Review of: Koji Kubo, Myanmar’s Foreign Exchange Market: Controls, Reforms, and Informal Market

By Sandar Win

It has been a great pleasure for me to read Koji Kubo’s work on Myanmar’s Foreign Exchange Market since there are a dearth of studies on Myanmar’s economic landscape and informal financial sector. Due to the government of Myanmar’s limited transparency on actual data on trade inflows and outflows or the implementation of different economic policies per se, we must appreciate the author’s efforts in collecting data which might not always be available in the public domain. Furthermore, by comparing the conventional economic theories or models to Myanmar’s foreign exchange market, the author has successfully differentiated and highlighted interesting developmental outcomes of the successive Myanmar governments’ economic controls and reforms from 1990 to 2014. As the book is a compilation of seven chapters, I would like to provide my review for each chapter. I find each chapter is able to stand alone from preceding chapters. The author seems to provide the reader with a holistic view of how different foreign exchange market activities and mechanisms have emerged over the years. I personally recommend each chapter to be read in its own right.

In Chapter 1, the author provides his definitions and descriptions of financial terminology, such as informal interfirm-based and bank-based foreign exchange markets, and different components of exchange rate restrictions. This allows readers to follow his discussion of Myanmar’s foreign exchange market in subsequent sections. Afterwards, the author provides a brief overview of foreign exchange regimes prevalent in other ASEAN countries namely, Indonesia, Malaysia, Philippines and Thailand as well as the justifications for the research questions in the book.

For those who are already familiar with the regional foreign exchange mechanism and are only interested to know the peculiarity of the Myanmar’s foreign exchange market, I would recommend the reader to start reading from Chapter 2 as it will provide an overview of how foreign currency deals are used by the military government to solve debts accumulated by the state economic enterprises, and their controls on foreign currency dealings in the private sector. Consequently, the author explained how the Myanmar government’s policies on the foreign exchange market along, its narrow tax base, its issuing of treasury bonds to fund fiscal deficit and relaxation of controls on commodity prices, subsequently led to the widening gap between the official and unofficial market exchange rates. The other aspect of the chapter that I think the readers who are not familiar with Myanmar’s financial market would find interesting is the author’s discussions of how Foreign Exchange Certificates (FECs) are used as a mean to officially recognise unofficial market rates.

In Chapter 3 and Chapter 4, the author discussed some key issues, i.e. the role of the informal economy on the foreign exchange market. Personally, I find this as the most important dimension. It illuminates how the informal money market was sustained over time in Myanmar, despite all the policy initiatives introduced since 2011 to formalise informal currency dealings. For those who are not only interested in Myanmar but also those who would like to know the effectiveness of economic sanctions on a country, the author makes a very detailed and persuasive argument on why they were not effective in Chapter 3. This is followed by the author’s discussions on how trade misreporting occurred in Myanmar. In Chapter 4, he examined whether natural gas export revenues have direct impacts on the unofficial market rate. He argued that it did not have direct impacts on the unofficial market rate whereas jade exports did. I found this argument perplexing after reading Chapter 3 where the author already mentioned about trade misreporting in Myanmar. Furthermore, it was based on qualitative examination of available data rather than applying statistical analyses. This is not to say that the argument has no merit. However, this warrants further detailed analyses.

Unlike previous chapters, in Chapter 5 and 6, the author moved away from descriptive analyses of the Myanmar foreign exchange markets to take a more analytic approach. For example, in Chapter 5, the author examined how the government policies on currency controls had impacts on volatility of unofficial foreign exchange rates using conventional economic models that test volatilities such as the GARCH model.

In Chapter 6, he focused on firm level impact rather than macro-level impacts, i.e. the firms’ choices of currency dealings using surveys. He found that larger firms tend to use official customer dealings at banks compared to smaller firms. Though this argument is valid, in practice, many companies irrespective of their size, use informal foreign exchange markets as a complementary to the formal currency dealings in Myanmar. The other issue related to the survey data is the risk related to social desirability bias (Win and Kofinas, 2019). It would have been great if the author provided descriptions on how the survey questionnaires were designed and administered.

In Chapter 7, the author summarised his propositions on how to modernise foreign exchange markets in Myanmar. They include merging unofficial and official markets through forcing firms to move to official customer dealing via regulations, and to open foreign bank branches in Myanmar. Though these suggestions are viable, it is could be more complicated than macro-level policy changes. This is due to the persistently inefficient official foreign exchange dealings in Myanmar. Many households and firms may have become accustomed to using informal financial markets. Hence, it becomes difficult to change these financial habits solely through governmental channels or through policy controls.

All in all, the book is a great read for those who would like to understand how Myanmar’s unique foreign exchange market has emerged from successive governments’ economic policies.


Win S and Kofinas AK. (2019) ‘Reflecting and Integrating the Contextual Influences of Ambiguities and Institutional Power in Organisational Research Design: A Case of Myanmar’, Management and Organization Review 15: 341-370.