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Leaked Minutes Show UN Knew of 20% Loss in Myanmar 2 Weeks Before $300 M Request

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 -- While UN humanitarian officials John Holmes and Dan Baker have belated admitted currency exchange losses of up to 25% to Myanmar's government, 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. But on July 10, the UN's humanitarian coordinator for Myanmar Dan Baker answered Inner City Press' questions by stating there were no significant losses to the government. Video here, from Minute 46:20.

   The troubling implications of the June 26 "Notes for the Record" are not limited to Mr. Baker. Fully two weeks after the "very serious 20% loss on foreign exchange" was acknowledged in writing by the UN, an appeal for an additional $300 million was launched at the UN in New York, with no disclosure at all about the losses.

   The preparation of this request for additional funding is noted in the June 26 minutes, which also discuss such matters as the "messaging" and talking points for the UN's phase-out of helicopter flights to the Delta. The minutes have it that the government urged that rice be bought outside of the country -- the UN, it should be noted, preferred to buy it in-country, putting in question Dan Baker's claim that foreign exchange losses were minimized by making purchases outside of Myanmar.

   Long after Inner City Press requested basic information about how much money the UN has exchanged into undervalued FECs, OCHA's Dawn Blalock on the morning of July 28 responded that "on the dollar issue, the UN [Country Team] in Myanmar is working on that and should have figure by the end of the week and Mr. Holmes will address the issue today after the noon briefing." It shouldn't take this long to get financial information. But Mr. Holmes will be asked about it, and about the June 26 minutes, at the July 28 UN noon briefing.

UN into Myanmar, size of currency exchange loss not shown or disclosed

  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." Video here, from Minute 51:46.

  Laroche 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. Their response is expected immanently, and will be covered as this series progresses.

  In fairness, the UN has now provided to Inner City Press its transcript of John Holmes' July 24 press conference in Yangon, which has him stating

"yes, there is an exchange loss. I’m not sure where that gain goes, it’s hard to be sure. There is an issue here, it’s a serious problem because we are losing purchasing power in the dollars we are spending. We have raised that with the Govt. I raised that with the Govt today, with the Govt ministers, and they have said that they understand the problem and will look for a solution, and I hope we can find a solution very quickly."

   Myanmar's government has implemented a temporary fix or cover-up. It has announced that certain taxes and fees can be paid with the Foreign Exchange Certificates it requires that the UN convert dollars into. Last week, this temporarily raised to street value of FECs from 880 kyats, the local currency, to 980 kyats, limiting exchange losses from 25% back to 17%. But now the spread is back to 21%, with the FEC to kyat exchange rate sliding back to 950 to 1, compared to 1180 kyats per dollar.

  The temporary fix or cover-up did not work. Even at its best, is a 17% loss of aid funds to the Myanmar government acceptable to donors?  Why were these losses never disclosed while funds were being raised, including in UN appeals for $200 million and then, earlier this month, $300 million more?

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These reports are usually also available through Google News and on Lexis-Nexis.

Click here for a Reuters AlertNet piece by this correspondent about Uganda's Lord's Resistance Army. Click here for an earlier Reuters AlertNet piece about the Somali National Reconciliation Congress, and the UN's $200,000 contribution from an undefined trust fund.  Video Analysis here

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