Burma Borrows $100 Mln from China to Fund Anti-Poverty Schemes

By Tha Lun Zaung Htet 22 August 2013

RANGOON — Burma’s government will receive a US$100 million loan from the Export-Import Bank of China, which it will use to fund cooperative programs that support farmers and the urban poor, lawmakers said.

Upper House member Phone Myint Aung said lawmakers and cooperative representatives attended a meeting at the Ministry of Cooperatives (MOC) on Sunday, where President Thein Sein set out the loan conditions and planned usage of the funds.

“The president informed participants that his government had borrowed $100 million for [the funding of] cooperative programs,” said Phone Myint Aung, adding that the Chinese loan came with a 4.5-percent annual interest and a repayment period of 10 years.

“He also said he would seek more international aid as 600 to 3,000 billion kyat [$600 million to $3 billion] is required to fund all cooperatives across the country,” Phone Myint Aung said.

An office administrator from the MOC in Naypyidaw told The Irrawaddy, “This loan from China will be used in micro-credit schemes that mainly target peasants.”

“Currently, we are working on these social and economic development programs with 50 billion kyat [$50 million] owned by cooperatives. These programs are aimed at rural people and low-income citizens in urban areas,” he said.

Under the government’s cooperatives policy, groups of farmers and poor urban communities can apply for microfinance loans if they join local cooperatives.

The cooperative policy was started by the British colonial administration in the early 20th century. During past decades of military rule, Burma’s government continued to use the policy to address widespread poverty in the country. The MOC is currently headed by Kyaw Hsan, who previously served as Minister of Information. During his tenure at this ministry he was considered a hardliner.

According to a recent paper by the International Finance Cooperation, there are more than 10,000 primary cooperative societies with 470,000 members in Burma.

Some economists and parliamentarians questioned the government’s decision to take out a loan from China to fund the cooperatives. They argued that the schemes have proven an ineffective socio-economic policy and are plagued by corruption.

“The cooperative system has never been successful in Burma’s history,” said Dr Maung Maung Soe, a retired economics professor at the University of Distance Education in Rangoon.

“In fact, the cooperative system doesn’t suit a market economy as the former normally runs as a social welfare program and is a centralized system, while [a market economy] encourages competition,” he said.

“If they borrow money, they will have to repay within a certain period. Also, because these are loans with interest they will suffer,” he said of the cooperatives.

Maung Maung Soe said Burma’s farmers and urban poor instead need interest-free credit through other programs. “If the government really wants to tackle poverty, it should provide the poor with loans without interest and ask them to gradually pay these back in 10 to 30 years.”

Kyi Myint, a Lower House member, said successful cooperatives in other countries are owned by their members and provide loans without interest.

“A true cooperative system should be based upon shared financial ownership by a cooperative’s members and their willingness to raise the status of the poor,” he said.

“The one we have now, however, is financially backed by the government so it seems to me that everyone applies for membership as they only want to find opportunity to borrow money and so on.”