banks operate local corporations, offices, or branches in Myanmar. All five major banks?KB Kookmin, Shinhan, Hana, Woori, and NH Nonghyup?have corporations, offices, or branches in Yangon, Myanmar, while three policy banks?KDB Industrial Bank, Korea Eximbank, and IBK Industrial Bank?also operate offices in Yangon. DGB Daegu Bank and Sh Suhyup Bank each have local corporations in Bago and Naypyidaw, respectively.

Currently, Myanmar is in turmoil as the military has seized power through a coup, arresting and detaining civilian leaders including State Counsellor Aung San Suu Kyi, leading to clashes between the military and protesters across various regions. Domestic banks, which had temporarily closed following the Myanmar Central Bank's suspension order on the 2nd, have resumed operations after the order was lifted. However, as clashes between the military and protesters intensify, most domestic bank employees dispatched locally are working from home except for essential personnel.

Local corporations, offices, and branches are operating with minimal activities, keeping their doors open but conducting only essential tasks. The domestic banking sector is closely monitoring the safety of locally dispatched employees and plans to devise further responses based on embassy notices.

The problem lies in the fact that domestic banks have encountered chaos at the initial stage of expanding their business in Yangon, Myanmar's economic capital. Nonghyup Bank opened an office in Yangon in October last year, and Kookmin Bank launched its local corporation on the 28th of last month. IBK Industrial Bank also established a local corporation on the 21st of last month, and the Industrial Bank opened a branch on the 8th of last month, marking a recent surge in domestic banks' local market entry.

Banks entering the local market have planned their business strategies in line with the government's New Southern Policy, focusing on expanding networks with the local government, strengthening the business base, and enhancing corporate and retail banking. For example, when domestic banks establish corporations in Myanmar, they can conduct corporate and retail banking without restrictions within Myanmar. They also have the authority to open up to 10 branches within the corporation.

Work from Home Except Essential Personnel...Some Have Yet to Start Operations

A representative from a locally operating bank said, "Given the unpredictable chaos in Myanmar, corporations and offices are unable to conduct proper business," adding, "Some banks that launched local corporations this year have not even started operations."

Another bank official explained, "Since Myanmar is linked to the government's New Southern Policy and domestic companies have entered the market, domestic banks have also established a presence to support these companies," adding, "However, if the ongoing Myanmar coup disrupts local projects of companies, the supporting banks could also suffer damage. This is the biggest concern for banks operating in Myanmar."

If the turmoil from the Myanmar coup continues for an extended period, domestic banks will inevitably have to shift their focus for New Southern region expansion elsewhere. The Industrial Bank plans to open a Hong Kong branch this year, focusing on corporate finance and fundraising to support Korean companies' expansion into Asia, financial support, and participation in local infrastructure projects in line with the government's New Southern Policy. Kookmin Bank intends to accelerate its market dominance through the acquisition of Indonesia's Bukopin Bank, despite ongoing legal disputes with local Indonesian companies.

This content was produced with the assistance of AI translation services.