YANGON—The Myanmar government has announced that local businesses that have been badly hit by COVID-19 can apply for loans as part of its initial stimulus package to cushion the impact of the global pandemic on the country’s economy.
On Sunday, a working committee to tackle the impacts of the global coronavirus outbreak on the country’s economy announced that the most vulnerable sectors—CMP (garment and manufacturing) and hotel and tourism businesses, as well as small and medium-sized enterprises owned by local businesspeople—can apply for loans from the COVID-19 fund set up by the state.
The fund, which was created last week, earmarks 100 billion kyats (about US$72 million) for those sectors, which have been recognized as priorities for state assistance based on their vulnerability to COVID-19. The interest rate on loans provided by the fund will be only 1 percent with a loan period of one year.
The committee said the businesses can apply for the loans from March 30 to April 9.
Among other criteria established by the government, qualifying businesses must have been licensed by the relevant departments before the end of March 2018; must have had an annual income for the past two years; and must be in sufficiently stable condition to repay the loan.
Moreover, the committee said the loans must be used to pay salaries and fund current business operations only.
To qualify for a loan, businesses must be currently active, or their operations must not have been suspended for more than three months prior to the date of the announcement. Operations must be resumed immediately upon the loan being granted, the committee said.
The committee said qualifying businesses, whether corporations or smaller companies, must not have been suspended or removed from the company register. The businesses must be on record as paying taxes, particularly income, commercial and special goods taxes.
The committee will prioritize businesses that have contributed to the Social Security Fund.
It said any company that fails to repay the loan will be dealt with in accordance with existing laws. In addition, such companies will receive negative credit ratings from the county’s credit bureau. This would make it difficult for them to obtain loans not only from banks, but also from non-bank financial institutions and the microfinance industry.
The announcement followed a meeting between officials from the committee and relevant government departments, and members of the Myanmar Federation of Chambers of Commerce and Industry (UMFCCI) from the states and regions.
The committee was set up during the second week of March to tackle the main economic impacts of the coronavirus, include drawing up both short- and long-term emergency plans to respond to the decline of the tourism sector; creating vocational training programs and new job opportunities for workers affected by factory closures; and advising the President’s Office on tax-exemption schemes for small and medium-sized enterprises and reduced interest rates for local businesses.
Since late January, the outbreak has hit Myanmar’s tourism, border trade and export sectors, causing massive losses for producers, exporters and workers. Airlines and hotels in the country have already suffered losses due to travel restrictions.
The Tourism Ministry said tourist arrivals in Myanmar are likely to drop by 50 percent this year due to the outbreak.
The Confederation of Trade Unions of Myanmar (CTUM) said nearly 15,000 workers have already lost their jobs as garment factories have been forced to close due to a lack of raw materials from China.
The Myanmar Garment Manufacturers Association (MGMA) also expects more garment factories will be shut down this week, following the cancellation of large numbers of orders from European Union countries last week. Europe has become the epicenter of the virus outbreak.
An earlier government stimulus package included eased deadlines for tax payments, and tax exemptions for Myanmar-owned businesses.
The Central Bank of Myanmar has cut its key interest rate twice in the past two weeks in response to a slowing of the country’s overall economy due to COVID-19. The two cuts, the most recent of which takes effect on April 1, have lowered the rate by a combined 1.5 percentage points in an effort to spur economic growth.
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