The Myanmar junta has moved to close down foreign trading firms, cancelling their import and export licences in a decision that has alarmed the foreign business community here, sources said Wednesday.

Myanmar's deputy chief of military intelligence Kyaw Win said earlier this week that the government would not be issuing licences to foreign companies other than for the import of construction and industrial material.

"Beginning from the first of March this year, foreign companies, foreign trading companies particularly, will not be allowed to import or export anything," he told reporters.

Major-General Kyaw Win said he presumed the decision was designed to "give domestic firms a competitive edge".

Diplomats in Yangon said Wednesday some companies holding licences due to expire at the end of the year were now having their permits summarily cancelled.

"They weren't in a great panic until now as their licences were in place. But now existing licences are being cancelled... and the business community is getting very concerned," one Asian diplomat told AFP.

"And there are rumours that they may not give visa extensions to foreign-

ers working for these companies."

The move is expected to hit the trading sector hard, affecting companies from across the world who bring in mostly pharmaceuticals, electronics and beauty products, and export Myanmar-grown commodities.

"It's a question of economic nationalism. They are saying that the money should stay in Myanmar and with Myanmar trading companies," the diplomat said.

"But these companies have thousands of Myanmar employees and if they pack and leave there will be a lot of unemployment."

The unease and confusion has been compounded by the fact the junta has made no official notification of the decision.

"There's been no announcement made so we don't know how far they will go," the diplomat said.

Myanmar's economy is an extremely poor state, thanks to stiff sanctions from the international community as well as mismanagement by the military government.

The kyat currency is now hovering at 800 to the dollar after slipping to a record low of 820 after the regime last month said it had foiled a coup attempt by relatives of former dictator Ne Win.