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Sunday, November 23, 2014
Business

Burma Relaxes Banking Regulations


By THE IRRAWADDY Monday, June 14, 2010


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Burma has designated money in foreign currency earned through domestic business as legal earnings which can be used to import products.

The foreign earnings include currency earned through the sale of handicrafts and art items, and lease of buildings and compounds as well as salaries. Under the new rules, a  foreign exchange currency account can be opened which would allow free transfers to other accounts in the Central Bank of Myanmar [Burma], the Rangoon-based weekly Voice reported on Sunday.

According to the report, Foreign Exchange Certificates (FECs) which are circulated in place of US dollars domestically are also transferable to accounts as US dollars, and wages paid in FECs are also transferable after a 10 percent surcharge.

Buying phone cards, petrol and diesel can be settled with FECs instead of US dollars, but phone call charges with foreign countries must be paid with FECs, the report said.

The new regulations were introduced following the news that four businessmen close to Burma's military regime have received permits to start private banking enterprises in September.

According to sources at the Ministry of Finance and Revenue (MFR) in Naypyidaw, the businessmen would like to open the banks before the election scheduled for later this year due to potential changes following the election.

“For now those who have private banking permits will have to register their banks at the Ministry of Commerce. The registration process will take one and a half months so they should be ready to do business by August,” said an MFR official.“All new private banks are commercial banks only.”

In late May, the Central Bank  issued private banking licenses to Tay Za (Htoo Co., Ltd.), Zaw Zaw (Max Myanmar Co., Ltd.), Nay Aung (IGE Co., Ltd.) and Chit Khaing (Eden Group Co.,Ltd.).  All businessmen are on the US sanctions list.

With the four new banks, there will be 18 privately owned banks in Burma.

The Financial Institution of Myanmar Law enacted in 1990 requires any financial institution to have capital of at least 60 million kyat (about US $60,000) in order to establish a private investment bank and of at least 30 million kyat ($30,000)for a private commercial bank.

Business sources have suggested that it is unfair that only businessmen who are close to the military regime have been allowed to establish private bank enterprises even though there are many businessmen in the country who have the necessary funds.

“It is really unfair that not every businessman who has the capital required by the law has the opportunity to do private banking. Only those who are directly dealing with the regime or are helpful to the generals are permitted. This is not a true market economy system. It's a monopoly,” said the businessman.

Businessmen in the banking industry said the MFR has treated existing private banks differently and  limited new branches.

Kanbawza Bank, owned by Aung Ko Win, who is known as a confidant of the regime's deputy Vice Snr-Gen Maung Aye, has been allowed to increase capital up to 50 billion kyat ($ 50 million) and open branches without any restraints, a banker in Rangoon said.

“Discrimination between private banks exits in many ways. The most important is that whatever business you are allowed to do, you won't be successful unless you are friends with the generals or give them money,” said a businessman who said he had to wait nearly five years in order to open a new branch.

An economist in Rangoon said the country's economy will not improve without allowing more private banks and making overdue changes in banking and monetary policy to upgrade standards and services.

“Currency exchange, monetary and banking policies must be upgraded to international standards. We also need to have the economic sanctions lifted,” said the economist.

The banking system in Burma is tightly controlled by the junta, and there is a fundamental distrust of the system, say observers.

The junta triggered a banking crisis in February 2003 when it closed a dozen private banks. A run on deposits led the regime to cap withdrawal limits to 50,000 kyat ($50) per week and temporarily cancel account transfer transactions which significantly disrupted the national economy.

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Zam Mang Wrote:
15/06/2010
Nothing will prosper under the SPDC's Phih-ga-tat-san system. They drafted their so-called Constitution and election law designed not to benefit the nation but their own fortune which keeps dragging the majority of citizens in the dirt. Banking system needs to be under systematic regulation. But now Than Shwe is doing everything like a mad man. Than Shwe is not educated, he is not a scientist, he is not an economist, he is not a politician, either. He is just a soldier who knows nothing about good.

Kyaw Wrote:
14/06/2010
If the Government is not brave enough to abandon the faceless official exchange rate of Burmese Kyat and go for the market rate, there is no hope of economy development. Myanmar economy will still be far behind the neighbors.

Dr.Myo.THI-HA Wrote:
14/06/2010
Sound good. But it must be practical & real in public.(1 US$=1000 kyats)

Why not SPDC apply the rules for "Dollarization" & free hand processing hard currencies"?

To grow up public economy (self standing up by people), SPDC must allow the public for the legal own processing of any "world hard currencies"; US, Euro, BGP, Swiss franc, S$, M$, Chinese RMB, etc.).

People will play Burmese local currency Kyats laterally by with world hard currencies in daily life. (International Daily exchange rates required twice per day 07am-07pm )

Public can save and earn more money (worldwide hard currencies) than the recent situation.

No need to waste the money unnecessarily by buying >20yrs old car, houses, land and etc...

This is my suggestion to SPDC government.

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