RANGOON—Burma’s government on Thursday denied reports that it holds up to US$11 billion worth of foreign reserves in several bank accounts in Singapore.
The figure was first mentioned by an independent financial researcher, who said that World Bank and Asian Development Bank (ADB) officials had provided him with estimates of Buma’s overseas reserves.
It is believed that the billions of dollars were stashed in Singapore by Burma’s former military junta, which for many years earned hundreds of millions of dollars annually from natural gas exports, much of which was siphoned off and pocketed by members of the regime.
On Thursday, Deputy Minister of Information Ye Htut refuted the allegations that Naypyidaw maintained vast amounts of foreign reserves overseas, after these reports emerged in local media in recent days.
“The government doesn’t stash away the national budget in foreign banks. Give us the evidence regarding the $11 billion in five accounts. The government is ready to take action on it,” he said in a Facebook post.
Jelson Garcia, Asia Program Manager with the Banking Information Center (BIC), said World Bank, ADB and International Monetary Fund (IMF) officials informed him last year that Burma’s government held up to $11 billion in several Singaporean bank accounts.
“These were estimates given to us […] I drew it from our meetings with the WB and ADB staff who said they were at that time informed that the accounts could be in 3 to 5 accounts,” Garcia told The Irrawaddy in an email. “They did not give the exact worth and specific banks as they themselves did not know that much.”
BIC is a Washington-based non-profit organization that monitors international financial institutions. The World Bank, ADB and IMF began re-engaging with the Burmese government last year. Previously, the institutions were not allowed to deal with the former military regime, which had grown isolated and failed to pay its outstanding arrears of almost $1 billion to the banks.
Encouraged by the political and economic reforms under President Thein Sein, a number of international creditor countries, led by Japan, slashed much of Burma’s debt in May, 2013. Japan also provided a bridge loan to Burma so that it could clear its arrears with the ADB and the World Bank, allowing both banks to resume lending and provide aid to Burma.
Garcia said ADB staff, during a meeting on April 2, 2012, told him that it was encouraging that Burma’s government was finally lifting the secrecy surrounding its Singaporean accounts—which at the time were estimated at $7 billion by the ADB.
“The $7 billion in banks in Singapore is both a good and bad thing. The government’s willingness to share the IMF report is encouraging. [Let’s] look forward to this meeting next year to see how things have progressed,” Garcia concluded from his meeting with ADB staff.
Following recent local media reports that Burma had parked $11 billion in Singapore, the World Bank issued a statement on Thursday distancing itself from Garcia. Although it made no mention of the reported claims, the bank said that “It is common for governments to hold reserves in foreign bank accounts in order to facilitate importation of goods and services and management of the exchange rate.”
World Bank officials could not immediately be reached for further comment on Friday afternoon.
It is not the first time that researchers have claimed that Burma’s government—and individuals connected to it—have stashed vast amounts of foreign reserves in Singapore and other overseas accounts.
In 2009, the US-based non-profit organization Earth Rights International (ERI) reported that the then ruling junta had excluded almost $5 billion in revenues—generated from the Yadana Gas project operated by oil giants Total and Chevron—from the country’s national budget.
These funds, the group found after an investigation, had been placed in two Singapore-based banks—the Overseas Chinese Banking Corporation and DBS Group—which functioned as “offshore repositories.” The banks have denied the allegations.
Paul Donowitz, ERI campaigns director, told The Irrawaddy on Thursday that these findings were corroborated at the time by international financial institutions. “The IMF confirmed that in fact over 99 percent of the income from natural gas sales due to the government, was held as foreign exchange reserves, and not included in the national budget,” he said in an email.
Donowitz said President Thein Sein’s reformist government, which assumed office in 2011, was ending the junta-era practice of parking gas export revenues overseas. “We understand that now, natural gas revenues are brought back into the country, and are likely included into the national budget,” he said.
ERI’s 2009 research also found that at the time “hundreds of millions of dollars” had been taken out of the government’s two Singaporean accounts and moved into other accounts controlled by Burmese individuals with close connections to the former junta, but who were not US sanctions lists.
Donowitz said, however, that ERI had since lost track of these funds. “More recent information indicates that this money left Singapore a couple of years ago, going briefly to Dubai, then to Macau and China […] whereupon the trail and details have gone very cold,” he said.
During the decades of military rule, Burma was plagued by public sector corruption on all levels, ranging from citizens paying for basic services to massive losses of revenues generated from the exploitation of Burma’s vast natural resources, such as timber, gemstones, oil, coal and gas. The resource revenues were siphoned off by the country’s military, political elite and businessmen with close connections to the regime.
In the past, economists and researchers have pointed to the junta’s artificial overvaluation of the kyat against the US dollar, at 6.5 kyat to $1, while money changers in Rangoon were offering about 1,000 kyat for $1. (The government launched the managed float of the kyat in April 2012, and it is currently valued at about 970 kyat to $1)
This overvaluation of the kyat in the past allowed the junta to claim that gas export revenues were reaching state coffers, while in fact most of the foreign currency paid by Thailand for Burmese gas imports simply stayed overseas.
“The difference was siphoned off and sent to banks in Singapore and Dubai. The country was robbed of billions of dollars,” said a foreign banking consultant based in Bangkok.
The consultant, who declined to be named, said the Burmese nationals who controlled this ill-gotten wealth through their connections with the former junta are now looking for ways to invest their illicit funds back into Burma’s growing economy.
With the economic reforms under way in Burma, however, the local financial sector is coming under closer scrutiny of the IMF and other monitoring organizations.
Rangoon’s booming property market provides the best vehicle for laundering this illicit, overseas money, according to the consultant, as Burmese authorities do not require real estate buyers to disclose the source of funding for their property purchase.
“They can use the money there [overseas] to buy real estate in Burma, then sell it and declare the income as money from real estate deals. Then the money is ‘clean’,” he said in an email.
“Hence the astronomical prices for real estate in Rangoon. This is what has caused prices for real estate to skyrocket. It’s not because of foreigners wanting to buy anything,” he said. “Foreigners cannot buy property in Burma and they think the prices are outrageous anyway, they are not interested… [They are] only [interested] in renting some office spaces or such.”
Aside from benefitting Burmese individuals tied to the former military regime, the Burmese government’s billions kept in Singaporean accounts could also have been used for defense procurements for the country’s powerful military.
In July, Lt-Gen Thein Htay, who heads the Directorate of Defense Industries (DDI), was put on a US Treasury sanctions list after it was found that he may have opened several bank accounts in Singapore in past years in order to help Burma’s military sort out international arms deals.
DDI was designated for US sanctions a year earlier for developing missile technology with the help of North Korean experts.
Several businessmen in Burma told The Irrawaddy that Thein Htay is believed to get involved in “illicit trade in North Korean arms to Burma,” which is said to involve tens of millions of dollars.
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