Foreign companies are added to the exemption list of mandatory forex conversion

The Foreign Exchange Supervisory Committee (“FESC”) decided to grant foreign companies an exemption from mandatory forex conversion in its meeting no.78/2022. In this regard, the Central Bank of Myanmar (“CBM”) issued letter no. FE-1/2861 dated 30 December 2022 concerning the resolution of the FESC’s meeting, which instructs the AD licensed banks to comply with such decision of FESC (“Letter FE-1/2861”).

The Letter FE-1/2861 includes two resolutions passed by the FESC’s meeting as below:

The first resolution is that foreign companies having more than 35% foreign ownership (referred herein as “foreign companies”) are exempt from mandatory forex conversion. The foreign companies can now keep their foreign currencies for internal use, or sell them to the AD licensed banks. In the case the foreign companies will remit the foreign currencies outbound for non-trading purposes, prior approval from FESC is still required. In other words, the foreign companies are now freely to use their foreign currency within the country in accordance with the Letter FE-1/2861.

Furthermore, the FESC resolved that the foreign companies exempted from mandatory forex conversion are not allowed to trade and export non-value-added agricultural products. The companies that are permitted to trade and export agricultural products are still required to comply with the requirement of the conversion of 65% of the export earnings as per the CBM’s Notification No.36/2022 dated 5 August 2022.

There are no further guidance on implementation of this Letter FE-1/2861. From the reading of the letter, it is understood that the foreign companies are not required to convert the foreign currencies into Myanmar Kyat only if such foreign currencies are derived from non-trading activities or trading and exporting of value-added agricultural products. If the foreign currency arises from the trading and exporting of the agricultural products that are not value-added, 65% of the export earnings are required to be converted into Myanmar Kyat.

We do note that the practice application and interpretation of this letter remain to be settled.