•  A McKinsey study estimates that Myanmar will need to invest $ billion in infrastructure up to 2030 to achieve an annual growth of 8%. •  Foreign capital, intermediated through a well-developed banking industry and wellfunctioning capital markets, is a necessary complement to meeting this infrastructure need. And it is not only financing that foreign participation brings, but critical expertise in structuring projects and managing risks. Most important, foreign financial institutions promote competition and innovation, providing the impetus for local institutions to upgrade their capabilities. This has been Singapore’s experience. •  We had protected our local banks from foreign competition in retail banking for many years. •  In 1999, MAS embarked on a programme to liberalise access to Singapore’s domestic banking market. •  The aim was to strengthen our local banks through competition and provide Singaporeans with quality banking services. The strategy worked. •  The local banks built up strong management teams and made significant infrastructural investments to expand their range of business activities and enhance operational effectiveness. •  They are now stronger and more dynamic, with much improved systems of management, risk controls, technology, and expertise. •  Liberalisation provided the spur for our local banks to raise their game and compete with some of the world’s largest banks while maintaining high prudential standards. Why liberalise at a measured pace This leads me to my second point.
•  In Singapore, liberalisation spurred the consolidation of Singapore banks from seven banking groups to three, a process which may otherwise have taken much longer. •  Foreign bank participation in the domestic banking system must therefore be strong enough to encourage the strengthening of the local banks but not so strong as to overwhelm them. •  It is a judicious balance that each country must find for itself. Third, selective and stringent admission. Singapore has always had a very open policy towards foreign banks in wholesale and offshore banking activities. But when we selectively liberalised foreign bank access to retail banking, MAS considered three sets of factors: •  First, the banks’ prudential strength, credit ratings, and quality of risk management. We only admitted strong, well-run banks. •  Second, we took into account the relationship we had with the home regulator, as we needed to be able to work with them on consolidated supervision of these banks and trust them to regulate the head office in a sound manner. •  Third, we evaluated the banks’ long-term business plans and how they could contribute to the Singapore economy. Liberalisation is not an end in and of itself. It must ultimately lead to a stronger, safer, and more competitive financial system that serves the needs of the economy and country.