Defiance Greets World Bank’s Funding Freeze

We can survive without it, government official says

Government officials yesterday dismissed the World Bank’s re­cently revealed decision to freeze funding for new projects in Cam­bodia to protest a Phnom Penh real estate project that has forced thousand of families out of their homes.

A housing rights group closely following the evictions said it still held out little hope that the funding freeze would do much good for the 4,000 mostly poor families evicted or still facing eviction from the city’s Boeng Kak lake area.

“It affects us, but if they want to freeze [funding], they can freeze it,” said CPP lawmaker Cheam Yeap, chairman of the National Assem­bly’s Commission on Economy, Fi­nance, Banking and Audit.

“The [World Bank] money con­tributes to our development, but not having it won’t hurt our development,” Mr Yeap said.

Having closely guarded the decision for months, World Bank Country Director Annette Dixon on Monday confirmed that no projects in Cambodia had been ap­proved since December and that no new lending would occur until the Boeng Kak dispute is settled.

The Bank has yet to comment on the possible implications of the freeze. But according to the World Bank’s website, at least $128 million worth of proposed projects-one of which was scheduled for approval in March-have been pending since January.

On Monday, Council of Ministers spokesman Phay Siphan said relations with the Bank had soured long ago, claiming it was the government that had turned its back on the Bank over its onerous lending conditions.

Indeed, the World Bank and government have been down this road before-with mixed results.

In 2005, the government paid back the Bank $2.8 million it had misspent buying motorbikes for retiring soldiers as part of an ambitious $18.4 million plan to demobilize some 30,000 troops. The repayment was made only after the Bank threatened to pull all funding out of the country. The Bank had been asking the government to repay the misspent money for more than two years.

The government moved a little faster in 2006.

That year, the Finance Ministry suspended funding to three World Bank supported projects worth $64 million, including the land-titling scheme that bypassed Boeng Kak lake, when the Bank informed the ministry it had uncovered widespread procurement irregularities. The Bank again threatened to pull all country funding unless all the misappropriated money was paid back. A month later, the government agreed to pay back $7.6 million.

Though the government ultimately returned the funds on both occasions, punishment of the individuals involved was conspicuously lacking.

This time, the Bank may have an even harder time getting its way.

For one thing, officials are accepting no fault in the Boeng Kak land case.

On the contrary, they have blasted the World Bank for setting unreasonable conditions for its assistance. For another, what the Bank is asking for is not so clear-cut as a simple return of funds. In the brief statement it released Monday evening, the Bank said it would not approve any new loans “until an agreement is reached with the residents” of Boeng Kak. There was no mention of what that agreement should look like.

Finally, the government may no longer have to depend on the World Bank as much as it used to.

Mr Yeap, the CPP lawmaker, suggested as much.

“We will ask others who have helped us to fund us again. We will take the frozen projects and ask them if they can help, like Korea, China, Japan, the European Union and international committees.”

China recently became the country’s largest foreign investor, and Prime Minister Hun Sen himself has-very often and very publicly-praised its habit of talking little, but doing much – and without the reform conditions required of the country’s traditional donors.

The real estate project at the heart of the latest Bank funding freeze may offer a telling example.

Erdos Hong Jun Investment Co, the Chinese firm backing the Boeng Kak project, plans to invest $2.17 billion in Cambodia, according to documents obtained from the government’s foreign investment board. Erdos’ funding alone dwarfs the $128 million in World Bank funds now on hold.

Mr Yeap suggested that Cambodia’s future might look something like its past.

“We did not have them [the World Bank] before,” he said, “but we still survived.”

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