The year 2023 is a year with dynamic effects of government policy changes in Myanmar’s economy.
Myanmar pursues market liberalization towards an open market economy. Myanmar executes international trade with its foreign trade partners, in which policy changes in export/import and financial policy play a key role in shaping the development of Myanmar’s economy.
This year-end review will highlight the policies and interventions of the Central Bank of Myanmar in the forex market and export/import policies.
Electric vehicle policies and incentives to promote the EV sector
First and foremost, the Myanmar Investment Commission (MIC) also released an announcement that electric vehicles (EV) and related businesses shall be promoted as the priority sector, as per its announcement dated 15 February.
In the exercise of the power conferred by Section 43 and Section 100 (B) of Myanmar Investment Law, the MIC issued this statement with the approval of the Union government.
Enterprises executing installation, manufacturing and restoration services of the EVs, renewable electricity generation, EVs charging service businesses, electric vehicle battery production, EV battery and related service business, electric bus operation services, electric taxi and transportation service businesses and scientific research development business are included in those priority sectors.
During the establishment and ideation phase for incorporation and operations, those businesses can seek permit from the MIC to enjoy tariff relief or zero-customs tariff status and exemption for other taxes levied in the country under Section 77 (A) of Myanmar Investment Law and income tax exemption in line with the Section 75 (C) of the Myanmar Investment Law for the importations of machinery, essential equipment and accessories, spare parts and construction raw materials that cannot be found in domestic markets.
Customs duty exemption on Electric Vehicles (EVs) and their components was also extended until the end of March 2024, the Ministry of Planning and Finance’s Notification on 27 April 2023 stated.
To encourage the number of EV users and improve the related business, tariffs of Battery Electric Vehicle (BEV) imported under Completely Built Up (CBU), Completely Knocked Down (CKD) and Semi-Knocked Down (SKD) in Customs Tariff of Myanmar 2022 were reduced to zero per cent, under the decision of the Union Government.
Importation, manufacturing and trading of the EVs and their components are exempted from commercial tax, according to Notification No 4/2023 released on 8 May 2023 by the Union Government in the exercise of the power conferred by Section 37 of the Union Tax Law 2022, under the approval of the State Administration Council. This notification has been effective from 1 January 2023.
Additionally, to bolster the growth of the EV industry and promote environmental conservation activities, import permits for electric vehicles or electric motorcycles are granted for inward remittance of foreign salary or other wages of Myanmar citizens as a special programme.
The Ministry of Commerce reduced income inward remittance of seafarers to US$50,000 from over $200,000 per year to grant import permits for Electric Vehicles (EVs), according to a Notification released on 26 October.
As per the statement, they were entitled to import one electric vehicle or one electric motorcycle which value is equivalent to five per cent of the inward remittance per year.
Central Bank of Myanmar’s intervention in Forex market
The Central Bank of Myanmar (CBM) set the reference exchange rate at K2,100 against the greenback in 2023. Nonetheless, the CBM notified that the exchange rate transacted on an online trading platform (interbank transaction) is the actual currency value. Subsequently, the rate in shady dealings posted on social media platforms is just a grey market rate, the CBM warned.
Exporters and importers will get their licences revoked unless they make transactions at the exchange rate determined on an official online trading platform by the CBM.
Nevertheless, 5 December, the CBM allowed authorized dealers (private banks) to operate forex exchanges freely as per the market rate determined by the market force of the supply and demand.
Moreover, the CBM notified that outward remittance must comply with the rules and regulations of the Foreign Exchange Management Committee.
The CBM issued a new K20,000 note on 31 July 2023, resulting in volatile commodity prices (rice and edible oil) and spikes in fuel oil, gold and forex markets.
To steer Kyat’s depreciation against the US dollar in the forex market, the Central Bank of Myanmar beefed up a crackdown on illegal forex transactions without a valid licence under the existing law.
Under Section 9 of the Foreign Exchange Management Law, only those entities holding foreign exchange dealer licences are allowed to deal in foreign currency and travellers’ cheques. Failing to do so will face legal action under the Foreign Exchange Management Law, the CBM warned.
Additionally, as per the Section 15 of the Foreign Exchange Management Law, domestic residents are allowed to keep US$10,000 in maximum or equivalent amount of foreign currencies for six months. If those foreign currencies that have been unused for over six months have to be repatriated at the market price through authorized dealers or deposited into bank accounts.
The CBM revoked the money changer licences of 166 companies in the past seven months.
Export/import policies
The CBM notified currency repatriation for export earnings, as per the CBM’s exchange rate (K2,100) that was set on 5 August 2022.
According to the CBM’s notification dated 5 August 2022, the exporters had to convert 65 per cent of the foreign currency they earned into local currency according to the CBM’s reference exchange rate. The CBM eased the foreign currency rules to 50 per cent for exporters, according to Notification 15/2023 released on 13 July 2023. Relaxed compulsory foreign currency conversion rule for Myanmar Kyat to 35 per cent again, according to its Notification No 26/2023 dated 6 December 2023.
With the CBM setting the reference exchange rate at K2,100, the exporters called for forex liberalization as the US dollar value is gaining at the over-the-counter market.
Translated by EM
