VZCZCXRO6392
RR RUEHCHI RUEHDT RUEHHM RUEHNH
DE RUEHGO #0198/01 0770102
ZNR UUUUU ZZH
R 170102Z MAR 08
FM AMEMBASSY RANGOON
TO RUEHC/SECSTATE WASHDC 7303
RUCNASE/ASEAN MEMBER COLLECTIVE
RUEHBJ/AMEMBASSY BEIJING 1787
RUEHBY/AMEMBASSY CANBERRA 1002
RUEHKA/AMEMBASSY DHAKA 4799
RUEHNE/AMEMBASSY NEW DELHI 4554
RUEHUL/AMEMBASSY SEOUL 8093
RUEHKO/AMEMBASSY TOKYO 5654
RUEHVI/AMEMBASSY VIENNA 0116
RUEHCN/AMCONSUL CHENGDU 1393
RUEHCHI/AMCONSUL CHIANG MAI 1464
RUEHCI/AMCONSUL KOLKATA 0251
RUEAUSA/DEPT OF HHS WASHDC
RUEHRC/DEPT OF AGRICULTURE WASHINGTON DC
RHHMUNA/CDR USPACOM HONOLULU HI
RUEHPH/CDC ATLANTA GA
RUCLRFA/USDA WASHDC
RUEHRC/USDA FAS WASHDC
RHEHNSC/NSC WASHDC
RUEKJCS/SECDEF WASHDC
RUEKJCS/JOINT STAFF WASHDC

UNCLAS SECTION 01 OF 03 RANGOON 000198 
 
SIPDIS 
 
SENSITIVE 
SIPDIS 
 
DEPT FOR EAP/MLS, EEB/IFD 
TREASURY FOR OASIA:SCHUN 
PACOM FOR FPA 
 
E.O. 12958:N/A 
TAGS: ECON EFIN ETRD PREL BM
SUBJECT: GOB ENCOURAGES USE OF SINGAPORE DOLLARS 
 
REF: Rangoon 197 
 
RANGOON 00000198  001.2 OF 003 
 
 
¶1. (SBU) Summary.  In a change to its banking policy, the Burmese 
Government now permits private companies with foreign export 
earnings to open Singapore dollar-denominated bank accounts in three 
state-owned banks -- Myanmar Foreign Trade Bank, Myanmar Investment 
and Commercial Bank, and Myanmar Economic Bank.  According to 
bankers, the availability of Singapore dollar accounts encourages 
increased trade between Burma and Singapore because companies will 
no longer lose profits when they change Singapore dollar earnings 
into U.S. dollars before depositing them in a Burmese bank. 
Additionally, by using Singapore dollars, the regime can better 
circumvent U.S. sanctions and ensure that financial transactions are 
not frozen.  In the past month, several large trading companies 
opened Singapore dollar accounts, although most private companies 
prefer to conduct transactions in U.S. dollars because foreign 
partners still use dollars.  End Summary. 
 
Deemphasizing US Dollars 
------------------------ 
 
¶2. (SBU) Although the official currencies of Burma are the kyat and 
the FEC (Foreign Exchange Currency) and Burmese law makes it illegal 
for Burmese citizens to hold foreign currency, the dollar is widely 
used in country for everyday financial transactions.  Foreign-owned 
companies, including restaurants and hotels, price goods in dollars, 
and many Burmese-owned businesses accept dollars in lieu of kyat or 
FEC.  Since U.S. financial sanctions on Burma went into effect in 
2004, the Burmese Government has attempted to reduce the influence 
and widespread use of the U.S. dollar.  In 2005, it passed a 
regulation allowing private companies to use the Euro and other 
foreign currencies for trading and financial transactions.  However, 
companies with foreign export earnings could only open Euro or U.S. 
dollar denominated accounts, limiting the use of Singapore dollars, 
Chinese yuan, or Thai baht in trade transactions. 
 
Sanctions Disrupting Business Flows 
----------------------------------- 
 
¶3.  (SBU)  Because Burma's internal policies were not conducive to 
trade in non-U.S. dollar denominations, business contacts estimated 
that despite the 2005 regulation, more than 90 percent of businesses 
in Burma maintain U.S. dollar accounts rather than Euro accounts at 
the Myanmar Foreign Trade Bank (MFTB), one of four state-owned banks 
that may hold foreign exchange (Reftel).  For years, international 
trading companies have complained that U.S. financial sanctions make 
doing business in Burma more difficult -- because U.S. dollars 
cannot be transferred directly to Burmese bank accounts, businesses 
had to open accounts in Singapore to make financial transactions. 
According to Kanbawza Bank Consultant U Than Lwin, companies pay 
heavily for the Singapore bank accounts, since they must hold 
Singapore dollars and change them into U.S. dollars at the official 
rate or bank rate for each transaction, as well as pay a hefty 
exchange fee.  Depending on the amount of each transaction, a 
company can lose thousands of dollars in exchange fees and currency 
price difference, he noted. 
 
¶4.  (SBU)  The government's recent announcement permitting companies 
with foreign exchange earnings to open Singapore dollar-denominated 
accounts addresses business complaints, U Than Lwin declared.  Since 
businesses can now transfer Singapore dollars directly to MFTB 
without changing them to U.S. dollars or Euros, they save on the 
exchange fees, he explained.  Although the government provided no 
justification for its recent policy change, U Than Lwin commented 
that in addition to making it easier for businesses to trade with 
Singapore, it may reduce the amount of U.S. dollars entering Burma 
and perhaps the overall use of dollars.  Additionally, the policy is 
 
RANGOON 00000198  002.2 OF 003 
 
 
another way for the government to circumvent U.S. sanctions, showing 
that it does not need to use U.S. dollars to trade internationally. 
 
 
Encouraging Trade With Singapore 
------------------------------- 
 
¶5.  (SBU) Singapore is Burma's largest trade partner, accounting for 
29 percent of imports and 6 percent of exports in 2007.  Burma 
primarily imports finished products from Singapore, such as food 
products, chemicals, and machine parts, while it exports 
commodities, particularly agricultural products, to the 
island-nation.  While trade between the two countries has increased 
in the past five years, Burma continues to have a large trade 
deficit with Singapore, worth $464 million in 2007. 
 
--------------------------------------------- ------- 
       Burma Trade with Singapore, 2005-2007 
                 In U.S. Dollars 
--------------------------------------------- ------- 
Year   Imports       Percent    Exports      Percent 
       From Spre     Change     to Spre      Change 
--------------------------------------------- ------- 
2005   602,985,615     --       257,662,576    -- 
2006   813,883,761    34.97     189,946,153   26.28 
2007   811,293,513   - 0.32     347,141,440   82.76 
--------------------------------------------- ------- 
Source: BIG, 2008 
 
¶6.  (SBU)  According to businessmen, the Burmese Government 
continues to encourage trade with Singapore and the new banking 
policy reinforces how important trade with Singapore is to Burma. 
In the past month, several large trading companies, including Htoo 
Trading, have opened Singapore dollar accounts and have begun 
trading using Singapore dollars instead of U.S. dollars.  However, 
many of the businessmen we spoke to said that companies in Burma 
prefer to use the U.S. dollar for international transactions because 
their trading partners, particularly the Chinese, Japanese, and 
Koreans, price in U.S dollars and have mechanisms to accept U.S. 
dollars rather than other foreign currencies.  U Than Lwin opined 
that companies such as City Mart (Burma's largest grocery store), 
which does the majority of its business with Singaporean companies, 
may open up Singapore dollar accounts, but companies that deal with 
multiple international partners may stay with U.S. dollar accounts. 
 
 
¶7.  (SBU)  Another barrier to opening Singapore dollar-denominated 
accounts is that there is a nascent informal exchange market for 
Singapore dollars in Burma.  MFTB will exchange Singapore dollars 
for kyat at the official rate of 3.83 kyat per 1 Singapore dollar. 
Only a few local money traders will accept Singapore dollars and 
sell kyat for 800 kyat for 1 Singapore dollar.  We know several 
businessmen who engage in arbitrage, selling Singapore dollars for 
U.S. dollars at the rate of 1.25 Singapore dollars per $1 and then 
purchasing kyat at the market rate of 1100 kyat per $1.  As the 
market for Singapore dollars expands, businessmen predict that 
financially savvy Burmese will attempt to make a profit on the 
foreign exchange market. 
 
Comment 
------- 
 
¶8.  (SBU)  Despite GOB efforts to encourage the use of Singapore 
dollars, the U.S. dollar remains king in Burma.  If the U.S. dollar 
continues to depreciate against world currencies, more businessmen 
may turn to alternate currencies, although they are more likely to 
choose the Euro over the Singapore dollar.  Businessmen in general 
 
RANGOON 00000198  003.2 OF 003 
 
 
are not interested in dealing with niche currencies and prefer to 
use the U.S. dollar, since it is the most widely accepted currency. 
Those businessmen looking to avoid U.S. sanctions, like Tay Za or 
even the senior generals, may opt for the Singapore dollar, but the 
majority of Burmese still prefer the greenback. 
 
VILLAROSA