Thursday, July 31, 2008

Official: U.N. Lost $10M in Burma

By BENNY AVNI, Staff Reporter of the Sun July 29, 2008

UNITED NATIONS — The United Nations lost at least $10 million as it carried out humanitarian relief efforts in Burma because it complied with a plan allowing the country's ruling junta to control foreign currency, according to the top U.N. humanitarian coordinator.

Storm victims stand outside their shacks after they rebuilt them with tarpaulin and leftover pieces from the river after Nargis cyclone at Ohnpinsu village near Labutta town at the Irrawaddy delta on July 10, 2008.

John Holmes's disclosure yesterday raises questions about how funds donated by well-meaning governments and private entities are spent by the United Nations in countries such as Burma, where a dictatorial regime controls every aspect of life, and whether the international effort unwittingly helps such regimes further tighten their grip on power, Burma watchers say.

U.N. officials had downplayed the scope of the losses accrued as a result of the junta's distorted exchange rate. But Mr. Holmes acknowledged yesterday that the amount was "significant," calling it "unacceptable." He promised to raise the issue with Burma's government to ensure that losses could be cut down in the future. But evidence emerged yesterday that the U.N. Office for the Coordination of Humanitarian Affairs, which he heads, was aware of the problem even as it was appealing worldwide for additional funds for Burma.

An economic professor at Macquarie University in Sydney, Australia, Sean Turnell, said yesterday that the figure of $10 million in Burma losses is "not inconsistent" with his own estimate. "But why is the U.N. handing any foreign currency to the Burmese regime anyway?" the economist, who was one of the first to expose the loss, said, adding that such handouts only strengthen the ruling junta.

International organizations were quick to offer assistance and donations to the victims of Cyclone Nargis after it hit the Burmese coast on May 2, killing 140,000 people. OCHA appealed internationally for $200 million, of which $180 million was quickly raised, Mr. Holmes said. A third of those funds was spent inside the country in kyat, the local currency, he told reporters yesterday.

The conversion from dollars to kyat is done through Foreign Exchange Certificates, which are issued by government-licensed local vendors according to what the government claims are market rates. The difference between the official conversion rate and the FEC rate has fluctuated between 10% and 25%, Mr. Holmes said. According to his office's calculation, $10 million of the initial $200 million appeal funds was lost through such conversions.

Although OCHA has said conditions on the ground have improved significantly, on July 10 it appealed for additional international funds — up to $480 million — to aid Burma. OCHA has already received $200 million of this second flash appeal, Mr. Holmes said.

Inner City Press, a Web site focusing on U.N. reporting that has investigated the foreign exchange losses extensively, yesterday published a internal memorandum from June 26 that showed OCHA was aware at that time that the foreign exchange conversions had caused losses of 20%. None of the losses, however, were disclosed to potential donors when OCHA launched its additional appeal in July.

"Presumably the government is benefitting somehow" from the exchange rate, Mr. Holmes said yesterday, though he acknowledged that he could not calculate how much of the $10 million that had already been lost went directly to top generals or their associates. A similar foreign exchange plan led to losses of U.N. funds in North Korea.

A sudden influx of funds to dictatorial countries such as Burma creates the potential for an inflationary effect, Mr. Turnell said. Such an effect "increases the power of anyone who controls the country," he said. Meanwhile, he added, the junta has enough resources to handle the relief efforts, if it cared to do so, without foreign funds.

The Bush administration has spent $47.2 million so far on assistance to Burma, according to government documents. "We're against any waste of resources that taxpayers around the world and member states provide to meet the needs of people around the world," the American ambassador to the United Nations, Zalmay Khalilzad, said. "We also do not want any diversion of it to unintended goals, and that applies to this case."

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