UN Admits $10 M Exchange Loss in Myanmar, Says Will Disclose Others Countries and Losses

Byline: Matthew Russell Lee of Inner City Press at the UN: News Analysis
FEC/Burma Shave series - 1st (June 26), 2nd, 3rd, 4th, last

UNITED NATIONS, July 28 -- At least $10 million in UN aid money raised by the UN after Cyclone Nargis hit has been lost in government-dictated currency exchanges, UN humanitarian chief John Holmes admitted on July 28. He stated that at the time he launched a second appeal for aid on July 10, "we here" in New York had not been aware of the seriousness or extent of the losses. But an internal UN document obtained by Inner City Press shows that the UN knew as early at June 26 of a "very serious 20% loss on foreign exchange... changing US Dollars to Foreign Exchange Certificates [FEC] then to local currency, Kyats." This appears in the internal "Notes for the Record" of an "Emergency Task Force Teleconference" call involving top officials in Yangon, Bangkok and Rome, available here.

Inner City Press on June 26, after being read the minutes by a source, wrote an article and asked questions about it, including to the UN Development Program. On July 9, before the appeal was launched, Inner City Press asked Holmes about it, on camera in front of the Security Council, video here, at end.

Holmes on July 28 put the loss at $10 million and called it unacceptable. Inner City Press asked what percentage loss through government-dictated currency exchange he and the UN would find acceptable. "I think we've had this discussion before," Holmes said. "It's very difficult to set the bar." Video here, from Minute 31:58. "We are arguably a bit slow to recognize, since the spread widened in June." But prior to June, and prior to the cyclone, the UN was losing 15% to currency exchange. Was that acceptable?

Given the UN's losses in Myanmar only came out due to questions being pursued about these leaked minutes, Inner City Press asked Holmes if he would commit to now releasing a list of those countries in which the UN suffers currency exchange losses of greater than five percent, and a plan to address the losses and / or appropriately disclose them to donors. "I don't see any reason why not," Holmes said. "There's no reason not to be transparent." Video here, from Minute 55:57. He added, "we had not been trying to conceal it."

But why then not have disclosed it in the July 10 appeal for several hundred million more dollars for Myanmar? Notably, if a publicly-traded company was even negligent in this way, there would be fines and worse. This now becomes a test-case not only for Holmes but also for Ban Ki-moon. The problems of currency exchange rip-offs by governments may have pre-existed their tenures. But now that it is belatedly known, if only through questions being pursued about leaked minutes, it remains to be seen if they and the UN move to clean out this heretofore undisclosed leakage of aid money.

Inner City Press first raised the issue on June 26 itself, in print and in questions to the UN Development Program, which handles UN finances in the field. UNDP Spokesman Stephane Dujarric provided a written response that

"UNDP Funds are remitted into the UNDP US dollar account at Myanmar Foreign Trade Bank. UNDP Myanmar exchanges US dollars for Foreign Exchange Certificates at the Bank, and then converts these into local currency (Kyat)."

After that, in response to Inner City Press' request for how much money UNDP and the UN have converted into FEC, UNDP has provided no information. Mr. Dujarric left a message that he was going on leave but that his colleagues would provide the information. This never took place. On July 25, Inner City Press asked UNDP Administrator Kemal Dervis after he launched an appeal for more most-emergency funds if he would answer questions about UNDP's Myanmar operations, there in the UN's conference room 4 or in a press conference. "You know I don't answer questions like this," he said, adding that any press conference would have to wait until "after the high summer season." There are indications that UNDP, even prior to Cyclone Nargis, provided larger cuts to Myanmar's Than Shwe government than the 25% now admitted to by the UN's humanitarian operations.

The amount of money the UN system has turned over to the Than Shwe government goes back far before the cyclone. At UN Headquarters on July 16, Inner City Press posed questions to Eric Laroche, now at the World Health Organization, but previously the UN's humanitarian coordinator in Somalia, and further back with UNICEF in Myanmar. When Inner City Press asked if Laroche thought it legitimate to accept a low exchange rate from a government in order to have access, he stayed silent for a full eight seconds before saying, "It's a very difficult question, and a more difficult answer. It has to do with principles." He said that when he was in the country with UNICEF, auditors were told about the exchange rate arrangements with the government. He and his spokesman committed to explain how WHO exchanges money in Myanmar, but to date have not done so. After a telephone call on the afternoon of July 28, their response is expected immanently, and will be covered as this series progresses.

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