CAMBODIA: World Bank Freezes Funds to Protest Corruption

By Marwaan Macan-Markar Reprint | | Print |

Marwaan Macan-Markar

BANGKOK, Jun 7 2006 (IPS) - If the Cambodian government of Prime Minister Hun Sen was hoping to drag its feet on cracking down on entrenched corruption in the country, then the World Bank is casting itself as a stumbling block.

In an unequivocal message, the Bank confirmed this week it was freezing funds to three ongoing programmes in the South-east Asian country due to “sufficient evidence to substantiate allegations of fraud and corruption”.

The three projects, worth nearly 7.6 million U.S. dollars of the Bank’s money, are for a land management and administration programme, provincial rural and infrastructure development and a provincial and “peri-urban” water supply and sanitation scheme.

In its ruling, the Bank called the decision a “difficult” one, since the projects have “a development impact (and) all three aim to assist some of the poorest people in Cambodia”.

The corruption-riddled land management project, for instance, has enabled some 400,000 people to receive land titles, “adding to their income security”. The water and sanitation scheme has enabled 30 towns and communities to “have access to safe water and improved sanitation services”, added the Bank.

The punitive measures will not be permanent. “Suspension (of funds) is a remedial measure available under all World Bank agreements,” says Kimberly Versak, Bank spokesperson in Cambodia, Laos and Thailand. “Each suspension would be lifted after the government has implemented an action plan, agreed with the World Bank, to introduce new measures for each of the three projects.”

The Bank’s move to confront the graft that is ubiquitous in Cambodia – giving rise to a common view that “everybody is on the take” – is receiving glowing endorsements from economists and sections of the country’s civil society. “It is a timely move. This is the role of donor countries and agencies,” Sok Hach, director of the Economic Institute of Cambodia, an independent think tank in Phnom Penh, told IPS.

“They have to make sure that the funds reach the people. Others should follow the World Bank’s decision,” said Hach.

Similar measures by other donors will help educate the Cambodian people that they have a stake in such funds, not just the government, he added. “The government uses this public money as its own money and keeps the people in the dark about its relevance to them.”

Cambodia was ranked 131 out of 158 countries by the global anti-graft watchdog Transparency International in its 2005 corruption index. Land grabbing, illegal logging and kickbacks have been the more obvious forms of corruption in a country of 13.3 million, 35 percent of whom live in abject poverty on less than 0.44 U.S. cents per day.

Furthermore, according to a 2004 study by the U.S. Agency for International Development, close to 500 million U.S. dollars are lost annually to corruption in Cambodia.

While few expect a political fall out, given the majority that Hun Sen’s ruling Cambodia People’s Party (CPP) enjoys in the 123-member National Assembly, the Bank’s decision could be troubling in another way – that international donors will act if Phnom Penh reneges on its promises.

In March, the country’s major aid donors, including the Bank, the Asian Development Bank and the governments of Japan and the United States, stressed that development assistance would be given on condition that the Hun Sen administration attacked corruption.

Three major conditions laid down for aid during the current year were the introduction of a comprehensive anti-corruption law, judicial reform across the board and a campaign to control the destruction of the country’s natural resources.

In agreeing to those conditions, Phnom Penh received 600 million U.S. dollars in aid, much more than the Cambodian government had requested – 513 million U.S. dollars.

It was not the first time the donors called for anti-corruption measures. The consultative group, as they are known, made a similar case against widespread graft at a December 2004 meeting. The Hun Sen administration, however, has still to introduce an anti-corruption law in the legislature for debate and approval.

The crackdown in Cambodia is part of a global anti-graft drive the Bank is pursuing to end the trend of dishonesty in government. “It requires a long-term strategy that systematically and progressively attacks the problem, and it requires the commitment and participation of government, citizens and the private sector,” said World Bank President Paul Wolfowitz during an April visit to Indonesia.

Yet not everybody is impressed by the Bank’s graft busting in Cambodia in the wake of the role the international community played to help rebuild the country after a peace accord in 1991 brought to an end over a decade of war and brutality.

“The donors and the international community created a cowboy capitalist economy in the name of reconstruction,” Shalmali Guttal, senior researcher at regional think tank Focus on the Global South, said in an interview. “A corruption scandal like this in a World Bank project in a poor country like Cambodia with a completely unregulated economy is only to be expected.”

“The Cambodian people are fed up with corruption and the fight against it is good, but how far is the Bank prepared to go?” she added. “Rather than be selective, the Bank should open up every infrastructure project it has supported for third-party scrutiny. That is transparency.”

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