In an effort to meet the current exigencies faced by Myanmar as a result of the COVID-19 pandemic, the Myanmar Government had, on 27 April 2020, launched the COVID-19 Economic Relief Plan (CERP). The CERP comprises seven goals, 10 strategies, 36 action plans and 76 actions, each with an estimated timeline and designated authority in charge, covering a range of fiscal and social measures.
Businesses in Myanmar should consider the various financing options and tax deferrals/waivers that may be applicable to their operations but also be mindful of possible conditions attached to those relief measures. For example, it appears that companies applying for loans under the government credit guarantee scheme would have to undertake to retain or rehire their employees but there are currently scant details on whether the employers can adjust the salaries or the moratorium period in which they are prohibited from dismissing their employees.
Foreign investors who have been looking at the Myanmar market may take the opportunity to seek fast-track approvals of their investments into the country, in particular for reputable international firms as well as companies in the promoted areas of renewable energy and strategic infrastructure, delivery and logistics services, healthcare, including the manufacturing of medical-related products, and digital payment services.
Goal 1: Improve macroeconomic environment through monetary stimulus
Under goal 1, monetary stimulus is triggered through the following measures by the Ministry of Planning, Finance and Industry and/or the Central Bank of Myanmar:
- Decrease of banks’ deposit and lending rate ceilings by 3.0%.
- Decrease of the minimum reserve requirement on banks.
- Credit auctions and reduction in treasury bonds/bill auctions.
Goal 2: Ease the impact on the private sector through improvements to investment, trade & banking sectors
Under goal 2, the measures to ease the impact of the pandemic on specific sectors are as follows:
- To ease impact on private sector firms through:
- Provision of low-cost funds by:
- offering MMK 100 billion worth of one-year working capital loans focused on micro, small and medium-sized enterprises (MSME) and companies in the hotel and tourism sectors at an interest rate of 1% per annum.
- Ensuring access by microfinance institutions (MFIs) to low-cost funding.
- Expediting the merger between Myanma Economic Bank (MEB) and Myanmar Agricultural Development Bank (MADB) to facilitate the expansion of existing pilot commercial lending programs to affected townships.
- Government credit guarantee schemes of up to 50% for any new loans made by banks to Myanmar enterprises, whose turnover is less than MMK 1 billion, for working capital, conditional upon maintenance or rehire of staff employed as of 1 February 2020 and to firms in selected high-growth sectors.
- Tax/fees deferrals or waivers, for example:
- Deferment of corporate income tax and commercial tax up to 30 September 2020 and Social Security Board (SSB) contributions up to three months.
- Waiver of 2% withholding tax, annual fees charged by the Ministry of Hotels and Tourism (MOHT), Specific Goods Tax, customs duties and commercial tax for critical medical supplies and products related to the prevention, control and treatment of COVID-19 and toll fees for cargo trucks on major roads/bridges.
- Three to six months exemption from lease fees charged to affected firms that have leased state-owned factories for manufacturing, made progress in their line of business and made regular lease payments in the past three months.
- Tax credits:
- Provision of 10% non-refundable tax credits on incremental wage bills and incremental investments on capital equipment.
- Deduction equal to 125% of wages paid.
- Permission for a one-time increase in depreciation equal to 125% of depreciation for the current year.
- Restructuring and rescheduling of existing loans to MSMEs that regularly pay interest on a timely basis for a maximum period of three years.
- Increase in flexibility on capital requirements, large exposure and non-performing loans (NPLs) for up to three years and the establishment of an asset management company where potential NPLs held by banks may be set aside for five to seven years.
- Promotion of investments through:
- A fast-track approval process for international private investments.
- Solicitation of renewable energy and infrastructure projects.
- A call for investments via a simple procurement process to manufacture key COVID-19 or medical products using vacant state-owned factories.
- A review and prioritization of public investments.
- Promotion of international trade by establishing a MMK 100 billion fund for trade financing, facilitation of importation processes for COVID-19-related products, a waiver of import licensing and Food & Drug Administration (FDA) requirements and a review of export applications, licenses and permits and suspend non-essential to maintain market access or protect public health, safety and security.
Goal 3: Easing the impact on laborers and workers
Under this goal, health care benefits for unemployed SSB members are extended from six months to one year from the date of unemployment and medicine and travel benefits are extended from six months to one year from the date of unemployment.
Goal 4: Easing the impact on households
Under this goal, the following measures are aimed at supporting households through the pandemic:
- Exemption from electricity tariffs for all households, excluding embassies and international organizations, up to 150 units per month.
- Provision of in-kind food transfers and emergency rations to sections of at-risk populations and increase in benefits for Maternal and Child Cash Transfer and pension beneficiaries.
- Cash transfers to vulnerable and affected households.
Goal 5: Promoting innovative products and platforms
Under goal 5, the Myanmar Government proposes to:
- Promote the use of mobile payment services, bank transfers or card payments for e-commerce sales.
- Encourage retail businesses to use e-commerce and social commerce systems.
Goal 6: Health care systems strengthening
Under this goal, the Myanmar Government has introduced the following measures:
- Extend and improve quarantine facilities by converting government premises into medical facilities, recruiting more medical staff, arranging regular disinfection at facilities and ensuring that these facilities are well-equipped.
- Expedite importation of key medical products.
- Improve preventive measures by establishing hand-washing stations, using mobile disinfection teams, setting up mobile teams for distribution of masks and conducting mass testing and improving waste management systems.
Goal 7: Increase access to COVID-19 response financing
Pursuant to goal 7, the Myanmar Government proposes to:
- Re-allocate the 2019 to 2020 budget from government entities to the COVID-19 Fund and increase the budget contingency fund.
- Obtain external development financing in the form of grants and concessional loans to finance measures under CERP and Myanmar’s response to the pandemic.
The CERP is a timely intervention by the Myanmar Government to cushion the financial, social and economic impact of the COVID-19 pandemic. Several of the measures have already been implemented and has gradually aided the management of the crisis. It has received a positive response from the public as it benefits both businesses and individuals. The CERP will see the government increasing its spending to the extent necessary to support the Myanmar economy and its people. The measures are targeted at both large and small enterprises as well as the at-risk population who are undoubtedly feeling the adverse impact of the pandemic harder.
We expect the relevant regulators to issue further policies and guidelines to provide clarity on the initiatives announced in the CERP. Businesses should monitor this space for further developments.