NGOs Condemn World Bank’s Forestry Loans

The World Bank is considering a $15 million loan disbursal that has hinged, for 18 months now, upon the government fulfilling conditions in forestry reform—conditions that some argue have not been met.

The $15 million is the so-called “second tranche” of the World Bank’s Structural Adjustment Credit worth $30 million. The first installment was paid when the deal was signed in February 2000.

The international lender has acknowledged that forests, which the SAC contract referred to as “Cambodia’s most developmentally important resource,” are dwindling through illegal logging, but contends there has been progress that should not be dismissed.

Some NGO representatives have called the Bank’s assessment either disingenuous or incompetent.

Whether the loan will be disbursed is up to World Bank directors in Washington. They will not convene over the matter, but if none of them object to the loan before Wednesday, it will be issued, Peter Stephens, a Singapore-based Bank official, said last week.

Questions submitted to the World Bank by e-mail on Thursday received a reply from Washington-based Bank official Melissa Fossberg on Sunday. According to country Director Ian Porter, the answers given were put together by a Bank team over the weekend.

According to the Bank’s e-mail, “the government was committed to carrying out a performance review of existing [forest] concession contracts and will take actions based on the outcome of the review, within the framework of Cambodian law and the existing contracts.”

Those actions include canceling “non-performing” contracts, requiring concessionaires to present restructuring programs and not awarding “any subsequent contracts outside the scope, rules, and procedures set out in the Sub-Decree on forestry concession management,” the e-mail said.

The government completed its review of 40 forest concessions in 2000, the e-mail said.

It resulted in the termination of 25 “non-performing contracts.” The remaining 15 companies have drafted restructuring plans for their concessions, and based on the evaluation of those plans, the government has moved to revoke seven more contracts, the e-mail said.

“The cancellation of nearly 4 million hectares of clearly non-performing concessions is an accomplishment that should not be ignored or minimized,” it continued.

“With the possible exception of [Grand Atlantic Timber],…I think it’s fair to say that all of the other ones were canceled because they simply were not economically viable anyway. There simply wasn’t timber left,” said Mike Davis, coordinator of London-based NGO Global Witness.

The restructuring condition is also disputed. The Asian Development Bank funded the previously mentioned review of the forest concession system, which it found to be severely flawed.

The ADB recommended that the concessionaires draw up sound management plans, renegotiate and sign new contracts with the government.

The logging companies agreed to do this by Sept 30, 2001, or face losing their contracts, according to a letter dated Oct 18, 2000, signed by Department of Forestry and Wildlife Director Ty Sokun and the then chairman of the Cambodian Timber Industry Association, Henry Kong. The letter was written by Andrew McNaughton, then facilitator of the Joint Working Group on Forest Concession Management.

New contracts were never signed. Not all existing contracts were canceled.

The Bank’s e-mail said, “It is important to note that contract negotiations are different from restructuring concessions.”

Andrew Cock of NGO Forum disagreed. “If concessions are restructured, meaning that royalty rates are modified, the investment regime is revised, the area available for harvesting changed, community forest areas delineated…then surely the contract would need to be modified or ‘renegotiated.’”

“The Bank’s response is an evasion that indicates either this has not happened, or if it has, it has occurred without the necessary transparency to ensure that contracts are in the public interest,” Cock wrote in an e-mail.

The Bank went on to say that management plans from the 15 companies still holding concessions are now being revised for government review.

Global Witness’ Davis said Friday that, if there is any restructuring process, it is happening quietly and without transparency.

As for the condition prohibiting the issuance of “subsequent concessions,” the Bank said in its statement that there had been none. It listed several “land concessions” that it said had raised concerns, but said they had been granted before the SAC had been agreed upon in 2000.

Among those listed was the Green Sea company, which the Bank said was awarded its contract in 1998. But according to a Ministry of Agriculture document, Green Sea got its contract to farm teak trees on 100,852 hectares in Stung Treng province in October 2001.

Bill Magrath, a local World Bank official, acknowledged the Bank’s date to be incorrect and took credit for the mistake on Monday.

It has been a frequent complaint of conservationists that concessionaires continue their logging, with the government’s approval, simply by calling their operation something else, such as a “land concession.”

Concerning Green Sea, Davis wrote: “This concession is sited on a forest and is simply a timber concession by another name. Moreover, it is partly situated on the former forest concession held by the Macro-Panin company.”

“This deal is contrary not only to the subdecree on forest concession management, and therefore the conditions built into the SAC, but also the Land Law, which…stipulates that no land concessions larger than 10,000 [hectares] may be awarded,” Davis wrote.

Article 5.4 of the Subdecree on Forest Concession Management reads: “All revoked or transferred forest concessions shall be preserved natural forest zones and the managed forest shall not be conceded to any other company.”

Marcus Hardtke, a Global Witness investigator, also criticized the Bank for adopting the government’s line used to justify cutting trees. “It’s another example of the incompetence of the World Bank’s concession project,” he said.

Hardtke said Monday that illegal logging is occurring in every forest concession, terminated or active, and protected area in Cambodia.

Asked by telephone Monday how the World Bank reconciled widespread illegal logging that benefits few Cambodians with the disbursal of a condition-based loan, Porter said that the Bank had been monitoring the implementation of the SAC program and felt specific conditions had been met.

“That certainly doesn’t mean we don’t recognize there are huge problems,” he said.

World Bank officials have also presented the government’s recent hiring of SGS as it forest monitor as fulfillment of the SAC condition that the government keep that position filled, despite the fact it has been vacant since Prime Minister Hun Sen fired Global Witness in April and SGS’ operations are not yet fully underway.


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