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Myanmar : ADB tackles a banking barrier to trade

May 5, 2014

CB managing director U Pe Myint said, the Asian Development Bank moved to ease global business money transfers from Myanmar by guaranteeing Letter of Credit transfers from CB Bank.

A Letter of Credit from a bank guarantees the seller will get payment from the buyer on time, with the bank responsible if the buyer fails to pay.

Using Letters of Credit needs the recipient bank to bear some credit risk, which foreign banks are reluctant to do when dealing with a transfer from a Myanmar banking counterpart.

U Pe Myint said, the ADB will step in to guarantee CB Bank s Letter of Credit transfers, taking responsibility if something goes wrong during the transfer.

He said, The ADB has guaranteed our ability to provide transfers this way.

Wire transfers are a common system of global transfers with Myanmar at present, where the buyer transfers the funds before getting the goods. The Letter of Credit system differs by allowing the buyer to transfer funds after getting the goods, with a bank guaranteeing the payment will be made even if the buyer fails to pay, in return for a fee.

U Than Aung Kyaw said, Ministry of Commerce official the ministry approved the Letter of Credit system for imports in May 2014, but recently allowed it for exports.

He said, The ministry did not permit this system for export as the US could seize money transferred into and out of Myanmar whenever it wanted, also adding sanctions on Myanmar funds transfers are not fully removed, delaying the decision to allow the transfers.

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Source: TendersInfo (India)

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