Thursday, July 31, 2008

UN aid disappearing in Burma cash scam

By Thomas Bell, South East Asia Correspondent
Last Updated: 1:48PM BST 29 Jul 2008

The missing money is likely to have lined the pockets of the ruling generals and their business cronies.

The scam, which is still occurring, involves forcing the UN to buy the local currency, the Kyat, at above the market rate by changing money through government backed Foreign Exchange Certificates (FEC).

A dollar currently buys around K1,100 while a "one dollar" FEC only buys K880.

In New York on Monday, Sir John Holmes, the under-secretary-general for humanitarian affairs, said: "We were arguably a bit slow to recognise... how serious a problem this has become for us."

He estimated that 15 per cent, or £5 million, of aid transferred in this way had been lost. "It is not acceptable," he added.

A UN spokesman in Rangoon told The Daily Telegraph that the exact losses are still being calculated. Observers believe the final figure could be higher, because for much of the period since the cyclone the discrepancy in exchange rates has been around 25 per cent.

The scandal was exposed in an investigation by Inter City Press, a New York blog, which began reporting the story on 26 June, after receiving a leak of purported minutes from a teleconference in which officials registered alarm at a "very serious 20 per cent loss on foreign exchange".

Yet top officials denied that such losses were occurring, even as they launched an appeal for another £150 million in cyclone aid on 10 July.

"We buy kyats at the market rate using dollars," Daniel Baker, the humanitarian co-ordinator for Burma said that day. "The government has not benefited."

On Monday Sir John insisted: "We were not aware of the extent of the loss."

A spokesman for the UN Development Programme in Rangoon explained yesterday: "I don't think people expected, given the past, this divergence to be as much as it was or to go on as long as it has."

Urgent steps were being taken to address the problem, he said.

Discrepancies between the official and market exchange rates are well known to visitors to Burma. The International Monetary Fund highlighted the issue in a report last year.

Aung Naing Oo, a Burmese academic at Chiang Mai University in Thailand, said that identifying the beneficiaries of the process would be difficult in Burma's corrupt financial system.

"Who is handling the money, who is doing the trade?" he asked. "Sure the military is profiting, but other shady people may also be profiting who the UN can not clearly pinpoint."

See the leaked minutes:

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