The government has returned $2.8 million in misused assistance to the World Bank, Finance Minister Keat Chhon said. The move comes just days after the international financial institution reportedly threatened to suspend all Cambodian credit if the sum was not repaid.
“I have solved the problem,” Keat Chhon told reporters on Wednesday in Phnom Penh. “We will establish who is right or wrong later.”
Keat Chhon explained that the $2.8 million had already been transferred to a World Bank account and was ready to be withdrawn.
The money was originally part of an $18.4 million World Bank package meant to assist a massive military demobilization project in Cambodia.
However, in 2003, the Bank declared misprocurement on a contract to provide motorbikes for the retiring soldiers and demanded the government repay $2.8 million in what it said were misappropriated funds.
Just before the demobilization program finally closed on Dec 31, the project’s task manager, Gillian Brown, said the World Bank was not concerned about the government’s commitment to repay the $2.8 million.
But this week, The Associated Press reported that the World Bank had sent two letters, one to Prime Minister Hun Sen and another to Keat Chhon, indicating that funding for the Bank’s projects—worth over $330 million—would be frozen if the government did not settle the demobilization issue.
“It was sad, Cambodia would not face the problem. It was because of governance,” Keat Chhon said. “So we have to have some discussion. If there is no discussion they (the World Bank) will regard us as being wrong.”
The finance minister said that further investigation into all of the involved parties—the World Bank, the government team and hired consultants—was necessary before anyone could be blamed for the alleged fraud.
He did, however, acknowledge that the government’s demobilization team, run by Council of Ministers Undersecretary of State Svay Sitha, had been careless.
Svay Sitha could not be reached for comment on Thursday.
“This is an experience, we want to build good governance so they will stop suspecting us of corruption,” Keat Chhon reiterated on Thursday. “We have to dare to put issues on the table, we should not hide information.”
Lao Mong Hay, legal expert at the Center for Social Development, also saw the scandal as an opportunity for reform.
“I would see it as a blow to our government in the international arena,” he said Wednesday, referring to reports of the World Bank threat to pull funds. “This could be a case in which the government could end the culture of impunity.”
Several observers said that if the World Bank had threatened to freeze its aid over an instance of corruption, other donors would soon follow its lead.
“The other donors, one after another, you know? They can take this as a precedent,” said Kang Chandararot, economist and director of the Cambodia Institute of Development Study.
Keat Chhon, however, said it was unlikely that international organizations would begin to withhold funds as a bargaining tool.
The matter is a relevant one, however, given that the government is currently in negotiations over another corruption scandal with a different international donor.
The UN’s World Food Program announced last year that donated rice had been diverted and sold for private gain in Cambodia.
Although the government has agreed to compensate the WFP for its loss, the exact amount is still under debate, along with who specifically was responsible. The UN agency has taken action within its own ranks, and seven employees have left or been fired over the matter.
Thomas Keusters, WFP’s country representative, said Wednesday that there had been no significant developments in the case and that discussions were still ongoing.
(Reporting by Kay Kimsong, Yun Samean and Christopher St John)