Update on Central Bank of Myanmar’s Foreign Currency Conversion Requirements
On 3 April 2022, the Central Bank of Myanmar (“CBM”) issued Notification No. 12/2022, instructing all banks holding Authorised Dealer Licenses (“AD Banks”) to convert foreign currency into Myanmar Kyats (“Notification 12/2022”). A series of instructions relating to the conversion of foreign currency in Myanmar has also been issued. Further details can be found in our previous Client Alert issued on 8 April 2022 here.
Below is a summary of the notifications issued pursuant to Notification 12/2022.
Exemptions from Foreign Currency Conversion
Following Notification 12/2022, CBM has exempted some businesses from Notification 12/2022 via the issuance of letters on 20 April 2022 and 16 June 2022. The list of exemptions are as follows:
- Foreign direct investment carried out under Myanmar Investment Commission (“MIC”);
- Companies that are more than 10% foreign owned and registered at Directorate of Investment and Company Administration (“DICA”);
- Investments operating in the Special Economic Zone;
- Foreign diplomats and their family members, and foreign staff of rank similar to diplomats employed by embassies established diplomatic relations with the Union of Myanmar;
- Staff of the United Nations and its agencies established in the Union of Myanmar and Myanmar national holding UN laissez-passer;
- Foreign staff under foreign development agencies working in aid projects in the Union of Myanmar;
- Foreign staff of diplomatic rank from international organisations, international non-governmental organisations and development agencies; and
- State-owned and citizen-owned international airlines.
The AD Banks must ensure documentation is provided to show that its customers fall under the exemptions, for example, requiring MIC exempted companies to adduce its MIC Permit. The exemption letters issued by CBM have significant effect as it creates carve outs for entities requiring USD liquidity for satisfying its business payments and other operational requirements.
Conversion of Foreign Currency
The Foreign Exchange Supervisory Committee (“FESC”) was formed by the State Administration Council’s Order 28/2022 on 4 April 2022 to scrutinise and approve the use of foreign currency in certain sectors. During the FESC meeting No. 20/2022, it was decided that the foreign currency reserved amount for the following logistics services organisations are set as follows:
|Members of Myanmar International Freight Forwarders’ Association||USD 300,000|
|Shipping line under Myanmar Mercantile Marine Development Association||USD 2,000,000|
|International air freight forwarding and ground handling services for international airlines||USD 100,0000|
Except from the abovementioned organisations and list of exemptions, other foreign currency bank accounts opened at AD Banks in Myanmar will have to abide by Notification 12/2022. For the income of exporters from China-Myanmar and Thailand-Myanmar borders, they are allowed to be converted within one month.
Furthermore, payment for importers at China-Myanmar and Thailand-Myanmar borders does not need FESC approval, while other payment transfers out of the Union is subjected to FESC approval. DICA is currently acting as the intermediary in the FESC approval process for offshore transfer.
On 25 May 2022, CBM issued a letter to the Ministries, State and Region Government and Nay Pyi Taw, Yangon and Mandalay Development Committee regarding domestic payment. Except for the exemptions that has already been provided, other foreign currency income will need to be converted into Myanmar Kyats within one working day. Thus, all domestic payments including hotels, restaurants, international schools, rent for foreigners, and souvenir shops must be done in Myanmar Kyat only. Previously, CBM had issued a letter instructing all Union Ministries, State and Regional Government to conduct and accept their domestic transactions only in Myanmar Kyat and direct the organisations under their supervision, other related government and private organisations to undertake local transactions in Myanmar Kyats.
Now regardless if the business is Businesses-to-Business service (B2B) or Business-to-Consumer (B2C), all payments for goods or services must be paid in Myanmar Kyats for domestic payment.
We will continue to monitor and update any further developments from CBM.
If you have any questions or require any additional information, please contact Geraldine Oh, Thuzar Tin, or the ZICO Law Myanmar partner you usually deal with.
This alert is for general information only and is not a substitute for legal advice.