Bloomberg News

U.S. May Face More Pressure to Unblock Myanmar Aid, ADB Says

July 02, 2012

The U.S. is likely to face increased pressure from other donor nations in the coming months to allow greater assistance to Myanmar, according to Stephen Groff, a vice president with the Asian Development Bank.

The Treasury Department remains bound by law to block the ADB and World Bank from providing most aid to Myanmar even after President Barack Obama’s administration eased sanctions in May. While shareholders are comfortable with the current moves to reengage for now, they may start to lose patience if the U.S. doesn’t soon change its policies, according to Groff.

“There are other donors and other shareholders of the ADB and the World Bank that are very keen for these institutions to move forward,” Groff, one of five ADB vice-presidents, said in a June 30 interview in Bangkok, where he stopped after a four- day visit to Myanmar. “There will be some point where they are wanting us to move forward a little bit more aggressively than we can under the current constraints.”

Myanmar President Thein Sein’s 16-month-old government is seeking help to reconnect with the global economy after about five decades of military rule left its 64 million people among Asia’s poorest. The ADB and World Bank are in talks with the government to settle about $900 million in overdue debt, a move that would bring them closer to resuming lending.

ADB Board

“Were we to put something to the board, the U.S. still because of the sanctions that are in place would have to vote against it,” said Groff, who met with Thein Sein and members of his cabinet during his visit. “There is very little benefit for all of us to bring something to the board that the U.S. has to publicly declare they don’t support.”

The ADB’s shareholders consist of 67 countries. The U.S. and Japan hold the most voting power with 12.82 percent each, followed by China at 5.47 percent, according to the bank’s annual report. Fourteen countries that are members of the European Union have a combined voting power of 15.7 percent, the report said.

ADB assessments of seven Myanmar sectors released yesterday reveal a range of needs. About a quarter of the population lives in poverty, agriculture accounts for 70 percent of employment and about three in four people don’t have access to electricity. Myanmar has about 18 vehicles for every 1,000 people, compared with 250 in Indonesia and 370 in Thailand.

Coca-Cola, Caterpillar

Coca-Cola Co. (KO:US) said last month it would return to Myanmar for the first time in 60 years once the U.S. government licenses the investment, while Kevin Thieneman, president of Caterpillar Asia, will co-lead a U.S. business delegation to the country next month. The Senate on June 29 confirmed Derek Mitchell as the first U.S. ambassador to Myanmar since 1990, part of moves to reward the nation’s leaders after opposition leader Aung San Suu Kyi won a parliamentary seat in April.

Myanmar may hold a meeting of donor countries in about three months at which governments can discuss the outstanding debt, Groff said. Any resolution is likely to be a hybrid of a trust fund to help pay off some of the debt and a bridge loan that would effectively reschedule payments on the rest, he said.

“The more that we rely on the provision of our own concessional resources to reschedule that debt, the less is available in the medium term for investments that are going to have an impact on poor people in the country,” Groff said.

Unemployment

Thein Sein last month pledged to create jobs and increase incomes while targeting economic growth of 7.7 percent per year until 2016, addressing what Suu Kyi has called a “time bomb” of youth unemployment. Underemployment rose to 37 percent in 2010 from 34 percent in 2005, according the ADB assessment.

Rural areas account for about 85 percent of total poverty, the ADB said, with the poorest states along the western border of Bangladesh. Recent fighting between Rakhine Buddhists and Muslim Rohingyas in the area has killed about 80 people and displaced more than 50,000 others, according to the United Nations.

Ethnic tensions may potentially “create some problems and some backsliding,” Groff said. “But again, I was left really feeling that there was a high level of commitment to the reform process.”

To contact the reporter on this story: Daniel Ten Kate in Bangkok at dtenkate@bloomberg.net

To contact the editor responsible for this story: Peter Hirschberg at phirschberg@bloomberg.net


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