During 2005, the independent Inspection Panel of the World Bank received a request from the Non-Governmental Organization (NGO) Forum on Cambodia; acting as a representative of affected local communities living in the Preah Vihear, Stung Treng and Odder Menchay areas of Cambodia (which were also the concession areas of the Chendar Plywood, Samraong Wood, Everbright, and Pheapimex companies), to investigate the $US 5 million Forest Concession Management and Control Pilot Project (FCMCPP). The Inspection Panel investigated their complaints and issued its final report on March 30, 2006, raising several points on the project’s planning and implementation, and on whether the project had drifted from its objectives and from complying with the World Bank’s safeguard policies. The Bank Management provided its response on May 16, 2006, along with information on lessons learned and proposed actions for the future. Here is a summary of the main issues raised by the Panel, the Bank Management’s response, and the Bank’s current action plan in Cambodia ’s forestry sector. The Forest Concession Management and Control Project aimed to demonstrate and improve the effectiveness of a comprehensive set of forest management and operational guidelines, and control procedures in forest concession areas. The Project also aimed to establish an effective forest crime monitoring and prevention capability. The Project was approved on June 5, 2000 and closed on December 31, 2005. More (description)
Issue 1: Project Concept and Design The Panel commended the Bank for engaging in forestry-related work in Cambodia and recognized the risks involved. However, it stated that in focusing on the technical and financial aspect of concessions, the Bank neglected to pay attention to other important factors such as livelihood and cultural assets, interest of local communities and Indigenous Peoples, while planning the Project. In particular, it noted that the FCMCPP did not seem to take on the key objective of using forests to reduce poverty. Bank Management Response: Management agreed that engaging in Cambodia ’s forestry sector entailed considerable risks, and explained the role of the FCMCPP, and the reasons for the Bank’s engagement in Cambodia ’s forestry sector. It highlighted that the Project came out of a Government request for Bank assistance in concession management as part of an urgent effort to address overexploitation of timber resources and illegal logging. While the Project was focused on concession management and review, the Bank was continually engaged with its partners on broader forestry issues, such as the livelihoods of forest communities; the environmental, social, and cultural aspects of forests; and reform in the sector.
Since the Project is closed, no action is possible under the FCMCPP. More | Action Plan - Lessons Learned:
· The Bank is working in partnership with other partners from civil society and the donor community to address issues in the forest sector in an integrated and participatory manner. · Agreement has been reached among a core group of donors on a strategy for integrated natural resources management approaches that are consistent with Government policy.
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Issue 2: Lending Instrument
The Panel stated that the main aim of the Learning and Innovation Loan used for the FCMCPP was to support a legal and regulatory program under which long-term concessions would be granted. However, the Project could not be easily regarded as a “learning and hypothesis-testing” exercise and elements conditioning the use of a Learning and Innovation Loan (LIL) instrument did not apply convincingly to the Project. Furthermore, LILs may not be appropriate when policy framework is poor and Borrower commitment and ownership especially weak. Since these two conditions were present when the Project was being designed, the Panel concluded that the LIL was not the appropriate instrument to use. Bank Management Response: Management considered that, given the risks, an LIL would allow the Bank to engage in the forestry sector in Cambodia, learn valuable lessons about forestry management, and still allow for a possible exit option. The Bank thought the LIL was an appropriate instrument to use to address the Government’s request for urgent Bank assistance in forestry concession management, allowing the Bank to engage in the regulatory aspects of the forestry sector without undertaking a riskier investment operation.
Since the Project is closed, no action is possible under the FCMCPP. More | Action Plan - Lessons Learned:
· In May 2005, the Board endorsed a new Country Assistance Strategy (CAS) for CambodCambodia in which the focus of the Bank’s work is on governance, with specific efforts to improve the management of natural resources, especially land and forests. · Building on the strategy outlined in the CAS as well as the experience with the FCMCPP, the Bank’s November 2005 letter to the RGC outlined a strategy for going forward in the forest sector, including concession management, monitoring, and a range of forest management options.
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Issue 3: Project Harm from Logging The Panel noted that the Project did not directly cause the damages from the large scale unsustainable logging in Cambodia over the past decade. Indeed the Project aimed to ameliorate the extent of damage done, and the Panel commended this intention. However, it is arguable whether and to what extent the Project had a positive impact on what actually happened in the field. Bank Management Response: Management fully agreed that the Project did not directly cause the damages from large scale unsustainable logging in Cambodia over the past decade. On the contrary, during the implementation of the Project, the RGC agreed to suspend concession logging from January 1, 2002 until concessionaires had submitted satisfactory plans. Furthermore, the Bank’s engagement has helped reduce the number of companies and the area under concession while working to strengthen the concession regulatory system. More
| Action Plan - Lessons Learned:
- Management will continue to press the RGC to apply the full weight of Cambodian law to prevent and control these activities.
- The Bank has also been actively involved in efforts to strengthen forest crime monitoring and prevention.
- A Forest Law Enforcement and Governance assessment mission reviewed in April 2006 the performance of the Independent Monitor and various government agencies responsible for forest crime monitoring and suppression.
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Issue 4: Identification and Protection of Forests of High Ecological Value The Prey Long forest is one of the few remaining areas of relatively undisturbed dense semi-evergreen lowland forest in Indo-Chinese province of the Indo-Malayan Realm. While the Bank did not finance harvesting of high value forests, it did not ensure that potential the high ecological value of the Prey Long forest was explicitly identified in the early years of the Project and taken into consideration during the development of relevant Strategic Forest Management Plans (SFMPs). Bank Management Response: Management agreed that the Project did not, nor was it designed to, finance the harvesting of timber. No concession was approved under the Project for the Prey Long forest areas nor was any new concession proposed. While the Bank does not underestimate the ecological value of the Prey Long, it is important to note that this area is not now, nor was it at any time prior to the review and approval of the Project, part of Cambodia’s declared system of Protected Areas that was established in 1993 to protect critical natural habitats at the macro landscape level.
Since the Project did not support logging or any management plan for logging in the Prey Long, there is no corrective action to be taken. More | Action Plan - Lessons Learned:
- Management recognizes that the Bank should have been better documented about areas of high ecological importance, and should have performed an environmental review of the Project.
- The Bank will take steps to ensure that such approaches as landscape level biodiversity management, best management practices for Protected Areas, and information-sharing (e.g., mapping, gap analysis, review of the Protected Areas system) are introduced in projects where the Bank is supporting forest management and biodiversity conservation.
- The Bank will seek opportunities in the future to work with the RGC, other stakeholders involved in biological diversity conservation in Cambodia, and, especially, conservation NGOs in the further development of approaches to analyze and manage biodiversity and areas of high ecological value that lie outside the officially designated Protected Areas system.
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Issue 5: Need for an Environmental Assessment The Panel stated that the Bank should have considered alternative approaches and measures to reduce or avoid the extremely negative impacts logging can have on natural habitats of world class value, and most importantly on very poor and vulnerable rural communities and indigenous peoples. The Bank should have included an appropriate analysis of environmental issues surrounding the Project in the Project Appraisal Document (PAD) and other formulation documents. Bank Management Response: The Bank was aware of the serious environmental and social implications of logging operations before the Project was approved, and agreed that logging can lead to high ecological and social impacts if carried out in the absence of adequate controls, procedures and review processes. The Project aimed to address these by ensuring that site-specific forest harvesting proposals or specific forest management plans were prepared to assess environmental and social impacts.
Since the Project is now closed, there is no specific corrective action that can be taken. More
Action Plan - Lessons Learned:
- Management acknowledges that the PAD could have made better use of ongoing assessments of biodiversity conservation efforts in Cambodia.
- Furthermore, explained in more detail in the next issue below, the Bank has designed a plan to follow-up on environmental screening and classification in technical assistance projects in Cambodia.
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Issue 6: Environmental Categorization of the Project
Given the very serious environmental and social impacts associated with concession management and logging activities, and therefore with the Project, the FCMCPP should have been placed in Category A, and a full Environmental Assessment should have been carried out. By neglecting to do this, the Bank did not comply with the Bank’s Environmental Assessment Policy. Bank Management Response: Management believes that the decision to classify this project as a B project was appropriate and consistent with Bank practice. Such decisions are judgment calls that are guided by Bank policy but also by current best practice. The Project was rated a category B because it did support direct physical interventions on the ground. The Project’s intent was to provide technical assistance to the RGC to improve planning and inventory management systems; strengthen its capacity to regulate and control concessions; and prevent and monitor forest crime. If implemented properly, the Project would have led to significant environmental improvements in the management of the forest estate. The categorization of B was fully consistent with the Bank-wide rating of technical assistance projects and with the rating of LIL’s at the time.
No project-specific action is proposed at this point since the Project is closed. More
Action Plan - Lessons Learned:
- Management acknowledged that relevant information on the important environmental issues could have been collected and examined during the preparation phase of the Project and, more importantly, additional opportunities for public debate on the environmental and social implications of the Project could have been built into the preparation period of FCMCPP.
- Projects of this type would also benefit from the application of analytical tools, such as Strategic Environmental Assessments (SEA), as an alternative to project level impact assessments.
- The World Bank is in the process of reviewing and updating the “Guidelines for Environmental Screening and Classification” issued by the Quality Assurance and Compliance Unit (QACU) in 2005 to provide additional guidance on classification.
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Issue 7: Impacts on Local People of Illegal Logging of Resin Trees The Panel raised the importance of resin harvesting for many rural Cambodians in its Report. Illegal logging of resin trees has had major negative consequences on local communities, in particular those represented by the NGO Forum on Cambodia. The Bank was frequently made aware of numerous complaints of harms to local communities due to the cutting of resin trees. The Bank should have considered and investigated these problems, and designed a proper environmental assessment which could have been subject of a participatory survey and inventory at the early stage of the Project. The Bank’s negligence to do so does not comply with the Bank’s Environmental Assessment and Forestry Policies. Bank Management Response: The Bank team was well aware of the importance of resin trees to local communities, and of the adverse effects these people endured prior to the Project by forest concession practices such as the logging of resin trees, or the restriction to access resin trees by concessionaires. The Bank was however not informed of the specific complaint letter which led to the Request for Inspection, or any other specific complaints. Management fully acknowledged that resin trees provide critical cash elements to communities who are predominantly subsistence dependent and stated that the Project in itself had no impact on resin tree tappers, since the FCMCPP did not finance any forest operations. However, the Project, through the partial influence on the logging ban, and the attention to the issue created by the Project did prevent continued destruction of this source of livelihood. More
Action Plan - Lessons Learned:
- The issue of resin trees is addressed in the draft Community Consultation Guidelines, which the Bank has offered to help the RGC finalize.
- The Bank and the RGC will also continue to discuss issues and measures concerning legal framework for indigenous and customary rights over forest resources.
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Issue 8: Consultations with Affected People during Project Preparation The Bank’s decision to postpone active social assessment and consultation procedures with local affected communities, and wait until concessionaires had fully prepared their Environment and Social Impact Assessments (ESIA) was not consistent with the Bank’s Environmental Assessment, Natural Habitats, and Indigenous Peoples policies, which require early consultations and/or surveys in the preparation phase of the Project. Bank Management Response: Management agreed that more independent, project-specific consultations during the preparation phase of the Project with local communities would have been very useful. This would have helped clarify opportunities and challenges associated with the implementation of the RGC’s proposed system, facilitated a more in-depth understanding of Indigenous Peoples’ concerns, and identified possible measures to avoid or mitigate potential adverse social impacts and enhance benefits. More
Action Plan - Lessons Learned:
- The Bank recognized that more should have been done to ensure appropriate consultations with Indigenous Peoples for site-specific concession planning.
- However, Management also noted that the Bank was concerned about the quality and impact of consultations undertaken by concessionaires in the course of their Forestry plan preparation. Indeed, consultations at various levels and with a wide spectrum of stakeholders have taken place because of the Bank’s efforts to improve the RGC’s management and control over the concession system.
- The Bank has insisted that consultations take place during all levels of planning to fully identify and protect community resources.
- The Bank has also participated actively in efforts to expand and improve the quality and impact of consultations related to forestry, for example, by facilitating the participation of NGOs in discussions on forestry law and the community forestry sub-decree.
- The Bank is also working with the RGC to the Community Consultation Guidelines.
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Issue 9: Preparation of an Indigenous Peoples Development Plan (IPDP) Indigenous peoples live in the heart of lands subject to concessions. Forests comprise their cultural and spiritual home and are the basis of their economic identity. The Panel noted Management’s acknowledgement that a framework IPDP would have been more appropriate during the design phase of the Project, and should have been prepared for this Project. Many of the prerequisites for an IPDP are lacking. Had they been developed, many of the problems that have afflicted the Project would have been recognized in advance and might have been corrected. Bank Management Response: Management agreed that the Bank was not in full compliance with the Bank’s policy on Indigenous Peoples and that further discussions on how to address this issue should have taken place during the preparation of the Project. Indigenous Peoples living in and around concessions areas were adversely affected, by de facto restriction of access, by indiscriminate logging in sacred forest, and by logging of resin trees. All of this was known, and the Project’s goal was to stop the anarchical and abusive ways of the concessionaires or their sub-contractors through the process of preparing SFMPs and ESIAs. During the implementation of the Project, a consultant was hired to improve the consultation guidelines, including provisions in line with the Bank’s policy on Indigenous Peoples. However, the Project did not prepare separate provisions for indigenous peoples. In hindsight, this should have been done, and should also have covered Khmer remote and forest dependent communities, who exhibit characteristics similar to those of Indigenous communities, such as a close and spiritual attachment to the natural resources on which they depend.
Since the Project is closed, no action is possible under the FCMCPP.
Action Plan - Lessons Learned:
- Management acknowledged that undertaking screening studies and a framework IPDP would have been the appropriate approach. Unfortunately, such an instrument was not explicitly available under the Bank’s policy on Indigenous Peoples, although it had become practice in the Bank to deal with more process oriented projects by preparing frameworks (both for Indigenous Peoples and resettlement).
- In the continued dialogue regarding the forest sector, the Bank has and is addressing Indigenous Peoples and broader social issues as a primary concern. The Bank has recognized the urgency of securing land and resource rights for Indigenous Peoples, make a strong and immediate effort (including providing technical assistance) in collaboration with other donors and Government under the Technical Working Group (TWG) for Land, to finalize, as a matter of priority, the legal and enabling implementing procedures required for making the provisions of the Land Law a reality for indigenous communities in Cambodia.
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Issue 10: Cultural Property - Spirit Forests and Archeological Sites Spirit forests are recognized throughout Cambodia, and have the status of protected areas under the Bank’s Cultural Property Policy. The Panel found that none of the means of handling the issue of spirit forests, provided for in the Bank policy, was carried out as part of the Project. To leave determinations about spirit forests to concessionaires is not consistent with the Bank’s Policy. Bank Management Response: Management acknowledged that the Bank was not in full compliance with the Cultural Property Policy and that more up-front work could have facilitated improved attention to these issues during the implementation of the FCMCPP. The concessionaires were and still are bound by national legislation related to spirit forest and archaeological “chance finds” in their operations, such as the Sub-Decree on Forest Concession Management. During the implementation of the Project, when it became evident that the concessionaires’ SFMPs and ESIAs did not meet the minimum standards of community consultation guidelines, a consultant was hired to prepare detailed, step-by-step, Community Consultation Guidelines and standards. Other Guidelines developed under the Project called for identification and designation of Special Management Areas and specifically refer to sacred groves, spirit forests and archaeological sites. More
Action Plan - Lessons Learned:
- The finalized Community Consultation Guidelines will explicitly reference the legal framework in Cambodia and will provide guidance as to which appropriate authorities to inform when archaeological “chance finds” occur.
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Issue 11: Technical Assistance Provided The Panel did not find evidence that technical assistance was provided directly to companies involved in concessions. On the contrary, consistent with the Bank’s Project Supervision Policy, the Bank focused its technical assistance on building the capacity of the Forest Administration to oversee the development of SFMPs by companies. Bank Management Response: Management agreed that the Bank team did not provide any technical assistance to the companies involved in concessions.
No action to be taken.
Issue 12: Review of SFMPs and ESIAs
Despite Management’s efforts to address problems that arose, significant problems persisted in the reviews and drafts of SFMPs and ESIAs. These included: neglect to disqualify companies who had engaged in past illegal logging practices; disincentive to identify and remove spirit forests from areas proposed for logging; conflict of interest issues; and inclusion of resin trees in proposed annual allowable cuts. The Panel recognized that some Management and Staff consistently attempted to press the RGC to improve the planning process and to press concessionaires to conform to the various guidelines for preparing SFMPs. However, the Bank’s supervision of the planning and development of SFMPs and ESIAs was inadequate given the magnitude of the problems caused by poor SFMPs and ESIAs. Bank Management Response: Management agreed that there were several problems found in the concessionaires’ SFMPs and ESIAs, and that many of them were not consistent with or did not follow the new regulations and consultation guidelines established by the Bank and RGC. However, it emphasized that the Bank was actively and consistently involved in advising the RGC on the planning and development of SFMPs and ESIAs, and later co-financed an independent review of the SFMPs and shared the results of this review with the Ministry of Agriculture, Forestry, and Fisheries (MAFF), concessionaires, other donors and civil society. After the review, the Bank specifically advised the RGC to demand appropriate performance from concessionaires, and encouraged it to enforce relevant Cambodian laws, to improve the situation.
No project-specific action is proposed at this point since the FCMCPP is closed.
Action Plan - Lessons Learned:
- In dialogue with Government counterparts, the Bank will continue to press for appropriate government action on concession reform and robust planning and management of post-concession areas.
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Issue 13: Suspension of Forest Concession Activities The RGC’s decision to stop issuing logging permits to the remaining concession companies, until a new forest concession management plan consistent with laws and regulations was approved, marked a significant turning point for Cambodia. The Bank’s participation in discussions on how to transport already cut logs to processing plants was appropriate and consistent with the Bank’s policies. However, the Bank could have supervised the RGC’s actions concerning the ban of transporting logs in a more effective way to discover whether the latter implemented the Project with due diligence or not. Bank Management Response: Management noted that the demand for better concession management plans and the suspension of logging operations gave much needed incentive for concessionaires to comply with their management planning obligations, and simultaneously reduced the scale of both legal and illegal logging associated with the concessions. The suspension of sawmilling operations by concessionaires had a reinforcing effect. Management has also strongly expressed its concerns about the fate of forests and land resources following the cancellation of concessions, and the need to establish a robust system for planning, management, and protection of post-concession areas in several discussions with the RGC. Furthermore, Management noted that activities concerning the transportation of felled logs were carried out under the oversight of the Independent Monitor and no problems were reported.
No action to be taken. Issue 14: Independent Monitoring The Panel noted the importance of having independent monitoring, which was one of the Project’s objectives. However, it was concerned that the Terms of Reference of the Monitor, which prevented SGS from initiating independent field investigations and demanded that its report be verified by the RGC, conflicted with the objective stated in the Project Appraisal Document (PAD) to have “an independent monitor to provide a check on the accuracy of Government reporting.” The Panel observed that information about SGS was readily available from various sources at the time that SGS was appointed. However, the Panel could not find in the Project documents evaluation or discussion on whether SGS fulfilled criteria related to independence for independent forest monitoring. This is not consistent with the Bank’s Project Supervision Policy. Bank Management Response: Management agreed that independent monitoring was important. A Bank mission reviewed the forest law enforcement and governance situation in Cambodia in March 2006. This mission examined the TOR for the Independent Monitor and recommended changes to ensure greater independence, and new reporting arrangements to ensure increased transparency and avoid conflict of interest. The decision to select SGS as the Independent Monitor was made by the RGC, who was executing the project. The RGC selected SGS through an international competitive process. The Bank had issued its no objections to the TOR for the Independent Monitor, the shortlist, and the bid evaluation report.
Action Plan - Lessons Learned:
- Management is currently reviewing the performance and independence of the Independent Monitor, including the process by which monitors are contracted.
- The role of an independent monitor is particularly demanding. Management will continue to work with other donors to maintain and improve the functioning of an independent monitor in Cambodia.
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Issue 15: Supervision Structures The Panel noted that the Project focused too narrowly on issues and therefore did not see the big picture. The multi-level nature of the Management structure appears to not have functioned effectively in engaging skills, expertise and oversight needed for a project of this nature. While supervising the Project, the Bank should have ensured that the unraveling of relationships that became apparent during the early years of the Project’s implementation was addressed explicitly and quickly. In particular, the Bank should have ensured that the Project had the capacity throughout its life to develop a broadly based constituency, embracing donors, Government and NGOs, to advance forest sector reform. However, the Panel appreciated Management’s efforts to identify lessons learned, and considered this a constructive step forward to promoting the effective design and implementation of development projects. Bank Management Response: Management agreed that more direct engagement in social aspects of forest management planning by Bank staff could have improved the outcomes of the Project. Such an approach would have helped to address a number of the issues raised in the Request and to maintain broader support for the operation and the sectoral reform process. Although the Panel observed that relationships deteriorated during the implementation of the Project, Management believes that good faith efforts were made to maintain relationships and open communications with other partners throughout the Project period, although there were some strong differences of opinion among the stakeholders, including the Government counterparts, NGOs, and other donors, on the design of the Project and consultation processes.
No project-specific action is proposed at this point since the FCMCPP is closed. More
Action Plan - Lessons Learned:
- Management acknowledged that the entire forestry program should have been put together under a framework document to ensure coherence and consistency in approach. On the other hand, this may not have addressed all the problems encountered in the Project, given the very difficult environment in which the Bank was, and still is, operating.
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Issue 16: Concession Reform Twenty-six concessions, covering 6.5 million hectares, were cancelled prior to the beginning of the Project, and thirteen concessions, covering 2.7 million hectares, were current as of November 2005. Some observers claimed that almost all the concessions cancelled no longer had a significant volume of commercial timber attractive to concessionaires. Natural attrition has been taking place, and it is arguable whether the Project played a significant role in reducing the number of concessions. Bank Management Response: While it has not been without difficulties, the Bank’s engagement has helped to reduce the number of companies and the area under concession while working to strengthen the concession regulatory system. The Project helped to establish within the RGC the capacity to put in place regulations and procedures to prevent damage to the interests of forest-dependent communities. Furthermore, the Project also helped achieve disclosure and public comment requirements for the first time, and was clearly aimed at helping achieve a sustainable approach to forestry.
No project-specific action is proposed at this point since the FCMCPP is closed. More
Action Plan - Lessons Learned:
- The Bank, along with other donors, has been engaged in the dialogue on reducing the number of forest concession for nearly ten years. This has been a difficult process. In recent years, the stalled concession reform process has been a real concern to Management, and the Bank. In dialogue with Government counterparts, the Bank will continue to press for appropriate government action on concession reform and robust planning and management of post-concession areas.
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June 2006 | 
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