Myanmar has granted nine foreign banks, including three Japanese lenders and Australia's ANZ, coveted licences to operate on a limited basis, the government's biggest move to date to bring in much needed foreign capital to a fast growing economy.
Crippled by decades of mismanagement under military regimes and cut off from much of the world due to Western sanctions, the domestic banking sector remains ill-equipped to provide services to local citizens, let alone global companies.
While the licences are limited to one branch that can provide loans to foreign companies and only in foreign currency, they will provide the winning bidders a strong foothold in what investors and economists see as one of Asia's most promising markets.
Myanmar's economy is expected to grow 7.75 percent in the 2014/15 financial year from 7.3 percent last year, International Monetary Fund data shows.
"Given its size, economic potential and its strategic position between China and India, Myanmar is forecast to be one of the fastest growing economies in the region over the medium term," Andrew Geczy, CEO of international and institutional banking for Australia and New Zealand Banking Group (ANZ) , said in a statement.
The core banking units of Mitsubishi UFJ Financial Group , Sumitomo Mitsui Financial Group and Mizuho Financial Group all gained licences – underscoring Japan's growing investment and influence in a country that is home to big projects such as the Thilawa economic zone near Yangon.
Also making the cut were the Industrial and Commercial Bank of China Ltd, Singapore's Oversea-Chinese Banking Corp and United Overseas Bank, Thailand's Bangkok Bank and Malaysia's biggest lender Malayan Banking Berhard (Maybank).
The bidding process was open to around 40 international banks with representative offices in the country. Twenty-five banks applied.
"This process has taken a very long time and been incredibly competitive," said Veronica O'Shea, a partner at law firm Herbert Smith Freehills in Singapore.
"These banks were never expecting to get a full licence, as long as they can do a reasonable amount of commercial activity then they will be very happy," she said.
U.S. banks did not apply, as the United States maintains some sanctions on Myanmar. These measures include a Specially Designated Nationals List, a so-called black list that forbids U.S. nationals or companies from doing business with persons or entities listed.
By contrast, the European Union, Australia and other countries have lifted sanctions in response to widespread political and economic reforms initiated by the reformist, semi-civilian government that took over from a military junta in March 2011.
The foreign banks will be allowed to lend to local institutions – a cooperation which is expected to encourage domestic outlets to improve their operations and cut down on corruption.
The tight restrictions are aimed a giving local banks time to grow, but some analysts said local businessmen, in dire need of capital, would benefit from foreign lenders.
"They have no opportunity to engage and finance local entrepreneurs," said Sean Turnell, an expert on Myanmar's economy at Australia's Macquarie University.
A United Nations study released in May found that only 4 percent of Myanmar citizens surveyed had savings accounts in their own names, while a 2013 report by the International Finance Corporation estimated that less than 20 percent of the population has access to financial services.
The licences are preliminary and banks have 12 months to comply with central bank requirements before they become final. A minimum paid-in capital of $75 million will be required.