More than 100 companies have had their export licenses revoked for allegedly failing to convert US dollar earnings into the domestic currency and another 12 have been ordered to convert a combined US$17 million into kyat within two weeks, executives at import-export companies say.
The executives said the licenses of 107 exporting companies were revoked by the junta’s commerce ministry this week.
The owners of the 107 companies face charges under the Export and Import Law that could see them jailed and their assets confiscated, the executives said.
Speaking on condition, an exporter in Yangon blamed the mandatory currency-conversion rules imposed by the junta. He said that some export-importers may be able to receive payment outside the junta-controlled banking system but cannot convert these foreign-currency denominated payments into kyat without using the domestic banking system because sanctions imposed by western governments have cut them off from banks outside of Myanmar.
The crackdown on trading companies is occurring after the kyat shed another 13 percent of its value last month, falling to 5,400 to the greenback from 4,800 at the beginning of July. The kyat was trading as high as 1,300 to the US dollar in the month before the Feb. 1, 2021 coup.
The junta-controlled Central Bank of Myanmar requires exporters to convert 35 percent of their foreign currency earnings into kyat through its authorized dealers at a rate of 2,100 kyats per dollar.
Consequently, they can only use 65 percent of their export earnings to purchase goods or services outside of Myanmar.
The junta’s commerce ministry also ordered 12 export companies to convert $17 million into kyat.
Myanmar has experienced a collapse in exports and foreign direct investment since the coup, while domestic businesses lost access to international loans. With almost no US dollars flowing into Myanmar, the regime has had to sell its foreign reserves.
The shortage of US dollars in Myanmar, and the artificially low conversion rates set by the central bank, led to the revival of a black market for exchanging foreign currency.
The junta has, however, found money to buy weapons. In the first two years after the coup, it imported at least US$1 billion worth of weapons and related materials from Russia, China and other countries, according to United Nations estimates.
Economist Jared Bissinger argues that the forex controls the junta has imposed are “rent seeking” and vital to its ability to fund its war. Writing in Fulcrum last month, he said the junta earned at least US$ 1.8 billion in the year to end-June by buying US dollars at the artificially low rate it had imposed and reselling them at the market rate. “This is nearly identical to the military budget and perhaps larger than the state’s natural gas earnings,” he wrote.
Still, faced with a severe shortage of the foreign currency necessary for international trade, the junta started pushing businesses to adopt barter trade in May. When the country’s largest business lobby group, the Union of Myanmar Federation of Chambers of Commerce and Industry, tried to explain the new barter system to its members, they were left even more confused.
The owner of a logistics company in Yangon that had worked with an export company whose export license was revoked this week said it appeared that the junta wanted all exports and imports to be made through barter trade.
“I think this is an attempt by the junta to push the entire trading system into its utopian barter trade system,” he said on condition of anonymity. The junta’s most recent market intervention will backfire, he said, adding that the revocation of export licenses will dampen trade and push the prices of goods sold in Myanmar even higher.
