Burma replaces dollar with euro to lessen impact of US sanctions

DVB, Aug 15, 2003

In order to ward off the impacts of US government’s sanctions, it is reported that the SPDC had issued a directive to businesses in Burma ordering them to stop using the US currency and to start using the Euro. The instruction was issued on the 10th of August but most people have learnt about it only today, said businessmen in Rangoon.
According to a report from Rangoon by AP, the directive was a result of the meeting between the SPDC top leaders and business owners on last Sunday. The US sanction law on Burma which was signed and ratified by the US President, George Bush on the 28th of July would come into effect from the 28th of this month, but businessmen in Rangoon are said to be already feeling increasingly jittery. Because of the directive, sales in Rangoon are said to be slow and the price of US dollar is reported to have gone down slightly. The price of FEC is said to have plunged to 650 kyats (Burmese currency unit).

In order to find out the condition in Rangoon, DVB contacted the leader of Shan NLD, U Khun Tun Oo who is also a business owner. He described the economical situation in Rangoon as follows:

U Khun Tun Oo : The value of FEC (Foreign Exchange Certificate) is 650 Kyats before the office closed today. The value of US dollar is 1050 kyats. I haven’t seen the euro yet but merchants say that the value of euro is 1100 kyats. But I have neither seen the euro nor have I used it. When I came back from the office, I heard that the FEC is to be withdrawn. That would be only rumour. The situation is like that but the sales is quite slow these days…I don’t know how long the euro will last. Merchants are feeling unsure and worried…

DVB : What we are not clear is – are they going to abandon the US dollar and use the euro alongside the FEC like they have been doing with the dollar? What is the situation in Rangoon like?

U Khun Tun Oo : It is not official but I heard that the euro could be purchased by dollars and then deposit at the bank. I also heard that you could now open a euro account at the MFTB (Myanmar Foreign Trade Bank). As they haven’t withdrawn the FEC, you could use FEC alongside euro, I think. But the gap [between euro and FEC] is quite great now that the euro is at 1100 kyats and the dollar at 650 kyats.

DVB : Now the US sanctions are biting. The euro is from EU and even if the EU sanctions are not as strong as those of the US, EU is imposing some sorts of sanctions…what are your views on the political and economical future of Burma?

U Khun Tun Oo : I have already said that you can’t predict it yet. The reason is – even if EU hasn’t imposed sanctions as such, the laws are complicated, I heard. Whatever you use; euro, Singapore dollars or ChineseYuan …there will be more profits in transactions… Economically, there are not much exports by air and I think there will be a boom in border trades. As long as China, India and Thailand don’t close their borders, I don’t think we will suffer that much. As they are not likely to do so, I think the volume of trades with China will become bigger and some will go to Thailand.

But Washington-based Burmese economist, Dr. Zaw Oo argued that the US sanctions are only just beginning and the SPDC will face more problems later:

Dr Zaw Oo : Many countries in the world are now pegging their currencies to the US dollar. Thailand used to peg its currency to the Japanese Yen but later as it was not profitable to do so, they have to return to the dollar. The reason is - dollar is quite a strong currency among the world currencies and it is quite stable and its price is quite low and it is very profitable for countries that are exporting their products. If you look at Burma, the SPDC’s strategy of not pegging to the US dollar heralds the prospect of unstable conditions. To be brief, the impacts of US sanctions would not only be confined to Burma’s export to the US as we expected, but also to the wider and more complicated issues of Burma.

Source: Democratic Voice of Burma, Oslo, in Burmese 1430 gmt 15 Aug 03