Identifier
Created
Classification
Origin
06RANGOON214
2006-02-14 07:40:00
CONFIDENTIAL
Embassy Rangoon
Cable title:
U.S. DOLLAR MOVES UNDERGROUND IN BURMA
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C O N F I D E N T I A L SECTION 01 OF 02 RANGOON 000214
SIPDIS
SIPDIS
STATE FOR EAP/MLS; PACOM FOR FPA; TREASURY FOR OASIA:AJEWELL
E.O. 12958: DECL: 12/08/2015
TAGS: ECON PGOV BM
SUBJECT: U.S. DOLLAR MOVES UNDERGROUND IN BURMA
RANGOON 00000214 001.2 OF 002
Classified By: Econoff TLManlowe for Reason 1.4 (b,d).
C O N F I D E N T I A L SECTION 01 OF 02 RANGOON 000214
SIPDIS
SIPDIS
STATE FOR EAP/MLS; PACOM FOR FPA; TREASURY FOR OASIA:AJEWELL
E.O. 12958: DECL: 12/08/2015
TAGS: ECON PGOV BM
SUBJECT: U.S. DOLLAR MOVES UNDERGROUND IN BURMA
RANGOON 00000214 001.2 OF 002
Classified By: Econoff TLManlowe for Reason 1.4 (b,d).
1. (SBU) Summary: Banks in China, Japan and Singapore are now
refusing to handle Burma's government and commercial
dollar-denominated business, forcing many companies to
transfer their business transactions to their personal
offshore accounts to keep cash flowing. Meanwhile, the
ruling regime is pushing traders to switch to euros for
cross-border trade, instead of U.S. dollars. U.S. sanctions
on financial transactions have significantly reduced the
regime's foreign exchange reserves. End summary.
2. (C) Burmese business representatives recently told us that
banks in China, Japan and Singapore have refused their
dollar-denominated commercial transactions. An official of
the Myanmar Foreign Trade Bank (MFTB) confirmed that, as of
January 2006, the Bank of China will not accept US dollar
transactions with either of the Burmese banks officially
authorized to conduct business in foreign currency, the MFTB
and the Myanmar Investment and Commercial Bank (MICB). The
banks will process transactions denominated in euros. The
MFTB official said that they could still conduct dollar
transactions as of February 7 through accounts MFTB holds in
Korea (Korea Exchange Bank),Singapore (UBS, United Overseas
Bank and OCBC Bank),and Malaysia (Public Bank and May Bank).
The official added that one of his managers told the staff
verbally that the Bank of Tokyo also would no longer accept
Burma's dollar transactions. Our business contacts tell us
that they have switched their companies' dollar accounts
abroad into personal accounts under their own names so they
can still conduct business transactions using U.S. dollars.
3. (C) A Director at the Commerce Ministry told us that the
Bank of China had "softly advised" the GOB to switch to euros
because it feared potential problems when clearing Burmese
dollar transactions through the US financial system. The
Director said he expected the volume of black market currency
trade to increase as a result of this decision. On February
6, Finance and Revenue Minister Hla Tun announced that border
branches of MFTB and MICB had converted customers' commercial
dollar accounts into euro accounts, and urged the public to
use euros instead of dollars for transactions with all
neighboring nations. Many private traders in Rangoon, as
well as government officials, already used bank Letters of
Credit denominated in euros for international transactions,
but traders in border areas have traditionally preferred
dollars. The Commerce Ministry contact confirmed that border
branches of MFTB and MICB have converted USD accounts into
euros, as the Minister ordered, but the GOB stopped short of
forbidding the use of dollars.
4. (C) These actions come amidst signs that the GOB faces a
significant crunch in cash reserves. A well-connected source
told us that the GOB has called in many of its assets placed
around the world, and said regime officials had chartered a
flight to bring gold and currency back into the country from
Switzerland. Private companies must wait longer than normal
for overdue GOB payments, according to our contacts in the
onshore oil and mining fields.
5. (C) Comment: The high cost of the GOB's move to Pyinmana
and world oil prices have drained regime coffers. The Bank
of China's and Bank of Tokyo's refusal to accept US dollar
transactions from the GOB and Burmese companies adds to the
pressures. Burmese business people are adept at
accommodating changing polices, and the dollar remains their
currency of choice. To adapt this time, they will switch to
cash and evade official channels, diluting the GOB's recent
efforts to capture more tax revenue from border trade and
further reducing foreign currency holdings. Businesspersons
tell us that the sanction on financial transactions has a
much greater impact than the trade sanction. Dwindling
RANGOON 00000214 002.2 OF 002
foreign exchange reserves are the result. End comment.
VILLAROSA
SIPDIS
SIPDIS
STATE FOR EAP/MLS; PACOM FOR FPA; TREASURY FOR OASIA:AJEWELL
E.O. 12958: DECL: 12/08/2015
TAGS: ECON PGOV BM
SUBJECT: U.S. DOLLAR MOVES UNDERGROUND IN BURMA
RANGOON 00000214 001.2 OF 002
Classified By: Econoff TLManlowe for Reason 1.4 (b,d).
1. (SBU) Summary: Banks in China, Japan and Singapore are now
refusing to handle Burma's government and commercial
dollar-denominated business, forcing many companies to
transfer their business transactions to their personal
offshore accounts to keep cash flowing. Meanwhile, the
ruling regime is pushing traders to switch to euros for
cross-border trade, instead of U.S. dollars. U.S. sanctions
on financial transactions have significantly reduced the
regime's foreign exchange reserves. End summary.
2. (C) Burmese business representatives recently told us that
banks in China, Japan and Singapore have refused their
dollar-denominated commercial transactions. An official of
the Myanmar Foreign Trade Bank (MFTB) confirmed that, as of
January 2006, the Bank of China will not accept US dollar
transactions with either of the Burmese banks officially
authorized to conduct business in foreign currency, the MFTB
and the Myanmar Investment and Commercial Bank (MICB). The
banks will process transactions denominated in euros. The
MFTB official said that they could still conduct dollar
transactions as of February 7 through accounts MFTB holds in
Korea (Korea Exchange Bank),Singapore (UBS, United Overseas
Bank and OCBC Bank),and Malaysia (Public Bank and May Bank).
The official added that one of his managers told the staff
verbally that the Bank of Tokyo also would no longer accept
Burma's dollar transactions. Our business contacts tell us
that they have switched their companies' dollar accounts
abroad into personal accounts under their own names so they
can still conduct business transactions using U.S. dollars.
3. (C) A Director at the Commerce Ministry told us that the
Bank of China had "softly advised" the GOB to switch to euros
because it feared potential problems when clearing Burmese
dollar transactions through the US financial system. The
Director said he expected the volume of black market currency
trade to increase as a result of this decision. On February
6, Finance and Revenue Minister Hla Tun announced that border
branches of MFTB and MICB had converted customers' commercial
dollar accounts into euro accounts, and urged the public to
use euros instead of dollars for transactions with all
neighboring nations. Many private traders in Rangoon, as
well as government officials, already used bank Letters of
Credit denominated in euros for international transactions,
but traders in border areas have traditionally preferred
dollars. The Commerce Ministry contact confirmed that border
branches of MFTB and MICB have converted USD accounts into
euros, as the Minister ordered, but the GOB stopped short of
forbidding the use of dollars.
4. (C) These actions come amidst signs that the GOB faces a
significant crunch in cash reserves. A well-connected source
told us that the GOB has called in many of its assets placed
around the world, and said regime officials had chartered a
flight to bring gold and currency back into the country from
Switzerland. Private companies must wait longer than normal
for overdue GOB payments, according to our contacts in the
onshore oil and mining fields.
5. (C) Comment: The high cost of the GOB's move to Pyinmana
and world oil prices have drained regime coffers. The Bank
of China's and Bank of Tokyo's refusal to accept US dollar
transactions from the GOB and Burmese companies adds to the
pressures. Burmese business people are adept at
accommodating changing polices, and the dollar remains their
currency of choice. To adapt this time, they will switch to
cash and evade official channels, diluting the GOB's recent
efforts to capture more tax revenue from border trade and
further reducing foreign currency holdings. Businesspersons
tell us that the sanction on financial transactions has a
much greater impact than the trade sanction. Dwindling
RANGOON 00000214 002.2 OF 002
foreign exchange reserves are the result. End comment.
VILLAROSA