By Wade Guyitt | Monday, 14 July 2014
This timeline could not have been assembled without the invaluable history of Myanmar’s economy, Sean Turnell’s Fiery Dragons: Banks, Moneylenders and Microfinance in Burma (2009).
First Anglo-Burmese war brings part of Burma under British Empire. Alongside British troops, Indian moneylenders called Chettiars – members of an ethnic group specialising in finance – arrive. In the coming century, Chettiars would spread as far as British India did, introducing many lending and bookkeeping innovations and employing the hundi system of informal remittance. By 1930 there were 1650 offices country-wide, making them the primary financial movers of Burma under British rule, more important than any official financial entity prior to World War II.
Second Anglo-Burmese War. Lower Burma falls to British.
King Mindon founds Royal Mint in Mandalay. In the first formal currency ever issued in the country, gold and silver coins are struck for the kyat using dies cast in Paris and machinery imported from Birmingham, England. Denominations are 1 pe, 1 mu (2 pe), 1 mat (4 pe), 5 mu (10 pe), and 1 kyat (which was par with 1 Indian rupee, the British currency of choice and probably the first paper money used in the country). The reverse of the coins bears the royal peacock seal, leading the British to call them “peacock rupees”.
Indian Presidency Bank of Bengal opens Yangon branch.
Suez Canal opens, halving the time it takes to ship to Europe and placing Burma in the perfect geographic spot to supply rice to the Empire.
In most areas in Burma there is no tradition of land ownership in the Western sense.
Burma Land and Revenue Act issued to accelerate agricultural expansion as well as earn income for Empire: Occupiers are allowed to own land after making 12 years of payments.
Third Anglo-Burmese War. All of Burma becomes part of British Empire. Rupee fully replaces kyat.
Government of India alters Burma rupee design to incorporate Burmese lettering.
Burma is by now the richest country in Southeast Asia.
First local bank opens, in Akyab (now Sittwe).
In part to stem the influence of the Chettiars, a formal system co-operative credit is introduced, growing to 4000 societies by 1929, though ultimately failing due to problems of implementation.
Burma Companies Act lays foundations for individuals wishing to set up companies.
Burma becomes a largely self-governing province within British India.
1920s and 1930s
Chettiars are targeted by anti-colonial backlash and their influence declines, despite their important role in building Burma’s rice dominance.
Co-operative societies rise, to supplant the Chettiars with a formal credit system, but prove sounder in notion than in implementation. As the Chettiars decline, no adequate substitute remains in their place.
The Depression, which sends countries worldwide into a decade of severe economic downturn, also hits Southeast Asia and Burma. Rice prices are driven downward and farmers struggle.
April 1 – The Government of Burma Act separates Burma from India and establishes an independent parliamentary government. Currency and banking issues remain solely controlled by British-appointed Governor. The Reserve Bank of India (RBI) is assigned to serve as central bank for two countries simultaneously.
May-June – Following orders that bank notes “of distinctive design” be issued by the RBI (without Burmese involvement), the 5 rupee note is released in May and the 10 rupee note in June, with English, Burmese and Shan writing on them.
July – Burmese rupees issued for 5, 10, 100, 1000, 10,000, denominations, with King George VI on one side and peacocks, elephants, tigers, boats or ox-carts on the reverse. They are legal in Burma only, not India, though Indian rupees continue to circulate in Burma as well, and Burmese notes flow to India for RBI exchange there, constantly draining the local supply.
Prior to Japanese invasion 24 commercial “exchange banks” operate in Burma, most headquartered elsewhere, including Lloyds, HSBC, Thomas Cook and Son, Bank of China, National City Bank of New York (now CitiBank)
March 7 Japan takes Rangoon. Banks had begun making duplicates of records months before; holdings shipped to Calcutta; and a last-minute train evacuates staff and gold bullion up-country in February. One bank director buries gold and jewels underground in Maymyo. Another, having missed the train, walks out to India carrying his. Indian moneylenders also flee.
Japanese military rupees are issued, divided in 100 cents and only in paper form. The following year these are replaced by a short-lived Japanese revival of the kyat.
World War II ends. Japan is driven out of Burma by British and Allies, who refuse to honour Japanese-issued currency, leaving many with worthless paper. The rupee is revived.
January – Foreign banks re-enter and re-open in Burma.
April 1 – Burma Currency Board (shortlived precursor to the Central Bank) is established to mediate exchange of local and foreign currencies, though headquartered in London.
Newly drafted constitution states “the economic life of the Union shall be planned”, setting pace for centralised economy with preference for “co-operative and similar economic organizations”. Capitalism is seen as hand-in-hand with imperialism.
January 4 – Independence. Civil war puts economic reform on back burner.
Land Nationalisation Act (later revised in 1953) implements constitution’s statement that “The State is the ultimate owner of all lands”.
The British-imposed Indian rupee is replaced by Burma’s own currency (also called rupee), with one Burma rupee equal to 16 pe and each pe equal to four pya.
Coins are introduced for pe and pya denominations, with a chinthe lion-dragon on the back.
Korean War boosts rice prices, swelling coffers. Country shifts to program of “democratic socialism”, rejecting private foreign ownership and reclaiming control through centralisation.
Drafted in part by US consultants contracted by Prime Minister U Nu, the Pyidawtha Plan, or “royal pleasant country”, aims to shift focus away from “colonial extractive economy”.
July 1 – Union Bank of Burma Act disbands BCB, establishing the Union Bank of Burma as central bank. The kyat (=100 pya) replaces the rupee at par, with chinthe designs on back. Coins also later introduced for K1 and pya denominations.
Following Indonesian model, a system of state-owned pawnshops begin, to prevent overcharging from private pawnshops. Three years later, State Pawnshops Management Board Order permits government to assume all private pawnshop licences as they expire, in part as a way to drive out Chinese money-lenders.
June – State Agricultural Bank set up to extend credit through system of village and district banks, using “joint security” and programs of compulsory savings (both ideas are central to today’s microfinance loans). Repayment rate from 1953 to 1962 is 98.7pc.
June 1 – State Commercial Bank formed. The next year all government institutions are ordered to bank with it exclusively
Coins introduced for 1, 5, 25, 50 pya and K1. In the decades ahead they would be periodically re-designed and eventually phased out as cost of living rises.
October 28 – Following instability during protracted civil war with ethnic groups, Ne Win takes power in coup to rule as “caretaker” government, until surrendering power in April 1960 to U Nu once more
October – Industrial Development Bank opens
March 2 –Military coup under General Ne Win and his “Revolutionary Council Government” ends oarliamentary democracy era. 1947 constitution is suspended.
April – “The Burmese Way To Socialism” is outlined in a tract of same name
Currency production is shifted out of Britain, where it had been carried out during colonial and parliamentary democracy periods, to the then-also-socialist East Germany.
February 13 – After nationalising the Burmah Oil Company’s assets in January, Ne Win proclaims that “Henceforth, no more private industry would be allowed” of any sort. A run on banks ensues.
February 23 – Nationalisation of banks announced. Fourteen foreign and 10 local banks – from the Central Bank of India through the Upper Burma Bank – are renamed People’s Bank No 1 through People’s Bank No 24, with foreign banks given the lower numbers and local banks the higher. Military officers are appointed general managers. Foreign banks are paid the level of capital they originally brought to the country when establishing, but not reimbursed for earnings since. Certain banks are assigned certain areas of specialty (No 1 credit, No 2 savings, etc). Deposits can hold only one account in one bank; cannot deposit over K10,000 per month or K50,000 per year; cannot make over two withdrawals per week; must make minimum withdrawals of K5; and cannot take out more than 10pc of account at once.
May – Ne Win tells attendees at a village meeting to “Work hard and put up with austerity for a couple of years”.
May 17 – Demoniitisation: Starting at 7pm all holders of K50 and K100 notes are required to hand them in to collection centres. The law proclaims holders of over K4200 will be taxed as “indigenous and foreign capitalists” for having “unfairly accumulated the people’s money”, then given “amnesty or light sentences”, while “the innocent or honest savers and the poor” are given equivalent values in return. People turn away from cash and toward savings in gold or jewellery.
People’s Bank of Burma takes over note production, issuing new designs.
People’s Bank of the Union of Burma Act nationalises 15 foreign and 10 local banks and merges them.
Remaining state-owned banks are merged with People’s Bank of Burma. No more private banks until 1992
People’s Banks No 1-24 and pre-existing state-owned banks are merged into one entity, the People’s Bank of the Union of Burma, following a Chinese model, to encourage socialism. Various pre-socialist banking laws are repealed. In 1972 this single bank entity is renamed the Union of Burma Bank.
Currency production is brought in-country for first time, at a printing plant established in Wazi (in what is now Magwe Region), where currency, lottery tickets and national identification cards are reportedly still printed today.
January 3 – Country renamed “Socialist Republic of the Union of Burma”. Revolutionary Council makes way for Pyithu Hluttaw (People’s Assembly). Ne Win governs as ruler of Burma Socialist Programme Party. Socialist constitution replaces system of 36 districts with system of divisions (now called regions) for majority Bamar group territory and states (for other large ethnic group territory).
Single bank splits into a central bank (the Union of Burma Bank) and three others with specific areas of responsibility, governed jointly by the UBB and the Ministry of Finance and Planning.
November 3 – Second demonitisation: Denominations of K100 and K50 (both having been reintroduced without fanfare after their 1964 demonitisation) and K20 are, after this date, no longer legal tender. Maximum amount for reimbursement: K5000. New notes – K25, K35 and K75 – are introduced in their place.
Burma requests and is granted United Nations “least developed county” status.
Sept 5 – Third demonitisation: K25, K35 and K75 notes are taken out, after less than two years of issue. No compensation is provided at first; later maximum K100 is allowed for trade-in, allegedly to let students return home from school – or, as some say, to get them away from political instability in Rangoon.
Sept 22 – New bills enter market: K45 and K90. Many believe it is because of superstitious meanings of number 9. Whatever the reason, the changes make everyone work on a new column of the times table – and make the kyat totally untrustworthy as a savings vehicle.
August – Student uprising leads to national revolt; subsequent crackdown leaves roughly 3000 dead. Ne Win subsequently resigns.
Sept 18 – State Law and Order Restoration Council, or SLORC, takes over in a coup, ending BSPP rule and the socialist era.
“Socialist Republic of the Union of Burma” renamed “Union of Burma”.
“Proper evolution of the market-oriented economic system” is the second of four economic objectives printed in government newspapers daily – though the fourth cautions that “The initiative to shape the national economy must be kept in the hands of the state and the national people”.
A number of important laws follow over the next few years, including Union of Myanmar Foreign Investment Law (1989); State-Owned Enterprise Economic Enterprise Law (1989), Private Industrial Enterprise Law (1990), and the repeal in March 1989 of the Law of Establishment of the Socialist Economic System (1965).
Burma is renamed Myanmar
National elections are held but results are denied as military continues “caretaker” rule. US imposes sanctions.
Fourth state bank, Myanmar Investment and Commercial Bank, is set up to stimulate growth of industry and production.
Military-run congolomerate Union of Myanmar Economic Holdings Limited (UMEHL) is set up.
July – Central Bank of Myanmar Law is passed to establish modern monetary policy.
Myanmar Agricultural and Rural Development Bank Law is passed to tackle rural credit shortage. Financial Institutions of Myanmar Law is passed, defining four state banks’ roles but also allows private banks for first time since 1963, as well as foreign bank representative offices but no foreign bank direct transactions.
The roadmap predicts eventual joint ventures to introduce foreign bank operations, and later foreign banks operating independently, though those processes would not proceed under SLORC/SPDC rule.
Private bank licences are issued for first time.
Primary government treasury bond market established (secondary market for on-trading bonds still lacking).
Foreign exchange certificates (FECs) established in 1, 5 and 10 denominations to limit circulation of US currency. Mandatory exchange on entry for tourists at one-to-one rate of US$200 (later $300 in March 1994). Local citizens can also bank FECs, but face a 10pc “service fee” and can only withdraw in kyat. The compulsory exchange would end in August 2003 and the FECs themselves would be discontinued in 2013.
Myanmar Accountancy Law passed.
Asia Wealth Bank begins operations; prior to crash of 2003 and subsequent de-licensing it would be largest of not only private banks but all banks operating. This and some other banks were alleged to have connections to drug money – another major bank of the time, Myanmar Mayflower Bank, was reportedly known by some as “Poppy Flower Bank” before it was shut down – and money-laundering. Other banks – Myawaddy, Cooperative and others – operate with government backing
November – First ATM, at Mayflower Bank (now defunct).
Myanmar Stock Exchange formed.
US sanctions expanded; EU sanctions implemented.
Asia Wealth Bank issues country’s first credit cards.
UNDP microfinance program permitted.
SLORC renames itself the SPDC, or State Peace and Development Council.
Myanmar Economic Corporation (MEC) set up.
Asia Wealth Bank (now defunct) offers first online banking.
Financial Action Task Force on Money Laundering, a G7 and OECD body, gives Myanmar “non-cooperative” status, meaning member countries were restricted in financial dealings as transactions could be proven not to be connected to opium production.
May - Law to Control Money and Property Obtained by Illegal Means promulgated as attempt by government to respond to international criticisms of banks being complicit in narcotics money-laundering, requiring all cash transactions above K100 million to be reported.
Myanmar Institute of Banking (MIB) founded as a quasi-department within MBA, providing banking training mainly from entry to middle-management levels.
The first-ever private sector banking crisis begins. After the informal money sector collapses due to overextending its rates of return on loans, runs on the banks follow and the meager liquidity support offered by Central Bank is unable to prevent what becomes a major economic crash leading into 2003.
National financial crisis boils over. Some banks penalised by government in aftermath. Ironically, the kyat gains strength in black market exchange, as non-banked money becomes a suddenly valuable commodity.
November – FATF, then US and EU, further restricts international transactions with Myanmar banks, due to possible money-laundering complicity. AWB and Mayflower are singled out especially. After AWB and Mayflower are shut down (and later the Myanmar Universal Bank is absorbed into Myanma Ecconomic Bank), the private bank landscape looks significantly different, with other banks later rising to take top slots.
November – Nation’s capital shifted from Yangon to Nay Pyi Taw.
June 3 – Central Bank moves to Nay Pyi Taw.
October – FATF removes Myanmar from its “non-cooperative” status list.
August 15 – “Saffron Revolution” uprising begins. Touched off by SPDC’s removal of fuel subsidies which caused fuel prices to increase as much as 66pc and CNG bus fuel to rise fivefold in less than a week, as well as longer-term rises in the costs of basic goods like rice, eggs and cooking oil, the protest involves students, activists and the general public but took its name from the monks who got involved August 18. The resulting crackdown brings international condemnation. US, Canada, Australia and others impose tightest possible sanctions, while EU steps up measures as well
Kyat drops to K1300 to $1 on black market (official exchange rate remains K6 to $1).
May 2 – At 12:00 UTC, Cyclone Nargis makes landfall in Ayeyarwady Region. It eventually kills over 100,000 and leaves the delta – and rice crops – decimated. International community brings help but criticises government for not allowing aid workers and supplies inside.
May 10 – In a nationwide referendum (cyclone-hit areas are polled later), a new constitution is passed by an overwhelming percentage, though scepticism arises over voting numbers.
ASEAN Comprehensive Agreement. Myanmar agrees to open to regional foreign banks by 2015
March 30 – U Thein Sein sworn in as president; civilian government takes office.
Auditor General of Union Law passed.
Myanmar Payment Union (MPU), a Central Bank initiative, is formed to reform payment system, sets up ATM network.
October – Private banks allowed to open foreign exchange counters.
November 30 – Microfinance Law legalises microfinance operations, introduces interest rate caps.
US, UK, EU sanctions eased; World Bank gets involved; Visa, MasterCard, Western Union arrive
April – Foreign Exchange Management Law lifts restrictions on transactions on exports and imports of goods and services.
August 10 – Foreign Exchange Management Law introduces managed float system.
November 2 – Foreign Investment Law allows 5-year tax holiday with various reliefs and customs duty relief; non-nationalisation and non-suspension of the business; land use up to 70 years (50+10+10); repatriation of profits and capital brought in.
January 27 – World Bank and Asian Development Bank clear $900 million debt via a bridge loan from Japan Bank for International Cooperation; Japan, Norway and others also agree to forgive loans. President later announces over $6 billion in old foreign debt has been cleared, the first step on way to Myanmar leaving behind UN “least developed country” status, and making way for new aid that will kickstart economic growth.
March – Abolishment of FECs announced.
May – CBM signs Memorandum of Understanding (MoU) with Tokyo Stock Exchange to establish stock exchange in Myanmar by 2015.
July 12 – Central Bank of Myanmar Law (revised) separates CBM from Ministry of Finance, granting it autonomous power to implement monetary and exchange rate policies.
July 31 – Securities Exchange Law moves to establish a stock exchange, securities exchange companies, and counter markets for the accumulation and allocation of financial resources; also to reduce speculation in securities which fuels inflation
August 5 – Interbank foreign exchange market opens.
November – Financial Institutions of Myanmar Law revision aims to install more efficient banking system.
A new Banking and Financial Institutions Law reaches the final stage of drafting.
Process begins to allow 5-10 foreign banks to operate later in year.
ASEAN Free Trade Agreement (AFTA) set to link region’s economies.
Yangon Stock Exchange to launch.
National elections to be held.
A word on sources
This timeline could not have been assembled without the invaluable history of Myanmar’s economy, Sean Turnell’s Fiery Dragons: Banks, Moneylenders and Microfinance in Burma (2009). Anyone interested in a fuller portrait of the events described is strongly recommended to consult it.
Also helpful were the reports Afford Two, Eat One: Financial Inclusion in Rural Myanmar and Making Access Possible. A number of other resources contributed information used in particular entries.
Images of bank notes and coins are free-to-use Creative Commons images taken from online.
Anyone interested in viewing a complete set of images of post-independence currency can do so easily at the website of the Central Bank of Myanmar.
The Myanmar Times would like to express its gratitude to its sources – and to its sources’ sources – for their diligent research. Any errors or omissions in this timeline are MT’s own.