Lee Min-hyung joined The Korea Times in 2014 and has worked as a journalist mainly in Korea’s finance, tech and automotive industry. He specializes in content creation, breaking news and in-depth analysis currently on transportation and mobility. You can reach him via mhlee@koreatimes.co.kr.
Korean financial firms pressed to change Myanmar business strategies
By Lee Min-hyung
By Lee Min-hyung
Korea's financial firms are being pressed to scale down their businesses in Myanmar amid escalating uncertainties following a military coup.
Myanmar's military staged a coup in early February. The political uncertainty there is showing little sign of abating amid a deepening conflict between the military and thousands of protesters there, raising the likelihood that the instability will last for a longer period of time.
This has sparked worries that a number of Korean financial firms would suffer financially and may end up scaling down their business operations there.
Several Korean banks, insurers and card firms are operating in the Southeast Asian country, with some opening their branches in January of this year. As most of them cannot engage in normal business activities for now, concerns are growing that they will have to downsize their operations or possibly pull out their staff.
Korean bank officials said they are stepping up monitoring of their branch offices in Myanmar in real time due to increasing uncertainties.
“KB Kookmin Bank has established a hotline between its head office in Seoul and Myanmar's Yangon branch, and strengthened monitoring of the country's political situation,” a KB spokesman said. “We are also paying attention to any notifications from the Myanmar embassy to ensure the safety of employees who are working from home.”
But the lender said that it does not have any specific plans to revise its business portfolio in Myanmar as of now.
Woori Bank, which also runs a Myanmar office, said it set up a contingency plan recently to minimize possible risks from the escalating military uncertainty there.
“We are keeping a close watch on the situation in the region, and are ready to take immediate action under the contingency plan in case of emergency,” a spokesman from Woori said. But the lender added that it is not considering scaling down its business there for now.
Industrial Bank of Korea (IBK), a state-run lender which opened its branch in Myanmar in January, is also maintaining a wait-and-see approach over the military crackdown without making drastic changes in its management policy for the region. But the lender also expressed concerns over the situation, as it has been able to carry out only a limited range of businesses there due to the coup.
“Even local financial firms cannot operate smoothly amid the country's anti-coup protest,” an official at the lender said. “IBK is also operating only depository businesses.”
Several Korean private and state-owned lenders, including Korea Development Bank (KDB) and KB Kookmin Bank, opened new offices in Myanmar in January this year, hoping to expand their presence in what they view as a strategic geographical center of the Association of Southeast Asian Nations (ASEAN).
But the much-hyped vision is showing little sign of progress amid the heightening conflict between Myanmar's military junta and demonstrators there.
This has pushed Korean lenders to find other Asian markets to serve as a key post for their regional business in Southeast Asia.
In December 2020, KB Kookmin Bank became the first non-Myanmar-based lender to obtain a license to operate there. But the military coup forced it to suspend operations of the new subsidiary. KB is shifting its focus to other Asian territories, including Indonesia, as a backup plan until the political turmoil subsides in Myanmar.
Last month, KDB announced plans to open a second office in Hong Kong in the latter half of this year, with some arguing that the move was aimed at enhancing its footprint in the Asian financial hub amid an increasingly dubious outlook for growth in Myanmar. KDB Asia, the lender's head branch office in Hong Kong, will play a crucial role as an investment bank, while the new office will handle corporate financing and other fundraising activities, according to the state-run lender.
The Myanmar turmoil is also having a negative impact on other non-banking Korean financial firms ― such as insurers and card companies.
Kyobo Life Insurance also opened a branch in Myanmar early this year, but the insurer is in a dilemma over whether to shift its strategy there.
For now, Kyobo Life said only a few things have changed in its business strategies there. Starting from February, the firm's Myanmar branch has adopted a work-from-home policy amid the ever-growing political uncertainties there.
Card firms here are also suffering from the aftermath of the Myanmar coup. Three Korean companies ― Shinhan Card, KB Kookmin Card and Woori Card ― have a presence there, but their earnings are expected to nosedive further this year amid the heightened military uncertainty there along with the coronavirus shock.
Shinhan Microfinance, the Myanmar branch of Shinhan Card, generated only 2.1 billion won ($1.85 million) in net profit in 2020, down 70 percent from the previous year. This was attributable to pandemic-induced weak consumption.
But all of the Korean card companies operating there have yet to confirm whether to withdraw their operations despite the skeptical outlook in their earnings and the growing political turmoil there.
"Banks and other Korean financial firms are urged to devise back-up plans to minimize losses incurred from the political instability in Myanmar, as the conflict between the military and protesters is showing little sign of abating and may cause more damage to their business,” a financial industry source said.