The Myanmar junta has in recent weeks introduced more restrictions on imports and exports, as well as controls on the flow of foreign currencies, both of which have been detrimental to international trade, according to industry insiders.
The regime’s commerce ministry issued a directive on June 28 requiring border trade exporters to deposit either 20 or 35 percent of the value of their commodities to the ministry’s trade department, depending on their level of experience: those active more than three years can give the smaller deposit, and those with less than three years trading must give the larger one.
The deposits can be made in four currencies: Myanmar kyat, US dollars, Thai baht, or Chinese yuan, with exchange rates based on the market rates at the borders.
Earnings from exports must also be remitted into the companies’ bank accounts within seven working days of export declarations being issued—a period reduced from what used to be three months. However, just over a week after declaring this requirement, the ministry relaxed the timeframe to 15 working days. Additionally, the deposits will only be returned to the companies after these earnings are remitted, the ministry said.
Traders are required to sell their remitted earnings of foreign currencies to the banks within one month at a fixed exchange rate of 2,100 kyat per US dollar, as per regulations around compulsory conversion under the regime’s Foreign Exchange Supervisory Committee. The committee, chaired by Lt-Gen Moe Myint Tun, was formed in early April last year and introduced an initial series of rules surrounding the required exchange of foreign monies.
On April 3, 2022, the Central Bank of Myanmar (CBM) issued a directive requiring foreign currency holders in Myanmar to convert their earnings into kyat within one day of receipt at the official exchange rate set up by the CBM. The CBM relaxed this order three weeks later for exporters and importers conducting trade with China and Thailand, extending the currency conversion deadline to one month.
The CBM issued another notification in August last year to clarify its foreign currency conversion requirement for exporters, which specifies that only 65 percent of income received from exportation must be converted into kyat within one day. It declared that the remaining 35 percent of companies’ export earnings balance would be converted into kyat if exporters did not use it within 30 days.
A businessman specialising in imports and exports told Myanmar Now that the regime’s shifting regulations on the finance and trade sectors were considered “unacceptable” within the industry.
“These are not the norms that businesses are practising internationally. International buyers who have been trading with our country can no longer accept these regulations,” he said on the condition of anonymity, fearing for his safety for criticising junta policy.
“It has a huge impact,” he continued. “When [the military council] restricts the export industry that much, traders become hesitant to export anything.”
Another local business owner who sells goods to China explained that many small trading companies like his can no longer bring in profits given the service fees and rising costs surrounding exports, noting that the sentiments were felt by many in his sector.
“The traders have to deposit 20 percent of their commodity values, and when they receive the payment for their goods, they have to sell 65 percent of their foreign income to the bank at the official exchange rate. This is not working out very well for them,” he said.
In addition to issues surrounding the regulations on deposits, the CBM issued a directive on July 3 to local banks with authorised dealers’ licences asking them to more thoroughly scrutinise importers’ transactions. The unprecedented order called on financial institutions to prohibit transactions for shipments that had departed their countries of origin before the companies in question had been issued their import licences.
“When scrutinising the companies that submit requests to transfer money for their import [shipments], ensure that the import licence issuance date corresponds with shipment departure and import declaration dates,” the CBM’s directive said.
The CBM also ordered the banks to bar transactions surrounding any shipment with an import declaration date more than six months old.
The latest policy decisions are in addition to strict restrictions on import licences for several commodities since the regime desperately launched an attempt to control the flow of foreign currencies.
“They have been trying to block and restrict every window out of which foreign monies can leak out. The result is that those restrictions are no longer logical and can’t be acceptable according to any economic standards,” the first businessman said.
He also explained that many buyers have cancelled their trade contracts with businesses in Myanmar in the wake of the shifting regulations.
“Everything is gone now. It’s all destroyed,” he said of the industry.
A World Bank report released in June detailed how policy failures have slowed Myanmar’s struggling economic recovery under the military regime, likely damaging people’s future earning capacity as well as inflicting short-term hardship. The report projected a three percent increase in GDP by September 2023, which will still be 10 percent lower than GDP in 2019.
New domestic regulations, as well as restrictions on foreign trade and financial transactions, have created impediments to business activities. These, along with lower demand from abroad and an overvalued kyat, have brought exports down while import levels have remained steady, resulting in a trade deficit which hit in March.
Junta chief Min Aung Hlaing met with members of the local trade organisation Union of Myanmar Federation Chambers of Commerce and Industry (UMFCCI) on July 2 in Yangon and urged them to “take necessary measures” to develop a self-sufficient economy, including in the oil sector.
“The meeting is to hold talks on requirements and on fulfilling them. The vision of the national task is for national prosperity and food sufficiency. Prosperity means national peace, happiness and tranquillity in doing business and pursuing education in all the urban and rural areas of the entire country,” the coup leader told UMFCCI officials.
