UN Admits Losses to Myanmar Junta Through Currency Exchange, NGOs Skirt with Hawala

Byline: Matthew Russell Lee of Inner City Press at the UN: News Analysis

UNITED NATIONS, July 11 -- The question is not "if" but "how much" money Myanmar's military government has taken from the UN aid that has come into the country since Cyclone Nargis hit, it emerged Friday at the UN. John Holmes, the UN Humanitarian Coordinator, told Inner City Press that some level of loss would be acceptable in exchanging dollars for government-issued Foreign Exchange Certificates, which are in turn converted into the local currency, Kyat. "One percent would probably be okay," he said. Video here, from Minute 37:50.

But Inner City Press is informed by multiple sources, both UN personnel and from non-governmental organizations which try to avoid siphoning or "seigniorage" by the military junta, that at least 20% of aid money is lost in converting into Foreign Exchange Certificates. Holmes acknowledged that while the FECs are supposed to be one-to-one with the U.S. dollar, they are often lower. He declined to say how much lower, but sources on the ground but it at 20% or more, with further losses in the FEC to kyat conversion process.

To work around this, some NGOs have taken to using the informal money transfer system known as hawala. While this traditional system, in which money is deposited in one country and paid out in local currency in another with no paper trail, was attacked by the U.S. government after its supposed use to fund the September 11, 2001 plane bombings of the World Trade Towers in New York, in this case it is being used to deny "seigniorage" by a military government the United States condemns.

Inner City Press first reported on June 26 that its "sources say UNDP paid dollars to Myanmar's government, and got local currency back at an artificially low official exchange rate." The spokesman for UNDP said he would look into it, but then provided no information for two weeks. Finally, after Inner City Press published its next article on the topic, UNDP acknowledged it converts dollars into FEC:

"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). The exchange rate is based on the prevailing [most competitive] rate in the market, which can fluctuate."

NGOs active in Myanmar to whom Inner City Press showed this statement called it ludicrous, the implication that the exchanges are made at "competitive" rates. "The government is the one which creates and determines the value of the FECs," one said. "The UN and UNDP are gettin ripped off by the government, they've known about it but just stayed quiet."

Inner City Press is informed that the UN is now belatedly pushing for some changes to how business has been being done in Myanmar. But future, present and past practices by the UN and UNDP should all now be disclosed. John Holmes said one percent would be OK. His July 10 Revised Appeal for Myanmar states that "$313,704,035 in total has been committed for Myanmar relief operations as of 9 July." One percent of that is over three million dollars, pure profit to the Myanmar military government. A twenty percent loss would amount to over $62 million. The UN should be required now to disclose what exchange rates it has been accepting, and how much has been lost. Future, present and past currency exchange practices by the UN and UNDP should all now be disclosed, and not only in Myanmar. Watch this site. And this --

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