Though the World Bank cannot sign any new loans until a new government is formed, ongoing programs are “proceeding” and the Bank plans to “remain engaged” here, a senior Bank official wrote to the leaders of the Alliance of Democrats last week.
“We agree that Cambodia today faces many challenges, including continuing poverty and governance and corruption issues,” wrote Jemal-ud-kin Kassum, the Bank’s East Asia and Pacific Region vice president, on behalf of James Wolfensohn, the Bank’s Washington-based president.
“The needs, however, are great, and we intend to remain engaged in Cambodia even though progress at times can be slow and difficult,” wrote Kassum in the letter, dated March 5 and addressed to Funcinpec President Prince Norodom Ranariddh and opposition leader Sam Rainsy.
The letter came in response to a letter written to Wolfensohn last month by Prince Ranariddh and Sam Rainsy, which alleged that the World Bank “is not achieving its poverty reduction targets in Cambodia despite having invested nearly $400 million here since 1993.” A similarly worded letter written by Sam Rainsy was also sent to the Asian Development Bank around the same time.
Similar to the World Bank, the ADB said last month that ongoing operations would continue but it would not approve new loans without the National Assembly’s approval.
The letters to both banks cited their failures to address “rampant corruption,” “tragic and unabated deforestation” and “a feudalistic type of land distribution.”
The letter to Wolfensohn also asked the World Bank to “cease the budget support the Bank has been providing to the current illegitimate government,” referring to the release of the second portion of the $30 million Structural Adjustment Credit, valued at $15 million, which the World Bank approved in December.
Forestry reform advocates strongly opposed the disbursement of the loan at the time, arguing that the government failed to meet the loan’s forestry conditions and was complicit in illegal logging operations.
Kassum’s recent letter again defended the release of the loan while conceding problems remained.
“After careful consideration and consultation, the Bank concluded that the Government had fulfilled its obligations under the credit and that the objectives of the program, including those related to forestry, had been met,” Kassum wrote in the Friday letter.
“We have been clear throughout that our assessment does not indicate that everything is working properly in the forestry sector, that governance problems have been eliminated, or that there are no risks that reforms could be reversed.”
It also said that the World Bank could not “complete discussion on our new Country Assistance Strategy until a new government is in place.”
The new World Bank strategy plans to focus mainly on governance reforms and the agricultural sector, though nothing specific has been finalized yet, said a local Bank official Tuesday.
“The main themes are almost finished but we need to discuss it with the government once it is formed,” the official said. “Now everything is on hold.”
The previous World Bank strategy for the country focused on rehabilitating and reconstructing the country, which was torn up through years of war. The new strategy, the official said, is to “speed up the process of reform and see the economy take off.”
Government spokesman Khieu Kanharith said Tuesday it would be “no problem” to run the country without new loans from the World Bank.
“It doesn’t matter,” he said. “We have many sources to get loans. We can borrow from other friendly countries.”
Though Khieu Kanharith didn’t say which countries he was talking about, one of them appears to be China, which pledged a $30 million aid package last November. A $6.1 million grant, included in the aid package, was earmarked for general use by the Cambodian government.
The only thing that would embarrass the government, said Khieu Kanharith, is if the World Bank refused to issue loans because it felt the government could not pay them back.
“But the World Bank never says that,” he said, adding that he expects the government to form soon, allowing the National Assembly to approve more loans.
An Asian diplomat saw the Alliance of Democrats’ letters to the World Bank and the ADB as a fruitless attempt to embarrass the government.
“They are barking up the wrong tree,” the diplomat said. “Their angle is always to bring their cause overseas, but they should be focused on convincing local people. Cambodia is low on the radar screen of most of the Western countries they are targeting for sympathy.”
Western countries and donor institutions appear to be getting less patient with the political tug-of-war.
“Nobody is amused” by the fact that it’s already March and still no government has formed, a senior official of a donor institution said on Monday.
US Embassy spokesman David Gainer said last week that “the current political deadlock in Cambodia does not help with the challenges it faces.”
(Additional reporting by Wency Leung)
