Contacts: In Washington: Mohamad Al-Arief, (202) 458-5964 Malarief@worldbank.org
In Cambodia: Kimberly Versak, 66-2686-8324; mobile: 66-(0)-1875-5064 kversak@worldbank.org Phnom Penh, June 22, 2006 -- This update is part of a series of regular updates on the World Bank’s program in Cambodia, following earlier statements on May 28, June 4, June 6, and June 18, 2006. Further Misprocurement Declared Further to details provided on June 18 regarding 30 contracts in three of the seven projects investigated by the World Bank’s Department of Institutional Integrity (INT), the Bank has now completed its detailed review of the contracts under the remaining four projects: Agricultural Productivity Improvement - APIP, Flood Emergency Rehabilitation - FERP, Forestry Concession Management and Pilot – FCMCPP, and Biodiversity and Protected Areas and Management - BPAMP. APIP, FERP and FCMPP have already closed, and BPAMP will close at the end of this year. Under the Agricultural Productivity project, the Bank found conflict of interest in one contract and corruption in three other contracts. Under the Flood project, the Bank found nine contracts affected by fraud, collusion and corruption. Misprocurement was already declared last year on the Forestry project; on the last project – Biodiversity Management and Protection – while investigations found strong indicators of corruption, in the majority of cases there is insufficient evidence at this time to warrant a declaration of misprocurement. Therefore, no further action has been taken at this time on the Biodiversity project. The total value of these 43 contracts – 13 this week and 30 last week – is $11.9 million. In addition to cancelling these contracts, the World Bank is seeking repayment of the money that has been disbursed against these contracts – this amount has not been calculated and confirmed yet. Further actions with respect to sanctions against specific companies and individuals will be explored according to Bank sanctions procedures. Sanctions including debarment from participation in future World Bank-financed projects are all publicly announced, as happened in the case of the Cambodia Demobilization and Reintegration project in November 2004. (www.worldbank.org/integrity “Press Releases”). Action Plans to Lift Suspension As indicated on June 6, 2006, the World Bank has suspended disbursements on three ongoing projects – Land Management and Administration Project (LMAP), Provincial and Peri-Urban Water Supply and Sanitation Project (PPWSP), Provincial and Rural Infrastructure Project (PRIP). Each project suspension would be lifted after the Government has successfully implemented an Action Plan, established by the World Bank after consultation with the Government, which introduces necessary remedial measures designed to reduce opportunities for abuses, minimize fiduciary risks, and ensure strong future monitoring and supervision. Government ministries have held technical discussions with the World Bank on actions necessary to lift the suspension on two of the three suspended projects, LMAP and PPWSP. In the coming weeks, the Bank hopes to initiate discussions on the Action Plan for the PRIP and to also have broader discussions with the Ministry of Economy and Finance (MEF) on each of the Plans. Before any new project in the same sector could be considered for possible World Bank support, it will be important that the Government is able to demonstrate a significant track record of performance with respect to the implementation of these action plans. Because all three of these projects contribute to growth and poverty reduction, the World Bank Country Assistance Strategy envisages continued involvement in the sectors if there is a track record of satisfactory implementation. Suspension of Projects – the Bridges Regarding the media story of June 21 about the halted construction of two bridges near Sala Visai village, the World Bank would like to confirm that the contracts for the construction of two bridges, 24 meters and 30 meters, were not misprocured and were given an exemption from suspension. The bridges are seen as critical infrastructure providing access to basic public services such as hospitals especially during the rainy season. For these reasons, the World Bank communicated this exemption to the project team in the initial letter of suspension on June 6, 2006 and is following up with project officials this week to ensure that this construction goes ahead. Government investigations The World Bank reiterates that it has sufficiently briefed the Government on the results of the investigations into these seven projects and that the evidence and information given – including on the specific contracts, the companies involved and the nature of the problem that occurred – will be of great help to the Government as it moves ahead with its own investigation. As stated on June 18, the one piece of information which the Bank cannot provide are the names of witnesses, as confidentiality was promised to them as part of the investigation process, per World Bank policies. The World Bank and other donors welcome the Prime Minister’s decision to carry out a thorough and credible investigation and stand ready to assist with it. The World Bank team shared with Government the types of corrupt practices found during the investigation process in Cambodia, including: solicitation and acceptance of bribes – sometimes as a condition for permitting companies to participate in bidding; rigging of bids for construction contracts; manipulation of procurement; fraudulent bid securities, price fixing and collusion to manipulate tenders, inflate bid prices and fix the outcomes of competitive procurement procedures; and submission of fraudulent bids by unqualified bidders – who misrepresented both their financial statements and prior experience. This is the kind of corruption that caused ‘irregularities’ in the project contracts – and the reason for the declarations of misprocurement and the suspension of the projects. These projects are, as the World Bank has said repeatedly, important interventions in the fight against poverty and important for helping Cambodian people. Follow-up investigation by the Government is critical so that the nature of the causes of the problems and pattern of abuses can be better understood, that the appropriate people can be held accountable for their actions, and that innocent people are not blamed unfairly. Importantly, the Government should follow the appropriate legal and judicial procedures for their investigation. Issue of World Bank Staff The World Bank reiterates that there is no evidence to establish wrongdoing on the part of World Bank staff. World Bank staff do, as part of their jobs, provide “no objections” for most contracts, but fraud or misinformation or collusion often can be difficult to detect in the normal course of supervision, which is why enhanced oversight through exercises such as the Fiduciary Reviews and INT investigations are so important. They aim to identify weaknesses in systems and procedures and develop measures to fix those problems. - | 
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