Byline: Matthew Russell Lee of Inner City Press at UN
www.innercitypress.com/un11myanmar072208.html
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
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%.
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
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
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 see, www.innercitypress.com/un11myanmar072208.html
