A$64 million funding scandal that has forced the Cambodian government to suspend

three major World Bank development projects is a result of misplaced emphasis by

international donors on building physical, rather than social, infrastructure, said

the head of an international human rights body.

"Our position is that this is to be expected," Basil Fernando, director

of the Asian Human Rights Commission (AHRC) told the Post by phone from Hong Kong

on June 1. "The maintenance of credible accounts and proper auditing is possible

only where a basic level of observance of the rule of law exists."

The World Bank's written response to the allegations claimed that "three years

ago the World Bank refocused its engagement in Cambodia to make the fight against

corruption, and efforts to improve governance, the centerpiece of its work."

But Fernando claims such efforts, and those made by other international donors, have

not addressed the root of the problem: the absence of an independent judicial system

in Cambodia and the lack of adherence to the rule of law.

"It is not only this particular case - it will happen again and again,"

he said. "There is nothing in place to prevent it happening.

"The social infrastructure necessary to run the country has received no investment.

If they had put some money into that, they would not have lost the money they just

have."

One of Cambodia's other major lenders, the Asian Development Bank, said on June 1

that the elements of social infrastructure - laws, regulations, policies to regulate

society and their fair and consistent application - were imperative for sound development.

"It is fair to say that without them, as well as accountability, participation,

and transparency, opportunities for issues such as those reported to have been found

in World Bank-financed projects in Cambodia are greater," Michael Stevens, director

of the ADB's Integrity Division, told the Post by email.

The decision to freeze funding for three active projects followed a World Bank Fiduciary

Review of seven projects amounting to $64 million in funding (the other four already

complete) conducted in tandem with the Cambodian government. The investigations,

made by the WB's Integrity Department, found problems with certain contracts in each

of the projects, including misuse of funds and misprocurement (meaning that guidelines

for paying for goods and services were not adhered to).

The process of placing blame began immediately after the suspension was announced.

Lu Laysreng, Minister of Rural Development - whose $20 million Provincial and Rural

Infrastructure Project has had its funding frozen - swiftly said that any financial

irregularities were due to the project's World Bank consultant. But Cheam Yeap, CPP

member of the National Assembly's finance and banking commission, said on May 30

that "the responsibility for the problem is shared between World Bank consultants

and state institutions."

The World Bank has yet to release detailed information relating to the cases, triggering

criticism from opposition politicians and human rights groups.

"We [the National Assembly] are disappointed with the World Bank for not informing

us about the corruption," said Son Chhay, Sam Rainsy Party parliamentarian,

on June 1. "The World Bank always conspires with the government to hide information

about corruption from us. This causes the corruption to get more serious."

Transparency on the part of both the government and the World Bank is essential for

Cambodia's public, said Ou Virak, spokesman for the Cambodian Center for Human Rights

(CCHR).

"The primary concern at the moment is that the World Bank release all information:

who was involved, which officials, which companies have been bribing officials to

get the lucrative contracts," Virak said. "The public deserves to know."

CCHR president Kem Sokha said it is in the public interest to expose the scandal

fully.

"The money received from the World Bank was meant for the many poor who lack

sufficient food, water, shelter and other most basic needs and not for the villas,

land cruisers and mistresses of some officials," Sokha said in a statement.

Marc Storella, Chargé d'Affaires at the United States Embassy, said "We

are encouraged by the fact that the Royal Government of Cambodia took the initiative

to suspend funding of the programs while it examines the allegations."

He said the scandal could "present an opportunity for the government to demonstrate

its commitment to fighting corruption."

The government has said its investigation will be conducted by the National Audit

Authority (NAA). Ut Chhorn, chairman of the NAA, said the organization was "busy

with our yearly planning. For this year, we have a full work schedule. However, we

cannot say we will not audit the case."

But for Fernando and the AHRC, such scandals are inevitable without an overhaul of

the judicial system.

"This is a magnified manifestation of what happens every day in Cambodia,"

Fernando said. "There is nothing surprising in what has happened, but if it

can teach the World Bank a lesson, it could herald a moment of truth and a new beginning."