Cambodia Country Update #2: MDB Investment July-October 2004
18 November 2004
The Cambodia Country Updates provide information about recent developments, decisions, civil society concerns and recommendations related to Multilateral Development Bank (MDB) involvement in Cambodia including that of the World Bank (WB), and the Asian Development Bank (ADB). The updates are emailed approximately every three months to a list of individuals and civil society organizations in Cambodia and abroad who are interested in monitoring MDB investment and project impacts in the country. This lists all approved MDB projects/programs to Cambodia since January 2003. Similar Updates are also being developed for Burma, Indonesia, Laos, Thailand, and Vietnam and can be read at http://www.bicusa.org/bicusa/issues/asia/index.php#country . If you would like to be included or removed from the list, or have any questions, please email Mishka Zaman (moderator) at
The Bank Information Center (BIC) is an independent, non-profit, non-governmental organization that aims to empower citizens in developing countries to influence World Bank and other Multilateral Development Bank (MDB) activities in a manner that fosters social justice and ecological sustainability. BIC advocates for greater citizen participation, transparency, and public accountability. For more information about BIC, see www.bicusa.org.
I. Recent News and Developments
Project to demonstrate poverty reduction impact of road maintenance in rural Cambodia
The Asian Development Bank (ADB) has approved a grant of $2.2 million to demonstrate the poverty reduction impact of maintaining Cambodia's national road network. Funded by the Japan Fund for Poverty Reduction, the project will pilot test sustainable road maintenance in three provinces of the northwest of the country - Battambang, Pailin, and Banteay Meanchey. The project will provide supplementary funding for the maintenance of about 600 kilometers of roads over the three-year life of the project, creating jobs for the poor and ensuring long-term access to and from remote rural areas. ADB expects that the project would reduce poverty by 5-10% in areas where the roads are maintained and would generate about 18,800 jobs. See Table 6 below for more information about the project.
World Bank team to work with Government on Phase Two of Fiduciary Risk Review
The Government of Cambodia and the World Bank announced on September 27 the start of the second phase of the study “Reduction of Fiduciary Risks in Cambodia”. The first phase of the study, which was completed in August, focused on collecting information on 625 contracts under four World Bank financed projects (Flood Emergency; Rural Investment and Local Governance; Road Rehabilitation; and Biodiversity and Protected Areas) and pre-selecting a number for detailed review. The second phase consists of an in-depth review of the pre-selected contracts to verify if funds made available for projects activities are being used for the intended purposes with due regard to economy, efficiency and transparency. The study should result in a series of recommendations on ways to tighten procedures, improve monitoring, and increase the understanding of how fraud and corruption may happen.
Cambodia needs decisive reforms to capitalize on WTO accession, attract investment: World Bank study
In August, the World Bank published a report entitled 
“Seizing the Global Opportunity: Investment Climate Assessment and Reform Strategy for Cambodia,” which argues that for Cambodia to grow its economy and reduce poverty, the Government needs to act immediately to improve the investment climate. The report employed an investment climate survey of 800 urban, rural, and informal firms to identify how the policy and institutional environment impacts individual firms. The study identified a number of critical constraints facing local and foreign businesses operating in Cambodia, including: 1) unofficial payments, 2) high minimum capital requirements, 3) slow process of clearing an import shipment, and 4) lack of institutions to absorb risk. The report was released during a workshop in August.
World Bank OKs forest concessions, angers activists
The World Bank has recommended that the Cambodian government allow renewed logging by six of the forest concessionaires for a further 25 years despite an independent review calling for their end. This was according to a statement released on August 5 by environmental watchdog Global Witness. Global Witness said that these six companies have been responsible for much of the illegal logging in Cambodia, are mostly fronts for cronies and relatives of senior government officials, and engage in abuse of the rights of forest-dependent communities. Despite this, the World Bank project has used loan money to assist them in producing new forest management plans. Global Witness identified the six companies as Colexin, Everbright, Cherndar Plywood, TPP, Timas Resources, and Samraong Wood. (Source: IPS-Inter Press Service, August 5, 2004)
Cambodia's hill tribes unite against proposed gem mine
A group of Cambodian indigenous minorities joined forces on September 13 to block a proposed gem mine in Ratanakiri province in the country's far northwest. Close to 100,000 people from more than a dozen groups of indigenous minorities presented a statement of their joint demands to the Ministry of Land Management, Urban Planning and Construction. The groups said that the mine was approved without consultation, and raised concerns about the destruction of the environment and sacred sites. The indigenous groups were also worried about the potential loss of income for the villagers, who for years have lived from the proceeds of the garnets they have mined themselves in small family mines. Organizers said it marked a new, homogenous effort by previously individual groups to solve common problems. Asian Development Bank representatives were in attendance. (Source: Deutsche Presse-Agentur, September 13, 2004)
II. MDB Policy Updates and Consultations
ADB releases second draft of new disclosure policy; draft now open for comments
On October 26, the ADB released the second draft of its Public Communications Policy (PCP) for a 30-day commenting period. ADB’s second PCP draft proposes that: the minutes of Board meetings, including ED votes, be disclosed; a tentative schedule of Board meetings be disclosed up to three weeks in advance; at least two draft CSPs/RCSPs be disclosed for consultation during the development of these strategies; and that ADB work towards developing a translation framework and doing better outreach in borrowing countries through public information centers. ADB is receiving comments on the 2nd draft at until November 24. Comments will be used to prepare a PCP Working Paper, which will be presented to ADB’s Board of Directors in January 2005. For more information on ADB’s PCP review, see ADB’s website on developing a new Public Communications Policy and BIC’s webpage on ADB’s disclosure policy review.
ADB launches review of its governance and anticorruption policy implementation
The Asian Development Bank has launched a review of the implementation of its Governance Policy and Anti-corruption Policies, which hopes to improve its understanding on how effectively governance and anticorruption policies have been operationalized in its country strategies and lending activities. The outcome of the review is expected to be a Medium-Term Agenda and Action Plan for the Governance and Anticorruption Policies for 2005-2009. The ADB states that the implementation of the Governance/Anticorruption Policy Review "is allowed to make recommendations for policy changes.". The ADB has completed and publicly disclosed its desk review. Country level consultations have been planned in 4 countries, namely: Indonesia (Oct 26-28), Vietnam (Nov 10-12), Nepal (Nov 15-18), and the Philippines (Nov 23). Those who are interested in working on the review or participating in a consultation can contact , ADB Consultant, and , Principal Governance Specialist. A 2004 assessment by BIC & Terra entitled "Zero Tolerance" revealed that the ADB almost never implements its anti-corruption policy.
ADB launches review of its Private Sector Development Strategy implementation
ADB is currently reviewing the implementation of its Private Sector Development Strategy, which will assess how effectively the development strategy is being operationalized in individual developing member countries. During the Review exercise, ADB will seek comments from internal and external stakeholders on the preliminary findings of the review. It involves a desk-based assessment, which is currently ongoing, and an internal and external stakeholders consultation, which are going to be held in Kazakhstan, Pakistan, Vietnam, and the Philippines. Consultations in Mongolia have already taken place. The exact date for the other consultations is yet to be determined but have started in September and will end in November. The person in charge of the review process is , Senior Governance Specialist. The external consultations for this review do not consist of events where all stakeholders gather, but Settle and his team are trying to approach NGOs individually, through e-mail and in meetings.
ADB finalizing its revised proposal on its Water Policy revision
ADB has finished collecting comments from water agencies, NGOs, and other interested stakeholders regarding its Water Sector Committee’s proposed revision. ADB staff has reviewed the nineteen comments and are now finalizing a revised proposal for the approval of ADB's Board of Directors. The revised proposed paragraph is expected to be publicly disclosed before the Board discussion, expected to take place before the end of the year. The intended revision seeks to give stakeholders only the “opportunity” to comment on such projects, in sharp contrast to the original Water Policy requiring “all government and non-government stakeholders” to agree on the justification for large water resources projects. Civil society organizations have urged the ADB President to hold true to its past commitment to the recommendations of the World Commission on Dams, which recognizes that free, prior and informed consent and other forms of public acceptance are important principles in development policy.
ADB to move forward on a Regional Cooperation Strategy and Program in South Asia
ADB has been formulating Regional Cooperation Strategy and Programs (RCSP) for specific regions/subregions in Asia, intended as a road map to guide ADB’s regional operations. RCSPs define a five-year strategy supported initially by a 3-year program of assistance. ADB has already completed its RCSP for the Greater Mekong Subregion (2004-2008) and Central Asia (2005-2007), and is presently formulating its RCSP for South Asia. In April 2004, ADB and the South Asia Association for Regional Cooperation (SAARC) signed a Memorandum of Understanding (MOU) that aims to strengthen cooperation between the two institutions. The MOU will help promote mutually interested regional programs/projects and help establish linkages with other regional initiatives.
ADB remains silent on its Forest Policy revision
ADB has not commented nor released any information regarding a revised Draft Forest Policy Paper that was due to be released by July 2004 for stakeholder comments. The June 2003 version currently available at the ADB website has, since July 2003, already been rejected by the Board of Directors. Only a period of four weeks has been allocated for comments when the revised draft is released. A number of concerned citizens have requested information from the ADB regarding the status of the revised Draft and other related information, but no answer has been given to date. The June 2003 draft has already received criticisms, in that it is a step backwards from the Bank's existing 1995 Policy on Forestry.
Monitoring framework for ADB’s environment policy launched
The Philippine Rural Reconstruction Movement and NGO Forum on ADB have released a publication entitled “ADB and the Environment: A Monitoring Framework for ADB’s Environment Policy.” It is based on four case studies that evaluate the implementation of ADB's environment provisions, which are the November 2002 Environment Policy and the preceding Operations Manual Sections. The case studies are 1) the Southern Transport Development Project, Sri Lanka, 2) the Sundarbans Biodiversity Conservation Project, Bangladesh, 3) the Nucleus Agro-Enterprise Project, Papua New Guinea, and 4) the Marcopper Mining Corporation, Philippines. The second part of the publication consists of summaries of all of the ADB's existing environmental provisions and is intended as an easy-to-use monitoring tool for affected communities or involved NGOs.
IFC launches Review of Social and Environmental Safeguard Policies and Disclosure Policy
The International Finance Corporation has launched a fundamental revision of its “safeguard” policies – the environmental and social policy requirements that govern its lending operations. Instead of ten safeguard policies, the IFC has proposed a set of “performance standards” for its private sector clients that allow much greater flexibility in implementation. For the disclosure policy consultations, the IFC has only released a “concept note” that represents a fundamental shift from the traditional “document-based” disclosure policy to a more “principle-based” policy. The IFC is also pursuing an extremely rapid and selective plan for engaging external stakeholders on these policy revisions, planning to engage external stakeholders for only four months. Four regional consultations are to occur between September–December 2004. The IFC will seek Board approval in February 2005. See www.ifc.org/policyreview for both draft policy papers.
121 civil society members claim that IFC consultation process is “seriously flawed”
On September 16, 121 civil society organizations sent a letter to World Bank President James Wolfensohn and IFC Managing Director Peter Woicke, highlighting the shortcomings of the IFC’s consultation process and its draft environmental and social performance standards. Civil society organizations noted a major shift from environmental and disclosure standards that are “mandatory and compliance-based…to a mainly discretionary approach.” The letter registered two major complaints: an inadequate timeframe and the lack of available materials. The civil society organizations demanded that IFC suspend the start of the consultation process on the Safeguard Policy Update until all relevant information had been made publicly available in all appropriate languages at least 30 days prior to the first regional consultation. They also argued that IFC extend substantially the period for consultation on the first draft consultation documents.
Launch of 'Penang Paper': A strategy report from 60 NGOs on the WB/IMF
The “60 Years of the World Bank and the IMF: Civil Society Strategy Meeting Summary Report” has been released, which is a product of the January 2004 gathering in Penang of over 60 civil society organizations to exchange analyses, experiences, strategies, and alternatives to the policies and practices of the Bretton Woods Institutions. Year 2004 marks the 60th anniversary of the World Bank and IMF, and the conference helped bring together civil society representatives from over 20 countries. The summary report distills some of the key themes and messages that emerged from the vibrant discussions in Penang and presents a common agenda for moving forward.
Indian NGOs reject proposed 2005-2008 World Bank Country Assistance Strategy for India
In a National Consultation held in New Delhi on August 7, several civil society organizations in India rejected the World Bank's draft Country Assistance Strategy (CAS) for 2005 to 2008. These organizations, representing major national alliances, rejected the CAS on the basis that the drafting process lacked transparency and adequate consultation from both Indian Parliament and the State Legislatures, and that lending is made conditional on the privatization and "reform" of key sectors. The proposed CAS, which sets an upper IBRD lending ceiling of $2.15 billion, calls for expanded Bank support for infrastructure projects, which may include large hydropower projects. Extensive state reforms, including large-scale privatization in power and agriculture, are also required of the Indian government. Noting the lack of national debate on the strategy, the National Consultation called on the Bank to withdraw the draft and re-engage in extensive consultations with civil society.
III. MDB Country Strategy in Cambodia
Cambodia’s Poverty Reduction Strategy Paper (PRSP) 2003-2005
The basis for cooperation between the Cambodian Government and the World Bank is its Poverty Reduction Strategy Paper (PRSP), which was prepared by the Government in December 2002. The PRSP is based on Prime Minister Hun Sen’s “Triangular Strategy,” which has three components: (i) building of peace and security; ii) full integration into regional and international relations; and iii) promotion of economic and social development programs. The document outlines several crucial priority poverty reduction action plans, including the expansion of job opportunities, rural development and the maintenance of macroeconomic stability through improved governance. The Government estimates that the Action Plans will cost $1.5 billion, of which $1.08 billion is to come from Official Development Assistance (ODA). It is envisioned that a new Socio-Economic Development Plan shall be prepared and merged with the corresponding PRSP in 2005.
World Bank Cambodia Country Assistance Strategy
Since 1992, the World Bank has provided more than $567 million in technical assistance and loans to Cambodia. There are currently 16 active WB projects with a net amount of $326 million. The World Bank periodically develops a Country Assistance Strategy (CAS) to outline its plan of investment to aid the implementation of a country’s PSRP. The CAS determines lending levels, operations and economic and sector research that it will set over a subsequent 1 to 5 year period. The current CAS was prepared in 2000, and a new CAS for 2004-2007 has yet to be finalized. The new CAS is said to focus strongly on improving governance, an issue that the Bank believes to be the “key obstacle” to growth in Cambodia. The 2000 CAS hoped to build on Cambodia’s newly found peace and stability and focused primarily on improving Cambodia’s governing institutions, fiscal discipline, anti-corruption measures and regulatory reforms. The three broad long-term objectives were (i) better governance; (ii) greater access for the poor to basic social services and (iii) a policy environment conducive to private sector growth. A base case IDA lending program of $270 million was envisaged.
ADB Country and Strategy Program for Cambodia
There are currently 21 active ADB loans worth about $433 million, and 18 proposed projects. During 2003-2006, ADB is expected to provide lending products of 17 loans for about $338 million, averaging $85 million a year. The latest Country and Strategy Program Update (2004-2006) maintains three priority areas: rural economic development, human resources development and private sector development. It maintains the focus on ten major sectors, including water resources, environmental management, education, health, roads, power, and the financial sector. Governance is increasingly seen as the most pressing cross-cutting issue in Cambodian economic development and many efforts have been made to promote legislative reforms, including the implementation of an anti-corruption bill. A new CSP is expected to be finalized soon. To view ADB’s Country Assistance Program Evaluation for Cambodia, which includes information on past and present projects, please see:
http://www.adb.org/Documents/CAPEs/CAM/CAPE_CAM_Jan_2004.pdf
IV. Active and Planned MDB Investments by Sector: Summary Tables
Active and Planned MDB Investments by Sector: Summary Tables
V. Tools for Civil Society
World Bank Email Updates
The World Bank periodically sends out regional updates to subscribers through email. These updates include information on recently approved projects, publications, and other major initiatives in that particular region. Visit http://www.worldbank.org/regionalupdates to subscribe to the East Asia and Pacific Regional Update.
Resource Book for Civil Society on Multilateral Development Banks and Burma
This Bank Information Center Resource Book helps those working toward democracy in Burma to learn about MDBs, so that as the MDBs start to operate fully in Burma, they can work to ensure that sustainable development and good governance are incorporated into MDB operations. To access the Resource Book, please visit http://www.bicusa.org/bicusa/issues/misc_resources/1629.php.
Bank Information Center Toolkits for Activists
BIC’s Toolkits are a series of fact sheets that describe the structure, functions, policies, and procedures of the World Bank Group. The Toolkits are intended to support NGOs, grassroots social movements, and other civil society organizations in their efforts to monitor and influence World Bank-financed projects and environmental and social policies. To view the toolkits visit: http://www.bicusa.org/bicusa/issues/misc_resources/292.php
Toolkits on the Asian Development Bank are currently under preparation and will be available in November 2004.