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In Myanmar, UN Loses 25% of Aid in Currency
Exchange, Up from 15% Pre-Cyclone
Byline: Matthew Russell Lee of
Inner City Press at the UN: News Analysis
UNITED NATIONS,
July 22 -- The UN has directed
hundred of millions of dollars into Myanmar since Cyclone Nargis hit,
and on
July 10 asked for $300 million more. But it has now emerged that
the UN has
lost some twenty percent of the money it
has exchanged in Myanmar, by acquiescing
to a government-required exchange of dollars for Foreign Exchange
Certificates.
Not only
does an internal UN memo reviewed by Inner City Press refer to a
"serious loss of 20%" -- now, sources in Yangon describe the
applicable exchange rates accepted by the UN between FECs and Kyats as
25% lower
than the dollars the UN changes into FECs. Before the cyclone, the loss
was
15%. The extra ten percent loss, applied to the millions of dollars
exchanged
by the UN system, could have helped the cyclone's victims. What will be
done
remains to be seen. The UN's top humanitarian John Holmes has pledged to get to
the bottom of the issue during his current three day trip to Myanmar.
The UN Development
Program is central to the
UN system's operations, and states that "funds are remitted into the
UNDP
US dollar account at Myanmar Foreign Trade Bank. UNDP Myanmar exchanges
US
dollars for Foreign Exchange Certificates (FECs) at the Bank, and then
converts
these into local currency, Kyat."
But in the
second half of July, the exchange rated was a mere 880 Kyats for each
Foreign
Exchange Certificate, compared to 1180 for each dollar the UN converted
one-to-one into a FEC. That's a loss of more than 25%. Before Nargis
hit, the Kyat
to FEC rate fluctuated between 960 to 980 per FEC, compared to 960 to
980 per
dollar, a loss of 15%.
Holmes and Ban Ki-moon plan Myanmar trip, exchange
rate losses not shown
The recent Post-Nargis
Joint Assessment Final Report, issued by the UN along with ASEAN
and, notably,
the Than Shwe government of Myanmar, acknowledges in Box
2 that
"Myanmar has a multiple
exchange-rate system. The official exchange rate applies to the
transactions
undertaken by the government and state-owned enterprises and is used
primarily
for accounting purposes. Foreign Exchange Certificates (FECs) are also
issued
by the government, exchangeable at a market-determined rate. A large
parallel market also exists that exchanges
US dollars
with Kyats at a small premium over the rate for
FECs. This report utilizes the exchange rate used by
the Government of
Myanmar in its presentation of damages
immediately
following Cyclone Nargis at the ASEAN-UN International Pledging Conference in Yangon on 25 May 2008 (K
1,100/USD), which was consistent with the
prevailing rate on the parallel market at the time
of the assessment.*
* FEC and USD rates are
fluctuating at present and should be kept under close review during the
initial
stages of the relief and recovery program: the upcoming Article IV
consultations would be a good opportunity for review."
This is a
diplomatic way to refer to the black market, and to dodge the question
of how
much the UN loses by accepting the requirement to change dollars into
FECs on a
one-to-one basis. Consider the above
quotes, annotated:
Foreign Exchange Certificates
(FECs) are also issued by the government, exchangeable at a
market-determined
rate." - The only rate is the black market
rate, which
currently is 880 Kyats per FEC. So when they say "market determined"
they're referring to the black market, as they are in the sentence that
follow
-- "A large parallel market also exists that exchanges US dollars
with
Kyats at a small premium over the rate for FECs."
"This report utilizes the
exchange rate used by the Government of Myanmar in its presentation of
damages
immediately following Cyclone Nargis at the ASEAN-UN
International
Pledging Conference in Yangon on 25 May 2008 (K 1,100/USD), which was
consistent with the prevailing
rate on the parallel
market at the time of the assessment." - it
appears that Myanmar
government actually used the "black market" rate for this, that
surprises me quite honestly. If you read the State Media here they're
always
very careful to quote US$ and Ks figures separately so as not to
acknowledge the
"real" black market value. The
claim that the rate was Ks 1,100 on the 25th May is questionable,
records show
that it was slightly higher at Ks1,1700, with FEC was trading at Ks975
at that
time. But all of that raises two questions;
1) If the Myanmar Govt. is using
an exchange rate of Ks1,100 to the US$ and it was the "prevailing
rate" at that time, why did the UN not get that rate? The answer to
that
is of course obvious, the Myanmar Government shafted the UN and the UN
damned
well knows it!
2) Who in Myanmar can change that
sort of money? The only people who have that amount of cash here are
the
Generals and their allies.
Not only
the UN's Sir John Holmes is in Myanmar -- the UN Development Program's
new regional
director for Asia and the Pacific, Ajay Chhibber is there as well. Both
should
know personally about the exchange rate scam.
Also according to a source, if one stays in an
"International"
hotel like Traders or Sedona -- both used by the UN, with Ban Ki Moon
staying
at Sedona and a apparently at least one whole floor occupied by the UN
at
Traders -- one will pay in FEC/US dollars as a foreigner, around
US$/FEC 55 per
night. If you're a Myanmar citizen you will pay Ks 40,000.
In some
cases it's
even more extreme, for example a hotel in Mandalay charging US$/FEC 25
per
night, with Myanmar nationals paying Ks 6,000 for the same room and
service. So
did Ban Ki-moon and his entourage notice this while they were in
Myanmar?
On Tuesday at UN headquarters, Inner
City
Press asked Ban Ki-moon's spokesperson Michele Montas about the
seeming wind-down of parts of the UN's Nargis response:
Inner City Press: it's been said
that the UN is going to stop its flights from Thailand and its
helicopter
flights inside Myanmar on 10 August and various humanitarian groups
have
questioned the decision and said that it’s going to make it more
difficult to
deliver aid. What’s the reasoning behind stopping those
flights? Is
it the problem is over?
Spokesperson Montas: Well,
this is because it is being taken over by maritime transportation and
other
considerations. It really happens quite often in relief
operations; that
after the emergency phase is over, that they take other means besides
transportation
by air.
Inner City Press: Maybe the
groups just didn't understand?
Spokesperson: No, it’s not
going to stop the flow of aid in any way. It’s going to be
simply, right
now they are getting into the phase of reconstruction.
And what
will the exchange rate loss be during that recovery phase? The
Post-Nargis
Joint Assessment Final Report asks for $1 billion, while stating in Box
2 said
the exchange rate should be reviewed also during the recovery phase.
Our point
here is that the pressure that countries such as France brought to
bear, to get
their own humanitarian workers into Myanmar, might have been better
exercised
in getting the Than Shwe government to back off requiring foreign
exchange
losses to it, at least in the cyclone's wake. We'll see.
Watch this site.
And
this --
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