Indonesia’s state-owned Mandiri Bank has announced its intention to enter Laos and Cambodia.
Rohan Nafas, Mandiri Bank corporate secretary, said the bank is now studying the best ways of penetrating the two new markets.
In particular, the bank is exploring which sectors would be the best to enter, such as banking or finance.
To that end, the bank has set up an investment fund to facilitate the process.
Mandiri Bank is the largest bank in Indonesia in terms of assets, loans and deposits. The bank had USD 83.6 billion in assets as of end-2018.
Laos has seen several foreign banks making a foray into the market over the past few years.
In November last year, Thailand’s Export-Import Bank opened its first representative office in Vientiane to assist the Lao government’s policy on trade and investment integration into the Mekong sub-region which covers Cambodia, Laos, Myanmar, Thailand and Vietnam.
Separately, The Joint Stock Commercial Bank for Foreign Trade of Vietnam, or Vietcombank, officially inaugurated its operation in Laos in October last year.
At that time, the bank said it will provide services for Vietnamese businesses investing in Laos, those already operating in the country, and others, to raise trade value between Vietnam and Laos.
Such moves by foreign players come amid Laos’s efforts to improve business standards for the banking sector.
The Lao banking sector is working to improve regulations and update preparations for implementing the Basel II principles, including learning about the International Financial Reporting Standards (IFRS 9).
Basel II is an international business standard that requires financial institutions to maintain enough cash reserves to cover risks incurred by operations. The accord prevents banks from hurting the economy by taking more risks than they can handle.
IFRS 9, meanwhile, addresses accounting for financial instruments. It contains three main topics: classification and measurement of financial instruments, impairment of financial assets, and hedge accounting.
The Lao Bankers’ Association and Deloitte Consulting Malaysia also held a meeting in March to review and update the revision of regulations in the local banking industry as part of strengthening capacity to implement the management of commercial banks based on the Basel principles by 2025.
At that time, Chairman of the Lao Bankers’ Association, Mr. Phoukhong Chanthachack, said improving the management and services of commercial banks in Laos to comply with international standards is entirely obligatory, as quoted by Vientiane Times.
He added that it would build confidence among investors and enable banks in Laos to approach bigger financial markets and expand services to integrate with global networks once they were recognized by the international community.
Laos and Indonesia established diplomatic relations in 1957. Indonesia maintains an embassy in Vientiane, while Laos has an embassy in Jakarta. There are currently no direct flights between the two countries.