reports Reuters from Yangon

Bank credit to the private sector was up 63.7 percent in the 12 months to March, a recent Economist Intelligence Unit report shows. Overall domestic credit growth was 32 percent in August 2011 from the same month the previous year, it said.

Deposits are up, too, reaching 5.2 trillion kyat in September, more than doubling from the end of 2009, the EIU said. At the end of 2010, outstanding loans, including those to government, equalled about 81 percent of total deposits.

But the EIU raised a red flag over the banking sector's outstanding foreign liabilities, calling then a "cause for concern" at nearly $3.4 billion. That is almost half the country's total foreign exchange reserves, which Upper House lawmaker Aye Maung put at $7.2 billion. The figure is all the more perplexing given Myanmar's ban on foreign currency-denominated assets.

Many businesses, however, remain starved of credit. Consider small and medium enterprises such as Technomation. Founder Htoo Myint Naung says the company commands an 80 percent share of Myanmar's mobile apps market, which could grow as the country's telecommunications sector is reformed.

While such small businesses employ the bulk of the country's workers, most have no access to bank loans. Htoo Myint Naung laughs at the very thought. "Everybody knows you don't go to the bank for a loan. They will refuse," the 24-year-old said. "They may give you money for a laptop, for instance, but not for a business plan."

Lucky businesses turn to family or friends for money, others to underground lenders with prohibitively high interest rates. In rural Myanmar, farmers have turned to local moneylenders for cash to pay for seeds, fertilizer and other materials. That has left a huge portion of the population in debt with double digit interest rates - a cycle that could be broken if more lenders are allowed to give credit to farmers.

Economists say the currency reforms should begin to stabilise the economy and underpin a revival of confidence in the kyat, which, in turn, could see more people open bank accounts. Less than 10 percent have accounts now.

"Reforming the complex exchange rate system is a priority to eliminate constraints on economic growth," the International Monetary Fund's mission chief in Myanmar, Meral Karasulu, sa id after a January visit.

The senior official from the Ministry of Finance and Revenue said the central bank had given permission this year to four private banks to do foreign remittances: Co-operative Bank in Singapore, Kanbawza Bank in Thailand, Asia Green Development Bank in Singapore and Malaysia, and Ayeyarwady Bank in Malaysia.

He said that banking services agreements had been signed with Chinese banks to enable payment in Chinese yuan for border trade, and memoranda of understanding had been signed with banks from Bangladesh and India on border trade cash payments.

Late last year, the central bank also authorised 17 local private banks to open 57 money exchange counters, and licensed 11 to carry out foreign banking services. Many of the exchange counters are open already, but the banks licensed to engage in foreign services were said to still be negotiating counterparty agreements with overseas banks. Some new banks such as the nearly two-year-old Ayeyarwady Bank have big plans.

Its owner, Zaw Zaw, said he has already met executives from several foreign banks in recent weeks including Swiss bank UBS AG, Malayan Banking Bhd (Maybank), CIMB, and Thailand's Siam Commercial Bank. He has hired British and Malaysian consultants, sent staff overseas for training and is preparing for an end to sanctions that analysts expect could come this year. His bank, he said, was already working to install the SWIFT cross-border payments system to initiate correspondence with foreign banks.

"We need to become stronger and stronger. After that, we can compete with others," he told Reuters in an interview. He employs about 970 staff in Ayeyarwady, named after the rice-growing region where he spent his childhood. The bank aims to more than double branches to 45 next year from 20 and hire foreign-educated talent.

But Ayeyarwady Bank and its peers represent a paradox for Myanmar's banking sector.

Ayeyarwady is one of four banks launched after the 2010 privatisation wave that are plotting aggressive expansions that could help modernise the sector.

The emergence of these banks - Ayeyarwady, Asia Green Development Bank, United Amara Bank and Myanma Apex Bank - is credited with boosting sector-wide lending. IMF data showed a 60 percent leap in private-sector lending in the nine months to December 2010, Turnell says.

Yet they are owned by crony businessmen considered close allies of the former ruling junta, all of whom are on international sanctions lists. Other Myanmar banks may not have such obvious potentially toxic liabilities, but finding international business partners will not be easy.

"These aren't banks of eminent reputation," said Rupert Haw, deputy country managing director in Myanmar for the law firm DFDL Mekong. "Local banks would be well advised to prepare themselves for rigorous due diligence."

To understand what role Myanmar's banking system could play, one need look no further than its past, says Turnell. Ravaged by World War Two, post-colonial Burma rebounded spectacularly on the back of effectively deployed credit. By the end of the 1950s, it was the world's biggest rice exporter. Today, the country lags far behind world rice powerhouses Thailand and Vietnam. But that could change. Myanmar "has a high growth potential and could become the next economic frontier in Asia", the IMF's Karasulu says.

But modernising the financial sector will be a critical part of upgrading the economy, she says.

Official data shows $40.4 billion was pledged in foreign direct investment by the end of this February. Of that, about 81 percent was for the power, oil and gas sectors. Mining, manufacturing, hotels and tourism and real estate took 17 percent combined.

Other services, which appears to include finance, was just 0.06 percent.

"All the banks are saying: We need help. We want reforms. We want changes. But how do we go about this?" said Dennis Openshaw, an emerging market bank consultant who is helping Co-operative Bank modernise.

"It all comes down to implementation and they've not got the knowledge and know-how."

Financial Express/Bangladesh/ 4th April 2012

A research work of the Bangladesh Bank (BB) has found that the country's high inflation has positive relationship with its remittance earning.

The positive relationship implies that higher inflation in home country, which reduces the purchasing power of migrants' families, induced the migrants to send more remittance to Bangladesh.

Interestingly, the country's remittance earning has been growing along with high inflationary pressure on the economy over the last few years.

The study said if domestic inflation goes up by 1.0 per cent, remittance inflow increases by 0.29 per cent.

The research, coordinated by Ahsan H Mansur, executive director of Policy Research Institute of Bangladesh (PRI), used monthly remittance data from 1980 to 2011.

The study used data of the Bangladesh Bank, the Bangladesh Bureau of Statistics, the Ministry of Finance, and the Bureau of Manpower, Employment and Training.

Mr Ahsan said: "The relationship between inflation and remittance inflow should be positive, and our study has found the same."

Remittance, which emerged as the key driver of economic growth, can help improve the country's development prospects, maintain macro-economic stability, and mitigate impact of adverse shocks.

Nurunaher, a joint director of the BB research unit and a researcher of the study, told the FE: "Remittance is very sensitive to inflation."

She, however, said abnormally high inflation might decrease remittance inflow, as it represents more risk and uncertainty in the home country, comparing with the host countries.

The aim of the study, recently released by the central bank, was to investigate whether the macro-economic variables of the home and host countries can affect the remittance inflow to Bangladesh.

The researchers said it is really tough for the country to maintain the rising trend of remittance in the face of low wages as well as the decreasing demand of migration in the labour importing nations, mostly the Middle-East countries.

The study suggested that Bangladesh has to strive hard to maintain its commendable liaison record with the labour-importing countries, especially the Middle-Eastern ones and Malaysia.

The other factors to affect remittance earnings are exchange rate, wage rate, and regulatory as well institutional arrangements, made by the government.

However, another study, conducted by Palli-Karma Sahayak Foundation (PKSF), found that there is negative relation between inflation and remittance.

One more study, conducted by leading manpower exporting country Mexico, also found that there is little relationship between inflation and remittance.

Financial Express/Bangladesh/ 4th April 2012

The World Bank, now probing into the alleged irregularities in the bidding for Bangladesh's biggest Padma Bridge Project, has temporarily barred a unit of SNC-Lavalin, a big Canadian engineering company, from bidding on new bank projects, according to online reports.

SNC-Lavalin Inc said Monday a subsidiary has been temporarily barred from bidding on new contracts by the WB.

The bank launched an investigation into the alleged irregularities in the bidding process in September last. A contract to build the bridge has not been awarded.

But the row over alleged corruption has already led to the suspension of funding by the Washington-based lender for the crucial Bangladesh project.

The Canadian engineering giant's offices outside Toronto were raided in September 2011 by the Royal Canadian Mounted Police as part of an investigation into the company's work on Padma Bridge, a World Bank-funded project in Bangladesh. A month later, the World Bank suspended its $1.2 billion loan for the project, its biggest-ever off-credit line to any country.

The temporary suspension is not a final decision, but is meant to control the interactions the company has with the World Bank as it continues an investigation, SNC-Lavalin said. The company intends to respond to allegations outlined in a World Bank report, as is allowed under the institution's regulations.

The World Bank report, and therefore the allegations contained within it, are confidential, according to a description (pdf) of the temporary suspension process on the bank's website.

Ian Bourne, SNC-Lavalin's interim chief executive, said in a statement that the company respects the World Bank's decision, but that ongoing projects will continue, and other subsidiaries will bid for new projects.

"We launched our own internal investigation when this matter was first brought to our attention and we will continue to cooperate fully with the World Bank on this matter," said Bourne.

A World Bank spokeswoman didn't immediately respond to a request for comment.

SNC-Lavalin was going to act as the engineer for Bangladesh government in supervising the contractor responsible for building the bridge, which would link Bangladesh's underdeveloped south with the capital, Dhaka, and the country's main port, Chittagong. Once completed, it would be the largest bridge in the country.

In 2010, the World Bank joined a consortium of the Japanese government, the Asian Development Bank and the Islamic Development Bank to provide Bangladesh up to $2.9 billion for the bridge.

The temporary suspension is the latest in a string of developments surrounding SNC-Lavalin's business practices. Last month, the company's chief executive stepped down after an internal probe found he breached company policies by approving $56 million in payments that it said were inappropriate. SNC-Lavalin has also been under scrutiny for its business in Libya with the ousted regime of slain ex-leader Muammar Gaddafi.

"While we do not expect this World Bank decision will materially impact SNC directly, we view the news as negative, particularly given SNC's recent findings with respect to its internal board investigation," RBC Capital Markets analyst Sara O'Brien said.

She said she expected SNC's stock, which is down 22 percent in the past three months, to come under more pressure.

The stock finished 2.0 per cent higher at C$40.75 on the Toronto Stock Exchange on Monday. The news was released shortly before the market closed.

SNC, which is one of the world's biggest engineering companies, said it intends to provide a "comprehensive response" to the allegations contained in the confidential World Bank report.

It did not name the unit affected by the World Bank suspension. The company declined to comment further saying the World Bank report was confidential.

SNC-Lavalin has offices across Canada and in over 40 other countries around the world, and is currently working in some 100 countries.

Financial Express/Bangladesh/ 4th April 2012

Outgoing World Bank president Robert Zoellick on Tuesday gave his backing to a new development bank proposed by the leaders of the BRICS emerging countries.

Zoellick said the World Bank would be prepared to work with the new financial institution, which was discussed by the leaders of Brazil, Russia, India, China and South Africa when they met in New Delhi last week.

While the plans are still in their preliminary stages, such a bank is seen as a potential counterweight to other multilateral lenders such as the World Bank and the Asian Development Bank.

“As a general principle if the BRICS countries want to develop it we would work with it,” Zoellick told the Boao Forum in southern China, according to a transcript posted on the meeting’s website.

“We work with the regional development banks, and I have created a series of partnerships with these banks that are likely to be similar to the BRICS bank in that it will probably be more of a financing vehicle than a knowledge and experience vehicle.”

Last week’s BRICS summit was the fourth since the bloc was formed in 2009.

The Independent/Bangladesh/ 4th April 2012

NCC Bank Limited has opened two new ATM booths at Osmani Medical College and Naya Sarak in Sylhet recently.

Mohammed Nurul Amin, Managing Director of the Bank formally inaugurated the booths as chief guest, said a press release.

Among others, Deputy Managing Director TM Faruque Chowdhury and Executive Vice President Md. Omar Faruque Bhuiyan were present on the occasion.

The Daily Sun/Bangladesh/ 4th April 2012