Cambodia has achieved great progress in the past decade, however, the three-fold transition that began in the late 1980s—from civil war to peace, from one-party rule to multi-party democracy, and from economic isolation to integration—has given rise to complex and often negative forms of state-society relationship and weak accountability for public resources. This has resulted in weak governance and high levels of corruption, documented, for example, in a number of indicators such as the “Governance Matters” Indicators produced by the World Bank, the Corruption Perception Index produced by Transparency International (TI); the Investment Climate indicators reproduced in World Development Indicators; and the Country Policy and Institutional Assessment (CPIA) ratings done by the World Bank. Cambodia’s government, civil society, and public alike recognize weak governance and high levels of corruption as a major impediments to lasting growth and poverty reduction. As a result, three years ago the World Bank focused its program in Cambodia on improving governance and fighting corruption. As part of this, the Bank has undertaken several high-profile analytical pieces that identified and publicized the extent and the nature of the problem of weak governance in Cambodia. These included the Integrated Fiduciary Assessment and Public Expenditure Review (IFAPER) in 2003; the Country Procurement Assessment Report (CPAR) in 2004; the Investment Climate Assessment (ICA) in 2004; and the Cambodia at a Crossroads report on strengthening accountability. These analytical pieces have been instrumental in advising Government to develop a comprehensive set of reform programs. The World Bank also developed, in partnership with the Asian Development Bank, DFID of the United Kingdom and the United Nations System, a new Country Assistance Strategy (2005-2008), endorsed by the World Bank’s Board last year which is based on a two-pronged approach: (1) supporting governance and anti-corruption reforms, particularly reducing the costs of doing business, improving management of natural resources, strengthening public financial management, and supporting decentralization and the demand-side aspects of governance; and (2) reducing the fiduciary risk for Bank-financed operations in Cambodia and more systematically in government systems. 1. Supporting Governance and Anti-Corruption Reforms: the current CAS focuses on assisting the Government in building long term institutions of reform in four areas that are deemed to be critical for higher growth and faster poverty reduction: - Promoting private sector development by reducing the costs of doing business—shortly after the CAS was endorsed by the Board, a $10 million IDA grant for Trade Facilitation and Competitiveness (FY05) to improve the business climate was approved and is now under implementation; and regular monitoring of impact through investment climate assessments will be carried out.
- Improving the management of natural resources, especially land and forests— the proposed program consists of a $10 million IDA grant for a Land Allocation for Social and Economic Development Project (scheduled for FY07) which would aim to provide land and/or greater security of tenure and agricultural services to the poor and landless. The World Bank has also been engaged in a Land Management and Administration project (LMAP), which aimed to reduce poverty by giving secure land ownership rights to families across the country, and establishing more efficient land administration institutions. The Bank’s work in improving the management of natural resources is also being complemented by analytical work on land, forestry and agrarian structure issues and aims to build consensus among all concerned stakeholders (government, donors, civil society, and communities) on the way forward.
- Strengthening public financial management— a $14 million IDA grant for a Public Financial Management and Accountability Project was approved by the World Bank’s Board of Executive Directors on June 27, 2006, and is seen as a key component of the Bank’s approach to helping improve governance and fight corruption. The project will help implement the first phase of a 10 year program of reforms in this area that is supported by 11 donors.
- Supporting decentralization and promoting citizen’s partnerships for better governance—the proposed program consists of three projects, one for supporting the supply of good governance at local levels and two for creating a stronger demand for good governance amongst the citizens of Cambodia. The supply side project will be a $30 million IDA grant for a Rural Investment and Local Governance Project II (RILGP II, FY08) that would strengthen commune level governments and would be a follow on to the current RILGP (approved in FY03). In addition, a $10 million IDA grant for Demand for Good Governance (DFGG) (FY07) will aim to catalyze and channel the demand for good governance in a manner that accelerates the pace of governance reforms and increases the likelihood of pro-poor outcomes from the implementation of the Government’s reform program. Another IDA Grant for $15 million for Empowerment of the Poor in Siem Riep Province will aim to improve the livelihoods of the poor by linking them to the tourism engine of growth in Siem Riep Province. The project work will be complemented by analytical work on creating a more enabling environment for civic engagement.
2. Reducing Fiduciary Risk As part of the efforts to reduce the fiduciary risk in Bank operations, a joint World Bank-Government Fiduciary Review was undertaken as an input into the preparations of the Country Assistance Strategy (CAS) to detect weaknesses in systems, help Government develop an action plan to address these, and reduce the opportunities for corruption. As a follow up to this, an investigation by the Bank's Institutional Integrity Department (INT) uncovered sufficient evidence to substantiate allegations of fraud and corruption in contracts – found in 49 contracts under 7 projects in our portfolio (4 on-going and 3 closed projects). Following detailed discussions, the World Bank has declared misprocurement on 43 contracts in 5 projects. The Government responded quickly to the results of the investigation – the Ministry of Economy and Finance (MEF) issued a letter of suspension on 3 of the 7 projects – Land Management and Administration, Provincial and Rural Infrastructure, and Provincial and Peri-Urban Water and Sanitation. They also announced their full commitment to an investigation, headed by MONASRI (Ministry of National Assembly Senate Relations Investigation), and to developing Action Plans for the 3 suspended projects to fix weaknesses and enable the valuable work of the projects to continue. The total value of contracts where misprocurement has been declared is approximately $11.9 million; the World Bank is seeking repayment of the money that has been disbursed against these contracts. In late July, the Government agreed to implement the Action Plans – which includes hiring of an international procurement agent for each of the 3 suspended projects (and has requested the Bank to extend this practice to all of the World Bank’s existing and future portfolio)– paving the way to lifting the project suspension once actions have been implemented. As the Government moves ahead with its own investigations, the Bank is seeking to balance its desire to ensure the public has access to information with the need to ensure an investigation is carried out with respect for confidentiality, where needed, and due diligence. The World Bank believes that transparency is a key ingredient to fighting corruption in Cambodia, and is working with Government, donors, and others in Cambodia to improve systems of accountability and transparency. Updated: September 2006 |
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