Almost US$20 billion in dirty money left Myanmar in five decades – researchers

KUALA LUMPUR (Thomson Reuters Foundation) – Almost US$20 billion (13 billion pounds) in dirty money linked to corruption, crime and tax evasion has left Myanmar in the past five decades, slashing government revenue and driving a thriving underground economy, a money-laundering watchdog said on Wednesday.

Fraudulent invoicing of trade deals and physical smuggling of drugs, timber, gems and other goods pose big challenges to Myanmar, which will hold its first general elections next month since the end of military rule, U.S.-based Global Financial Integrity said in a report.

Illicit financial inflows have accelerated in the past few years as the economy has opened up, and over the past five decades were four times as big as outflows, it said.

“Myanmar must be one of the most porous countries in the world,” GFI economist Joseph Spanjers, the report’s co-author, told the Thomson Reuters Foundation.

“It is a serious challenge for the country as tax losses due to illicit flows are robbing it of crucial public funds.”

Long isolation and trade restrictions during the nearly 50-year-long reign of a military government until 2011 and attempts to regulate currency exchange rates have combined to drive a substantial part of Myanmar’s economy underground, GFI said.

The Southeast Asian country, one of the poorest in the region, is not alone in grappling with the negative impacts of illicit financial flows.

GFI estimates almost US$1 trillion in dirty money leaves poor nations each year, an outflow that has grabbed the attention of anti-poverty groups and world leaders because, by cutting tax revenue needed to fund areas such as health and education, it has a corrosive impact on development.

Illicit financial flows from Myanmar totalled US$18.7 billion from 1960 to 2013, averaging 6.5 percent of the country’s annual economic output, GFI said.

In the same period US$77.7 billion of illicit money entered Myanmar, an inflow typical of countries where smuggling is a major part of the economy.

Total illicit financial flows were the equivalent of up to 172 percent of health expenditure and up to 73 percent of education spending, the researchers found, showing how both movements of money deprive the government of crucial tax revenue.

Myanmar’s tax collection rates are among the lowest in the world at 7 percent of economic output.


GFI said its figures for illicit flows of money are likely to underestimate the amounts relating to drug trafficking and trade in goods subject to international sanctions.

The underground economy accounted for an average of about 55 percent of economic output during the period covered in the report, one of the highest in the world, GFI said.

Spanjers said the fact that about 30 percent of the tax loss happened in the last four years of the study was troubling. In 2013 alone, unregulated financial inflows totalled some US$10 bilion, more than 20 percent of GDP.

“It indicates that some individuals have been taking advantage of increased economic openness for personal gain, at the expense of the rest of the country,” he said.

GFI said it was crucial that Myanmar improve its financial transparency, as well as data collection and quality, including moving towards real-time world market pricing to curtail trade misinvoicing.

The government was unavailable for comment.

Source: CNA

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