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Myanmar Crisis

Shooting of Myanmar central banker shows new forex-rule backlash

Business and embassies protest order to convert dollar inflows to local currency

Myanmar military soldiers in front of the Central Bank of Myanmar in Yangon in 2021. Than Than Swe, 55, one of the bank's deputy governors, was shot at close range by two armed assailants at her home in Yangon on Thursday morning.    © Getty Images

BANGKOK -- The shooting of one of Myanmar's top central bank officials in Yangon on Thursday highlighted growing public hostility toward financial regulators and institutions associated with the military regime amid the country's deepening financial crisis.

Than Than Swe, 55, a deputy governor of the Central Bank of Myanmar, was shot at close range by two armed assailants at her home in Yangon on Thursday morning. It was still unclear on Friday whether she had survived the attack although sources close to the central bank told Nikkei Asia that she was in "critical condition" at a military hospital in Yangon.

The attack came days after the Central Bank of Myanmar issued orders that all foreign currency inflows, including those in U.S. dollars, must be converted within one day of entering the country by licensed banks at a fixed rate of 1,850 kyats to the dollar, almost 10% below the unofficial market rate of about 2,050 to the dollar.

The order, which allowed for few exemptions, also requires an onerous process of securing government approval before any foreign currency can be sent overseas.

An organization calling itself the Yangon Regional Military Command later Thursday claimed responsibility for the shooting, and told independent Burmese media outlet Mizzima that Than Than Swe was behind harsh financial directives including moves to pressure businesses to pay taxes. Among other directives, she had also signed orders to local banks to "take action" against employees who supported anti-regime protests.

A long-time central bank official, Than Than Swe was appointed as one of the central bank's three deputy governors days after the military takeover on Feb. 1, 2021. She has been identified in some Burmese media reports as the signatory on unpopular central bank policies including orders to financial institutions to dismiss employees who were supporting the mass civil disobedience movement. However, the April 3 directive on currency conversion was signed by the bank's Gov. Than Nyein.

Justifying the attack, a Myanmar-based dissident told Nikkei that Than Than Swe was seen as "a key person responsible for closing bank accounts of dissidents," adding that "through her position, she is helping the military shut down financial support for resistance."

The shooting of a central bank bureaucrat reinforces claims by urban guerrilla groups, operating under the broad category of people's defense forces, that they are stepping up their campaign of targeted assassinations, bombings and infrastructure sabotage in the cities, and expanding their range of targets.

Critics have blamed the central bank as well as the regime for the sharp deterioration of Myanmar's economy and financial system. The economy contracted by about 18% last year compared to 2020 and is forecast to grow by 1% this year, according to the World Bank.

Executives at two major Myanmar banks said they had begun implementing the orders on Wednesday on clients' foreign currency deposits, but stressed that the conversions were limited to inflows from April 4.

However, a Yangon-based foreign business executive told Nikkei that the local bank that held his deposits had made repeated calls from Monday, warning that if he did not convert his existing dollars to local kyat, the bank would "flag" his organization to the central bank, which would then take action.

"It was basically a veiled threat, so we finally decided to convert all our dollars at the mandatory rate on Thursday. We estimate we lost about 12% of the value of our deposit," he said.

A Yangon-based bank executive told Nikkei that Than Than Swe, like the governor himself, was "clearly implementing orders from above. Monday's directive could only have come from the junta." Sources close to the central bank confirmed that the orders came directly from "top levels" of the military regime.

Adding to the mounting backlash, the new foreign exchange rules have drawn fierce criticism from embassies, businesses and international organizations. In unusually strong language, the embassies of Japan and Singapore in Myanmar urged the regime, known as the State Administration Council, to rescind the order.

Other embassies including the European Union are preparing to follow suit, according to several Yangon-based diplomats. A spokesman for the U.S. Embassy in Yangon told Radio Free Asia that mismanagement had drastically affected Myanmar's economy and that the new rules would further weaken the outlook. He urged negotiation or revision of the rules.

On Friday, 12 prominent Yangon-based business associations, including the American, Australian, British, European, German and New Zealand chambers as well as a key private equity association, issued a statement that warned: "Implementation of these measures and the associated lack of clear exemptions for foreign investments create significant, and for some insurmountable, challenges to all businesses operating in Myanmar."

Other executives said that the new rules, if not modified or rescinded, will only antagonize investors and drive remaining foreign businesses out of Myanmar while pushing local importers into crisis.

"This is yet another sign that the junta will prioritize its security and interests at all costs, regardless of collateral damage to business and the economy... and unravel a decade of reforms as it doubles down on its attempt to secure its hold over the country," said a Western business consultant who advises companies in Myanmar.

Other analysts said the move was the clearest sign yet of the regime's growing desperation as Myanmar's dollar reserves slide amid spiraling prices for fuel and other imports. At the same time, they expressed bewilderment at what one independent economist called the "self-destructive logic" of the move.

"Effectively this is like the junta sanctioning itself," said Jason Tower, Myanmar country director of the Washington-based think tank USIP. "After this, who would want to bring one dollar into the country?"

The economic costs of Myanmar's dependence on imported oil and other commodities have been exacerbated by the impact of Russia's war in Ukraine on commodities prices.

Myanmar exports more than $1.3 billion worth of natural gas per year but is reliant on imported fuel and oil for a range of sectors. Months of rolling power cuts have reflected frantic efforts to cut energy and fuel costs, while draconian new bureaucratic requirements for import licenses for more than 7,000 additional items reinforce the push to curb dollar expenditures.

Adding to the problems is collapsing foreign investment. In the five months from July to November 2021, FDI amounted to just $267 million, only about 20% of the amount in the same period in 2020, according to the World Bank. The 2020 figure was near a 10-year low due to COVID-19 restrictions, and recent data suggests FDI this year might reach the lowest level in decades.

Most significant is the dwindling level of Myanmar's foreign reserves. The figure of $6 billion given by the regime's investment minister, Aung Naing Oo, in an October 2021 interview with Reuters, equals about four months' worth of imports at the official exchange rate of 1,850 kyat. But several economists who specialize in Myanmar said that given the soaring prices of oil and other essential imports as well as military hardware purchases, foreign reserves could amount to less than $4 billion -- below the three-month equivalent of imports, generally seen as a critical situation in an economy.

Compounding the problems, some of Myanmar's reserves held in the U.S. have been frozen by the U.S. administration. In addition, large defense expenditures on new military aircraft, tanks and other big-ticket items, displayed in the March 27 Armed Forces Day parade in the capital, Naypyidaw, suggest that the military regime has racked up bills of tens of millions of dollars with key arms suppliers such as Russia, China and India -- a situation further complicated by international financial sanctions against Russia and the growing pushback on currency restrictions.

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