Financial Structure and Exchange Arrangements
Myanmar's financial structure includes State and private banks and a State insurance institution. The State banks are the Central Bank of Myanmar and four major specialised banks namely the Myanma Economic Bank which provides countrywide domestic banking and saving services, the Myanma Investment and Commercial Bank which renders both domestic and foreign exchange transactions, the Myanma Foreign Trade Bank which deals in foreign exchange transactions and the Myanma Agricultural and Rural Development Bank which provides seasonal and term loans for agriculture and livestock breeding. The Small Loans Department was separated from the Myanma Economic Bank and set up as a finance company, namely the Myanma Small Loans Enterprise, which deals in pawn-shop opera- tions. The Myanma Insurance is the sole insurance institution in Myanmar and presently underwrites various kinds of insurance.
In accordance with the new banking laws, the Central Bank of Myanmar has granted operating licences to eight domestic private banks and had granted permission to open representative offices of the seven foreign banks.
Central Bank of Myanmar
The Central Bank of Myanmar Law (1990) empowers the Central Bank to operate with relative independence and to exercise supervisory and regulatory authority over a wide range of financial institutions, both State and private owned. In particular, the Central Bank is also empowered to set reserve requirements, maximum discount rates, maximum and minimum interest rates on loans and deposits, asset and liability ratios and minimum cash margins. In this regard, the stipulations are applicable uniformly to all financial institutions without discrimination. Thus, the law enables the Central Bank to rely less on quantitative credit control but more on indirect instruments of monetary control including the use of reserve ratio and interest rate policy. It also includes provisions governing the relations of the Central Bank with the Government, measures and procedures to formulate and implement monetary policy, implementation of exchange rate policy and control of foreign exchange transactions and the powers of the board of directors to ensure the effective performance of the Central Bank.
The Financial Institutions of Myanmar Law (1990) provides for the establishment of financial institutions, whether State-owned, jointly owned by the State and private or private, to perform financial activities with the permission of the Central Bank.
The purpose of exchange management is to conserve the available foreign exchange reserves of the country. Exchange management is administered by the Controller of Foreign Exchange of the Exchange Management Department of the Central Bank of Myanmar and the Exchange Management Board in accordance with the Instructions from the Ministry of Finance and Revenue. Both exportation and importation of kyats are prohibited. The Kyat is not negotiable abroad. All external payments are subject to authorisation. All export proceeds and invisible receipts must be declared to the Myanma Foreign Trade Bank at present.
The currency of Myanmar is the Myanmar Kyat. which is pegged to the SDR at K 8.50847 = S D R 1. Myanmar applies margins of 2 per cent in respect of spot exchange transactions, based on the fixed Kyat - S D R rate. The buying and selling rates of the Kyat for the Deutsche mark, the French franc, the Japanese yen, the pound sterling, the Swiss franc, and the US dollar quoted by the Myanma Foreign Trade Bank are determined on the basis of the daily calculations of the value of these currencies against the S D R. Buying and selling rates for other currencies such as Singapore dollar, Italian lira, Hong Kong dollar, Netherlands guilder, etc., are determined on the basis of appropriate cross rates in different money markets of various geographical regions. There are no taxes or subsidies on purchases or sales of foreign exchange. There are no arrangements for forward cover against exchange rate risk operating in the official or the commercial banking sector.
The Central Bank of Myanmar has issued Foreign Exchange Certificates (FECs), equivalent in US dollar, since February 1993, in order to enhance the foreign exchange earnings and for the convenience of tourists. FECs can be used by both residents and non- residents alike for any type of payment within the Union of Myanmar. Tourists entering Myanmar are required to exchange compulsorily the prescribed minimum amount of US $ 300 with 300 FEC units, which will not be reconverted at the time of departure from Myanmar. However, in the case of unutilised balance of the FECs exchanged above the 300 FEC units the balance will be reconverted at the time of departure on presentation of the FEC Voucher at the exchange counters. FECs are exchangeable with US dollars or pounds sterling or with acceptable Traveller's Cheques. Myanmar residents who own foreign currencies are permitted to exchange them with FECs, but they cannot reconvert their FECs into foreign currencies. However, any Myanmar resident who owns a minimum of 100 FEC units is allowed to open a new foreign currency account or to deposit them into his existing foreign currency account at State-owned commercial banks on payment of a 10 per cent service charge. The banks concerned will then credit the remaining 90 per cent value of FECs into the US dollar denominated foreign currency account of the individual Myanmar resident. The organisations which are authorised to obtain FECs from the Central Bank of Myanmar are the State-owned commercial banks, State-owned hotels holding money changer licence and private individuals who hold FECs changer licence. FECs cannot be sold for Myanmar Kyat.
Effective April 29, 1993, foreigners and non-residents can bring into Myanmar at any one time from any place abroad any foreign currency not in excess of US dollars two thousand or its equivalent without making a declaration to the Customs on arrival.
The Myanma Agricultural and Rural Development Bank
The Myanma Agricultural and Rural Development Bank (MARDB) is one of the State- owned banks. It was established in 1953 as State Agricultural Bank (SAB) and later had its name changed to Myanma Agricultural Bank in 1976. Under the MARDB Law enacted in July 1990 the Bank will support agricultural, livestock and rural socio-economic enterprises including production, processing, storage, distribution and marketing activities relating to agro and livestock based industries. It has a countrywide network of 14 regional offices. 164 branches and 48 agency offices. It provides short and long term credits to 2.5 million farmers for crop production. salt production, livestock, fish and dairy farming etc. From fiscal 1993/94 it launched the Rural Savings Mobilisation Scheme under which savings, deposits and loans services were initiated for all farmers and the rural population.
The Myanma Economic Bank
The Myanma Ecnomic Bank was estanbished in 1976 for the purpose of developing general commercial and industrial banking. It also acts as fiscal agent of the State. It provides nationwide commercial banking with 259 bank branch offices. The functions of the bank include accepting current accounts, savings deposit accounts, and other accounts, issuing savings certificates, advancing loans to economic enterprises in all sectors of the economy, financing private business undertakings such as production, trade and services as well as providing personal loans. It also acts as the agent of the Central Bank of Myanmar for the operation of currency chests throughout the country. Its also entrusted with the maintenance of the accounts of the Government Departments and State Economic Enterprises.
The Myanma Economic Bank has handed over tre small loans business to the Myanma Small Loans Enterprise with effect from 1993/94 Foreign Exchange Certificates issued by the Central Bank of Myanmar promoting the tourism industry are being handled by the Myanma Economic Bank branch offices.
The Myanma Economic Bank is planning to extend its banking business from domestic commercial banking to international financial services.
The Myanma Foreign Trade Bank
Myanma Foreign Trade Bank is to conduct foreign exchange operations arising out of external trade as well as non-trade foreign exchange operations. The Bank may enter into or execute contracts relating to payments and receipts of foreign exchange, and may also maintain clearing accounts under bilateral counter-trade agreement.
The Bank is authorised to conduct businesses of international banking and domestic banking. Some of the services the bank is allowed are: accepting deposits in Kyats and foreign currencies, giving loans and advances both secured and unsecured, issuing, accepting, discounting, buying, selling and collecting all securities including bills of exchange, all matters relating to letter of credit, sales and purchases of travellers cheques and foreign currencies; all matters relating to international fund transfers and bank guarantees: accepting valuables for safe keeping; making status enquiries and obtaining status reports on local and foreign firms and banks.
The Myanma Foreign Trade Bank is initiating to change gradually from a specialised bank into a general commercial bank. The initial steps taken are the acceptance of current deposits from individuals and firms, and arrangements are being made for financing of export trade.
Foreign Correspondent Bank
The Myanma Foreign Trade Bank has long established correspondent relationship with first class international banks in all the major financial centres of the world. In addition, through a network of over 120 correspondent banks in 58 countries, banking transaction can be made with almost any country in the world.
The Myanma Investment and Commercial Bank
The Myanma Investment and Commercial Bank was formerly established in 1989 within the organisational structure of the Myanma Economic Bank. It became a separate entity as a State owned Financial Institution in Myanmar under the Financial Institutions of Myanmar Law 1990. It provides investment, development and commercial banking facilities to local and foreign investors, organisations, partnership firms, joint ventures, limited companies, sole proprietorships and importers and exporters established and doing business in accordance with the existing laws of Myanmar. It has provided bank advances to foreign and local investors for the purpose of processing and manufacturing, building and engineering, transport and public utility services, distributive trade and marketing, overseas trade in exports and for personal and professional purposes. It has also extended branch banking facilities to Mandalay.
Myanma Small Loans Enterprise
The Myanma Small Loans Enterprise was established as a separate entity formerly under the Myanma Economic Bank. This enterprise was established in accordance with the market oriented economic policy with a view to promoting and enhancing efficiency of financial activities. A network of 182 branches has been established throughout the country to facilitate financial transactions.
The Myanma Insurance
The State Law and Order Restoration Council enacted the Myanma Insurance Law in July 1993 to replace the Insurance Business Law of 1975, in order to facilitate wider coverage of insurance business.
Myanma Insurance, the State-owned organisation, is the sole insurance organization in Myanmar and presently underwrites classes of insurance as shown below:(a) Life Assurance; (b) Third Party Liability insurance; (c) General Liability Insurance: (d) Fire Insurance; (e) Marine Cargo Insurance; (f) Marine Hull Insurance; (g) Aviation Insurance: (h) Engineering Insurance; (i) Comprehensive Motor Insurance; (j) Oil and Gas Insurance; (k) Cash-in-transit Insurance; (l) Cash-in-safe Insurance; (m) Fidelity Insurance; (n) Travelling Insurance; (o) Bodily Injury Insurance; (p) Other classes of Insurance; (q) Insurance determined by the Ministry.
With a network of 34 branches established throughout the country, Myanma Insurance fully satisfies over-all demand for insurance coverage necessitated by the growth and diversity of the economic activities in line with the market-oriented economic policy of Myanmar.
Like other insurance enterprises all over the world. Myanma Insurance has a very ambitious and efficient reinsurance programme under which large risks written are ceded to financially strong and well-established reinsurers worldwide.
Premium rates charged are reasonable and competitive with those existing elsewhere.
With a view to meeting the ever-growing requirements of its customer, insurance can be affected in a freely convertible currency i.e, if premium is paid in a freely convertibit currency the claim would be met with the same type of currency.
Myanma Insurance backed by internationally reputable and renowned reinsurers is fully capable of meeting all the insurance needs within Myanmar.
An entrepreneur or an organisation operating an enterprise which may cause loss to State-owned property or which may cause damage to the life and property of the public or which may cause pollution to the environment shall effect compulsory General Liability Insurance with the Myanma Insurance, from which the Ministry may determine from time to time the entrepreneurs or organisations which are to effect compulsory General Liability Insurance.
State Organisations and Enterprises which have fifty per cent and above of the capital investment subscribed by the State, shall effect insurance only with the Myanma Insurance if the class of Insurance they desire to effect is of the class which is accepted by the Myanma Insurance.
Economic Organisations which have been formed under a permit under the Union of Myanmar Foreign Investment Law shall effect only with the Myanma Insurance the classes of insurance which the Myanma Insurance determines from time to time. However, fron amongst the classes of insurance which the said Economic Organisations are to effect, the Ministry of Finance and Revenue may exempt from effecting insurance of any class or more than one class, in the interest of the State.
Prepared by THAN TUN WIN, Embassy of
the Union of