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Vikram Kumar, the Resident Representative for the International Finance Corporation (IFC) in Burma, spoke to DVB Interview International’s Alex Bookbinder about IFC investments in Yoma Bank and Shangri-La hotels.
The IFC, which is part of the World Bank Group, are financing several major infrastructure projects in Burma. One major investment is US$75 million in funds to Yoma Strategic Holdings (YSH) and Hongkong and Shanghai Hotels (HSH), both companies linked to Burmese business tycoon Serge Pun.
The money will go towards financing the development of a five-star resort that will transform Rangoon’s British Burma Railway Company into offices, a hotel and apartments. A further $30 million will go to Pun’s Yoma Bank to fund a small and medium enterprises (SME) lending programme.
“Our engagement with Yoma Bank is extremely comprehensive. It’s not just the investment support, it is comprehensive advisory because we honestly believe local banks need a huge amount of capacity building,” Kumar said.
“If you compare the quality of banking service here in Myanmar [Burma] to any country in the world, it has a really long way to go.”
The IFC has faced criticism over its investment in Yoma Bank, particularly from the US Campaign for Burma. They questioned why the IFC had categorised the project has ‘Financial Intermediary 2’ (FI2), which means it can forego environmental and social impact assessments and disclose certain information such as local partners.
Kumar defended the categorisation, and said the IFC was providing more than just finance to the bank; an Environmental and Social Management System (ESMS) is in place, and the IFC has people working inside the bank in an advisory capacity.
“We have full visibility on Yoma Bank’s lending operations because we are helping them develop their risk management system,” he said.
“In no possible way are the reporting and supervisory requirements any different. What we expect from Yoma is, in fact, an ESMS which is water tight.”
Another major IFC project is a $80 million investment for the expansion of the Sule Shangri-la hotel in downtown Rangoon and the construction of Shangri-La’s luxury apartments. But the IFC has come under intense criticism in many cases around the world over its financing of high-end hotels and luxury apartments from those who question how this kind of investment fits within the IFC’s commitment to poverty alleviation.
“We strongly believe hotels and tourism is fundamental to job creation,” he said.
“When we talk about democracy dividend we are talking about people actually having jobs, people having enough money to feed their families. The job creation of hotels and tourism is unmatched,” Kumar added. “I don’t see the creation of 1,500 jobs as contributing to inequality in any way.”
Kumar ended by saying that IFC operations in Burma are not just limited to real estate and the hotel and tourism sector. He disclosed that the IFC has a mandate for 12 transactions in the country across sectors including agriculture and energy.
In February, the IFC pledged funds to develop Rangoon’s energy supplier, the Yangon Electricity Supply Board (YESB).