BANGKOK, Thailand — Myanmar officials sought Thursday to reassure foreign investors over currency controls that foreign governments and businesses say would make doing business in the military-ruled country nearly impossible.
Two ministers of Myanmar’s army-installed government said in an online briefing that approved foreign investors, embassies, United Nations agencies and non-government organizations are exempt from recently announced rules requiring conversion of foreign exchange into the local currency.
The officials also dismissed as a “myth" reports and social media postings suggesting the country may be short of fuel, with long lines of vehicles forming outside service stations in recent days.
Aung Naing Oo, the army-installed government’s minister for Investment and Foreign Economic Relations, said details of the central bank’s new rule were being worked out. Foreign companies and others qualifying would be given an automatic exemption. That includes businesses operating in Myanmar's only special economic zone, Thilawa, south of the biggest city, Yangon, he said.
“There will be no additional burden to businesses because of the notification of the Bank of Myanmar," he said. “We have already expected, anticipated there will be some negative impact."
The Bank of Myanmar’s announcement that foreign currency bank holdings must be converted to kyats within one day of their receipt appeared aimed at alleviating a shortfall in hard currency following the Feb. 1, 2021 military takeover that ousted the elected government of Aung San Suu Kyi.
Foreign governments and business organizations vehemently protested the rule, which added to the formidable risks investors face in doing business in the country.
A statement by the American Chamber of Commerce and British, French and Australian chambers and similar groups said the requirement to swap all dollars and other foreign currencies for kyats would lower Myanmar standards of living, discourage foreign business activity and foreign investment and cause trade tensions.
“Implementation of these measures and the associated lack of clear exemptions for foreign investments creates significant, and for some, insurmountable challenges to all businesses operating in Myanmar,” the statement said.
The U.S. and other mostly Western countries have imposed targeted sanctions on the military, army-affiliated businesses, military leaders and their families, freezing assets held in those countries.
It's unclear how severely those measures have impacted the military leadership and its finances. But Myanmar’s economy has slumped amid widespread public resistance to the military takeover and the pandemic. That has in turn kept away tourists whose spending accounts for a large share of foreign exchange earnings needed to pay for imports of fuel, food and other necessities and to repay foreign debts.
Aung Naing Oo said the rule was intended to stabilize the exchange rate after the kyat fell to more than 2,000 kyat to the U.S. dollar.
Critics of the new policy noted that limits on bank withdrawals would further complicate its implementation. To clarify, the government plans to draw up “standard operating instructions" on obtaining foreign exchange and obtaining cash from banks, Aung Naing Oo said.
Myanmar has been ruled by the military for most of the time since it gained independence from the British in 1948. But for about a decade beginning in 2011 the country began a faltering transition toward democracy and its economy began to take off as it opened further to foreign investment.
Many major foreign businesses have opted to leave, or suspended operations in Myanmar, since the military seized power last year, citing rising risks and a deteriorating business environment, as well as the sanctions.
This is a “transitional period," Aung Naing Oo said, “and there will be some difficulties but hopefully all these difficulties and inconveniences will be resolved."