Letter of Credit only accepted for gold export, import payment

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Local gold price is lower than that of international market, causing suspension of export. Photo: Phoe Khwar

International remittance for Myanmar’s gold exports and imports can be made by the only Letter of Credit (LC), according to the notification released by the Trade Department under the Ministry of Commerce on 12 August.
Myanmar is placed on the Grey List by the Financial Action Task Force (FATF), the inter-governmental body that sets anti-money laundering standards. Therefore, the country needs to monitor the gold and jewellery exports and imports to ensure there is no illegal income, according to the Trade Department.
As per the notification released by the Ministry of Commerce, starting from April, payment method was changed to LC.
Yangon Gold Entrepreneurs Association (YGEA) submitted a request for the resumption of the previous payment system (Telegraph Transfer) to the Ministry of Commerce instead. However, the ministry issued the notification to use LC only starting from 12 August.
“With the use of LC, payment can take about two months, cost banking service changes by two sides, and increase the charges for security matter in transportation. The traders are not happy with the new payment system due to volatile prices in the international gold market,” said U Myo Myint, chair of YGEA.
“The traders are ok with TT system even if the prices fluctuate three to four times a day as there is no delay. Because of the anti-money laundering, only the LC system is available for trading.
We have to open an account at the Myanma Foreign Trade Bank for both systems. Earlier, the foreign traders made the transaction through TT, and we also used the TT system. It has the fast nature of the deal.
“With the LC system, we have to open LC at the bank and so do for the buyer side at his/her bank. Additionally, they have to be shipped by linking with the insurance company. It costs around US$500 for 1,000 worth items, due to the banking service for the delayed payment and higher transportation charges,” he explained
“Furthermore, the gold price daily fluctuates. Typically, telegraphic transfer is done depending on the origin and destination of the transfer, as well as any currency exchange requirements. Payments with LC are delayed for about one month. The traders will suffer losses if the gold price is on the rise. That is why we are not happy with the LC system,” he added.
Change in payment system halted gold exports at the end of June. As a result of this, more than 10,000 local goldsmiths were unemployed owing to a trading halt with the external market, he continued.
Gold and other jewelleries are primarily purchased by Japan and the Republic of Korea, and other tourists also buy them, the YGEA stated.
YGEA will insist on submitting the request for the resumption of the TT system regardless.  (Translated by Ei Myat Mon)

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