One week before Christmas, the World Bank released the final $15 million of its Structural
Adjustment Credit (SAC) to Cambodia, despite the fact that the Cambodian government
has not met the forest management-related conditions of the loan.
The industiral logging associated with 'plantation development' in Kampong Thom province.
In so doing, the Bank has dealt a potentially fatal blow to Cambodia's beleaguered
forest sector reform process and turned its back on its responsibilities as an international
lender. As it seeks to defend its decision, the Bank is justifying the subversion
of reforms the loan conditions were intended to promote.
The $30 million SAC to Cambodia was initiated at the high-water mark of forest reform
in Cambodia in early 2000. This reform process began after the IMF suspended its
support programme to Cambodia in 1997, in protest at the Government's failure to
collect revenues from a forest sector being ravaged by so-called 'anarchic' logging.
In linking lending and forest management, the IMF highlighted the squandering of
Cambodia's most valuable natural resource. The Cambodian Government was spurred into
initiating a forest sector reform process, which was launched by Prime Minister Hun
Sen following the 1998 elections.
Recognising forests as "Cambodia's most developmentally important resource,"
the SAC agreement between the World Bank and the Cambodian Government set out conditions
concerning forest sector management for the Government to qualify for the release
of the loan's second tranche of $15 million. While by no means comprehensive, the
conditions encompassed structural and regulatory changes critical to the success
of forest sector reform.
Some of these, such as the introduction of a new forestry law, have ultimately been
met. Others, however, have been disregarded, as part of what appears to be a deliberate
government strategy to facilitate logging outside the reformed regulatory framework.
From the late 1990s, forest concessions run by Cambodian and foreign companies, became
the driving force behind illegal logging in Cambodia. Many of these companies are
no more than fronts for groups and individuals with close ties to senior politicians.
All are focused on maximising short-term profits and none have an interest in sustainable
In recognition of these realities, the architects of the SAC made release of the
loan's second tranche conditional on a major shake-up of the timber concession system.
The conditions required termination of non-performing contracts of concessionaires;
other concessionaires' presentation of restructuring programs satisfactory to the
World Bank; and no granting of timber concession contracts outside the revised legal
framework, which prohibits reallocation of cancelled concessions.
Observance of these conditions would have provided the basis for an overhaul of the
way Cambodia's forests are managed and a chance to show the door to the criminal
enterprises plundering them. That the conditions have not been met is testament to
the determination of senior officials within Government to thwart reforms which might
diminish their own profit from illegal logging. That the World Bank has pronounced
this acceptable, indicates a lack of will which will do nothing to encourage future
governments to take forest sector reform seriously.
Over the lifetime of the SAC, it is the case that Government has cancelled some timber
concession contracts. However, with perhaps one exception, those terminated have
been concessions which were commercially exhausted or controlled by companies which
were bankrupt or had the wrong political affiliations. It is hard to think of a single
criterion by which any of Cambodia's forest concessions might merit the description
'performing'. In terms of delivering the required royalty revenues to the state,
managing forests sustainably and respecting the rights of people living within the
concessions, Cambodia's forest concessions represent, in the words of a 2000 ADB
review, "a total system failure".
The timber concessionaires have between them liquidated a substantial proportion
of Cambodia's most valuable resource, with Cambodians receiving nothing in return.
If the World Bank were to use its own over-arching goal of poverty reduction as an
indicator of performance, then all the current logging concessions would be considered
to be 'non-performing'. The consequence of the government's failure to meet its obligations
and the Bank's acquiescence, is continued control of vast swathes of Cambodia's forests
by companies that have consistently demonstrated their disregard for the country's
laws and the rights of its citizens.
None of the timber concessionaires has presented a restructuring programme satisfactory
to the World Bank. All the concessionaires missed the initial November 2001 deadline
for production of Strategic Forest Management Plans (SFMPs) and Environmental and
Social Impact Assessments (ESIAs). Rather than penalising the companies, the Cambodian
Government instead extended the deadline for submissions by a year; calling into
question its commitment to ensuring that this SAC condition be met.
When the concessionaires' SFMPs and ESIAs were publicly released in November 2002,
they were universally condemned for their dismal quality. The companies' plans offered
little substantive basis for their claims concerning the timber resource in their
concessions, the benefits Cambodians would derive from their logging activities,
or their projected environmental and social impacts. Reflecting the seriousness with
which they approached the restructuring process, concessionaires copied entire sections
of each other's plans. This copy and paste approach yielded sometimes surreal results,
such as the revelation that a timber concession in Preah Vihear province would act
as a 'wildlife corridor' between Vietnam and a wildlife sanctuary in Mondulkiri.
Rather than treating the concessionaires' submissions as a statement of their will
and capacity to manage Cambodia's forests sustainably, the World Bank instead offered
the concessionaires technical assistance, funded by loan money which Cambodians will
have to repay, to try to make their plans more presentable. On the basis that this
window-dressing exercise is ongoing, the Bank has decided that the SAC condition
on restructuring of concessionaires is now met, when clearly it is not. Again, this
serves to perpetuate the tenure of companies whose illegal and destructive activities
are well documented.
The Bank has similarly indicated its satisfaction that the Government has not awarded
any new concession contracts outside the revised legal framework. Yet, in contravention
of the letter and the spirit of the SAC agreement, senior government officials have
continued to reallocate timber concessions and dispense an array of legally dubious
documents to facilitate logging operations. These include contracts to establish
land concessions on forested areas, old log collection permits, firewood, stump and
sapling collection permits and permits for construction of houses, boats and bridges.
All fall outside the legal framework and all are being used as a cover for large-scale
illegal logging operations. These activities corrode an already weak system of governance
and threaten the livelihoods of forest-dependent communities.
In a letter to NGO Forum on Cambodia dated December 17, World Bank Vice-President
Jemal-ud-din Kassum defended the Government's right to issue such permits. His endorsement
will come as welcome news to the permit holders, for example the 'firewood collectors'
currently helping to clear-cut several thousand hectares of former concession forest
in Tumring commune, Kompong Thom province. The 'firewood', which in this instance
comes in two meter by one-meter sections, is being collected by a company owned by
Seng Keang, the wife of the Prime Minister's cousin, Dy Chouch. From Tumring, the
Seng Keang company illegally transports the 'firewood' to a factory outside Phnom
Penh, where it is turned into plywood. This venture is particularly profitable, as
by harvesting 'firewood', rather than 'logs', Seng Keang has been able to evade royalty
payments to the tune of at least $1,000,000.
Meanwhile, in neighbouring Preah Vihear province, the North East Lumber company has
been illegally allocated part of a cancelled timber concession for the purposes of
collecting 'tree stumps'. This is directly contrary to the World Bank's SAC conditions,
given that the stump collection contract falls within the legal definition of a timber
concession. As it happens, the tree stump collectors are in any case undertaking
traditional-style logging operations. Interviewed by Global Witness investigators
in May as they were felling a tree, North East Lumber workers stated that they had
once tried collecting tree stumps, but it had proved difficult so they had decided
to cut down trees instead. This was not a problem, they explained, because the trees
they cut were nearly dead anyway.
Forestry officials obviously concur with this view, and have been carrying out inspections
of the North East Lumber operation on a weekly basis. So, it seems do the World Bank,
who have stated that they are "satisfied that the Government has not awarded
new forestry concessions of the type barred by SAC conditionality", despite
the abundant evidence of this conditionality being breached or circumvented across
Cambodia. While the efforts of logging syndicates and their political patrons to
evade loan conditions and the law are not altogether surprising, the Bank's position
requires an explanation. While, in the past, Bank staff were quick to see through
the use of quasi-official permits to legitimise logging operations, it appears that
critical faculties have been blunted by the urge to disburse the SAC and proceed
to another round of less conditional and less contentious loans to Cambodia.
In its efforts to get clear of the SAC, the World Bank has made effective use of
another loan to Cambodia: its $5 million Learning and Innovation Loan (LIL), which
funds a Forest Concession Management and Control Project in the Government's Forestry
Administration. This project's poor design and implementation have resulted in the
World Bank legitimising the flawed timber concession system, rogue logging companies
and corrupt officials.
A 2002 Bank appraisal concluded that the performance of the LIL was "unsatisfactory",
and the loan was due to expire at the end of 2003. In the event, the LIL has received
an extension sufficient for some of its remaining funds to pay for the appointment
of a new Independent Monitor of the forest sector. Employment of an outside agency
to carry out independent monitoring is yet another condition of the SAC loan which
Government officials have sought to circumvent and no official monitor has been operating
In November, World Bank staff publicly stated that the only outstanding SAC condition
which the Government had yet to fulfil was the appointment of a new independent monitor.
While this was not true, it was a convenient position from which to move towards
final disbursement of the SAC; as it was the Bank, through its LIL loan, which was
putting up the money to recruit Swiss firm SGS to the role.
Concerns that SGS has, with World Bank approval, been issued with a weak mandate
which compromises both its independence and its scope to carry out monitoring activities,
have been dismissed by the Cambodian Government and the Bank.
The catalytic impact of the IMF's withdrawal in 1997 shows that linking lending with
forest management performance in Cambodia can be effective in persuading government
to manage the country's natural resources responsibly, but only if the lender is
prepared to insist that conditions are actually met. The converse is also the case,
and the World Bank has gone from taking a commendably firm stand on forest sector
reform in Cambodia to endorsing breaches of its own lending conditions. This suggests
a lack of commitment by the Bank to ensuring that Cambodia's forests are managed
for the benefit of its population, something which corrupt officials will be quick
to take note of.
Moreover, in denying the validity of the terms of the SAC, the Bank loses credibility
and signals to future Cambodian Governments that conditions written into its aid
agreements are essentially cosmetic. The impact is to undermine what remains of the
forest reform process at a time when illegal logging, much of it commissioned by
members of the political elite, is rampant throughout Cambodia's forests.
Perhaps most serious of all, is, the World Bank's abandonment of its responsibilities
as an international lender. Amidst the profusion of multi-million dollar aid packages
to Cambodia, it is easy to lose sight of the fact that funds such as the SAC are
loans, which Cambodia's citizens will one day have to pay back. If lending to Cambodia
is not accompanied by substantive improvement in the management of its principal
natural resource, international financial institutions' engagement will do little
for the country's prospects of escaping an ever-mounting burden of international
Mike Davis is a campaigner with Global Witness, a London-based NGO, which has been
working to combat illegal logging in Cambodia since 1995.