UN’s Lost Aid May Be Tip of the Iceberg
covering burma and southeast asia
Monday, September 25, 2023

UN’s Lost Aid May Be Tip of the Iceberg

By WILLIAM BOOT Wednesday, July 30, 2008


BANGKOK—The loss of United Nations aid money via “unacceptable” exchange rates orchestrated by the Burmese regime was going on long before this week’s disclosures about Cyclone Nargis cash losses, a US nongovernmental organization says.

“There are indications that [the United Nations Development Program], even prior to Cyclone Nargis, provided larger cuts to Myanmar’s Than Shwe government than the [up to] 25 percent now admitted to by the UN’s humanitarian operations,” said Matthew Russell Lee of the New York-based NGO Inner City Press.

The NGO investigates issues such as transparency, corporate accountability and predatory lending. It was instrumental in forcing the UN this week to admit to losses to the junta of at least US$10 million on cyclone cash aid transmitted into Burma.

The “very serious loss” was disclosed by the UN’s humanitarian chief, John Holmes, when he returned to New York this week after a post-cyclone assessment visit to Burma.

“Now that Holmes has admitted the losses, putting the figure at $10 million, it’s important to note that is only for the period from the cyclone until now,” Lee told The Irrawaddy on Wednesday.

Inner City Press has asked the UN Development Program (UNDP), which has accepted the Myanmar government’s currency exchange rules for 14 years, how much it has converted during that time, and at what rates. For now, UNDP says it doesn’t know, which is also troubling,” Lee said.

The UN usually expects to lose small amounts through exchange of dollars into local currency, but the enforced conversion into Burmese kyat via Foreign Exchange Certificates (FECs) at a government-controlled bank has led to a loss of at least 15 percent, Holmes said.

“The amount of money the UN system has turned over to the Than Shwe government goes back far before the cyclone,” said Lee, who was the first to obtain a secret internal UN memo outlining the losses on cyclone funds.

“Why were these losses never disclosed while [new cyclone] funds were being raised?” Lee asks.

Sizable losses were first disclosed after the UN’s second appeal on July 10 for additional aid of several hundred million dollars to tackle the aftermath of Cyclone Nargis. A secret internal accounting memo outlining the problem was obtained by Inner City Press.

However, it was only after Holmes’ visit to Burma last week that a firm figure was announced. The UN had been “a bit slow to recognize” the size of the losses, Holmes said in New York on Monday this week.

Holmes’ disclosure follows a meeting he had in Naypyidaw with Burma’s ruling generals last week, at which he said, “We must make sure that humanitarian efforts continue to be separate from politics.” Back in New York, Holmes said the extent of the loss through junta-dictated exchange rates was “unacceptable.”

At one point earlier this month, the exchange rate was only 880 kyat for each FEC, compared with 1,180 previously.

It appears that after the UN was jolted into public acknowledgement of the losses, the agency pressured the junta to prevent further skimming of funds by the Myanmar Foreign Trade Bank, where the UNDP holds a US dollar account.

According to Inner City Press, this led to losses dropping to 17 percent, giving the UN 980 kyat per dollar. The UN has already raised $200 million for cyclone relief work in Burma and is seeking an additional $300 million.
About $66 million has so far been used for local purchases within Burma, requiring its conversion into kyat—hence the estimated $10 million loss, based on an average deflated conversion at 15 percent.

Inner City Press, as part of its campaign for financial transparency at the UN, asked a former UNICEF official in Burma, Eric Laroche, who is now with the World Health Organization, whether he thought it was legitimate to accept a low exchange rate from a government in order to have access.

Laroche told Inner City Press: “It’s a very difficult question, and a more difficult answer. It has to do with principles.”

Evidence has emerged that the UN knew in June that it was losing what Holmes now calls “significant” sums of aid money to the junta.

The loss on each cyclone dollar has ranged from 15 percent to as much as 25 percent, peaking in June—before the UN made its second appeal for further donations from member countries.

“We were arguably a bit slow to recognize how serious a problem this has become for us,” Holmes said on Monday. “It’s not acceptable.”

Holmes insisted it was “unclear” who is benefiting from the UN’s losses, although he conceded the “likelihood” that the Burmese government gained.

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