The government controversially issued transport permits in March without informing donors or monitors. This picture was taken near Phnom Penh in early May.

As donors and the government gear up for the six-monthly Consultative Group meeting

in mid-June, Cambodia is being forced to show it is complying with the donor-driven

forestry reform agenda.

Money from donors is likely to be squeezed by other demands, such as funding for

Afghanistan and East Timor, leaving less for Cambodia, which is looking for around

$1.4 billion over the next three years.

In its first response the government announced it has canceled the concessions of

two logging companies: Hero Taiwan and Voot Tee Pearnich. Cancellation of some concession

contracts was one of several requirements contained in a blunt letter from the World

Bank that warned of its dissatisfaction with progress on forestry reform.

However some forestry observers said the cancellations were unlikely to make much

difference on the ground as Voot Tee Pearnich did not log last year, and Hero Taiwan

is understood to have wanted to quit Cambodia for the past nine months.

The World Bank's regional head, Ian Porter, sent a strongly- worded letter to senior

government ministers stating that the lack of progress raised "serious concerns

regarding commitment to reform in the forestry sector".

In the letter dated May 2, Porter warned that the final tranche of money from the

Structural Adjustment Credit (SAC), worth around $15 million, would be in jeopardy

if reform did not proceed as agreed.

The letter was sent to the Council of Ministers' Sok An, Finance Minister Keat Chhon

and Agriculture Minister Chan Sarun, and copied to donors and diplomats.

Porter noted "well-documented increases in illegal logging, unexpected and undisclosed

approvals for the transport of logs", as well as "prolonged delays"

in cancelling some concessions and the seeming inability of the Forest Crimes Monitoring

Unit (FCMU) to follow up and prosecute offenders.

The letter demanded three actions to restore the Bank's confidence, including that

the government immediately cancel certain concessions. Politically, one observer

told the Post, the timing of the two cancellations "is perfect".

The second of the Bank's demands was for the government to justify its March move

to allow transport of logs. That action, done without the knowledge of donors and

forest monitors alike, angered and embarrassed the bank. It was on the verge of sending

SGS, a consultancy firm, into the field to carry out an inventory.

The letter demanded that until an inventory was done, all log transport "should

be suspended". The Post understands that the ban on transport of logs will be

enforced from midnight May 23.

The Bank also noted that the FCMU, which was set up more than two years ago to investigate

illegal logging, be overhauled as it had "fallen into disrepair and conflict".

The letter reminded the ministers that the monitoring system was a condition of the

SAC.

Chris Price of the UK's Department for International Development (DfID), which funds

the unit, said a review of the FCMU would start after the June donor's meeting. Both

DfID and the UN Development Programme (UNDP) would carry out the review.

The FCMU could be closed down as soon as August if the review determines its mission

is unfeasible, said the unit's new chief technical advisor, M. Pushparajah. But that,

he said, was only one of several possible outcomes.

Asked whether the govern-ment's moves would satisfy the World Bank's conditions outlined

in its letter, country head Bonaventure Mbida-Essama said the Bank had not received

official notification of the government's moves to comply with the letter. Until

that happened, he said, it was unable to determine whether the actions were sufficient.

In another development, the Department of Forestry and Wildlife (DFW) is understood

to have completed its preliminary assessment of a report that concessionaire GAT

logged in Kampong Thom this year in defiance of the government moratorium which began

Jan 1 this year.

Sources say DFW has found evidence that illegal logging did take place, though it

is unclear at this stage as to whether it agreed that an estimated 800-2,000 logs

were removed from one of GAT's concession coupes.

If that finding of illegal logging is contained in its final report to the Council

of Ministers, which decides on penalties, GAT could have its concession revoked,

as Prime Minister Hun Sen warned all concessionaires last year.

And there is broad agreement among forestry experts that the action taken, if any,

against GAT will speak volumes about the govern-ment's true commitment to reforming

the sector. As one forestry observer put it: "It is key to the future commitment

by the government."

Pat Lyng, the former chief technical advisor to the FCMU, which carried out the initial

GAT investigation as per its mandate, said circumstantial evidence indicated the

company was guilty of logging in defiance of the ban.

"It points a strong finger towards GAT, which at a minimum is responsible for

controlling illegal activity that occurs within their concession. And that didn't

occur."

Among the evidence said Lyng, was that logging took place less than five minutes

travel time from the GAT logging camp, on a road that has only one way in and one

way out, and which runs past GAT's log rest area and a provincial checkpoint.

One aspect of GAT's apparent illegal logging that particularly concerns donors is

that none of the logs would have been declared, as they were harvested illicitly,

meaning the government would not receive royalties.

As for the ongoing battle to determine which concessionaires have paid past royalties,

many of which are years in arrears, Dennis Cengel, advisor to DFW, said a review

process is still under way.

"Although there may not be a problem, the accounting [used to determine royalty

payments] is done in a way that is not quite clear, so the IMF and the World Bank

have both asked for clarification on receipt of royalties to government," said

Cengel.

Cambodians living in rural areas rely heavily on forests for non-timber products

such as vines, resin and food. Loss of the country's forests would likely have a

substantially adverse effect on their lives, which is why donors such as the ADB

are strongly behind the community forestry project where local people will get the

right to manage forests.

But the clock is ticking. Pat Lyng estimates the country's forests could survive

for another five years "or maybe longer" if sustainable forestry is not

introduced.

The biggest problem, he said, was that no one actually knows how much illegal logging

has been going on, and consequently how much forest is left. However he felt the

prevalence of illegal logging had sharply reduced over the past few years, although

he thought much had been forced underground to avoid detection.

"It is hard to predict now what is actually going on illegally, until you can

actually tie it down," said Lyng. "But it is easily 60 or 70 percent down

- and that's a huge impact."

One recent example where the system has not worked is Tumring Commune in Kampong

Thom. Last year the government granted 12 square kilometers of land to the Chup Rubber

Plantation Company for a new plantation. Chup then engaged neighboring concessionaires

GAT and Colexim, from whose concessions the land was taken and where the villagers

live, to clear the area's forest.

Despite Prime Minister Hun Sen's promise last year to the villagers that no resin

trees would be lost and that they would get access to community forests, the timber

companies have felled hundreds of the villagers' resin trees with impunity. As the

trees have gone, so has any chance of the villagers earning a living.

The situation is so serious that the World Food Programme has been asked to examine

the food needs of Tumring's villagers as their supplies are unlikely to last beyond

July.

And in another development, concessionaire Samling International has pulled out of

its concession in Mondolkiri, one of two it was awarded. Forestry observers said

over-logging meant neither was viable.

Henry Kong, Samling's country head, admitted the Mondolkiri and Koh Kong concessions

were "severely depleted" but maintained there was still room for sustainable

logging in them. He blamed "anarchic third parties" for the problem.

He said Samling has not yet submitted its forest management plan (FMP) or environmental

and social impact assessment (ESIA), both required under the agreed new regulations,

as it was waiting to see the outcome of renegotiations with the government over the

future of logging. Kong confirmed the company would quit Cambodia if those negotiations

were not satisfactory.

"I can't say how long [it will take], but we are waiting for some indication

from the government that the negotiations will be positive and it will be meaningful

to submit an FMP and ESIA," Kong said.

"We will definitely not stay on if the conditions are not conducive for a sensible

business venture here, because our exposure is too big [internationally]," he

said. "We will not agree to survive by shady or unethical business means to

stay alive, because we stand to lose much more from our reputation abroad. Our investment

in Cambodia is less than 10 percent of our investments abroad."

He confirmed Samling was also considering suing the government for several million

dollars for the costs it incurred building roads into the Mondolkiri concession,

from which it has now withdrawn all machinery while it awaits the government response.

Kong denied the road was built illegally through the Snuol Wildlife Reserve, as some

have charged.

"That is not correct," he said. "The part of the road through the

wildlife reserve was already in existence, so we only upgraded it," he said.

Speaking in his capacity as head of the Cambodian Timber Industry Association, Kong

said he had some reservations about the recent attack on Global Witness country head

Eva Galabru, who was beaten up at night outside her office.

"Global Witness is not entirely blameless in their attitude and in their reporting

style. I think [it] could improve in this area and thereby gain valuable support

from the private industry," said Kong. "We do not really know who is behind

the attack, but we are assuming it is related to the controversies relating to the

timber industry."

Although Samling has not submitted its FMP or ESIA, nine of the remaining 15 logging

concessionaires have done so, in line with the agreed new forestry regime.

Colexim, Chendar Plywood, Everbright, Timas Resources, Samrong Wood, Yurisako, Pheapimex,

GAT and TPP are all believed to have lodged their documents with DFW.

The DFW's forest planning specialist Yann Petrucci will lead the teams which will

analyze the companies' FMPs. That will involve an inventory, on a random sample basis,

of trees remaining in their concessions. Two teams of six people each began heading

into concessions May 22 to examine the inventories submitted by concessionaires,

which will help analyze the amount of forest left in Cambodia.

"We are going to check the same places they did the inventory in the field and

see if they have made a good inventory," said Petrucci, adding that he was confident

the teams, made up of DFW employees, would act independently in their assessments.

"It is very easy to see if there has been manipulation of the data if you know

how it is done in the field," he said. "For each company it will take ten

to 15 days. This is the first stage and in a few months we will see if the inventories

were well made."

Dr Jurgen Hess, team leader of German aid arm GTZ's forestry project, said there

had been some improvements in forestry, although there were several weaknesses in

the overall policy framework.

"There is a lot of capacity missing. When you talk about the code of practice,

for example, most people don't know exactly what is written in this code, and they

hardly know how to apply this code on the ground, especially at the district and

province level," he said.

Hess said he had the impression that the government wanted to look into the sector

in "a broader sense" to strengthen areas such as community forestry, conservation

and protection, and reform of the concession management system.

"There is [government] willingness to reform the forest sector, by looking into

it in a broader sense and by establishing linkages from the forest sector to other

sectors like agriculture or land management," said Hess. "It is a question

of what you can achieve and it needs time."