Nisha Agrawal, the outgoing World Bank country manager for Cambodia, says the Kingdom faces a major challenge in making sure economic growth is not achieved by “cannibalizing” the country’s natural resources.

Indian born Nisha Agrawal arrived in Cambodia as country manager for

the World Bank in April 2003 to find herself eventually thrust into the

bank’s biggest ever confrontation with the government of Cambodia over

corruption. The problems culminated in June 2006 in the dramatic ten

month suspension of funds for three World Bank projects. The ban was

lifted in February 2007, but the bank cancelled over $2.5 million in

project funding and the government subsequently was asked to repay the

World Bank $2.9 million. The bank has since hired Crown Agents, a

British company, to handle procurement in their Cambodia projects. At

the end of February, Agrawal will leave the World Bank after 18 years

to go back to India and take the helm of a new NGO, Oxfam India.  In an

interview with the Post’s Susan Postlewaite on February 7, the director

discussed the highs and lows of her five-year tenure at the Bank,

which, with a budget of $50 million, is one of Cambodia’s most

influential development partners.

 

What do you count as the accomplishments of your five years as country manager for Cambodia?

Four things. Firstly we have done a lot of research that has generated

very useful knowledge about what is happening in the Cambodian economy.

Before I came we really didn’t know whether the growth that Cambodia

has seen in the last decade was having an impact on poverty or not. The

Poverty Report was a very important piece of work by the World Bank to

show that growth was actually benefiting poor people and that their

lives were getting better off as a result. 

Secondly, a very big thing is helping Cambodia agree on the priorities

for reform and supporting the reforms that are happening.

 

Third,  the way the development community works together has changed

very dramatically and the World Bank has played a key role in bringing

all the donors together around a common agenda. When I came here

everybody had different priorities. We helped put in place a very

elaborate architecture – 18 technical groups which meet and talk

together with the government, with NGOs, with the development partners.

We have quarterly meetings at senior levels of the government to

discuss major policy issues.

 

Finally, the World Bank has built a very strong and large country

office. When I came we were about five people and now we are 45 and

most of these are Cambodian staff, and very high capacity staff.

What do you leave for your successor? What needs to be done?

During my five years, the economy has almost doubled in size, and

government revenues have almost doubled in size. Foreign investment has

taken off and is now larger than foreign aid for the first time. The

challenge ahead is to ensure there’s also high quality development

going on at the same time as a high growth rate. These would be the

things my successor would focus on. Cambodia after ten years has been

having an impact on poverty but only about one percent of the

population is being lifted out of poverty per year. Vietnam is able to

raise four percent of its population out of poverty each year. The

difference is the emphasis that Vietnam has on agriculture.

 

The second challenge is how to make sure the growth is not coming at

the cost of just cannibalizing your natural resources. One big choice

the government faces is in the mining sector. How the government

decides to do mining in the future will have a big impact on how

sustainable it will be. These debates should happen very openly and

transparently. Do Cambodians really want to be mining everywhere

including in the national parks, or do they value their national parks?

 

A second choice is on how to manage the oil and gas revenues. That is a

huge challenge. Suppose there are these large orders of magnitude that

people are talking about. How they are managed would really make or

break this country. If the government doesn’t use those revenues well,

Cambodia could go down a very bad path where the revenues not only kill

off other industry and employment, but corruption levels rise to such a

level that everything else could fall apart.

The World Bank has come under heavy criticism – from The Wall Street

Journal and others – for allowing corruption in its programs in

Cambodia. Are you satisfied that you’ve corrected the problems?

We are making a huge effort to make sure that funds from our own

projects don’t leak. Our projects are implemented by the government and

supervised by us. The biggest problem was in the way procurement was

done and who got the contracts. Because there were systematic problems

in procurement, we are taking a two-track approach to deal with this

issue: in the short-run, all procurement will be done by an independent

procurement agent, while in the medium to long term, we will work with

government to build and strengthen their systems.

 

Ultimately it should not be just about whether the World Bank money is

leaking or not, but it should be about the country’s own spending. Our

funds in this country are $50 million a year. What we would like to do

is work with the government to improve their procurement and financial

management system in the long run to make sure that the whole

$1.2-billion budget is spent wisely.

In retrospect was your decision to suspend disbursement on three World

Bank projects in 2006 and then to reinstate the funding ten months

later the most effective way to handle the corruption problem? 

It was the best way. It was tough on our relationship with the

government because it’s a very drastic measure to take. But once we

have evidence that our funds are leaking, we really have no other

choice but to halt disbursement while we put in place measures to

prevent those kinds of leakages in the future. We wanted to send a very

strong signal in this country that we are not going to tolerate

corruption in our projects and the suspension did that. Many people in

Cambodia felt reassured that the Bank was taking this issue very

seriously, people who had seen that this was happening in our projects but had not really come forward to complain about it.

 

It was tough with the beneficiaries of these projects. To go out in the provinces and see a project that was actually delivering goods and services to the people – like clean drinking water – was halted was quite tough.

Was the suspension of the three projects a low point or a high point of your tenure?

It was both. It was very tough for our relationship with the government because, unfortunately, most of the evidence that we gathered during our investigations was obtained confidentially and we could not share it with the government, which upset them a lot. That was definitely a low point in our relationship. At the same time, however, corruption does remain a major problem in this country and during that time, many Cambodian people came up to me on the street and said “Thank you for what the World Bank has done and we are glad that at least someone has stood up on this issue.” That was pretty rewarding since no one else had taken quite such a public stance on this issue and put their whole relationship with the government on the line the way that we did.

How much was the leakage?

It is hard to quantify what the leakage was. The problems were that people were interfering with the procurement process and the wrong people were getting the contracts. But the projects were still being delivered and so was their development impact in terms of growth and poverty reduction.

Do you know where the bribes went?

No. We have to rely on people for our investigations, and while they might know, it’s very hard to document who got a bribe, how much money changes hands and so forth.

Could this kind of leakage be happening right now to other development agencies like USAID or ADB?

To the extent that any agency is implementing its programs through the government as the World Bank does, they could be facing similar problems to ours.

Do you believe the draft law on corruption will ever be passed by the National Assembly?

The government has committed to passing it but we don’t know when. It has been a frustratingly long wait. On the other hand, it is not a magic bullet – it is just one of many things that need to be done to fight corruption in this country. Other things are happening – such as public financial management reform – that are reducing corruption in this country, but passing the anti-corruption law would send a strong and visible signal about the government’s intention to tackle corruption. The government has said they are going to pass it after they pass the Penal Code, which is still being written. We would like to hear from them when that would happen.

What have been the highlights of your life here in Phnom Penh?

Even though the work has been challenging, I’ve really enjoyed living here for five years. I think that Phnom Penh is a very charming city. I think this is another area that Cambodians need to pay attention to, to make sure they keep Phnom Penh beautiful. In any case, I have a lot of friends in Cambodia and I will miss them and miss Phnom Penh when I leave for New Delhi next month. But I am sure I will be back for a visit soon.