Korean banks try to maintain expansion momentum in Southeast Asia despite Myanmar coup

Officials from KB Kookmin Bank and Myanmar's government hold an opening ceremony for KB Bank Myanmar in Yangon on Jan. 27. Courtesy of KB Kookmin Bank

By Lee Min-hyung

Korea's commercial lenders are changing their expansion strategies in the Asian market to focus on boosting their presence in a few key markets as uncertainties mount in the wake of the military coup in Myanmar.

Several Korean private and state-owned lenders, including the 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 region" of the Association of Southeast Asian Nations (ASEAN).

But persistent corruption, lack of transparency and a disastrous human rights record in recent years continue to plague the Southeast Asian country. Yet many foreign investors still believe in the vast growth potential of the ASEAN region from a mid to long-term perspective.

Several companies have already announced they will be halting operations in Myanmar or even terminating relationships with the government following the coup. Korean financial companies have also temporarily halted their businesses in Myanmar.

At the same time, however, Korean financial companies are shifting their growth strategies in the region, choosing to bolster their presence in established emerging economic powerhouses, rather than investing in relatively untapped territories such as Myanmar.

"Uncertainties keep growing, making it unclear when they will be able to resume their businesses in Myanmar," a bank industry source said. "For now, banks have no choice but to focus on other key Asian markets to generate stable overseas earnings and offset losses from Myanmar."

Last week, the KDB announced plans to open another office in Hong Kong in the latter half of this year, calling the move as part of a strategy to build a "double post" there. KDB Asia, the lender's head branch office in the special administrative region, will play a pivotal role as an investment bank, while the new office will handle corporate financing and other fund-raising activities, according to the state-run bank.

The KDB and other major Korean commercial banks have pursued aggressive business expansion plans in recent years as the Korean market became increasingly saturated. In 2014, the KDB opened an office in Manila, Philippines aiming to help finance business projects of Korean companies in Southeast Asia. But the state-run lender recently decided to shut down the office as Korean firms pay less and less attention to the territory.

In December of last year, KB Kookmin Bank became the first non-Myanmar-based lender to obtain a license to operate there. But the military coup forced it to discontinue operations at the new subsidiary. As a back-up plan, KB is shifting its focus to other key Asian markets, including Indonesia until the political turmoil comes to an end in Myanmar.

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