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Myanmar announces exemptions from forex order; eyes new energy investments

Myanmar's local currency has fluctuated between 1,300 kyats and 2,000 kyats to the dollar in the past year. PHOTO: REUTERS

SINGAPORE - Myanmar's junta will exempt businesses operating in the country's sole special economic zone (SEZ) and all other approved businesses from a draconian foreign exchange order, a top economics official said on Thursday (April 21).

The junta's Minister of Investment and Foreign Economic Relations, Mr Aung Naing Oo, disclosed this while speaking to journalists at a virtual press conference addressing Myanmar's worsening power shortages.

He said the country would rely on liquefied natural gas (LNG) and court foreign investments in renewable energy to generate more electricity.

The minister acknowledged that the central bank directive issued on April 3 would deter investments. The directive, which sparked alarm among foreign businesses in Myanmar, instructed individuals and companies to convert income received in foreign currency to the local currency within a day of receipt. This must be done at a fixed rate of 1,850 kyat to the US dollar.

Mr Aung Naing Oo said the central bank's objective for issuing the order earlier this month was to stabilise the local currency, which has fluctuated between 1,300 and 2,000 kyats to the dollar in the past year.

He said the government had consulted the local business association and intended to "ensure no additional burden is placed on businesses", adding that the central bank may remove its directive once the exchange rate has stabilised.

In a notice issued shortly after the press conference, the Central Bank of Myanmar announced that businesses operating in the SEZ, foreign investments permitted and approved by the Myanmar Investment Commission, as well as foreign embassies, diplomats and international government agencies would be excluded from the April 3 directive.

The move comes as Myanmar seeks to attract more foreign oil and gas investments after several existing operators, citing social issues, withdrew from the country.

Mr Aung Naing Oo confirmed that French giant TotalEnergies, Chevron from the United States and Australia's Woodside Petroleum have exited. Malaysia's Petronas and two Japanese companies - Mitsubishi Corp and Eneos Holdings - are also reported to be pulling out as well.

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Conversely, more joint ventures between Myanmar and China are being accelerated or pursued, including a US$2.5 billion (S$3.4 billion) project in central Myanmar involving the construction of an LNG plant, terminal, transmission line and gas pipeline. This will become operational in 2027, according to a statement released by the ministry.

Myanmar is courting investments in power generation amid a worsening power shortage that has led to frequent nationwide blackouts which have crippled the economy.

According to state-controlled media, electricity generation has declined by more than one-third since the military overthrew Ms Aung San Suu Kyi's government in February last year.

At least two LNG power projects have been suspended due to rising global LNG prices and the blowing up of three major power lines in eastern Myanmar by those opposed to the junta. The power lines are now being repaired, Mr Aung Naing Oo said.

The junta is also seeking investments in solar and hydro power. Tenders are being called for 18 solar power projects, while medium-sized hydro power projects would be permitted. Larger-scale hydro power projects would not be approved, Mr Aung Naing Oo said.

The country is also planning to increase the use of natural gas for local power generation. Several LNG power plants have been given permission to resume operations, the minister said.