WORLD BANK DISCUSSES GOVERNANCE, LAND ISSUES WITH

UNCLAS SECTION 01 OF 02 PHNOM PENH 000515 SENSITIVE SIPDIS STATE FOR EAP/MLS, DRL, and EEB/IFD/ODF/RLEATHEM USAID FOR ASIA BUREAU E.O. 12958: N/A TAGS: PGOV PHUM ECON KDEM CB SUBJECT: WORLD BANK DISCUSSES GOVERNANCE, LAND ISSUES WITH AMBASSADOR REF: PHNOM PENH 60 SENSITIVE BUT UNCLASSIFIED ¶1. (SBU) SUMMARY. World Bank Country Director for Cambodia Annette Dixon met with the Ambassador July 17 to discuss her meetings with Royal Government of Cambodia (RGC) officials on anti-corruption, governance and land issues. She reported that the RGC plans to present the draft anti-corruption law to the National Assembly within three months, although she speculated that reaching consensus on contentious portions of the draft law could delay consideration. She described the difficulty that the Bank had encountered in implementing programs in Cambodia because of governance issues and the collusive nature of the private sector in the country. She explained that the Bank had recently conducted an enhanced review of its land registration program and hoped to continue the project, although she expected that the RGC would end the program after the current contract expires at the end of the year. ¶2. (SBU) COMMENT. Despite the challenges it has faced in the implementation its programs, the World Bank has played an important role in building the institutional capacity of the RGC. END COMMENT AND SUMMARY. ANTI-CORRUPTION EFFORTS -------------- ¶3. (SBU) Ms. Dixon said that Deputy Prime Minister Sok An estimated that the anti-corruption law would be presented to the National Assembly within three months. (NOTE: RGC officials have told the Ambassador that anti-corruption legislation would be completed by the end of the year. END NOTE.) She added that World Bank senior management was skeptical about the RGC's commitment to passing and enforcing the anti-corruption law. She speculated that the law has been delayed because various stakeholders have been unable to reach a consensus on more contentious portions of the draft law, such as rules for declarations of assets or reporting lines. When asked who she thought these "stakeholders" were, Ms. Dixon replied that she was not sure, as the drafting process had not been transparent. She also noted that it would be important to monitor the implementation of the law, as she had seen anti-corruption laws used to punish or silence opponents of the ruling elite in other countries with governance issues, similar to the current mode in Cambodia of using defamation charges to challenge perceived opposition or criticism. GOVERNANCE -------------- ¶4. (SBU) Ms. Dixon explained that the World Bank has had difficulty implementing programs in Cambodia because of governance issues and the collusive nature of the private sector in the country. She said that many of the Bank's investment projects had not moved forward, because they had to be re-bid repeatedly due to corruption concerns. She described Cambodia as an increasingly corporatist state, where the RGC had become an alternative mechanism for redistributing private sector investment. She said that given the decreasing influence of donors and the increasing influence of private sector interests on the RGC, attracting the "right kind" of investment is important for donors to promote. LAND ISSUES -------------- ¶5. (SBU) Ms. Dixon acknowledged the issues faced by the World Bank-funded Land Management and Administration (LMAP) project, which have been raised by Cambodian civil society groups (reftel). She noted that one of the larger issues was that while LMAP focused on issuing land titles in rural, undisputed areas, urban communities have become more at-risk of forced eviction without access to the dispute resolution mechanisms that LMAP was supposed to help create. She also observed that the RGC has been setting aside land from the LMAP systematic titling process (reftel) in an effort to classify it as state land through non-transparent processes. ¶6. (SBU) Ms. Dixon said that the World Bank recently concluded an enhanced review of the project, which highlights these and other issues and offers recommendations for future LMAP activities. She delivered the results of the review to the RGC the week of July 13 and is waiting for a response. She predicted that the RGC would likely find the report's recommendations too burdensome and would choose not to renew the World Bank's contract to support the LMAP project when it expires at the end of the year, although the Bank hoped to continue its support. The Ambassador offered to help in any way to encourage the RGC to continue cooperating with the World Bank on the project. PHNOM PENH 00000515 002 OF 002 COMMENT -------------- ¶7. (SBU) Despite the challenges it has faced in the implementation of its programs, the World Bank has played an important role in building the institutional capacity of the RGC, especially as the U.S. and other bilateral donors have steered away from direct budget support for RGC ministries. This is evident in the superior competence and abilities of organizations such as the Ministry of Economy and Finance, which the Bank has actively supported over the past several years. The notion that government should provide services beyond basic security is still a new concept for RGC leaders; the World Bank's programs help ensure that as the RGC's will to become a more service-oriented institution increases, it will have the abilities to implement new policies to better serve the Cambodian people. However, governance issues remain a significant concern, and any direct budget support to RGC Ministries needs to provide for significant governance risk mitigation mechanisms. RODLEY