The Irrawaddy Business Roundup (Nov. 7, 2015)

By Simon Lewis 7 November 2015

Government Rules on Dollar Transactions ‘Unclear,’ Warns Lawyer

The Burmese government’s recent intervention to restrict transactions made in US dollars have left businesses without clarity on when foreign currencies can and cannot be used, according to legal advisory firm VDB Loi.

The Central Bank issued new rules in October that canceled the foreign exchange licenses of businesses in a number of sectors, effective from the end of November. The move was seen as an effort to shore up the kyat, which has lost about 20 percent of its value, relative to the dollar, this year.

But many businesses saw it as a drastic measure, and a reminder of the ways of Burmese governments of old, which made ill-conceived interventions in Burma’s financial system, often at the expense of the country’s people.

In a briefing note to clients on October 27, VDB Loi partner Edwin Vanderbruggen wrote that while some companies would lose their ability to receive physical cash in foreign currencies, currency obtained otherwise legally can still be exchanged through licensed changers.

But he criticized the Bank for being too vague on the measures contained in a letter dated Oct. 13, which followed an earlier letter regarding the use of dollars on May 28. “You can’t implement a massive game change in a country’s financial policy based on a letter with two paragraphs,” he wrote.

The “real problem,” according to Vanderbruggen, is that the Central Bank’s instructions on the issue were ambitious on in which circumstances companies may still conduct business in dollars.

“[T]he problem is not that companies suddenly have no way to receive and hold foreign currency,” he wrote. “…in all likelihood you are already allowed to open and use a foreign bank account, generally speaking.

“Once it is clear a business can indeed receive US$ remittances, there is no issue keeping that currency in its foreign currency bank account. The problem is that there are basically at this time no clear rules setting out when Myanmar residents may uberhaupt [generally] use foreign currency when dealing with each other, and when they may not.”

Myanmar National Airlines Hires US Marketing Firm

Burma’s national airline has hired an Arizona-based firm to do marketing and sales work from Singapore, according to press release.

In a release on Wednesday carrying the dateline Scottsdale, Ariz., a company named Discover the World said it had agreed to partner with Myanmar National Airlines.

The state-owned airline has undergone a rebranding and overhaul that culminated with the launch of its first international flight in years when MNA began flying from Rangoon to Singapore in August. Despite doubts over whether it can compete with foreign-based airlines who have the advantage of offering passengers transcontinental transfers onto their other flights, MNA officials have said they want to expand the international service further.

The press release said that Discover the World would be marketing the Singapore flight, as well as an MNA service known as Mingalapar, in which business class passengers are met at Rangoon by an airline representative and fast-tracked through the airport’s immigration lines.

MNA chief executive Than Tun was quoted in the release praising the deal.

“Singapore is the first destination where we plan to expand, given our new B-737-800 aircraft,” he was quoted saying.

“Since we will have seven weekly flights between Singapore and Yangon that began Oct. 25, we needed to partner with a firm that had vast experience in the marketplace and a professional team possessing a strong, established trade network to help us increase our brand awareness. Discover fit that bill.”

Burma Gets New Hotels to Cope With Tourism Boom

As official tourist figures continue to climb, the number of hotels in Burma is also ramping up, with about 50 new hotels now operating that were not open last year.

Tourist arrivals began to boom after Burma’s political climate eased from 2012, but in many areas tourism infrastructure was not in place to cope with the new demand. New official figures suggest that the industry has begun to catch up.

A report from the Chinese government’s English-language newswire, Xinhua, quoted Tin Win, chairman of the Myanmar Hoteliers Association, saying that the country now has 340 hotels compared with 290 in 2014.

“[More than 800,000 tourists entered Myanmar by air [or] ship while more than 2.2 million tourists visited the country through border entrances…,” the report said, referring to the first nine months of 2015. “Meanwhile, the government has established 17 hotel zones in such areas as Nay Pyi Taw, Yangon, Mandalay and Bago regions,” it added.

The government’s figures for the number of tourists visiting the country are suspected to be inflated since they include expatriate workers, and are bolstered by day-trippers who only spend a short time in Burma’s border towns.

The Ministry of Hotels and Tourism’s total figure for 2014 was 3.05 million visitors, but the government set a target of 5 million visitors for this year. Going even further, Tin Win was cited by Xinhua giving the ambitious prediction that 10 million foreign tourists will visit Burma in 2016.

India Nixes Barter Trade Across the Border

India’s central bank has put an end to so-called barter trade across the country’s border with Burma, according to reports in the Indian media.

A report in the Economic Times newspaper said that goods have long been exchanged on the border without the use of money in order to “facilitate” the exchange of certain commodities that India buys from Burma, including mustard, pulses and fresh vegetables.

The report said that the Reserve Bank of India had issued a statement saying that the system will come to an end from Dec. 1. It said the move was the result of improved access to banking in the border region.

“Over a period of time the trade basket has diversified and adequate banking presence is in place to support normal trade with Myanmar,” the central bank was quoted saying.

“It has, therefore, been decided, in consultation with Government of India, to do away with the barter system of trade at the Indo-Myanmar border and switch over completely to normal trade.”

Telenor Subscribers Reach 11.8 Million

Norway-based telecommunications company Telenor says it added 2.3 million new subscribers during between July and September, according to a new company report.

The company’s third quarter interim report said that Telenor Myanmar’s revenues were about $390 million in the first nine months of 2015.

“In Myanmar, the solid momentum continued. After a year of building network coverage in cities and larger towns, Telenor is now continuing its expansion into rural townships and villages,” the report said.

The firm only launched its services in 2014, and has accelerated ahead of Qatar’s Ooredoo in terms of subscribers.

“Telenor Myanmar added 2.3 million new subscriptions during the third quarter,” a note in the report said. By the end of the third quarter a total of 11.8 million subscriptions were recorded, of which 57% were active data users.”