Development Banks Back in Burma

The World Bank and the ADB move to support the once-pariah state’s political reforms with development aid.

Pamela Cox (c), the World Bank's vice president for East Asia and the Pacific, addresses reporters in Rangoon, August 1, 2012.

The World Bank and the Asian Development Bank opened new offices in Burma's former capital Rangoon on Wednesday as they prepare to resume aid to the country, now emerging from decades of military rule.

The World Bank pledged U.S. $85 million in development grants and help in clearing nearly U.S. $400 million of past loans in arrears.

"We are committed to eradicating poverty, and the new office opening in Myanmar [Burma] will allow us to reach some of the poorest people in East Asia,” Jim Yong Kim, World Bank Group President said in a statement.

“They have been cut off from the global economy for too long and it's very important that they receive real benefits from the government's reforms,” he said.

The proposed U.S. $85 million loan, expected to be approved by October, will allow communities to invest in schools, roads, water, or other projects, the bank said.

The institution has not made any loans to Burma since 1987, when the country ruled then by the military stopped making payments on its debts.

Burma will have access to interest-free loans from the International Development Association, the bank’s fund for the poorest countries, after it clears arrears of U.S. $397 million, a process the bank said could be completed by early next year.

Pamela Cox, the World Bank's vice-president for East Asia and the Pacific, said that Burma will be receiving a bridging loan to help it clear the arrears, but that the debt is not being forgiven.

"We have worked out a way to clear those arrears and we hope to do that by January," she said.

She said the bank's presence in Burma is part of efforts to support the country’s political transition and to re-engage with Burmese people to help them have a better life.

"This comes at a critical time when the country is undergoing what we call a triple transition — [Burma’s] moving from a military government to a more open and democratic government, [Burma] is moving from conflict to peace, and [Burma] is moving from a closed economy to an open economy."

In the first visit by senior bank officials since the country began undertaking political and economic reforms last year, Cox met in Naypyidaw with President Thein Sein and other members of parliament, including opposition leader Aung San Suu Kyi.

Asian Development Bank

Burma also owes about U.S. $500 million to the Asian Development Bank (ADB), which is returning to the country for the first time since 1988.

The Manila-based ADB, which grants loans for infrastructure development in the region, said it has already completed needs assessments in key sectors and will station long-term staff in the country.

“Establishing an office in Myanmar allows us to deepen our understanding of the challenges facing the country, and how best to offer assistance to achieve inclusive and sustainable economic growth,” said Stephen Groff, ADB’s vice president for East and Southeast Asia and the Pacific.

“It’s crucial that we understand the reality facing Myanmar as we work with the government to formulate a partnership strategy for successful development and poverty reduction.”

The World Bank and ADB had pulled out of Burma after pressure from the U.S. and other countries who imposed sanction on the country following widespread rights abuses by the then-ruling military junta.

The U.S., EU, and other countries began easing investment sanctions this year after Thein Sein’s nominally civilian government carried out a series of reforms since coming to power in March 2011.

In February, the U.S., the bank's largest shareholder, lifted its opposition to multilateral development banks giving limited technical assistance to Burma, but other sanctions still require Washington to oppose new lending.

Reported by Rachel Vandenbrink.

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