Dozens queue in the rain to receive free meals and by subsidised cooking oil in Yangon as prices for basic commodities soar. (AFP)

‘We are losing while we are selling’: junta policies bite businesses

Erratic economic decisions by the junta have created an inept foreign exchange system, which has been a boon for black market operators, but has left other sectors on the verge of collapse.


In 2018, Ma Sin Thi* started her business providing services to migrant workers using the illegal money transfer system known as hundi. In hundi transfers, workers pay an agent in one location, and the money is delivered by an agent elsewhere.

Workers in Thailand, Singapore and Malaysia sent their money to Sin Thi’s hundi contacts in those countries, then she paid the money out in Myanmar either in cash or into the KBZPay and Wave Money accounts used by the workers’ families, minus a small fee. She also provided currency exchange services, trading in the currencies of the three countries to and from the kyat, and also in US dollars, at black market rates.

Before the February 2021 coup, it was easy for Sin Thi to access her funds and make deposits into the workers’ accounts. Then a complication arose during the massive street protests in the weeks after the coup, when the Central Bank of Myanmar imposed limits on withdrawals from banks and ATMs.

In a letter to banks dated March 1, 2021, the CBM said the withdrawal limits were aimed at “facilitating the transition to a digital economy” by reducing cash use among government agencies and the public; in reality, it was more likely an attempt to stop a run on the banks, due to panicked citizens withdrawing their funds.

The withdrawal limits meant that Sin Thi had to stand in long queues to withdraw cash at banks, a task that became impossible when many banks temporarily closed. 

Bank employees saw an opportunity to cash in on the inconvenience of queueing, and with the collusion of branch managers began offering to withdraw funds from customers’ accounts for a percentage of the withdrawal, typically between five and 10 percent. 

The corruption saw increasing numbers of migrant workers opting to rely on hundi transfers, which in turn was a boon for Sin Thi’s black market business. With access to cash withdrawals severely restricted, she offered clients a cash withdrawal service, whereby they would transfer funds to her KBZPay or Wave Money account and Sin Thi would hand over cash, for a fee. 

In April, Sin Thi’s business received another boost, courtesy of the junta’s erratic attempts at financial management.

The CBM fixed the rate of the kyat at 1,850 to the US dollar (updated in August to 2,100), and nearly all USD foreign currency accounts have since been converted to kyat at the official exchange rate. For Sin Thi, the new policies mean that business has boomed.

“After the foreign exchange policy was announced in April, my business has grown two-fold because of business customers,” Sin Thi told Frontier in August.

“Exporters who want to sell US dollars and importers who want to buy US dollars have all turned to the hundi market. I used to sell millions of kyat worth of US dollars, Singaporean dollars and Thai baht per month but now it has reached billions of kyat… The number of customers I used to have for money transfers and foreign exchange trading was about 150 a month, but it has grown to 300,” she said.

But trouble was around the corner. The sudden increase in the amount of money being transferred through Sin Thi’s Wave Money account resulted in it being closed in February this year by the company. “Then in June, one of my family members working on the Myanmar side was arrested,” she said.  

The junta has cracked down on hundi and other money transfer services in an effort to limit money flowing to resistance groups. In Sin Thi’s case, her relative was charged with financing terrorism.

“When my family member was arrested, I offered a bribe of K30 million [US$14,000 at market rates] to have the case dropped. But I had to give up because he was charged under section 52(b) of the Counter-Terrorism Law,” she said.

Customers queue at a KBZ Bank ATM on March 22. Myanmar's largest private bank has reopened just five of its 144 Yangon branches, according to its website, leaving customers reliant on mobile banking and ATMs. (Frontier)
A long queue of customers at a KBZ Bank ATM in March 2021, when Myanmar’s largest private bank had reopened just five of its 144 Yangon branches. (Frontier)

Import nightmares

The junta’s attempts to control the foreign exchange market have also created a serious problem for importers.

“Importers have suffered because they need foreign currency exchange,” U Myo Gyi*, a commodities importer, told Frontier on August 22. 

“The currency shortage was beginning to be felt in April. At first it was not very noticeable, but by June it was obvious,” he said.

Myanmar needs dollars to import products ranging from basic foodstuffs to technology and other manufactured goods. Imported fertiliser and farm chemicals, for example, are essential to maintain rice yields and maintain food security. However, the Foreign Exchange Securities Commission did not approve sufficient US dollar sales to importers to cover all required imports, including those on priority lists. 

This has resulted in a situation where importers are having to buy US dollars from exporters or acquire them through hundi services.

“We buy US dollars at the market price, but because it is rising every day, we lose every time we sell,” said Myo Gyi. “We are being gradually worn down like a moth ball. If we don’t sell, our business will come to a stop. If we sell, we lose. The product we sell today we cannot buy at the same price to replace it on the shelf tomorrow. We are losing while we are selling. In this situation we are all suffering,” he said.

Businesses wanting to import products on the priority list – such as fuel, edible oil, pharmaceuticals and some building materials – have been told by the CBM that they must purchase US dollars at the fixed rate of K2,100, for which they need a letter of recommendation from the relevant business association. The recommendation is submitted to the FESC for approval, which is then used to apply for an import licence from the junta’s Ministry of Commerce. Then the import licence is presented to the CBM, which grants permission to a private bank to sell dollars to the importer.  

“When you buy dollars for imports, you are required to pay the bank for them in kyat after three months and at the current fixed rate. The current rate is K2,100 but we can’t know what it will be in three months,” said a senior executive at a pharmaceutical import company.

“If you apply to import 13 kinds of medicine, you will be permitted to import only one. You may not receive approval to import the other 12 within the period in which the import licence is valid,” Myo Gyi added. Import licences are valid for just two months, which can be extended for one additional month.

Most importers who have spoken to Frontier since the policy was put in place have expressed being unable to obtain dollars at the CBM’s rate due to the junta’s reluctance to redistribute its foreign reserves. The combined bureaucratic hurdles for importing products have contributed to serious shortages of medicines.

In an attempt to alleviate shortages, the commerce ministry told pharmaceuticals importers on August 16 that if they could buy dollars on the informal market, they would be issued import licences.

Non-priority imports which do not make the list can only be bought using dollars acquired on the informal market, but merchants have reported difficulty obtaining sufficient dollars on the black market as well.

“The number of companies waiting for import licences has increased, making the situation more difficult,” said Myo Gyi. “The price of medicines imported with dollars bought on the black market will never be affordable for the general public,” he added.

Importers of products not included on the junta’s priority import list have also had to buy dollars through the hundi market, though in recent times that has become more difficult, said Ko Hein Htet*, who imports equipment for the power industry.

“Until April, when the foreign exchange policy started to change, we could import as we liked.  Even though we had to rely 100pc on hundi services, we could easily buy tens of thousands or hundreds of thousands of dollars… Now we can’t. To get even $100,000, we have to buy in about 10 instalments. It’s been like this since July,” Hein Htet said.

The increased demand for hundi has meant that those providing the service have had to change the way they are doing business to avoid risking arrest. Sin Thi said that since July, most hundi service providers have been careful to provide dollars in small instalments. 

“After one of my family members was arrested, instead of relying on one person to handle all my transfers in Myanmar, I have appointed several people to do the work. I dare not sell as many dollars as major buyers would like in one transaction, and only sell in instalments; the work previously done by one person is now done by 10 people, so labour costs have increased unnecessarily,” she said.

Power equipment importer Hein Htet said that dollar shortages had caused foreign trade partners to lose trust. 

“Some businesses in Myanmar have relationships with exporters in China that were developed over many years, and they used to extend credit for between four to six months. But since early 2022, Chinese businesses no longer extended credit to any business in Myanmar,” he said.

Protesters face off with soldiers outside the Central Bank in February of last year. Since seizing power, the military has presided over an economic collapse. (Frontier)

New Central Bank rules, new tax systems

On August 16 the Central Bank, perhaps acknowledging the negative impact of its April ruling, announced that just 65pc of export income must be converted at its official rate directly after a transaction. The remaining 35pc can currently be retained for personal use, yet must be sold to a bank, also at the CBM’s submarket rate, within a month of receipt.

A businessperson who asked not to be identified said the change had not benefitted importers.

“Although 35pc of export income can be sold to others, importers have to buy dollars at the market rate, so they are disadvantaged. I think that only those closely related to senior military officers can buy dollars at the fixed rate,” he added.

Three days later, a clearly rattled junta announced a reshuffle of ministers and CBM board members, including an appointment of a high-level crony to the board. The reshuffle saw CBM governor U Than Nyein and deputy governor U Win Thaw being “permitted to retire”, often a euphemism for being sacked.

As businesses grapple with foreign exchange controls, a plunge in the kyat and a slump in demand for commodities because of rising prices, the junta’s Internal Revenue Department has announced a new tax collection system aimed at reducing tax evasion.

The change, from an Official Assessment System to a Self-Assessment System, has been in the works for over a decade. It will take effect from the fiscal year beginning in September 2023. 

Importer Hein Htet lamented the end of the Official Assessment System. “Business owners could negotiate with tax officials under the OAS, but this fiscal year will be the last and next year the new system will be implemented. The military council is not giving businesses breathing space and is even squeezing their necks,” he said.

“The military council is refusing to consider a relaxation of taxes and instead trying to collect more,” said Myo Gyi. “This is why clandestine trade has become rampant. As traders who act within the law face difficulties paying their taxes, black market traders are importing products, some of which are fake or low-quality, and selling them cheap. If they encounter problems, they delete their online sales pages and disappear. The government can’t control them,” he said.

After the announcement of the currency conversion policy in April, shipping companies started to pay out seamen’s salaries directly in cash instead of depositing it into their USD foreign currency accounts in Myanmar. 

The junta subsequently added seamen’s salaries to the list that must be converted to kyat at the official fixed rate, and in August, when it set the exchange rate to the dollar at K2,100, the CBM ordered that merchant seamen working for foreign shipping companies must transfer their salaries through bank accounts instead of cash payments. 

As a result, shipping companies from Singapore told Frontier that starting from September they will be sending Myanmar seamen’s salary payments directly to their bank accounts again. 

A merchant seaman said that would mean having their salaries converted from USD at a rate of K2,100, when the informal rate was more than K3,300. “Now the company issues our salaries in cash and we send the money by hundi. But the company said it will send money to bank accounts from September. We don’t yet know what we are going to do,” the seaman, who requested anonymity, told Frontier on August 25. 

One method seamen have used to evade the CBM’s conversion rate is having their salaries paid into relatives’ bank accounts outside of Myanmar, then sending the money back to their families through hundi services. It means more business for hundi operators like Sin Thi. “After this announcement, more and more seamen use hundi transfers,” she said.

The junta is clearly aware of the large sums of money coming into the country from workers abroad via black market channels, and on August 30 they expanded foreign income restrictions. New CBM chair Daw Than Than Swe issued a directive that all expatriate Myanmar citizens, as well as local citizens who have earned foreign income, must transfer money to the country through official channels. She also directed that the foreign income can be sold within 21 days, but after that the remaining foreign currency must be exchanged for kyat at official rates. 

If the new CBM restrictions were implemented across the board, the impact would be widespread – there are hundreds of thousands of workers abroad remitting money, and most of them are trying to avoid the central bank’s conversion rates. However, the junta’s ability to shut down the black-market operators remains limited, and will mostly affect workers in specific industries and large companies, who have to comply with regulations to stay in operation.

A man sits in front of a shuttered shopfront decorated with anti-coup graffiti in April 2021. (AFP)

The end of the line, for some businesses

The parlous state of the economy and inept financial management has resulted in many businesses closing shop or suspending operations.

“The military council can’t solve these problems. People have cut extra spending and are not buying some products because prices are high. Businesses have stopped operating because they are running at a loss. The entire market has come to a stop,” Myo Gyi said.

The decline in business activity has produced a chain reaction in the labour market and few jobs are available. The electricity generation sector is one that is heavily affected, with many projects either being cancelled or suspended.

“All power projects that involved a lot of megawatts have stopped and others have downsized; many workers have been sacked,” said Hein Htet. 

“The power equipment sector has almost completely stopped. Only home solar projects are left. There are no solar projects for village lighting or commercial or industrial customers or projects that can generate a lot of megawatts,” he said.

Myo Gyi said one indication of the slump in the economy was a paucity of customers in shopping centres.

“Shopping centres used to be crowded, but now customers do not even need to queue at cashier counters. This shows how business has come to a stop,” he said.

“Unless the military council relaxes the rules for import licences and allows importers to buy US dollars freely, there will be no breathing space for businesses and the economy will collapse completely,” he added.

An economic analyst who did not want to be named said the economy had come to a halt.

“The whole economy is standing still. Poor people are starving. Wealthy businesspeople are selling their properties and investing in real estate in Thailand and Singapore. It’s like the economy is heading for zero,” he said.

*Denotes use of pseudonym upon request for safety reasons

More stories

Latest Issue

Stories in this issue
Myanmar enters 2021 with more friends than foes
The early delivery of vaccines is one of the many boons of the country’s geopolitics, but to really take advantage, Myanmar must bury the legacy of its isolationist past.
Will the Kayin BGF go quietly?
The Kayin State Border Guard Force has come under intense pressure from the Tatmadaw over its extensive, controversial business interests and there’s concern the ultimatum could trigger fresh hostilities in one of the country’s most war-torn areas.

Support our independent journalism and get exclusive behind-the-scenes content and analysis

Stay on top of Myanmar current affairs with our Daily Briefing and Media Monitor newsletters.

Sign up for our Frontier Fridays newsletter. It’s a free weekly round-up featuring the most important events shaping Myanmar