Aug 7, 2012

ADB, World Bank open Myanmar office

ONE small office at Yangon’s Inya Lake Hotel is now home to two of the biggest names in international banking: the Asian Development Bank and the World Bank.

It makes “cents” for new Myanmar. All jokes aside, it signals the country has taken a very large step forward.

As World Bank vice president for East Asia and the Pacific region, Pamela Cox, said during a press conference to open the office on August 1, Myanmar was in a period of transition.
“[Myanmar] is engaged in a triple transition. It is moving away from a military-style of government to something more open and democratic, it is establishing peace over conflict and an open market economy is replacing a closed one. We are here to say that the World Bank backs this transition,” she said.

There is also a palpable sense of joie de vivre in the air. During a 40-minute interview with The Myanmar Times on 1 August, Mr Kunio Senga, director general for the Asian Development Bank’s (ADB) Southeast Asia Department, repeated the following statement at least four times: “There is a lot to do.”

However this new beginning must also confront old challenges. For several decades, the Myanmar government has been unable to pay off its debts. It owes about US$500 million to the ADB and nearly $400 million to the World Bank.

But the issue has been resolved and Myanmar will receive a bridging loan to help it to clear the arrears, a senior official at the Washington-based multilateral lender told the press conference in Yangon on August 1.

“We are not forgiving the debt. We are just clearing the back interest payments. Then they’ll start repaying it again,” said Ms Cox.

Mr Kunio has already devised a three-pronged approach to making repayments to ADB and the World Bank easier. He advocates maintaining high levels of foreign reserves, finding a partner, perhaps Japan, to help clear the debt or for the government to borrow money on short-term loans from commercial banks, and then to use these loans to settle the arrears.
“By adopting this approach, the government could settle its accounts within a couple of hours,” said Mr Kunio, although his determination to help lift Myanmar out of the debtor doldrums is evident.

“I am quite optimistic,” he said, “because the president has made significant reforms.”

To the naysayers who regard the banks’ arrival as premature, Mr Kunio’s reasoning is this: “If these [reforms] are not seen to be rewarded and supported by the international community, people on the ground won’t feel tangible change and will start asking whether there’s something wrong. So it’s a case of ‘the quicker, the better’ in terms of the international community’s engagement with Myanmar.”

Unsurprisingly, Mr Kunio is disappointed by what he considers the banks’ late arrival. He considers President Obama’s recent suspension of most US sanctions as too slow. “[The ADB and World Bank] should have been among the first international institutions to come and help build national institutions and assist with the formation of new public policies. Yet we were the last to come.”

“The US administration is working very closely with Congress to find a way of allowing us to progress as quickly as possible. I’m hopeful that further steps will be made with the backing of the US Treasury,” he added.

He explained why the ADB and the World Bank should offer incentives for establishing an economic framework that genuinely benefits the private sector: “Though it’s true that new businesses maximise the amount of profits being made, the most important aspect of financial reform is ensuring that the progress is inclusive and sustainable. In our view, the most important objective is to achieve this goal and thereby reduce poverty, narrow gaps of disparity and contribute to national reconciliation.”

Additionally, the World Bank is stepping up its support for reforms in Myanmar by preparing to present its board with up to $85 million in grants to benefit men, women and children through community driven development programs that will allow communities to decide whether to invest in schools, roads, water infrastructure or other projects.

Mr Kunio’s repeated statement concerning the many issues Myanmar needs to address echoes comments made by President U Thein Sein in a mid-June speech. He said the government needs to focus on developing the economy and is targeting annual gross domestic product growth of 7.7 percent and improving household incomes.

However, Mr Kunio noted that Myanmar faced key questions in solving its economic challenges. These include insufficient agricultural loans to poor farmers, electricity shortages, capital deficiencies to build basic economic infrastructure, ethnic conflicts, an overly strong national currency and remaining US economic sanctions.

Source: Myanmar Times