Report No. 31862 \ The Inspection Panel @ ReportandRecommendation / Cambodia: Forest Concession Management and Control Pilot Project (CreditNo. 3365-KH andTrust Fund. 26419-JPN) March 30,2005 TheInspectionPanel Report and Recommendation On Requestfor Inspection CAMBODIA: Forest ConcessionManagement and ControlPilot Project (FCMCPP) (Credit No. 3365-KH andTrust FundNo. 26419-JPN) 1. On January 28, 2005, the Inspection Panel received a Request for Inspection, dated January 21, 2005, (the "Request") related to the Cambodia: Forest Concession Management and Control Pilot Project (FCMCPP) (the "Project"). The NGO Forum on Cambodia submitted the Request on its own behalf and on behalf o f affected local communities living in the districts of Tbeng Meanchey inPreah Vihear Province; Siem Bok and Sesan in Stung Treng Province; and Anlong Veng in Oddar Meanchey Province, Cambodia (the "Requesters"). These four districts are located respectively in the concession areas o f the companies Chendar Plywood, Samraong Wood, Everbright and Pheapimex. The NGO Forum on Cambodia states that they have received "letters from a number of villagers signed in March 2004" asking them "to represent their request [. .../. ''I They also state that the "local community representatives who signed the letters have requested that their names be kept 2. The Request includes two signed letters from representatives of affected communities and a report prepared by the NGO Global Witness for the affected communities at the request of their representative, the NGO Forum o f Cambodia, to provide "details of the case and the violations of World Bank policies which occurred. r r 3 A. The Project 3. The Project is financed by IDA Credit No. 3365-KH approved within the Learning and Innovation Loan (LIL) f r a m e ~ o r k .The Project's objectives are ~ ' Request for Inspection, Letter to the Inspection Panel, January 21,2005, p.1, [hereinafter "Request Letter 1"1. 2 Request, p.1. Request for Inspection, "Submission to the Inspection Panel World Bank Forest Concession Management and Control Pilot Project in Cambodia," Global Witness, February 2005, [hereinafter "Request, Attachment 1"I "The learning and innovation loan (LIL) supports small pilot-type investment and capacity-building projects that,if successful, could lead to larger projects that would mainstream the learning and results of 1 "to demonstrate and improve the effectiveness of a comprehensive set of forest management and operational guidelines and control procedures in forest concession areas, and to establish an effective forest crime monitoring and prevention c~pability."~ 4. The FCMCCP has four components:6 o Component A (Forest Planning and Inventory) provides the preparation o f `yorest concessions management plans to serve as models for current and future concessions, including jield surveys and inventory [...Iand preparation of detailed annual operationalplans to givepractical effect to suchforest concessions management plans." o Component B (Concession Regulation and Control) seeks to strengthen the capacity of Forest Management Offices "to oversee concession operations and ensure that they are in compliance with the forest management and operationalplans. '' o Component C (Forest Crime Monitoring and Prevention) aims at "strengthening the capacity " of the implementingagency, the Department o f Forestry and Wildlife (DWF), and the Ministry o f Environment to "systematically and regularly monitor illegal logging and launch effective prevention activities." This component i s also aimed at supporting the concessionaires, the local and national forestry and national parks offices, and the affected communities to design and implement "timber theft prevention plans and disseminate the information on the government o f " Cambodia's `yorest crimeprevention programs. " o Component D (Project Management and Institutional Strengthening) provides the creation o f the Project Management Unit (PMU) and the "strengthening of its capacity to manage the project and be responsible for procurement andfinancial management activities, and monitoring and evaluation." 5. Management Response to the Request for Inspection describes the "Project Organi~ation."~The Project i s being implementedby the former DFW, which the LIL. LILs do not exceed $5 million, and are normally implemented over 2 to 3 years - a much shorter period than most Bank investment loans. All LILs include an effective monitoring and evaluation system to capture lessons learned." See World Bank, Operation Policy and Country Services, World Bank Lending Instruments, Resourcesfor Development Impact, at http:llsiteresources.worldbank.org. Development Credit Agreement (Forest Concession Management and Control Pilot Project) between the Kingdom of Cambodia and the International Development Association (IDA), Credit No. 3365-KH, July 6, 2000, [hereinafter "Credit Agreement"], Schedule 2 (Description of the Project). 'Credit Agreement, Schedule 2 (Description o f the Project). Bank Management Response to the Request for Inspection Panel Review of the Cambodia Forest Concession Management and Control Pilot Project (Credit No. 3365-KH), March 8, 2005, [hereinafter "Management Response"], 7 10. 2 was reorganized in 2003 and became the Forestry Administration (FA). "The F A is a semi-autonomous agency of the Ministy of Agriculture, Forestvy and Fisheries (MAFF). A Deputy Director serves as Project Director."8 Concession plan reviews are the responsibility o f a Technical Review Team (TRT) created by the FA. The forest crime monitoring and prevention role was initially carried out under a project financed by the Food and Agriculture Organization (FAO) and the UnitedNations Development Program (UNDP), within which the NGO Global Witness served as "independent monitor." Presently, this function i s the responsibility o f a commercial firm contracted under the FCMCCP. 6. Management states that the Project was modified in 2003 "to address post- concession management issues " "in areas released from concessions, [where] the Government has taken preliminay steps to institute new management arrangement^,^" though the Development Credit Agreement did not require amendment." According to the Response, the GOC has designated a total o f 1 million hectares in three post-concession areas as protected forests," and has requested technical assistance to develop management plans for these areas. International donors and NGOs, among them the Wildlife Conservation Society (WCS), are assisting the Government inthis effort. Management states that the FCMCCP, as amended, finances the collaboration between the FA and the WCS inone o f these post-concessions areas, Mondulkiri.'* B.Financing 7. The Project is supported by an IDA Credit o f SDR 3.6 milliont3,approved on June 6, 2000. The Credit Agreement became effective on October 20, 2000. The closing date was originally set for December 31, 2003, but upon request o f the Borrower, the Credit was extendedto June 30,2005. A Japanese Policy and Human Resources Development Fund Grant o f USD 240,000'4 financed technical assistance during implementation. C,The Request 8. The NGO Forum on Cambodia submittedthe Request on its own behalf and on behalf o f affected local communities living in the districts o f Tbeng Meanchey in Preah Vihear Province; Siem Bok and Sesan in Stung Treng Province; and Management Response, 7 60. Management Response, 7 10. loManagement Response, 7 9. `IManagement Response, 7 60. The three areas are Central Cardamom (401,313 ha), Mondulkiri (429,438 ha), and Preah Vihear (190,027 ha). l2Management Response, 7 60. l3USD4.6 million equivalent at the time of Credit approval. l4Japanese Grant Agreement, (Forest Concession Management and Control Pilot Project), TF026419, January 11,2001. Anlong Veng in Oddar Meanchey Province, Cambodia. As indicated above, these four districts are located respectively in the concession areas o f the companies Chendar Plywood, Samraong Wood, Everbrightand Pheapimex. 9. The Requesters claim that "in its commissioning and supervision of the FCMCPP, the Bank has violated a number of its operationalpolicies leading to harm or potentialfuture harm to people living in the project-affected areas."" Intheir view, the Projecthas "endorsedforest concession managementplans of six forest concession companies" that "have a poor record with regard to the protection of community rights and livelihoods."16 The Requesters claim that when the logging activities resume, trees the villagers tap for resin will again be "cut i l l e g a l l ~ "and the villagers will be subject to the "kinds of abuses "I8 they ' ~ have suffered inthe past. 10. The Requesters allege that "through flawed project design and poor implementation the World Bank has promoted the interests of the logging concession system and concessionaires," even though "the companies have already caused harm to theforest-dependent communities and will continue to do ~ 0 . ' " ~ They add that by assisting the companies in preparing sustainable forest management plans (SFMPs) and environmental and social impact assessments (ESIAs), the Bank i s "using loan money to beneJit logging companies that have a track record of timber thejt tax evasion and human rights abuses.20" In the Requesters' view, by endorsing such management plans and impact assessments with no additional check and balances requirements, the Bank has "increased the likelihood" that these companies will continue their logging concession, and has strengthened the companies' position "making it even more difJicult for adversely affected communities to hold them to account." The Requesters allege that the Bank "has contributed to a set of outcomes that stand to inflict harm onforest-dependent communities in the nearfuture."21 11. The report prepared by Global Witness further elaborates on these claims and describes in details the policy violations the Requesters believe the Bank i s responsible for. According to the Requesters, "[bloth the design and the execution" o f the Project "have contravened World Bank operational policies.22" Intheir view, the "overall consequence" of these violations is that the Bank has endorsed concessionaires' activities harmful to forest dependent people, showing its "bias towards the concession companies." If World Bank ~~ 15 Request, Letter 1, p. 2. I` Request, Letter 1, p. 1. "Request, Letter1,p.2. l8 Request, Letter 1, p. 2. *'Request,Letter I 9 Letter 1, p. 2. Request, 1, p. 2. 2 1 Request, Letter 1, p. 2. 22 Request, Attachment 1, p. 58. 4 policies had beencomplied with, the Request alleges, the Project "would never have been conceived in the way it was."23 12. With respect to the Project's Environmental Assessment, the Requesters claim that the Bank did not comply with OP 4.01's requirements related to the classification o f the Project, the evaluation o f the impacts, public consultation and disclosure o f information. According to the claimants, the Bank "erroneously categorized the FCMCPP project as Category B."24 In their view, the Project should have been categorized as "A" because the concession system caused "signijkant adverse environmental impacts," such as "immediate degradation" and "damage to watershed," which under OP 4.01 require the classification as Category A. In addition, the Requesters believe that an "A" classification i s warranted as the logging concessions have impacts that cannot be construed as "site speczjk" because they affect an area larger than the site o f the Project's physical works and cover "a significant portion of Cambodia'sforest reserve and largepopulation who inhabit or depend on itfor their livelihood."25 13. The Requesters complain that not only was the Project incorrectly categorized, but "the level of assessment was so low that it did not even conform to Categoy B standards."26The Request also includes passages from the Project Appraisal Document (PAD) and infers from them that "the Bank has chosen not to address environmental impacts at the pre-project plannin stage and will instead deal with them during the implementation phase." However, the claimants state, given that the Bank's EA policy "is primarily concerned with prior assessment of potential risks" the Bank did not comply with the policy because it was "unable to show any such assessment [...] asidefrom the ESIA [Environmental and Social Impact Assessment] work done in conjunction with the concessionaires themselves, the standards of which fall well short of the requirements of OP 4.01.'y28 The claimants believe that this happened because the FCMCCP is a learning and innovation loan and "Bank staffassociated with the FCMCCP are evidently keen to push the idea that [...I it was therefore not bound by Bank operational policies."29 They conclude that if a proper assessment had been carried out "it is unlikely that the Bank would have decided to support the activities of environmentally destructive ~ompanies.~~" 14. The Requesters claim that "it is not clear what consultation, ifany, tookplace before the project began." They add that the affected people who submitted the Request to the Panel "were not amongst those invited toparticipate in any 23Request, Attachment 1, p. 58. 24Request, Attachment 1, p. 59. 25Request,Attachment 1, p. 59. 26Request, Attachment 1, p. 60. 27Request, Attachment 1, p. 61. 28Request, Attachment 1, p. 61. 29Request,Attachment 1,p. 61. 30Request, Attachment 1, p. 62. 5 pre-project consultation process. ,131 According to the Requesters, although the Bank states that consultation was carried out through "Bank-supported activities of the concessionaires, jJ2 the companies did not carry out any consultations during the preparation o f the management plans submitted in 200233. When companies were indeed compelled to consult affected people in late 2002 and early 2003, such consultations, the Requesters claim, L`wereofa poor standard, with instances in whichparticipants were subject to intimidation by guards and oficials accompanying company representative^."^^ It is the Requesters' belief that "[qn this context, Jawed consultation is arguably more damaging than no consultation at all."35 The Request also states that the Bank did not ensure that the Sustainable Forest Management Plans (SFMPS)~~and ESIAs were disclosed to community representatives inNovember 2002.37 15. The Requesters claim that the Bank has violated its own policy on Forests - OP 4.36 - as it provided technical assistance to "undeserving" logging companies "to facilitate their future logging operations. JJ38 They also believe that the Cambodian government can hardly be deemed "in compliance with all or even many" o f the criteria the policy demands from a government that i s committed to sustainable forest management.39 The Request addresses one by one these five criteria to document the policy violations they believe have occurred. In summary, they claim that the Bank has not tried to challenge the problematic features o f the concession system, including non-competitive and non- transparent concessionaires' selection process, but has adopted this concession system as the foundation on which to buildits project.40 The Requesters further maintain that no development plan outlining a clear definition o f roles for the government, the private sector and the local people for forestry conservation has been elab~rated:~' that the concession companies have prepared "extremely poor" social, economical and environmental assessment; that there was no prior assessment o f Cambodia's production forests before parceling them into concession; and that the companies "have consistently disregarded forest dwellers ' rights and interest^."^^ Inaddition, according to the Requesters, the FCMCCP has no institutional capacity, and the reorganization o f the DFW into the FA has worsened the situation because o f "[iJnstitutionalJlaws such as the 3'Request, Attachment 1, p. 62. 32Request, Attachment 1, p. 62. 33Request, Attachment 1, p. 62. 34Request, Attachment 1, p, 62. 35Request, Attachment 1, p. 63. 36Inthe Request, Attachment 1, (page 63), SFMP stands for Sustainable ForestManagement Plans. In Management Response's Abbreviation List, SFMP stands for Strategic Forest Management Plans. 37Request, Attachment 1, p. 63. 38Request, Attachment 1, p. 68. 39Although the Requesters seem to refer to the current Bank policy OP 4.36 on Forests (November 2002), the policy applicable to this Project is the old OP 4.36 on Foresty (September 1993), as the Project Concept Review took place before January 1,2003 (See OP 4.36, November 2002, Note). 40Request, Attachment 1, p. 69. 4'Request, Attachment 1, p. 69. 42Request, Attachment 1, p. 69. 6 lack of separation between production management and regulatory control 16. The Request also complains that the Bank did not undertake an assessment that could have identified the Cambodian forests, such as the Prey Long Forest, as `tforests of high ecological value. jA4 Similarly, the Requesters claim that the promotion o f forest concessions in the context o f the FCMCCP will lead to degradation o f natural habitats, inviolation o f OP 4.04.45 They state that the six management plans approved under the Project (with the "proposed o ~ e r c u t t i n g ~ ~ " ) and the past behavior o f the companies indicate that this degradation will continue.47 According to the Requesters, "[ilt appears that the project's architects and executors have declined to consider theforests slated for logging as natural habitats. Once again, the Requesters believe that this failure has ledto a "poorly conceivedproject."49 17. The Request claims that "Cambodia 's indigenous people, notably the Kouy minority [.. .] are directly affected by the logging concessionaires." The Requesters state that these populations live in the forests in the north and northeastern part o f the country - "the heart of Cambodia 's logging concession system." Their livelihood and culture are "intrinsically linked with theforests" and this "makes them particularly vulnerable to the impacts of industrial logging operation^."^^ Inthe Requesters' opinion, the Bank seems not to have identified issues relatedto indigenous peoples.51 18. The Requesters claim that "the Bank deemed that no indigenous people s plan was required," because, among other reasons, concession plans approved under the Project adequately addressed social issues and a social consultant had been hired to look into how the concessionaires deal with the social impacts at the compartment (five year) planning The Requesters argue that an indigenous people development plan was necessary under OD 4.20 on Indigenous Peoples because the "very existence" o f an indigenous peoples policy suggests that "this issue is distinct from broader question of social impacts." Moreover, they add, analysts from the Bank itself "have consistently dismissed the idea that consideration of these [social impacts] can be relegated to the compartment five year) planning 43 Request, Attachment 1, p. 70. 44 Request, Attachment 1,p. 70. 45 Request, Attachment 1, p. 71. 46 Request, Attachment 1, p. 71. 47 Request, Attachment 1,p. 71. 48 Request, Attachment 1, p. 71. 49 Request, Attachment 1, p. 72. Request, Attachment 1, p. 64. 5 'Request, Attachment 1, p.65. 52 Request,Attachment 1, p. 66. 53 Request, Attachment 1, p. 66. 7 19. The Request also mentions that under a 2001 Cambodian Law, the indigenous people have a prior claim to the land on which they practice traditional agriculture, including "lands held in reservefor thesepurposes." According to the Request, this should lead to repealing the "competing claims from logging concessions companies whose contracts were issuedprior to 2001 ." 20. According to the Requesters, the Bank has also violated the policy on Cultural Property, OPN 1I.3. Although the six logging concessions areas approved under the Project "contain both spirit forests and sites of archeological importance that undoubtedly constitute cultural property," no survey of these sites was carried out during Project ~reparati0n.j~The Requesters further complain that the Bank did not take into account the concerns o f the communities in and around the concession areas about the inclusion o f spirit forests inthe concessionaires' management ~ 1 a n s . j ~ 21. The Requesters allege that the Bank has failed to comply with OP/BP 8.40 on Technical Assistance. In their view, there are deficiencies in the work o f the Technical Assistance (TA) consultants, such as assisting and advising logging companies that "should have been excluded" from the consultants' terms of reference, and refusing to take into account the prohibition under Cambodian Law on cutting resin-producing trees.j6 These failures, according to the Requests, also violate the policy on ~upervision.~~ 22. The Requesters state that the World Bank has been "negligent" in its supervision o f the FCMCCP58,thus violating the related policy OP/BP 13.05. Section 2 o f the Global Witness report - Project Implementation - includes a detailed account of the alleged policy "breaches"59 by the Bank. The Requesters believe that once the implementation o f the Project began, "the case against the concession system and its operators [...I strengthened [...I more as evidence of concessionaires ' illegal activities emerged.60" They contend that the Bank tolerated the FCMCCP's "indulgent view of forest crimes by the concessionaires.yy61What i s more, the Request adds, in June 2004 the Bank recommended to the government the approval o f the six companies' logging plans6*. Other violations o f the supervision policy that the Requesters believe occurred are: inadequate and inappropriate consultations during the preparation of the SFMPs and EIAs; failure to observe minimum standards in the 2003 forest cover survey developed under the Project; and the Bank inaction to stop the companies to log resin trees, which is an illegal activity that will further ~~ ~ 54 Request, Attachment 1, p.74. 55 Request, Attachment 1, p. 75. 5G Request, Attachment 1, p. 74. 57 See Request,Attachment 1, pp. 20, 21, 72. 58 Request,Attachment 1, p. 72. 59 Request, Attachment 1, p. 72. ` ORequest,Attachment 1, p. 19. "Request,Attachment1,p.19. 62 Request,Attachment 1, p. 19. 8 impoverish the people.63 In the Requesters' view, "lack of supervision has accounted for many of the FCMCPP's damaging acts and omissions [...I [which] in turn have contributed to the project's overall negative impact : legitimating of aflawed system and rogue concessionaires that cause material harm toforest-dependent communities."@ 23. The Requesters conclude their submission to the Panel by stating that the FCMCCP is harmful, because o f the "Bank's determination to keep the concessionaires ~perating."~~ They believe that the project was conceived within the Bank "around the assumption that the concession system would work and this could be demonstrated through its [the Bank] project intervention.66" However, the Requesters add, "this distortion that the Bank introduced in the project's conceptual framework has driven the FCMCCP's constant effort to lower the bar for the concessionaires and ensure that some of them stay in business."6' 24. In its Notice of Registration, the Panel noted that the above claims may constitute violations by the Bank of various provisions o f the following operational Policies andProcedures: OP/BP 4.01 Environmental Assessment OP/BP 4.04 Natural Habitats (September 1995) OPN 11.03 Cultural Property O D 4.20 Indigenous People OP/BP 4.36 Forestry OP/BP 8.40 Technical Assistance OD/OP/BP 13.05 Project Supervision BP 17.50 Disclosure o f Information D.ManagementResponse 25. On March 8, 2005, Management submitted its response to the Request. The Response provides background information on the Project and discusses a number of challenges encountered during implementation, such as issues related to the logging concession systems and poor logging practices; log transport permits; a weak national forest revenue management system; and tensions among various stakeholders. The Response also discusses in detail the so-called "special issues" o f this project (1) Bank approach to the forestry issues; (2) weakness in Cambodian governance institutions and (3) forestry management instruments. It also includes "lesson learned" and "next step" 63Request,Attachment 1, p. 73. 64Request,Attachment I,p.73. 65Request,Attachment 1, p. 81. 66Request, Attachment 1, p. 81. "Request,Attachment1,p.81. 9 sections. Detailed responses to each specific claim raisedby the Requesters are provided inAnnex 1of Management Response. 26. The "lesson learned" section o f the Response frames many of the difficulties the Bank faced, and i s facing, in Cambodia and with the FCMCPP Project in particular. Management states that the "Bank chose to address afocused and prioritized set of issues" such as concession management, forest crime and community forestry.68 It also argues that while this Project attempted to "introduce the concept of social responsibility" in the Cambodian management o f public resources, it was not enough to "address the underlying distrust" against the concession system.69 ``In retrospect", Management claims, "many crucial issues might have been more effectively addressed at an earlier stage," and the Bank could have ``played a more proactive role" in ensuring the involvement o f local communities since the Project design phase, possibly through "conditionalities in the legal agreement concerning social Further, having recognized that "Project implementation was slow," Management maintains that the Bank "repeatedly raised concerns with the Government about its performance [...I"although, "in retrospect'' it admits that the Bank could have beenmore aggressive in questioning the Government and more outspoken invoicing its concern^.^' 27. With respect to alleged instances of non-compliance the Requesters raise, Management believes that it "made every effort to apply its policies and procedures [.,-1'' although it recognizes not being "in full compliance with processing and documentation provisions of OP 4.01 and OD 4.20 during project prep~ration."~~ Management adds, however, that "[tlo have complied fully with the policies, the Bank should have requested more explicit documentation from the Government and provided more extensive explanation in the PAD. Local-level consultations on the proposed project concept should have been held at selected concession locations. ,773 According to Management, the "lack of full compliance" with the policies "has not had a material effect on the project nor has it led to harm or potential future harm to people living in project affected areas."74 It also states that the "Bank did anticipate the social and environmental issues associated with theproject, incorporated processes to address these issues into the project and supervised the project appropriately. rj75 According to the Response, any h a m the Requesters may have suffered has not been caused by the Bank-financed FCMCCP. It i s Management's view that "the Requesters 'rights or interests have not been, nor ManagementResponse,7 64. 69ManagementResponse,7 64. 70ManagementResponse,7 64. 71ManagementResponse,164. 72ManagementResponse,173. 73ManagementResponse,139. 74ManagementResponse,740. 75ManagementResponse,7 73. 10 will they be, directly and adverseZy affected by a failure of the Bank to implement itspolicies andprocedures. ,176 28. In its Response, Management challenges one of the main allegations included in the Request - that the Bank has promoted the interest of the logging concessions and the concessionaires - and states that, to the contrary, the FCMCCP Project triedto assist the government o f Cambodia (GOC) to regulate the forestry sector in a "more effective and equitable77" way, The Response explains that the Cambodian forest concession system was established in 1994 without Bank assistance. However, as it became clear in Cambodia and in the international community that the country needed a "transparent and accountable system to control and manage the concession system," the Bank decided to assist the government in this effort. Although several issues were expected to emerge, such as conflicts o f interests and capacity limitations, Management claims that, at the time o f Project preparation, the Bank, NGOs and other donors "were optimistic about working constructively with concessionaires.78y~ The Response emphasizes that the Project did not provide any funds to forest concessionaires, because "Project funding seeks to build capacities within the Government79"for forest crime monitoring and reporting in general and to help the FA to control illegal logging." Management also states that the Project "was based on extensiveprior studies", such as an ADB- commissioned review (the Fraser Thomas study), the BanWFAOIUNEP Forest Policy Assessment, and Bank supervision o f a previous Technical Assistance Project (TA) approved in December 1994 (Credit No. 2664-KH)." These studies recognized .that forest and other land had been misallocated to concessionaires. Thus, Management continues, "the project 's process orientation was intended toprovide apractical contextfor reassessment of land andforest use, based on site-specijk data."82 29. With respect to the erroneous environmental categorization o f the Project claimed by the Requesters, Management believes that "the decision to class@ this project as a "B " was correct and appr~priate."~~ The categorization o f a project depends on various factors, including the "nature and magnitude of its potential environmental impacts," and is normally based on "expected impacts on-the-g~ound.~~" According to Management, a forestry project i s typically classified as A when it involves plantation activities or production forestry. This Project was categorized as B because o f its "interventions," such as strengthening the capacity o f Cambodia and forest crime monitoring and '`Management Response,7 73. 77 Management Response,Annex 1, Item 1, p. 25. 78 Management Response,Annex 1, Item 1, p. 25 79 Management Response, Annex 1, Item 1, p. 25 8o Management Response, Annex 1, Item 1, p. 26. Management Response,Annex 1, Item2, p. 26 82 Management Response,Annex 1, Item2,p.26. 83 Management Response,Annex 1, Item5, p. 29. 84 ManagementResponse, Annex 1, Item5, p. 29 11 reporting. It was not rated C, the Response notes, because of concerns about the social and environmental implications o f the concession system. Management acknowledges that the files do not show that the draft Environmental Data Sheet reflecting the B categorization was finalized, but notes that the rationale for the B categorization i s explained in the Project Information Document (PID).85 30. Management states that no Environmental Assessment (EA) was carried out prior to appraisal,86 but adds that "no A-level EA process was req~ired."'~ Management also claims that the project design incorporates measures to address the Project's environmental and social problems." The Response explains that "[s]pecijk planning decisions to be made at each location could not be known in advance" and "the value added of additional up-front impact analysis was, therefore, questionable [. . A `>rocess-oriented approach'' was thus preferred". However, Management recognizes that the PID "did not record the type of environmental impacts, make note o f the type o f EA or EA instruments needed or of a proposed consultation s~hedule.~'"Management adds that "[wlhile noting that the processing requirements for a LIL were not well developed at the time, Management acknowledges, nevertheless, that the Bank was not infull compliance with OP 4.01."92 31. Management also recognizes that the only environmental assessment work undertaken during the Project's first four years was the ESIA that each concessionary was required to prepare under Cambodian law. It also acknowledges that there are still no "satisfactory standards" for the preparation o f the ESIAs and the sixteen developed so far by the concessionaires "have been In view of this, the Response states, "of these concessions, ten have either been cancelled by the Government, withdrawn voluntarily or identiJied for rejection by the FA."94 Six concessions remain under consideration and are still subject to rejection or further requirements. Management claims that it will "continue to work with the Government to improve the quality of the ESIA through the ongoing independent Review of SFMPs and ESIAs, recommendations of which have been provided to MAFF. "" *`ManagementResponse,739. 85 Annex 1, Item5, p. 30. *'ManagementResponse,Annex ManagementResponse, 1, Item6, p. 30. ManagementResponse, Annex 1, Item6, p. 30. 89ManagementResponse, Annex 1, Item6, p. 30. 90ManagementResponse,Annex 1, Item6, p.30. 9'ManagementResponse, Annex 1, Item6, p. 30. 92ManagementResponse, Annex 1, Item6, p. 30. 93ManagementResponse, Annex 1, Item7, p. 31. 94ManagementResponse, Annex 1, Item7, p.31. 95ManagementResponse, Annex 1, Item7, p. 31. 12 32. The Requesters also complain about lack o f disclosure o f the SFMPs and the ESIAs. Management responds that "although not required under Bank policies, proper disclosure" of these documents was a "pressing" concern for the Bank.96 According to the Response, although disclosure was agreed with the Government inJune 2002, the FA resisted the publication o f the documents. ``After much pressure from the Bank" in October 2002 the Government agreed to disclose the draft SFMPs, and the FA to place Khmer versions o f the plans in each affected commune. The documents were also to be publicly available in the Bank's Public Information Center (PIC), though problems arose because NGO representatives complained that color copies o f these documents were not available inthe Bank's Public Information Center.97 The dispute was solved in November 12, 2002, when several copies were provided to NGOs. Management concludes, however, that "public disclosures of documents could have been planned better" and that expectations o f disclosure have not been managed properly.98 33. With respect to the claim that affected communities were not consulted, Management states that "there were no consultations speciJic to the EA process."99 However, Management claims that "the project builds on'' consultations carried out in the context o f the above-mentioned TA project, on ADB-supported consultation, on "Bank work during the identipcation mission," and consultations conducted on community forestry during the Fraser Thomas study'". Inaddition, the Response claims that the Bank consulted with NGOs in 1998 when it assisted the Government in the design of the forest planning system and drafting of regulation, guidelines and codes. A workshop with NGOs was also organized in 1999 to discuss forest certification. Management acknowledges that "the quality of consultations may have been affected by the presence of higher level officials," although it maintains that at the time o f the project appraisal "there was suficient information about the social and environmental aspects of the concession management system to design a process to address these aspects.'0'" Management also claims that this consultation process "led to a set of criteria and guidelines for sustainable production/concession forest management, specipcally [...] protecting the rights of the communities/people.'"02 34. As to lack of consultations during the preparation of the ESIAs, the Response emphasizes that the Bank did not finance any activities o f the concessionaires and does not endorse any claim that the companies have conducted the consultations adequately. However, the Response claims that such consultations '6ManagementResponse,Annex 1, Item22, p. 40. '*ManagementResponse,Annex1, O7 1, Item22, p. 4 1. ManagementResponse, Annex Item22, p. 41. "ManagementResponse,Annex I,Item8,p.3I. loo ManagementResponse,Annex 1, Item8, p. 31. lo' ManagementResponse,Annex 1, Item8, p. 32. lo* ManagementResponse, Annex I,Item8, p. 32. 13 have been conducted because o f the "Bank's effort to improve the Governments' management and control over the concession system.lo3" In addition, the Bank has made efforts "to develop linkages between NGOs, including the NGO Forum and the FA." When the Bank realized that the FA and the concessionaires were not carrying out adequate consultations, the Bank recommendedto the Government to hire an international consultant to preparea "step by step manual" for community consultations. Moreover, Management adds that the "Bank has monitored the consultationprocess" and pointed out its weaknesses to the GovemmentIo4.On the other hand, Management states that consultations with affected communities in each concession area are the responsibility of the concessionaires when they prepare their compartment and annual plansIo5. With respect to the Requesters' allegation o f intimidation during the consultation process, Management responds that "the Bank cannot take action against non-Bank stafJ:'06" However, Management contacted "immediately" MAFF after the intimidation incidents referred to by the Requesters.`07 "The Government's account" Mana ement claims, "did not support the allegation of threats having been made."" F 35. In response to the allegation of non-compliance with the Bank policy on Forestry, Management reiterates that the Project does not finance logging operations, including in high ecological value areas,'" nor have the concessionaires received any Bank funds. The Response again emphasizes that the Project has supported activities permittedby OP 4.36, such as inventory and fields control, capacity building and system development.' lo Management maintains that the Bank has engaged in Cambodian forestry, and particularly in the FCMCPP, based on ``$rank dialogue" with the Government as well as NGOs, and has received "repeated assurances of commitment to a sustainable forest policy.yy' `' Management claims that the Project is a "vehicle to test "Il2and if possible "convert that commitment to an ongoing program," and lists a series o f actions from both the Bank and the GOC working towards that goal. It i s Management's view that, although the "progress of the Government on the reform agenda was and continues to be uneven" it was encouraging.' j 3 36. Management also believes it i s in compliance with OP 4.04 because "[nlo' degradation o f critical habitats has occurred due to the project."It4 It adds that I O 3ManagementResponse,Annex 1, Item9, p.32. I O 4ManagementResponse, Annex I,Item9,p. 33. lo' ManagementResponse, Annex 1, Item9, p. 33. ManagementResponse,Annex 1, Item 10, p. 33. lo' ManagementResponse, Annex 1, Item 10, p. 34. Io* ManagementResponse, Annex 1, Item 10, p. 34. IO9 ManagementResponse, Annex 1, Item 16, p.37. `Io ManagementResponse, Annex 1, Item 14, p. 36. `I' ManagementResponse,Annex 1, Item 14, p. 36. ` I 2Management Response, Annex 1, Item 14, p. 36. ManagementResponse, Annex 1, Item 14, p. 37. `I4 Management Response, Annex 1, Item 17,p. 38. 14 no concession over new areas has been approved because of the Project and the planning guidelines for existing concessions prevent the issuance o f cutting permits before completing the forest management planning process, which requires the preparation of three plans (strategic concession-wide 25 years; 5- year compartment and annual). The Response claims that no cutting permits have been issued to date. With respect to biodiversity issues, the Response states that the Bank identified biodiversity concerns since the beginning o f its work in Cambodian forestry. Under the Project, the Government adopted the "Biodiversity Conservation Guidelines for the Managed Forest," prepared in collaboration with WCS and revised based on a field study supported through Bank-Netherlands Partnership Program grant resources, and a Biodiversity Code of Practice."' 37. The Request claims that the Project adversely affects the Kouy indigenous peoples but did not take them into consideration. Acknowledging that the "Bank was not in full compliance with OD 4.20," Management responds that the policy was deemed applicable during preparation though "no efforts were made to developpolicies andplans in accordance with OD 4.20.""6 It adds that "the project approach was to develop, together with and as part of the general consultation process, criteria and guidelines for community engagement in concession areas with local people" but admits that "in hindsight, screening studies and a framework Indigenous Peoples Development Plan, along with more discussion of the issue, would have been more appropriate during project design.""' Management claims that the importance o f this issue has been later recognized in Aide Memoires and BTOs in 2003 and 2004, which recommended "to revise comprehensive guidelines for community consultations" to include, inter alia, specific provisions for Indigenous Peoples and protection o f cultural and spiritual resources.' l8 38. Management acknowledges also that no Indigenous Peoples Development Plans were prepared under the Project, because "Indigenous Peoples issues were to have been embedded in the SFMPs and ESIAs prepared by the concessionaires. ""'The SFMPs and the ESIAs should have addressed issues such as the identification o f forest dependent communities and consultations about their rights. Management recognizes that "guidelines for community consultations are dispersed in various documents and manuals" and that the "Bank had already acknowledged this, because the SFMPs and ESIAs were inadequate and theprocess of consultationflawed."'20 ~ ~~ `I5 Management Response, Annex 1, Item 19, p. 38. Management Response, Annex 1, Item 12, p. 34. 'I7 Management Response, Annex 1, Item 12, p. 34. `I8 Management Response, Annex 1, Item 12, p. 35. ` I 9Management Response, Annex 1, Item 13, p. 35. Management Response, Annex 1, Item 13, p. 35. 15 39. Management "believes that the project complies with OPN 11.03" on Cultural Property, since the "SFMPs and ESIAs have not been `approved"' for the six loggingconcession areas and "the Bank has not conveyedany endorsement. ""' The Response claims that the Bank expressed concerns about spirit forests and sites sacred to the local communities and recommended "participatory mapping of community useforest," such as resin trees and spiritual, burial, village and bamboo forests, to exclude these areas from any form o f logging.'22 Management also claims that the Project developed guidelines to identify and designate Special Management Areas, which include sacred groves, spirit forests, and archeological sites. However, the Response adds that, because o f inadequate consultations, "archeological sites may not have been identified yet."123 According to Management, as a step-by-step consultation manual is under preparation, "cultural resources to the extent that these are known to local communities" will be considered so that cultural resources areas will be excluded from commercial logging operations, 124 40. Management further believes it has complied with the Bank policy on Project Supervision. Management emphasizes that it has "supervised the project intensively." The Response states that "[nline formal supervision missions including a mid-term review (MTR)" were conducted since June 2000."'25 41. The Response notes that Unsatisfactory ("U") ratings on certain aspects o f the project ``were first registered in December 2001 The Development Objectives and Implementation Performance ratings were downgraded to "U" in December 2002. As of the end of 2004, the Implementation Performance rating i s still Unsatisfactory.'*' [The Panel observes that, as o f December 21, 2004, Implementation Progress and Monitoring and Evaluation are rated "U." The Project component "Forest Crime Monitoring and Prevention" i s also rated Unsatisfactory.] 42. Management reports that a "voluntary" Quality Enhancement Review (QER) was also conducted upon "request of the East Asia and the Pacific (EAP) Region" inOctober 2003. The QERfound that, while "goodforest governance is far from being achieved," reforms in this area "would not be moving at all without Bank It also found, however, that the Bank image and its effectiveness "have suffered" in this Project because of, inter alia, "an insuficiently well articulated bank commitment to non concessionaire forest 12' ManagementResponse,Annex 1, Item21, p. 39. 122 ManagementResponse, Annex 1, Item21, p. 39. 123 ManagementResponse, Annex 1, Item21, p. 40. '" 124 ManagementResponse, Annex 1, Item21, p. 40. ManagementResponse,7 16. '""*ManagementResponse, Annex 1, Item29, p. 45. ManagementResponse, Annex 1, Item29, p. 45. Management Response, 18. 7 16 users, especially the rural poor in and near the forest."'29 The QER further expressed concerns about the effectiveness o f the LIL instrument to address long term forest governance issues in Cambodia and emphasized the need for the Bank to "develop and continuously refine a single coherent view on the substance and theprocess of the [Bank's] forest sector strategy."'30 43. In response to some o f the Requester's allegations, Management reiterates that the concessionaires have not received technical assistance under the FCMCCP Project. The Response acknowledges that consultation conducted for the preparation of the SFMPs and the EIASs was inadequate and notes that a social forestry consultant i s preparing revised consultation guidelines to address these issues. Management rejects the allegation that the Bank ignored evidence o f the concessionaires' illegal logging and claims that the Bank has supported studies and proposals aimed at "strengthening controls on illegal logging and log transport under the TAproject." Nevertheless, Management also refers to a Bank-financed 1998 report on illegal logging (Findings and Recommendations on L o g Monitoring and Logging Control Project) and supports the report's finding that "without further monitoring, it is difficult to determine to what extent uncontrolled logging is conducted by concessionaires, their sub- contractors or poacher^."'^' 44. Management's Response includes a section on "Lessons Learned" and concludes with a section on "Next Steps." Management proposes a "dual track approach, one for actions to be taken before project closure, and the second, suggested options over the longer term, once theproject has Among the proposed action preceding the closure o f the Project, Management includes the supervision of the "ongoing work to refine ... consultation procedures in order to better address, inter alia, Indigenous Peoples issues;'' "[ulrging the Government to formalize forest management planning procedures for post- concession and non-concession areas"; and "[sleekin a decision by the Government on concessions recommended for c10sure'~~'"Options"proposed for the post-project period include, among others, "[...]tofacilitate a transition from an international monitor to a participatory system of forest crime monitoring;'' and to apply the "lessons learned in the forestry sector to the broader dialogue on land/economic concession ref~rms.'~~'' The Bank also plans to keep its dialogue with the Government open so as to solve the outstanding issues affecting Cambodia's natural resources management'35. Management Response, 7 18. I 3 OManagement Response, 7 18. I3l Management Response, Annex 1, Item 27, p. 43. The Report was financed under the 1994 TA Project. 132 Management Response, 7 65. `33 Management Response, 7 66. 134 Management Response, 7 67. 135 Management Response, 7 71. 17 E.Eligibility 45. The Panel must determine whether the Request satisfies the eligibility criteria for an Inspection, as set forth inthe 1993 Resolution establishing the Panel and the 1999 Clarifications, and recommend whether the matter alleged in the Request shouldbe investigated. . 46. The Panel has reviewed the Request and Management's Response. The Panel Chairperson, EdithBrown Weiss, together with Panel member Tongroj Onchan and Executive Secretary Eduardo Abbott, visited Cambodia from March 12 through March 19, 2005. During their visit, the Panel Members met with the signatories o f the Request for Inspection and with over a hundred affected villagers from several communes, with the NGO Social Forum, Global Witness, Wildlife Conservation Society, Oxfam GB, and other local nongovernmental organizations, with national govemment officials, with the Danida Resident Representative in Phnom Penh, and with local Bank management and staff and the Country Director in Bangkok. The affected villagers with whom the Panel met included indigenous people. 47. The Panel i s satisfied that the Request meets all o f the eligibility criteria provided inthe 1993 Resolution andparagraph 9 o f the 1999 Clarifications. 48. Duringthe visit, the Panel confirmed that the Requesters are legitimate parties under the Resolution to submit a Request for Inspectionto the Inspection Panel. The villagers living in four different logging concession areas have a common interest and common concerns and reside in the Borrower's territory, as required in Paragraph 9(a). The Request also indicates that affected villagers have authorized the NGO Forum on Cambodia to represent their interests to the InspectionPanel. 49. The Panel notes that the Request "assert[s] in substance that a serious violation by the Bank of its operational policies and procedures has or is likely to have material adverse effect upon the requesters." The Requesters assert that "throughflawed project design and poor implementation, the World Bank has promoted the interests of the logging concession system and the concessionaires [...Idespite abundant evidence that the companies have already caused harm toforest-dependent communities and will continue to do so." The Requesters allege that the "World Bank has not succeeded in introducing any additional checks and balances to the concession system that would compel the companies to operate differently from the way that they did before." Moreover, "the World Bank project endorsement has in fact strengthened theposition of these six companies," who will now "present their operations as having the WorldBank seal of approval." The Request notes that "[slome companies are already using this endorsement to deflect criticism of their past and future actions, making it even more dijjjcult for adversely affected communities to hold them to account." 18 50. The Requesters assert that they have suffered serious harm or will suffer harm in the future, because the project "has contributed to a set of outcomes that stand to inflict harm on forest-dependent communities in the near future." Duringthe Panel's visit, the Requesters and other affected people stressed their grave concern about the destruction o f their livelihoods which depend upon the forests, because o f the logging o f resin trees, loss o f access to non-timber products in forests, such as fruits and medicinal plants, and elimination o f wildlife from the destruction o f the forest. 51. Some o f the Requesters are indigenous people who have centuries old ancestral ties to the forests and are dependent upon access to and use o f the forests for income. They fear the Project will destroy their way o f life and their culture, which relies on forests. 52. The Requesters allege that the World Bank actions constitute a violation o f Bank policies and procedures on forests, environmental assessment, indigenous peoples, and supervision and that these actions have had a significant adverse effect on the Requesters' rights, as required by paragraph 9(b). 53. Management Response alleges that "neither the four local communities who submitted the letter noted under item (i) [the Request] nor their representative had previously communicated with the Bank on the spec@ claims asserted in the letter."136The Request, however, provides a list o f letters and meetings between the NGO Forum on Cambodia, Global Witness, Oxfam GB (a member o f the NGO Forum on Cambodia), and the World Bank, and minutes o f meetings between the World Bank and the NGOs mentioned above. The Panel was able to confirm that the World Bank has been aware from the outset o f concerns from civil society about the Project's adverse effects on villages in concession areas, and that for the last four years numerous complaints about the Project, including from people represented in the Request for Inspection, have been brought to the Bank's attention. 54. Indeed, Management Response acknowledges that there have been numerous exchanges with civil society where all these concerns were voiced and discussed.137 According to the Requesters and their representatives, these include a November 2002 meeting where eight members o f the Requesters' villages visited the World Bank Phnom Penh office and complained about the destruction o f forests and the harmful effects on commune life. In addition, during its field visit, local communities confirmed to the Panel that on March 17, 2004, representatives from the four different concession areas signing the Request participated in a meeting in Phnom Penh where the issues raised inthe ~~ 13`Management Response,7 4. `37Management Response,Annex 1, Item22. See also ManagementResponse, Annex 5, whichdescribes the meetingreferencedinAnnex 1as anNGO-ledWorkshop with "NGO-led discussions with communities" and "with several sets of comments submitted." 19 Request for Inspectionwere discussed. The Request for Inspection states that at this particular meeting "an expert from the World Bank," in referring to the concession system, asked "Why do you say it isfinished? We have worked hard to improve the logging concession system and it is good now, it is almost operating again.'' According to the Request, this made clear to the representatives that the "World Bank is supporting the logging concession system" and that the "World Bank had loaned money to the government to help the logging companies prepare management plans so that they can log again." 55. The Panel i s therefore satisfied that the Request "does assert that the subject matter has been brought to Management's attention and that, in the Requesters' view, Management hasfailed to respond adequately demonstrating that it has followed or is taking steps to follow the Bank's policies and procedures. " Hence, the Requestmeets the requirement o f Paragraph 9(c). 56. The Panel notes that the subject matter of the Request i s not related to procurement, as requiredby paragraph 9(d). 57. The expected closing date o f the related loan i s June 30, 2005. Only about 73 percent o f the Credit had been disbursed as o f the date the Request was filed. The Request therefore satisfies the requirement in paragraph 9(e) that the related Credit has not been closed or substantially di~bursed.'~~ 58. Furthermore, the Panel has not previously made a recommendation on the subject matter o f the Request.Therefore, the Request satisfies paragraph 9(Q. 59. The Panel notes the importance for economic development o f undertaking risky projects and acknowledges that the Bank has been willing to provide financing indifficult situations where other sources o f financing have been wary o f doing so. The Panel welcomes Management's willingness to take risks in supporting activities in a complex and controversial area like the forestry sector in Cambodia. Inthe instant Request, however, the Panel notes the allegations that the Credit has led to support for a system o f private logging concessions, which i s perceived by many as causing serious harm. The World Bank actions connected with this alleged result are the subject o f this Request for Inspection. 60. The Panel also notes that Management's Response contains a number of remedial actions that in Management's view would address the Requesters' concerns and improve Project implementation. While these actions indicate Management's intention to comply with the policies and procedures invoked by the Requesters, the Panel i s not satisfied that they would ensure compliance with, inter alia, the applicable environmental and indigenous peoples policies. The Panel cannot be satisfied that the actions described by Management in the Response would, by themselves, demonstrate prima facie compliance with ~ .I3* According to the Resolution that established the Panel, "this will be deemed to be the case when at least ninety9vepercent of the loan proceeds have been disbursed." Footnote to Paragraph 14 (c). 20 Bank policies and procedures as required by the Resolution. The Panel, therefore, cannot refrainfrom recommendingan investigation. 61. In order to ascertain compliance, or lack thereof, the Panel must conduct an appropriate review o f all relevant facts and applicable policies and procedures. The Requesters, Management's Response, the Panel's visit to Cambodia, interviews with Govemment officials, Bank staff, and affected persons, confirmed that there are sharply differing views on the issues raised by the Request for Inspection. F. Conclusions 62. The Requesters and the Request meet the eligibility criteria set forth in the Resolution that established the Inspection Panel and the 1999 Clarifications. The Request and Management Response contain conflicting assertions and interpretations about the issues, the facts, and compliance with Bank policies and procedures. 63. In light of the foregoing, the Panel recommends that an investigation be conducted. 21 Annex 1 REQUESTFORINSPECTION . 21January 2005 ., .n Office ofthe InspectionPanel World Bank 1818 MStreet, M.W. WashingtonDC 20433 UnitedStates ofAmerica Requestfor Inspection: ForestConcessionManagement andControl (Pilot) Proiect - Cambodia The NGO Forum on Cambodia, actingas arepresentativeofaffectedlocal communities, wishto submitthe ForestConcessionManagementandControl (Pilot) Project (FCMCPP) in Cambodiafor Inspection. Insupportofthis InspectionPanelrequest, we attachanumberofsupportingdocuments: 1. Two letters fromrepresentativesofaffectedcommunities, includingEnglish translations; 2. Reportpreparedby Global Witnessprovidingdetailsof the case andthe violations of WorldBankpolicies which occurred [Still under revision -may be sent a week later]; 3. Copiesof previous correspondencebetweenNGOsandthe World Bank regarding forestry inCambodia. The NGO Forum on Cambodiais a Cambodia-basedNGOmembershiporganisation representingboth international andlocalNGOs. We are a recognisednon-government organisationregisteredwiththe CambodianGovernment. For the past few years, we have conductedaForestLivelihoods Projectthat has facilitated the networking and advocacy of NGOsworking inforest concessionandex-concessionareas and the ruralcommunities they support. We have decidedto take this actionafter receiving letters froma number ofvillagers, signed inMarch2004, askingusto representtheir requestthatthe InspectionPanelofthe World Bankinspectall ofthe actionsofthe WorldBank-financedFCMCPP, which supportsthe loggingconcessionsysteminCambodia. Pleasenote that the local community representativeswho signedthe letters haverequestedthat their namesbe kept confidential. Since the villagers wrote their letters, the FCMCPPhas endorsed forest concession managementplansof six forest concessioncompanies, pavingthe way for the possible resumptionoflogging by companiesthat havea poorrecordwithregardto the protectionof community rights and livelihoods. As statedinthe villagers' letters, aresumption of logging will surelyentail arepeatofthe kindsofabusesvillagers havesuffered inthe past. The FCMCPP and Bank staff have also continued to endeavour to facilitate the movement of logs cut illegally, including trees that villagers tapped for resin. We perceive that inits commissioning and supervision of the FCMCPP, the Bank has violated a number of its operational policies leading to harmor potential future harm to people livinginthe project- affected areas. Over the past few years, NGOs inCambodiahave raised with Bank staff problems associated with the FCMCPP on numerousoccasions (see sample of correspondence attached), While some of the responseshave beenencouraging, the violation of World Bank policies and the potential harm to forest-dependent communities has not been substantially addressed. The NGO Forumfinally decided to represent the above-mentionedvillagers inameetingheld on 10' January 2005. The NGOForum's Management Committee (a group elected from our members)heardopinions from NGOs involved inforestry andhumanrightsissues andfrom NGOsoperating inthe project-affec tedareas before makingtheir decision. Our concern i s that: 1, Through flawedproject designandpoor implementation, the WorldBank has promoted the interests of the logging concession system andthe concessionaires. This despiteabundantevidencethat the companieshave already causedharmto forest-dependent communities and will continue to do so. Here, it i s worth noting that the World Bank hadaround five years worth of information about the concessionaires'track records before the FCMCPP began. 2. A key element of the FCMCPP has been assisting the companiesintheir production of sustainable forest managementplans (SFMPs) andenvironmental and social impact assessments (ESIAs).The concessionaireshave beenrequiredto produce these as a precondition for continued logging. The Bank is thus usingloan money to benefit logging companies that have a track recordof timber theft, tax evasion and human rightsabuses. This would appear somewhat at odds with the Bank's stated goals of poverty reduction andpromotion of good governance. 3. By allowing its project to endorsethe sustainable forest managementplans and environmental impact assessments of six of these companies, the World Bank has increasedthe likelihood that they will continue to maintaincontrol of their concessions. At the same time, the Bank has not succeededinintroducing any additional checks andbalances to the concession system that would compel the companies to operate differently from the way that they didbefore. 4. The World Bank project endorsementhas infact strengthenedthe position of these six companies, which hereon will present their operations as having the World Bank seal of approval. Some companies are already usingthis endorsement to deflect criticism of their past andfuture actions, making it even more difficult for adversely affected communities to hold them to account. 5. Through its acts andomissions, the World Bank has contributed to a set of outcomes that standto inflict harmon forest-dependent communities in the near future. While the above-mentioned GlobalWitness report provides details of the Bank's violations of Bank operational policies, anumber of these violations are summarised below: erati& Policy OP 4.36 -Forests For the Forest ConcessionManagement and Control Pilot Project in Cambodia the applicable World Bank ForestPolicy would be OP 4.36, September 1993, along with relevant Annexes, c . as this was the operational policy inplace at the time of FCMCPP design andinitial implementation. The Policy says: operations... in primaly tropical moistforests. ' ' . e . . the Bank Group does notfinance commercial logging I' The Bankhas breachedthis Operational Policy, though indirectly, inits provision of loan- backed technical assistanceto commercial loggingcompanies that is designed to facilitate their future operations. Operational Policy on Environmental Assessment (OP 4.01) The Bankhas breachedanumber of provisions of this operational policy: Misclassification of the project as a lower impact category B project, rather than high- Impact category A. This lowered the level of environmental assessmentthat the project would be requiredto carry out. Lack of environmental assessment even to category B standards-infact, it appears that no meaningful environmental assessment was carried out before the project began. Poor standards of public consultation -Here the breach is twofold: lack of public consultation during the project planning stage and thenflawedpublic consultations duringits implementationstage. Poor standards of disclosure -this breach centres on the disclosure of the concessionaires' SFMPs andESIAs inlate 2002. This was marredby a failure to properly disclose inwhich the Bank's Phnom Penh office was directly involved. Ope-1 Directive 4 70 -In- Peoples Cambodia's indigenous people, notably the Kuy minority (who are represented among those who have drafted letters to the InspectionPanel), are directly affected by the logging concessionaires. Under OD 4.20, the Bank must ensure "infonned participation ' Iby indigenous people andproposedprojects that could impact on indigenous people, such as those relating to forestry, should be assessedcarefully. Screening of projects for such impacts should usually take place via environmental assessment, which as noted above, appearsnot to have beenundertaken for the FCMCPP. OD 4.20 states that "For a investmentproject that affects indigenouspeoples, the borrower should prepare an indigenouspeople 's developmentplan that is consistent with the Bank's policy. Any project that affects indigenouspeoples is expected to include components orprovisions that incorporate such aplan. If Operational Policy OP 13.05 -Project SuDervision - . . The Policy states, '?ISa development agency, the Bank also has an interest in assisting member countries to achieve their development objectives on a sustainable basis. To these ends, recognizing thatproject implementation is the borrower 's responsibility, the Bank supervises the borrower 's implementation of Bank-financed projects. 'I Project supervision is required inorder to "(a) ascertain whether the borrower is carrying out theproject with due diligence to achieve its development objectives in conformity with the legal agreements; (b) identify problems promptly as they arise during implementation and recommend to the borrower ways to resolve them; (c) recommend changes inproject concept or design, as appropriate, as theproject evolves or circumstances change. 'I Examples of the Bank's poor supervision of the FCMCPP include: * Allowing project technical assistance to be offeredto companies that should have been excluded under the terms of reference given to the TA consultants; * Overlooking the project requirements to undertake Environmental Assessment and produce an Indigenous People'splan; Failure to ensure that the planning processes for SFMPs andESIAscarried out under the auspices of the project includedadequateand appropriate consultation; Failure to ensure quality of the 2003 forest cover survey that the FCMCPPproduced. To our knowledge, the FCMCPP hasnot yet reachedthe 95% completion point beyond which an Inspection cannot be carriedout. We therefore request that the project be inspected and action be taken to bringit into compliance with World Bank policies. We would also like to suggest that the World Bank: * Publicly acknowledge the damage that the Forest ConcessionManagement and Control Project stands to cause to the interests of forest-dependent communities in Cambodia; Publicly refute the FCMCPP's endorsement of the six logging companies; * Write off the debt that Cambodia'scitizens have incurred through the Learning and InnovationLoan that supports the FCMCPP; Undertake a wide-ranging review of World Bank interventions concerning forestry and other extractive industriesto i)ensure that these projects have not breached the same operational policies standards as the FCMCPP; ii)ensure that they are not serving to entrench and endorseorganizations that have a history of illegal activities; * Include timber inthe Extractive Industries Transparency Initiative (EITI) andhold Bank interventions inthe forestry sector to the same standards as those inoil, gas and miningsectors. Insummary, our hopeis that anInspectionwould leadto bothrectifications inthe World Bank's approach to the forest sector inCambodia andpotentially to similar WorldBank projects elsewhereinthe world. We hope that the World Bank will welcome the opportunity to reflect on lessonslearned from this experience and will continue to value their relationship with NGOs inCambodia, who consider the World Bank to be an important andrespected player inCambodia's development. Sincerely, Copy: World Bank office in PhnomPenh MemberNGOsof the NGOForum ' I Kingdom of Cambodia Nation Religion King ChendarWe are villagers living in the concession areas of Plywood,Samraong Wood, Everbright,and Pheapimex Respectfullyaddress The Inspection Panel of the World Bank. Beaardina: Requestfor inspectionof the activitiesof the Cambodia Forest Concession Managementand Control Pilot Project. According to the above subject, we are ail villagers livinginthe Chendar Plywood, samraong Wood, Everbright,and Pheapimex concession areas,who have all been impactedby these four ccm"ies. We are worried that these companieswill re-start their activitiesand impact further on us, and we are unhappywith the World Bank's support for these companies. Inthe past, these companies have impactedon our communities and on us personally also, as follows: . Chendar Plywood has cut thousandsof resintrees belongingto villagersin Prame and Mlu Prey 1 Communes that have provideda source of livelihoodfor many years. Other non-timberforest productsthat villagers have collected to sell have also been lost. Soldiers protectingthe company have threatened villagers not to go intothe concession area to tap resin. One company worker eloped with the daughter of villagers. * SamraongWood has cut hundreds of resintrees belongingto villagers inAnlong Veng Commune. Company soldiers have forbidden villagers from going into the forest to collect nontimber forest productsthat villagers collect to make a living. , Pheapimex has cut thousands of resintrees belonging to villager in Talat Commune and forbidden villagers from going intothe forest to collect non-timber forest products. . Everbright has cut thousands of resin trees belonging to villagers. The group of soldiers that protects the company has threatened villagerssaying that, "If you sell your resin trees, we will cut them, if you don't sell them, we will still cut them.'' They also said that "I am not cutting your resin holes, Iamjust cuttingthe trees, and I'm leavingthe holesfor you." When villagersgo into the company's logging concession, company soldiers don't let them go in. In November 2002, we went to ask for environmentaland social impactassessment books of the logging concessionairesfrom the Department of Forestry. But the Deputy Director of the Department, named Chea Sam-Mg, said that the books aren't at the Department of Forestry,they are at the World Bank. We waited for two days at the World Bank before getting the books, in order to take them to consult with people inour villages.This made uswonder: Why is the World Bank involved in this? When we looked at the books, we were startled becausethe reports by the logging concessionaireswere not accurate, We saw that the companieswere going to cut again without consideration for impactson the livingsituation of villagers. On 17 March2004,we were interested again when the independentteam evaluating forests in Cambodia said in a meeting at the Cambodiana Hotelthat the logging concession system in Cambodia is finished.Then an expertfrom the World Bank asked, "Why do you say it is finished?We haveworked hard to improvethe logging concession system and it is good now, it is almost operatingagain."This made us understandthat the World Bank itself is supportingthe loggingconcessionsystem. After that we learnedthat the World Bank loaned moneyto the governmentto helpthe loggingcompanies prepare managementplans so that they can log again. If the logging concessions' management plans,which receivedtechnical assistance from the World Bank, are acceptedby the Government, and the companies start up their activities again, there will certainly be violationseven more severe than before on villagers, especiallyon indigenous people,such as inthe areas of the Chendar Plywood, Everbright,and Pheapimexconcessions. Ifthe companiesoperate again, theywill certainly cut resin trees again; if they don't cut resintrees they won't have any wood to cut. Therefore, we ask the InspectionPanelof the World Bankto inspect all of the actions of the World Bank Projectthat supportsthe logging concessionsystem in Cambodia. Inthat, we would liketo give the rightto NO0 Forumto representus in all of this work. Becausewe are worriedabout our personalsecurity, we ask that the InspectionPanel not releaseour names as the peoplewho have askedfor the inspection. We all are hopefuland believefully that your InspectionPanelwill definitelyhelp us who are Cambodianvillagers. Pleaseenjoy good healthand success at all times. global witness February2005 Submission to the World BankInspectionPanel: WORLD BANKFOREST CONCESSIONMANAGEMENT AND CONTROL PILOT PROJECT INCAMBODIA Preparedfor NGO Forumon Cambodia by GlobalWitness 1 Project Description . . .............................................................................................................. 3 Glossary.............................................................................................................................. 4 INTRODUCTION .............................................................................................................. 5 SECTION I: 1.1 Point of Departure..................................................................................................... PROJECT CONCEPTION ............................................................................ 7 7 1.2 Cambodia's ConcessionSystem............................................................................. 10 1.3 The LoggingConcessionaires ................................................................................. .................................................... 11 1.5 Embracing the System and the Operators............................................................... 1.4 Adverse Impacts of Concessionaires'Activities 14 16 SECTION 2 . IMPLEMENTATION PROJECT ............................................................. 19 2.1 Overview ................................................................................................................. 19 2.2 Production of ConcessionManagementPlans ............................................................... ........................................................ 19 2.3 Disregarding Project Terms of Reference 20 2.4 Standards for Preparationofthe ManagementPlans .............................................. 23 2.5 Ignoring Evidenceof IllegalActivities by the Concessionaires 2.6 Submission o f the ManagementPlans -"Deadlines are not written instone" .......25 ............................. 29 2.7 Disclosure ............................................................................................................... 29 2.8 Consultation ............................................................................................................ 31 2.9 Forest Cover Survey ............................................................................................... 33 2.10 Declarationon ForestryRevenues Systems Management.................................... 34 2.11 Reviewing the ManagementPlans 2.12 The ModelPlans ................................................................................................... ........................................................................ 35 43 2.13 OldLog Transportation ......................................................................................... 48 2.14 Outcomes of the FCMCPP .................................................................................... 52 2.15 The Without-Project Situation .............................................................................. 54 SECTION 3: WORLD BANK BREACHES OF OPERATING POLICIES ................... 3.1 OperationalPolicy OP 4.01 -Environmental Assessment..................................... 58 58 3.2 OperationalDirective OP 4.20 -IndigenousPeoples ............................................ 64 3.3 OperationalPolicy OP 4.36 - Forests ..................................................................... 68 3.4 OperationalPolicy OP 4.04 -Natural Habitats ...................................................... 71 3.5 OperationalPolicy OP 13.05 - Project Supervision............................................... 72 3.6 BankProcedureBP 8.40 -TechnicalAssistance ................................................... 73 3.7 OperationalPolicy OP 4.11- Cultural Property .................................................... 74 SECTION 4: PREVIOUS COMMUNICATION WITH THE WORLD BANK.............76 CONCLUSION AND RECOMMENDATIONS ............................................................. 81 Appendix I: ConcessionaireProfiles ............................................................................ 83 2 Project Description The Forest Concession Management and Control Pilot Project i s fundedby a World Bank IDA credit of US$4.82 millionmadeto the Royal Government of Cambodia initially commencing 20' October 2000 and originally due to end on 31December 2003. This was subsequently extended to an end date o f June 2005. The U S $4.82 million credit takes the form o f a Learningand InnovationLoan (LIL). The project i s situated inthe Government Forest Administration (FA), a semi-autonomous department o f the Ministry o f Agriculture, Forestry and Fisheries. The Forest Administrationwas formerly known as the Department o f Forestry and Wildlife (DFW) up until its internal restructuring in 2003.' Project Development Objective: "The overallproject development objectives are to demonstrate the effectiveness of a comprehensive set of forest management and operational guidelines and control procedures inforest concession areas and to establish an effectiveforest crime monitoring andprevention capability. ' j 2 The Project's four main components (quotedfiom the FCMCPP Project Appraisal Document): 0 A. ForestPlanning and Inventory Component. This component will support DFW (Forest Administration) inproviding guidance and exercising quality control over concessionairepreparation o f detailed long and short-term forest managementplans. The resulting plans will set harvesting prescriptions and define other conditions for further operations. This component will finance acquisition o f satellite imagery, aerial photography, conduct o f field inventories, training and technical assistance. 0 B.ConcessionRegulation and Control Component. This component will strengthen the capacity o f the Forest Management office (FMO) o f the DFW (Forest Administration) to oversee concession operations and to ensure that operations are incompliance with plans and conditions established under the Forest Planning and Inventory Component. Itwill finance acquisition o f vehicles, equipment, training facilities and programs, and technical assistance. 0 C. Forest Crime Monitoring & Prevention Component. This component will strengthenthe capacity o f the DFW's (Forest Administration's) Legal and Litigation Office (LLO) and the Ministryo f Environment(MoE) to systematically and regularly monitor illegal logging and to launch effective prevention activities. Itwill introduce systematic data collectionand analysis techniques, provide equipment and contractual services, training and technical assistance. The component will assist concessionaires, provincial forestry offices, nationalparks ' * Forest ' Forthe sake ofclarity, the institution is referredto as Forest Administration throughout this document. ConcessionManagement and Control Pilot Project Appraisal Document, dated 2 June 2000. 3 and protected area managers and affected communities with design and implementation o f timber theft prevention plans and will disseminate information on the Government's forest crime preventionprogram usingmedia, training programs and other mechanisms. An international NGO will function as an independent monitor to check on the accuracy o f Government's rep~rting.~ 0 D.Proiect Management and Institutional StrengtheningComponent. This component will establish a Project Management Unit (PMU) inthe DFW (Forest Administration). The PMU,which will be developed from the Secretariat o f the National Committee for Forest Policy, will provide overall coordination for the project, manage procurement and contracting, and be responsible for project monitoring and evaluation. Glossary A A C Annual Allowable Cut ADB Asian Development Bank CTIA Cambodia Timber IndustryAssociation ESIA Environmental and Social Impact Assessment FA Forest Administration FCMCPP Forest Concession Management and Control Pilot Project IFSR Independent Forest Sector Review LIL Learning and InnovationLoan MAFF MinistryofAgriculture, Forestry andFisheries MEF MinistryofEconomy and Finance RCAF Royal Cambodian Armed Forces RGC Royal Government o f Cambodia SAC Structural Adjustment Credit SFMP Sustainable Forest Management Plan WGNRM Working Group on Natural Resource Management Global Witness took on this role as independentmonitor from the end of 1999 (before the FCMCPP began) to April 2003, whenthe Cambodian government announcedthat it hadterminatedthe organisation's role. Global Witness' activitieswere not funded throughthe FCMCPP; however its replacement as independentmonitor,the Swiss company SGS, is financedthroughthe Bank project. 4 INTRODUCTION InApril 2004, the outgoing World Banktask manager for the ForestConcession Management and Control Pilot Project observed that the forest concession system introduced by the Cambodian government inthe mid 1990s was "inadequate onpaper, dysfunctional in reality ".Despite the abundant evidence o f its adverse impacts on the interests o f ordinary Cambodians, however, the World Bank has sought to strengthen and perpetuate this same forest concession system and its operators. The World Bank's Forest ConcessionManagement and Control Pilot Project was premisedon the validity ofthe existingsystem and its operators, when flaws inthe system and persistent illegal activities by the concessionaires were already well documented. As the project has progressed, evidence that the concession system and the concessionaires are inimicalto the interests o f ordinary Cambodians has continued to mount. Rather than changing course however, the Bank has, through its project, continued to support the concession companies and underminedlaws, regulations and professional standards designedto make them accountable to ordinary Cambodians. In the process, the Bank has greatly increased the likelihoodthat six o f these companies will retaintheir concessions for a further 25 years. At the same time, the World Bank's intervention has done nothingto change the way the concessionaires will operate inthe future. Over-riding evidence suggests once they re- commence logging operations, the six companies whose management plans the FCMCPP has approved will continue to inflict material harm on individual Cambodians and interests o f the population as a whole. Indoing so, the companies' efforts to deflect criticism and maintain impunitywill be strengthenedby the seal o f approval bestowed upon them by the World Bank project. Communities living in and around the forests are those most directly affected by the concessionaires' operations. They are alarmed at how the Bank i s promoting the interests o f companies that have abused their rights inthe past and are certain to continue doing so. Their appeal for a correction to this approach is the basis for this inspection panel claim. Inits endorsement of six loggingcompanies, the FCMCPP has underminedthe Bank's over-arching goals in Cambodia o f reducing poverty and strengthening governance. H o w was this allowed to happen? The project's damaging outcome i s explained, in large measure, by the World Bank's contravention o f a number o f its own operating policies, duringbothproject preparation and implementation phases. The operational policies breached include those concerning EnvironmentalAssessment, Indigenous Peoples, Forests, Natural Habitats, Supervision and Cultural Property. It i s inconceivable that the FCMCPP would have been designed or implemented as it has been, ifthe Bank had adheredto these operational policies. This document proceedsthrough four main sections. The first o fthese outlines the World Bank's flawed conception o f the FCMCPP and project's inherent bias towards the 5 interests o f the concessionaires. Section 2 examines the project's implementation and how the Bank allowed it to shield the companies from efforts to hold them accountable. The third section examines those aspects o f the World Bank's planning and project implementation that violate Bank operational policies. Section 4 summarises previous attempts by NGOs and others to raise with the World Bank the concerns outlined inthis report. All three sections expandupon and support the central arguments ofthis paper: The World Bank, through its project, has consistently promoted the interests o f the concession systemand operators, despite the evidence that they have and will continue to inflict harm on forest-dependent communities. The Bank has, through its acts and omissions, underminedlaws, standards and other accountability mechanisms designedto protect the interests o f forest- dependent Cambodians. By allowing its project to endorse the strategic level management plans o f six companies, the Bank has significantly increased the likelihood that they will continue to maintain their logging concessions and go on inflicting material harm on local people. 6 SECTION I: PROJECT CONCEPTION 1.1PointofDeparture `Project Development Objective: Demonstratedjeld implementation in concession areas, of a comprehensive set of forest management and operational guidelines and control procedures ' (Project Appraisal Document p.13) The Forest Concession Management and Control Pilot Project's endorsement o f the concession system stems from the point o f departure set out in its project objective. World Bank staff took the view that the existing concession system was the most appropriate management regime for Cambodia's forests and the project was designedto demonstrate that it could be reformed. The Bank's intentiono f proving that the existingconcession system can work i s further articulated elsewhere inthe FCMCPP Project Appraisal Document and the Project InformationDocument: reformed policyframework. Ifsuccessful, these innovations will re-energize the `the LIL serves to demonstratej e l d implementationapproaches supportive of the currently dormant concession sub-sector ... A `the Project is specijkally designed to enhance the sustainability of forest concessions in Cambodias These project objectives are founded on the conclusions o f a World Bank 1999 vision paper on forest sector management in Cambodia. The paper argues that "Asustainably managed industrial concession system can be the center piecefor the Cambodian Forestry Sector. While not addressingall these dimensions in equal detail, the studies conductedby Government with the assistance of WorldBankfinancing provide the essential basisfor moving toward theproposed vision"` Moreover, World Bank staff responsible for designing and supervisingthe project speak o f its conceptual framework interms o f a hypothesis: that the Bank's intervention can overhaul the concession system and make it worke7 World Bank, `Project Appraisal documenton aProposedLearning and Innovation Credit To the Kingdom of Cambodiafor aForestConcessionManagementand Control Pilot Project', June 2000, p.3. 'World Bank, `Cambodia-Forest ConcessionManagement and Control Pilot Project: Project Information Document', May 1999. World Bank, `Background Note: Cambodia-A Vision for ForestSector Development', February 1999, p.7. Bank staffexpressedsuch views during ameetingbetweenNGOs and World Bank project staff, 20th April 2004; see also minutes ofmeetingbetweenWorld Bank FCMCPPtask manager andNGOs 24 September 2002 which quote the task manageras commentingthat "the WorldBank's operationalfocus is to bring the concession system to whatever scale to make it work.'' 7 The significance o f the objectives, vision and hypothesis i s that they can only be realised or proven if Cambodia's concession system continues. Ifthe concession system disappears, the project is, on its own terms, a failure. Fromthe outset the FCMCPP's success or failure has thus hinged closely on the fate o f forest concession system; giving the Bank an unhealthily strong stake in its preservation. A modest reduction inthe number o fconcessions would not initself invalidate the Bank's hypothesis.8 However, termination o f all concessions would leave the project's architects facing difficult questions as to their decision to invest $4.8 millionand 5 years intheir restructuring. A more serious flaw is the way that the Bank effectively linked successfulproject outcomes to the continued tenure o f the incumbent concessionaires. Article 5.4 o f Cambodia's Sub-Decree on Forest Concession Management, introduced inFebruary 2000, before the FCMCPP commenced, states that "All revoked or transferredforest concessions shall bepreserved naturalforest zones and the managedforest shall not be concededto any other company." This meant that ifany logging companies hadtheir contracts terminated, their concessions could not be reallocatedwithin the concession system. Ifthe Bank wanted to demonstrate a functioning concession system and thereby realise its vision and project objectives, it needed to ensure the continued tenure o f the incumbent concessionaires. Accordingly, it weighted the FCMCPP heavily towards the companies' own interests, by assisting them intheir production o f sustainable forest management plans (SFMPs) and environmental and social impact assessments (ESIAs), for example. Following the logic o f its pro-concession agenda, the Bank perceived the development o f alternative management regimes as a threat. This sentiment i s expressed inan internal memo from the FCMCPP task manager to the Cambodia country director about proposals to turn some o f the concessions into protected areas for conservation: "This area is currently under concessionand thefinancial package offered to Government (by conservationorganisations) could result in diflculties coordinating activities andprojects, not to mention maintaining the coherenceof the concession system reform program. '' (emphasis added)' * World Bank, `Background Note: Cambodia - A Vision for Forest Sector Development', February 1999, p.6 advocatesa reduction inthe concessionsystem from approximately seven million hectaresto around four million. Infact, according to the ADB-financed review of concessions, by April 2000, the area under concessionhad beenreducedto 4.6 million hectares. Thus, by the time the FCMCPP commencedinlate 2000, the concessionsystemhad already contracted to a size close to that which the World Bank consideredappropriate. This raises questions as to whether the Bank was genuinely committed to further reductions inthe area under concession, as it has since claimed. InternalWorld Bank memo from FCMCPP Task Manager William Magrathto World Bank Country Director IanPorter, February 2001, 8 Notwithstandingthe Bank's misgivings, the Cambodian government has since designated the area inquestion - Cambodia's central Cardamom Mountain range - as a permanent protected forest. UNESCO is considering this same area as a possible World Heritage site on account o f its highecological values. Given the extent to which the existingconcession system and concessionaires were already discredited before the project began, the World Bank's construction o f the FCMCPP on such a set o f concepts and assumptions represented a serious error o f judgment. It also suggested an approachto project preparation that owed more to the Bank's confidence inits preconceptions than observance o f its operational policies. Discussions with Bank staff indicate that pre-project preparation, interms o f gauging environmental and social impacts inparticular, was cursory at best and did not meet operational policy standards. This issue i s examined inmore detail in Section 3." Setting the Bank's prior intent to promote the existing forest concession system as the management regime for Cambodia's production forest i s important for three main reasons: 0 Ithighlightsthe flawed planningofthe FCMCPP andthe World Bank's refusalto acknowledge overwhelming evidence that preservation o f the existing concession system and operators would inflict material harm on forest-dependent Cambodians. It explains the subsequent behaviour ofthe boththe Bank andFCMCPP personnel towards the concessionaires, particularly their unwillingnessto take account o f companies' breaches o f laws, planning requirements and agreed deadlines. '' 0 Thirdly, highlightingthis obvious bias towards the concession model has become necessary given recent denials by World Bank staff. Criticism o f its approach has prompted Bank officials to claim that the FCMCPP i s as much about developing alternative management regimes such as community forestry as supporting the concession system. Project planning and implementation do not bear out this claim, neither does the vision paper from which the FCMCPP draws its inspiration.12 loMeetingbetweenWorld Bank staffmembersWilliam Magrath(FCMCPP Task Manager 2000-2004), PeterJipp (FCMCPPTask Manager 2004-), Stephen Mink and StevenSchonberger; with Suwanna GauntlettandDelphineVann Roeof Wildaid; Mike DavisandHannahThompson of GlobalWitness, PhnomPenh, 20 April 2004. l1MeetingbetweenStevenSchonberger,World Bank SpecialOperationsManagerandMarcus Hardtke andMike Davisof GlobalWitness, 29 July 2004. StevenSchonbergerclaimedthat it was unfairto label the FCMCPPas a projectdedicatedto the concessionsystem, arguingthat itwas as muchabout developing alternativeforest management regimessuchas community forestry. World Bank, `BackgroundNote: Cambodia-A Vision for ForestSectorDevelopment', February 1999, p.15 dismisses the ideaof communitymanagementofhighvalue forests: "Community Forestry: As noted, perhaps 4 million ha of reasonably well stocked, highpotentialforests is availablefor commercial production oriented management and some 3.3 million ha is currently devoted toprotection status. There still remains approximately 3 million ha offorest and another 7 million ha of rural area in which management of smallforest areas and scattered trees is needed. In addition to having thepotential of poverty alleviation, communityforestry nee& to be recognized as a meansfor achieving sustainable 9 Indeed, the prevailing bias towards the concession system was highlightedin a World Bank internal `Quality EnhancementReview' o f the FCMCPP in2003, which acknowledged that "The Bank has not beenfully prepared to discuss alternatives outside the concession model The World Bank decided to base its forestry project on the existingconcession system and concessionaires inthe face o f abundant evidence that they were damaging the interests o f Cambodia's citizens, particularly forest-dependent communities. The FCMCPP began in 2000, by which time NGOs, journalists, other international donor agencies and even the Bank itself, had documented the flaws inthe system and the track records o f the operators over several years. The arguments against perpetuating the status quo were very clear. To grasp the extent o f the flawed assumptions on which the Bank founded the FCMCPP, requires a brief overview o f the concession system, the concessionaires and their impacts. 1.2 Cambodia's Concession System Labelling Cambodia's array o f forest concessions a system suggests a degree o f forethought and planning which i s certainly not warranted. Inthe mid-l990s, the Cambodian Government awarded between 30 and 40 timber concessions to a range o f Cambodian and foreign-owned ~ompanies.'~ The contracts signed away atotal of 7 millionhectares on terms that greatly favoured the interests o f the concessionaires over those o f Cambodia. Settinga trend in Cambodia's forest sector that has persisted ever since, the process by which the contracts were awarded was secretive and suggestive o f high-level government corruption. The Bank's own 2003 Quality EnhancementReview o f the LILnotes that "over halfof these concessions had been established in I995 and I996 under unclear criteria and among widespreadallegations of cronyism."15 To borrow from the terms o f referencethe FCMCPP later issuedto consultants working on the project, `fforest concessions are seldomproperly surveyed and demarcated on the ground".16 Indeed,as noted inan ADB-financed review published in 2000 "the DFW (Forest Administration) has never been consultedprior to selection of concession areas. Apparently, allocations were made according to the requests of the concessionaires. pll managementfor the large bulk offorest resources that are not suited to commercial production and which will be beyond the direct management capacity of Government." l3World Bank, `Quality EnhancementReview - Cambodia Forestry', 2003. l4Asian Development Bank SustainableForest Management Project, `Cambodian Forest Concession Review Report', April 2000 identifies 33 concessions. IsWorld Bank, `Quality EnhancementReview - Cambodia Forestry', 2003. l6Forest ConcessionManagement and Control Pilot Project, `Consulting Services on Forest Management Planning and Training Terms of Reference'. 10 Moreover, as acknowledged inthe FCMCPP planning documents, most ifnot all contained large areas o f non-operable forest, non-forest areas, entire communities and agricultural land.' * Regarding the resource itself, the World Bank made the assumption that the existing concessions constituted a basis for sustainable use o f Cambodia's forests. It adopted this position despite its own admission that "little or nothing is known about the dynamics of stand structure, species composition, regenerationandgrowth in Cambodianforests following logging. This acknowledgementechoedthe ADB concession review's own conclusion that "The currentforest management system has no scientijic basis, and does not ensure sustainedyield and sustainableforest management.'"` Inits projectplanning, the World Bank tacitly acknowledged these very fundamental problems, yet made no attempt to challenge them. It conducted no thorough assessment o f the values and possible altemative uses o f Cambodia's forests (despite being one o f the few institutions with the capacity to do so). Neither did it require any reworking o f the existing concession boundaries as a pre-condition for, or even a component of, its efforts to reform the concession system. 1.3 The LoggingConcessionaires Cambodia's logging concessionaires encompass a spectrum o f operators. These range from fly-by-night foreign investors looking to exploit weak govemance and reap a quick profit, through to Cambodian operators whose approach to business is more mafia than corporate. Well before the Bank commenced its project in 2000, investigations into these companies' activities, carried out over several years, showed that most, ifnot all had Asian Development Bank Sustainable Forest Management Project, `Cambodian Forest Concession Review Report', April 2000, p.15, footnote 22. Project Appraisal Document on a ProposedLearning and Innovation Credit For aForest Concession Management and Control Pilot Project p.9. Forest ConcessionManagement and Control Pilot Project, `Consulting Services on Forest Management Planning and Training Terms o f Reference'. Asian Development Bank Sustainable Forest Management Project, `Cambodian Forest Concession Review Report', April 2000 p.32. The ADB report also cautioned that given the damage already caused by illegal logging, the concessionairesmight find it intheir own intereststo assess the resource intheir concessionsbefore investing time and money in production o f managementplans: `Ylso in the meantime, the concessionaires should start identiJLing resources (national andor international) for thepreparation of theforest managementplans. Thepreparation of forest maps, design and implementation of forest inventories, carrying out ESIAs and dataprocessing andfinally preparation of forest managementplans would be an expensive operation. I t is therefore advisablefor the companies holding critical concessions to carry out a reconnaissance level assessment of the remaining resourcesfirst, before committing larger resources. ", ibid. p.39. 11 seriously violated Cambodia's laws.21 All the concessionaires, moreover, demonstrated either a lack o f capacity for, or interest in, sustainable forest management.22 Through the late 1990sand up until 2002, the concession companies were a driving force inthe illegal loggingthat degraded what the WorldBanktermed "Cambodia's most developmentally important natural resource FCMCPP documents acknowledge, moreover, that in 1997, "about 93% of the industrial wood volume was harvested illegally ".24 Apologists for the concession system ascribe much o f the so-called `anarchic logging' o f the late 1990s to factions o f the Royal Cambodian Armed Forces (RCAF). While RCAF's involvement i s not in dispute, it i s important to note that many o f the concessionaires the World Bank project has assisted were also heavily involved in illegal logging over this period and subsequently. Indeed, inmany casesthe `anarchic' RCAF factions were loggingto order for the concessionaire^.^^ An ADB-commissionedsurvey o fthe concession system and concessionairescarried out from 1999-2000compiled data on the companies' contractual breaches. The review's findings, which represent a conservative estimate, are summarised intable 1below. Briefing notes on the six companies whose concession management plans the Bank's project has approved, are provided inAnnex I. "SeeforexamplereportsproducedbyGlobalWitness,www.globalwitness.orp;AsianDevelopmentBank ''SustainableForestManagementProject,Internationaland `CambodianForest ConcessionReview Report', April 2000. Only two of the concessionaires, GAT Samling, had any prior experience of forest management. These firms may have hadthe technical capacity to manageforest sustainably, howevertheir actionsquickly demonstratedalack of interest indoing so inCambodia. 23World Bank, `StructuralAdjustment Credit to Cambodia', 2000. 24Forest ConcessionManagement and Control Pilot Project, `Consulting Services onForestManagement Planningand Training Terms ofReference'. 25A summary ofthe role playedby concessionaires in illegal logging during the mid to late 1990scan be found in Global Witness, `The Untouchables:Forest Crimesandthe Concessionaires-Can Cambodia Afford to Keep Them?', December 1999. 12 Table 1.Legal and contractual breaches by the concessioncompaniesz6 Samling * * Supenvood I I I I + I Timas I * I * I * I * I Resources TPP I * I * I * I * I * I I I I I Voot Tee I * I * I * I * I * Peanich ~ o u r y ~ a c oI I I I I aNo proof supplied to support their claims o f payment bNo payment inthe 2nd or 3rd years 'No payment in 1996or 1997 No payment before 31stDecember 1999 e No payment inthe 2nd year f No payment in2nd, 3rdor 4th years gNo payment last 4 years hNo payment in last 2 years iConcessionairepermitsThaicompaniestologintheirconcession j Logging carriedout by unknown(illegal andorganised)parties k N o existing managementplan at all 26 Asian Development Bank SustainableForest Management Project, 'Cambodian Forest Concession Review Report', April 2000. 13 1.4 AdverseImpacts of Concessionaires' Activities The range o f adverse impacts that concessionaires have on forest dependent communities and the country as a whole have been documented in detail over several years. Illegal logging of resin trees Resin tapped from various species o f dipterocarp tree i s an economically valuable commodity both within Cambodia and abroad. An estimated 100,000 Cambodians derive a portion o f their income from resin c ~ l l e c t i o n .This ~ ~ far exceeds the numbers o f people concessionaires can claim to be employing.28 Resin tapping i s a sustainable activity that causes little or no harm to the trees that are tapped.29 As such it is regarded as complementary to forest conservation. The activities o f the logging concessionaires pose a direct threat to resin tappers' livelihood^.^^ The trees that rural Cambodians tap for resin, are those same commercial grade species that the timber companies target for use inproduction o f plywood and veneer. Records o f concessionaires' harvests duringthe last cutting season (2000-200 1) before the government imposed a moratorium on further logging clearly illustrate this. One concession company claimed that 80% o f its harvest comprised the principalresin- producingtree specie^.^' The harvesting records o f another state that 89% o f the trees it cut were o f this type.32 UnderArticle 17 (g) the 1988 Decree on Forest Practice Rules, it is illegal to cut trees that people have tapped for resin. This law has since been superseded by the 2002 Forestry Law, Article 29 o f which extends this protection to "trees of species thatpeople tupfor resin ". The concessioncompanies do not acknowledge the legal prohibitions on cutting resin trees and have violated them with impunity.33 ''Prom Tola & Bruce McKenney, `Trading Forest Products inCambodia: Challenges, Threats and Opportunities for Resin', Cambodia Development ResourceInstitute, 2003; p.15; for summary o f figures on income from resin-tapping in three provinces, see Bruce McKenney, Yim Chea, Prom Tola and Tom Evans, `Focusing on Cambodia's High Value Forests: Livelihoods and Management', Cambodian Development ResourceInstitute and Wildlife Conservation Society; November 2004, p.59. 28 The 2004 Cambodia IndependentForest Sector Review writes that "At the zenith ofthe working ofthe concession and woodprocessing system there were estimatedto be about 37,000 workersemployed in the forest sector ",CambodiaIndependentForest SectorReview, `TheForest Sector in Cambodia', Part I, p. 63. 29 Tom Evans, Hout Piseth, PhetPhaktra and Hang Mary, `A Study o f Resin-tapping and livelihoods in southem Mondulkiri, Cambodia, with implications for conservation and forest management', Wildlife Conservation Society, 2003, pep.69-70. 30 Prom Tola & Bruce McKenney, `Trading Forest Products in Cambodia: Challenges, Threats and Opportunities for Resin', Cambodia Development ResourceInstitute, 2003, chapter 3. 31 Global Witness, `Deforestation Without Limits', July 2002, p. 17 32 Log harvesting books compiled for Pheapimex-Fuchan Stung Treng / Thalabariwat concession, 2001. 33 See for example Global Witness letter to Cambodian Prime Minister Hun Sen, 9 January 2002, regarding illegal cutting of resin trees by Chemdar Plywood, GAT Intemational, Pheapimex-Fuchan, Colexim Enterprise and SamraongWood forest concessionaires. 14 Itis worth emphasising, moreover, that resin isjust one ofthe numerous forest products which rural Cambodians depend upon for food, medicine and fuel. Access to others i s also jeopardised by logging operations carried out by concessionaires -both because o f damage as a result o f industrial logging and because many concessionaires attempt to prevent local people from accessing the forest. Acts of violence and intimidation against local inhabitants Employees of the concessionaires have violated the rights o f people living inside or adjacent to forest concessions on any number o f occasions. Abuses committed by company staff have included denial o f access to forest areas, intimidation, rape, and, in at least one case, murder. In 1997, staff o f the Colexim Enterprise logging company killed a local resin tapper who remonstrated with the concessionaire over its illegal cutting of people's resin trees. Colexim i s one o f the companies whose 25 year management plan the FCMCPP has recommendedthat the government approve. Further examples of human rights abuses suffered by local inhabitants are provided by the letters which form the basis for this submissionto the Inspection Panel. Environmental Impacts The environmental impacts o fthe concessionoperations are felt both locally and nationally. At a local level these typically include obstruction o f streams that form people's water supply as a result o f poor road and bridge construction, as well as the damage caused to existing roads by logging trucks and heavy machinery.34 At a national level, the overall impacts ofthe concessionaires' logging are also apparent. Agriculture and fisheries are the Cambodian population's main sources o f food. Both are sustained through natural systems o f water management within which the forests play an important role. UNagencies cited deforestation as a cause o f the severe floods in 2000 that cost Cambodia an estimated $156 milli~n.~' The forest degradation caused by the industrial logging, has likewise impacted on Cambodia's biodiversity. The extent and nature o f these impacts has not received a full analysis, however it is likely that they have been severe.36 34See for example reference to problems causedby bridge construction in Global Witness, `The Untouchables:Forest Crimes and the Concessionaires-Can Cambodia Afford to Keep Them?', December 1999p.14; referenceto problemsassociatedwith roadbuilding inAsian DevelopmentBank Sustainable ForestManagementProject, `CambodianForestConcessionReview Report', April 2000, p.29. 35Cited inGlobalWitness, `Deforestationwithout Limits' July 2002, p.3. 36IndependentForest Sector Review, `The ForestSector inCambodia', PartI, 64. p. 15 Loss of revenues to the state Floods in 2000, which the UNlinkedto deforestation, are estimated to have cost Cambodia $156 million. By contrast, the entire forest sector generated only $92 million for the national treasury between 1994 and 2000.37 This $92 million is a fraction o fthe royalties due on the timber cut by concessionaires and others duringthis period.38 Proponents o f the concession system argue that the value o f concessions lies intheir reliable delivery o f revenues to the state. This argument i s not supported by the Cambodian experience, where the concession system has comprehensively failed to deliver, even inthis respect. Inthe meantime, the concessionaireshave played a major role in liquidating one o f the country's few natural resources o f value. Interms o f destruction o f the resource and the opportunity cost, the companies' collective impact has been Cambodia's further impoverishment. 1.5 Embracingthe System and the Operators The World Bank was fully aware o f the track records o f the concessionaires and the adverse impacts they were having before it initiatedthe FCMCPP. The evidence that the existingconcession system and its operators were underminingefforts to reduce poverty and strengthen governance inCambodia was compelling and readily available. Indeed, just months before the FCMCPP got underway, an ADB-commissionedreview of the concession system concluded that it constituted a "total systemfailure Notwithstandingthe conclusions o f the ADB review, the World Bank proceeded with the development o f a project premisedon the validity o f the same failed system and operators. It made no attempt to challenge such fundamental flaws as the location and boundaries o f the concessions, nor did it question the legitimacy o f the ~ompanies.~'If the Bank wished to prove that some kindo f concession system could work inCambodia, itwas dealing itselfthe weakestpossible hand before its project even commenced. 37Global Witness, `Deforestation without limits', July 2002, p.3. 38Asian Development Bank SustainableForest Management Project, `Cambodian Forest Concession Review Report', April 2000, p.3 notesthat for the years 1996-98 alone, "total logproduction in Cambodia, including illicitfelling, was between 4 to 8 million cubic metres, which, assumingthat the annual allowable cut (AAC) calculations apply to the nation'sforests as a whole, under the current management system wouldcorrespond to between 8 to 16years AAC"; for details of the role o f the concession companies in this, see Global Witness, `The Untouchables: Forest Crimes andthe Concessionaires-Can Cambodia Afford to Keep Them?', December 1999. 39Asian Development Bank Sustainable Forest Management Project, `Cambodian Forest Concession Review Report', April 2000, p.32. 40 that "the decision of the Bank to respect (concessionaires 7 contracts was very unpopular with the Donor World Bank, `Quality EnhancementReview -Cambodia Forestry', 2003; alludes to this in its comment and NGO communi&, and contributed to widespreadsuspicion that the Bank would not take on vested interests.I' 16 The World Bank's justifications for the course it took are both flimsy and contradictory. Concerning concessions' problematic location and boundaries, Bank staff have argued that with the concessions already allocated, the Bank was not ina position to demand any revisions. The notion that the Bank lacked the bargaining power to effect any kind o f change here i s dubious, although admittedly hard to prove either way. Regarding its decision to support the incumbent concessionaires, the World Bank's arguments are more convoluted. Bank staff claim that the Government could not unilaterally cancel any o f the concessionaires' contracts without being subject to lawsuits by the companies.41 Inmakingthese assertions, the Bank invariably refers to a legal analysis that it commissioned inthe late 1990s. The Bank has consistently declined to publishthe lawyers' assessment, making its professedrationale for opposing cancellation hard to verify. Ineither event, the Bank's positionis unconvincing for two mainreasons. One is the substantial body o f evidence already assembled concerning the companies' contractual breaches and illegal activities. This initselfprovided strong grounds for terminating most ifnot all the concession contracts. The other i s the Cambodian government's willingness, since before the start o f the FCMCPP and subsequently, to cancel the investment agreements of a large number o f concessionaires. Not one o f these cancellations has encountered a legal challenge from the companies concerned. Somewhat paradoxically, the Bank has consistently tried to take the credit for the government's termination of concession contracts, indeed as recently as December 2004; the World Bank Cambodia Country Director wrote ina letter to Global Witness that "The WorldBank (has)focused on support to reforms of theforest concession system... Through aprocess of deliberative case-by-case review the number of concessions has been reducedfiom forty in August 2000, to six concessions covering 1.1million hectares. 'r42 The claim that there are now only six concessions left i s almost certainly inaccurate - the government has announced the cancellation o f only two o f the 18 that remained at the start o f 2003.43 Onthe question o f how the number was reduced, the implied role o f the Bank and the deliberative quality o f the process are not substantiatedby comments made by the FCMCPP Task Manager inan internal memo addressed to the same Country Director in2001: "Governmenthas unilaterally cancelled about I O concession contracts without consultationwith the Bankfor reasons that have generally not been disclosed and which seem to include inadequacy of a resource capable of supporting commercial 41This line of argument is summarisedin World Bank, `Quality EnhancementReview - Cambodia Forestry', 2003. 42Letter from World Bank Country Director IanPorter to Global Witness, 20 December 2004. 43These concessionswere controlled by 14 different companies, three o fwhich controlled two or more concessionseach. 17 operations. Thesehave not resulted in any ongoing dispute or claims against .. Government."44 There is infact no evidence that the Bank has had a role inconcession cancellations, with two possible exception^.^^ The real grounds for termination have been, inmost cases, because the company had no more timber in its concession, was bankrupt or was associated with opponents o f the government. The Bank continues to advance conflicting arguments on the issue, however. On the one hand, Bank staff advise the government against termination o f concessions because o f the supposed legal risk. On the other, as the letter from IanPorter to Global Witness shows, the Bank expects to be congratulated when the Government ignores its advice and terminates concessions anyway.46 As one o f Cambodia's most important donors, the World Bank has substantial political leverage over the Cambodian government, which it could have usedto demand pre- conditions for its assistance inreformingthe forest sector. More importantly, the Bank was inno way compelled to put its name to Cambodia's forest concession system. Ifit genuinely had no scope to demand pre-conditions for its engagement, then it should have declined to lend its endorsement to an un-reformable system and un-reformable operators. Instead, it chose to endorse the failed system and rogue concessionaires as the basis for future forest management inCambodia. That this would increase the risks o f further material harm to forest-dependent communities was clear. As is argued in Section 3, the Bank conceived the FCMCPP as it did only by disregarding a range o f operational policies that, if observed, would surely have prevented the project being initiatedinthe first place. 44Internal World Bank memo from FCMCPPTask ManagerWilliam Magrath to World Bank Country Director IanPorter, February2001. 45The findings ofthe FCMCPPmay have beeninstrumentalinthe government's cancellationofthe Kingwood and MiengLy Heng logging concessions,which were terminatedin line with the project's own conclusions in 2003. However, even here it shouldbe notedthat boththese were concessions that were practically exhaustedcommercially. 46For similar claimssee e.g. letter from World Bank Vice PresidentJemal-ud-dinKassumto NGOForum, 17December 2003. 18 SECTION 2 -PROJECTIMPLEMENTATION 2.1 Overview The case against the concession system and its operators, clear before the FCMCPP began, only strengthened once the project implantation phase commenced. From an early stage, the World Bank struggledto justify the project's underlying assumptions, as more evidence o f concessionaires' illegal activities emerged. Rather than correct the FCMCPP's approach, however, the Bank allowed or perhaps even encouraged it to take an indulgentview o f forest crimes by the concessionaires. Through the project, the Bank worked to ensure that some companies at least cleared the strategic (25 year) level concessionplanningprocess the FCMCPP was supervising. They achieved this by 0 usingloanmoney to helpthe logging companies make more presentable management plans 0 turninga blindeye to illegal activities by those companies that the project was assisting 0 lowering the standards o f concessionplanningwith which companies had to comply 0 helpingto undermineaccountability mechanisms such as public disclosure and consultation. By June 2004, the World Bank's project had recommendedthat the Cambodian government approve the logging plans o f six o f the companies. This recommendation is based on the FCMCPP's review o f management plans that the companies wrote with technical assistance from the project. 2.2 Productionof ConcessionManagementPlans Shortly before the FCMCPP commenced, the Cambodian government announced that the logging concessionaires would all be required to produce Sustainable Forest Management Plans (SFMPs) and Environmental and Social Impact Assessments (ESIAs) to international standards as a condition for continued operation. This measure followed the recommendations o f the ADB-sponsored forest concession review completed inApril 2000: "Some of the concessionaires may not agree toprepare a new management plan and/or renegotiate a new contract. However, no inadequacy in the agreements or proven violations shouldprevent the Governmentfiom taking measures toprotect the nation 's resources. Theforest estate remains a vital resource and the government retains its responsibility to bring about its effective management. Since the mainpurpose of the RGCS entrusting the management of its renewable resources to concessionaires is to 19 attain sustainable economic growth based on sustainable resource management we recommend that the RGC should insist on obtaining assurances that the resources will be put under sustainable management, and that these assurances be monitorable. Therefore, if any concessionaire declines toprovide such monitorable assurances as would be requiredfor a new managementplan and/or contract, it should not be considered as apartner of the Governmentfor resource management and the contract should be terminated. 'I4' Common sense, not to mention protection o f the public interest, would suggest that companies unable or unwilling to comply with this requirement by themselves should not be given custody o f what the World Bank has described as "Cambodia's most developmentally important resource The World Bank took a different view, however and decided to offer loan-funded technical assistance through the FCMCPP to aid the companies inpreparing their SFMPs and ESIAs. As a use o f loan money which Cambodians will have to repay, this element o f the project i s highly questionable, particularly giventhe concessionaires' documented theft o f valuable state assets. This aspect ofthe Bank's intervention hadtwo immediate implications. One was to enhance greatly the companies' chances o f clearing the planningphase and retaining tenure o f their concessions for a further quarter o f a century. The other was to reduce the planning process from a meaningful test o f companies' suitability, to a window-dressing exercise inwhich the concessionaires' technical deficiencies and cynicism would be masked courtesy o f loan-backedtechnical as~istance.~~The Bank's decision to assist the companies hadthe effect o f loweringthe bar intheir favour. Itrobbed Cambodia o f a crucial opportunity to measure the concessionaires' commitment and capacity and to show the door to operators that had already damaged its forests and abused the rights o f its inhabitants. 2.3 Disregarding Project Terms of Reference Intheory at least, this technical assistance was not to beprovidedto companies indiscriminately. Terms o f Reference issued to the consultants hired to implement the 47Asian Development Bank SustainableForest Management Project, `Cambodian Forest Concession Review Report', April 2000, p. ix. 48World Bank, `Structural Adjustment Credit to Cambodia', 2000. 49 J. Blakeney, Kay Panzer, Wemer Schindele, `Forest ConcessionManagement and Control Pilot Project -FinalReportoftheMid-TermReviewMission', February-March2003,p.15:Accordingtothereview team, this componento f the FCMCPP experienced delays, meaning that FCMCPP may have played a smaller part inpreparation o f concessionaires' first draft plans than envisaged inthe original project design. There can be little doubt that the project made up for lost time through its provision o f advice and assistance to the companies on the redraftingo f these documentsover the next year and a half, however. 20 planning components o f the FCMCPP included various criteria for assisting companies in their preparation o f SFMPs and ESIAs, includingthe f~llowing:~' "concessionaire's operable area is suflcient for management: " This criterion alone should have excluded all the companies. As the ADB review o f concessions concludedjust months before the FCMCPP began: "Of the concessions where the consultantcould obtain suflcient information to assess the number of harvestable coupes, 40% are estimated to havefewer thanJive years le$, 50% have between 5 and 10years le$, and 10%have between 10and 15years le$. Of thefour companies that have never harvested their concessions, none have more than 10 years of viable annual coupes remaining. 'j5' Inother words, none ofthe concessionaires hadforest sufficient for a 25 year cutting cycle as required by their contracts. "minimum of illegal activities" With regard to this second requirement, the ADB review is again instructive. It concluded that all the companies had breachedeither their contractual obligations or Cambodian law or both. Global Witness meanwhile, had been exposing the companies' illegal activities over a period several years.52 Published evidence o f significant levels o f illegal activity by companies such as Colexim Enterprise, Everbright CIG Wood, Pheapimex-Fuchan, Samling and others was readily available to the World Bank and its project staff. Despite this, the World Bank allowed or perhaps even instructed the FCMCPPto provide advice and other forms o f assistance to all 13 o f the companies that embarked on the production o f managementplans. This highlightsone of the main flaws inthe World Bank's supervision o f its project -the willingnessto allow loan money to be usedto support concessionairesthat have a well- documented history o f illegal activities. This approach sits somewhat at odds with the Bank's stated goal o f poverty reduction. "company hasprofessional forestry staff ea able ofparticipating in, and beneJitingfiom, theforest management planning process; P j J 5 World BankForestConcessionManagementand Control Pilot Project, `Terms of Reference: Consulting Services-Forest ManagementPlanningand Training'. S IAsian DevelopmentBank SustainableForestManagementProject, `CambodianForestConcession ReviewReport', April 2000, p. vii. '*Asummary of illegal activities by concessionairesup to 2000, the year that the FCMCPPcommenced, can be found in Global Witness, `The Untouchables: Forest Crimesandthe Concessionaires-Can CambodiaAfford to Keep Them?', December 1999. 53 World BankForestConcessionManagementand Control Pilot Project, `Consulting Services on Forest Management Planningand Training Terms ofReference'. 21 On the question o f companies' employment o f professional staff, the ADB Review found that "All except two of the concessionaires do not employprofessional foresters toplan and supervise logging activities and more sign@cantly, no measuresare taken to monitor the health of the resource and adapt logging activities or take corrective silvicultural measures accordingly ... Thefield staff of most of the concessionaires are simply logging supervisors, whose sole interest is the volume of logs removed and sent to the mills. ,954 meanwhile "The Department of Forestry and Wildlife staff are actively preparing concession managementplans, carrying out annual coupe inventories and receiving directpayments for their servicesfiom the concessionaires ... The current system is a clear case of conflict of interest. j 1 j 5 Despite this unequivocal and timely conclusion (published immediately before commencement o f the FCMCPP), the Bank project ignored these findings and its own criteria for assisting the companies. Indeed,the FCMCPP has persistently refused to recognise the problem o f concessionaires sub-contracting all technical forestry work to Forest Administration staff. This practice i s symptomatic o f two serious problems associated with the concession system in Cambodia. Firstly, concessionaires' reliance on government officials to undertake even the most mundane technical tasks on their behalf i s evidence enough o f their unsuitability as managers o f the country's forests. Secondly, the companies' employment o f the same officials responsible for regulating their activities sets up a fundamental conflict o f interests; one that gives Forest Administration staff a stake inthe continued tenure o f the concessionaires. The Bank should have prevented its project from assisting companies that had `captured' the officials responsible for regulating their activities. Conversely, it has permittedan employee o f one o f Colexim Enterprise's main shareholders to work as Director o f the FCMCPP Project Management Unit.56 Assumingthat the Bank was adhering to its operational policieson procurement o f services and recruitment o f consultants, it would have been fully aware o f the content o f the FMCPP consultants' terms o f referencess7Its failure to intervene when these TOR 54 Asian DevelopmentBank SustainableForestManagementProject, `CambodianForestConcession ReviewReport', April 2000, p.30. 55 AsianDevelopmentBank SustainableForest ManagementProject, `CambodianForestConcession ReviewReport', April 2000, p. vii. 56 Hang Sun Tra, who describes himself as an assistantto Colexim Enterpriseshareholder So Sovann. See Mr WilliamMagrath who introduced me during the workshop and trade show ... my name is Hang Sun Tra, for example e-mailfrom Hang Sun Tra to ScanComcompany 14April 2002: "Iheardyour name through assistant to Mr So Sovann,shareholder of the Colexim concession company." This conflict of interestshas beenpointedout to World Bank staff on anumber of occasions. 57 In particularthe World Bank OperationalPolicy OP 11.OO on Procurement andthe World Bank Consultant Guidelines. The Bank states its commitmentto observingboth sets of standards in the Forest ConcessionManagementand Control Pilot ProjectAppraisalDocument,2 June 2000, p.21. 22 were so seriously breachedagain raises questions about the quality o f the project's supervision. 2.4 Standardsfor Preparationof the ManagementPlans The regulatory requirements for preparation o f forest management plans were largely complete before the FCMCPP began.58 However the concessionaires, who had an obvious interest in lowering these standards, took it upon themselves to devise their own framework for environmental and social impact assessment. This problem was highlighted inJuly 2001 by a World Bank staff consultant's report on terms o f reference for ESIA prepared by the Cambodian Timber IndustryA~sociation.~' InOctober 2001, the World Bank Cambodia Country Director sent the staff consultant's paper to the Cambodian government, describing it as "a notepreparedfor the World Bank".60 While not presentingit as the World Bank's official position, the Country Director's letter implied that the views expressed inthe report were those o f the Bank. The staff consultant's damning verdict on the CTIA's ESIA terms o f reference i s captured inthe report's opening sentence: "this document is sofundamentally flawed that it is unlikely to achieve the desiredresults for either the timber industry or government. The paper went on to detail the deficiencies. Inthe light o f subsequent approaches taken by the FCMCPP (discussed inmore detail insubsequent sections) two o f its comments deserve particular attention: 1. "Theproposal to use Forest ResearchInstitute (FM)staff to assist in environment and social assessment work is inappropriate unless and until the institute is establishedas an entity entirely independent and separatefiom DFW (Forest Administration); " The Forest Research Institute i s situated within the Forest Administration and staffed by FApersonnel. The staffconsultant's identificationo fthe obvious conflict o f interest in 58 A summary ofthe laws, regulationsandguidelinescoveringconcessionplanningcan be found in GFA Terra Systems: `Results ofthe IndependentReviewof Strategic ForestManagementPlans preparedby ConcessionCompaniesoperatinginCambodia', August 2004 p.p. 22-27. 59An earlier critique ofthe same terms ofreference for ESIA was producedby NGO Forumon Cambodia inApril 2001. 60Letter from Ian Porter, World Bank Country Director, Cambodia, to CambodianMinister ofFinance, Minister of Agriculture Forestryand FisheriesandMinister ofEnvironment,4 October2001. "JohnH.Dick,StaffConsultanttoTheWorldBank,`CommentsontheEnvironmentalandSocialImpact Assessment Terms ofReferenceand Workplan for The PreahVihear Concessionof Cambodia Cherndar Plywood, as preparedby the CambodianTimber Industry Association, April 2001', World Bank, July 2001. 23 FRI staffpreparing concessionaires' ESIAs echoes the conclusions o f the 2000 ADB- financed concession review. 2. "The mechanismsfor community consultation are much too vagueand the proposal that `communityparticipation shall be at the Compartment @e yearly) and Annual Plan levels'is entirely inappropriate sincepublic participation will be essential to strategic-level concessionzoning.'' Inthe event, the StaffConsultant's comments were ignoredbythe Cambodian government and not followed up by the World Bank. An examination o f the ESIAs that concessionaires subsequently produced, including those the FCMCPP later endorsed, shows that they are based on the CTIA's `tfundamentallyflawed" terms o f reference.62 The World Bank intended that assistance to concessionaires preparing SFMPs and ESIAs would be a main focus o f the FCMCPP. This raises questions as to why the Bank did not make more effort to ensure that the companies observed the appropriate guidelines. WhenNGOs raisedthis issue at a meeting inDecember 2003, the projecttask manager claimed that he could not remember having seen the staff consultant's report.63 Asked again in April 2004, he said that he would need more time to look at the document before ~ o m m e n t i n g . ~ ~ The concessionaires' failure to produce ESIAs inaccordance with appropriate guidelines i s not solely the fault o f the Bank and the FCMCPP. On the other hand, the Bank's unwillingness to pushfor highstandards set the tone for the FCMCPP's constant attempts to lower the bar for the concession companies. As detailed insection 2.10, FCMCPP staff disregarded the staff consultant's comments completely when they came to review the concessionaires' plans. Meanwhile, the response o f the World Bank to the lack o f community consultation in companies' ESIA preparation has been to adopt the positiontaken by the Cambodian Timber Industry A~sociation.~~ Intotal contradictionwiththe positionadvocatedbythe 62 GFA Terra Systems: `Results ofthe IndependentReview of StrategicForestManagementPlans prepared by ConcessionCompanies operatingin Cambodia', August 2004, p.p. 30-3 1. 63 Meeting betweenWorld Bank country representative andFCMCPPtask manager, together with representativesof Oxfam GB, Oxfam US, NGOForumon Cambodia and Global Witness, 22 December 2003. 64 Meeting betweenWorld Bank staff membersWilliam Magrath(FCMCPP Task Manager 2000-2004), Peter Jipp (FCMCPP Task Manager 2004-), Stephen Mink and Steven Schonberger; with Suwanna Gauntlett and DelphineVann Roeof Wildaid; MikeDavis and HannahThompson of Global Witness, PhnomPenh, 20 April 2004. 65 CambodiaTimber Industry Association, `Environmentaland SocialImpactAssessment (ESIA) Terms of Reference(TOR) and Workplan for PreahVihear Forest Concession of Cherndar PlywoodMfg. Co. Ltd', April, 2001, p.15: ` I t the Strategic Plan level, only the assessment of current situations, identification of community dependence onforest resources, identification of impacts and recommended mitigation measures are to be carried out. Detailed and specijk treatment s and applications of ESIA measures are to beformulated at the Compartment Plan levelfollowing the terms of tri-partite CollectiveAgreements between the local authority, subject communities and the concessionaire throughconsultativeprocesses." 24 staff consultant in2001,the Bank now argues that consultation on social impacts can be deferred to the five year planning level. The staff consultant's overall recommendationwas that "The ESLA terms-of-reference and workplan should not be endorsed in their currentform by the Cambodian Government, the international donor community or NGOs", however this is effectively what the Bank, through the FCMCPP, has done. The issue o f lack o f adequate consultation i s examined further inthe sections that follow. 2.5 Ignoring Evidence of Illegal Activities by the Concessionaires The efforts o f community groups, NGOs and the media to document the illegal activities o f the concession companies continued after the FCMCPP got underway. Under pressure from international donors, the government agreed to the appointment o f Global Witness as official monitor o f forest governance reform inCambodia at the end o f 1999. Global Witness' activities received financial support from various bilateraldonors and fitted within the framework of an overarching Forest Crime Monitoring and ReportingProject managed by UNDP and FAO. This project focused on supporting efforts by the Forest Administration and the Ministryo f Environment's Department o f Inspection to detect and suppress forest crime. Its sources o f financing included the FCMCPP. Example 1-Illegal logging by Everbright CIG Wood The World Bank usedthe FCMCPP to support aspects o f the Forest Crime Monitoring and Reporting Project situated within the Forest Administration. However, the Bank declined to make the connection betweenthe findings o f the forest crime project and the FCMCPP's parallel efforts to reform the concessionaires. Thus, while Global Witness and others continued exposing illegal logging by concessionaires, this inno way shook the World Bank's convictionthat the same companies remainedappropriate recipients of LIL-funded technical assistance. This `see no evil' attitude is exemplified by a well- publicised case o f illegal logging by EverbrightCIG Wood, a Chinese state-owned company. Between December 2000 and April 2001 Global Witness, together with Forest Crime Monitoring and ReportingProject advisors supported by the FCMCPP, investigated a large-scale illegal logging operation by Everbright. Over the same period, Global Witness publicised a related case o f timber royalty evasion by the same company. Everbright,whose sub-contractor is the ForestAdministration Director General Ty Sokhun's father-in-law, responded by mounting a law suit (unsuccessfully) against Global Witness staff. Everbright,by contrast, was never prosecuted or otherwise punished for its actions.66 66FA staffwere conspicuously uncooperative inthe provincial authorities' efforts to investigate Everbright. The provincialprosecutor handlingthe case informedGlobal Witness inOctober 2001 that the FA hadnot 25 The World Bank appearsto have given little considerationto these developments. Through the FCMCPP, it continued to advise and assist Everbright inthe company's preparation of management plans. Eighteen months later, project staff declared Everbrightto be one o ftwo companies inwhich they hadparticular ~onfidence.In~ ~ early 2004, as detailed below, the FCMCPP made its recommendation to the Cambodian government that Everbright's management plans be accepted.68 The Everbright case was just one example o f many illegal operations exposed by Global Witness and others over the lifetimeo f the project. The World Bank likewise acknowledged on several occasions that the concessionaires were continuing to break the law: Cambodiacontinues tofact a serious timber theft problem. The level of forest crime appears to still be of worrisomeproportions and higher than is recognised in oficial estimates and involves concessionaires, sub-contractors,and others operating within concession boundaries in disregard of Government standards and required procedures."69 Notwithstanding these expressions o f concern, the Bank continued to allow its project to assist these same companies. It i s worth reflecting on how this approach sits with Cambodia's own laws. The criteria by which companies' suitability as forest concessionaires should bejudged are set out inArticle 4 o f the 2000 Sub-Decree on Forest Concession Management: "Only those commercial entities who have beenpre-selected and complied with the conditions andproof below are allowed to apply: a) Demonstratedcompetencein all aspects of forest management including planning, harvesting,forest regeneration, stand management, environmental protection and community relations; b) A good compliancerecord, with an absence of serious technical violations in all jurisdictions in which it has been engaged inforestry operations; (emphasis added) e) AdequateJinancial andprofessional staff resources to carry out effectiveforest operations. given himthe completed documentation required to move the case forward. The prosecutor claimed that the FA'Sfoot-dragging was a deliberate ploy to obstruct prosecution ofEverbright. 67Global Witness interview with Yann Petrucci, technical advisor to FCMCPP, 17 September2003. 68The exact dateon which this recommendation was made is not known, becauseFCMCPP reports on the concessionaires' managementplans have not beenmade publicly available. 69Letter from World Bank Country Director IanPorter to Minister for Agriculture, Forestry and Fisheries, 12 December2001. Other examples of similar statementsinclude i)the December2001 World Bank mission report, Annex 3; ii)letter from Mark Wilson, HeadofRural Development and Natural Resource Sector Unit, East Asia and Pacific Regionto Forest Administration Director-General Ty Sokhun, 10 June 2002. 26 Example 2 - Offsetting Timber Royalties Itwas not only FCMCPP-supported technical staff who obtained evidence of serious violations by the concessionaires, however. InJuly and August 2002 the FCMCPP task manager wrote to Global Witness requestin informationon corruption and misuse o f funds relating to Cambodia's forest sector?' At a meetingin September 2002, Global Witness representatives duly presentedboth the task manager and the head o f the Bank's Rural Development andNatural Resource Sector Unit,East Asia and Pacific Regionwith documentation that exposed high-level corruption involving the concessionaires. The offsetting scheme inquestion enabled the misappropriation o f large sums o f money that the companies owed to the government in unpaid timber royalties. The offsetting system emerged soon after the government imposed a moratorium on further cutting and logtransportation inJanuary 2002. With concession operations in suspension, revenue flow to the companies and their subcontractors almost immediately dried up. Inresponse, the most powerful o f the company subcontractors and industry fixers, who have blood or business relations with senior officials, engineered the offsetting o f royalty payments owed by the companies. This operated as follows: 0 Senior officials claimed that the government owed large sums o f money to certain creditors. 0 Rather than paying the timber royalties they owed direct to the government, the concessionaires were instead invitedto pay these creditors -the payment o f royalties was thus offset. 0 The concessionaires would be able to reimbursethe creditors incrementally. As an additional incentive, the amount they paid would be very slightly less than the total royalties they were legally obliged to pay the government. 0 The transactions would be facilitated by the subcontractors and fixers, who also brokered their authorisation by senior officials (including the prime minister and deputy prime minister). The disappearance o f royalties owed to the government was initially detected by the IMF inmid-2002. Inresponse, the MinistryofEconomy andFinance (MEF) initiatedits own audit which uncovered five `irregular' cases o f offsetting government debts against royal tie^.^^ MEF demandedthat the concessionaires involvedpay the offset royalties to the government; however evidence gathered by Global Witness suggests that this never happened. Inaddition, Global Witness found that MEF's findingstouched on only a few o f a much larger number o f cases involving almost all o f the concessionairesthat operated in2001. Infact, there are very strong indications that some or all ofthe government's purported debts to creditors were fictitious and that the companies inquestion, many o f which had not operated in Cambodia for years, were entirely unaware o f their role inthe offsetting 70E-mails from William Magrath to Global Witness, 13 July and 1August 2002. 71Global Witness investigations revealed that MEF, as well as other ministries, was in fact notified of all of the offsetting deals at the time that they were originally brokered. 27 arrangements. It i s hardto avoid the conclusion that the money, which amounted to several million dollars, was simply stolen by the subcontractors and their political patrons.72 One o f the World Bank's mainjustifications o f the concession system i s its supposedly reliable delivery o f tax revenue to the state. Moreover, the Bank has frequently been forthright (albeit selectively) in its condemnation o f corruption inCambodia.73 Inhis e- mails to Global Witness requesting information, the FCMCPP task manager duly expressed serious concern at the possibility o f royalty misappropriation havingtaken place: "IhavediscussedwithGlobalWitnessstaff onnumerousoccasions,theimportanceI would attach to information that Global Witnessmightprovide on royalty accruals. "Regarding our last conversation aboutpossible new information and allegations that Global Witnessmight be in aposition to raise in respect of corruption and misuse of funds, as Ihave indicated on other occasions,Ihave stand ready topass on information and evidence to the appropriate Bank oflcials. Please let me know ifyou have material of relevance to Bank operation in Cambodia and be assured that such information will be treated very seriously. ' j 7 j Inthe event, however, the Bank did little or nothingwith the evidence concerning the offsetting scheme. Indeed, only days after receiving the documentation from Global Witness, the task manager wrote to the Forest Administration proposing that the log transport moratorium be overturned and the same concession companies that had offset their royalty payments be allowed to resume timber shipments.76 The Bank's conduct in these (and other similar cases) again betrays its steadfast bias towards the concessionaires, inthe face o f overwhelming evidence o f the damage they have inflicted on the public interest. Hadthe World Bank demanded that the FCMCPP desist from supporting the companies, it i s highly unlikely that any would have cleared the strategic levelplanningprocess. Inthe event, the overriding imperative to keepthe concessionaires inbusiness in order to realise the project goal prevailed over principle, concerns about Cambodian law or the integrity o f the forest sector reform process. 72The MEF investigationof June 2002 claimedthat, the five cases that it examinedinvolved offsetting of more than $3 million owedto the state. 73A summaryof World Bank statementsconcerningcorruption in Cambodiais includedinGlobalWitness, `Taking aCut', November2004, p.8. 74E-mail from William Magrathto Global Witness, 13 July 2002. 75E-mail from William Magrathto Global Witness, 1August 2002. 76Letter from William Magrath,to Ty Sokhun, Director General, ForestAdministration, 3 October 2002; the Bank's attemptsto facilitate renewedlogtransports are examined inmore detail in section 2.12. As examinedinsection2.12, a significant proportionofthe logs in concessionaires' stockpileshadbeen felled illegally in the first place. 28 2.6 Submissionof the ManagementPlans- "Deadlinesare notwritten in The concession companies had committed to submittingtheir SFMPs and ESIAsby the end of September 2001.78 Shortly before this deadline expired, consultantsto the FCMCPP gave a presentation to members o f the international donor Working Group on Natural Resource Management, inwhich they claimed that the companies had made significant progress towards completion o f the plans. These claims were subse uently exposed as grossly exaggerated or, inthe case o f some companies, entirely false?' Inthe event, all the concessionaires missedthe 30 September deadline. This providedgrounds for cancellation o f their contracts. Instead, World Bank officials argued that the deadline should be allowed to slip and none o f the companies penalised for their failure to meet it.*' These arguments prevailed and the government decided to grant the companies another year to produce their plans. The short-term consequence o f this was that the companies continued logging for the remainingmonths o f 2001, before pressure from international donors other than the Bank persuadedthe government to suspendconcession operations effective from January 2002. Duringthis three month period several o f the companies, including Cherndar Plywood, Colexim Enterprise and Samraong Wood continued ille ally logging resin trees and thus inflicting substantial material harm on local inhabitants. ki Itis difficult to determine the degree to which lobbyingby Bank and FCMCPP staff influenced the extension o f the plans' submission deadline. At a minimum, it reassured the government that the Bank would support a decision to let companies off the hook. Eitherway, this episode againhighlightsthe determination ofthe Bank and its projectto shield the concessionaires from efforts to make them accountable. 2.7 Disclosure Disclosure o f concessionaires' management plans is a requirement under the Article 19 o f the Cambodian Forestry Law. Inaddition, the World Bank had made disclosure o f the plans a condition for release o f the US$15 million second tranche o f its Structural Adjustment Credit (SAC) to Cambodia, which was due for disbursement inDecember 2002. ~~ 77Comment attributedto FCMCPPtask manager when it became clear that the concessionaireswould not meet the plans submission deadline. 78Department ofForestryand Wildlife (Forest Administration), `Progress Reporton ForestryReform- Presentedat the Meeting ofthe Donor Working Group on Natural ResourcesManagement', 27 September 2001. 79Notably the case of Casotim company, which to date has still not producedan SFMP or ESIA but continuesto maintaintenure of its concession. See, for example, minutes o f meetingbetweenJon Buckrelland Rosie Sharpe (Global Witness) with Steven Schonberger, 9 August 2001. Global Witness `Deforestation Without Limits', July 2002, p.p. 16-17. 29 Inlate October 2002, the ForestAdministration announced that itwould allow aperiodof only 19 days for public review and consultation on the documents. This period coincided with a major public holiday, reducingthe actual amount of time to around two weeks. The World Bank reactedby criticisingthe 19 day limitation, but then indicated that this would nonetheless be sufficient to fulfil the SAC conditionality. Clearly, the Bank i s not primarily to blame for the inadequate consultation period. However, its effective endorsement o f the government's decision passed up a clear opportunity to use its influence to remedy the situation. Moreover, the Bank's position gave the impression that it was quite happy to see a basic mechanism for ensuringconcessionaire accountability to forest dependent communities diluted to a degree that rendered it close to meaningless. Further to its tacit acquiescence to the 19 day consultation period, the World Bank office inPhnomPenhagreedto take onthe government's legal responsibility for disclosing copies o f the concessionaires' plans. However, following an intervention by the Cambodia Timber IndustryAssociation, the Bank agreed that itwould disclose only an edited version o f the plans, which excised the economic data.82 As discussed inmore detail in section 2.11, the commercial viability o f all the concessions is highly questionable. The Bank's acceptance o f the CTIA's argument that the public should be denied access to the data that might reveal this is hard to reconcile with its professed commitment to ensuring meaningful tran~parency.~~ When community andNGO representatives requested copies o fthe documents from the Forest Administration on the first day o f the designated review period, the FA referred them to the World Bank office. The Bank's reaction to the request for the documents was to announce that it did not have some o f the documents, that it had only one copy o f those that it had received and that these were all inblack and white (which renderedtheir colour-coded maps indecipherable). Bank staff informedthe community and NGO representatives that it did not have the funds to make more copies. What makes this response all the more astonishing i s the fact that NGO representatives had comprehensively briefedWorld Bank staffjust a few days beforehand on villagers' intentions to come and request copies o f the plans. Inthe words ofthe OxfamRegionalDirector inher letter to the World Bank Cambodia Country Director "It is hard to understandwhy the Bank chose to take on the legal responsibility of the government to ensure disclosure of the documentsand why, having done so, itfailed to discharge this responsibility competently. Letter from CambodiaTimber Industry Associationto IanPorter, World Bank CambodiaCountry Director, 21 October 2002. 83Inpractice this information did enter the public domainbecause, while the CTIA and Forest Administrationremovedthe economic data from English languageversions ofthe managementplans, they forgot to excise it from the Khmer languagecopies. 84Letter 2002 from Heather Grady, RegionalDirector of Oxfam to IanPorter, World Bank Country Director, Cambodia, 6 December 2002. 30 Inview ofthe WorldBank's underlying commitment to the poor andvulnerable, its role inthe unravelling ofa key accountability mechanism designedto protect suchpeople's interests i s particularly regrettable. It also constitutes a breach o f the provisions on disclosure of Operational Policy OP 4.01 on Environment Assessment, as detailed in section 3,Ibelow. 2.8 Consultation One o f the first outcomes o f the eventual disclosure o f the SFMPs and ESIAswas to confirm that the concessionaires had not carried out adequate community consultation, as required by the planningprocess.85 On 5 December representatives of communities situated in and around concessions went to the Forest Administration to request a consultation on the content o f the management plans. They spoke with the Project Director o f the FCMCPP, Chea Sam Ang, who i s also Deputy Director o f the Forest Administration. Chea Sam Ang refused their re uest for a meeting and, according to some o f the community members, threatened them.' In response, the villagers staged a sit-inprotest outside the Forest Administration main office. The same evening, special police unitsviolently dispersed them, usingelectric shock batons. While the World Bank did protest the use o f violence by the police, it nevertheless undermined this commendable stance by failing to take action against the FCMCPP Project Director. Inthis regard it i s worth notingthat evidence o f subsequent illegal activities by the same individual has been brought to the World Bank's attention and elicited no response.87 The outcomes o f the FCMCPP are damaging primarily because they strengthenthe hand of companies whose activities cause material harm to rural Cambodians. Inthis instance, however, the harm was immediate and implicated FCMCPP staff directly. The ways in which this represents a breach o f operational policy OP 4.01 are examined in Section 3. Inthe face ofwidespread criticismofthe limitedwindow for comment onthe plans and the lack o fpublic consultations duringtheir preparation, the government announcedthat 85GlobalWitness, `Preliminary Assessment of Strategic ForestManagement Plans and Environmentaland SocialImpactAssessment Reports-Cambodia's Forest Management Options for the Future' December 2002, p.p.21; GFA Terra Systems: `Results ofthe IndependentReview of Strategic ForestManagement Plans preparedby ConcessionCompaniesoperatingin Cambodia', August 2004, p.135. 86Letter from Heather Grady, RegionalDirector of Oxfam to IanPorter, World Bank Country Director, Cambodia, 6 December 2002. 87 See, for example letter from Global Witness to Peter Jipp, Task Managerofthe FCMCPP, 22 July 2004 concerning Chea Sam Ang's role in facilitating the transportoftimber illegally loggedwithin aprotected forest inMondulkiri. The fact that conservationofthis same protectedforest was beingfunded throughthe FCMCPPwas apparently insufficient to persuade the World Bank to take action. 31 itwould allow further consultations beyondthe allotted 19days. These consultations, which had started at the beginningo f the designated review period inNovember 2002 thus continuedthroughthe first months of2003. Some ofthese were marredby intimidation o f the participants and attempts to trick villagers into signing off blank documents.88 A World Bank representative inJanuary 2003 admitted that the standard o fthese consultations was very poor.8g By contrast World Bank Regional Vice-president Jemal- ud-dinKassuminformedNGO Forum on Cambodia inDecember 2003 that "community consultations onforest concession managementplans have been taking place. A report has beenproduced by the Government, but has not been madepublic. Wewill urge the Government to disseminate this report to interestedparties in the interest of increasing understandingof community concerns regardingforest management. Specialist social science staff of the WorldBank have reviewed this work and concluded that it was a satisfactory basisfor the strategic level decision making of Government. Itis not clear whether Mr Kassumwas referringto the same set of consultations andthe report he referred to does not appear to have been published. World Bank staff responsible for the FCMCPP have since echoed his satisfaction with the standard o f consultations. InApril 2004 the outgoing task manager claimed that a World Bank social science specialist had concluded that social impacts were adequately addressed duringthe strategic level planningproce~s.~'The social scientist's supposed conclusions (which have also not beenpublished) are at odds with those o f the independent review team that examined the companies' plans in July to August 2004: `>participation in the designation of community areas did not takeplace and the whole social context of these concessions has becomeproblematic as a result, even though the TRT (FCMCPPplans review team) initiated community consultations aspart of their review process. The currentlyproposed community use zones and resource accessplans . are therefore inadequate. 'lg2 '*See, for example, letter from Heather Grady, Regional Director of Oxfam to IanPorter, World Bank Country Director, Cambodia, 6 December 2002; field notes compiled by NGO representatives attending the consultations. Inat least one instance, representativesofthe Colexim Enterprise company tried to persuadevillagers to thumbprint a blank document in exchange for blankets. 89MeetingbetweenPeter Stephens, Melissa FossbergandBou Saroeun of the World Bank, together with Eva Galabru, Jon Buckrell, Marcus Hardtke and MikeDavis of Global Witness, 15 January 2003. 90Letter from World Bank Vice PresidentJemal-ud-din Kassum to NGO Forum on Cambodia, 17 December2004. 9'MeetingbetweenWorld Bank staff membersWilliam Magrath (FCMCPP Task Manager 2000-2004), Peter Jipp (FCMCPP Task Manager 2004-), Stephen Mink and Steven Schonberger;with Suwanna Gauntlett andDelphine Vann Roe of Wildaid; MikeDavis and Hannah Thompson of Global Witness, Phnom Penh, 20 April 2004. 92GFA Terra Systems: `Results of the IndependentReview of StrategicForest ManagementPlans prepared by ConcessionCompaniesoperating in Cambodia', August 2004, p.135. 32 The World Bank and FCMCPP's satisfaction with the consultations is further manifested inthe project's conclusion in2004 that plans submittedby six ofthe concessionaires should be approved. On one level, this provides an example o f the FCMCPP endorsing harmful acts by other parties (officials and companies), which undermined a key public accountability mechanism. The World Bank should have ensured the FCMCPP took the poor quality o f the consultations into consideration when it reviewedcompanies' plans; however, as discussed below, it did not. Comments by World Bank staff suggest that the project had a more direct responsibility for ensuring the quality o f the consultations, however. The Bank undertook no prior environmental and social assessmento f the project's impacts before it began, thus placing it inbreach o f OP 4.01 on Environment Assessment. Asked to explain this, the outgoing project task manager claimed that compliance with this operational policy was fulfilled through the environmental and social assessmentwork carried out by the concessionaires assisted by the FCMCPP.93 This explicit identificationo f the FCMCPP's performance with the social and environmental work o f the companies raises more questions than it answers. Giventhe standard o f the consultations conducted by the companies, this suggests that the FCMCPP i s also in breachthe provisions o f OP 4.01 regarding public consultation. This issue is explored in more detail in Section 3. Lack o f consultation was one o f the reasons for the World Bank rating the FCMCPP as `unsatisfactory' inthe second half o f 2002.94It is reassuring to know that the Bank had some awareness o f the project's deficiencies inthis regard. Nevertheless, the belated increase in number o f consultation exercises since has not been matched by any qualitative improvement. Moreover, as these consultations have taken place after the companies had already submittedtheir SFMPs and ESIAs, their scope to influence the concessionaires' planning process has been very limited. 2.9 Forest Cover Survey In2003, the FCMCPP undertook a forest cover study of Cambodia for use inits assessmento f concessionaires' management plans. Consultants working on the FCMCPP admitted that the three months allocated made it difficult to do the job th~roughly.~'Inthe event, the consultant nominally leading the study was absent for 93Meeting betweenWorld Bank staff membersWilliam Magrath (FCMCPP Task Manager2000-2004), PeterJipp (FCMCPP Task Manager2004-), StephenMink and Steven Schonberger togetherwith Suwanna Gauntlettand DelphineVann Roe of Wildaid; MikeDavis and HannahThompsonof Global Witness, PhnomPenh, 20 April 2004. 94J. Blakeney, Kay Panzer,Wemer Schindele, `Forest ConcessionManagement and Control PilotProject- FinalReportofthe Mid-TermReviewMission', February-March2003, p. 3. 95Global Witness interview with Yann Petrucci,technical advisorworking onFCMCPPteam, 17 September 2003. This view was supportedby the findings ofthe mid-term review ofthe FCMCPP:J. Blakeney, Kay Panzer, Werner Schindele, `Forest ConcessionManagement and Control PilotProject- FinalReportofthe Mid-TermReview Mission', February-March2003. 33 most o f this period. Neither he nor the World Bank exercised much supervision o f the exercise. When the forest cover survey results were released inJune 2003, they purported to show that Cambodia's forest cover had increased by more than 4%. This came as a surprise in view o f documented deforestation and forest degradation inthe years since the previous cover assessment (1997). As it turned out, the FCMCPP study contained internal inconsistencies, methodological weaknesses and basic errors.96 When asked why areas that the 1997 survey displayed as bare earth were now fully forested, an FCMCPP consultant suggested that this reflected the inability o f the study to distinguishbetween forest cover and bamboo.97 The overall conclusion, that Cambodia's forest cover was increasing, helped boost the World Bank's arguments for more industrial logging by concessionaires. More immediately, however, the study's flawed findings provided a usefulpolitical prop for the governing party's re-election campaign ahead o f the national ballot inJuly 2003. On National Tree Planting Day in July 2003, Prime MinisterHun Sen citedthe FCMCPP forest cover study as evidence o f his wise stewardship o f the country's forests over the previous five years. While unlikelythat such a claim would, on its own, determine the outcome o f an election, forest management i s a highlypolitical issue in Cambodia, and has been known to influence the results o f previous polls in some localities. Itis difficult to determine whether the FCMCPP deliberately set out to manipulate the findings o f the study, not least as ithas declined to publishthe survey's findings infull. Either way, the main outcomes can be summarised as follows: 0 LILmoney wasted 0 the opportunity to produce an authoritative assessment of forest cover lost 0 production o f misleading information at a time when it was liable to be used for political purposes At a minimum,the poor oversight ofthis projectcomponent constitutes a breacho f operational policy OP 13.05 on project supervision. 2.10 Declaration on Forestry Revenues Systems Management Another component of the FCMCPP has been the development o f a prakas - a ministerial declaration that forms an additional component o f an existing law - covering forestry revenue systems management.98 Under an action plan agreed by the World Bank and the RGC in early 2003, the government agreed to put this prakas inplace by the start o f May 96Bruce McKenney, notes on forest cover study presentation, 27 June 2003. 97Global Witness interview with Yann Petrucci, technical advisor to FCMCPP, 17 September2003. 98This prakas is called for under Cambodia's 2002 Forest Law. 34 the same year. Prior to finalisation, the prakas would be publicly disclosed and available for comment. Assistance inthese processes would be provided through the FCMCPP. The prakas was not completed intime for the May 1deadline and the process effectively dropped out o f sight. FCMCPP staff involved admitted that they were not keeping a close track o f the prakas development and were unable to provide informationas to when the slated disclosure and comment periodwould take place.99 At a meeting inDecember 2003, the WorldBank task manager informedNGO representativesthat the prakas had already been passed. Responding to requests for information on its availability for comment prior to completion, the task manager stated that "apublic" had been consulted. Asked to define the public inquestion, he explained that it consisted solely o f the IMF office in Cambodia.'00 While presumably now completed and legally applicable, the prakas has still not been publicly disseminated. Inthe first instance its disclosure i s undoubtedly the responsibility o f the Cambodian government rather than the World Bank. However the Bank, having chosen to take a role inthe prakas development, had considerable scope to steer the process. It chose not to exercise this. Although not necessarily materially harmful in itself, the Bank's handling o f the issue is indicative o f the lack o f commitment to transparency and consultation which has characterisedthe FCMCPP and explains several o f its more damaging outcomes. 2.11 Reviewingthe Management Plans As described above, continued evidence o f forest crimes by the logging concessionaires did not shake the World Bank's conviction that the FCMCPP should continue supporting them. Neither did the FCMCPP take account o f companies' illegal activities when it came to assessing their plans."' As with other elements ofthe project, the FCMCPP team went out o f its way to accommodate the companies. 99E-mailfrom DennisCengel, technical advisorto FCMCPPto Global Witness, 15 September 2003. looMeeting betweenWorld Bank country representative andFCMCPPtask manager,together with representativesof Oxfam GB, Oxfam US,NGOForum on Cambodiaand Global Witness, 22 December 2003. lo'As criticism ofthe FCMCPPhas mounted, the World Bank has taken to referring to the team reviewing the concessionaires' plans as "thegovernment's technical review team"; for example inthe letter from CambodiaCountry Director IanPorterto Global Witness, 20 December 2004. This is anonetoo subtle attempt to place distance betweenthe Bank and areview team that clearly labels its written outputs as "Forest Concession Management and Control Pilot Project"; as for example in the FCMCPP's 2003 report on the SFMP and ESIA produced by Kingwood company. The report on Kingwood's is one of only two out of 13 such documents that the project has actually publicly disclosed. 35 Refusal to take account of concessionaires' track records The FCMCPPteam reviewingthe plans closed its eyes to all past offences by the concessionaires. This establisheda skewed system o f assessmentby which plans written by external consultantswere treated as the sole indicator ofthe company's will and capacity to manage forest responsibly. Meanwhile, documented past practices o f the companies themselves (as opposed to the scribes who drafted the management plans) were studiously overlooked. Interms of evaluating the companies' suitability as forest managers, this approach had obvious limitations. From a supposedly `technical' forestry standpoint, moreover it introduced basic errors into the review process. For example, inthe aforementioned case o f illegal logging by Everbright in2000-2001, the concessionaire cut substantial portions o f the timber stand in its concessioncoupe number two. Inits management plan the company indicated its intention to log this same coupe again within 10-11 years, despite the fact that coupes are only supposedto be cut once every 25 years. As a result oftheir refusal to take account o f past and ongoing illegal activities, the FCMCPP review team did not pick this up. When it was pointed out to them they refusedto factor it into their review o f the company's submission.'02 Prioritising timber volume to the exclusion of environmental and social impactplanning The World Bank took no action to prevent its project from adopting a wholly flawed scorecard system for assessing concessionaires' SFMPs and ESIAs.lo3 Under the FCMCPP methodology, different elements o f companies' submissions are assessedand a certain number o f points awarded or deducted for each component. These individual scores are then added to produce an overall figure. The system is very heavily weighted towards consideration o f the amount o f timber the company has left in its concession. Thus, while a company can obtain a maximum of 125 points ifitproduces satisfactory inventory data, it will only receive 30 points for an acceptable ESIA. The available project reports on Kingwood and MiengLy Hengplans include the careful caveat that "A quantitative score and weight wereprovided at each stagefollowing the evaluation, but these should be interpreted more as guidelines than as absolute measures of the relative importance o the criteria that were established to evaluate theforest managementplan. j 1 1of4 lo' Minutesofmeetingbetween Yann Petrucci,technical advisorto FCMCPPandMikeDavis of Global Witness, 17 September 2003. IO3 Although the natureofthis scoringsystemwas not publicly disclosedduring the review process, scorecards for Kingwood andMiengLy Heng company plans are includedinthe FCMCPP's reports on the submissions ofthese two concessionaires. IO4 ForestConcessionManagement and Control Pilot Project, "TechnicalReview of the Strategic Forest Management Plan and Environmental and SocialImpactAnalysis -Kingwood Company Kratie Concession 2003. `I, 36 However, the implication is clear enough -companies that still have viable forest intheir concession will receive approval to carry on cutting. Poor quality o f SFMP, ESIA or community consultation (up to 30 points added or subtracted for each) i s not going to prejudice this outcome. So distorted is this system, that it seriously questions the sincerity o f the World Bank's professed efforts to reform the companies. The methodology betrays the fact that the project's over-riding concern i s how much timber is left, rather than the quality o f forest management that the concessionaires can offer or their respect for the rightso f local communities. The Bank was quite aware o f this situation and did nothing to correct it, suggesting that the FCMCPP's approachwas entirely in line with its own agenda. Disregarding legal prohibitions on cutting resin trees Probably the most harmful impact o f the concessions on rural Cambodians has been the companies' illegal logging of resin-producing trees. The 1988 Decree on Forest Practice Rulesprohibitedfelling o ftrees that peoplewere actively tapping for resin. Concessionaires consistently flouted this law, however, and cut them invast numbers. Various public statements by officials, including the prime minister, calling on the companies to desist from cutting resin trees did little to change this.'05 Article 29 o f the new Forest Law introduced in 2002 extended the existingprotection to "trees within a species /type that local communitieshave traditionally tappedto extract resin ";inother words all resinproducing trees, notjust those already tapped. This provisionthus protects not only those trees that villagers are currently tapping, but also those that they have earmarked for tapping inyears to come.lo6 Resin-producing dipterocarp trees are the staple inputfor plywood and veneer production by the concessionaires and have historically constituted the bulk o fthe harvest inmany of the con~essions.'~~the law is upheldand cutting o fthese trees is stopped, it is highly If unlikely that any o f the concessions can be considered economically viable. A recent IO5PrimeMinister Hun Sen publicly orderedthe concessionaires to stop cutting resintrees on 18 April 2001. Letter from Global Witness to PrimeMinister HunSen concerningcontinued logging ofresintrees by Cherndar Plywood, Colexim Enterprise, GAT International, Pheapimex and SamraongWood, 9 January 2002. Io6BruceMcKenney, Yim Chea, Prom Tola and Tom Evans, `Focusing on Cambodia's HighValue Forests: Livelihoods and Management', CambodianDevelopmentResourceInstitute and Wildlife Conservation Society, November2004, p.58: "In addition to tappedtrees, most householdshave resin trees "in reserve" - untapped smaller resin treesgrowing among their currently tapped resin trees which theyplan to tap in thefuture. On average, Kompong Thom householdsclaim 145 trees in reserve and Preah Vihear householdsreport 34 trees in reserve.'' `07Reference inPheapimex-Fuchan/ DepartmentofForestry and Wildlife harvest logbookfor Pheapimex- FuchanStungTreng/ Thalabariwat concession cited inGlobal Witness, `Preliminary Assessment of Strategic ForestManagementPlans andEnvironmentaland Social Impact Assessment Reports- Cambodia's ForestManagementOptionsfor the Future', December 2002, p.13; Global Witness, `DeforestationWithout Limits', July 2002, p.17. 37 analysis o f timber stands inthe Cherndar Plywood concession inPreahVihear concluded as follows: "Resin trees represent about halfof the timber volume and rent in the Preah Vihear (Cherndar Plywood) area, suggesting that logging operations (in this area) will have great incentivesto cut resin treesregardless of the legalprohibition. Such actionswill significantly increasepoverty in the areafor more than half of the (surveyed)households. This income cannot easily be replaced because employmentalternatives in the area are scarce. Expectinglogging companiesto adopt sustainableforest management appears to be a non-starter, as rentsfall dramatically under such an approach. No operation that that reduces timber rents by nearly 90percent, especially if there remainfew enforced can carry on with conventionallogging will want to adhere to a management approach penaltiesfor non-compliance. >j1O8 Intheir managementplans, concessionaires included resin-producing trees intheir inventories and annual allowable cut (AAC) -calculations by which they justified their economic viability. A review o f the plans carried out to basic professional standards would have been unable to avoid the following conclusions: 0 The companies claims to economic viability were highly suspect 0 The plans indicated the companies' intentionto carry on cutting resin-producing trees illegally Instead, the FCMCPP review team accepted the companies' intended logging o f the trees as legitimate and assessedthe concessions' inventories and AACs accordingly. NGOs pointed out the content and meaning o f the Forestry Law's Article 29 to both the FCMCPP and the World Bank on several occasions. At a meeting with Global Witness inSeptember 2003, a member ofthe FCMCPP review team acknowledgedthe meaning o f the law and its protection o f all trees o f resin-producing species. However, he said that the review team would ignore it because they thought that the Ministry o f Agriculture, Forestry and Fisheries (MAFF) might grant an exemption for the companies. Any attempt by MAFFto issue a blanket waiver for logging companies would certainly be strongly contested. Either way, no such exemption has been issued. As argued above, inorder to meetthe project objectives set by the World Bank, the FCMCPP neededto ensure that some o f the concessionaires at least could resume logging. Inthe absence o f any plausiblejustification, this appears the most likely explanation for the project's conscious decision to ignore the law in its assessment o f the companies' managementplans. As the FCMCPP team surely realized, this amounted to encouragement o f illegal logging that would penalise some o f Cambodia's poorest citizens. lo*Bruce McKenney, Yim Chea, Prom Tola and Tom Evans, `Focusing on Cambodia's High Value Forests:Livelihoods and Management', Cambodian Development ResourceInstitute and Wildlife Conservation Society, November 2004, p.87. 38 Global Witness staff raised the same matter with the World Bank task manager and two o f his colleagues in October 2003 and they promised to look into it.'09Whether they did or not is unclear; in either event they did not compel the FCMCPPteam to amend its review methodology. As well as exposing the underlyingrationale o f the FCMCPP and its bias towards companies' interests, the project's decision to ignore the law and Bank's failure to correct this point to a breach o f the Bank operational policy on project supervision. Extra time and extra chancesfor the concessionaires Inthe event, the FCMCPP's review ofconcessionaires' SMFPs and ESIAs was far from beinga substantive examination o ftheir will and capacity for sustainable forest management. Instead the assessment evolved into a protracted exchange o f drafts that robbed the process o f any residual credibility that it might otherwise have had. When the companies finally submitted their plans up to a year after the originally agreed September 2001 deadline, FCMCPP staff conceded that in all cases the quality was extremely poor. Rather than treating the documents as a gauge o f the companies' suitability for concession management, however, the project chose to give them multiple extra chances to improve them. By May 2004, some o f the companies had submitted plans as many as three times.' loOn each occasion, FCMCPP staff sent the companies suggestions on how to make them more presentable. Throughout its review o f concessionaires' plans, the FCMCPP team repeatedly insisted that its assessment was based on purelytechnical criteria. This was their justification for overlooking companies' past violations o f the law, for example. Project staffs decision to give the companies more and more opportunities to improve their plans was anything buttechnical however. Once again, this reflectedthe FCMCPP imperative o f shepherdingat least some o f the companiesthrough the process to a point where they could resume logging. Not for the first time, the project demonstrated its determination to place the interests o f the companies above those o f Cambodians who stood to suffer the adverse impacts o ftheir continuedoperations. The Bank, meanwhile, was quite aware o f these shortcomings, but did nothingto remedy them. Postponing consideration of adverse social impacts Inspite ofthe FCMCPP's provision oftechnical assistance to the concessionaires, the calibre o f the plans they produced, even after several revisions, remained desperately low, not least inthe realms o f environmental and social impacts. This threatened to logMeeting betweenHak Sarom, Oxfam; Andrew Cock, NGO Forum, Mike Davis, Global Witness together with William Magrath and Andrew Bondof World Bank and JohnDick, World Bank Staff Consultant, PhnomPenh, October2003 `loGFA Terra Systems: `Results ofthe IndependentReview of Strategic ForestManagementPlans preparedby ConcessionCompanies operatinginCambodia', August 2004, p.15. 39 obstruct the project's efforts to ensure that some companies continued operating. In response, the FCMCPP staff and the World Bank task manager have increasingly sought to gloss over the concessionaires' glaring lack o f attention to social impacts by arguing that these can be addressed at the compartment (five year planning) level, after the companies' strategic (25 year) level plans have already been approved. This line o f argument is extremely disingenuous. The production and assessmento f the strategic (25 year) plans offers the only real opportunity inthe concession reform process to judge companies against their willingness and capacity to address the concerns o f local communities. Indeed, the primacy o f strategic level planning for all aspects o f concession management i s the reason the World Bank focused its project on this process rather than planning at the compartment and annual coupes level. For the same reason, communities, NGOs and other donors have concentrated their efforts on ensuring that the strategic planning phase meets minimuminternational standards. Itwas with the same concerns inmindthat the World Bank staffconsultant examining the CTIA terms o f reference for ESIA wrote that community participation at the strategic-level planning stage was essential.' l1 Ina similar vein, the independent review of six companies' concessionplans completed inAugust 2004, argued that "There is still disagreement regarding whether work with communities should takeplace during strategic or compartment levelplanning. However, most of the existing guidelines, notably the Social Forestry Guidelines of 1998,are very clear that participatory planning with stakeholders needs to takeplace at concession level. Wefeel that, given the strategic nature of the social tasks and thepaught history of relations between many of the concessionsand the communities, there is no alternative to participatory survey andplanning at the concession level. " With their strategic level plans approved, the concessionairesare inan unassailable position. Indeed, it is almost inconceivable that they would have their concessions terminated on the basis o f poor planningat the five year and annual coupe stages. The notion that local inhabitants might, in subsequent planning exercises, stand a better chance o f compelling the companies to take account o f their interests i s fanciful. Relegating social impacts considerations to subsidiary stages completely undermines their negotiating position. Nevertheless, the FCMCPP and the project task manager have increasingly talked about how social impact considerations such as the cutting o f resin- producingtrees should be addressed in compartment level rather than strategic level planning. 'l2 `I1John H.Dick, Staff Consultantto The World Bank, `Comments on the Environmental and Social Impact Assessment Terms of Reference andWorkplan for The PreahVihear Concessiono f Cambodia Cherndar Plywood, as preparedby the CambodianTimber Industry Association, April 2001', July 2001, section 2. GlobalWitness interview with Yann Petrucci, technical advisor to FCMCPP, 17 September 2003; Meeting betweenWorld Bank staffmembersWilliam Magrath (FCMCPP Task Manager 2000-2004), Peter Jipp (FCMCPP Task Manager 2004-), StephenMinkand Steven Schonberger; with SuwannaGauntlett and Delphine Vann Roe of Wildaid; Mike Davis andHannah Thompson of Global Witness, Phnom Penh, 20 April 2004. 40 World Bank and FCMCPP staffs motivations for pushingsocial considerations to the compartment levelplanning stage are suspect, not least as the project design never anticipated work at the compartment level at all. The FCMCPP Project Appraisal Document talks about planningtaking place only at the strategic and annual coupe level^."^ The terms o f reference for consultants assigned to the project, moreover, refer only to strategic (25 year), coupe (one year) and block (subdivision o f the annual coupe) planning.' l4 That the World Bank i s now so eager to push social issues to a planning level that it did not previously considered o f importance raises serious questions about its commitment to ensuring that they are addressed ina meaningful way. The overall approach reinforces the impression o f a project desperate to find ways o fjustifying some o f the companies and prepared to sideline the interests o f ordinary Cambodians in order to do so. Ignoringconjlicts of interest The concessionaires' SFMPs and ESIAswere not written by company staff responsible for operations, but rather by three different groups and institutions' 15: Table 2: Authorship of concessionaires' managementplans World Bank, `Project Appraisal Document on a Proposed Learning and Innovation Credit to the Kingdom of Cambodia for a Forest Management and Control Pilot Project', June 2000, p.15. `I4Forest ConcessionManagement and Control Pilot Project, `Consulting Serviceson Forest Management Planning and Training Terms of Reference'. `I5Global Witness, `Preliminary Assessmento f Strategic Forest Management Plans and Environmental and Social Impact AssessmentReports-Cambodia's Forest Management Options for the Future', December 2002, p.5. 41 This initself made the validity of the plans highlyquestionable. That none ofthe concessionaires had staff capable of producing a concession managementplan or ESIA should have served as yet another reminder o f the quality o f forest stewardship that these companies could offer. Presumably inthe interests o f efficient time management, the documents' authors copied whole sections from one plan to another. For example, the CTIA discovered identical eating habits in all six o f the concessions for which it prepared plans: "Dried toads were observedfor sale in the medicine shops in nearby towns, as well as river terrapins in the local wet markets. Frog is a common andpopular dish, both in the local kitchens as well as urban restaurants. I t is interesting to note that a kind of tarantula spider, black beetle and cricket arefavorite snacks of localpeople, but these species normally occur near ricej?elds. '' (Section on Reptiles and Amphibians for Silveroad ESIAp.43; Samling Kratie-Mondulkiri ESIAp.44; Samling Koh Kong ESIA p.42; Everbright ESIAp. 49; Cherndar PlywoodESIAp.40; Mieng Ly HengESIA p.41)" Inits reviewprocess, the FCMCPP team decidedto close their eyes to the copy andpaste methodology and the World Bank appears to have made no effort to correct this. Furthermore, the Bank and the project team declined to address the serious conflict o f interests that that the documents' authorship posed. Five o f the concessionaires had commissioned plans from staff o f the Forest Administration and Ministry o f Agriculture, Forestry and Fisheries -the same institutions responsible for deciding whether or not the companies should be allowed to resume operations. Three more companies had hiredthe Forest Research Institute;an organisation establishedwithin the Forest Administration. The World Bank's staff consultant drewthe Bank's attention to this issue inJuly 2001; however his advice was not heededby either the FCMCPP task manager or the project team. '* FCMCPP international consultants tasked with reviewing the plans insistedthat none o f their Forest Administration counterparts hadwrittenthe plans they were reviewing. Even iftrue,thisdoesnotaddresstheunderlyingproblemoftheFCMCPPreviewteam's FA membersassessing documents producedby their own institution. Moreover, as already noted, one o f the FCMCPP's senior project staff has been simultaneously employed as assistant to a concession company shareholder. Itis difficult to determine whether such conflict of interestsplayeda role inthe conclusions that the FCMCPP reached. Either way, this offers one more example o f the way that the Bank was prepared to overlook the project's deviation from basic professional standards. `I6GlobalWitness, `Preliminary Assessment of Strategic ForestManagement Plans and Environmentaland SocialImpactAssessment Reports-Cambodia's ForestManagement Options for the Future', December 2002, p.5 John H.Dick, Staff Consultantto The World Bank, `Comments on the Environmentaland SocialImpact Assessment Terms ofReferenceand Workplan for The Preah Vihear Concessionof Cambodia Chemdar Plywood, as preparedby the Cambodian Timber Industry Association, April 2001', July 2001, Section 2. 42 Ignoring the combined impacts of concessionaireson Cambodia'sforested landscapes The FCMCPP assessmentexcluded considerationo fthe combined impacts o f logging companies' plans on Cambodia's forested landscapes. The team examined the different sets o f plans entirely in isolation from one another. This approach proceeded from the flawed assumption that logging would only have environmental and social impacts within the boundaries of the given concession and the combined impacts o f groups o f contiguous concessions could be discounted. The FCMCPP therefore took no account o f the obvious environmental and social impacts o f the plans o f two companies with adjacent concessions to drive parallel roads into Cambodia's last intact lowland evergreen forest, Prey Long.'18 Again the Bank took no corrective action. The Bank's decision to help companies develop plans for industrial logging inthis ecologically valuable area i s itself a breach o f World Bank operational policy OP 4.36 on forests, as discussed in Section 3.3. 2.12 The ModelPlans "The concessionmanagement and operationsplans developedwith the aid of technical assistancewill serve as modelsfor similar plans to be developed,subsequently, in all operating concessions. As such they will serve as standards by which the acceptability of suchplans will bejudged (by the ForestAdministration)" FCMCPP Project Appraisal Document, p.15 As a result o f the deficiencies inthe FCMCPP's assessment andthe Bank's failure to correct them, by June 2004 the project had recommended that the Cambodian government approve the plans o f six o f the companies: Cherndar Plywood, Colexim Enterprise, EverbrightCIG Wood, Samraong Wood, TPP and Timas Resources. The companies may yet be requiredto produce further plans (compartment / five year level and annual coupe). However, acceptance o f the strategic level plan is the critical threshold that the concessionaires must cross in order to assert control o f their concessions for the next 25 years. It is for this reasonthat all stakeholders - Cambodian government, World Bank and other donors, community groups and NGOs have attached particular importance to the strategic level planning process. With two exceptions, the FCMCPPhas not disseminated its assessmentso fthe companies' plans. A table setting out the review team's conclusions is included, however `I8 Global Witness interview with Yann Petmcci, technicaladvisor working on FCMCPPteam, 17 September 2003; Global Witness, `Preliminary Assessmentof Strategic Forest ManagementPlans and Environmentaland SocialImpactAssessment Reports-Cambodia'sForestManagement Options for the Future', December 2002, p.30-31. 43 inthe annex of the 2004 GFA Terra review ofthe six sets of documents' 19. This summary shows how the FCMCPP has implicitly or explicitly acknowledged deficiencies inall the concession documents to which ithas given its endorsement. Ineach case ithas justified this with the argument that these flaws can be rectifiedduring subsequent planning stages.120 Itis therefore not surprisingto findthat the quality ofthe SFMPs and ESIAsthat the FCMCPP recommended for approval remains thoroughly deficient. Many contain even the same elementary errors as the first drafts disclosed inNovember 2002, notably blatant copying o f whole passages from other companies' plans. For example the FCMCPP- approved Cherndar Plywood management plan persists in describing its concession in Preah Vihear province (close to the Thai border) as a wildlife corridor between a protected area inMondulkiriprovince and Vietnam. Cherndar Plywood, or rather the CTIA staff it hired to write the document, copied this section wholesale from the plan prepared by Samling for its Mondulkiriconcession. In this regard is interestingto notethat the FCMCPP dismissedboth sets of concession plans produced by Samling, a company involved ina protracted disputewith the Cambodian government, despite the fact that Samling's plans provided the blueprint for the other four drafted by the CTIA. All six concessionaires have a track record of serious forest crime and/or contractual breaches documented by the ADB Concession Review o f 2000, reports by Global Witness and others. Moreover, they include the same company (TPP) whose concession was described by the 2000 ADB-financed study as 90% non-operable.'21 According to the same ADB report, none of the companies had enough forest left to permit the sustainable 25 year cutting cycle that the concessionaires are required to follow. The companies all either state or implytheir intention to cut resin-producing trees, despite the fact that this is illegal. Resin-producing trees are not excluded from inventories and calculations of annual allowable cut. One concessionaire (Colexim) talks about how it has decided to pay villagers small amounts o f money (unilaterally determinedin advance by the company), after illegally cuttingtheir trees. Some also indicate their hostility towards local forest users by describing collection o f non timber forest products as illegal, which it is not; and declaring their intentionto exclude communities from certain areas, which is.`22 ` 1 9 GFA Terra Systems: `Results of the IndependentReview o f Strategic Forest Management Plans preparedby ConcessionCompanies operating in Cambodia', August 2004, annexes. I 2 Oibid. 12' Asian Development Bank SustainableForest Management Project `Cambodian Forest Concession Review Report', 2000. I22 Article 15 ofthe 2002 Forest Law states that: "Concessionaires shall have the right to manage and conductforest products and by-products harvesting operations within their concession, while ensuring that the operation does not interfere with... customary access and user rightspracticed by communities residing within or adjacent toforest concessions.'' 44 The concessions that the FCMCPP recommends for renewed logging include three encompassing the core o f Prey Long forest, the last intact lowland evergreen forest in mainland Southeast Asia. The FCMCPP's position i s at odds with the recommendation o f the 2004 Cambodia IndependentForest Sector Review, funded by the World Bank and other donors, which concludes that Prey Long should be takenout o f production in recognition o f its highconservation value. This decision to support logging o f an ecologically valuable area breaches the World Bank operational policy on forests (section 3.3 below). As already noted, the World Bankproject and the Government ForestAdministration have declined to publishthe FCMCPP's evaluations o f the SFMPs and ESIAs, thus adding to prevailing lack of transparency within the sector. Communities affected by concessionaires' activities are therefore denied even an explanation as to why the World Bank project is endorsing the six companies' plans. The FCMCPPreview team's conclusions tacit1 concede that community consultation for the plans it has approved has been inadequate.lY3 This deficiency alone should be grounds for rejection of the companies' submissions. However, rather than holdingthe companies to account for their failings inthis regard, the FCMCPP staff and the World Bank task manager have argued that they be invitedto compensate for these deficiencies with extra consultation at the compartment level (five year) planning stage, as described above.'24 As argued above, once the companies have secured control over concessions for another 25 years, there will be little or no incentive for them to take account o f the views o f local inhabitants. The FCMCPP is thus denying forest-dependent communities an unprecedented opportunity to hold concessionaires to account and have their voices heard. Following the FCMCPP's recommendation o f approval for Cherndar Plywood, Colexim Enterprise, EverbrightCIG Wood, Samraong Wood, TPP and Timas Resources, the international donor Working Group on Natural Resource Management convened an independent evaluation o fthe six sets o fplans. The review team concluded that not one o f the six companies should be allowed to resume logging without serious adjustments to the plans that the FCMCPP had recommended for approval. Their report draws particular attention to deficiencies in companies' assessment o f environmental and social impacts and also the proposed logging of resin trees. It also criticises the FCMCPP review team for the way inwhich they "generally permitted concessions to defer addressing social Notethat this annex ofthe GFA Terra Systems:`Results ofthe IndependentReviewof StrategicForest ManagementPlanspreparedby ConcessionCompaniesoperating in Cambodia' was not disseminateduntil January 2005. See, for example, annex o f GFA Terra Systems: `Results o f the IndependentReview of StrategicForest ManagementPlanspreparedby ConcessionCompaniesoperating inCambodia', August 2004, which summarises the conclusions ofthe FCMCPPteam reviewingthe plans. 45 issues until the compartment level. In doing so, (they) have gone against the guidelines 1'.'25 The World Bankhelpedto fundthis independent review. Italso helpedto pay for the IndependentForest Sector Review(IFSR) completedinApril 2004 that recommended that the entire concession systembe scrapped. InOctober 2004 the Bankpublisheda set o f comments inresponseto the IFSRwhich admittedthat "concessionaire and Governmentperformance has been largely a continuation of the (system ailure ' described in theADB supported assessment (of concessionsin 2000) ".12 l Despitethis financial support of other reviews,and its acknowledgement oftheir findings, the WorldBankhasnonetheless declinedto haltthe FCMCPP's unstinting promotionofthe concessionsystem and itsoperators. Itspublic admissionthat the concession system has failedCambodia hasnot done anythingto obviatethe damaging impactof its project's endorsementofthe six loggingcompanies. GFA Terra Systems: `Results of the IndependentReview of Strategic Forest ManagementPlans preparedby Concession Companiesoperatingin Cambodia', August 2004, p.128. World Bank,CambodiaIndependentForestry Sector Review- Comments and Proposals Going Forward', October 2004; p.4 46 SIX PLANSTHAT THE FCMCPP RECOMMENDED FOR APPROVAL Cherndar PlywoodSFMP: Communities' rights will be respectedonly ifthey don`t conflict with the concessionaire'slegitimate interests. p. 66. This is an inversion of provisions ofArticle 15 of the Forest Law, which allows concessionaireactivities only so far as these do not interfere with "customary access and user rights practiced by communities residing within or adjacent toforest concessions". The company intendsto restrict community access to the forest outside of the `free access zones' unilaterally determined by the company (p. 112), which is against the law. The SFMP statesthat the only resin-producing trees that are protected are those tapped for household use (p. 113). Article 29 o f the Forest Law protectsall resin-producing trees. Cherndar Plywood does not subtractresin-producing trees from its calculations o f its annual allowable cut; hrther indicatingits intention to ignore the law. The company repeatedly states its intention to reduce shifting cultivation and collection of non-timber forest products by local people (p. 4, 6, 9, 11, 14, 29, 56, 57, 66). The right to collect non-timber forest products and practice shifting cultivation is protectedunder the Forestry Law and Land Law respectively. The company indicates its intention to cut luxury timber species, which is illegal (p.60) ColeximEnterpriseSFMP: The company intends to continue cutting resintrees, eventhough this is illegal (p. 29). The company gives an annual harvesting estimate of 167,703.344 cubic metres per year (p. 82). Elsewhere it describes how, inthe past, it cut at a rate seven times what could be considered sustainable. The figures it gives for these previous unsustainableharvests are between 18,939 to 62,433 cubic metres per year. This suggeststhat Colexim i s now intent on cutting at three or more times a levelthat was itselfseventimes more than what was sustainable. The results of its wildlife survey show that the company has succeeded in detecting animal species not usually known to be resident incentral Cambodia, notably coyote and seal (p.24). EverbrightCIG Wood SFMP: The plan talks about free accesszones (p.79), which conversely suggests that it may continue to exclude local inhabitants from areas o f the concession illegally. Everbright regards local people's resin collection activities as being in conflict with its own interests. The company says that it will not cut resin trees that are currently tapped; however it will log those that it perceivesto be unusedor no longer (resin) productive (p.79). Meanwhile, it does not excise resin-producing trees from calculations o f its annual allowable cut. SamraongWood SFMP: The company admits it has no expertise (p. 8) According to the plan, the company will only allow people to collect non-timber forest products for household use (p.22). Such a restriction would be illegal. TPP company SFMP: The company plans a 46,700 ha plantation of acacia (p. 1, p. 20). Creation o f such a plantation would necessitateclear-cutting o fthe natural forest on a vast scale, which would be againstthe law. TPP has plansto log deciduous forest (p. 21); a forest type generally regarded as too ecologically fragile to withstand commercial-scale harvesting. Timas ResourcesSFMP: Timas Resources intends to create anNTFP collection zone during the compartment (five year) level planning process (section 2.7). This suggests illegal prevention o f NTFP collection in other areas. The company regards large-scaleresin tapping as illegal (Section 3). The plan argues that the company should be given the rights to harvest/control NTFPs (Section 3). This is in conflict with the Forestry Law. 47 2.13 Old Log Transportation Aside from assisting companies intheir production o f managementplans andthen reviewing them, a consistent focus o fthe FCMCPP's activities has been planningthe transportation o f stockpiles o f old logs. These logs constitute residual stocks that the companies were unable to move before the Government's introduction o f a definitive ban on log transports inMay 2002. The ban on log transports followed the impositiono f a ban on cutting effective from January 2002. These two suspension orders were intended to compel the companies to actually produce the management plans and ESIAsthat they had all failed to submit by the original deadline o f 30 September 2001. An unknownbutevidently significant proportiono fthe timber inthe remaining log stockpiles was cut illegally. This includes logs from Samraong Wood's 2001 harvest, around 16% o f which the company admitted comprised trees that people were tapping for resin.'27 Logs cut by Colexim Enterprisesubcontractors fall into the same category - many o f these were resin-producing trees beingtapped by local villagers. The reasons for the companies' subsequent efforts to have the transportation ban lifted are clear enough. Inthe first instance, transporting the logs would enable them to continue processing operations at their factories and reduce the pressure caused by the cutting ban.'28 Secondly, past practice has shown that retrieval o f old logs i s one o f the most effective ways o f circumventing cutting bans in Cambodia. `Old log collection' was the device most commonly used by illegal loggers duringthe late 1990s. Under this system, concessionaires, military commanders and others would claim to have discovered quantities o f old logs inthe forest and request official permission to collect them. Upon receiving approval, they would log new areas and then extract the fresh-cut logs, claiming that they were `old'. In 1998, a report commissioned by the World Bank estimated that illegal `old log collection' accounted for more than 90% o f logging in Cambodia in 1997. Recognising the scale o f the problem, Prime MinisterHunSen bannedthe issuingo f `old logcollection' permits inJanuary 1999. This has not stopped loggers from continuing to use `old log collection' as a pretext for illegal felling, often with the connivance o f local government and the Forest Administration. While the motivations o f the companies are clear enough, the same cannot be said o f the World Bank, which has made several attempts over the past three years to overturn the logtransport ban and facilitate shipmento f the logs. Ina letter to the Director o f the Forest Administration sent inOctober 2002, the FCMCPP task manager acknowledged that "any revision of the currentprohibition on log transport risks abuse andfiaud and Global Witness, `DeforestationWithout Limits', 2002, p. 17. This is acknowledged inColexim's letter entitled `Proposalfor Transportationof 2,812 RoundLogs equivalentto 7,649.334 cu.m. from Tumring to Colexim mill.' addressed to Director General ofthe Forest Administration Ty Sokhun, 16May 2003. 48 contributing to illegal butthen went on to argue the case for precisely this course o f action. Given the risksthat the task manager himself highlightedand the fact that the prime beneficiaries o f renewedtransportation would be logging companies yet to produce acceptable SFMPs and ESIAs, this course o f action would seem impossible tojustify. Two other factors make the Bank's proposal all the more extraordinary. Firstly, the task manager floated the ideajust days after he received evidence that some o f the same concessionaireswere involved ina high-level corruption scandal. This scheme (detailed insection 2.5) concernedthe misappropriationofroyalties that the companies owedto the government on the same logs the Bank was now proposing be tran~ported.'~' Secondly, as the Bank was equally well aware, some o f the concessionaires' stockpiles contained large numbers o f resin trees that they had effectively stolen from Cambodian villagers. Inhis letter to Ty Sokhun, the task manager noted that "In view of the weak controls and lack of supervision at the time of harvest, Government needs to give serious consideration to thepossibility that some of these logs were illegallyfelled. Therefore a substantial burden ofproof should beplaced on anyparty claimingpossession and seekingpermission to transport. Applicants shouldprovide clear and compelling documentaryevidencethat harvests were conductedinplaces and manners authorizedby Governmentand that all royalties,fees and applicableJines and penalties have beenpaid infull to the National Treasury, ""' This approach has not beenfollowed by either the task manager or the FCMCPP, however. Inthe first half o f 2003, the project, at the behest o f the Bank, commissioned a plan for regulating the transportation o f logs felled by Colexim Enterpriseand stockpiled inTumringcommune inKompong Thom. Itdid so inresponseto representationsfrom the company: "Facingall these difficulties (associatedwith the cutting and log transport ban), Colexim has met withMr. WilliamMagrath, Senior Economist, WorldBank TaskManager, Forest ConcessionManagement and Control Pilot Project, to inform of logs remain unprotect in TumringRubber Plantation and thoseproblems as mentionedearlier. Immediately after receiving those reports, Mr. WilliamMagrath and his colleague,Mr Matti Raisanen (FCMCPP consultant)and the DFW (ForestAdministration) staff visited those logs. He Letter from William Magrath, Task Managerofthe FCMCPPto Ty Sokhun, Director General, Forest Administration, 3, October 2002. I 3 OThis evidence, summarisedinsection 2.5 above, was presentedto FCMCPPtask manager William Magrathand MarkWilson, headofRural Development and Natural ResourceSector Unit, EastAsia and Pacific Regionby Global Witness in September2002. 13' Letter from William Magrath, Task Managerofthe FCMCPPto Ty Sokhun, Director General, Forest Administration,3 October 2002. 49 recommended that Coleximshouldprepare a log transportproposal asper the attachment to this letter. "132 Ontheir visit to the site, the task manager and FCMCPP consultant evidently made little effort to ascertain the legal origin o f the timber. Hadthey done so, they would have noticedthat many, ifnot most o f the logs had visible resin-tapping holes cut into them - showing clearly that the trees had been cut illegally. Ifthe task manager and the consultant had any doubts about legality, these did not deter them from encouraging Colexim to develop plans for extracting the wood to its factory. On the advice of the task manager, the FCMCPP consultant proceeded to draft a proposal for controllingthe proposed log transportation. This document makes no reference at all to the legal origin o f the logs or the question o f whether or not the company hadpaid due r0ya1ties.l~~Reflectingits own evident interest inseeing the operation proceed, the World Bank office inPhnomPenhthen circulated copies o f the monitoringplan, together with Colexim's own voluminous justification for the scheme. The proposed transportation was shelved following strong written expressions o f disapproval sent by the international donor Working Group on Natural Resource Management (WGNRM) to the Cambodian authorities: 1. "Theproposed log transport can not be separatedpom the origin of the logs. Our understandingof the developmentof the TumringRubber Plantation is very troubling... communitieshave been displacedand lost their established livelihoods... Our critical concern is that any authorized log movement should not create an opportunityfor reason that the Working Group urged in 2002...thepresent suspensionof log transport of new illegal logging or transport of illegallyfelled timber. It wasfor this transport. J~~ 2. "As we indicated in our earlier letter, we also see the environmental aspects (erosion) as well as the social issues of the Tumringproject as closely linked with the wisdom of advancingon the controlled transport and sale of logs@om theproject site. Even with the clarijkations youprovide, we still can not endorse the movement of these logs.r7135 13*Letter from Colexim to Director Generalofthe Forest Administration Ty Sokhun, entitled `Proposal for Transportationo f 2,812 RoundLogs equivalentto 7,649.334 cum. from Tumring to Colexim mill.', 16 May 2003. 133`World Bank-financedForestConcessionManagementand Control Pilot Project-Guidelines for Control and Monitoring ofLog TransportationI Case Study:Log Transportation from Tumring Rubber Tree PlantationAreato Colexim Company Sawmill', April 2003. `34Letter from Working Group on Natural ResourceManagementto Ministerfor Agriculture, Forestryand Fisheries, 30 June 2003. Letter from Working Group onNatural ResourceManagement to Ministerfor Agriculture, Forestryand Fisheries, 28 October 2003. 50 World Bank, FCMCPP and Forest Administration staff continued to discuss means o f overturning the transportation moratorium throughout 2004. 136 Written communications from Global Witness in July and December 2004 requestingthat the Bank explain its involvement have so far met with no response.'37 InDecember 2004 Bank staffwere instrumental inweakeningthe logtransport moratorium inthe course o f negotiations between donors and government over next steps inthe forest reformprocess. InmidJanuary 2005 government officials announcedthat they were on the point o f resumingold log transportation and would be engaging the services o f consultants to the FCMCPP to facilitate the process.'38 At the time o f writing the full details o f the proposed operation have not been announced. However they appear to be a product o f the Bank's continued lobbying to allow shipment o f timber by Colexim and other concessionaires. As already noted, the cutting and logtransport moratoria were originally implemented with the express intent o f compelling the logging companies to present new SFMPs and ESIAs. However, the World Bank has demonstrated itself quietly determinedto overturn the transportation moratorium inparticular. The only plausible motivation for this appears to be its need to keep the concessionaires operating inorder to achieve its project objective. The outcomes o f these activities are harmful intwo ways. Firstly, the Bank is weakening one o f the few available points o f leverage over the companies. It i s the suspension o f their activities that has forced the concessionaires even to pay lip service to such requirements as community consultation and environmental and social impact assessment. Ifthe Bank succeeds ingetting the companies operational once again before the planning process i s complete, the concessionaires will make even less effort to address such issues. Perhaps even more disturbingis the Bank's efforts to help logging companies to profit from serious forest crime, the victims o f which were poor villagers. The Bank thus stands on the verge o f becoming an accessory to criminal activities. The fact that it should embark on such a course o f action i s one o f the most troubling aspects o f the entire history o f the FCMCPP. '36e-mail from SGS (independentmonitor ofthe forest sector and consultants to FCMCPP)to Global Witness, 19July 2004. '37Letter from Global Witness to Peter Jipp, Task Managerofthe FCMCPP, 22 July 2004, e-mail from Global Witness to IanPorter, World Bank Country Director, Cambodia, December 2004. 13'CambodiaDaily, 'GovernmentCuts Back Moratorium on TransportingOld Timber' 18 January 2005. 51 2.14 Outcomes of the FCMCPP The FCMCPP's outcomes have been shaped by its conceptual weaknesses -the World Bank's idea that the incumbent logging concessionaires could be reformed -together with flawed implementationthat persistently lowered the standards o fplanning and performance that Cambodia can expect o f the companies. These factors have combined to produce a situation inwhich companies whose track records should have excluded them from consideration as managers o f Cambodia's forests are poised to continue logging for another twenty five years (or inpractice the much shorter time that it will take for them to exhaust their concessions completely). IfCambodia's concession system continues, the precedent that the FCMCPP has set in endorsing a truly dismal quality o f concession planningwill block efforts to achieve acceptable standards for many years to come. Unfortunately, the FCMCPP designer's expectationthat the SFMPs and ESIAs which the project developed will be held up as models for other management plans i s likely to be fulfilled.'39 Inthe meantime, recent independent studies ofCambodia's forest sector indicate that the Bank has not wrought any changes inCambodia's forest sector governance that would compel the concessionaires to behave any differently from the way that they did inthe past.'40 There are neither incentives nor `controls sufficient to force the companies to obey the law and respect the rights o f ordinary Cambodians. They can therefore be expected to operate in line with past practice; inother words illegal logging and abuse o f local inhabitants. This much is apparent from management plans that the FCMCPP has endorsed, which indicate quite clearly the intentionby some companies to log resin trees illegally and exclude communities from areas o f forest. As inthe past, this will cause serious material harm to ordinary Cambodians who live inand around concessions. to strengthenthe legalframework and encouragecommercial timber operations to adopt "To date, the main response topoor loggingpractices (by the concessionaires)has been sustainableforest management (SFM). As argued here and elsewhere, this strategy appears doomed tofailure due to the tremendousfinancial incentivesto avoid SFM...there shouldbe no illusions of "win-win SFMschemesunder which logging companiesmanageforest for a modest return whilefulJilling their responsibilities to village welfare and conservation. Rather, a "cut and run logging scenario should be assumed where commercial logging is allowed, unless regulation and enforcement (and incentivesfor them) improve dramatically. 'J" 139 FCMCPP Project Appraisal Document, June 2000, p.15: "The concession management and operations plans developedwith the aid of technical assistance will serve as modelsfor similar plans to be developed, subsequently, in all operating concessions. As such they will serve as standards by which the acceptability of suchplans will bejudged (by Forest Administration)". I 4 OIndependentForest Sector Review, `The Forest Sector in Cambodia', 2004; Bruce McKenney, Yim Chea, Prom Tola and Tom Evans, `Focusing on Cambodia's High Value Forests:Livelihoods and Management', Cambodian Development ResourceInstituteand Wildlife Conservation Society; November 2004. 14' Bruce McKenney, Yim Chea, Prom Tola and Tom Evans, `Focusing on Cambodia's HighValue Forests: Livelihoods and Management'; Cambodian Development ResourceInstituteand Wildlife Conservation Society, November 2004, p.92 52 The impact of the FCMCPP has not only been to help maintain the concession system, however. Thanks to the World Bank's project, those six companies that it has recommended for approval are now in a stronger positionthan before the project commenced. As argued above, it is highly unlikelythat any o f the companies would have cleared the strategic level planning stage without assistance provided by the FCMCPP; both interms o f its technical advice on drafting plans and its overly accommodating approach to assessing them. As the Bank is well aware but keen to deny, its endorsement of, or even associationwith, particular institutions or policies is a political commodity. Cambodia's forest sector i s no exception. Examples include the debates on the draft Forest Law held inthe Cambodia's National Assembly in2002, as well as use o f the FCMCPP forest cover survey as a political prop in July 2003. Inthe first ofthese cases, MinisterofAgriculture, Forestry andFisheries Chan Sarun rebuffed opposition MPs' criticisms o f the Forestry Law with the argument that they had no rightto question a law drafted with input from World Bank experts. The following year, Prime Minister Hun Sen citedthe FCMCPP's flawed forest cover survey in election campaign speeches as evidence o f hisjudicious preservation o f the country's forests. Itshould therefore come as no surprise when concessioncompanies use FCMCPP approval o f their management plans as a means o f deflecting questions concerning their legitimacy and past and future performance. For the next 25 years, or untilthey have logged out their concessions, Cherndar Plywood, Colexim Enterprise, Everbright CIG Wood, Timas Resources, TPP and Samraong will present themselves as the companies whose logging operations have the endorsement o f the World Bank. This process is already underway. The following passages come from a letter that Cherndar Plywood, which holds the chairmanship o f the CTIA, sent to Forest Administration Director General Ty Sokhun in September 2004. The letter i s an extended attack onNGOsthat have criticised the concession system, and ajustification o f Cherndar Plywood's activities: "In every meeting during the consultations, the company hasprovidedfull opportunity in apee andfair manner to the community representatives and villagers in the community to raise all theirproblems, suggestion, thoughts and recommendations and all the issues wereproperly solved in accordance with the effective laws and regulations. Before the meeting closed in each consultation centre, the consultation were going on until the participating community villagers told the company they had no any moreproblem, suggestiodcomment or doubt. The result of the consultation has now also been officially recognized by the FA/World Bank (WB) expert team. I' "FMP/ESLA has been strictly, thoroughly and carefully reviewed, checked and assessed by the experts of the WorldBanWForest Administration s technical review team, who are professional, disciplined to code of ethic and conduct, responsible and experienced. The 53 review and assessmentby these experts were made in serious details, spending times of twoyears andsome US$5million. This review team were supported with suflcient educated/qualiJied staff@ such allfields of forester, environmentalist, ecologist, biologist, communityforest specialist, natural scientist, sociologist, economist etc.) and sophisticatedtools in their works, including long-time inspection/checking tasks in the field. This work,for people who has no or less knowledge of forest management techniques and experiences or any independent researchhtudy with lack of the above stafl could not be done while the claim by these accusers or independent review cannot be technicallyjustijied and supported. The criticism against the WorldBanWForest Administration expert team 's reviewedplans is an intentional contempt against, disparagement against and disrespect of the internationally and the Royal Government of Cambodia-recognisedprofessional technicians/scientists. 1'142 The message i s clear - critics have no rightto question the activities o f Cherndar Plywoodnow that it has the support o f World Bank specialists. The World Bank has strengthenedthe position o f Cherndar Plywood and the over five companies, even as its project has helped them evade legal and regulatory standards. This will make it evenharder for rural Cambodians to challenge the companies' control or assert their rights inthe face o f the future abuses that will inevitably follow. Acts and omissions by the FCMCPP are set to cause material harm to forest dependent communities living within or inproximity to the six concessions. It i s ironic that these communities represent those same sections o f rural Cambodian society that World Bank claims it i s most committed to helping. 2.15 The Without-ProjectSituation What would have happened ifthe FCMCPP had never been commissioned? Cambodia's forestry reform process began in 1999with the RGC undertaking a major crackdown against illegal logging operators, closing hundreds o f medium-size sawmills, drastically increasing the timber royalty rate and cancelling at least nine concession agreements. Following on from the first World Bank fundedforestry project in 1998,the 2000 ADB concession reviewproduced an action programme to advance the reform process. This programme encompassed the immediate cancellation o f another three concessions, preparation o f proper management plans, a reduction inor suspension o f logging activities, a new model concession agreement and other measures. Inits assessmentofthe loggingcompanies' legal and contractual compliance, the ADB review identifiedgrounds for terminating all o f the concessions. It also argued that 14'Letter dated22 September2004 from LuChuChang, ChiefExecutive of Chemdar Plywoodandheadof the CTIA addressedto Ty Sokhun, Director-GeneralofForestAdministration. 54 "The alarming state theforest estate is now in, due to extremelypoor management has given a new perspective, and shown that no serious attempt has been made to manage the concessions sustainably. In the opinion of the legal experts, this constitutes a violation of theprime objective of the concession agreementswhich was sustainable economic growth based on sustainableforest management... ...The absence of a specijk law or existence of apoorly written agreement should notprevent the government protecting its resources that belong to the nation as a whole, even ifsuch action may entail adverse financial consequences. 143 However, through excessive caution or an error o fjudgement, the ADB review accepted the World Bank's arguments that the RGCwould be exposed to serious legal risk ifit unilaterally terminated concessionaires' contracts.144 The review's key recommendation that the companies instead be forced to adhere to a strict restructuring and evaluation process was clearly conceived as a less risky means o f achieving a similar outcome. With respect to the managementplans, the ADB-fundedreviewnoted that `Yssumingthat the concessionaires start aprogramfor preparing concession managementplans as early as October 2000, thejeldworkfor these can be completed by the end of May 2001. The new managementplans can then be prepared, reviewed and approved and the new agreements signed by allparties before the beginning of the logging season in November 2001. '1145 The ADB- funded review presentedthe conclusions not only o f the team that undertook the study, but also the recommendations o f a panel o f experts. On the issue o f the management plans, the panel o f experts advocated "time-bound milestonesfor the development of sustainableforest management plans...the maximum time spanfor completion of the managementplans should be one year... Concessionaires who do not meet any single item in the schedule ofprescribed milestones in the development of their FMPs (Forest Management Plans) should have their concessions cancelled within one month after receiving DFW (Forest Administration's) letter of notification of failure to meet the milestone, if the milestone cannot be satisfactorily shown to have been met.146 Adhering to the action programme's prescribed timeline, in October 2000, the concessionaires and the Cambodian government did in fact agree such a set o f milestones. Ina letter to the World Bank, "CTLA members agreed that acceptable 143Asian DevelopmentBank SustainableForestManagementProject, `CambodianForestConcession Review Report', April 2000 p.32 144Asian DevelopmentBank SustainableForestManagementProject, `CambodianForestConcession ReviewReport', April 2000 p.35. As already noted, this risk has never materialised,eventhoughthe governmenthas cancelled numerous concessioncontracts over the years. 145AsianDevelopmentBank SustainableForestManagementProject, `CambodianForest Concession ReviewReport', April 2000 p.39. 146AsianDevelopmentBank SustainableForestManagementProject, `CambodianForest Concession ReviewReport', April 2000 Appendix 11. 55 SFMPs must be inplace by the end of November 2001 or else the defaulting concessionaireswillface cancellation of the contract".147 The Forest Administration subsequently announcedthat this deadline had been moved forward to 30 September 2001 Inthe event, none of the companies metthe 2001 deadline. Rather than cancellingtheir concessions, however, the government merely suspended the companies' activitie~.'~~ Several factors explain this. Close familial and business relationships between concession operators and high-ranking officials as well as entrenched corruption gave some elements inthe government a strong stake inthe companies' activities, for example. Another significant factor, however, was the stance o f the World Bank and the focus o f its project. As outlined above, the Bank had its own stake in continued concession operations; which were a prerequisite for successful implementation o f the FCMCPP. Thus inSeptember 2001 itwas FCMCPP consultantswho played a leadingrole inefforts to persuade the donor Working Group on Natural Resource Management that the concessionaires had already made substantive progress towards the completion o f their plans. World Bank staff, meanwhile, sought to convince donors and other stakeholders that the deadline for submission o f plans should be allowedto slip.'*' Aside from the lobbyingby Bank and FCMCPP staff for a stay o f execution for the concessionaires, the very existence o f its project provided a convenient excuse for the RGC to treat the companies with unwarranted indulgence. Through the FCMCPP, the Bank had promisedto reform the concessionaires via its own set o f prescriptions. These consisted less o f "time-bound milestones than a package o f assistance, advice and " elastic guidelines. As a result, the RGC was never forced to choose between either terminating defaulting companies or having its professed attempts at reform exposed as hollow and insincere. Rather than holding the companies to account, it could always point to the World Bank's ongoing efforts to reform them as ajustification for a more lenient approach. The FCMCPP provided a useful alibi. The overall impact o f the Bank's intervention was to weaken significantly the momentum o f the forest sector reform process. The ADB review's recommendation that the concessionaires undergo a stringentrestructuring process provided a means o f weeding out those that had already caused serious material harm. However, this approach was comprehensively undermined by the FCMCPP, which set out with the express intention 14'Letter to William Magrath, task manager for FCMCPPfrom Henry Kong, Chairmanofthe CTIA, Ty Sokhun, Director General ofForestAdministration and Andrew McNaughton,Facilitator (contracted by the UKDepartmentfor InternationalDevelopment), 18 October 2000. 14'See referenceto this changeddate in Departmentof Forestry and Wildlife (Forest Administration), `Progress Reporton ForestryReform-Presented at the Meeting ofthe Donor Working Group on Natural ResourcesManagement', 27 September2001. 14'The CambodiaDaily, 31 December 2001 `Six CompaniesReject Logging Moratorium': The reactionof six ofthe companiesto the imposition of the moratoriumwas to threatento sue the government; illustrating how little interest the industryhad infollowing the restructuringprocess. 150See, for example, minutesof meetingbetweenJon BuckrellandRosie Sharpe (Global Witness) with Steven Schonberger, 9 August 2001. 56 o f helping the companies to clear this new set o f hurdles. Indeed, without the project's assistance, advice and willingness to bendthe rules infavour o f the concessionaires, it i s highly unlikely that any would have stood a chance o fpassingthrough the strategic level planning process. Moreover, by positioning itself as both assistant to and arbiter o f the companies' planningefforts, the FCMCPP excluded a more neutral entity from taking the lead inevaluating the plans. In 1999-2000there was emerging agreement betweenreformists inthe RGCand Cambodia's international donors community that the forest concession system had proven disastrous as a management tool inthe Cambodian context. However, inputting its weight behind the same failed management system and operators, the Bank severely dilutedthe strong medicine that the ADB review advocated and which the government had shown a willingness to accept. The Bank's agenda obstructed the development o f alternative management models such as community forestry and proved a source o f disunity within the international donor ~ommunity.'~'This inturn resulted inthe donors sendingmixed messagesto the government and underminedthe positiono f more reform- minded officials. Inthe absence ofthe FCMCPP, the forest sector reformprocess would have developed quite differently: The RGC would have felt obliged to take a much tougher line towards the concessionaires rather than falling back on the pretence that they could be reformed. The rapidtermination o f most or all o f the concessions would have forced the government, donors, NGOs and other stakeholders to focus on developing alternative management systems capable o f contributing to poverty reduction. There would have been far more scope for other donor-led interventions inthe forest sector in support o f such efforts. The donor-RGC forest reform agenda would have maintained much greater coherence and momentum. The ADB offered the Cambodian government loan-backed technical assistance to help develop not only industrial, but also community forestry models as part of its SustainableForest Management Project. In 2000, however, the year that the FCMCPP began, the Cambodian government informed the ADB that further assistance in forest sector development was not required. 57 SECTION 3: WORLD BANK BREACHESOF OPERATING POLICIES'52 Both the design and execution o f the Forest ConcessionManagement and Control Pilot Project have contravened World Bank operational policies. This section examines the policies breached and the material harm that this is set to cause. The overall consequence has been to allow the commissioning and implementation o f a project that has endorsed concessionaireswhose activities are harmful to forest dependent communities. Put another way, ifthe operational policies had been observed, the FCMCPP would never have been conceived inthe way that it was. Secondly, the project would not have been implemented with the bias towards the concession companies that it has consistently exhibited. 3.1 OperationalPolicy OP 4.01-EnvironmentalAssessment The World Bank has breachedthis operationalpolicy inrelation to its classification of the Forest Concession Management and Control Pilot Project. Inaddition, the Bank has failed to observe the operational policy's requirements for environmental assessment o f the project's likely impacts. Duringits implementationphase, meanwhile, the Bank, through the FCMCPP has contravened those provisions relating to public consultation and disclosure. Categorisation of theproject OP 4.01 Section 1: "The Bank requires environmental assessment (EA) of projectsproposedfor Bank financing to help ensure that they are environmentally sound and sustainable, and thus to improve decisionmaking.'' The operational policy classes projects into four categories. Inthe case o f the Forest Concession Management and Control Pilot Project, those o f relevance are the highestrisk categories A and B. A project should be classed as Category A if "it is likely to have signijkant adverse environmental impacts that are sensitive, diverse, or unprecedented. Theseimpacts may affect an area broader than the sites orfacilities subject tophysical worb. CategoryA project examines theproject's potential negative andpositive environmental impacts, compares them with those of feasible alternatives 15*The World Bank's OperationalManual describes operationalpolicies as "short, focused statementsthat follow from the Bank's Articles of Agreement, the general conditions, and policies approvedby the Board, OPs establishthe parametersfor the conduct of operations; they also describethe circumstancesunder which exceptions to policy are admissible and spell out who authorizes exceptions." 58 (including the `withoutproject 'situation), and recommends any measures needed to prevent, minimize, mitigate or compensatefor adverse impacts and improve environmentalperformance. For a Category A project, the borrower is responsiblefor preparing a report, normally an EIA (environmental impact assessment) 'I By contrast "Aproposedproject is classijied as Category B if itspotential adverse environmental impacts on humanpopulations or environmentally important areas - including wetlands, forests, grasslands, and other natural habitats -are less adverse than those of Category A projects. These impacts are site-specijic;few ifany of them are irreversible; and in most cases mitigatory measures can be designed more readily thanfor CategoryA projects. Thescope of EAfor a Category Bproject may varyfiom project toproject, but it is narrower than that of Category A EA. Like CategoryA EA, it examines theproject's potential negative andpositive environmental impacts and recommends any measures needed toprevent, minimize, mitigate or compensatefor adverse impacts and improve environmentalperformance. Thefindings and results of Category B EA are described in theproject documentation ProjectAppraisal Document and Project Information Document. '' The World Bank erroneously categorised the FCMCPP project as Category B, despite the fact that the concession system and companies that the project supports have already comprehensively demonstratedhow they have "significant adverse environmental impacts that are sensitive, diverse, or unprecedented". These include not only the immediate degradation caused by industrial-scale logging, but also secondary impacts such as damage to watersheds. All available evidence suggests that the impacts o f future concessionaire logging operations will be equally serious. Moreover, the logging concessions undoubtedly do have "impacts (that) may affect an area broader than the sites orfacilities subject tophysical works". The impacts o f concessionaires' activities affect a significant portion o f Cambodia's forest reserve and large populations who inhabit or depend on it for their livelihoods. Inthis sense, it i s difficult to see how the FCMCPP's impacts could be construed as "site-specijk". In addition, evidence from studies o f the impacts o f industrial logging inother tropical countries would suggest that the impacts o f concessionaires' logging on Cambodia's forests are likely to be "irreversible". World Bank staff have defended their classification o f the project with two main arguments: 0 The FCMCPP was initially conceived as a `pilot' and that it was only once activities were underway and the project extended to all concessions, that the likely impacts became so wide-ranging. 59 0 The FCMCPP i s policy oriented, it does not involve construction or physical operations and it does not leave a physical imprint.'53 The first claim is unsatisfactory for two main reasons. Inthe first instance, all forest concessions in Cambodia cover large areas, typically measuringbetween 100,000 and 200,000 hectares and insome cases over 300,000. Evenifthe project had initially set out to work with only a few concessionaires, the area o f forest and number o f communities affected would nonetheless have been substantial and certainly more than "site-speciJic ". Moreover, this line o f argument does not explain why the Bank did not reassess and reclassify the project once its scope had expanded. The second contention i s likewise highly questionable. The thrust o f the FCMCPPhas been helpingthe concession companies to prepare for renewed logging operations that will leave a very clear physical imprint. That the Bank's role inthis is more instigator than executor does not divest it o f responsibility. Furthermore, the imprint left by the FCMCPP will be more extensive than those o f many project interventions that involve site-based construction operations. Inaddition, as the FCMCPPProject Appraisal Document argues: "The concession management and operationsplans developed with the aid of technical assistance will serve as modelsfor similar plans to be developed, subsequently, in all operating concessions. As such they will also serve as standards by which the acceptability of suchplans will bejudged by (the Forest Administration). '' Ifthe goals of the PADare realised, theFCMCPP stands to have anenvironmental impact not only across all existing forest concessions but any future concessions that the government may allocate. Environmental Assessment of FCMCPP impacts The World Bank's erroneous classification o f the project's impacts as Category B has provided thejustification for a level o f environmental assessmentthat might charitably be described as minimal. Bank staff did not produce the kind o f EIA report called for inthe case o f Category A projects. Infact the level o f assessment was so low that it did not even conform to Category B standards. As noted above, the OP requires that "the jndings and results of CategoryB EA are described in theproject documentationProject Appraisal Document and Project Information Document." Is3 MeetingbetweenWorld BankstaffmembersWilliam Magrath(FCMCPP Task Manager 2000-2004), PeterJipp (FCMCPPTask Manager2004-), StephenMink and StevenSchonberger;with Suwanna Gauntlett andDelphineVann Roeof Wildaid; MikeDavis andHannahThompsonof GlobalWitness, PhnomPenh, 20 April 2004. MeetinginPhnomPenhbetweenMikeDavisof GlobalWitness, togetherwith GlennMorgan,Task Managerofthe World Bank BiodiversityandProtectedArea ManagementProject(BPAMP) andKlaus Schmitt, Senior TechnicalAdvisorto BPAMP; May 2004. 60 The Project Appraisal Document for the FCMCPP contains a single paragraph on environmental assessment: "Concessionoperationspresent signijkant impacts on the environment. Theregulatory regime to bepiloted under theproject seeks to anticipate and manage these impacts by requiring attention throughout theplanning and operational cycle. Thesystem is intendedto ensure that at the large scaleplanning levelparticularly fiagile areas are excludedfiom concessions operationsand that harvestingoperations are conductedto minimize adverse impacts at the site or (coupe'level. Theproposed system will be synchronizedwith the national environmentalimpact assessment requirements.'' This passage suggests that the Bank has chosen not to address environmental impacts at the pre-project planning stage andwill insteaddeal withthem duringthe implementation phase. This impression is reinforced by comments made by World Bank representatives inApril 2004. Askedto explain the EAprocess onthe project, Bank personnel responded inthe following terms: 0 the FCMCPP was fundedby a learning and innovation loan and designed to be process oriented. Therefore, environmental issues could be addressed duringthe course o f the project rather than before omm men cement.''^ Giventhat OP 4.01 is primarily concernedwith prior assessment o f potential risks, a lack o f prior EA itself constitutes a breach o f this operating policy. Furthermore, the Bank representativeswere unable show any such assessment having been undertaken during the project's first four years, aside from the ESIA work done inconjunction with the concessionaires themselves, the standards o f which fall well short o f the requirements o f OP 4.01. Bank staff associated with the FCMCPP are evidently keen to pushthe idea that because the FCMCPP was backedby a learning and innovationloan, it was therefore not bound by Bank operational policies. This argument is not born out by OP 4.01 (or other operational policies), which states that the loans and projects that it covers include `>projects under adaptable lending -adaptableprogram loans (APLs) and learning and innovation loans (LILs)" The rationale for carrying out prior environment assessment as part o f a projectplanning process i s to safeguard against the initiation o f projects that are likely to cause harm to the environment and those whose livelihoods dependupon it. Hadproper environmental assessment beencarried out, it is unlikely that the Bank would have decided to support MeetingbetweenWorld Bank staff members William Magrath(FCMCPP Task Manager2000-2004), Peter Jipp (FCMCPPTask Manager2004-), StephenMink and Steven Schonberger;with Suwanna GauntlettandDelphineVann RoeofWildaid; MikeDavisandHannahThompson of GlobalWitness, PhnomPenh, 20 April 2004. 61 the activities o f environmentally destructive companies. The project outcome that stands to cause most material harm- Bank endorsement o f six o f the concessionaires -can thus be traced to its failure to comply with this operational policy. Public Consultation OP 4.0 1: "For all Category A and Bprojects proposedfor IBRD or IDAfinancing, during the EAprocess, the borrower consultsproject-affected groups and local nongovernmental organizations (NGOs)about theproject's environmentalaspects and takes their views into account. " The Bank has a responsibility for ensuring that this requirement i s met, however, as with the environmental assessment, it is not clear what consultation, if any, took place before the project began. What is certain is that the project-affected groups who are requesting an InspectionPanel investigation, were not amongst those invitedto participate in any pre-project consultation process. Bank staff working on the project have contended that compliance with this Operating Policy has been achievedthrough Bank-supported activities o f the concessionaires them~e1ves.l~~ This argument is all the more dubious given the kindof public consultation exercise that the companies have pursued under the auspices o f the FCMCPP. The companies failed to consult with communities duringtheir preparation o f the plans that they submitted in 2002. Subsequently, when they were compelled to do so in late 2002 and early 2003, these were o f a poor standard, with instances inwhich participants were subject to intimidation by guards and officials accompanying company representatives. These flawed consultations have effectively reducedthe scope o f forest dependent communities to hold the logging concessionaires accountable. As a result, communities' views have not been acknowledged inplans that companies will use to justify their operations inCambodia over the next quarter o f a century. At the same time, concessionaires will claim that they have fulfilled consultation requirements already, and are therefore under no obligation to listen to concerns that affected communities might raise inthe future. Here it i s worth referring again to the arguments made by the head o f the Cambodian Timber IndustryAssociation inhis letter to Ty Sokhun o f 22 September 2004: "In every meeting during the consultations, the company hasprovidedfull opportunity in afFee andfair manner to the community representatives and villagers in the community to raise all their problems, suggestion, thoughts and recommendations and all the issues ~ Is'Meeting betweenWorld Bank staff members William Magrath (FCMCPP Task Manager 2000-2004), Peter Jipp (FCMCPP Task Manager 2004-), Stephen Mink and Steven Schonberger;with Suwanna Gauntlett andDelphine Vann Roe of Wildaid; MikeDavis and Hannah Thompson of Global Witness, Phnom Penh, 20 April 2004. 62 wereproperly solved in accordancewith the effective laws and regulations. Before the meeting closed in each consultation centre, the consultationweregoing on until the participating community villagers told the company they had no any moreproblem, suggestion/commentor doubt. Theresult of the consultationhas now also been officially recognizedby the FMWorld Bank (WB) expert team." Inthis context flawed consultation is arguably more damagingthan no consultation at all. Perhaps the most serious violation o f this provision o f OP 4.01 concerns the intimidation and violence used against community representatives inDecember 2002. Inthis instance the FCMCPP Project Director is alleged to have made threats against villagers seeking a consultation session. One can surmise that failure to comply with this part o fthe operating policy has hadthe following adverse impacts: a Direct harm-consultations marred by attempts by companies and officials to intimidate weaken an important accountability mechanism designed to protect the interests o f local inhabitants. a Imminentharm- such exercises enable concessionaires to claim to have fulfilled consultation requirements without having to take account o f the views o f local people. This strengthens their ability to move forward through the planning process and resume logging as before. Disclosure Similar issues arise inrelation to the paragraphs o f OP 4.01 that deal with disclosure: OP 4.0 1: "For meanindul consultationsbetween the borrower andproject-affected groups and local NGOs on all Category A and Bprojectsproposedfor IBRD or IDA financing, the borrower provides relevant material in a timely mannerprior to consultation and in aform and language that are understandableand accessibleto the groups being consulted. I' The World Bank contravened this policy in its failure to ensure that the borrower (Forest Administration) providedthe concessionaires' SFMPs and ESIAs to community representatives inNovember 2002. In fact, direct responsibility for this breach lay with the Bank's own office in Phnom Penh. Having agreed to assist with the disclosure process, Bank representatives then informed communities that they would be unable to provide them with copies o f the plans. The negative impacts o f this breach were two-fold. Inthe first instance those groups most directly affected by the concessionaires' activities were denied important ~ Letter from Lu ChuChang, ChiefExecutiveof CherndarPlywoodandheadof the CambodiaTimber IndustryAssociationto Ty Sokhun,Director-GeneralofForestAdministration, 22 September2004. 63 information about the companies planned future operations. Secondly, a precedent- setting opportunity to ensure that the Forest Administration observed its legal obligations to disclose such informationwas lost through the Bank's decision to intercede and take on the government's legal responsibility. Monitoring of Implementation OP 4.0 1;Duringproject implementation, the borrower reports on (a) compliancewith measures agreed with the Bank on the basis of thefindings and results of the EA, including implementationof any EMP, as set out in theproject documents; (b) the status of the mitigatory measures; and (e) thefindings of monitoringprograms. TheBank bases supervision of theproject's environmental aspects on thefindings and recommendations of the EA, including measures set out in the legal agreements, any EMP (environmental managementplan), and other project documents. Given that little or no environment assessment was undertaken, this aspect o f the operational policy also appears to have been breached by the World Bank. 3.2 Operational Directive OP 4.20 -Indigenous Peoples Cambodia's indigenous people, notably the Kouy minority (who are represented among those who have drafted letters to the InspectionPanel), are directly affected by the logging concessionaires. The main populations o f Kouy and other indigenous groups are inthe forested north and northeasternparts ofthe country -inother words the same areas that constitute the heart o f Cambodia's logging concession system. The livelihoods and culture o f these groups are intrinsically linked with the forests. This makes them particularly vulnerable to the impacts o f industrial logging operations. Articles 25-26 o f Cambodia's 2001 Land Law set out the prior claim that indigenous people have to land on which they practice traditional agriculture. This includes not only land incurrent use, but also lands held in reserve for these purposes. Article 26 o f the law states that "Anyprovisions that are contrary to this law are repealed". This would include any competing claims from logging concession companies, whose contracts were all issued prior to 2001. The Bank's approach to engaging with indigenous people is set out inoperational policy 4.20 as follows: (` the objective at the centre of this directive is to ensure that indigenouspeoples do not ... suffer adverse effects during the development process, particularly @om Bank-financed projects, and that they receive culturally compatible social and economic benefits. `( 64 "The Bank'spolicy is that the strategyfor addressing the issuespertaining to indigenous peoples must be based on the informed participation of the indigenouspeople themselves. Thus, identifiing localpreferences through direct consultation, incorporation of indigenous knowledge intoproject approaches, and appropriate early use of experienced specialists are core activitiesfor anyproject that affects indigenouspeoples and their rights to natural and economic resources. " " ... afull range ofpositive actions by the borrower must ensure that indigenouspeople bene$t@om development investments. Itis difficult to findany evidence that the World Bank has observedeither the spiritor the letter o f these requirements inthe case o f the FCMCPP. Discussions on the issue with Bank staff suggest little, ifany consideration ofthe potential impacts on indigenous people. This despite the very clear acknowledgement inthe operational policy that forestry projects are among those most likely to impact on indigenous populations: "Issues concerning indigenouspeoples can arise in a variety of sectors that concern the Bank; those involving,for example, agriculture, road construction,forestry, hydropower, mining, tourism, education, and the environment should be carefully screened. The operational policy notes that "Issues concerning indigenouspeoples are commonly identij?ed through the environmental assessmentor social impact assessmentprocess, and appropriate measures should be taken under environmental mitigation actions I' That the Bank does not appear to have identified any "issues concerning indigenous people inthe course o f planning or implementingthe FCMCPP may be explained by the " lack o f proper environment assessment described inthe preceding section. Section 13 o f the operational policy outlines the specific measures that must be taken for projects that affect indigenous people: "For an investmentproject that affects indigenous peoples, the borrower shouldprepare an indigenouspeoples developmentplan that is consistent with the Bank'spolicy. Any project that affects indigenouspeoples is expected to include components or provisions that incorporate such aplan. " The detailed list of components required for this plan includes many that are directly relevant to Cambodia and the impacts o f forest concessions: "Particular attention should be given to the rights of indigenous peoples to use and develop the lands that they occupy, to beprotected against illegal intruders, and to have access to natural resources (such asforests, wildlife, and water) vital to their subsistence and reproduction. 65 World Bank staff working on the FCMCPP informed Global Witness in April 2004, that the Bank deemed that no indigenous people's plan was required.lS7 The reasons they cited were as follows: 0 Previous studies on the forest sector commissionedby the World Bank duringthe last 1990s examined the social dimensions o f forestry in Cambodia and fed into the FCMCPP. 0 Social impact issues had been mentioned inthe 2000 FCMCPP Project Appraisal Document and could be reviewed duringthe lifetime o f the project. 0 The project had recently recruited a consultant to look at how social impacts would be addressed by the concessionaires at the compartment (five year) planning level. 0 One o f the Bank's social science specialists had advised the Bank that the concession plans produced under the auspices o f the FCMCPP addressed social issues adequately. Ina separate meeting, meanwhile, a WorldBank official instrumental inreviewingthe pre-project planningo f the FCMCPP, including matters pertaining to environmental and social impacts, citedthe difficulty o f anticipating impacts inprocess-oriented projects.lS8 None of these arguments constitute a convincingjustification. The very existence o f an operational policy specifically addressing indigenous people reflects the World Bank's own recognition that this issue is distinct from broader questions o f social impacts. Moreover, even interms o f general social impacts, analysts such as the World Bank's own staff consultant have consistently dismissed the idea that consideration o f these can be relegated to the compartment (five year) planning As suggested above, the argument that the Bank has fulfilled its obligations under this and other operational policies courtesy o f social impact work contained within the concessionaires' SFMPs and ESIAs is very difficult to sustain. Here it i s worth referring to the findings o f the August 2004 GFA Terra Systems assessment o f the six sets o f plans approved by the FCMCPP. This review produced in depth analyses o f two o f these (Everbright CIG Wood and Samraong Wood), on which it made the following comments. Is'Meeting betweenWorld Bank staff membersWilliam Magrath (FCMCPP Task Manager 2000-2004), Peter Jipp (FCMCPP Task Manager 2004-), StephenMink and Steven Schonberger; with Suwanna Gauntlett andDelphineVann Roe o f Wildaid; MikeDavis and Hannah Thompson o f Global Witness, Phnom Penh, 20 April 2004. Is*Meeting inPhnom Penhbetween MikeDavis o f Global Witness, together with GlennMorgan, Task Manager ofthe World Bank Biodiversity andProtected Area Management Project (BPAMP) and Klaus Schmitt, Senior Technical Advisor to BPAMP, May 2004. John H.Dick, Staff Consultant to The World Bank, `Comments on the Environmental and Social Impact Assessment Terms o f Referenceand Workplan for The PreahVihear Concession o f Cambodia Cherndar Plywood, as preparedby the Cambodian Timber Industry Association, April 2001', July 2001 -note that the same paper makes particular referenceto the needto mitigate impacts on indigenous people in section 4.3. GFA Terra Systems: `Results o fthe IndependentReview o f Strategic Forest Management Plans prepared by ConcessionCompaniesoperating in Cambodia', August 2004, pp. 134-135. 66 On Everbright CIGWood: "Socialplanning has been treated inadequately in the ESU and SFMP, inprocess and content. Inprinciple, it should have been done in aparticipatory manner involving communitiesand local government. As a top-downexercise it is also inadequate - baseline datawas either inaccurate or incorrectly applied and the resulting community areas are unsuitable in size, location andforest type. 91160 On Samraong Wood: "Social research andplanning have been inadequate, inprocess and content. Thefact that an enormous area has been set-aside,principally for communitypurposes, should not disguise thefact that the diverse interests of the surrounding communitieswere poorly understoodand their own opinions not taken into account. Most of the area is low valueforest, and access to resin trees and other NTFPs, is not assured. Theproposal to renegotiate the law to give the company the right to control NTFP management (resin tappina) seems indicative of the real intentions of the company. Consultation mechanisms have not been established."161 Commenting on standards o f social impact assessment and planning across all the six plans that the FCMCPP had recommended for approval, the review team found that: `)participation in the designationof communityareas did not takeplace and the whole social context of these concessions has becomeproblematic as a result, even though the TRT (FCMCPP review team) initiated community consultations aspart of their review process. The currently roposedcommunity use zones and resource accessplans are therefore inadequate.A 2 On the specific issue o f indigenous people, moreover, their conclusion was as follows: "Guidelines andplans must address the issue of indigenous ethnic groups, and their land rights, but none of the concessions have begun to do this. The World Bank's failure to abide by this operational policy has meant that the FCMCPP has taken no account o f the potential impacts o f concession activity on indigenous peoples, or their rights (to land inparticular) under Cambodian law. This inturn has allowed concessionaires to ignore these issues completely. I6OGFA Terra Systems: `Results o fthe IndependentReview o f Strategic Forest ManagementPlans preparedby Concession Companiesoperating in Cambodia', August 2004, p.113. ibid, p.122 ibid, p.135 ibid, p.59. Note that the failure o fthe concessionairesto recognise populations of indigenous people had already beenhighlighted in Global Witness, `Preliminary Assessmentof Strategic ForestManagement Plans andEnvironmental and Social Impact Assessment Reports - Cambodia's Forest Management Options for the Future', December 2002, p.p. 28-29. 67 More broadly, one can conclude that these omissions have had the overall effect o f making the concessions appear more viable and less socially disruptive than i s infact the case. Again, this feeds into the overriding harmful impact o f the FCMCPP -the lowering of standards for concessionaires and the provision o f World Bank Project endorsement to companies whose activities cause material harm to Cambodian citizens. 3.3 OperationalPolicy OP 4.36 -Forests For the Forest ConcessionManagement and Control Pilot Project inCambodia the applicable World Bank Forest Policy i s OP 4.36, September 1993, along with relevant annexes, as this was the operational policy inplace at the time o f FCMCPP design and initial stages implementation. OP 4.36: `i... . the Bank Group does notfinance commercial logging operations... in primary tropical moistforests. " The World Bank has breachedthis Operational Policy inits provision of loan-backed technical assistance to concessionaires that i s designed to facilitate their future logging operations. OP 4.36 does state that "When the government has (made a commitment to move towards sustainable management of primary tropical moistforest), the Bank mayfinance improvements in theplanning, monitoring, andfield control of forestry operations to maximize the capability of responsible agencies to carry out the sustainable management of the resource. The critical point here, however is that the Bank has allowedthe FCMCPP to go beyond this inits active support ofthe logging concessionaires. As noted above, the companies with which the project has engaged are inany case particularly undeserving beneficiaries o f loan money. Inaddition, this operational policy includes five criteria for what constitutes a "government's commitment to move toward sustainable management of (primary moist tropical)forests ". Itis doubtful that the Cambodian government can be considered in compliance with all or evenmany o f these: (I,Adoptpolicies andan institutionalframework to (a) ensure conservationand sustainable use of existingforests and (b) promote more activeparticipation of local people and theprivate sector (withproper incentives) in the long-term management of naturalforests The Cambodian government, however, has based production forest management on a concession system inwhich, as the FCMCPP task manager himself admitted, "land allocation was inappropriate, concessionaire selection was noncompetitiveand nontransparent contracts werepoorly conceived, (and) local interests were not 68 considered. The situation might be different had the World Bank focused the FCMCPP on rectifying these problems. However, as outlined above, the World Bank has not attempted to challenge any o f these problematic features o f the concession system and has instead adopted them as the foundations on which to build its project. (io Adopt a comprehensive and environmentally soundforestry conservation and development plan that contains a clear definition of the roles and rights of the government, theprivate sector, and local people (includingforest dwellers) The government had no such plan at the commencement o f the FCMCPP and appears to be no closer to producing one. (iii) Undertake social, economic, and environmental assessments of theforests being consideredfor commercial use N o prior assessmentso f Cambodia's production forests were undertaken before they were parceled into concession^.'^^ Itis true that the logging companies have been required to carry out social, economic and environmental assessments as part o f the FCMCPP-supported planningprocess. However, the fact that these are only being attempted years after the forest has already been allocated as logging concessions means that their scope to influence strategic management decisions is limited. Inany case, as argued above, the quality o f the social, economic and environmental assessments produced by the concessionaires has been extremely poor. (iv) Set aside adequate compensatory preservationforests to maintain biodiversity and safeguard the interests of forest dwellers, specijkally their rights of access to designated forest areas Since 1993 Cambodia has had a national protected areas system designed to conserve biodiversity. Moreover, official guidelines for concession management developed during the late 1990s do call for the interests of forest dwellers' to be addressed inconcession planning. Boththese factors suggest that the Cambodian government has met this criterion on paper at least. Inpracticehowever, concession companies' have consistently disregardedforest dwellers' rights and interests. Moreover, the management plans approved by the FCMCPP do not appear to herald any significant improvement inthis regard. The companies have tended to allocate preservation and community forests on degraded areas, non-operable forest and areas not suited to community use.166 ~ 164InternalWorld Bank memo from William Magrathto IanPorter, February 2001. 165Asian DevelopmentBank SustainableForest ManagementProject, `CambodianForestConcession ReviewReport', April 2000, p.15. 166See, for example GFA Terra Systems: `Results ofthe IndependentReview of Strategic Forest ManagementPlanspreparedby ConcessionCompanies operating inCambodia', August 2004; p 113, 122, 135. 69 (v) Establish institutional capacity to implement and enforce these commitments. N o such institutional capacity existed at the start o fthe FCMCPP. World Bank staff would doubtless argue that establishing this institutional capacity was the primary objective o f the project. However, it i s an objective that the FCMCPP has signally failed to meet. Interms o f basic institutional structure o f the Forest Administration, for example, the situation has actually deteri~rated.'~~Institutional flaws such as the lack o f separation between production management and regulatory control functions persist. Recent studies of the institutional framework leave little doubt that it remains inadequate to implement and enforce the standards that OP 4.36 calls for.'68 The FCMCPP falls well short o f meeting other standards required by this operational policy. For example, the requirementthat "borrowers identzfi and consult the interest groups involved in aparticular forest area" has not beenmet. This deficiency relates closely to the breaches o f Operational Policy 4.01 on Environment Assessment and Operational Directive 4.20 on Indigenous Peoples concerning consultation. Inaddition, OP 4.36 states that "Inforests of high ecological value, the Bankfinances only preservation and light, nonextractive use of forest resources. " As described above, the World Bank undertook no environment assessmentahead o fthe FCMCPP that might have identifiedsuch forests o f highecological value. Instead, the project has advised the Cambodian government to allow another 25 years o f logging by three concessionaires (Colexim Enterprise, Everbright CIG Wood and Timas Resources) inthe highlyecologically valuable Prey Longforest. This area was identifiedby an IUCN(World Conservation Union) study three years before the FCMCPP commenced as a "Remote, andpossibly very old, lowlandforest area with major wildlife populations ... feasibility of a WorldHeritageNomination should be established(emphasis in original). 1~169 A botanical study undertaken in2004, meanwhile, notedthat "We can also assume that the rainforests of the greater Prey Long region maintain a level of biodiversity that equals or exceeds other lowland terrains of Cambodia. Given that most national parks of Cambodiaare located in or near mountainous regions, the biological value of the greater Prey Long region seems all the more critical. '1170 The 2004 Independent Forest Sector Review, to which the World Bank committed funding, also draws particular attention to the ecological significance o f Prey Long."l 167IndependentForestSector Review, `The ForestSector inCambodia', PartI,pep.78-85. Mary Hobley / IndependentForest Sector Review, `Players inthe Sector: GovemmentAgencies', Chapter 11, Part 11, p.p. 64-65. DavidAshwell incollaborationwith the DepartmentofNature Conservationand Protectionofthe Ministry ofEnvironment, `Cambodia-aNational Biodiversity Prospectus', IUCN, 1997, p.56. I7OJ. Andrew Macdonald, `Ecological Survey o f PreyLong, Kompong Thom', September 2004. 17'David Ashwell, Frank Miller& Ignas Dummer/ IndependentForestSector Review, `Ecology and Status of Cambodia's Forest', Chapter 1, Part 11, p.p. 34-36. 70 Ina set o fcomments circulated inresponse to the IFSR, the World Bank did make acknowledgement of the ecological value o f the Prey Long forest. This has not changed the prescriptions o f the FCMCPP and their likely impact, h0~ever.l~~ The harmful consequences o f the World Bank's breaches o f this operational policy can be summarised as follows: 0 Assistance to and endorsement o f concessionaires that will allow these companies to continue logging with the same harmful consequences to environment and local people as inthe past. 0 Allowing the FCMCPP to promote the logging o f a forest o f highecological value, thus greatly increasingthe chances o f its degradation. 3.4 OperationalPolicyOP 4.04 -NaturalHabitats OP 4.04: "The Bank does not supportprojects that, in the Bank's opinion, involve the sign$cant conversionor degradation of critical natural habitats" No doubt the World Bank staffresponsible for the FCMCPP would argue that it does not consider the promotion o f forest concessions as likely to lead to the degradation o f the natural habitats which Cambodia's forest concessions constitute. As argued above, the substantial body o f evidence on the impacts o f the concessionaires' activities strongly suggests otherwise. The concession companies have already significantly degraded the natural habitats within their concessions. Their past behaviour and, indeed the contents o f the six sets of plans that the FCMCPP has approved (interms o f proposed over- cutting) indicate that they will continue to do so. "The Bank expects the borrower to take into account the views, roles and rights of groups, including local nongovernmentalorganizations and local communities afected by Bank-Jinancedprojects involving natural habitats, and to involve suchpeople in planning, designing, implementing, monitoring and evaluating suchprojects. " Again, as described inrelationto breaches o f operational policies on environment assessment and indigenous peoples, consultation has been absent or o f a very poor standard, both duringpreparation and implementation o f the FCMCPP. Moreover, the Bank did not ensure that the borrower (Forest Administration) invited the stakeholder participation inplanning, design, implementation, monitoring and evaluation that this operational policy calls for. It appears that the project's architects and executors have declined to consider the forests slated for logging as natural habitats. While the six concessionaires endorsed by the FCMCPP have, as required, made reference to biodiversity conservation within their plans, the quality o f this work has been abysmal, as World Bank, `Cambodia IndependentForestSector Review -Comments and ProposalsGoing Forward', October 2004. 71 a recent study of these components o f the EverbrightCIG Wood and Colexim Enterprise plans makes ~ 1 e a r . l ~ ~ Failure to recognise the concessions as natural habitats in any meaningful sense has, as with other deficiencies, resulted inthe commissioning of a poorly conceived project. By the same token, the Bank has allowed the project to be produce outcomes that increase the probability o f severe imminent damage to natural habitats that are part o f Cambodia's natural heritage. 3.5 Operational Policy OP 13.05 -Project Supervision OP 13.05: "Asa development agency, the Bank also has an interest in assisting member countries to achieve their development objectives on a sustainable basis. To these ends, recognizing thatproject implementation is the borrower 's responsibility, the Bank supervises the borrower's implementation of Bank-jnancedprojects. Project supervision is required inorder to "(a) ascertain whether the borrower is carrying out theproject with due diligence to achieve its development objectives in conformity with the legal agreements; (b) identifi problems promptly as they arise during implementation and recommend to the borrower ways to resolve them; (e) recommend changes inproject concept or design, as appropriate, as theproject evolves or circumstances change.'' Inthe case ofthe FCMCPP, the World Bank has repeatedly contravenedpoint (a), as a result o f negligence in supervision. Details o f these breaches are set out in detail in Section 2 o f this report. The following appear particularly clear-cut examples. i)Allowingprojecttechnicalassistancetobeofferedtocompaniesthatshouldhavebeen excluded under the terms o f reference given to the TA consultants. This has had the impact o f increasingthe chances o f these companies passingthrough the planning process, despitetheir track records and obvious unsuitability as concession managers. ii)NotensuringthattheplanningprocessesforSFMPsandESIAscarriedoutunderthe auspices o f the project includedadequate and appropriate public consultation. Note that consultation is required under Cambodian law (Sub-Decree on Forest Concession Management). This has weakened the bargaining position o f communities intheir dealings with the companies. Ithas enabled concessionairesto ignore the interests of communities and remain unaccountable to those who live inand around their concessions. iii)Failuretoensuretheobservanceofminimumstandardsinthe2003forestcover survey that the FCMCPP produced. This extremely poor piece o f work has provideda 173J. Andrew Macdonald, `Ecological Survey o f Prey Long, Kompong Thom', September 2004. 72 distorted picture of forest quality and cover in Cambodia. This inturn assists proponents o f the concession systemto argue the case for continued industrial logging. iv) Not taking any action to change the flawed methodology of the FCMCPP's review o f the SFMPs and ESIAs, inparticular the project's refusal to take account o f the legal prohibition on cutting resintrees. This protection o f resin trees is specified inCambodia law (1988 Decree on Forest Practice Rules; 2002 Forest Law). This has led to FCMCPP' s endorsement o f companies whose concessions may not be economically viable. Itwill also encourage companies to continue logging resintrees, an activity that i s illegal and which will serve to further impoverish already poor Cambodian~.'~~ This has been raised with World Bank and FCMCPPstaff on a number of occasion^.'^^ goes directly against overall World Bank development objectives. Note that this issue v) Repeatedly attempting to help a company (Colexim Enterprise) overturn the log transport ban and profit from its illegal logging o f villagers' resin trees. Admittedly, World Bank staff have themselvesbeen so directly implicatedthat i s debatable as to whether this i s simply a breach o f the supervision policy. Overall, lack o f supervision has accounted for many o f the FCMCPP's damaging acts and omissions. These, inturn have contributed to the project's overall negative impact: legitimating o f a flawed system and rogue concessionaires that cause material harmto forest-dependent Cambodians. 3.6 Bank ProcedureBP 8.40 -TechnicalAssistance A related World Bank standard that the projecthas not met is its Bank Procedure BP 8.40 on technical assistance, which accompanies the Operational Policy OP 8.40 concerning the same issue. BP 8.40: "Becausesupervision offers an opportunityfor informal TA,Bank staff must remain aware of importance of effective supervisionto the implementation and ultimate success of the TA. 'I `74 BruceMcKenney, Yim Chea, PromTola and Tom Evans, `Focusing onCambodia's High Value Forests:LivelihoodsandManagement', CambodianDevelopmentResourceInstituteand Wildlife ConservationSociety;November2004, p. 91: "Basedon experiences in Cambodia and elsewhere in the region, continuation of the current commercialforestry model will result infurther forest losses with little revenue generatedfor government. It will not lead topoverty reduction and rural development. Indeed, findings of this study suggest some logging operations (and some agricultural concessions) are helping to move villages in high valueforest areas intopover&, not out of it." `75 For example meetingbetweenHak Sarom, Oxfam; Andrew Cock, NGOForum,MikeDavQ,Global Witness togetherwith William MagrathandAndrew BondofWorld Bank and John Dick, World Bank StaffConsultant,PhnomPenh, October 2003; GlobalWitness interviewwith Yann Petrucci,technical advisor to FCMCPP, 17 September 2003. 73 Several breaches o f the Operational Policy on supervision outlined above, also contravene this section o f BP 8.40. Deficiencies inthe work o f the TA consultants to the FCMCPP that suggest inadequate supervision by the World Bank include: 0 Provision o f assistance and advice to all logging companies, including those that should have been excluded under the terms o f reference issued to the technical assistance consultants. 0 The refusal of consultantsto the FCMCPP to take account of the legal prohibition on cutting resin-producing trees. 0 The distorted score-card system o f assessing concessionaires' management plans. 0 The poor standard of the TA-supported forest cover survey. This has contributedto the same negative outcomes as breaches of the operational policy on supervision. 3.7 OperationalPolicyOP 4.11 -Cultural Property OP 4.1 1 "1. Culturalproperty... encompasses both remains left by previous human inhabitants for example,middens, shrines, and battlegrounds) and unique natural environmentalfeatures such as canyonsand waterfalls. 2. The WorldBank's generalpolicy regarding culturalproperties is to assist in their preservation, and to seek to avoid their elimination. SpeciJically: (a) TheBank normally declines tofinance projects that will significantly damagenon- replicable culturalproperty, and will assist only thoseprojects that are sited or designed so as toprevent such damage. (b) TheBank will assist in theprotection andenhancement of culturalproperties encounteredin Bank-financedprojects, rather than leaving thatprotection to chance. (c) Deviationsfiom thispolicy may bejustified only where expectedproject benefits are great, and the loss of or damage to cultural property isjudged by competent authorities to be unavoidable, minor, or otherwise acceptable. Specific details of thejustijkation should be discussed inproject documents. (d) Thispolicy pertains to anyproject in which the Bank is involved, irrespective of whether the Bank is itselffinancing thepart of theproject that may affect cultural property. 3. (2) If there is any questionof cultural property in the area, a brief reconnaissance survey should be undertaken in thefield by a specialist," The six loggingconcessions whose plans the FCMCPP has recommended for approval contain both spirit forests and sites o f archaeological importance that undoubtedly constitute cultural property. Despite this, it appears that the World Bank carried out no survey o f these sites prior to the project's commencement. This omission falls inline 74 with the Bank's erroneous acceptance ofthe existingconcessionboundaries as an appropriate basis for management o f the country's production forest. There i s strong circumstantial evidence that many communities, particularly those comprising indigenous peoples, have spirit forest areas. Despitethis, only one o f the companies endorsed by the FCMCPP, Colexim Enterprise, has identified a spirit forest in its plan. Communities inKompong Thom have complained that this company previously logged their spirit forests inboth 1997 and 2002. Inmid2004, a group ofprovincial, national and international NGOsfacilitated public consultations concerning the six sets of SFMPs and ESIAs approved by the FCMCPP. These consultations involved 1,529 people from 13 communes situated inand around concession areas. One o f the common concerns that participants' voiced was companies' inclusionof spirit forests intheir management plans; a factor apparently not considered by the Bank or the FCMCPP.'76 Aside from spirit forests, the six concessions also contain important archaeological sites. As with the spirit forests, itappears that a significant number ofthese have not been identified and excised from production areas inthe SFMPs produced by the six companies, An assessment o f the first sets o f plans submitted by concessionaires in 2002, noted that: "Anumber of concessionaires recognize and excisefiom their areas officially recognized temples and archaeological sites. This however is not the casefor smaller and uncharted temples which dot Preah Vihear, Kompong Thom and Kratie provinces. Theseomissions are inexplicable as thepresence of such sites is widely known locally. "177 Once again, The World Bank has not the met standards o f pre-project assessment required by its operational policies. Consequently, the FCMCPP has proceededto endorse SFMPs that appear to spell destruction for sites o f cultural significance. Logging o f spirit forests will seriously harm the interests o f local communities. Furthermore, similar lack of attention to archaeological sites couldjeopardise cultural property that i s part of the national heritage o f all Cambodians. NGO Forumon Cambodia and Oxfam GB, `BriefNotes regarding Community Consultations on Forest ConcessionManagementConcessions', August 2004. `77Global Witness, `Preliminary Assessment of Strategic Forest Management Plans and Environmental and Social Impact Assessment Reports-Cambodia's ForestManagement Options for the Future', December 2002. 75 SECTION 4: PREVIOUSCOMMUNICATIONWITH THE WORLD BANK The World Bank's project intervention has beensituated within the Forest Administration and has focused primarily on planning processes. This meant that, in its initial stages at least, the FCMCPP had a fairly low profile within Cambodia. As implementation has progressed, however, this has changed, and affected communities have had more contact with the Bank and more awareness of its project's activities, as is clear from the letters accompanying this submission. Nonetheless, much of the debate around the project has been conducted between the World Bank and local and international NGOsworking in Cambodia. The reasons for this can be summarised as follows: 0 The focus o f the project has made it largely inaccessibleto rural Camb~dians.'~~ 0 By the time the project commenced, there was a well establisheddialogue on forest sector issues involving the World Bank, other donor agencies and NGOs. Discussion o f the FCMCPP naturally fed into this. 0 NGOsworking at boththe grassroots and national policy level were able to provide a conduit for the concerns and interests o f rural communities; NGO Forum on Cambodia and Oxfam GB beingobvious examples here. Raising concerns with the WorldBank Dialogue between the World Bank and NGOs has addressed both the FCMCPPand other elements inthe Bank's forest sector reform efforts, notably its $30 million Structural Adjustment Credit (SAC). The SAC, initiatedinearly 2000, contained a range o f conditions for release of the second tranche of US$ 15 millionthat related to the forest sector. The government's failure to meet these conditions and the Bank's decision to disburse the money anyway became a source of serious disagreement betweenthe Bank and NGOS.'~~ The Bank's handling o f the SAC disbursement undermined confidence in its commitment to achieving reform inthe forest sector. Appeal to the Inspection Panel is intended as a measure o f last resort and the case o f the FCMCPP i s no exception. For three to four years NGOs have been raising concerns about the conduct of the project and its potential impacts on forest-dependent communities with the Bank staff responsible. From 2001-2002, Global Witness, in its function as official independent forest sector monitor, held meetings with FA officials on a weekly basis. These were frequently 17*This problematicaspect of the projectwas highlighted inJ. Blakeney, Kay Panzer, Werner Schindele, `Forest ConcessionManagementand Control Pilot Project-Final Reportofthe Mid-TermReview Mission', February-March2003, p.4. 179Arguments against the release ofthe second tranche ofthe SAC are summarisedin Global Witness, `World Bank caves inon ForestReform', PhnomPenhPost, 18 December 2003-1January 2004. http:l/www.phnom~enh~ost.com/TXT/comments/c1301.htm. 1- 76 attended by FCMCPP staff, as well as the project task manager and more senior World Bank staff who were visiting Cambodia. While these sessions focused primarily on developments inthe Forest Crime Monitoring and Reporting Project, they also provided a forum for discussion o f the FCMCPP. Through these meetings, the World Bank obtained regular updates on the activities o f the concessionaires, for example instances o f illegal logging and large-scale royalty evasion. Italso receivedprior notice ofproblems likely to be encounteredinthe implementation o f the FCMCPP, such as disclosure o f the management plans and `old log' transportation. On numerous occasions over the last four years Global Witness and other NGOs have also raised concerns regarding the FCMCPP at meetings o f the donor Working Group on Natural Resource Management (WGNRM), o f which the World Bank i s a member. Over the same period, World Bank and FCMCPP staff accompanied several Global Witness field inspections to obtain a first hand understanding o f the issues. Participants inthese field visits includedthe FCMCPP task manager, the senior operations officer in Cambodia, the East Asia and Pacific regional director o f the rural development sector unit,as well as others. FCMCPP staffalsojoined Global Witness on aerial surveys that revealed the discrepancy between concessionaires' claims and the reality on the ground. NGOs' countless attempts to address deficiencies inthe World Bank's performance inthe forest sector inCambodia have extendedto mediation by third parties, such as the Bank's regional external affairs and communication unit, World Bank personnel seconded to Fauna & Flora International (FFI), as well as representatives o f other donor agencies. NGOs have also keptup regular communications with World Bank staffthrough more informal channels. WorldBank responses The Bank has respondedto questions and criticisms concerning its project inthe following ways: Inmost cases, the Bank has beenpreparedto meetNGOsto discuss points of concern. The Bank has responded to most, but not all, written communications. In2002, the Bank downgraded the project's ratingto `unsatisfactory', partly as a result o f the lack o f public consultation undertaken inthe course o f the project. InNovember 2003, as the LILneared its due expiration date, the Bank convened a workshop involvingNGOs, inorder to discuss future direction o f the FCMCPP. Inthe last quarter of 2003, the Bank adjusted its spending plan for the remainder o f the LIL; allocating sums o f money to activities such as post-concession management. The Bank's efforts to maintain dialogue are commendable. Nevertheless, the dialogue and the shufflingof budgetary allocations have done nothing to alter the substance o f the 77 FCMCPP. Inno meetings, written communications or actions has the Bank indicated any willingness to acknowledge the damaging impact o f its support to the concession companies, let alone a readiness to rectify this. The Bank's stock responses to criticism o f its project have been: 0 blaming the Cambodian government 0 arguing that it has no responsibility for and little control over what the FCMCPP does 0 chiding critics for calling the Bank to account and exhorting all stakeholders to `look ahead', rather than scrutinising Bank decisions and project activities 0 arguing that because the FCMCPP i s process-oriented, it is not subject to Bank operational policies Infact, the mainthrustof WorldBank activities inthe forest sector has not changedat all. Indeed it i s since the Bank began repackaging the FCMCPP in late 2003, that the project has produced some its most damaging outcomes. The most significant o f these has been its endorsement o f the six logging companies in June 2004. This seal o f approval is already beingused by the concessionaires to argue their case for resumption o f industrial logging. Inaddition, the Bank continues to use the project to help the concessionaires resume transportation o f timber that includes logs that were harvested illegally. Community members and NGOs have thus concluded that further dialogue will not persuade the Bank to abandon its support for the concessionaires and address the damaging impacts o f its project. This has ledto consideration o f the Inspection Panel as an alternative means o f holdingthe Bank to account. Table 3: Samplelistof correspondence and meetingsbetween NGOs and World Bank and FCMCPPstaff.'*' Written communicationsfrom the WorldBank and FCMCPP team are in marked in bold, Note that this list isfar from being exhaustive. DATE NATUREOF COMMUNICATION 28 December 2004 e-mail from Global Witness to Ian Porter, Cambodia Country I Director. World Bank 20 December2004 I Letter from Ian Porter, CambodiaCountry Director,World 1 Bank to GlobalWitness 2 December 2004 Letter from Global Witness to James Wolfensohn, World Bank I I President I Notethat this list only refersto those meetingsfor whichminutes are immediately available. It is possiblethat WorldBank andFCMCPP staffmay also have their ownrecords ofthese and some ofthe numerousother meetingsthat haveencompasseddiscussionofthe FCMCPP. 78 27 August 2004 e-mailfrom Kimberly Versak, World BankExternalAffairs divisionto Oxfam GB 27 August 2004 e-mail from Oxfam GB to IanPorter, Cambodia Country Director, World Bank 19 August 2004 Letter from IanPorter, CambodiaCountry Director,World Bank to Oxfam GB 13 August 2004 Letter from Oxfam GB to Nisha Agrawal, Cambodia Country Remesentative. World Bank 11 December 2003 Letter from NGO Forum on Cambodia to Jemal-ud-din Kassum, World Bank Vice President, East Asia and the Pacific Region 22 October 2003 Global Witness press release 17 September 2003 Minutes o f meeting between Yann Petrucci, Technical Advisor to FCMCPP and Global Witness 21 August 2003 - Letter from IanPorter, CambodiaCountryDirector, World Bankto NGOForumon Cambodia 27 June 2003 Minutes o f meeting between World Bank and FCMCPP consultants and NGO representatives, Phnom Penh 17 June 2003 Minutes o f meeting between John Dick, Staff Consultant to FCMCPP and NGO representatives, Phnom Penh 9 June 2003 Letter from NGO Forum to Ian Porter, Cambodia Country Director, World Bank 23 May 2003 e-mailfrom FCMCPPTask ManagerWilliam Magrathto donor agenciesand NGOs 25 April 2003 e-mailfrom Jemal-ud-dinKassum, World BankVice President, EastAsia and the PacificRegionto Oxfam GB 22 April 2003 e-mail from Oxfam GB to Jemal-ud-din Kassum, World Bank Vice President, East Asia and the Pacific Region and Ian Porter, Cambodia Country Director 10April 2003 e-mail from Oxfam GB to Jemal-ud-din Kassum, World Bank Vice President, East Asia and the Pacific Region 3 April 2003 Letter from Yann Petrucci, TechnicalAdvisor to FCMCPPto GlobalWitness 79 28 March 2003 Letter from GlobalWitness to YannPetrucci,TechnicalAdvisor to FCMCPP 17 February2003 e-mail from Jemal-ud-din Kassum,World BankVice President, EastAsia and the PacificRegionto Oxfam GB 24 January 2003 e-mailfrom OxfamGB to IanPorter, CambodiaCountryDirector, WorldBank 23 January 2003 e-mailfrom OxfamGB to IanPorter,CambodiaCountry Director, WorldBank 22 January 2003 Minutesof meetingbetweenrepresentatives of OxfamGB and James Wolfensohn,President, WorldBank 15 January 2003 Minutesofmeetingbetweenrepresentatives of World Bankand 17 December2001 e-mail from FCMCPP Task Manager William Magrath to Global Witness 9 August 2001 Minutesof meetingbetweenrepresentativesof World Bank and Global Witness 80 CONCLUSION AND RECOMMENDATIONS World Bank staff have defendedthe FCMCPP by arguing that the project's focus on planning and review does not leave a physical imprint, and that they cannot be held accountable for the outcomes o f these processes. This argument is unacceptable for a number ofreasons. The fact that the FCMCPP is strengthening the hand o f other parties to log ina destructive way, rather than undertaking logging operations directly, does not divest it o f responsibility. The general pattern o f World Bank projects, even those that leave the most obvious physical imprint, such as dams, i s for Bank interventions to be carried out via other actors; typically government agencies and private companies. Inthis sense, the FCMCPP is no different. One respect inwhich it i s different, however, is the scale o f the area that stands to be affected. The Bank / FCMCPP seem to have taken the view that the huge size o f the area involved means that observance o f operational policies is impractical and therefore unnecessary. This i s not much o f a defence. Another o f the Bank's most commonjustifications o f the FCMCPP i s that the Bank cannot be heldresponsible for the flaws inherent in a system and operators that existed prior to the commencement o f its project. Again, these claims are unsatisfactory. The outcome o f the FCMCPP has been entrenchment o f some o f the worst o f the logging companies. These firms will pass up no opportunity to brandishtheir World Bank seal o f approval and use it to deflect attempts by local inhabitants to holdthem accountable. Equally flimsy, i s the Bank's claim that it had no choice but to throw in its lot with the concession system and concession companies. Since when has it beenBank policy to respond uncritically to all requests for loans that client governments make? Inreality, the Bank was under no obligationto intervene inCambodia's forest sector beyondits own institutional imperative to keep making loans. While tryingto reform an unreformable system and operators was folly initself, what has made the FCMCPP not only misconceived, but actually harmful, has been the Bank's determination to keep the concessionaires operating. The Bank constructed the FCMCPP around the assumptions that the concession system could work, and that this could be demonstrated through its project intervention. The objectives that the Bank then set the project meant that it could only succeed if a significant number o f the concessionaires kept operating. Were all the concessions to be terminated, the FCMCPP would be exposed as a complete waste o f $5 million and five years. This distortion that the Bank introduced into the project's conceptual framework has driven the FCMCPP's constant efforts to lower the bar for the concessionaires and ensure that some of them stay inbusiness. The combination o f endless dispensations and public endorsement from the project has left Cherndar Plywood, Colexim Enterprise, Everbright CIG Wood, Samraong Wood, Timas Resources and TPP strongly placed to resume logging, with the same harmful impacts as before. Meanwhile, the Bank has not 81 introduced any controls that will cause the companies to operate with greater respect for either the law or the rightso f local inhabitants. This leaves people who have sufferedat the hands of the logging companies inthe past, anticipating their resumption o f harmful activities inthe very near future. They perceive that the World Bank project has contributed to this outcome and that is why they are demanding redress. Recommendations for World BankBoard of Executive Directors I n Cambodia: 0 Publicly acknowledge the damage that the Forest Concession Management and Control Pilot Project stands to cause to the interests o f forest-dependent communities in Cambodia. 0 Publicly refute the FCMCPP's endorsement o f the six logging companies. 0 Write off the debt that Cambodia's citizens have incurred through the Learning and Innovation Loanthat supports the FCMCPP. Internationally: 0 Undertake a wide-ranging review o f World Bank interventions concerning forestry and other extractive industriesto i)ensure that the Bank is not breaching operational policies as it has in Cambodia; ii)ensure that Bank projects are not servingto entrench and endorse organisations that have a history o f illegal activities. 0 Inthis regard, givepriority to a review ofthe World Bank's forestry project in Democratic Republic o f Congo. 0 Include timber inthe Extractive Industries Transparency Initiative (EITI) and hold Bank forestry projects to the same standards as interventions inthe oil, gas and miningsectors. 82 Appendix I:Concessionaire Profiles Cherndar Plywood Cherndar Plywood currently holds a 103,300 hectare timber concession inPreah Vihear. Although the company's official owners and management are Taiwanese, Cherndar Plywood's operations are effectively runby its subcontractors Dy Chouch (also known as HunChouch), who is the cousin of Prime MinisterHunSen, together withhiswife Seng Keang. Illegal logging An investigation by Global Witness in 1999 found multiplecaseso f illegal logging by Cherndar Plywood, including logging outside permitted coupes, failure to stamp trees after felling, and the purchase for resale o f prohibited luxury woods.'81Aerial photographs taken inJanuary 2001 o f Cherndar Plywood's Dong Mar log rest area showed an estimated 22,000 m3 o f timber, indicatingthat the company harvested considerably more timber than they declared or were allowed for the 2000 cutting season.'82 Despite possessing its own concession, Cherndar Plywood has also been found purchasing illegally felled logs from areas outside o f its concession, including the Sandan District o f Kompong Thom and Casotim's log rest area inthe Kang Chhor village in Chhlong Cherndar Plywood targeted trees tapped for resin throughout 2001 in spite o f the clear prohibition on their felling. InDecember 2001, Global Witness documented the cutting o f 340 resin trees by the company. The Forest Administration investigated and confirmed these findings but took no action. The company has continued to antagonise local people and deprive them o f their livelihoods. Throughout January 2002 Cherndar Plywood security manningthe checkpoints were denying local people access to the forest in an apparent attempt to kill off the resin trade, inorder to eliminate the competition for the commercially desirable resin-producing trees remaining inthe concession.184 Other legal and contractual breaches A random inspection carried out by Global Witness inJanuary 2001 found that Cherndar "* Global Witness, `Chainsaws Speak Louder Than Words', May 2000, p.p. 23-24. Global Witness, `The Credibility Gap and the Needto Bridge It', May 2001, p.p. 35-36. Global Witness, `Going Places...Cambodia's Future on the Move', March 1998,part 4, part 9.4; Global Witness, `The Credibility Gap and the Needto Bridge It', May 2001, p. 26. GlobalWitness, `DeforestationWithout Limits', July 2002, p. 17. 83 Plywood failed to pay any royalties for 29 out of the 89 logs inspected, while the royalties for an additional 18 logs had been substantially underpaid.lg5 The Asian Development Bank-funded concession reviewfound that Cherndar Plywood failed to pay USD 250,000 inroyalties for the years 1997-1999. It i s not known whether this debt has since beenpaid.ls6 Cherndar Plywood was heavily involved inthe offsetting scheme that deprived the Cambodian treasury o f timber royalties in2001-2002. As o f mid2002, the company had offset more than a million dollars inroyalties owed to the state. Poor concession management The Asian Development Bank-funded 1999-2000 concessionreview gave Cherndar Plywood's performance a rating o f 60 points out o f a possible 200 and described its performance as "unacceptable in all aspects" and required "urgent action ", The review found the company's operations particularly deficient with respect to environmental sensitivity(three points out o f 40) and harvesting (15 points out o f 4O).lg7The report further suggested that of Cherndar Plywood continued its current pattern of activity it would exhaust its concessionwithin five to ten years.'" Inadditionto its illegal logging activities, Chemdar Plywoodhas further refusedto comply with its concession contract provisions and has been cited for inadequate technical training o f its own staff.lS9 ColeximEnterprise Colexim Enterprise currently controls a 147,187 hectare timber concession covering part o f PreyLong-one o f Cambodia's most valuable remaining areas o f forest, both in commercial and ecological terms. Duringits tenure Colexim has consistently demonstrated its contempt for Cambodian law. Illegal logging Global Witness has documented many instances o f illegal logging by Colexim since 1995, including logging incontravention o f the January lSt 1995 cutting ban, obtaining GlobalWitness, `The Credibility Gap and the Needto Bridge It', May 2001, p.p. 35-36. Ibid, p. 11. AsianDevelopmentBank SustainableForest ManagementProject, `CambodianForestConcession ReviewReport', April 2000, Appendix 8 page 1-3. Ibid, Appendix 8 page 4. Ibid, Appendix 7 p. 1. 84 illegally felled logs from the neighbouring GAT International concession and receiving logs from the Boeung Per Wildlife Sanctuary. InOctober 2001,Global Witness found Colexim sub-contractors illegally felling trees being tapped for resinby local people. A subsequent investigation by the Department o f Forestry and Wildlife (DFW) found that Colexim had cut 240 trees inthree different locations. However, DFW accepted the company's excuses that it neededthe timber to collect sample data for its inventory and that it intended to use the wood to build schools and repair a bridge. DFW recommended that the Ministryo f Agriculture, Forestry and Fisheries (MAFF) issue Colexim with a written warning. MAFF instead opted to furnish the company with `advice' and then close the investigation. Had this volume o f timber been logged legally, royalties to the Cambodiantreasury would have amounted to approximately $60,000. Under the 1988 Decree on Forest Practice Rules, the appropriate fine for Colexim's illegal logging should have been between two and three times the value o f the logs. Investigations during2003 and 2004 revealed that at least one thousand hectares o f forested land around the Colexim logging camp `99' have been cleared illegally. The land is now beingprepared for commercial plantation development. Colexim subcontractors are instrumental in organising these activities and are also involved in illegal logging and timber processing activities inthe same area. Other legal and contractual breaches InApril 1997 Colexim security personnel murdered Chan Oeurn, a local resintapper, at the company's logging camp `99'. Chan Oeurn was trying to persuade a Colexim sub- contractor not to cut resin trees inthe area, when he was shot three times by a company security guard. The guard subsequently fled the area with the assistance o f other Colexim employees and has never been charged with the murder. Inearly 2003, localpeople livingwithinthe Colexim concession reportedthat company representatives were visiting villages and handing out blankets in exchange for villagers thumb-printinga document. Colexim subsequently sought to present this exercise as a consultation with local people about the content and implications o f the company's Strategic Forest Management Plan. The Asian Development Bank-funded concession review found that Colexim failed to pay the Cambodian Government royalties in 1996 and 1997 and in 1999 still owed $40,000. More recently, Colexim has been involved inthe offsetting scheme designed to divert royalty payments owed to the Cambodian government. As o f early 2002, the company had offset due royalties totalling at least half a million dollars, It i s not known whether any o f these debts to the government have ever been paid, however in late 2003, 85 the World Bank toldjournalists that it believedthat Colexim still owed the Cambodian government $80,000 inunpaid royal tie^.''^ Poor concession management The Asian Development Bank-funded 2000 concessionreview observedthat "Colexim staffpossess low technical capacity and under thepresent administrationsystem are `required' to employ DFW teams to undertake inventory, tree marking andplanning functions. " The ADB review also concluded that Colexim had committed seven different breaches o f its contractual obligations and Cambodia's Environmental and Forestry laws. Of these breaches, four relatedto deficiencies inthe company's concessionmanagement. Conflicts of interest The Cambodian government holds a fifty one percent stake inColexim. Forty percent i s controlled by the Japanese firm Okada and the remaining 9% by former Colexim accountant So Sovann. The lack o f any meaningful separationbetween the company and DFW is such that a senior member o f DFW staff working on the World Bank-funded Forest Concession Management and Control Project, Hang Sun Tra, who i s Director o f the Project Management Unit, also describes himselfas an assistant to Colexim shareholder So Sovann. In2002, Colexim submitted Strategic Forest Management Plans andESIAswhich had beenprepared by DFW's Forestry ResearchInstitute. The fact that the plans had been written with staff o f the same institution charged with assessing them represents a clear conflict o f interest. Everbright CIG Wood EverbrightCIG Wood is a subsidiary o f the Chinese state-owned Everbright group, a conglomerate which was has been at the centre o f high-profile corruption scandal in mainland China. Like Colexim, Everbright's 136,376 hectare concession contains one section o f the Prey Long forest area. Illegal logging Everbright carried out major illegal logging operations inCambodia in2000 and 2001, InDecember 2000throughJanuary 2001 Global Witness gathered evidence ofEverbright logging illegally inside its timber concession inKratie province. Company staff were observed collecting old and freshly cut logs at a range o f locations within concession The CambodiaDaily, `Illegal Loggers Keep Busy inKompong Thom', 31December 2003. 86 coupe 2, inwhich the company had no authorisation to cut. Loss o f royalties to the Cambodian treasury from Everbright's illegal logging incoupe 2 alone could be as much as $250,000. Approximately 20% o f the logs inspected by Global Witness at Everbright'splywood factory inKandal province in January 2001 had not been stamped by the Department o f Forestry and Wildlife (DFW), indicating that they had been harvested illegally. Ifthe same proportion o f the remaining logs inthe compound on the same date were also unmarked, this would point to a loss o f royalties o f approximately $26,000. While the evidence gathered inJanuary 2001warranted the termination o f Everbright's concession, the company escaped any serious punishment. Everbright did, however, receive an official warning from the Ministry o f Agriculture, Forestry and Fisheries (MAFF) concerning the company's "illegal loggingactivities" inwhich the Ministry threatened to cancel the concession agreement ifthe terms o f the order were not adhered to. In2002 Everbright submittedto DFW its Strategic Forest Management Plan. This document proposed harvesting operations within 11years inthe same area (coupe 2) where Everbright was caught logging illegally in2001. A basic premise o f sustainable forest management i s that logged areas should be allowed 25 years o f regeneration prior to renewed cutting. Other legal and contractual breaches The 1999-2000 Asian Development Bank concession review team found that Everbright owed the Cambodian Government $200,000 in unpaid royalties and deposits. It i s not knownwhether the company has since cleared its debts. Poor concession management The ADB review concluded that `Everbright staffpossess low technical capacity and under the present administration system are "required" to employ DFW teams to undertake inventory, tree marking and planning functions.' The review team also noted that Everbrighthad committed eight different breaches o f Cambodian law and its investment agreement with the Cambodian Government. Four o f these concerned deficiencies inthe company's management o f its concession. The Review concluded that Everbrightperformance was "Verypoor... Unacceptable in all aspects ". Conflicts of interest One o f Everbright's sub-contractors has close familial linkswith senior Government officials responsible for determining whether or not Everbright should be permittedto 87 continue operating. Sub-contractor KhunThong i s the father-in-law o f DFW Director General Ty Sokhun and brother-in-law o f Minister for Agriculture Chan Sarun. Samraong Wood Samraong Wood i s a Cambodian company holding a 200,050 hectare concession in Siem Reap. The company shares offices and personnel with Timas Resources company. There are strong indications that, like Timas, it is owned by Singaporeanbillionaire Robin Loh. The ADB concession review projected that Samraong Wood would completely exhaust its concession within 5-10 years.'" Illegal logging Duringan inspection of Samraong Wood's coupe 5 inDecember 2001by Global Witness found freshly felled resin trees throughout blocks 35 and 36. A company official estimatedthat 80% o f Samraong Wood's 2001 harvest was made up o f resin trees; 20% o f which were beingtapped for resinwhen they were cut down. This destruction o f resin producing trees was corroborated by former resin tree owners inthe area who told Global Witness that foresters forced them to sign sales contracts by telling them that ifthey did not sign the contracts they would never see any money, which they did not anyway.19* InJanuary 2002 Global Witness submitted a crime report to the ForestAdministration relatingto a large sawmill operating two kilometres from the Varin District Forestry Office, observed during an aerial survey o f the Samraong Wood concession in late December 2001. The sawmill is not on the official Forest Administration list o f licensed processing facilities and i s therefore illegal. Inany case, the sawmill i s located inside a concession, which i s also ~r0hibited.l~~ Other legal and contractual breaches The 2000 Asian Development Bank concession review cited Samraong Wood for contractual breaches including failure to invest, failure to make financial deposits or pay annual royalty, failure to submit a financial statement, EIA re ort, or adequate forest management plan, and inadequate technical training o f staff.18 19'Asian DevelopmentBank SustainableForestManagementProject, `CambodianForest Concession ReviewReport', April 2000, Appendix 8, page 4. 19`Global Witness `DeforestationWithout Limits', July 2002, p. 17. Ibid. Asian DevelopmentBank Sustainable Forest Management Project, `CambodianForest Concession ReviewReport', April 2000, Appendix 7, page 1. 88 Inaddition, the review foundthat, as of 1999, Samraong Wood hadfailedto pay USD 200,000 inroyalties to the Cambodian Government. In2001 and 2002, Samraong Wood offset more than $450,000 in royalties which it owed to the Cambodian treasury. It i s not known whether any of these debts have since beenpaid.'95 TPP CambodiaTimber Product TPP is a Thai company that holds a 395,900 hectare concession encompassing parts o f Siem Reap, PreahVihear, and Pursatprovinces. Since securing its investment contract in 1998, the company has made little effort to manage these areas andhas been largely inactive. Due either to negligence or complicity on the part o f the company, TPP's concession has been consistently subject to illegal logging operations. The 2000 ADB-funded concession review concluded that less than 10% o f the TPP concession area contained o erable forest and recommended that the government place a moratorium on its activities.796 Illegal logging TPP-subcontracted sawmills were active for several years before the company was first officially active in 2001 and some, notably the Ta Ouk sawmill inK o m ong Thom, have been caught processing illegally logged timber on numerous occasions.P97 Inlate 2000, GlobalWitness uncovereda major illegalloggingoperation inthe Phnom Samkos Wildlife Sanctuary inPursat province, with signs that the loggers were accessing the area through the adjacent TPP concession, 19* One year later, Global Witness found TPP engaged in illegal construction o f a road from its concessionto the wildlife sanctuary. Inlate 2001, Global Witness investigations revealed numerous instances of illegal harvesting and land clearance inthe TPP concession inPreah Vihear province. The extent o f the company's role inthese activities remains unclear. Even if TPP did not organise the logging itself, however, it i s evident that it has made little attempt to exercise any managerial control o f its concession. 195Global Witness, `The Credibility Gap and the Needto Bridge It', May 2001, p. 11. 196AsianDevelopmentBank SustainableForestManagement Project, `CambodianForestConcession ReviewReport', April 2000, Appendix 1. 19'Global Witness, `Deforestation Without Limits', July 2002, p. 15. 19*Ibid. p. 15 89 Other legal and contractual breaches TPP was cited by the Asian Development Bank-funded concessionreview o f 2000 for a range o f contractual breaches, including failure to make due investment, failure to make financial deposits or pay minimumannual royalties, failure to submit required financial statements, EIA report, or adequate forest managementplan, as well as inadequate technical training o f staff.lg9 In2000 the Asian Development Bank-funded concession review found that TPP failed to pay USD 100,000 indeposit and royalties to the Cambodian Government. It is not known whether this debt has since been paid.200 Timas Resources Timas Resources is a part o f the Singapore-based Robina group owned by RobinLoh, a billionaire accused by academic researchers o f beinga business associate o f Indonesia's Suharto family.201 In 1997Timas acquired a 161,450 hectare concession encompassing parts o f Preah Vihear, Kompong Cham and Kratie. The Preah Vihear part o f the concession includes the northwestern edge o f the Prey Long forest, the largest tract o f lowland evergreen forest inmainland Southeast Asia. Nevertheless, "47% of the Preah Vihear area consists of inoperableforest types or villages and ricefields. 'J202 Illegal logging Timas was operational during the late 1990sand implicated in illegal logging and export of logs. 203 The company was then largely inactive up untilthe 2001 cutting season, duringwhich it felled villagers' resin trees illegally inthe PreahVihear part o f its concession. Inthe same year, overloaded Timas log trucks caused the collapse o f a major road bridge inKompong Cham province. Other legal and contractualpressures Timas Resources was cited by the 2000 Asian Development Bank concession review for contractual breaches, including failure to invest, failure to make financial deposits or pay minimumannual royalties, failure to submit a financial statement, EIA report, or ~~ AsianDevelopmentBank SustainableForestManagementProject, `CambodianForestConcession ReviewReport', April 2000, Appendix 1. 'O0Global Witness, `The Credibility Gap and the Needto Bridge It', May 2001, page 11. George Aditjondro, `US BusinessLinks ofthe Suharto and Habibie families and their cronies (1)'. 'O'AsianDevelopmentBank SustainableForestManagementProject, `CambodianForestConcession ReviewReport', April 2000, Appendix 1. '03Global Witness, `Just Deserts for Cambodia?', June 1997, p. 15; Global Witness, `Going Places... Cambodia's Futureon the Move', March 1998, part 9.2. 90 adequate forest management plan, extensive illegal logging, and inadequate technical training o f staff.204 The Asian Development Bank-funded concessionreviewfound that Timas Resources failed to pa USD200,000 in deposits and due royalties to the Cambodian Government as of I999$' Moreover, like many other concessionaires, Timas Resources was involved in the 2001-2002 offsetting scheme to divert royalty payments owed to the Cambodian treasury. Global Witness investigations in 2002 revealed that it had offset a sum o f over $350,000. *04 Asian DevelopmentBank Sustainable Forest Management Project, `CambodianForestConcession Review Report', April 2000, Appendix 7 page 2. Global Witness `The Credibility Gap and the Needto Bridge It', May 2001, p. 11. 91 Annex 2 MANAGEMENT RESPONSE BANKMANAGEMENT RESPONSETO REQUEST FOR INSPECTION PANEL REVIEW OF THE CAMBODIA FOREST CONCESSIONMANAGEMENT AND CONTROL PILOTPROJECT(Credit No. 3365-KH) Management has reviewed the Request for Inspection o f the Cambodia Forest Conces- sion Management and Control Pilot Project (Credit No. 3365-KH), received by the In- spection Panel on January 28, 2005 and registered on February 4, 2005 (RQ05/1). Man- agement has preparedthe following response. , CONTENTS I. Introduction .............................................................................................................. 1 11. The Request .............................................................................................................. 1 111. The Forest ConcessionManagement andControlPilotProject ......................... 3 IV. SpecialIssuesandLessonsLearned... .................................................................. 14 V. NextSteps ............................................................................................................... 22 VI. Management's Response ....................................................................................... 24 Tables Table 1. Supervision Costs Table 2. Chronology of Key Events Annexes Annex 1. Claims and Responses Annex 2. Social Analysis and Consultations Annex 3. Supervision Mission Chronology Annex 4. SelectedDocuments and Correspondence Annex 5. Detailed Chronology of Key Events Annex 6. Cambodia's Forest Management Regulatory Regime Annex 7. References Map Map 1. Cambodia: Concession Areas, 1997to Present (IBRDNo. 33865) ... I11 AbbreviationsandAcronyms ADB Asian Development Bank AusAID Australian Agency for International Development ARD Associates inRural Development BNPP Bank-Netherlands Partnership Program BP Bank Procedures BTO Back to Office Report CAS Country Assistance Strategy CG Consultative Group C I Conservation International DAI Development Alternatives, Incorporated DANIDA Danish InternationalDevelopment Agency DfId Department for International Development (UnitedKingdom) DFW Department of Forestry and Wildlife EA Environmental Assessment EAP East Asia and the Pacific Region EASRD East Asia Sector RuralDevelopment ESIA Environment and Social ImpactAssessment FA Forestry Administration FA0 Foodand Agriculture Organization o fthe UnitedNations FCMCPP Forest Concession Management Control and Pilot Project FRM For& RessourcesManagement GAT Grand Atlantic Timber GTZ Deutsche Gesellschaft fiir Technische Zusammenarbeit IDA InternationalDevelopment Association IFSR Independent Forest Sector Review IMF Intemational Monetary Fund IPDP Indigenous Peoples Development Plan IPN InspectionPanel ITTO IntemationalTropical Timber Organization LIL Leaming andInnovation Loan MAFF MinistryofAgriculture, Forestry and Fisheries MEF MinistryofEconomy andFinance MOE MinistryofEnvironment MTR Mid-Term Review NGO Nongovernmental Organization O D Operational Directive OED Operations Evaluation Department OP Operational Policy OPN Operational Policy Note PAD Project Appraisal Document PHRD Japan Policy and HumanResources Development Fund PIC Public Information Center PID Project Information Document Prakas Regulation issuedby a Government office or officer, also known as a MinisterialOrder PROFOR Program on Forestry QAG Quality Assurance Group QER Quality Enhancement Review SAC Structural Adjustment Credit iv SDR SpecialDrawingRights SFMP Strategic ForestManagementPlan SGS SociBt6 GBn6ralede Surveillance TA TechnicalAssistance TFT TropicalForestryTrust TOR Terms of Reference TRT TechnicalReviewTeam TTL Task TeamLeader TWG TechnicalWorkingGroup UNDP UnitedNations DevelopmentProgramme USAID UnitedStatesAgency for InternationalDevelopment. USD UnitedStates Dollar wcs Wildlife ConservationSociety WGNRM WorkingGroup onNaturalResourceManagement WWF WorldWildlife Fund V I. INTRODUCTION 1. On February 4, 2005, the Inspection Panel registered a Request for Inspection, IPN Request RQ05/1 (hereafter referred to as "the Request"), concerning the Cambodia Forest Concession Management and Control Pilot Project ("FCMCPP" or "the Project"), Credit No. 3365-KH, financed by the International Development Association (IDA). 2. Structure of the Text. The document contains the following sections: Section I T provides information on the Request; Section I11presents background information and analytical work on the Project, including the overall country context fer World Bank ("the Bank") operations and policy dialogue in Cambodia, and key events during imple- mentation. Section IV discusses special issues and lessons leamed, and Section V consid- ers Management's intentions moving forward. Section VI presents Management's con- clusion. Annex 1 contains the Requesters' claims, together with Management's detailed responses, intable format. 11. THE REQUEST 3. The Request for Inspection was submitted by the NGO Forum on Cambodia act- ingon its ownbehalfand onbehalfof affectedlocal communities living inthe districts o f Tbeng Meanchey in Preah Vihear Province; Siem Bok and Sesan in Stung Treng Prov- ince; and Anlong Veng in Oddar Meanchey Province, Cambodia (hereafter referred to as the "Requesters"). These four districts are respectively located inthe concession areas o f the companies Chemdar Plywood, Samraong Wood, Everbright and Pheapimex. See Map 1. 4. Attachments to the Request received by Management from the Inspection Panel are: (i) One letter from representatives o f four affected communities (English translation) instead o f the two letters referenced inthe NGO Forum letter o f January 21,2005; and (ii) Report prepared by Global Witness providing details of the case and the violations o f Bank policies that allegedly occurred. No hrther materials, Le., the correspondence betweenNGOs and the Bank, referred to in item (3) o f the NGO Forum letter, were received by Management in support o f the Re- quest. Management wishes to note that prior to the Request for Inspection, neither the four local communities who submitted the letter notedunder item (i) nor their representa- tive had previously communicated with the Bank on the specific claims asserted in the letter. Cambodia 5. The Request containsclaims that the Panelhas indicatedmay constitute violations by the Bank of various provisions of its policies andprocedures,including the following: 0 OP 4.01, EnvironmentalAssessment (January 1999) 0 OP 4.04, NaturalHabitats (September 1993) OD4.20, Indigenous Peoples(September 1991) 0 OP 4.36, Forestry (September 1993) OP 8.40, Technical Assistance (October 1994) OPN 11.03, CulturalProperty (September 1986, reissuedAugust 1999) 0 OP 13.05, Project Supervision (July 2001) OD 13.05(August 1989 andJanuary 1996) 0 BP 17.50, Disclosure of Operational Information(September 1993) World Bank Policy on Disclosure o fInformation(August2001). 6. The Requesters claim intheir letter that: 0 "Through flawed project design and poor implementation, the World Bank has promoted the interests o f the logging concession system and the conces- sionaires. .. 0 A key element ofthe FCMCPP has been assisting the companies intheir pro- duction o f [strategic] forest management plans (SFMPs) and environmental and social impact assessments (ESIAs). The concessionaires have been re- quiredto produce these as a preconditionfor continued logging. The Bank is thus using loan money to benefit logging companies that have a track record o ftimber theft, tax evasion andhuman rights abuses... 0 By allowing its project to endorse the [SFMPs and ESIAs] o f six of these companies, the World Bank has increased the likelihood that they will con- tinue to maintaincontrol of their concessions. At the same time, the Bank has not succeeded in introducing any additional checks and balances to the con- cession system that would compel the companies to operate differently from the way that they didbefore. 0 The World Bank project endorsement has in fact strengthenedthe position o f these six companies, which hereon will present their operations as having the World Bank seal of approval. Some companies are already using this en- dorsement to deflect criticism o f their past and future actions, making it even more difficult for adversely affected communities to hold themto account. 2 , Forestry Concession Management and Control Pilot Project 0 Through its acts and omissions, the World Bank has contributed to a set o f outcomes that stand to inflict harm on forest-dependent communities in the near future." The Requesters' letter and the attached report fiom Global Witness claim that the Bank has violated all the policies noted in para. 5 above. The claims and Management's re- sponse are presented inAnnex 1. 111. THE FORESTCONCESSIONMANAGEMENTAND CONTROL PILOT PROJECT 7. The Project. The IDA Credit o f SDR 3.6 million (USD4.82 million equivalent at the time o f approval) for a Learning and InnovationLoan (LIL) was approved on June 5, 2000, The legal agreement was signed July 6, 2000 and the project became effective on October 20, 2000. A Japan Policy and Human Resources Development Fund (PHRD) Grant o f U S D 240,000 was provided for technical assistance duringimplementation. The project was originally scheduled to close on December 31, 2003. The Closing Date was extendedat the request o f the Borrower to June 30,2005. As o f February 2005, a total o f USD3.7 million (73 percent) was disbursed out of the IDA Credit of SDR 3.6 million equivalent (USD 5.1 million, reflecting SDR appreciation against the USD). 8. Project Objectives. The overall project development objectives (Schedule 2 to the Development Credit Agreement) were to demonstrate and improve the effectiveness o f a comprehensive set of forest management and operational guidelines and control proce- dures inforest concession areas, and to establish an effective forest crime monitoring and prevention capability. The project was formulated with the expectation and understanding that greater knowledge was needed about Cambodian forestry and`about the ways in which reforms couldbe advanced. As a LIL, the project was specifically expected to gen- erate better understanding o f the following issues (PAD, p. 4): 0 Maintaining Commitment. The Government's commitment to sustainable forestry threatened strongly entrenched interests. A hypothesis behind the project was that increased revenue flows, professional support from the Department o f Forestry and Wildlife (DFW, now the Forestry Administration or FA), and local support related to socially responsible operations would help to overcome resistance to re- form; 0 Private Sector Support. The then newly established Cambodia Timber Industries Association (CTIA) supported the proposed project, although its membership was acknowledged to include enterprises not fully committed to, or currently capable o f practicing, sustainable forest management. Moreover, the full costs o f sustain- able management could include significant reductions intimber supply and could lead to resistance from some concessionaires unless paired with other suitable policy or regulatory reforms, which would needto be identified and considered as part o f the project; and 3 Cambodia 0 Monitoring and Supervision Requirements. While the elements o f the reformed regulatory system were defined in detail, the FA monitoring and supervision re- quirements would depend, in large part, on concessionaire response. The rate at which concessionaires could absorb the proposed innovations and adjust their op- erations was not known. Petty and large scale corruption were characteristic o f the forestry sector and learning was needed to discover how regulations could be made more effective in the face o f extremely low salaries and difficult working conditions. 9. Project Components.The project consists o f four components (PAD, p. 5): 0 Forest Planning and Inventoty Component (USD 1.3 million). This supports the FA in providing guidance to and exercising quality control over concessionaire preparation o f detailed long- and short-term forest management plans. It includes conduct of field surveys and inventories, and assessment o f management con- straints, biodiversity and social issues, and risks of timber theft; 0 Concession Regulation and Control Component (USD 2.04 million). This com- ponent strengthens the capacity o f the FA to oversee concession operations and to ensure compliance o f operations with plans and conditions; 0 Forest Crime Monitoring and Prevention Component (USD 1.11 million). This component strengthens the capacity o f the FA and Ministry o f Environment (MOE) to systematically and regularly monitor illegal logging and to launch ef- fective prevention activities. It introduces systematic data collection and analysis techniques, and provides equipment and contractual services, training and techni- cal assistance; and 0 Project Management and Institutional Strengthening Component (USD 0.97 mil- lion). This component establishes a Project Management Unit in the FA, includ- ing construction o f a small office building, and provision of equipment and staff training. The project was subsequently modified in 2003, as indicated in para. 60; this modifica- tion didnot require an amendment to the Development Credit Agreement. 10. Project Organization. The project i s implemented by the DFW, which in 2003 became the FA as a result o f the reorganization o f the DFW pursuant to the Forestry Law o f 2002. The FA i s a semi-autonomous agency o f the Ministry o f Agriculture, Forestry and Fisheries (MAFF). A Deputy Director o fthe FA serves as Project Director. Under the project, the FA established a Technical Review Team (TRT) to conduct concession plan reviews, Staff from various units within FA and MAFF are involved in the project. The forest crime monitoring and prevention function was initially supported by a project o f the UnitedNations Food and Agriculture Organization (FAO) and United Nations Devel- opment Programme (UNDP) in 2000, using Global Witness as an "Independent Moni- tor." This role is now contractedto a commercial firmunder the FCMCPP. 4 Forestry Concession Management and Control Pilot Project 11, The Government-Donor Consultative Group (CG), which the Bank chairs, andthe associatedWorking Group on Natural ResourcesManagement (WGNRM), although not formally party to the FCMCPP, have consistently been engaged in discussion and infor- mal oversight of the project and the sector dialogue. The WGNRM was recently restruc- tured into four Technical Working Groups (TWGs), with the Forestry and Environment TWG chaired by the Director ofthe FA andDANIDA as LeadDonor Facilitator. PROJECT BACKGROUND 12. The project developed as Cambodia, one o f the poorest countries in the region (USD290 per capita income in 2000), emerged inthe mid-1990s from decades of war and isolation. Its institutions were fragile and violence and social disiocation were ongo- ing, with disarray extending to all parts o f the economy. By the late 1990s, the Govern- ment had begun an ambitious structural reform program, with the support of the Bank and other donors. The Bank's 2000 Country Assistance Strategy (CAS) for Cambodia discussed the governance challenges facing the country: "[governance] overshadows al- most all of Cambodia's development problems" (CAS, p. l). The CAS built on awareness o f the excessive role of the military innational life, the limitations and weak capacity o f the public administration, low civil service salaries, widespread corruption, and other problems; it set out building "the foundations for sustainable development and poverty reduction" as the Bank's main objective in Cambodia (CAS, p. v). The CAS acknowl- edged the risks to Cambodia o f faltering political commitment to reforms in the face o f powerfid special interests or a return to social unrest and political instability. During his February 2005 visit to Cambodia, World Bank President Wolfensohn told Government ministers, diplomats and others that Cambodia must tackle corruption because good gov- ernanceis key to a stronger economy. 13. Analytical Work. The Government, the Bank and others engaged in an intensive examination o f forest policy following a sector analysis by the Bank, UNDP and FAO, presentedin early 1996. That report, "Cambodia: Forest Policy Assessment'' (Report No. 15777 KH), laid out the enormous economic, social and environmental potential of the forest resource and identifiedserious weaknesses inthe Government's approach. Conces- sions stood out as a critical constraint to the emergence o f sustainable, diverse and so- cially responsible forestry in Cambodia. Illegal logging was also seen as a serious threat to the sector. The Bank, UNDP and FA0recommended a strategy involving development o f an improved regulatory and legal framework, re-examination of concession contracts, trade policy reform for log and forest products and other measures. Subsequent studies estimated 3-4 million cubic meters o f illegal logging in 1997-1998 and showed a contin- ued pattern of grossly inadequate fiscal returns (DAI, 1998, Fraser Thomas, 2000b). At that rate o f exploitation, the forest would be exhaustedinfive years. 14. The project was identifiedin December 1998 at the conclusion o f the program of technical studies supported by the Bank under the Technical Assistance Project (TA Pro- 5 Cambodia ject, Credit No. 2664-KH).' These studies, which included consultations, workshops (see Annex 2) and specialist input, helped establish the legal and contractual framework for concession regulation and clarified the basis for the Government's use o f its right to ter- minate concession contracts. The identification mission reviewed this work, considered the role o f other donors, and concluded that appropriate management o f the concessions would require substantial investment to build capacity and operationalize the desired pol- icy reforms. In early 1999, the Government embarked on reforms to enforce forest law, shut down illegal operations, andraise forest royalties. 15. A design alternative considered was the targeting of a small number of conces- sions for intensive technical assistance and development as "model" operations (Ap- praisal Completion Note, December 11, 1999). This was rejected, because o f the Bank's obligation to comply with OP 4.36 on Forestry, the risks for the Bank in aligning with any particular concessionaire, and the important needto deal with system-wide regulatory deficiencies. Project preparation and appraisal were completed in2000. PROJECT IMPLEMENTATION 16. Project Supervision. Since approval o f the project in June 2000, Bank staff con- ducted nine formal supervision missions, including a Mid-Term Review (MTR). The Task Team Leader (TTL) was based ina neighboring country during the preparation and early implementation period of the project, and inCambodia from August 2002 untilDe- cember 2003. This allowed regular on-time and face-to-face communication with the Government, donors, and other partners. The Credit was augmented by several trust funds, including a Recipient-executed PHRD Grant (TF026419) o f USD240,000 and a grant from the Bank Netherlands Partnership Program (BNPP) o f USD 164,000 to sup- port project implementation. The Bank has utilized a substantial supervision budget (see Table l), including trust funds, especially relative to the Credit amount. See Annex 3 for supervision frequency and composition. ` Table 1. Supervision Costs'(`0dO) .. -4: Source 2001 2002 2003 2004 2005 Total BB . - 35 23 39 120 112 `-329 I_ +.. TF 41 113 37 0 0 190 Total 75 136 `76 *. &120 .. 112 `519 17. MTR. The Government commissioned consultants to assist in a project MTR in February 2003 and a report was prepared and made available publicly in April 2003 (DFW, 20030. The MTR recognized serious problems that had arisen during implemen- tation, suggested that the FA redouble its efforts to utilize project resources and proposed expanded use o f project resources for forest concession control, forest law enforcement work, and reinstatement o f compartment-level planning. It highlighted the lack o f trust 'Technical studies addressed forest policy, legal aspects, log tracking and forest law enforcement, and for- est concessionmanagement. 6 Forestry Concession Management and Control Pilot Project and credibility that was facing the FA and as aninitial measure proposed establishment o f a Public Affairs Unit under the project. The MTR suggested an arrangement for the re- sumption of logging (the Bank advised against this in a Management Letter from the Ru- ral Sector Director to the FA Director on May 21, 2003, see Annex 4). The MTR also proposed that the Government seek an extension o f the Closing Date o f the Credit. A Bank-led multi-donor supervision mission, proposed to coincide with the Government's MTR, was cancelled due to criticism by several nongovernmental organizations (NGOs) o f the terms of reference (TOR) and proposed mission staff composition. A small Bank supervision mission was later fielded to discuss the MTRfindings inMay 2003. 18. Qual@ Enhancement Review (QER) Review, At the request o f the East Asia and the Pacific (EAP) Region, a voluntary QER was organized by the Quality Assurance Group (QAG)inOctober 2003. The findingslresults o f the QER were (pp. 1-2): "Good forest governance is far from being achieved., . and much work remains to be done at both the institutional level and inthe forest. While Donors and NGOs are impatient with the perceived slow rate o f progress, the panel's judgment i s that reform in this difficult area is probably occurring as rapidly as can be ex- pected, and would not be moving at all without the Bank's involvement.. , 0 The Bank's image, and indeed [its] effectiveness, have suffered from the follow- ing: (i) inability of the country team to coalesce around a shared strategy on the substance and on process; (ii) the early termination o f the FAOAJNDP Forest Crime Monitoring and Reporting Project due to the breakdown o f relations be- tween the Forest Crime Monitor, Global Witness and the Government; (iii) not having inplace a clear and well-articulated vision o f how the recently liberated 4 million hectares [from the cancelled concessions] are to be occupied; and (iv) an insufficiently well articulated Bank commitment to non-concessionaire forest us- ers, especially the ruralpoor in and near the forest. o The panel concluded that the LIL and Structural Adjustment Credit (SAC, Credit No. 3323-KH) have had limitations as instruments in addressing the long-term structural nature o f Cambodia's forest governance problem. Nevertheless, care- hlly selected forest-related SAC conditionalit[ies], that are squarely on the larger governance agenda and are completely under Government control, should con- tinue to be considered inforthcoming SACS... 0 The forestry sector i s o f strategic importance to achieve gains on the top two agenda items in Cambodia, governance and poverty reduction. Bank efforts in these areas will require a commitment by the regional and country management working incooperation with the Task Team and the Bank's external relations staff in order to develop and continuously re'fine a single coherent view on the sub- stance and the process o f [the Bank's] forestry sector strategy, and to develop and implement a proactive communications and partnership-building strategy." 19. The QER also recommended extending the Closing Date of the Credit and using the remaining funds to carry out aerial and field surveys to verify the current status o f I J Forestry Concession Management and Control Pilot Project Table 2.-i2hronology of Key Events Event ,. March 2003 - June Independent Forest Sector Review, preparation through 2004 distribution April 2003- . GovernmentW Rpubliclyavailable August 2003 Prukas on Forestry RevenueSystemsManagement Octobh2Q03 Sub-DecreeonCommunity Forestry * . December 2003 Closing Date Extended s of SFMP and ESIA Approval recommendationwith- heldon 1.4 millionhaofconces- sions ~ -~ July 2004 -ongoing IndependentReview(GFA Terra Systems) of SFMPs and 2 of 6 plansreviewedas of Febru- ESIAs ary 2005 March2005. . ' . 1 . Concessionsofaroundone million ha remainunder review June 30,2005 ClosingDate ofthe Credit 21. Concession Logging and Suspension. The Requesters cite harm from previous and possible future improper logging as the basis for their claim. The evolution o f log- ging policy inCambodia prior to and duringthe life o fthe project is central to the claim and to understanding the Bank's performance. Concession logging preceded the project and Bank involvement in Cambodian forestry. Early logging was based on Government approval o f plans prepared by concessionaires, usually without adequate investigation and analysis. Logging was authorized on an annual basis according to plans based almost entirely on processing capacity and not on the basis o f forest potential. Logging practice by concessionaires was generally poor, as were road construction, worker safety and other aspects. 22. As part of its reform program, the Government enacted the February 2000 Sub- Decree on Forest Concession Management, which defines roles and responsibilities for concession management and supervision and sets out the key principles to guide conces- sion operations. These aimed to provide protection to local communities and the envi- ronment, restrict harvests to sustainable levels, facilitate revenue collection and generally increase transparency and accountability. Provisions o f the Sub-Decree were initially in- troduced gradually in line with the Government's limited implementation capacity. After IDA approval of the project, the Asian Development Bank (ADB) and the United King- dom's Department for International Development (DffD) continued to support technical assistance and advanced proposals for the planning process, inparticular developing fur- ther a three-level planning process (see Annex 6).2 This process included brokering agreement between the Government and industry on an interim 50 percent reduction in harvesting for the 2000-2001 logging season from the levels approved for 1999/2000, and a September 2001 target for preparation o f management plans. A November 2001 super- vision mission provided suggestions on a draft Prakas (a regulation or Ministerial order) That work, which was originally intendedto prepare a community forestry project, was redesigned mid- way in implementation when Government informed the ADB that it would not borrow for community for- estry, and requested ADB to direct the balance o f the project to the development o fproposals for conces- sion management and for completion o f a review of concession performance. 9 Cambodia on the enforcement of the planning and other requirements o f the Sub-Decree on Forest Concession Management and the Bank followed immediately with confirmation in a Management Letter. On December 16, 2001, the MAFF issued the Prakas suspending logging and logtransportation for concessions that were not hlly in compliance with the requirements o f the Sub-Decree as o f January 1,2002. 23. Since the introduction o f the Prakas, no forestry concession logging has been au- thorized by the Government and no reports o f illegal logging by concessionaires have been substantiated by the Government or the Independent Monitor, except for the GAT concession, which was terminated by the Government for illegal logging in May 2002. Concessionaire compliance has been assessed by Bank supervision missions that have visited idle concession wood processing factories and concession areas. Forest crime i s independently monitoredby SGS. 24. Log Transport Restrictions. The Requesters assert harm deriving from the Gov- ernment's policy towards transport o f logs, including logs felled prior to the imposition o f the Prakas. Log transport policy has also evolved during the life o f the project. In Janu- ary 2002, when the Prakas went into effect, the Government estimated that 94,265 cubic meters o f felled logs remained inthirteen different concession areas. InMarch 2002, log movements were sanctioned by the Government in contravention o f the Prakas. In re- sponse to concerns expressed by the Bank and others, log transport permits were re- scinded and the ban on log transport was reinstated within days, with large volumes re- maining in the forest. Bank missions, the Independent Monitor, and others visited concession areas to inspect the stockpiles, some o f which are deteriorating, subject to ar- son, and could possibly be used to conceal additions of new illegal fellings. In April 2004, estimates o f log volumes proposed for transportation provided by the Independent Monitor were significantly less than in January 2002 but the basis for the reporting was different. The discrepancy was discovered in the course of preparing this Response and the Bank i s seeking clarification from the Independent Monitor. 25. The Government repeatedly expressed concern over uncollected royalties, and concessionaires approached the Bank regarding interruptions in the supply o f raw mate- rial supplies, idle factories and unemployedmillworkers. Discussions in September 2002 inthe field with GlobalWitness andNGOForumstaffledto agreement onthe possibility o f safe and legitimate transport o f logs. Shortly thereafter, the Bank wrote to the FA out- lining a set of principles that could be applied to managing the controlled transport o f logs. These included transparency, preservation o f evidentiary value, collection o f royal- ties and worker and road safety. In2003, the FCMCPP forest concession control adviser, whose TOR covered issues related to log transport, undertook preparation o f guidelines for log transport management. This followed interest expressed by the Colexim Conces- sion, regarding transport o f salvage logs remaining from site preparation for the Tumring Rubber Plantation. However, concern was raised by several NGOs over the origins o f these logs and harm alleged inthe course o f this operation. Despite the fact that the Bank didnot finance this land development, inorder to be responsive, the Bank sent a staff so- cial specialist to Cambodia. As a result, the social specialist proposed TOR for a retroac- tive plan to mitigate damage done by the Tumring operation, but the Government subse- 10 Forestry Concession Management and Control Pilot Project quently disputedany deficiencies inthe management o f social impacts from Tumring and the log movement issue was shelved. 26. The issue o f log transport was raised again inApril 2004 when the TWG was ap- proached by the FA with a proposal to move confiscated and legally harvested logs from nine concessions including Colexim. The letter was issued inthe last week o f April and proposed that log movements begin in early May. The Bank responded to the Govern- ment through the TWG and reiterated the principles first set out in September 2002. Log movements were resumed inJanuary 2005 following a Government-donor discussion of limited log movements at the December 2004 CG meeting. 27. Timber Royalty Offsets. The Request also cites wezknesses inthe Cambodian for- est revenue management system and suggests shortfalls in the Bank's response to prob- lems. For most o f the project's life, logging has been suspended and there have been no new royalty revenues due from logging inconcessions during that period. InMay 2002, during consultations with the International Monetary Fund (IMF), questions were raised over apparently off-budget transactions involving forest concession royalties collected in 2001. A Government audit later found these to have involved improper "offsetting" transactions. As this issue was associated with the Government's request for an extension o f the closing date o f the SAC and development o f an Action Plan to satisfy the remain- ing conditions, the Bank asked for and received clarifications. The Bank also provided assistance under the FCMCPP for the development o f strengthened financial procedures. The Bank supervised the work o f an interministerial team that developed a Prakas on forest revenue systems adoptedby the Ministers o f the Ministryo f Economy and Finance (MEF) and MAFF inAugust 2003. Work continues with the Government on forest reve- nue systems, including participation o f MEF and MAFF officials in the World Bank In- stitute/PROFOR (World Bank, February 2004) policy seminars and training. 28. Tensions among Stakeholders. Because forestry reform was painfully slow, the Bank, other donors working on the sector, and NGOs were frequently frustrated with the lack o f progress on the part o f the forestry administration. Members o f the NRMWG and the NGOs often disagreed among themselves and with each other over the differing ap- proaches to forestry reform. Tensions among project stakeholders, inparticular the Bank, NGOs and concessionaires, emerged over a variety o f issues. For example, Global Wit- ness, the Independent Monitor supported by the parallel FAOAJNDP project on forest crime monitoring and reporting, disclosed its report on the Government's law enforce- ment work without the agreed prior consultation with the Government in January 2001 (for which Global Witness subsequently issued an apology). The FA0 project lacked the funds needed to support FA work and there were numerous disputes about contracts, re- porting, access to information and Government endorsements. The Bank expressed its concerns on these issues to the Government as well as to UNDP, FA0 and other partners. In December 2001, a Bank supervision mission noted that the problems FA0 encoun- tered indelivering assistance were a major obstacle to moving forward with the FA0 pro- ject, the FCMCPP and reform. An FA0 review mission in early 2002 reinforced these observations and provisions were made for additional technical assistance up to the deci- sion to close the FA0 project in December 2003. NGOs also expressed concerns about the substance and process o f the Government's development o f what was ultimately the Cambodia 2002 Forestry Law and the Community Forestry Sub-Decree. The Bank intervened with the Government on numerous occasions to expand opportunities for NGO comment and input.Throughout this time, the Bank maintained an ongoing dialogue with Global Wit- ness about both forest crime monitoringand views on forestry inCambodia. 29. The tensions disrupted and delayed the expected development o f sector reforms and law enforcement systems, contributedto the breakdowno f collaboration between FA and Global Witness, and deepened the mistrust and lack o f confidence o f many NGOs and others inthe Government's commitment to reform. In April 2002, the local director o f the Global Witness program was physically attacked and beaten. The Bank and other donors expressed concern about the attack and the Council of Ministers issued a state- ment on M a y 10, 2002 condemning the assault. InDecember 2002, an incident occurred infront ofthe FAwhen forest-affected communities petitioned FAofficials for a meeting on the recently disclosed managementplans. The group was dispersed by police with re- ports o f use of physical force. Bank management conveyed its serious disapproval and received a detailed report from the Minister o f MAFF, which in addition addressed alle- gations against the FCMCPP Director (see Annex 1, Item 10). Inthe aftermath o f the De- cember incident and related allegations o f human rights abuses leveled by Global Wit- ness, the Government announcedthat it would no longer recognize Global Witness as an Independent Monitor and requested donor assistance inmaking alternative arrangements. InMarch2003, consultant selection beganunder the project and a commercialenterprise (SGS) was awarded a contract as Independent Monitor inNovember 2003. Despite these tensions, several NGOs have continued to work and collaborate closely with the FA (for example, WCS,CI, WildAid and Concern International). 30. Forest Cover Survey. To respond to concerns that hadbeen raised by NGOs and others about the possibility that changes in forest area and condition might have signifi- cantly undermined the management potential o f large areas o f forest, the Bank in 2002 urgedthe Government to undertake anupdate o f forest cover data as a contribution to the MTR. The FA proposed assigning this work to its Remote Sensing Unit with interna- tional technical assistance provided by the PHRD Grant. The Bank arranged for external reviews o f the TOR and proposed methodology and provided its non-objection. During the course o f this work, the consultant presented the study methodology to a meeting at- tended by NGOs and researchers at the Bank Cambodia Office and was available to NGOs for individual consultations. The study provided detailed maps o f forest cover, forest cover changes and tabular estimates of changes by major forest type for each con- cession and each park and protected area inCambodia. These were based on satellite im- agery backedby ground truthingand the study (DFW, 2003e) has now become a standard reference for forest cover in Cambodia (see Annex 1, Item 30). Reference to the Forest Cover Survey was made in the course o f political events and speeches during the 2003 national parliamentary election campaign, and complaints were registered with the Bank that candidates for office had inappropriately utilizedthe study findings. 3 1. IFSR. The TWG initiated a multi-donor sponsored Independent Forest Sector Review (IFSR) in March 2003. The purpose o f the IFSR was to provide a fresh look at the entire forestry sector, and was to have evaluated the FCMCPP and reviewedthe draft SFMPs and ESIAs (the work on the SFMPs and ESIAs was not completed by the IFSR 12 Forestry Concession Management and Control Pilot Project team and was subsequently contracted with GFA Terra Systems in June-July 2004). The Bank's contribution to the IFSR included participation in planning and discussions with the Government, and fees for the team leader from the Bank budget, but the IFSR was managed independently of the Bank by the TWG. The IFSRteam delivered its report in April 2004 and it has since been publishedon the Internet (http://m.cambodia-forest- sector.net/). This 800-page report made a large number o f recommendations, including some with a direct bearing on the FCMCPP. One o f the IFSR recommendations was to close the forest concession systemand to move toward a system of local government con- trol over forest resources decision making, referred to as "Partnership Forestry" by the IFSRauthors. 32. A compendium of public comments on the IFSR was distributedto stakeholders by F A 0 inAugust 2004. The Bank issuedits public comments on the IFSR'reportinOc- tober 2004 and these were also distributedby FAO. The Bank's comments on the IFSR noted that it provided apotential basis for a constructive dialogue on forestry in Cambo- dia. Unresolved aspects of the IFSR recommendations, including inconsistencies inpro- posals for the concession system and the lack o f consideration for legal and contractual risks, were outlined in the Bank's comments. The Bank provided observations on the "Partnership Forestry" concept o f the IFSR and noted issues in need of hrther policy analysis and development, including allocation o f land to protected areas and other uses, community forestry policy, other mechanisms for public timber sales, forest law en- forcement and administrative arrangements for the sector. 33. SFMPBSIA Submission and Disclosure. At the core of the project has been Government's establishment o f a systemto review and manage concessionaireproposals, the first ina sequence ofwhich would be the SFMPs/ESIAs. Various parts o fthe Request deal with qualitative aspects of those plans and the process by which they are reviewed and disclosed. Under Cambodian regulations, concessionaires are requiredto prepare and submit SFMPs and ESIAs for review, consideration and approval by FA, MAFF and MOE. A target date o f September 2001 for submission by the concessionaires was not met; the Government extended the deadline to September 2002, and allowed logging to continue inthe fall of 2001. The Bank considered the extension o f the date for plan sub- mission reasonable, in view o f delays in the selection o f technical assistance under the project, but conveyed its written concerns to the Government regarding the continued logging (see also Annex 1, footnote 2). A Bank mission inNovember-December 2001 reachedagreement with the Government on the Prakas suspending logging that was sub- sequently issuedinDecember2001. 34. Following some resistance by the Government (see Annex 1, Item22), the draft SFMPs and ESIAs of the concessionmanagement plans prepared by the concessionaires were madepublic inNovember 2002 with provision for a limited 19-day period o f public comment, The Bank made its Public Information Center in Phnom Penh available as a supplementary site for the disclosure o f the SFMPs and the ESIAs both for convenience and because it was considered less intimidating than the FA building. The Bank moni- tored distribution of copies to Provincial and Commune Offices inthe concerned conces- sions and found that the F A had distributed Khmer versions o f the plans and a letter o f explanation specifically allowing unlimited disclosure in each affected commune. The 13 Cambodia manner o f the FA presentation o f its disclosure plans, the short period set for public comment and brief delays in the availability o f copies at the Public Information Center (PIC, see Annex 1, Item22), aggravated tensions between NGOs and the FA (see paras. 28-29 above). Together with the announcement regarding the public comment period, the FA also announced that it was dropping requirements for preparation o f medium-term, compartment-level plans that were to be the next level inthe planning sequence. Follow- ing several exchanges between the Bank and the Government as well as interventions by NGOs, the period o f comment was eventually extended to January 31, 2003, and the compartment-level planrequirement reinstated. 35. In2003, theFCMCPP concluded its first technical reviews ofthe concessionaires' SFMPs and ESIAs and solicited comments from the TWG. The first two reviews recom- mended rejection o f the two respective concessionaire proposals, and the methodology and conclusions were endorsed by the TWG. Although the TWG originally undertook to review all SFMP and ESIA submissions, this did not materialize. The TWG then in- cluded reviews of SFMPs and ESIAs inthe TOR o f the IFSR in2003-2004 but these re- views also didnot occur. By mid-year 2004, the FA TRT had completed its reviews o f all SFMP and ESIA submissions. 36. The Bank, in association with TWG, contracted GFA Terra as an independent consultant to consider the TRT reviews o f the six concession plans that were recom- mended to advance to the compartment planning level. GFA provided detailed reviews on two concessions and suggested significant additional work inboth cases. Further in- dependent reviews are proposed for the other four concessions; negotiations with con- sultants and the TWG are pending. The Bank has not commented independently on the six concessionplans or the TRT reviews and the Government has withheld action pend- ing TWG and Bank comments. No concession operations have been approved, and con- cessionaires have expressed uncertainty about proceeding with hrther planning or con- sultations. IV. SPECIALISSUES AND LESSONSLEARNED OVERVIEW 37. In response to the Request, the Bank has meticulously analyzed the claims and reviewed its work on the project. The basic premise o f the Request is that the project con- cept was flawed because o f the emphasis on concessions. Management maintains that the choice o f working for gradual reform o f the system was the most appropriate at the time. I t s strategy was widely shared by knowledgeable observers and forest policy specialists, and was publicly discussed at the time o f approval. It grew logically from the work o f other agencies andwas built on dialogue with the Government. 38. The Requesters call into question the Bank's compliance with eight o f its policies and procedures-OP 4.01, OP 4.04, OD 4.20, OP 4.36, BP 8.40, OPN 11.03, OD/OP 13.05 and BP 17.50. Management believes that the detailed analysis undertaken inAnnex 1 demonstrates that the Bank is in compliance with all o f the policies and procedures 14 Forestry ConcessionManagementand Control Pilot Project noted above, with the exception o f some processing and documentation provisions of OP 4.01 and OD 4.20. 39. Under OP 4.01, the project was rated "By'and emphasis was placed on improved planning processes and assessments because: (i) the concession system was already fully defined and would only be reduced in area by the proposed project and ongoing policy work (under the SAC); (ii) social and environmental risks and mitigation needs were an- ticipated within the background studies (which were publicly available); and (iii) the pro- ject would not involve physical works. However, no Environmental Assessment (EA) was undertaken prior to appraisal (see Annex 1, Items 5-6). Neither was an Indigenous Peoples Development Plan (IPDP) prepared (see Annex 1, Items 12-13), in accordance with OD 4.20. To have complied fully with the policies, the Bank shouldhave requested more explicit documentation from the Government and providedmore extensive explana- tion in the PAD. Local-level consultations on the proposed project concept should have beenheld at selected concession locations. 40. Management considers that the lack o f full compliance with certain o f its policies has not had a material effect on the project nor has it led to harm or potential future harm to people livinginproject affected areas. 41. The Requesters m h e r suggest that the Bank: 0 Acknowledge the damage that FCMCPP stands to cause toforest communities in Cambodia. Inresponse, Management notes that the Bank has helped to establish within Government the capacity to put inplace regulations andprocedures to pre- vent damage to the interests o f forest-dependent communities; 0 Publicly refute theproject's "endorsement" of six logging companies. The Bank i s well aware o f the deficiencies in the plans o f the six logging concessions and has refrained from "endorsing" them or "recommending [their] approval." En- dorsement and recommendation are the sole purview o f the FA and not o f the Bank; 0 Write off the debt that Cambodian citizens have incurred through the LIL. The Government is obliged to repay the IDA concessional Credit under the Develop- ment Credit Agreement. Inaddition, debt write o f f i s not undertaken for individ- ual projects or project specific reasons but because o f country economic circum- stances; and 0 Undertake a wide-ranging review of World Bank interventions concerning for- estry and other extractive industries, as well as include timber in the Extractive Industries Transparency Initiative. Because an Inspection Panel case is project- specific, such policy-level issues are not addressed ina Management Response. Cambodia SPECIALISSUES 42. The following paragraphs discuss some o f the special issues encountered in deal- ing with the challenging and difficult governance setting o f a post-conflict country such as Cambodia. The Bank recognized from the outset that there would be no easy solutions to the problems inthe forest sector. It would be inaccurate and unfair to attribute to the Bank the problems that persisted or ensued in the sector. Management believes that the Bank adopted a responsible approach, consistent with its evolving forest policies and strategies. Admittedly, the Bank faced a very complex environment and may have fallen short inrecognizing or gauging some of these multiple challenges, especially inthe con- text o f a small LIL. This situation cannot, however, be interpretedas indifference to the goal o f promoting the sustainable development o f forests. In fact, hlanagement believes that the Bank's intervention likely led to significantly better overall outcomes in the Cambodian forest sector than ifthe Bank hadbeenabsent. BankApproachto ForestryIssues 43. Management wishes to highlight the responsible approach that the Bank adopted, consistent with the 1993 Forestry Policy, which was applicable to the project; the 1991 Forest Sector Policy Paper; and the insights that the project derived from the evolving new Forest Strategy during 1999-2000. The Forest Sector Policy Paper (1991)recognized the role o f forestry inpoverty reduction. This paper, which constituted what today's Bank terminology calls a forest strategy (OED, 2000), emphasized preservation o f intact forest areas and included a Bank commitment not to finance commercial logging in primary moist tropical forests. The broad goals o f the 1991 strategy were to prevent or signifi- cantly reduce deforestation and to stimulate plantations and creation o f additional forest resources. OP 4.36 on Forestry reflected the policy content o fthe 1991paper. 44. During 1999-2000, while the FCMCPP was being prepared, OED undertook a review of the 1991 strategy and the 1993 policy. OED found that implementation had fallen short of its objectives and resulted in a "chilling effect" on Bank support for for- estry sector activities and that lending for self-standing forestry sector operations that tra- ditionally dealt with key forest policy and management sector issues had stagnated. Among many recommendations, OED advised that the Bank should "address the risky and controversial issues o f the forest sector." Inparticular, OED stated that "Illegal log- laws and regulations.. . helping Bank borrowers improve, implement, and enforce exist- gingneeds to bereducedby actively promotingimprovedgovernance and enforcement of ing laws and regulations." To do so "will also require that national stakeholders (espe- cially civil society and the private sector) demand, implement, and monitor improved governance practices." It was in this context that the Bank appraised and approved the FCMCCP. 45. Subsequent to the.OED review, the Bank conducted a two-year process o f analy- sis and consultation resulting in a revised Forest Strategy. This Strategy mandates active Bank engagement in the sector to promote three equally important and interdependent objectives-harnessing the potential of forests to reduce poverty; integrating forests in sustainable economic development; and protecting the vital local and global environ- 16 Forestry ConcessionManagementand Control Pilot Project mental services and values providedby forests. The Strategy identified, as a priority, the need to address illegal logging and corruption and reform forest concession policies. Concerning concessions, the Strategy committed the Bank to promote use o f regulatory fi-ameworks for timber concessions to enhance the contribution o f forests to economic and social development as well as environmental protection. The strategy also committed the Bank to encourage governments to engage independent third-party certification bod- ies inperformance-based monitoring o f forest harvesting and management operations. 46. Although the FCMCPP was preparedunder the 1993 OP on Forestry, it benefited from the insights of the OED review and the paradigm shift that emerged inthe new For- est Strategy. The project reflects the emphasis on governance and forestry reform in the new Strategy. Weaknesses inCambodian GovernanceInstitutions 47. InCambodia, similar to other poor, post-conflict countries, natural resourceshave been distributed to appease warring factions, "purchase" political support, and finance a patronage-basedpolitical party system. As a result, the cessation of civil war, while un- doubtedly the most important priority o f Cambodian citizens, has not providedthe liveli- hood security neededby the rural poor. Rather, corruption and the non-transparent alloca- tion of natural resource exploitation rights have exacerbated their problems and their access to the natural resources upon which they depend for a significant proportion o f their consumption and income-land, forests and fish in particular-has been diminish- ing. Competition for access to resources has continued to grow, intensified by a current population growth rate o f 2.5 percent per year, and a dearth of alternative employment opportunities for the rural poor, or investment options for the wealthy, due to an adverse business environment affected bothby briberypayments and excessiveregulation. 48. Cambodia's tragic, recent history and the complexity of governance issues have requiredspecial vigilance, responsibility and continuous learning on the part o f the Bank and other donors regarding issues o f corruption and reform. Given the combination of tremendous needto provide basic services to Cambodia's poor and the acknowledgement that rebuilding Cambodia's institutions would take time, donors have historically recog- nized Cambodia's governance shortcomings while tolerating limitedprogress inaddress- ing these issues. Hence, strongly critical assessments of Cambodia's governance per- formance have, until recently, generally not been accompanied by sanctions in the form of reduced aid flows, leading to general questioning o f donor commitment to governance reforms by civil society groups. More recently, multilateral donors, including IDA, have reduced their finding based largely on governance assessments, although this has been compensatedfor by increasedfhding from bilateral agencies, 49. The 2000 to 2003 CAS statedthat "Cambodia's institutions o f governance are still weak, This issue overshadows almost all of Cambodia's development problems." The CAS set out to build "the foundations for sustainable development and poverty reduc- tion" as the Bank's main objective in Cambodia (p. v). The Bank's program focused on institutional strengthening through support for anti-corruption studies, public sector re- form, legal andjudicial reform, and improvedlandmanagement and administration, to be 17 Cambodia supported through analytical work, capacity building assistance, investment and adjust- ment lending. The CAS program included three LILs, including the FCMCPP. While the foundations o f the last CAS-governance, service delivery and investment climate- were appropriate and remain so today, good delivery o f the program did not lead to the broader change in outcomes that was anticipated at the outset. Duringthe CAS period, a number o f output targets were achieved through this approach, but the failure to address cross-cutting issues such as expenditure management and public administration reform in a more comprehensive manner resulted in "islands" o f improvement with very limited impact on the Government's general approachto service delivery. 50. Not surprisingly, IDA'Sprojects faced particular problems in sectors such as for- estry, in which the incentives for resistingreform were pronounced. Based inpart on the experience gained with forestry reform, the forthcoming 2005 to 2008 CAS will focus on a limited number o f critical governance reforms3stemming from consensus amongst all stakeholders on required reform actions that are both critical and feasible in a limited time period. As a result, Bank support will include relatively more analytical work inthe context o f technical working groups to develop and maintain agreed sectoral reform pro- grams, supported by sectoral programs and proposed Poverty Reduction Support Credits (PRSC). ForestryManagementInstruments 51. Over the last ten years, the Bank has put considerable effort into its work on for- estry, which has brought into better focus the diverse values o f forests, the need for ro- bust systems o f governance, and the participation o f communities and the private sector as critical ingredients for environmentally sustainable and equitable resource develop- ment. Cambodia has been a particularly challenging environment in which to advance such reforms. The perception inthe Request that the Bank i s indifferent, or even hostile, to development o f forests for uses other than commercial timber is contradicted by the Bank's actions and statements. The Bank has made efforts to work with the Government to ensure a suspension o f logging, promote disclosure and transparency, and formalize a regulatory process to anticipate and mitigate risks o f future harm. 52. The Bank has employed a three-pronged strategy inCambodian forestry issues to: (i) theGovernmentinreducingtheconcessionsystem; (ii) instrengthening assist assist the regulatory system for the remaining concession system; and (iii) contribute directly to the development of alternative forest management arrangements. 53. Reducing the ConcessionSystem. At its peak, the concession system covered 6.4 million hectares and consisted o f large, primarily internationally owned and operated holdings linked with capital intensive wood processing investments. The intemational donor community urgedthe Government to address serious deficiencies inthe system and pursue reforms. The Bank, together with ADB, encouraged the Government to pursue a The CAS will focus on the private investment climate, public financial management, decentralization and management of land and forest resources. 18 Forestry ConcessionManagement and Control Pilot Project case-by-case restructuring of concessions to achieve a higher level o f sustainability (see Annex 1, Item 3). As shown on Map 1, a dramatic reshaping o f the claims on forest re- sources inCambodia has resulted, with the area covered by concessions recommended by the TRT to go forward now totaling just over one million hectares. N o other country has ever, in percentage terms, so radically reduced the claims o f the commercial private sec- tor over forest lands in so short a time as has Cambodia over the last ten years. While many concession areas that were cancelled, abandoned or not allowedto go forward were o f limited commercial value, others had both commercial and other forest values, making the reductions important achievements and genuine contributions to public welfare. Much o f this reduction inconcession area is clearly attributable to the FCMCPP. 54. Strengthening the Concession Regulatory System. While concession systems alleviate some forest management burdens on the public sector, because resource owner- ship is unchanged, the ultimate concern and responsibility for sustainable management remains with the public sector. The FCMCPP was designed to help Cambodia move to- wards establishing a credible regulatory framework. A three level planning framework (strategic, compartment, annual) helped to provide the tactical focus for the FCMCPP. While the full range o f skills needed by the FA could not be developed under a single project, strategic level planning requirements, for which the requisite skills were largely inplace inthe FA, allowedfor an assessment ofthe physical feasibility o f long-term op- erations, and led to a large number o f concessions being recommended for closure. 55. While much remains to be done, the project has raised the quality o f the conces- sion regulatory process to a new level. The inventory claims o f concessionaires have for the first time been subjected to field verification by the FA. The FA has had a cadre o f staff trained and oriented to the role and fhction o f an independent regulatory agency. The FA has the basic physical infrastructure, mobility and communications needed to implement its mandated responsibilities. There are, and have been genuine doubts- which the Bank has shared with the Government and expressed openly-about the poten- tial for conflicts of interest, and the breadth and depth of commitment to the use o f the FA'Sregulatory potential. 56. The Bank's supervision o f the FCMCPP was informed and balanced inthe face o f these uncertainties. The Bank responded promptly and effectively to the improper re- sumption o f logging in late 2001 and to log transport in 2002. The Bank made its office available to help ensure the distribution o f draft SFMPs and ESIAs and has repeatedly taken responsibility for shortcomings inthat process. The Bank joined with other donors in securing from the Government a reinstatement of the compartment planning require- ment. These efforts, however, do not remove uncertainty about the intentions o f some authorities inthe Government, or the risks that special interests will seek to, and possibly succeed, inevading the rules, regulations and safeguards that have beenput inplace. 57. Given the complexity o f many issues in the project, prioritizations were required. Therefore, efforts to assess the social aspects o f concessions were deferred until the po- tential concession area was reduced. At the time, other critical actions such as forest in- ventory, mapping, and yield calculations were considered to be more immediate priori- 19 Cambodia ties. The suspension of logging on January 1, 2002 provided a level o f confidence that harmresultingfrom uncontrolled logging would not occur. 58. Another critical development was the disclosure o f draft SFMPs and ESIAs pre- pared by the concessionairesinNovember 2002. It is unfortunate that the opportunity for public comment and debate, a genuine landmark arid potentially a watershed in Cambo- dian forestry, has not been idly realized. Nevertheless, the public scrutiny that disclosure and transparency generated has contributed to the continued Government adherence to the suspension o f logging andpursuitofthe planning process. 59. Alternative Forest Management Systems. Prior to the project, the most signifi- cant alternative utilization o f forest resources was deforestation and conversion. Conver- sion occurs through land development schemes and through spontaneous settlement by individuals, often landless and poor. Land development projects, unlike concession log- ging, are designed to completely remove the natural forest and leave no residual sources o f non-timber forest products. At the time o f project preparation and approval, as indi- cated above, very limited work had been done on alternative systems for potential devel- opment, such as community forestry and protected areas systems. FAO's Community- Based Management o f Natural Resources Project has been the largest effort related to community forestry, and as of 2004 covered around 100,000 hectares. Others, such as the German GTZ, and NGOs, such as Concern International, have pursued pilot work on community forestry. The 2004 International Tropical Timber Organization (ITTO) diag- nostic mission (see Annex 1, Item37) found that "community forest management will not bepossible at the scale requiredto dealwith extensive forest rich landscapes - although it should be developed in appropriate locations within these landscapes." In addition, the Bank has financed, through a Credit and GEF Grant totaling about USD4.7 million, the Biodiversity and Protected Areas Management Project (Credit No. 3320-WTF023524- KH).This isthe largest biodiversityproject inCambodia bothinscaleandfbnding. 60. Inthe areas released from concessions, the Government has taken preliminary steps to institute new management arrangements. The Government has requested addi- tional technical assistance to prepare management plans for post-concession forest areas and has designated approximately one million hectares o f post-concession areas as pro- tected forest-the Central Cardamom (401,3 13 hectares), Mondulkiri (429,43 8 hectares), and PreahVihear (190,027 hectares) ProtectedForests. The Government i s beingassisted in the management, protection and development of these areas by international donors and NGOs, most prominently by WCS in Mondulkiri and C I in the Central Cardamom. The FCMCPP itself was modified in2003 to addresspost-concession management issues and has financed the FA'Scollaboration with WCS inMondulkiri. The Task Team i s also seeking grant resources to develop a participatory forest monitoring system and to pilot community forestry approaches following project closure. 61. The forest system research and modeling work funded by FCMCPP (FA, 2004d) provides the Government with new data on permanent sample plots, forest growth and log volume tables and other information that is essential to sustainable forest manage- mentthrough any institutional arrangement.The Forest Cover Survey (DFW, 2003e) is a similarly valuable contributionthat is applicable to a range o fmanagement arrangements. 20 Forestry Concession Management and Control Pilot Project The inventory information that is now available for cancelled as well as potentially ongo- ing concessions, and particularly the data from the FA validation studies by the TRT, are new contributions to the knowledge about Cambodia's forests that transcend their con- cession system application per se. 62. The introduction of the concept o f "social responsibility" into public policy to- ward commercial development o f natural resources, the demonstration o f a formal proc- ess for the review of concession plans, and the solicitation o f public comment on com- mercial activity on public lands, are models that could be extended to other state lands based on lessons learnedfrom the implementation o f the FCMCPP. 63. The project's approach to forest management systems has contributed to a number o f important improvements-formal adoption o f guidelines and codes o f practice for for- est management; regular public reporting on forest crime; effective control of anarchic logging in concession areas; and a sharp reduction in the area under forest concessions. Unfortunately, the process o f reform in the forestry sector has moved much more slowly than originally anticipated, raising doubts about the Government's commitment to the reform process and the sustainability o f sectoral impacts. Delays inthe preparation, proc- essing and review of forest management plans have left unanswered questions about con- cessionaires' potential performance under the new legal and regulatory regime even as the project nears its revisedClosing Date (June 30, 2005). LESSONSLEARNED 64. The Bank recognized from the outset that there would be no easy solutions and that many of the problems (corruption, lack o f transparency) were systemic and could not be addressed through a sectoral operation alone. To tackle the broader context, the Bank adopted and applied a range o f tools and approaches-SAC conditionality, joint prepara- tion with other donors o f a "Governance" CAS, analytic work, partnership with NGOs, public disclosure of information, and targeted work on land administration and tenure security. Within the forestry sector, and again in consultation with other donors, the Bank chose to address a focused and prioritized set o f issues-concession management, forest crime, legal systems development, biodiversity conservation, and community forestry. A numbero flessons emerge fromthis: 0 Because it does not intervene or take sides on existing investment contracts be- tween its member countries and the private sector, the Bank was limited to pro- moting gradual reform and to working largely within the existing system. I n ret- rospect, this constrained the Bank's options in the sector. 0 This project marked a first attempt to introduce the concept o f social responsibil- ity into the management o fpublic resourcesinCambodia. Project contributions to the legal framework, management guidelines, regulatory capacity, and disclosure o f information were all essential elements in moving toward "socially responsi- ble" forest management. Unfortunately, these elements in combination were not sufficient to address the underlying distrust associated with the concession sys- tem. One important lesson must be that inthe absence o f clear resolve on the part 21 Cambodia o f Government regulators, the Bank might have played a more proactive role in encouraging greater involvement of local communities at an earlier stage in the process to clarifi both opportunities and challenges inherent in the implementa- tion of the Government's proposed system. I n retrospect, many crucial issues might have been more effectively addressed at an earlier stage-overlapping claims on timberhesin trees, lack of effective concessionaire controls over sub- contractors, restriction of access to livelihood resources-lowering tensions and apprehensions on all side and speeding theprocess of reform. 0 Project implementation was slow and suggested a weak Government commitment to concession system reform. The Government's response to issues, including il- legal activity by some concessionaires, was at times weak and at other times more positive and encouraging. The Bank repeatedly raised concerns with the Govern- ment about its performance and level o f effort. Indifferent and, at times, techni- cally poor work by concessionaires was commonly viewed as part o f doing busi- ness in Cambodia. I n retrospect, the Bank could have more aggressively questioned the Government's commitment. It also could have been more outspo- ken regarding its concerns about the quality of submissions and aflawed disclo- sureprocess. 0 The quality and impact of consultations undertaken by concessionaires in the course o f their planpreparation was to have been one o f the dimensions by which plans were assessed. The responsibility o f the Government and the concession- aires for consultation related to concession developments neededto be more rig- orously examined and developed. The Government's understanding o f consulta- tion and informed consent needed strengthening; thus the PHRD Grant program was put in place to provide technical assistance in social aspects o f plan evalua- tion. Government pursuit of this work was slow, but i s now proceeding using Bank internal budget and under Bank supervision. I n retrospect, conditionalities in the legal agreement concerning social issues might have been appropriate. V. NEXTSTEPS 65. Management has reviewed the progress o f the project, its accomplishments and lessons learned. In light o f the limitedtime remaining prior to project completion, Man- agement proposes a dual track approach, one for actions to be taken before project clo- sure, andthe second, suggestedoptions over the longer term, once the project has closed. 66. ProposedActions during the Remaining Project Period. The Bank will focus on: 0 Supervising ongoing work to refine and field-test community consultation proce- dures, inorder to better address, inter alia, Indigenous Peoples issues; 0 Monitoring Borrower-implemented mitigation actions identifiedthrough consulta- tion; 22 Forestry ConcessionManagementand Control Pilot Project 0 Working inpartnership with the TWG to initiate the process o f facilitated consen- sus buildingcalled for by the IFSR; 0 Making resources available and seeking donor support to complete the review o f the remaining SFMPs and ESIAs; 0 Urging the Government to formalize forest management planning procedures for post-concession andnon-concessionareas; and 0 Seeking the Government's final determination on concessions recommended for closure by the TRT. 67. Options beyond the Project Period. Management i s considering options available to the Bank to continue work inthe forestry sector within the broader context o f natural resources management. Options include: 0 Mobilization o f grant support to pilot alternative forest management regimes (led by communities andor local government) and to facilitate a transition from an in- ternational monitor to a participatory system o f forest crime monitoring; 0 Application o f lessons learned in the forestry sector to the broader dialogue on landeconomic concession reforms; 0 Continued dialogue on forestry sector reform and natural resources management inoperations that follow fromthe governance CAS nowunder preparation; and 0 Exploration o fpartnershipswith other stakeholders includingthe TWG. 68. Options beyond Cambodia. Inthe ongoing development o f a forestry strategy for the Bank in East Asia, the Bank i s examining opportunities outside its usual lending and country analytic instruments on issues o f forest law enforcement and governance. It i s developing initiatives to address illegal logging and forest-based corruptionthrough Anti- Money-Laundering efforts, developing technical guidance on timber theft prevention, planning consultations on anti-corruption work focusing on forestry, and supporting fol- low-up to the Bali Declaration on Forest Law Enforcement and Governance. 69. Risks and Mitigation. The Bank recognizes the risks posed by the Cambodian forest concession management system and has consistently triedto mitigate the risks con- cessions pose to local communities and the environment throughout its work. This is why the Bank has promoted development o f a formal system for concession planning that in- cludes predictable opportunities for transparency and public input. The project has not been completely successful in achieving these objectives. There i s still a long way to go indeveloping greater predictability, confidence andtechnical quality inthe forest conces- sion system. Nevertheless, the Bank ensured that draft SFMPs were made available through its Cambodia office, has endeavored to bring social forestry expertise into the management o f the concession system, and commissioned independent consultants to re- view the assessments of concession plans prepared under the project. The Bank also has 23 Cambodia contributed to bringing about a reduction in the area exposed to concession operations from 6.4 million hectares to just over one million currently recommended by the TRT to go forward. Insummary, the Bank sought to help the Government ininstitutingmeaning- hlandeffectivecontrolsontheplanningandoperationsoftheremainingconcessions. 70. Ifimproperly planned anduncontrolled concession operations are allowed to re- sume, communities will indeed be at risk o f future harm. The Bank expects the Govem- ment to abide by its commitments to continue to require concessionaires to complete all the planning and consultation requirements of Cambodian law. Any operations that are allowed to proceed should be supervised by the Government working with local commu- nities and other stakeholders to provide increased transparency to hold concessionaires accountable for implementing their commitments to sustainable and socially responsible forestry practices. 71. Going forward, and based upon the lessons learned from the project, the Bank will continue its dialogue with the Government and explore options regarding naturalre- sources management issues, including forestry. VI. MANAGEMENT'SRESPONSE 72. The Requesters' claims, accompanied by Management's detailed responses, are providedinAnnex 1. 73. Management believes that the Bank has made every effort to apply its policies and procedures and to pursue concretely its mission statement inthe context o f the pro- ject. Management recognizes that the Bank was not in full compliance with processing and documentation provisions o f OP 4.01 and OD 4.20 during project preparation. The Bank did anticipate the social and environmental issues associated with the project, in- corporated processes to address these issues into the project and supervised the project appropriately. Any harm that may have come to the Requesters was, in the opinion o f Management, not in anyway attributable to the Bank project. Management believes that the Requesters' rights or interests have not been, nor will they be, directly and adversely affected by a failure of the Bank to implement its policies and procedures. 24 Forestry Concession Management and Control Pilot Project CL- ANNEX1 SMS P Project Basis. The Forest Concession 7-10 The Banks objective in Cambodia, as reflected in the February Management and Control Pilot Project`s 2000 CAS, was to help buildthe foundations for sustainable de- endorsement of the concessionsystem velopment and poverty reduction, in particular strengthening good stems from the point of departure set out in governance through a more efficient and accountable public ad- its projectobjective. World Bank staff took ministration.The LIL for the FCMCPP was conceived in this con- the view that the existing concessionsys- text, along with two other LILs, the Northeast Village Development tem was the most appropriate management Project; and the Biodiversityand Protected Areas Management regimefor Cambodia's forests and the pro- Project. The LlL did not seek to promote the existing concession ject was designed to demonstratethat it system. Rather, it sought to assist the Government to make the could be reformed. regulationof the forestry sector more effective and equitable. Fromthe outset the FCMCPP'ssuc- cess or failure has thus hinged closely The Government establishedthe forest concession system on the fate of forest concessionsys- with arrangements dating as early as 1994and some before. This tem; giving the Bank an unhealthily system, adopted without consultation with the Bank, carried with it strong stake in its preservation. a regulatory burden that the Government was ill-equippedto A more serious flaw is the way that the carry. As the international community's engagement in the for- Bank effectively linked successful pro- estry sector grew, and as debate developed within Cambodia, the ject outcomes to the continuedtenure needfor a transparent and accountable system to control and of the incumbent concessionaires....If managethe concession system became apparent. Recognition of the Bank wanted to demonstratea the responsibilitiesto regulate the system was developing through functioning concession system and studies supported under the Banks TA Project and ADB-financed thereby realise its vision and project work (see Item 2). The Bank, after considering that other donors objectives,it needed to ensure the con- were not taking on the challenge posed by the concession sys- tinued tenure of the incumbent conces- tem, decided to assist the Government in reforming the system. sionaires. As discussed in the FCMCPP PAD (E. Summary Project Analysis, 4.a.; Sustainability and Risks), conflicts of interest, capacity con- Followingthe logic of its pro- straints, and the public sector's lack of familiarity with a fair and concessionagenda, the Bank per- well-governed system were among the obstacles that the Bank ceivedthe development of alternative managementregimes as a threat. This expected. Nevertheless, at the time of project preparation and approval,the Bank, other donors and NGOs (such as, WWF, sentiment is expressed in an internal TFT, WCS, FAO, UNDP and ADS) were optimistic about working memofrom the FCMCPPtask man- constructivelywith concessionaires, as indicated in various corre- agerto the Cambodia country director spondence and reports. about proposals to turn some of the concessionsinto protectedareas for The FCMCPP had learning and innovation goals (PAD, p. 4) conservation:"This area is currently that aimed to generate better understanding of the following is- under concession and the financial sues, which go beyond the concession system per se: (i) how package offered to the Government (by increased revenue flows, professionalism in the FA and local conservationorganisations)could re- benefitsfrom socially responsible operations would help over- sult in difficulties coordinating activities come resistance to reforms; (ii) how industry commitments to sus- and projects,not to mention maintain- tainableforestry could be made durable and meaningful in the ing fhe coherenceof the concession face of higher costs and an increased regulatory burden; and (iii) system reform program." (emphasis how an effective regulatory mission could be adopted by the FA in added)....Indeed,the prevailing bias the face of corruption, low public sector wages and difficult work- towards the concessionsystemwas ing conditions. The project also addressed illegal logging and highlightedin a World Bank internal capacity building concerns. `Quality EnhancementReview'of the Under the project, nofunds are provided to forest conces- FCMCPPin 2003, which acknowl- sionaires. Funds from the IDA credit are directed to the FA with edgedthat "The Bank has not been the aim of reforming the regulatory system. Project funding seeks fully preparedto discuss alternatives to build capacities within the Government. By the time of the ' Page numbersare from the Global Witness 2005 report, "World Bank Forest Concession Management and Control Pro- ject in Cambodia,"prepared for the NGO Forum on Cambodia and submitted as a supporting document to the Request for Inspection. ' 25 Cambodia outside the concession model." Credit Closing Date in June 2005, roughly one-quarter of total The World Bank decided to base its forestry project costs will have been directed to forest crime monitoring project on the existing concessionsystem and reporting, includingthe costs of independent monitoring and and concessionaires in the face of abun- physicalequipment (computers, boats, etc.) that will be used by dant evidence that they were damaging the the FA in the control of illegal logging. A substantial share (about , interests of Cambodia's citizens, particularly 20 percent)of the project'stechnical assistance addresses opera- forest-dependent communities. tional forestry research matters and other work directly relevant to forest management and forestry institutions. The physicalinfra- structure, communications and other equipment procuredby the project is adaptable to any forest management arrangements adopted in Cambodia. The quate about a preoccupation with concessions is taken out of context. The statement was made in the context of the for- estry dialogue as a whole, including community forestry and pro- tected areas, and was not intended to convey limitationsof the Bank`s work or the exclusion of alternatives. In correspondence with the NGO Forum, the Bank wrote: "Some areas may simply needto be off limits to concessionaires as special management areas within concessions." Concerning the QER, this Bank review was project-specific and,thus, did not consider the full range of other projectwork in Cambodia. Nevertheless, since the QER, the Bank has made additionalefforts, within the project and in other aspects of the policy dialogue, to broaden its scope in the forestry sector, includ- ing community forestry. Prior to the QER and after, alternatives to concessionswere not ignored, as reflected in the conduct of su- - pervision and the Bank's ongoing policy dialogue in the forestry sector. ~ ~~ 2. Status of the Forest. [The World Bank] 10- The project was based on extensive prior studies (by Fortech, conducted no thorough assessmentof the 11, ARD, DAI,White and Case and the ADB-commissioned review - values and possible alternative uses of 16-17 hereinafterthe Fraser Thomas study), as well as Bank supervi- Cambodia'sforests (despite being one of sion of the TA Project and the BanWFAOlUNDPForest Policy the few institutionswith the capacityto do Assessment These all recognized misallocation of forest and so). Neitherdid it require any reworking of other land to concessions and contributed to the logic of Bank the existing concession boundariesas a funding of gradual reform. As indicated elsewhere in the Re- pre-conditionfor, or even a component of, sponse (see Items 1and 5), the project's process orientation was its efforts to reform the concessionsystem. intendedto provide a practical context for reassessment of land [Jlust months beforethe FCMCPPgot and forest use, based on site-specific data. The Bank made clear underway, an ADB-commissioned review of its view that credible land-use evaluation, planning and allocation the concessionsystem concludedthat it processfor Cambodia would have been desirable prior to major constituted a "total system failure." Notwith- land allocations. No legal basis for such an undertaking existed standing the conclusions of the ADB re- until recently, nor is there adequate resource information.With view, the World Bank proceededwith the concessions already in place in 1997,there was an immediate developmentof a project premised on the need to improve resource use and protection on those areas. validity of the same failed system and op- Integralto any sub-regional natural forest management planning erators. It made no attempt to challenge (Le., SFMPs) is a forest zoning process, in order to eliminate from such fundamentalflaws as the location and harvesting those lands needed for watershed protection, biodiver- boundariesof the concessions, nor did it sity conservation and community resource conservation. questionthe legitimacy of the companies.... Concerningconcessions'problematic loca- The quote from the Fraser Thomas study, "Cambodian For- tion and boundaries,Bank staff have ar- est Concession Review Report" (2000a), is taken out of context gued that with the concessions already and does not reflect the study's overall recommendationto pursue allocated,the Bank was not in a position to further planning and restructuring efforts. A fuller quote is: "It can- demand any revisions. not be overstressed that no one entity is to blame for the current crisis. It is the result of a total system failure; resulting from greed, corruption, incompetence and illegal acts that were so widespreac and pervasive as to defy the assignment of primary blame. Re- sponsibilityfor the debacle must be shared by national and pro- I I - 26 Forestry ConcessionManagementand Control Pilot Project - - Page No.` ~ vincial politicians,government staff, the police and military, con- cessionaires,private businessesand individuals, and by individu- als and organizations in the neighboring countries of Thailand, Laos and Vietnam" (p. 25). In fact, the report concluded "that DFW [now FA] should acceleratethe effectiveness of the World Bank supported LIL project,so that the process of restructuring can be monitored and guided" (p. 39). Problems posed by concession boundaries, as well as other constraints raised by the terms of concession contracts, were recognizedearly in the process. Setting aside areas for commu- nity use and conservationfrom within concessions is one of the objectivesof the SFMPESIA strategic level plannipg process (seeAnnex 6). Government,through the support of the FCMCPP, is responsiblefor regulationand oversight of this process.The Bank has not been satisfied with the outcomes of this process to date. See also Items 33 and 36. Groundsfor Cancellation of Conces- 17-18 The Bank has raised with the Government on numerous occa- sionaire Contracts. Bank staff claim that sions its expectationsthat the Government should protect the the Government could not unilaterallycan- public interest by cancelingconcession contracts that were not cel any of the concessionaires'contracts operating according to contractual provisions.2While cancella- without being subject to lawsuits by the tions are the Government`s responsibility, much of the information companies. In makingthese assertions,the and standard-setting arising from Bank projects has influenced Bank invariably refers to a legalanalysis the cancellations.The SFMP review indicated that one conces- that it commissioned in the late 1990s.The sionaire never submitteda plan and thus will probably be stopped Bank has consistently declined to publish after a reasonable grace period and two had their management the lawyers' assessment, making its pro- plans rejected and are now dormant. As of now, only six remain in fessed rationalefor opposing cancellation the review process.There is, therefore, an indication that in- hard to verify. In either event, the Bank`s creased standards and performance expectations are having the position is unconvincingfor two main rea- effect of eliminatingthose operators who are either incapable of sons. One is the substantialbody of evi- or uninterested in improvingtheir forest management perform- dence already assembled concerningthe ance. companies' contractual breaches and illegal activities.This in itself providedstrong The Bank does not intervene nor take sides on existing in- groundsfor terminating most if not all the vestment contracts between its member countries and the private concessioncontracts. The other is the sector. When the Bank has reason to believe that contracts may Cambodian government'swillingness,since have negative impacts on the development of its member country, beforethe start of the FCMCPP and subse- the Bank in general advises such member to undertake a full re- quently, to cancel the investmentagree- view of its contractual relationships and the performance of its ments of a large numberof concession- contractual partners and to seek legal and technical advices from aires. Not one of these cancellations has reputable experts and firms. encountereda legal challenge from the Through the Forest Policy Assessment (BanWUNDPIFAO, companies concerned. 1996),the Bank encouragedthe Government to seek legal advice Somewhat paradoxically,the Bank has on its options for an estimated 30 concessions (6.4 million hec- consistently tried to take the credit for the tares) already in place. The report also stated that: "the Govern- government'sterminationof concession ment should also require concessionaires to satisfy [their] com- contracts...The claimthat there are now mitments or should declare concessions in default" (p. ii). only six concessions left is almost certainly inaccurate-the government has an- Under the TA Project, a legal study was undertaken in 1997 nouncedthe cancellationof only two of the on behalf of the Government by an international law firm. The 18 that remainedat the start of 2003. On study was commissioned by the Government and it was not the * For example, "Continuationof agreements with concessionaires that have seriously abused the forest resource, and especially those that have blatantly violated the Prakas suspending operations, is especially troubling" (Rural Develop- ment Sector Director to Director FA,June I O , 2002, N.B. the GAT concession was cancelled June 16, 2002); "W]e do also believe that the Governmentneeds to act definitively with respect to concessionaires that are in clear and persistent noncomplianceand which are unlikely to be viable long-termparfners."(Country Director to Minister, MAFF, December, 12,2001,N.B. Prakas suspending operations issued December 16, 2001). 27 Cambodia - -Page NO? the question of how the number was re- Bank`s role to disclose it. Requeststo the Bank for the document duced [from forty in August 20001, the im- were referredto the Government. However, sections of the study plied role of the Bank and the deliberative have since been widely disseminated.The study resulted in a quality of the process are not substanti- ated...There is in fact no evidencethat the detailedcritique and guidancefor a reform process. It described the legal context for concessionsas riddled with ambiguities and lations...The real grounds for termination Bank has had a role in concessioncancel- inconsistencies,identified shortcomings in the concessioncon- tract~,~and examined possiblejustifications for contestingtheir have been, in most cases, becausethe validity. It noted that the success of challenges was highly uncer- company had no more timber in its conces- tain and would pose a variety of risks. The study concludedthat sion, was bankrupt or was associatedwith the Government could exercise its rights to terminate contracts on opponents of the government. The Bank the basisof well established defaults, but could also seek to ami- continuesto advance conflicting arguments cably resolve disputes with concessionaires on the basis of volun- on the issue, however. On the one hand, tary restructuring. Bank staff advise the government against terminationof concessions becauseof the The Government did cancel concessions on the basis of its supposed legal risk. On the other...the Bank own assessments beginning in 1997 and further in 1999 when expects to be congratulated when the Gov- twelve concessions covering two million hectares were terminated ernment ignores its advice and terminates (FraserThomas, 2000a, p. 14).This study noted that the FA did concessionsanyway. not effectively respond to the management responsibilities implied by the cancellation of these areas. At the 1999 CG meeting in Tokyo, the Bank reflected on the partial progress of the Govern- ment, referring to the fact that cancellations were concentrated in low potential areas and concessionswith higher commercialvalue meritedfurther review and action. Concerningthe Bank`s position on cancellation of conces- sions, the Chief Counselfor East Asia concluded: "the review of the concessions should carefully avoid encour- aging or facilitating breach of existing contracts, as this has been alleged in some situations to amount to `tortious inter- ference' by the Bank in ongoing contracts. For this reason, any actions arising from such reviews should be taken con- sistent with existing contractual arrangements." (Chief Coun- sel for East Asia to TTL, SAC, 1/24/2000.) This approach was reflected in the formulation of the SAC program regarding concession management (see Letter of Devel- opment Policy). The FraserThomas study identified performance deficiencies by nearly all active concessionaires and this specifically led to cancellation of three. It proposed that with concerted effort con- cessionaires and the Government could come to closure on ac- ceptable programs before the beginning of the 2001-2002 logging of the World Bank supported LIL project . season, and encouraged the FA to "accelerate the effectiveness .. sothat the process of restructuringcan be monitored and guided" (p. 39). In response to criticisms raised at that time by Global Wit- ness, the ADB explained that unilateral cancellations would likely result in legal action by concessionaires and that the Govern- ment's liabilities could be substantial (see Letter from Senior Sec- tor Specialist, ADB to Global Witness, March 9, 2000). -comoliance Fraser Thomas undertook a legal review of the issue of non- and Dotentialconcession cancellation. The advice Strictly,concessionsare createdby two interlinkedcontractsbetweenthe Governmentand the concessionaire:an In- vestmentAgreementaddressing establishment of wood processing capacity;and a Timber License Agreement providing termsof access to forest areas for harvesting and management. 28 Forestry ConcessionManagementand Control Pilot Project - -Page No.' providedwas that the only valid groundsfor canceling conces- sions are: first, significant non-compliancewith the terms and conditions of the concession InvestmentAgreements and Forest Timber Licenses; and second, serious and deliberate illegal acts. It found that in respect of compliancewith contractual conditions: The two contractual documentswere poorly drafted and, be- cause they were not founded in regulatory law, were not di- rectly enforceable by the Government.As civil contracts, the only avenue for an aggrieved party would be civil action, which was notjudged a useful vehicle for enforcement or cancellation. The Government administration of these contracts split re- sponsibilities between six government departments with no clear roles and responsibilities;record keeping and filing was poor, and instructions were either non-existent or contradic- tory. The administration of these contracts was, therefore, so subject to challenge that, even if non-compliance were dem- onstrated, the Governmentwould share culpability. Fraser Thomas concluded that cancellation of concessions because of contractual non-compliancewould be very difficult, would have to be pursuedin civil court, and would almost cer- tainly involve counter-suits. Lack of pre-conditions for Bank en- 18 LILS are loans of USD 5 million or lessfinancing small, experi- gagement. As one of Cambodia's most mental, risky andlor time-sensitive projects in order to pilot prom- important donors, the World Bank has sub- ising initiatives and build consensus around them, or experiment stantial political leverage over the Cambo- with an approach in order to develop locally based models prior to dian government, which it could have used a larger-scale intervention. LlLs are predominantly used in sectors to demand pre-conditions for its assistance or situations in which behavioral change and stakeholder attitudes in reformingthe forest sector. More impor- are critical to progress, and where `prescriptive' approaches might tantly, the Bank was in no way compelledto not work well. put its name to Cambodia'sforest conces- sion system. If it genuinely had no scope to Bank policy dialogue was conducted through the 2000 SAC, demand pre-conditionsfor its engagement, which contained conditions regarding a broad range of forestry then it should have declined to lend its en- issues raised by earlier Bank-supported analysis and others -see dorsementto an un-reformable system and response to Item 2. The FCMCPP was not considered as effec- un-reformableoperators. Instead,it chose tive leverage in view of its small size. to endorse the failed system and rogue Instead, leverage on the forestry sector relied upon the sepa- concessionaires as the basis for future for- rate SAC conditionality, which was aimed at authorities in central est management in Cambodia.That this economic agencies. This proved to be a useful strategy through- would increase the risks of further material out project implementation and throughout the SAC period, be- harm to forest-dependent communitieswas cause it enabled the Bank to carry out a more intensive and clear. - higher level dialogue than would otherwise have been possible. OP 4.01 Environmental Assessment - - Categorization. The World Bank errone- 58-60 Management believes that the decision to classify this project as ously categorizedthe FCMCPP project as a "6" was correct and appropriate. The Bank`s environmental Category 3, despite the fact that the con- classification of projects depends on the type, location, sensitivity cession system and companies that the and scale of the project as well as the nature and magnitude of its projectsupports have already comprehen- potential environmental impacts. The assignment of category is sively demonstrated how they have "signifi- typically based on the expected impacts on-the-ground, the guid- cant adverse environmentalimpacts that ance given in OP 4.01 and precedents and current practice within are sensitive, diverse, or unprece- the region and Bankwide. dented".,..Moreover,the logging conces- sions undoubtedly do have "impacts (that) Categorization of projects varies according to the characteris may affect an area broader than the sites or tics of each project. In recent years, forestry projects in the region facilities subject to physicalworks." In addi- have been categorized as "A," typically when they involved direct 29 Cambodia - Page - No.' ion, evidence from studies of the impacts nvestment in productionforestry or in plantation activities (e.g., )f industrial logging in othertropical coun- :ertain projectsin China and Laos). Other recent forestry projects ries would suggest that the impacts of con- lave been categorized as "8"when their primary goal is improved ;essionaires' logging on Cambodia'sfor- ?stsare likely to be irreversible.... If the orest regulation, planning or conservation (e.g., projects in Viet- lam and Cambodia). goals of the PAD are realised,the FCMCPP standsto have an environmentalimpact not The "B" rating assigned to this project was based on its inter- mly across all existingforest concessions ientions-technical assistance to develop improved planning and ,ut any future concessionsthat the gov- nventory managementsystems, strengthening Borrower capacity mment may allocate. `or concession regulation and control, and for forest crime moni- .oringand prevention.The decision to make this a "B" rather than 3 "c" reflectedconcerns over the social and environmental impli- :ations of the concession system. The files, unfortunately,do not show that the draft Environ- nental Data Sheet reflecting the B categorization was finalized. The PID, processedby the lnfoshop in October 1999,and for Nhich recordsof disclosure are contained in ImageBank, de- scribes (in para. 9), the rationalefor the "B" categorization. It also discussesthe proposed regulatory regime to be piloted, which soughtto anticipate and manage impacts by requiring attention throughoutthe planning and operational cycle. The PID stated that "the system is intended to ensure that at the large scale plan- ning level, particularlyfragile areas are excluded from concession operations.The proposed system is to [be] synchronized with the nationalenvironmental impact assessment requirements." 7 Prior EA. Bank staff did not producethe 60-61 The projectdesign explicitly recognized that environmental kind of EIA report called for in the case of and social problems existed in the management of forest conces- Category A projects. Infact the level of as- sions and incorporated measures to address them. Specific plan- sessment was so lowthat it did not even ning decisions to be made at each location could not be known in conform to Category B standards.... Given advance.The value added of additional up-front impact analysis that OP 4.01 is primarilyconcernedwith was, therefore, questionable, and a process-oriented approach prior assessmentof potential risks, a lack of was considered preferable. Furthermore, prior to project ap- prior EA itself constitutesa breach of this praisal, Fortechand ARD studies under the TA Project did exam- operating policy. ine social and environmental issues. The preparationand provision of an EA is the responsibility of the Borrower.The role of the Bank is to advise the Borrower (Cambodia) as to the kind of EA to be prepared. Inthis case, the Bank advised the Borrower to adopt an approach that incorpo- rated environmental and social planning criteria, backed by a consultative process, into the planning procedures to be applied in every concession. Since this was not a Category " A project, no "A-level EA process was required. OP 4.01 recognizes that, when the screen- ing process determines or national legislation requires, the find- ings of a Category "B" EA may be set out in a separate report, or, depending on the type of project and nature and magnitude of impacts, other options may be considered, such as environmental mitigation or management plans (OP 4.01, footnote 11). In this case, since no form of prior EA report was undertaken, no find- ings or results could be described in either the PAD or the PID, as stated in OP 4.01. In addition, the PID did not record the type of environmental impacts, make note of the type of EA or EA instru- ments needed or of a proposed consultation schedule. While not- ing that the processing requirements for a LIL were not well de- - veloped at the time, Management acknowledges, nevertheless, that the Bank was not in full compliance with OP 4.01. 30 Forestry Concession Management and Control Pilot Project -Page No? 31 Managementagrees that the EA work carried out during the pro- ject's initialyears was the environmental and social assessment (ESIA) requiredof each concession under Cambodian law. Man- agement acknowledgesthat the Government has not yet estab- lishedsatisfactorystandards for ESIA; to address this, the Bank sought supplemental grant resources under the project to finance the Government`swork on environmental, social and legal issues. Bank staff and ADB consultants had encouraged FA and MOEto developjoint TOR for a combined SFMPIESIA in order to link plans and the assessment of impacts (Identification Mission Aide Memoire 1211998; FraserThomas, 2000~).Given the lack of directicn from MOE, the CT1.4 took it upon itself in 2GC: to de- velop TOR for an ESIA.A Bank environmental consultant under- took a detailedcritical review of the TOR in July 2001, with com- ments circulatedto the CTlA and the MOE (Environmental consultant,July 2001, and Country Director to Ministers of MAFF, MOE, and MOF, in October 2001). The sixteen ESlAs prepared by the concessionairesto date have been poor. Of these concessions, ten have either been can- celled by the Government, withdrawn voluntarily or identified for rejection by the FA. The six concessionsthat remain under con- sideration are still subject either to rejection or to further require- ments to address issues at the strategic and compartment plan- ning levels.The Bank will continue to work with the Government to improvethe quality of the ESlAs through the ongoing Inde- - - pendent Review of SFMPs and ESIAs, recommendations of which have been provided to MAFF. 8. Prior EA Consultation.The Bank has a 62-63 As no EA was undertaken prior to project appraisal, there were nc responsibilityfor ensuring that this require- consultationsspecific to the EA process. Nevertheless,the projec ment [for EA consultation] is met, however, builds on the previous TA Project, ADB supported consultations as with the environmental assessment, it is and Bank work during the identification mission (Identification not clear what consultation, if any, took MissionAide Memoire 12/1999). During the Fraser Thomas study place before the project began.What is consultationswere conducted on community forestry, including a certain is that the project-affectedgroups specificworkshop organized by Concern International on conces- who are requesting an Inspection Panel sion-relatedcommunity issues (Fraser Thomas, 2000b). The pro- investigation,were not amongst those in- ject also relied upon several studies done during the prior TA Pro- vited to participate in any pre-projectcon- ject that addressed logging impacts on communities and for whick sultation process. consultationswere conducted. See Annex 2. The Bank consulted during 1998 with conservation and socia NGOs in assisting the Government to draft regulations, design thc forest planning system and prepare the various components of the guidelines and codes. The project identification mission in- cluded a social scientist, who, based on available documents and interviews,produced "Social Forestry Guidelines for Forest Con- cessions" (Annex 4 to the Aide Memoire, November 1998), which was the foundation for addressing social aspects and consultatior processes during the project. Also, prior to IDA approval, the project was discussed at a workshop for government, industry and NGOs on forest certifica- tion, held in Phnom Penh in November-December, 1999 (WWF/Bank.National Forest Certification Workshop Cambodia Report, Phnom Penh, November 30-December 1,1999). The quality of some consultations may have been affected b! the presence of higher level government officials, especially fores - officials. Nevertheless, by the time of project appraisal, it was determined that there was sufficient information about the social 31 Cumbodiu - Claimllssue - Page NO.` md environmental aspects of the concession management sys- em to design a processto addressthese aspects. The above- nentioned consultation processled to a set of criteria and guide- ines for sustainable productionlconcessionforest management, ;pecifically including ongoing consultations, working relations ietween concessionairesand communitieslpeople, and protecting he rights of communitieslpeople. See also Item 9. Consultationon SFMPsand ESIAs. Bank 62-63 The Bank did not finance any activities of concessionaires and staff working on the project have contended ias not accepted or endorsedthe claims of concessionaires to that compliance with this [OP] has been lave consulted villagers adequately. Consultations have taken achieved through Bank-supported activities ,lace because of the Bank`s efforts to improve the Government's of the concessionaires themselves...The nanagement and control over the concession system. In Novem- companies failed to consult with communi- ,er 2000, CTIAs consultant recommendedthat detailed commu- ties during their preparation of the plans iity consultation and participationcould be focused on the com- that they submitted in 2002. Subsequently, 3artmentlevel of planning. Neitherthe Bank nor FCMCPP staff when they were compelled to do so in late agreed with that recommendation,since, at the strategic level, 2002 and early 2003, these were of a poor iorest use mapping, including set-asides to protect community standard, with instances in which partici- -esources,cannot be crediblewithout community consultation. pants were subject to intimidationby guards and officials accompanying company repre- The Forest Concession Management Planning Manual sentatives. These flawed consultations [DFW, 2001b) contains several directives on community consulta- have effectively reduced the scope of forest tion: dependent communities to holdthe logging "Consultative processes and forest management practices concessionaires accountable. As a result, will be adopted to minimize negative environmental impacts communities' views have not been ac- in operable productionforest zones and special management knowledged in plans that companies will areas will be designatedto protect unique environmental val- use to justify their operations in Cambodia ues and local community livelihoods in the concession area." over the next quarter of a century.At the same time, concessionaires will claim that "The team is to consult with a wide range of stakeholders... they have fulfilled consultation requirements including local communities in a transparent process of public already, and are therefore under no obliga- meetings, workshops and informal discussions to introduce tion to listen to concerns that affected different views, important issues...and find compromises and communities might raise in the future. [See new solutions." also pages 24-25,31-33, 37,45,53 and 67 In determining special management areas for supporting of the Global Witness report.] community livelihoods, concessionaires must "participate in consultative processes with communities" in order to "protect livelihoods based on traditional wood and non-wood forest products." ESlA guidelines (Annex 1 of DFW, 2001b) also give guidance on the role of communities in forest management, community survey techniques, community consultation and conflict resolution. CTIA, at its own initiative, distributed TOR for fulfilling the ESlA guidelines to NGOs and donors and requested input and advice (email from CTIA President to TTL, April 2, 2001). In re- sponse to the various difficulties that arose in relation to disclo- sure and consultation, the Bank also sought and reached agree- ment with the Government to incorporate a Public Affairs Unit into the FA in July 2003. - The Bank made efforts throughout project implementation to develop linkages between NGOs, includingthe NGO Forum and 32 Forestry Concession Management and Control Pilot Project - Ciaimllssue - Page No.` he FA, and also to engage the NGO Forum in a collaborative xogram to work with comm~nities.~Since 2002, when it became svident that consultationsby the FA and the concessionaires Mere inadequate,the Bank has consistently recommended to the Sovernmentthat an internationalconsultant be hired to develop a detailed and comprehensivestep-by-step manual for community :onsultations, do field testings and build initial capacity for com- nunity consultations,benefit sharing and protection of CUI- :ural/spiritualand livelihood resources. In April 2004, a social for- sstry consultantwas selectedto begin these tasks, which are still mgoing. The Bank has monitoredthe consultsticn process and called the Government'sattention to weaknesses and limitations in re- peated Managementletters and meetings (Country Director to the Ministerof MAFF in December 2002, Country Director meeting with Ministerof MAFF in January 2003, Rural Development Sec- lor Directorto FA Directorin June 2002, December 2002 and May 2003, Rural DevelopmentSector Director to the Minister of MAFF in June 2004 and February2005). Under the SAC, the Bank caused the Governmentto ensure that SFMP and ESlA disclo- sure took place, including monitoring the availability of documents in remote commune offices.The Bank put in place measures to expand and improve the quality and impact of consultations re- lated to forestry, for example, by facilitating input from NGOsto discussions on forestry law and the community forestry sub- decree. With regardto any particular concession area, the responsi- bility to carry out meaningfulconsultations with local communities rests with the concessionaireswhen preparing their strategic, compartment, and annual plans. To date no concessionaire has completed these steps and the Government has issued no cutting permits. Management recognizesthat there is very little time remain- ing during project implementation (the Closing Date is June 30, 2005) and given the pace of reform and restructuring of conces- sion management, it will be difficult to complete the process withir the remaining project period (see Section IV of the Response and Item26 below). -~ ~~ ~~ intimidation,Perhapsthe most serious 62- The Bank cannot take action against non-Bankstaff any action violation of this provision of OP 4.01 con- 63, can only be taken by the Government. Following the incident of cerns the intimidationand violence used 31 intimidation on December5, 2002, the Bank immediately sent a against community representativesin De- about...[the] violence outside of the [FA] against people wishing letter to the MAFF to expressthe Banks "most serious concerns cember 2002. In this instancethe FCMCPP Project Directoris allegedto have made to express views on the recently disclosed forest concession threats against villagers seeking a consulta- plans-input that, from [our] point of view, has been legitimate tion session. and constructive." (December 6, 2002 letter to the Minister of While the World Bank did protestthe MAFFfrom Country Director).The Country Director also sent the use of violence by the police, it neverthe- Bank's regional communications advisor and country manager to less underminedthis commendablestance look further into the issue in Phnom Penh the next week and fol- by failing to take action againstthe lowed up with a visit of his own on January 14-15, 2003. The FCMCPP Project Director. - Country Director met directly with the Minister of MAFF as well as For example, in the fall of 2002, NGO Forum submitted a proposal to the Bank for Community Consultationson Forest Concession ManagementPlans, which was in turn submitted to the Norwegian Trust Fundfor Environmentally and So- cially Sustainable Developmentfor funding, although it was subsequently rejected. 33 Cambodia - - Page NO.' donors and NGOs (January 21, 2003 email from Country Director to EastAsia Vice-president). The Government`s responseto the Bank included statements by the Ministry of Interior,and reports to the MAFF from the FA. The reportfrom the FA describedthe FCMCPP Project Director's actions in discussionswith villagers on December 2, 2002 and November 12, 2002. The Government's account did not support the allegation of threats having been made. Monitoring of EA compliance. Giventhat Becausethere was no EA, there were no EA conditions, actions little or no environment assessmentwas or undertakingsto the Bank with which the Government was spe- undertaken,this aspect of the operational cifically obliged to comply,Concessionaires and the Government policy also appears to have been breached were, and are, obligatedto comply with national regulations and by the World Bank. law, including preparationof ESIAs. The Bank provided advice and comments on the ESlA TOR and has subsequently reviewed ESIAs.When logging was allowed to proceed in the fall of 2001, the Bank engaged with the Government on the need for actions to ensure compliance with the terms of the Sub-Decree on Forest ConcessionManagement,leading to the Prakas and suspension of loggingand log transport.The Bank also provided advice on the quality of environmentaland social consultations and compli- ance with the logging and log transport suspension. A Bank environmentalconsultant participated in nearly all supervision missions (see also footnote 3 in the Response, Item 6 above, and Annex 3 on Supervision). The environmental consult- ant produced several substantial reports, including ones cited in the Global Witness report attached to the Request. Consideration of Indigenous Peoples. The Indigenous Peoples policy is not mentioned in the PAD. Ap- Cambodia's indigenous people,notablythe plicability of OD 4.20 was recognized during preparation (May 4, Kouy minority(who are representedamong 1999email of Bank consultant regarding social issues for the those who have drafted lettersto the In- PCD review) but no efforts were made to develop policies and spection Panel), are directly affectedby the plans in accordance with OD 4.20. Rather, the project approach logging concessionaires .... Itis difficultto was to develop, together with and as part of the general consulta- find any evidence that the World Bank has tion process, criteria and guidelines for community engagement in observed either the spirit or the letter of concession areas with local people, including issues such as cus- these requirements [indigenousPeoples tomary use of resources,traditional property rights and symbolic not to suffer adverse effects, informedpar- value and religious practicesassociated with forests (see Annex 4 ticipation; and benefit from development of the Project Identification Mission Aide-Memoire, December investmentsof OD 4.201... [.I 1998). Management acknowledgesthat the Bank was not in full compliance with OD 4.20.and that, in hindsight, screening studies and a framework IPDP, along with more discussion of the issue, would have been more appropriate during project design. The consultation guidelines discussed below outline the process that will require that IndigenousPeoples concerns be addressed, in keepingwith OD 4.20. In hindsight, screening studies and a framework IPDP, along with more discussion of the issue, would have been appropriate. The project approach was to develop, together with and as part of the general consultation process, criteria and guidelines for com- munity engagement in concession areas with local people, includ- ing issues such as customary use of resources, traditional prop- erty rights and symbolic value and religious practices associated with forests (see Annex 4 of the Project Identification Mission 34 - Forestry Concession Management and Control Pilot Project -Page No.` 4ide-Memoire,December 1998).The consultation guidelines dis- :ussed below will outlinethe process that will requirethat Indige- ious Peoples concerns be addressed, in keeping with OD 4.20. A June 2003 Back to Office (BTO) report of the Bank social Scientist states that "social issues and impacts of concessionson oca1communities have been dealt with inadequately in the past, md relations betweenthese and the concessionaires, and to some extent [FA], are characterized by mistrust and non- :ooperation." The BTO "recommendedthat this aspect [social ssues] is given increasedattention for the remaining period of the xoject." The BTO was accompanied by the TOR for the social forestryconsultant to revise comprehensive guidelines for ccm- nunity consultations, including specific provisions for Indigenous Peoples,benefit sharing and protection of culturallspiritual and livelihoodresources. The consultant was selected in April 2004 to begin this work. See also Item 9. The Bank has recognizedthe importance of this issue. The October 2004 Aide Memoire states that "it [is] essential that unre- stricted access of villagers to resin trees, collection of rattan and other NTFPs is ensured by the concessionaire." The Aide Mem- oire further states that "the mission recommends that the Social Forester'sTOR be revisedto apply to all forms of productionfor- est, and to be able to address the strategic (concession-wide) as well as the compartment level planning. Furthermorethe mission suggests that provisions of the World Bank Operational Directive (OD4.20) on Indigenous Peoples would be incorporated into the guidelines." - See also response to Item 21. IPDP. World Bank staff working on the 65-67 No separate IPDPs were prepared prior to project appraisal. In- FCMCPP informed GlobalWitness in April digenous Peoples issues were to have been embedded in the 2004, that the Bank deemed that no indige- nous people'splan was required...the ar- SFMPs and ESlAs prepared by the concessionaires (see also Item 12). Subjects to have been addressed were identification of gumentthat the Bank hasfulfilled its obliga- forest dependent communities, consultations about their rights tions underthis and other operational and forest use and exclusion of areas and species (e.g., resin policiescourtesy of social impact work con- trees and rattan) from the operating area, all of which were to tained within the concessionaires' SFMPs form the basis of any additional interventions regarding indige- and ESlAs is very difficultto sustain. Here it nous communities. is worth referringto the findings of the Au- gust 2004 GFA Terra Systems assessment The Bank acknowledges and agrees with the findings of the of the six sets of plans approved by the GFATerra Systems assessment of August 2004, which. inter alia FCMCPP....The World Banks failure to find that guidelines for community consultations are dispersed in abide by this operational policy has meant various documents and manuals. The Bank had already acknowl. that the FCMCPP has taken no account of edged this, because the SFMPs and ESlAs were inadequate and the potential impacts of concession activity the process of consultation flawed. As a consequence,the Bank on indigenouspeoples, or their rights (to took further steps to assist the Government in preparing revised land in particular) under Cambodian law. community consultations guidelines, with a detailed step by step This in turn has allowed concessionairesto - manual,including provisionsfor Indigenous Peoples (see also Item 12).These guidelines are under preparation. Criteriafor Financing.The World Bank 68-7( Management believes that the project is in compliance with the has breachedthis Operational Policy in its 1993OP 4.36. The project is consistent with the OP's prohibition provisionof loan-backedtechnical assis- on financing of logging in primary tropical moist forest. No such tance to concessionairesthat is designed to logging hasbeenfnanced by the project. Concessionaires have facilitatetheir future logging operations. OP received no IDA financial support, including none for preparation 4.36 does state that "When the government of the SFMP/ESIAs. The project has financed systems develop- 35 Cambodia - Page - No.` ias (made a commitment to move towards nent, capacity building, inventoriesand field controls as permitted ustainable management of primarytropical )ythe policy. During implementation,an internal examination noistforest), the Bank may finance im- Vulnerability Assessment, 2003) of compliance with OP 4.36 was rovements in the planning, monitoring,and :onducted. ield control of forestry operationsto maxi- nize the capability of responsibleagencies The Bank's engagementin Cambodianforestry and its sup- o carry out the sustainable management of ~ortfor the FCMCPP have been measuredand deliberate. Both he resource." The critical point here, how- he design of activitiesto be financed, and the assessment, per 3ver is that the Bank has allowed the he guidance of OP 4.36, of the Government commitment have XMCPP to go beyond this in its active ieen based on frank dialogue with the Government and consulta- ;upport of the logging concessionaires.As ion with other donors and NGOS. ioted above, the companies with which the The 1993 OP 4.36 explicitly allowed the Bank to provide fi- iroject has engaged are in any case par- lancing in forest regulation and managementwhere there was icularly undeserving beneficiariesof loan ;lear Government commitmentto sustainable and conservation- noney. In addition, this operational policy iriented forest management. Paragraph 1a states that: `Where ncludesfive criteria for what constitutesa he government has made this commitment,the Bank may fi- government's commitmentto move toward lance improvements in the planning, monitoring, and field control wstainable management of (primary moist if forestry operations to maximize the capability of responsible ropical)forests". It is doubtfulthat the agencies to carry out the sustainable management of the re- 2ambodian government can be considered jource'.] n compliance with all or even many of .hese. Furthermore, the document upon which the OP was based :The Forest Sector: A World Bank Policy Paper, World Bank, 1991) provided the following additional guidance with regard to such support (see p. 66): "If such conditions are present [e.g., the Government com- mitment to sustainable and conservation-orientedforestry], projects will bejudged on their individual merits. If they are not present, Bank support will be restricted to operations that directly help countries achieve them. Such operations will be appropriately limited in scope, sequenced, and specifically targeted at helping countries meet the stated conditions". This is the approach the Bank adoptedfor the FCMCPP. The Bank consulted with the Government and received repeated as- surances of commitment to a sustainableforest policy. The Bank approached the project as a vehicle to test and, to the extent pos- sible, convert that commitment to an ongoing program. For exam- ple: In response to the Forest PolicyAssessment in 1996, a pro- posal for technical assistance was made to the MAFF, which it accepted. The program was funded under the TA Project. In 1996, the Senior Minister in charge of Rehabilitation and Development and of MEF presented measures "to strengthen the control undertaken by competent authorities to enforce obligations made by concession holders... and to pursue ap- propriate approaches covering among others the utilization of forestry resources by households,farmers and the small en- terprises." Following the Forest Policy Assessment, in July 1996,the Government established a National Committee on the Or- ganization and Implementationof Forest Policy.The Commit- tee has not been as vibrant a forum for policymaking and de- bate as hoped, but its Secretariat, in the FA, has functioned as the counterpart for the contemporary donor-government policy dialogue. In the Letter of Development Policy (February, 1999) pre- Forestry ConcessioniManagement and Control Pilot Project pared in associationwith the SAC, the Minister of MEF wrote: "Present loggingconcessions operate under a legal and regulatoryframework which does not give adequate consid- eration to such criticalfactors as area to be harvested,forest inventories,and biodiversityprotection. (para. 14)" "Under communityforestry, the Government needsto de- velop means for awarding long-termforest tenure rights to 10- cal communities, indigenous peoples, and other target groups (para. 15)." In 1999,the Prime Minister issued a "Declaration on Man- agement of Forests and Elimination of Forest IllegalActivity," mandating a "crackdown"on illegal logging and other meas- ures to introduce controlsover the forestry sector. Experiencewith technical studies (see Item 2) and comple- mentary actions, such as suspension of log exports in 1996, can- cellation of twelve loggingconcessions in 1999, termination of the "log collection quota system," and increases in timber royalties, was satisfactory. The progress of the Government on the reform agenda was, and continues to be, uneven but has repeatedly provided encour- agementshared by the Bank and NGOs, including Global Wit- with his political will illegal logging can be brought under control - ness (press release,January 22, 1999):"Hun Sen has shown that this gives real optimismfor the future of Cambodia's forests and should impress the international community, said GlobalWitness' PatrickAlley." An important component of the Bank`s willingness to deepen engagement in forestry was the readiness of the Government to engage an "Independent Monitor of Forest Crime Reporting."This arrangement was formulated as an integral part of the SAC pro- gram and the FCMCPPand involved partnership$swith UNDP, FAO, UK DflD, and the Australian Agency for International Devel- opment (AusAID). ~~~~ Consultation. The requirementthat "Bor- See response to Items 8,9 and 12. rowers identify and consult the interest groups involved in a particularforest area" has not been met. This deficiency relates closely to the breaches of Operational Pol- icy 4.01 on EnvironmentAssessment and Operational Directive4.20 on Indigenous Peoples concerningconsultation. High Ecological Value. OP 4.36 states The Bank has not financed logging or infrastructure in high eco- that "In forests of high ecologicalvalue, the logical value areas (or any others). As noted in the Global Wit- Bank finances only preservationand light, ness report (p. 69), Cambodia has an extensive national pro- nonextractive use of forest resources."As tected areas system that provides protection for critical natural described above, the World Bank undertook habitats at the macro landscape level. Furthermore, the Bank has no environment assessment ahead of the supported studies under the Biodiversity Management and Pro- FCMCPPthat might have identified such tected Areas Projectto address Prey Long. Standards and guide- forests of high ecologicalvalue. Instead,the lines developed for and under the FCMCPP address micro-level project has advisedthe Cambodian gov- considerations by requiringthe mapping of forest use, including ging by three concessionaires... in the ernment to allow another 25 years of log- environmentally and socially sensitive Special Management Ar- eas. highly ecologicallyvaluable Prey Long for- est. This area was identifiedby an IUCN SFMPs are 25-year plans and, under the project planning (World ConservationUnion) study three process, subsequent compartment (5-year) and annual plans are 37 Cambodia - -Page No.` years before the FCMCPP commenced as to be developed and reviewed. All are expected to address areas 3 "Remote, and possibly very old, lowland 3f ecologicaland othervalues. One reasonfor the initial "U" (un- forest area with major wildlife populations... satisfactory) rating of the project in December 2002 (see Item 29) feasibilityof a World Heritage Nomination was the Government`sremoval of the compartment plan require- shouldbe established (emphasis in origi- ment, which was reinstated as of May 29, 2003 (Letterfrom the nal)." The FCMCPP [...I FA Directorto the President of the Cambodia Timber Industry took no account of the Association). obvious environmental and social impacts of the plans of two companies with adjacent concessionsto drive parallel roads into Cambodia'slast intact lowland evergreen Forest, Prey Long. Again the Bank took no correctiveaction. [See also page 45 of the Global Witness report.] - Degradation of Critical Natural Habitats. 71 Bank management believes that the project is in compliance with The concession companies have already OP 4.04. As notedfor claim 16 above, the studies supported by significantlydegraded the natural habitats the Bank will help to identify gaps in Cambodia's protected area within their concessions. Their past behav- system. No degradation of critical habitats has occurreddue to jour and, indeed the contents of the six sets the project. No concessions have been issued over new areas as of plans that the FCMCPP has approved (in a result of the project and planning guidelines for existing conces- terms of proposed over-cutting) indicate sions developed under the project preclude issuance of cutting that they will continue to do so. compartment-5 years; and annual coupe) forest management permits until a three tiered (strategic concession-wide-25 years; planning process is completed (seeAnnex 6). The planning guidelines include numerous provisions to ensure identification, assessmentand proper planning for critical habitats.These is- sues have been carefully reviewed and supervised by the Bank. No formal approvals by the Government to allow cutting have been issued to date (see also Items 19and 36). - Consultation. As described in relation to 71 See response to Item 9. breaches of operational policies on envi- ronmentassessment and indigenous peo- ples, consultation has been absent or of a very poor standard, both during preparation and implementationof the FCMCPP. More- over, the Bank did not ensure that the Bor- rower (ForestAdministration) invited the stakeholderparticipation in planning, de- sign, implementation,monitoring and evaluationthat this operational policy calls for. - Biodiversity Conservation in Forest 71 "Biodiversity Conservation Guidelines for the Managed Forest," Plans. It appearsthat the project`s archi- prepared in collaboration with WCS, have been adopted (and tects and executors have declined to con- revised) by the Government under the project..Biodiversity as a sider the forests slatedfor logging as natu- concern in relation to concessions was identified early in the ral habitats.While the six concessionaires Bank`s work on forestry in Cambodia. A Biodiversity Code of endorsed by the FCMCPP have, as re- Practice was developed as part of the Identification Mission and quired, made referenceto biodiversity con- was integral to the Sub-Decree on Forest Concession Manage- servationwithin their plans, the quality of ment as developed under the SAC. On the basis of consultation this work has been abysmal, as a recent with NGOs (WCS, Flora Fauna International,WWF), revisions study of these components of...[two] plans were proposed and the Bank mobilized Bank-NetherlandsPart- makes clear. nership Program grant resources to assist in a "Field Testing of Biodiversity Conservation Guidelines for the Managed Forest Pro- 38 Forestry Concession Management and Control Pilot Project iect."Under the project,WCS was contracted and worked collabo- rativelywith FA and one concessionaire (SL International)on a series of studies and field inventories. Field testing of this work was constrainedby the suspension of logging, which prevented exploration of some issues at the felling block level. Nevertheless, the study successfully led to revised Guidelines that were adopted by the FA. 4 related World Bank standard that the 73-74 Responsesto these claims are addressed specifically under OP xoject has not met is its Bank Procedure 13.05, Items 23-41. BP 8.40 on technical assistance,which accompaniesthe Operational PolicyOP 5.40 concerning the same issue. BP 8.40: `Because supervision offers an opportunity for informal TA, Bank staff must remain aware of importance of effective supervi- sion to the implementation and ultimate success of the TA." Several breaches of the Operational Policy on supervision outlined above, also contravenethis section of BP 8.40. Defi- ciencies in the work of the TA consultants to the FCMCPP that suggest inadequate supervision by the World Bank include: Provision of assistance and advice to all logging companies, includingthose that should have been excluded under the terms of reference issuedto the technical assistance consultants. The refusal of consultantsto the FCMCPP to take account of the legal prohibition on cutting resin-producing trees. The distorted score-card system of assessing concessionaires' manage- ment plans. e The poor standard of the TA-supported forest cover survey. This has contributedto the same negative outcomes as breachesof the operational oolicv on suDervision. I . - Spirit Forestsand Archaeological Sites. 74-75 Bank management believes that the project complies with OPN The six logging concessionswhose plans 11.03. SFMPs and ESlAs have not been "approved" (the Gov- the FCMCPP has recommendedfor ap- ernment review process is ongoing) and the Bank has not con- proval contain both spirit forests and sites veyed any endorsement. On the contrary, the Bank has ex- of archaeological importancethat undoubt- pressed its serious reservations, specifically concerning spirit edly constitute cultural property. Despite forestkacred sites and other sites of social and cultural signifi- this, it appearsthat the World Bank carried cance to local communities. As stated in the October 2004 Aide out no survey of these sites prior to the Memoire: "The mission...finds it essentialthat as part of the im- project'scommencement.This omission provements of the SFMP, and latest when the first compartment falls in line with the Bank's erroneous ac- level plan is being prepared, participatory mapping of community ceptance of the existing concession use forest (Resin trees, Sacred siteslspiritual forest, burial forest, boundariesas an appropriatebasisfor watershed protection, village forest, and bamboo forest) are un- managementof the country's production dertaken. These should be excised from any form of logging." 39 Cambodia forest. Guidelinesdeveloped underthe project call for identification and There is strong circumstantialevidence designationof Special ManagementAreas and specifically refer that many communities, particularly to sacred groves, spirit forests and archaeological sites. those comprising indigenouspeoples, have spirit forest areas. Despitethis, Since community consultations so far have been inadequate, only one of the companies endorsed by archaeologicalsites may not yet have been identified. Duringfu- the FCMCPP,...has identifieda spirit ture communityconsultationscarried out according to the detailed forest in its plan...In mid 2004, a group manualunder preparation, cultural resources, to the extent these of provincial, national and international are knownto localcommunities,will De considered in line with the NGOs facilitated public consultations March 2001 Manual criteria, according to which cultural resource concerning the six sets of SFMPs and areas will be excludedfrom commercial logging and reported to ESlAs approved by the FCMCPP. the archaeologicalauthorities. ..One of the common concerns that `Chance finds" of archaeologicalsites are not currently ad- participants' voiced was companies' in; dressed underforest concession contracts in Cambodia.The clusion of spirit forests in their man- Bank will, priorto closure of the project, seek the Government's agement plans; a factor apparently not agreementto include provisionsfor appropriate treatment of considered by the Bank or the chancefinds in revisedconcession contracts and to introduce FCMCPP. chancefind provisions into annual operating plans to ensure that The six concessions also contain im- such sites are preserved. portant archaeological sites. As with the spirit forests, it appearsthat a sig- nificant number of these have not been identified and excisedfrom production areas in the SFMPs producedby the six companies. The World Bank contravened this policy in Although not required under Bank policies, proper disclosure and its failure to ensure that the Borrower(For- improvements in the quality of the consultations in the SFMP and est Administration) provided the conces- ESlA processwere a pressing concern of the Bank, Transparency sionaires' SFMPs and ESlAs to community was viewed by the Bank as a critical element of the reform proc- representativesin November2002. Infact, ess and of overall governance and accountability issues. direct responsibilityfor this breach lay with Immediatelyafter the CG in June 2002, at which disclosure 01 the Bank`s own office in Phnom Penh. Hav- the SFMPS and ESIASwas agreed, the Bank encouraged the ing agreed to assist with the disclosure Governmentto move rapidly. Over the course of the following four process, Bank representativesthen in- months, the FA resisteddisclosure, leading the Bank to establish formed communitiesthat they would be disclosure as the remainingtrigger for the second and final SAC unable to providethem with copies of the tranche release. Duringthe negotiation process, the Bank con- plans. sulted with members of the TWG, industry, NGOs and others, to The negative impacts of this breach were convey the importanceattached to this issue. two-fold. In the first instancethose groups most directly affected by the concession- The Governmentagreed, after much pressure from the Bank aires' activities were denied importantin- donors and other stakeholders, on October 17, 2002 to disclose formation about the companies planned the draft SFMPS and the FA committed to placing Khmer ver- future operations. Secondly, a precedent- sions of the plans in each affected commune, accompanied by a setting opportunityto ensure that the Forest letter of explanationspecifically allowing unlimited disclosure, Administration observed its legal obligations later confirmed by Bank staff during field visits. The public com- to disclose such informationwas lost ment period, announcedon October 29 for a period of 19 days, through the Bank`s decision to intercede was later officially extended, from November 11to January 31. and take on the government`slegal respon- The Bank agreedthat its PIC would provide a supplemental sibility. venue for disclosure (not the sole site) to ensure that people had (More detail is providedon pages 29-31 of ample, unfettered access to the plans and maps. the GlobalWitness report.) Two black and white copies of each SFMPwere received from the FA project advisor, based on the request from the Bank the previous day, and placed in the PIC on November 11,2002. The NGO Forum noted that color coding of the maps was essen- tial. Because of the size of the maps, 24 hours would be needed to make two color copies of each SFMP. A group that had gath- 40 Forestv ConcessionManagementand Control Pilot Project red outsidethe Bank's Phnom Penh office requestedvia a iember of parliament,with whom Bank representatives had met arlier in the day to resolvethe issueof color copies, that color opies of the SFMPs be provided immediatelyto representatives If each of the communities present-up to 10 copies of each ;FMP (for a total of more than 300 copies). Bank staff stated that it least one color copy of each SFMP could be provided to repre- entativesthe next day, and that meanwhile community represen- atives could consult the information available in the PIC, as the iext best alternative. On November 12, a limited number of representatives of the :ommunitiesand international NGOs agreed to come to the Bank )fficeto discussthe situation. The available color copies were rovided to those representatives and a system by which further :opies could be requested was put in place. Several copies were rovided to NGOs and other interested groups. Beyond the end of the formal consultation period on January 31, 2003, the Bank stated that consultationswere to be continued with affected communities until there was agreement on a satis- actory plan; and only then would plans be approved (January 21, 2003 email from Country Director to East Asia VP). The Bank acknowledgesthat public disclosure of documents :odd have been planned better. The Government-and the 3ank4id not manage appropriately expectations for the disclo- jure process. ODlOP 13.05 Project Supervision - Compliancewith ODlOP 13.05. See items 3ank management believes that the project is incompliance with 24-41on claims related to supervision. the OD (through July 19,2001) and subsequently, with the curren 3P. This statement applies to responses to Items 23 through 38. Since approval of the project in June 2000, Bank staff con- ducted nine formal supervision missions, including an MTR. The TTL was based in a neighboring country during preparation and early implementation of the project, and in Cambodia from August 2002 until January 2004. This arrangement allowed regular on- time communication with the Government, donors, and other partners. The Bank has utilized a substantial supervision budget, augmented by several trust funds. Actual resources devoted to supervision are greater than accounting records indicate, since forestry policy and governance issues were also supervised under the SAC and the project has benefitedfrom these efforts. See also para. 16 in the narrative and Annex 3 on supervision fre- quency and composition. Technical Assistance Criteria. [The Bank The project did not target concessionaires as recipients of techni- is in breach of OP 13.05 by] allowing pro- cal assistance and none has been provided through the ject technical assistanceto be offered to FCMCPP. Concessionaires have borne the costs of field studies, companies that should have been excluded analyses, assessments and plan preparation of SFMPs. Never- underthe terms of reference givento the theless, as part of the implementation of its regulatory process, TA consultants.This has had the impact of the Government has provided direction to ensure consistency and increasingthe chances of these companies quality in data gathering, analysis and presentation. The Govern- passingthroughthe planning process, de- ment establishes and explains the objectives and standards; pri- spite their track records and obvious un- vate industry must meet the standards, either from its own re- suitability as concession managers. sources or by hiring competent technical expertise, in seeking The Bank's decision to assist the com- approval. Technical direction by the regulatory authority is neces- panies had the effect of loweringthe bar in sary and was not considered as technical assistance as such. 41 Cambodia - -Page No.` their favour. It robbed Cambodiaof a crucial opportunityto measure the concession- aires' commitment and capacity and to show the door to operators that had already damaged its forests and abusedthe rights of its inhabitants. None of the concessionaireshad forest sufficient for a 25 year cutting cycle as required by their contracts. The World Bank allowedor perhaps even instructed the FCMCPPto pro- vide advice and other forms of assis- tance to all 13 of the companies that embarked on the productionof man- agement plans. This highlightsone of the main flaws in the World Bank's su- pervision of its project-the willingness to allow loan moneyto be usedto sup- port concessionaires that have a well- documented history of illegalactivities. - ~~ Sub-contracting of Technical Work and 22- Conflictsof interest in Cambodianforestry have been recognized ~ Conflicts of Interest. The FCMCPPhas 23, by the Bank from its first involvement (World BanWUNDPIFAO persistently refused to recognize the prob- 41-43 Forest Policy Assessment, 1996, pp 25-27). The PAD made note lem of concessionaires sub-contractingall of both petty and large scale corruption (p. 4) and stated: "Unlike technical forestry work to ForestAdmini- current practice, salaries and allowance of DFW supervisory (em- stration staff. This practice is symptomatic phasis added) staff will be paid by the DFW and not by conces- of two serious problems associated with the sionaires." However, the pool of foresters in Cambodia is limited, concession system in Cambodia. Firstly, and Government employees in Cambodia are poorly compen- concessionaires' reliance on government sated and outside employment is common. The Bank discussed officials to undertake even the most mun- with the Government the issue of Government staff working pri- dane technical tasks on their behalf is evi- vately as consultants to concessionairesand cautioned against dence enough of their unsuitabilityas man- the Government's appearingto condone conflict of interests agers of the country's forests. Secondly, the (Management Letter, December 14,2000,from the Country Di- companies' employment of the same offi- rector to MAFF, and from the Country Director to three Ministers, cials responsiblefor regulatingtheir activi- October 4,2001). The Government assured the Bank that Gov- ties sets up a fundamental conflict of inter- ernment staff who had worked as consultants would not be in- ests; one that gives Forest Administration volved in evaluation of concessionswith which they had worked. staff a stake in the continuedtenure of the concessionaires.The Bank should have This issue was monitored during supervision. For example, prevented its project from assistingcompa- the TRT recommendations do not reflect a bias in favor of con- nies that had `captured` the officials respon- cessionaires. Involvement of the Forestry Research Institute (the sible for regulating their activities. Con- Government agency affiliatedwith FA) is documented in the versely, it has permitted an employee of SFMP and ESlA documentsthat were made publicly available. one [enterprise's] main shareholdersto The Bank has investigatedthe involvement of the Project work as Directorof the FCMCPP Project Management Unit Director with a concession company and found Management Unit. no conflict of interest. He assisted the company in commercial The Bank and the projectteam de- correspondence in a follow up to the 1999 Certification Workshop clined to address the serious conflict of The particular concession company is partly State-owned and it is interests that that the documents'author- common for Government staff to be assigned to such duties. As ship posed. Five of the concessionaireshad Project Management Unit Director, the individual had no regula- commissioned plans from staff of the Forest tory authority or duties related to the concerned company. Administration and Ministry of Agriculture, Forestryand Fisheries-the same institu- tions responsiblefor deciding whether or not the companies should be allowedto resume operations.Three more companies had hired the Forest Research Institute; an organisation establishedwithin the Forest I 42 Forestry Concession Management and Control Pilot Project - -'age No? idministration.The World Bank`s staff con- ultant drew the Banks attentionto this ;Sue in July 2001; however his advice was lot heeded by either the FCMCPPtask nanageror the project team. - :onsultation on ManagementPlans. `2, `he Bank acknowledgesthat consultations carried out thus far The Bank is in breach of OP 13.05 by] not !4-25 ire inadequateto provideinput to strategic level zonation and to nsuring that the planning processesfor nsure meaningfuldialogue between concessionaires and com- jFMPs and ESlAs carried out under the nunities.The social forestry consultant preparing the revised iuspices of the project includedadequate :onsultationguidelines underthe project is addressing these is- ind appropriate public consultation.Note ues. Inthis context, there has been debate about whether in- hat consultationis required under Cambo- jepth, high quality communityconsultations and negotiations on jian law (Sub-Decree on Forest Conces- Ienefit sharing should take place at the strategic 25-year planning ;ion Management). This has weakened the evel, or at the 5-year compartmentlevel. While the Bank and FA Iargaining position of communitiesin their agree that some consultations have to take place up front as input lealings with the companies. It has enabled o the SFMPs, some villageslcommunities would not experience :oncessionaires to ignore the interests of ogging operations in the next 20 years. For such vil- :ommunities and remain unaccountableto ageslcommunities,the consultations and negotiations with con- hose who live in and aroundtheir conces- :essionaires might put pressureon villagers, and they might sions. agree now to arrangementsto which they might not agree when The [Bank] staff consultant`s comments `uturelogging operationstake place. [on mechanismsfor communityconsul- tation] were ignored by the Cambodian Commentson the ESlA TOR expressing disagreement with governmentand notfollowed up by the :he CTlA position were conveyed in a Management Letterfrom World Bank. :he EAP Country Directorto the FA Director (October 4, 2001). D The response of the World Bank to the See also responses in Items 9 and 12. lack of community consultationin com- panies' ESlA preparation has been to adoptthe position taken by the Cam- bodianTimber IndustryAssociation. In total contradiction with the position ad- vocated by the staff consultant in 2001, the Bank now argues that consultation on social impacts can be deferredto the five year planning level. Ignoring Evidenceof IllegalActivities 25-28 //legal Logging. The Bank had supported initial studies of law MlegalLogging.The World Bank used 31 enforcement and design of proposals for strengthening controls the FCMCPP to support aspects of the on illegal logging and log transport under the TA Project.The ille- ForestCrime Monitoringand Reporting gal logging situation was analyzed nationally (with input from Projectsituated within the ForestAd- Global Witness and other sources). The final report, "Findings anc ministration.However,the Bank de- Recommendationsof the Log Monitoring and Logging Control clinedto make the connection between Project" (DAl, 1998) noted: "evidence collected through the findings of the forest crime project ...surveillance activities indicatesthat logging is occurring on al- and the FCMCPP'sparallel efforts to most all concessions. Without further monitorinq. it is difficult to reformthe concessionaires....The determine to what extent uncontrolled loaqina is conducted by World Bank likewise acknowledgedon concessionaires, their sub-contractors or Roachers" (p. 14) (em- several occasionsthat the concession- phasis added). aires were continuingto break the law...Notwithstandingthese expres- The second component of the FCMCPP, Concession Regu- sions of concern,the Bank continued lation and Control, was intended specifically to provide the FA to allow its projectto assist these same with the mobility, communications, training and protocols to moni. companies. tor plan compliance and to distinguish between criminal and non- criminal problems. To date, the project has provided field equip- ment and technical assistancefor protocol development. Fraser Thomas (2000a) also investigated the issue of legal non-compliance by concessionaires, in parallel with a similar re- view underthe FAONNDP-supported Forest Crime Monitoring and Reporting Project. At the time there were only four serious 43 Cambodia offenses in the effective Cambodian Laws (Decree 35 of 1986, Regulation049 of 1986 and Decisions 05 of 1995 and 02 of 1996) -unauthorized cutting of trees, transport of timber, export of tim- ber and road construction. A detailed review of reports on forest crime was used to determine whether any of the allegations could and should be entered intothe crime monitoring system. Review- ers could find fewer than thirteen instances where reports con- tained corroborating information(pictures, taped conversations with third party witnesses or witnesses willing to testify). With in- formation from all sources, FraserThomas (2000a) found a total of 47 allegations awaiting inquiry and investigation. Four compa- nies had previously been fined and received sanctions for unau- thorized cutting and one of these concessions was cancelled. Of the six concessions currently in the planning process, two each have three outstanding allegations and the other four have none. FraserThomas (2000a) concluded: "the existing forest crime da- tabase and the actions by the Government so far are considered inadequateto recommend [termination]" (pp. 24-25). Concessionaire logging ceasedfollowing the December 2001 Prakas. Illegal activities by the GAT concession have been sub- stantiated and the concession cancelled as a result. Since the appointmentof the new IndependentMonitor in 2003, no new cases of illegal logging by concessionaires have been brought forward (see SGS, Third Quarterly Report as Independent Moni- tor, Forest Crime Monitoring and Reporting, September 2004). Concession-related mills and factories are closed and have been visited by Bank staff and the Independent Monitor. Reports of illegal logging have concerned parks and protected areas, land development projects (economic land concessions) and "wild cat" illegal logging without demonstrable linkage to concessionaires. Offsetting Timber Royalties. At a Royalty Offsets. Royalty offsets were identified in a 2002 IMF meeting in September 2002, Global audit of the 2001 national budget, which was discussed with the Witness representatives...presented Bank in the context of the SAC. The transactions of concern were boththe task manager and the head of off-budget transactions that were approved by the Council of Min- the Bank`s Rural Developmentand istersto compensate enterprises that were owed as a result of the Natural Resource Sector Unit, East Governmentcancellation of log exports in 1996 and 1997. Royal- Asia and Pacific Regionwith documen- ties collected by the Government agencies (in this case the FA) tation that exposed high-levelcorrup- were transferred directly to the enterprises holding claims against tion involvingthe concessionaires.The the Government, rather than, as required by the Budget Law, to offsettingscheme in questionenabled the NationalTreasury. This was explained to the Bank in a letter the misappropriation of large sums of from the Minister of MEF and the Minister of MAFF on July 18, moneythat the companiesowed to the 2002. According to a May 2002 audit by MEF (MEF to Country governmentin unpaid timber royalties. Director,June 10, 2002), USD 3.0 million was mishandled. The The offsetting system emerged soon Government satisfied the Bank and the IMFthat the claims after the government imposeda mora- againstthe Government were genuine and that it was also pursu- torium on further cutting and log trans- ing compensation from two firms that had been overpaid. The portation in January 2002...In the Bank pursued work with MAFF, FA and MEF on development of event, however,the Bank did little or improved systems to prevent reoccurrences. nothingwith the evidence concerning the offsetting scheme. Indeed,only Regarding the log transport ban, see Item 38. days after receiving the documentation from Global Witness, the task manager wrote to the Forest Administration pro- posingthat the log transport morato- rium be overturned and the same con- cession companiesthat had offset their royalty payments be allowedto resume timber shipments. 44 Forestry ConcessionManagement and Control Pilot Project D //legalFA Director Activities...[ljt is FA DirectorActivities. A letter sent on July 22, 2004 by Global worth noting that evidence of ...illegal Witness included accusationsof complicity on the part of the Pro- activities by the [FCMCPPProject Di- ject Directorin issuingtransit permits to move logs. The allega- rector] has been broughtto the World tions against the Project Directorwere referred to the Bank`s De- Bank`s attention and elicitedno re- partmentof Institutional Integrityimmediately. Other concerns sponse. expressed in the July 22 letter and another letter sent by Global Witness on July 29, 2004 were discussed with them during a meetingheld at their offices on July 29. An email outlining the discussionsis attached in Annex 4. Deadlines for Management Plans.The Guidelinesfor the Governmentreview of SFMPs stipulate that concessioncompanies had committedto revisionand re-submissionby concessionaires is allowed (FA, submittingtheir SFMPs and ESiAs by the 2004~).The number of resubmissions is not specified, however, end of September 2001 [however] all the concessionaires missed the 30 September This claim misrepresents potential legal ramifications in the deadline. This provided groundsfor cancel- event that concessionairesmissed the SFMP submission dead- lation of their contracts. Instead,World line. The September 2001 deadline for SFMP and ESlA submis- Bank officials argued that the deadline sion was an agreed target, but this date was not based on a for- should be allowed to slip and none of the mal commitmentto the Bank (Report of first meeting of the Joint companies penalised for their failure to CTIA-DFW Working Group, May 16, 2000). The Bank was not a meet it. These arguments prevailed and the specific party to this group, which was established underthe ADB government decided to grant the compa- projectand was assisted by a UK DflD-financed consultant). nies another year to producetheir plans. While failure to meet this deadline was discussed by donors and The short-term consequence of this was the Government as possible grounds for cancellation, any such that the companies continued loggingfor cancellationwas to be implemented at the discretion of the FA the remaining months of 2001, before pres- Director. sure from international donors other than When the deadline was missed, the Bank took action to en- the Bank persuaded the governmentto sure that inappropriate logging did not occur. It conveyed disap- suspend concession operationseffective proval of logging that occurred in the fall of 2001 (explained by the from January 2002. Governmentas based on a 12-month approval cycle that would Throughout its reviewof concession- lapse on December 31,2001). A Bank mission in November- aires' plans, the FCMCPPteam repeatedly December 2001 discussedthese issues with the Government and insisted that its assessmentwas based on reached agreement on a draft Pfakas to enforce planning re- purely technical criteria...Projectstaffs de- quirementsof the Sub-Decreeon Forest Concession Manage- cision to give the companies more and ment. A revised Prakas was issued by the MAFF on December more opportunities to improvetheir plans 16,2001 (Aide-Memoire and Management Letter of December was anything but technical however. Not for 12,2001). the first time, the project demonstratedits determination to place the interestsof the The same Bank supervision mission urged the Government companies above those of Cambodians to finalize its determination of which concessionaires qualified for who stood to suffer the adverse impacts of immediatetermination. A suggested notice of cancellation letter their continued operations.The Bank, was attached to the Management Letter (December 2001). See meanwhile,was quite aware of these short- also Item 3. comings, but did nothingto remedythem. Unsatisfactory Rating. Lack of consulta- As summarized in Annex 3, the Bank team has supervised the tion was one of the reasonsfor the World project intensively. "U" ratings on aspects of the project were first Bank rating the FCMCPP as `unsatisfactory' registered in December 2001, followed by subsequent downgrad- in the second half of 2002. It is reassuring ing of Development Objective and Implementation Performance to know that the Bank had some awareness ratings to "U" in December 2002. As of end 2004, the rating re- of the project`s deficiencies in this regard. mains "U". Nevertheless,the belatedincrease in num- ber of consultationexercisessince has not In June 2002, prior to the downgrading, the Bank called the been matched by any qualitative improve- Government's attention to an absence of progress. In its commu- ment. Moreover,as these consultations nicationto the FA Director (June IO, 2002), the Bank expressed have taken place afterthe companies had doubts that the Government"would not fully exploit the conces- already submitted their SFMPs and ESIAs, sion control capabilities being developed under the project." The their scope to influencethe concession- Bank recommended specific remedial actions regarding utilization aires' planning process has been very lim- of project resources on forestry field control and law enforcement, development of revenue systems, and project evaluation, The 45 Cambodia ted. 3ank also called attention to Cambodian regulatory requirements `or disclosureof management plans to affected communities. In 3ecember 2002, the Bank informed the Government that it had jowngraded the rating of the project because substantial im- Jrovementshad not been made. The letter from the Sector Direc- .orto the FA Director noted specifically that the Bank had re- :eived complaintsthat local communities had been denied access :oconcession plans, documents and remedies. The letter urged :he Governmentto resume its commitments to the project and dfered the prospect of reallocating Credit proceeds to, for exam- Die, communityforestry, forest mapping and demarcation. InJune 2003 Bank staff reviewed the results of the MTR and Totedthe FA'Sreversal on abandoning the compartment plan ?equirementas well as other initiatives proposed by the MTR. Agreement was also reached on moving ahead with support for a PublicAffairs Unit in the FA and recruitment of a social scientist to assist in the consultation process. At the conclusion of this mis- sion, the rating of the Development Objective was upgraded to `Satisfactory." Quality of Forest Cover Survey. tThe The forest cover survey (DFW, 2003e, "Trends in Land Cover Bank is in breach of OP 13.05 by] failure to Changes Detection between 1996/1997 and 2002 by Remote ensure the observance of minimum stan- SensingAnalysis") was prepared by the FA with assistancefrom E dards in the 2003 forest cover survey that qualifiedinternational consultant. The study aimed to provide cur- the FCMCPP produced. This extremely rent informationabout recent land cover trends as a basis for dis- poor piece of work has provided a distorted cussion of forest management issues nationwide. It described picture of forest quality and cover in Cam- technical issues and methodology, the extent of ground truthing 01 bodia. This in turn assists proponents of the the satellite imagery and the results of that ground tr~thing.~The concessionsystem to argue the case for study provided detailed maps of forest cover, forest cover continued industrial logging. changes and tabular estimates of changes by major forest type It is difficultto determinewhether the for each concession and each park and protected area in Cam- FCMCPPdeliberatelyset out to manipulate bodia.To estimate the degree to which logging was occurring, the the findings of the study, not least as it has study used the extent of road development as a surrogate meas- declinedto publish the survey'sfindings in ure. The study cost less than USD 100,000 and was financed by full. Eitherway, the main outcomes can be a PHRD Grant for ImplementationTechnical Assistance. summarisedas follows: LIL money wasted Bank and independent specialists reviewed the TOR for the The opportunityto producean authori- study and consulted with the FA technical advisers. An open tative assessment of forest cover lost workshop held by the advisers at the Bank Cambodia Office was Productionof misleadinginformation at attended by NGOs and researchers. No specific defects in the a time when it was liableto be used for methodologyhave been called to the attention of the Bank, but political purposes. there have been complaints that the results of the study have [See also page 34.1 been misquoted. Specialists employed by the Multi-Donor IFSR reviewed mul- tiple sources of geographic data on Cambodian forestry, includinc the FA assessment. The IFSR Annex on forest cover (D. Ashwell D.F. Miller and A. Dummer, 2004, "Ecology, Forest Cover and Quality") discusses the assessment in detail and makes note of various limitations and caveats, but does not dispute its work- manship or technical quality. The IFSR, in fact, makes extensive use of the study. The Bank also has utilized the results of the study in its own due diligence work on SFMP and ESIA. The "Trends in Land Cover Changes" survey has been dis- Of 88 ground truthing points, 67 (76%) matched with the image interpretation results. Misclassifications were all among the deciduous,other forest and non-forest categories. No errors were detected within the evergreen and semi-evergreen types. 46 Forestry ConcessionManagementand Control Pilot Project - - Page No? - ,eminatedin Cambodia and the Bank will encourage the MAFF to nake the digital data files publicly accessible. Ieclaration on Forestry RevenuesSys- 34-35 -hePrakas on forestry revenue systems management was one ems Management. Another component of ollow-upto the royalty offset problem (see Item 27). An inter- he FCMCPP has been the development of igency team was establishedto reviewthe forest revenue system 1 Prakas -aministerialdeclarationthat md to make recommendations leadingto a joint August 2003 orms an additional component of an exist- 'rarakas of the Ministers of MAFF and MEF. ng law- covering forestry revenue systems nanagement...While presumablynow Supervision of the review process proved difficult, and the :ompleted and legally applicable,the 2overnment proceeded with the Prakas.A limited consultation Jrakas has still not been publiclydissemi- vas organized and involvedthe Bank and the IMF, but this was iated. In the first instance its disclosureis ised by the Governmentto inform rather than to seek input during indoubtedly the responsibilityof the Cam- hafting of the Prakas. The efforts of the interagencyteam devel- iodian government rather than the World )ped somewhat stronger institutional capacity in both Ministries 3ank. Howeverthe Bank, havingchosento md involved Government staff in World Bank Institute/PROFOR- ake a role in the Prakas development,had sponsored international policy seminars. :onsiderable scope to steer the process. It The Bank proposesto bring the issue of disclosure and con- :hose not to exercise this. - :erns about remaining weaknesses in the Prakasto the multi- jonor TWG and seek support for a resumption of work. Review of Management Plans Conces- - 36 The Bank has endorsed using companytrack records in conces- sionaireTrack Records. The FCMCPP sion evaluation and has encouragedthe Governmentto cancel :eam reviewing the plans closed its eyes to ;ontracts for concessionaires that are in clear and persistent non- dl past offences by the concessionaires. :ompliance with Cambodianforestry regulations (see Item 3). This established a skewed system of as- Sompany background was reviewed as part of the Independent sessmentby which plans written by exter- Reviewof SFMPs (co-financed by the Bank) and recommenda- nal consultants were treated as the sole tions on suspect practices, such as the irresponsible use of sub- indicator of the company's will and capacity contractors,have been brought to the attention of the Govern- to manageforest responsibly. ment and the CTIA. Ultimately, the FA refused to accept unproven allegations in its assessment methodology, but the TRT addressed a number of issues, including the quality and completenessof environmental and social impact assessments, in qualifying and explaining its final recommendations. If illegal logging had diminished forest volumes, this would have been reflected in the strategic level in- ventory results and allowable yield calculations.The TRT also highlighted issues and weaknesses in the ESlAs that will need special attention at the next level of planning. Data on legal and contractual breaches by concessionaires (p. 13 of the Global Witness attachment to the Request), based on Fraser Thomas (2000a), show that none of the six companies that were recommended to proceed to the next level of planning ii known to have engaged in "extensive" illegal logging. Review of Management Plans Timber - 36-37 The scorecard is only one part of an internal review system estab Volume. The World Bank took no action to lished within MAFF and FA for evaluation of SFMPs and, despite prevent its projectfrom adopting a wholly the flaws in the scorecard approach, the results of the first phase, flawed scorecard system for assessing in which rejections were recommendedfor 9 of 15 concessions, concessionaires'SFMPs and ESIAs. Under generally support the validity of the system. the FCMCPP methodology,different ele- ments of companies'submissions are as- To ensure an objective and balanced review, the Bank estab sessed and a certain number of points lished its prerogative to review and comment on forest manage- awarded or deductedfor each component. ment plans prior to their submission for final approval (Develop- These individual scores are then added to ment Credit Agreement, para. 5(c) of Schedule 4). In addition, th6 produce an overallfigure. The system is donor community, with Bank support, established the process of very heavily weighted towards considera- public review and comment on SFMPs; this drew attention to tion of the amount of timber the company weaknesses in the estimates of timber volume and concerns about the need to eventually adjust volume estimates and com- 41 Cambodia - -Page No.' ias left in its concession. - )artment boundariesto accountfor community use, biodiversity :onsewation and other management objectives. 1 ~~ ~~~ ~ ~ ~ _ _ _ _ _ ~~~ ~~ Methodologyof SFMP andESlA Review 73 3leoresins are producedin varying quantities and qualities by ~ .egarding Resin Trees. [The Bank is in :reesof many tropical species. Resin tapping is an important )reach of OP 13.05 by1Not taking any ac- source of incomefor many poor rural Cambodians, as it is in other ion to change the flawed methodologyof :ropicalcountries. Industrialforestry can be in direct conflict with ,he FCMCPP's review of the SFMPs and 'esin utilization, and protection of livelihoods requires careful ISIAs, in particular the project's refusalto danning to excludetrees used for resin from the harvesting pro- :akeaccount of the legal prohibitionon cut- gram. If this is not possible,either substantial areas must be re- :ing resin trees. This protectionof resin moved from the area availablefor industrial timber harvesting, or :rees is specified in Cambodia law (1988 alternative compensatoryor protective mechanisms developed. Decree on Forest Practice Rules; 2002 The full extent of the resin tree issue in Cambodia emerged dur- Forest Law). This has led to FCMCPP's ing implementationof the project and the Bank has supported endorsementof companieswhose conces- studies (BNPP-supportedwork on biodiversity by WCS), including sions may not be economicallyviable. It will those cited in the Request. also encourage companiesto continue log- ging resin trees, an activitythat is illegal Regulatory provisions regarding resin trees have evolved and which will serve to further impoverish during the period of projectimplementation but at present hatvest- already poor Cambodians.This goes di- ing of resin trees is prohibited. Inclusion of all standing trees in the rectly against overall World Bank develop- concessionforest inventory is based on the purpose of the inven- ment objectives. Notethat this issue has tory (and the associatedcalculations), which is to support com- been raised with World Bank and FCMCPP partmentdefinition and not determination of harvesting strategy. staff on a number of occasions.[See also Volume figures were discounted by 50 percent in harvest calcula- pages 14-15, 37-39 44-45, 47-50 and page tions used by the FA TRT and do anticipate limitations that might 73 of the Global Witness report.] occur at later stages in the planning process. Concessionaires plan their operations at their own risk, and nothing in the TRT work implies a commitmentto or guarantee of concession con- tinuation. Work on a legal opinion on resin tree tapping and logging has proceeded over the last year under USAlD funding, and the Bank - has assigned a social forestry consultant to help facilitate related consultations and discussions. Adverse Social Impacts. In April 2004 the 32, The Bank has been concerned from the outset about social risks. outgoing task managerclaimedthat a 40-41 There has been substantial discussion within the project Task World Bank social science specialist had Team, with Governmentcounterparts and with concessionaires concluded that social impactswere ade- on how best these can be managed and anticipated and at which quately addressed during the strategic level junctures in the three tiered planning process. The intention was planning process. The social scientist's to give attention to social issues at all levels, but it was anticipated supposed conclusions(which have also not that deficiencies would occur especially at the strategic level, be- been published) are at odds with those of cause of the large areas, large number of villagers, and long-term the independent reviewteam that examined planning horizon (25 years). Measures, such as support (from the companies' plans in July to August PHRD and later Bank budget) for a social forestry consultant were 2004. introduced to respond as specific concerns materialized. mhe FCMCPP staff and the World Bank task manager have increasingly The Bank has never approved any strategic level ESlA and sought to gloss overthe concessionaires' has acknowledged the weaknesses highlighted by the Independ- glaring lack of attention to social impacts by ent Review of SFMPs. The Bank agrees with its recommenda- arguingthat these can be addressed at the tions and has encouraged the Government and concessionaires compartment (five year planning) level, to meet and discuss how to address the concerns highlighted in after the companies'strategic (25 year) the Independent Review report. level plans have already been ap- In response to the assertion that the project design did not proved...World Bank and FCMCPPstaffs envision a compartment level planning process, the December motivationsfor pushingsocial considera- 1998 Identification Mission outlines the three tiered concession tions to the compartment level planning management planning system (later published by Fortech, 1999, stage are suspect, not least as the project P. 5). design never anticipatedwork at the com- partment level at all....That the World Bank - 48 Forestry ConcessionManagement and Control Pilot Project 9 now so eager to push social issuesto a )lanninglevel that it did not previouslycon- ;ider of importance raises serious ques- ions about its commitment to ensuringthat hey are addressed in a meaningfulway. gnoring Impacts on Forested Land- Management believesthatthe Bank appropriately followed the scapes. The FCMCPP assessment[of the :riteria of the 2004 Guidelinesfor the Review of Forest Manage- Aans] excluded consideration of the com- nent Plans (FA, 2004c, Annexes 4 and 5). These criteria address lined impacts of logging companies' plans 3djacent land uses, watershed processes, wildlife, and "effects on )n Cambodia'sforested landscapes.The heforest resourceas a whole." .eamexamined the different sets of plans Mirely in isolation from one another.This The Bank recognizedlandscape approaches to forest manage- approach proceeded from the flawed as- ment in the BiodiversityConservation Guidelines prepared in Eng- sumption that logging would only have envi- ish in 1998, subsequentlytranslated into Khmer with AusAlD *onmentaland social impacts within the wpport: "The purposeof forest management units, whether soundariesof the given concession and the zommercialconcessionsor community forests, is to balance sus- :ombined impacts of groups of contiguous tainableforest commodity production with the maintenance of :oncessions could be discounted. ecologicalservices, biodiversity conservation and landscape sta- bility. Forest concessionswill not only have an important biodiver- sity conservationfunction on their own, but will also provide buff- ers around and connectivity between the systems of national protectedareas. Thus concession planning will have to look both internallyand to the provincial scale in its compartment designa- tions and management prescriptions" (Section 2.2). In partnershipwith the WCS a pilot study and training course was funded by the BNPP with the overall goal of strengthening the mainstreamingof biodiversity concerns into forest concession reform and management.This work led to a Ministerial declara- tion formally designatingthe Keo Seimar section of the former Samling Concession as a national area for biodiversity conserva- tion. In addition the aforementioned Biodiversity Conservation Guidelineswere revisedto incorporate the lessons of the WCS pilot (Final ReportAugust 2002). During the October 2004 supervision mission, the Bank sought and received the commitment of the FA to explore oppor- tunities for landscape level conservation in the Strung Chinit- Prey Long area, subject in particular to cumulative impacts. Specifi- cally, the Bank agreed with Government on use of an ongoing review of the protected areas system funded by the Biodiversity and Protected Areas Management Project to assess appropriate mechanismsfor conservation in an area that is overlapped by three concessions. That project is currently completing a nation- wide gap-analysis of the protected areas system in Cambodia.As part of that review the study will evaluate areas currently not un- der formal protected status. Stung Chinit-Prey Long is included within this national review. Recommendations on its biodiversity significance and future protected status will be made as part of the study's final analysis. See also responsesto items 16, 17,and 19 above. Deficienciesin Draft SFMPs. As a result The Bank is aware of deficiencies in the six plans and has re- of the deficienciesin the FCMCPPs as- frained from "endorsing" them or "recommending [their] approval.' sessment and the Bank`s failure to correct Endorsement and recommendation is the sole purview of the FA them, by June 2004 the project had rec- and not of the Bank. The TRT of the FA has recommended the si ommendedthat the Cambodian govern- plans to the Director, and provided both justifications and qualifi- ment approvethe plans of six of the com- cations on its recommendations.The FA and the MAFF have as- panies....With two exceptions,the FCMCPP sured the Bank that they will either: (i) have the deficiencies in has not disseminatedits assessments of 49 Cambodia - - Page No? the companies' plans. A table setting out these plans corrected; or (ii) reject the plans the review team's conclusions is included, however, in the annex of the 2004 GFA Concerns about disseminationof information and the disclo- Terra review of the six sets of documents. sure policy are addressed under Item22. The Government has This summary shows howthe FCMCPP not formally accepted the IFSR recommendationto end the con- has implicitly or explicitly acknowledged cession system; it has verbally indicatedthat it will not abandon deficiencies in all the concessiondocu- the case-by-case concession review process (Aide memoire, Oc- ments to which it has given its endorse- tober 2004 mission).The Bank has recommendedthat if the Gov- ment. In each case it has justified this with ernmentwere to proceed with forest concession management the argument that these flaws can be recti- planning (even for the short period of ten years indicated in the fied during subsequent planningstages.,, IFSR)then it should reflect carefully on the recommendationsfor As already noted, the World Bank project additional planning requirements included in the report of the In- and the Government ForestAdministration dependent Review of SFMPs. !I?the Bznk`s public comments on have declined to publish the FCMCPP's the IFSR and in consultations with the Government, the Bank evaluations of the SFMPs and ESIAs,thus highlightedthe urgent need to establish a robust system for plan- adding to prevailing lack of transparency ning, management, and protection in post-concession areas. within the sector. Communities affectedby The ITTO sponsored an internationaldiagnostic mission in concessionaires' activities are therefore 2004 on obstacles to achieving sustainableforest management in denied even an explanation as to why the Cambodia. This mission, led by a Senior Fellow with WWF Inter- World Bank project is endorsingthe six national and the former Director Generalfor the International Cen- companies' plans. tre for International Forestry Research, recommendedthat, not- ...Followingthe FCMCPP's recommenda- withstanding the controversy and problemssurrounding the tion of approval for [six enterprises]...,the management of concession in Cambodia, a small number of con- international donor Working Group on Natu- cessions should be allowed to proceed to the next stage of their ral Resource Management convened an management planning. Furthermore,the missionfound that the independent evaluation of the six sets of "The World Bank sponsored studies of concession management plans. The review team concludedthat not have produced 15 sets of guidelines that, if implemented, would one of the six companies should be allowed result in Cambodia having some of the most sophisticated, tech- to resume logging without serious adjust- nically difficult and costly concession management in the world." ments to the plans that the FCMCPP had ("Achieving the ITTOObjective 2000 and Sustainable Forest recommendedfor approval. ...The World Bank helpedto fund this inde- Management in the Kingdom of Cambodia," International Tropical Timber Council Document (XXV11)/15, November 12, 2004). pendent review. It also helped to pay for the Independent Forest Sector Review (IFSR) completed in April 2004 that recommended that the entire concession system be scrapped. In October 2004 the Bank pub- lished a set of comments in responseto the IFSRwhich admitted that "concessionaire and the Government performance has been largely a continuation of the `systemfailure' described in the ADB supported assess- ment (of concessions in 2000)". - ~~~ Overturn of Log Transport Ban. r h e 73, The Bank endorsed the December 2001 Prakas banning log Bank is in breach of OP 13.05 by] Repeat- 48-51 transportation and suspending harvesting operations. The Bank edly attempting to help a company... over- has been cautious in its approach and mindful of local community turn the log transport ban and profit from its and civil society concerns when considering how to dispose of the illegal logging of villagers' resin trees. Ad- large volume of harvested material that remained along road mittedly,World Bank staff have themselves sides and in the forest when the transport suspension came into been so directly implicated that is debatable effect (apyoximately 6,000 pieces with an estimated volume of as to whether this is simply a breach of the 19,000m -see SGS letter to FA auditing proposed logs and supervision policy. outstanding royalty payments, April 1, 2004). World Bank, FCMCPPand ForestAd- ministrationstaff continued to discuss In 2003, the Bank mobilized a resettlement specialist to con- means of overturningthe transportation sider claims by NGOs that the stockpiles associated with the moratoriumthroughout 2004. Written com- Colexim concession and an adjacent rubber plantation resulted municationsfrom Global Witness in July from socially disruptive logging and land development. The Bank and December2004 requesting that the noted serious problems with the land development process and Bank explain its involvementhave so far - the absence of adequate planning and social safeguards in the 50 Forestry ConcessionManagementand Control Pilot Project - Claimbsue -Page No.` met with no response. In December2004 `ubberplantation project (which was not Bank financed). The Bank staff were instrumental in weakening 3ank preparedTOR for a retroactive mitigation plan that were the log transport moratorium in the course iresented to the Governmentand discussed with donors and of negotiations between donors and gov- VGOs. The plan proposedthat revenues be set aside to fund ernment over next steps in the forest reform :ompensatory measures. Ultimatelythis plan was not put into process. In mid January 2005 government action because of NGO objections. officials announced that they were on the point of resuming old log transportationand InApril 2004 the Bankwas approached by the Government would be engaging the servicesof consult- :hroughthe TWG and asked to comment on a proposal to move ants to the FCMCPP to facilitate the proc- ogs from nine companies.Bank staff responded that all of the ess. ogs shouid be inventoriedand all royalties paid before authoriza- The outcomes of these activitiesare :ionto move them was given; that SGS should monitor any harmful in two ways. Firstly,the Bank is novement; that the Government shodd puS1icly disclose its plan weakening one of the few availablepoints to move the logs so that civil society could participate in the moni- of leverage over the companies. It is the toring if it wished to; that Government proceeds should be di- suspension of their activitiesthat hasforced rectedto address development in communities neighboring the the concessionaires even to pay lip service narvestareas; and that the value of logs as evidence in any ongo- to such requirements as communityconsul- ng court cases should be preserved. tation and environmental and social impact During preparationfor the December 2004 CG meeting the assessment. If the Bank succeeds in get- subject of the log transportation ban was again raised by the ting the companies operationalonce again Government,which sought an easing of the ban to allow log before the planning processis complete, movements to meet domestic demand (wood for the new parlia- the concessionaires will make even less ment building was specifically referenced). In donor discussions, effort to address such issues. various formulations rangingfrom quite liberal to very restrictive Perhaps even more disturbing is the were considered.The Government held that the position that was Banks efforts to help loggingcompaniesto tabled during the CG meetingwas too restrictive and objected, profit from serious forest crime, the victims claimingthat it had not been adequately consulted. Ultimately the of which were poor villagers. The Bank thus version that was agreed between donors and the Government stands on the verge of becomingan acces- addressessome but not all of the concerns that the Bank had sory to criminal activities. The fact that it highlightedin its recommendationsto the TWG in April 2004. The should embark on such a course of action new benchmark reads: "Maintain suspension/moratorium on log- is one of the most troubling aspectsof the ging, transport of logs (except those which have been already entire history of the FCMCPP. inventoriedand for which royalties have been paid in full), and new economic land concessions pending completion of applicable review processes and/or a legal framework." It is correct that no written reply was issued to either of the cited Global Witness letters but it is not correct to assert that there was no response. A Bank representative met with Global Witness in its offices on July 29, 2004 to discuss log transportation and other issues. As reported by Bank staff in an email dated July 29, 2004, Global Witness appeared to agree that if the Government did not provide a reasonable plan for transport of existing logs, the Bank should indicate clearly that it did not support the pro- posed transport. If the Government chose not to transport, all would accept that decision. Should the Government choose to transport, the Bank should focus, inter alia, on inventory con- trolllog tracking and ensuring the royalty status of the logs. Governance. Recent independentstudies 52 Timber harvesting in concession areas has been effectively con- of Cambodia'sforest sector indicatethat strained by a logging banfor more than two years while the ca- the Bank has not wrought any changes in pacity of Cambodia's FA to review and regulate concession man- Cambodia'sforest sector governance that agement is being strengthened. From the initiation of the first would compel the concessionairesto be- Bank TA Project, through ADB Project Preparation Technical As- have any differentlyfrom the way that they sistance, to FCMCPP, the principal intent has been improved did in the past. There are neither incentives governance; specifically, to improve the capacity of Cambodia's nor controls sufficientto force the compa- forest management agency to control the industrial concession nies to obey the law and respect the rights system that Cambodia had chosen as the main instrument for of ordinary Cambodians. - regulating production forest management. This has led to: 51 Cambodia - -Page No.' A Concession ManagementSub-Decree February 2000, es- tablishing Government expectations for the forest industry and a basisfor enforcingthose expectations; The first ForestryLaw for Cambodia in August 2002, provid- ing a context for both commercial and communityforest managementand for compliance and enforcement in all for- est operations; A series of standards and guidelines, producedfrom 1998 to 2004, for concessionforest management, including planning, reduced impact harvesting,forest engineering (roads and water crossing),forest crime reduction, biodiversity conserva- tion and social forestry; A map folio and computed statistics on forest cover, pub- lished in 2003, showing the extent of forest cover in 1996/1997and in 2002, thus allowing calculationof trends in forest cover; A three tiered forest planning system with approved plans directly enforceable in law; A series of Handbooks, prepared from 1998to 2004, to guide the planning system-Forest Planning Handbook, Forest In- ventory Handbook, Forest Systems Research and Modeling Handbook and Guidelinesfor the Review and Management Plans; A total ban on forest harvesting on concessions, initiated in 2002 and now in its third year, until strategic and compart- ment level plans are prepared and approved: and The recommendedcancellation of 10concessionsfor either - non-viability or irretrievably poor performance. - 40. World Bank EndorsementAs a Political 53-54 Cambodia is a post-conflict country in which the Bank has made Commodity.As the Bank is well aware but good governance a key objective. The Banks work with Govern- keen to deny, its endorsement of, or even ment institutions in this context may appear to legitimize actions associationwith, particular institutionsor taken by those institutions.A delicate balance needs to be main- policies is a political commodity.Cambo- tained when the efforts of the Bank in a project such as the dia's forest sector is no exception. Exam- FCMCPP are focused on improving forest management. ples includethe debates on the draft Forest Law held in the Cambodia's NationalAs- The Bank has helped generate information, insight and pro- sembly in 2002, as well as use of the cedures addressing a range of issues facing the forestry sector in FCMCPPforest cover survey as a political Cambodia. For interest groups to engage in political, commercial prop in July 2003... or other processes in relation to this information, or to misuse or - misrepresent data or concepts is beyond the control of the Bank. OutcomesWith versusWithout the Pro- 56-57 Studies undertaken during the TA Project estimatedthat illegal ject. The overall impact of the Bank`s inter- logging (occurring in 1997 at a rate of 4 million m3per year) would vention was to weaken significantlythe exhaustthe forest resource in five years (DAl, p. vii). In contrast momentumof the forest sector reform to this "without project" scenario, concession logging has been process.The ADB review's recommenda- suspended, large scale illegal logging has been brought under tion that the concessionairesundergo a control (according to the Government's audited estimates of foresi stringent restructuringprocess provideda crime), and a more coherent planning and managementframe- means of weeding out those that had al- work has been defined and begun to be implemented. Significant ready caused serious material harm. How- problems and challenges remain, but illegal logging has been ever, this approachwas comprehensively sharply reduced (SGS quarterly reports). underminedby the FCMCPP,which set out with the express intentionof helpingthe Following up on suggestions that logging would be resumed Forestly ConcessionManagement and Control Pilot Project Claimllssue Page No.' zompaniesto clear this newset of hurdles. - _c nappropriately,the Bank has consulted with the Government and indeed, without the project's assistance, *eceivedassurancesthat it intended to adhere to the provisions of advice and willingness to bendthe rules in :he concession managementSub-Decree and the December favor of the concessionaires, it is highly 2001 Prakas.To date, these provisions have been observed. unlikelythat any would have stood a chanceof passing through the strategic At the core of the Request is the overall assertion that the level planning process...The Bank's Bank has or is poised to give its approval to logging in the context agenda obstructed the developmentof al- of inadequate plans and processes.Over a period of years, this ternative management modelssuch as possibility has been raised repeatedly by groups and individuals communityforestry and proved a source of associated with the Request,despite the fact that no logging ap- disunity within the internationaldonor com- provalshave yet been issued.As recently as January 2005, the munity. Directorof the FA indicated to donors that he estimates that at least two more years will be requiredfor concessionaires to com- plete the necessary approvals. The Bank remains aware of the fragility of the ongoing sus- pensionof logging activities.The excesses of the 1997 logging season are a constant reminderof the urgent need to establish effective operations and controls in the sector. Through FCMCPP, the Bank sought to assist the Government in building its capacity for effectiveforest planning and regulation. Management does not find credible the claim that the Bank has obstructed the development of alternative management mod- els in Cambodia. As noted above (see Item I), many of the pro- ject's contributions to the sector-sponsored inputs including planning guidelines, regulatorycapacity enhancement, crime monitoringand reporting procedures-are applicable to any forest management regime that Cambodia currently has or may adopt in the future. While the Request focuses on the FCMCPP, Management believesthat its efforts in Cambodia and Cambodian forestry demonstrate the Bank's responsibleengagement through multiple operations.The Bank has integrated forestry issues, including sector legislation, community forestry, and forest law enforce- ment, into its policy-based lending. The Bank supports the man- agement and protection of the country's largest protected area, the Virachey National Park,as well as improvement of livelihoods in communities in surrounding areas through the Biodiversity and Protected Areas Management Project (Credit No. 33200-KH). Thc Land Management and Administration Project (Credit No. 36050- KH, USD 24.3 million equivalent)addresses security of title and land policy including management of State lands. Through its Agricultural Productivity Improvement Project (Credit No. NO110- KH, USD 27 equivalent) and Rural Investment and Local Govern- ance Project (Credit No. 37470-KH, USD 22 million equivalent), - the Bank is working at the local community level on issues of rura poverty, insecurity and instability. ~~ Harm from Logging. CherndarPlywood Letter Prior to the Request, the Bank was not informed about the cited has cut thousands of resin trees belonging from logging and claims of harm and has not had an opportunity to to villagers in Prame and Mlu Prey 1 Com- Com investigate. The Bank has not financed any logging and is not munes that have provided a source of live- muni- responsible for damages that may be the result of third parties, lihood for many years... Other nontimber ties including concessionaires, guards, military forces or others acting forest productsthat villagers have Gollected in violation of Cambodian law. to sell have also been lost... Samraong Wood has cut hundredsof resintrees be- The Government, with the encouragement of the Bank, sus- pended logging as of January 2002. mune... Pheapimexhas cut thousands of longing to villagers in Anlong Veng Com- Cherndar, Samraong and Everbright have been recom- resin trees belongingto villagers in Talat - mended by the FA TRT to advance to the compartment planning Cambodia Commune... Everbright has cut thousands of resin trees belonging to villagers...Ifthe phase, but have not had logging approved by the Government or the Bank. Pheapimex has not been recommendedto continue to logging concessions' management plans the compartmentplanning stage. which receivedtechnical assistancefrom the World Bank are accepted by the Gov- The Bank has provided no financial assistanceto the prepa- ernment and the companiesstart up their ration of concessionaires'management plans (see Items 'land 24 activities again, there will certainly be viola- tions even more severe than before on vil- lagers, especially on indigenouspeople... 54 5Ei t Forestry Concession Management and Control Pilot Project ANNEX3 SUPERVISIONMISSIONCHRONOLOGY November- December2001 Task Team LeaderILead Natural ResourceEconomist 2003; supervisionconducted in the field <. - , December2002 > " ' der/Le&dNaturalResourceEconomist* February2003 Cancelled due to lack of progress in projectimplementation MTR Supervision Mission 20 - Sr. SocialScien .SocialScienti Social ForestrySpecialist 'ProcurementandFinancialManagementSpecialistsvisited theprojectseparately. 61 ANNEX4 SELECTED DOCUMENTS AND CORRESPONDENCE 1. Cambodia Forest Concession Management Joint Working Group - Report of ISt Meeting, 16 May 2000 2. Email from Task Team Leader on Cambodia Forestry, February 22,2001 3. Management Letter from Country Director to Senior Minister, Ministry of Economy andFinance, October 4,200 1 4. Letter from Task Team Leader to Minister o f Agriculture, Forestry and Fisheries, Economy and Finance and Environment, October 19,2001 5. Letter from Country Director to Minister, Ministry of Agriculture, Forestry and Fisheries, December 12,2001 6. Letter from Task Team Leader to Director General, Department o f Forestry and Wildlife, October 3,2002 7. Management Letter from Country Director to Minister, Ministry of Agricultural, Forestry and Fisheries, December 6,2002 8. Letter from Minister, Ministry o f Agricultural, Forestry and Fisheries to Country Director, December 18,2002, with attachment 9. FRM 5th Quarterly Report, Appendix 1- Descriptiono f Satellite Imagery Study, Responseto Letter sent by Global Witness, March-May 2003 10. Management Letter from the Rural Sector Director to the Director General, Department o fForestry and Wildlife, May 21, 2003 11. Quality Enhancement Review-October 2003 12. Email from Senior Operations Officer on Meetingwith GlobalWitness, July 2004 CAMBODIA FOREST CONCESSIONMANAGEMENT JOINT WORKING GROUP REPORTOF lST 16 MAY 2000 MEETING, Background The AD6 funded Concession Review report, and the dialogue following its release in draft, have created a valuable momentumfor change inthe managementof Cambodia'sforest sector. All padiesexpresseda commitment to sustainability and equitability principles as a basisfor management. The Departmentof Forestryand Wildlife (DFW) andthe CambodianTimber IndustryAssociation (CTIA) undertookto continuethe dialogue, in an attemptto respondquickly and positivelyto the various recommendationsof the ADB reportandthe Review Panel. The followingis a brief report on the 1` meeting of the Joint Working Group, establishedby the DFWand the CTIA for this purpose. Participants The Departmentof ForestryandWildlife, representedbythe Directorand some of his senior staff; The CTIA, representedby the Chairmanand some concessionaires; The ADB SustainableForestManagement Project,representedby the Team Leader; The Facilitator, an internationalconsultant. Agenda 1. Roleof CTlA inthe dialogue; 2. Discussionof timing and processfor establishmentof standardsof acceptability for concession managementplans; 3. Proposalsfor performancemilestones in managementplandevelopment; 4. Discussionof processfor the establishment of interimannual allowablecuts (AAC), pendingacceptanceby DFWof concessionmanagement plans; 5. Discussionof processand timing for reviewof draft modelforest concession agreement. Identification of criticalquestionsand inputs required; 6. Mechanismsfor involvementof O W staffinconcessioninventoryand monitoring work; 7. Proposalsfor the Working Group'sown work-plan; 8. Timing and agendafor next meeting. Discussionand Conclusions: - 1. CTlA Role:The CTlA is ableto representthe concessionaireson all mattersof a generalor technical naturein the dialogue. Renegotiationof individualcontracts later inthe processwill be bilateral, betweenthe RGC and each concessionaire. Cambodia Forest ConcessionManagement and Control Pilot Project 1 2. Standards for Sustainable Forest ManagementPlans: Standardsfor the development of managementplanswill bedevelopedwith technicalassistance provided by the existingADB project, now in its concluding3 months. Appropriate expertswill be on handin early June, and the standardswill be available in eady July 2000. The expertswill present an inception reportto the Joint Working Group early intheir work, so that the CTlA and other stakeholderscan make appropriateinput to the processof standardsdevelopment. While the standards will bethe product of a consultativeprocess, it will be upto the DFWto enforcecompliance,inthe design of the management planswhich will be based on them. It is anticipatedthat the standards derivedfrom the consultative processwill be availableto the CTIA, for their acceptance, in July 2000. 3. Performance Milestones: The standards for management plan designwill be in place in July, as above. By the beginning of September 2000 the CTlA will submit, for the approvalof the DFW,evidence that it has obtainedthe services of credible professionalexpertise, to leadthe processof plandevelopment for its members, in responseto the standards. By early October 2000 the CTlA will presentto the Joint Working Group, for approval by the DFW, an inceptionreport by the planningteam. The reportwill cover the planningparameters,information requirements,scope of work, and resourcerequirements,for the formulationof management plans by the concessionaires. Fieldwork on the forest-technical,environmental,andsocial aspects of the managementplanswill take place in the dry season (October 2000 to May 2001). Managementplanswill be submittednot later than September2001. The DFW maytake two or more monthsto reviewand approveor rejecteach proposed plan. The 15 November2001 deadlinefor submission of the sustainable forest managementplan by the concessionaireswas understoodto be a real deadline. Concessionairesfailing to meetthe deadline will be so notifiedby the DFW. If an acceptable management planis then not submitted by 15 December2001,the offendingconcessionairewill face immediatecancellationof the concession,at the discretion of the Directorof DFW,after considerationof any mitigatingfactors and affer one month's prior notification, in linewith the subdecreeon Forest ConcessionManagement. 4. InterimAnnual Allowable Cuts: Forthe interim period until managementplans are in place, the CTlA and the DFW haveagreedto take a very conservative approach, by reducing annualallowable cuts by at least 50% to 70%. Subdecree 049 providesfor a maximumofftakeof 30% of matureor over-maturetrees inany given area for the calculationof currentAAC. Forthe cutting seasonwhich will begin in November2000, the interimAAC will be reducedbetween50% to 70% Existingregulationsconceming girth limit, species, and other silvicultural, environmentaland social parameterswill apply. Monitoringof the cutting activity will be carried out by staff of D W s Forest ManagementOffice (see below). Cambodia Forest Concession Management and Control Pilot Project 2 5. Draft Model Forest ConcessionAgreement: The ADB Concession Review Project has provideda draftmodelagreement, as a basisfor discussion leading to revision of the concessioncontracts. It was agreedthat review of that document should begin at an early date, under the auspices of the Joint Working Group. A date and processfor the reviewwill be determinedat the next meeting. General issuesconceming royaltiesand taxationwill be considered here,among other matters. It is understoodthat finalizationof contractswill be a bilateral procedure, and that the terms of eachcontractwill dependin parton the content of the particularmanagement plan. 6. DFW Staff: Itwas agreedthat there are at least two separate roles for DFWstaff inthe managementof concessionsinthe field, i.e. inventoryandmonitoring.To be carried out effectively,both requireresourcesof funds, equipment and training. Both tasks could legitimatelybechargedto the concessionairesinthe form of a service charge, if an appropriatelytransparentand accountablefinancial mechanismwere in place. The Director of DFW undertookto explore the establishment of an official mechanismwhereby service charges would be paid by the concessionairesto the DFW, who would usethe funds to meet the costsof the services,includingreasonableincentive paymentsto staff. The two functions of forest inventoryand performancemonitoringare quite separateand potentially in conflict. Inventorytasks will be carriedout by staff of DMTs Forest Research Institute. Monitoringwill bethe purviewof the Forest Management Office. It is anticipatedthat the Geographic InformationSystems (GIS)unit of DRNwill be similarlyinvolved, inthe provisionof mappingservices. 7. Work Plan: It is intendedthat the Joint WorkingGroupwill meetfrequently. A formalworkplan will be developedfor confirmationat the next meeting. 8. Next Meeting: Dateto be announced,on or about the 30" of May 2000. ! Cambodia Forest Concession Managementand Control Pilot Project 3 William 6. Magrath Subject: Fw: CambodiaForestry 02/10/2005 03:36 PM 81679 EASRD Please keep on file William B. Magrath Lead Natural Resource Economist Rural Development and Natural Resources East Asia and the Pacific Phone (202) 458-1679 -----Forwardedby William 6.Magrath/Person/World Bank on 02/10/2005 03:36 PM ----- Fax (202) 477-2733 From: William B. Magrath on 02/22/200104:40AM EASES To: Tom C. Tsui/Person/World Bank, IanC. Porter/Person/World Bank@WorldBank CC: BonaventureMbida-Essama/Person/World Bank@WorldBank,Su Yong Song/Person/World Bank@WorldBank, Mark D. Wilson/Person/World BankOWorldBank,Glenn 5.Morgan/Person/World Bank@WorldBank, Steven N. Schonberger/Person/World Bank, LouiseF. Scura/Person/World Bank, Zafer Ecevit/Person/World Bank@WorldBank bcc: Subject: Cambodia Forestry As the subject of the Cambodia Oraft Forestry Law has come up, Ithought it would be useful t o give a recap on where we have been and come t o generally on forestry inCambodia. Ihave tried t o keep this as brief as Ican and will be happy t o provide additional information or references as needed. Ihave also not dwelt on biodiversity issues. Glenn is better equipped there, Iwill be preparing a simlar note covering the sector inLao POR. Please let me know if this is useful and if you need additional information. Immediate Issues and Next Steps for the Bank. Legiiv'afion. A draft law was submitted to the Council of Ministers by MAFF on February 1. The draft, which has not been provided t o the Bank, is reportedly under review, but debate by the full CoM is not yet scheduled. The Prime Minister, however, is said to have ordered that the draft be forwarded to the National Assembly by March i(the significance of the SAC and IMf target dates in this are not known). Government has not responded on Bank comments on most recent draft provided t o the Bank. Without assurance on the points raised, the current draft can not be considered satisfactory t o the Ilrclyn lj~ii~tistn-l.aauidnc~, Ii:\SlU>, Thc World Rank rcl. 202-458-2450, cmd: claR"idao@woildbank.org Cumbodia Forest ConcessionManagement and ControlPilot Project Bank. Recently, the Bank has been trying to makearrangements for Government acceptance of additional legal technical assistance. Resourcesare available under the PHRD for the LIL project or under the LIL itself. Effective assistance could be provided while the draft is being considered at an interministerial level or at the National Assembly, Whatever the status of the draft at the time of the upcoming SAC supervision mission, the Bank should request an exdicit schedule for further grocessinq and consultation linked t o the upcoming Bank assistance. Forest Law Enforcement. Global Witness and Government are in indirect negotiations regarding public disclosure of information on alleged illegai loggingactivities. Bepending on the outcome of these negotiations, the Bank will needto work with Government t o identify an alternative independent monitor or t o satisfy itself of the viability of the aoreed Drotocols. The Bank may eventually be called upon t o assist in dispute settlement between Government and Global Witness. Concession System Restructuring. The Bank should reauest from Government a schedule of actions [between now and end-Satember. 2001) on the reneootiation of concessioncontracts and the processino of onv cancellations and terminations. This should include steps on the recruitment and selection of legal and other advisers under the recently signed PHRO. The Bank is mobilizing consultants to review results of an ongoing industry sponsored study of royalties and revenue arrangements. Forest ConcessionManagementandcontrol Pilot Project. Government should complete contracting with the Project Adviser and proceed with consultant selection and other project activities. The Bank is continuing t o work with concessionaires,NGOs and the DFW on field testing of biodiversity guidelines for concessions. NewIssues. The Bank should consider incorporation of second generation forestry and natural resource management policy issues into the proposed second SAC. Potentially important issues include: domestic timber market pricing; log export deregulation; decentralization of community forestry administration; judicial reform; Department of Forestry and Wildlife budget sustainability. Donor Coordination.With the posting of a Senior Operations Officer responsible for rural sector issues to the PhnomPenh Office, as well as Bank predominance inthe natural resource sectors, the Bank should consider assumina IeadershiD of the Donor Workina Group on Natural Resource Manaaement. The Bank should also consider preparinq a forestrv sector uDdatefor the upcoming CG Meeting, Background. Forests cover roughly half of the country (10-11million ha out of 18 million ha). Some 3 million ha (most forested) are designated as parks and protected areas. A t the peak, nearly 7 million ha of forests had beengranted as industrial forest concessions. This amounted to essentially all of the commercially valuable area and also included margincl and unstocked areas, Cancellations, mostly affecting relatively less valuable areas, have reduced the area under concessiont o around 4.7 million ha. Most o f the remaining forest amounts to scattered woodlands, open areas and flooded forests, which while of value t o local communities and for environmental considerations, are I:icl!,ii t3autista.l .aguidxi. Il.\SIID, `l`hc \K'orld Hank tcl. 201-458-2450, cmail: cla~uidao~worldbank.~r~ Cambodia Forest Concession Management and Control Pilot Project o f limited commercial interest. Deforestation is proceeding at a relatively slow pace (by regional and international standards), although there are increasing reports o f conversions t o agriculture. More significant is forest degradation largely due t o illegal logging. There are no genuinely scientifically defensible estimates of annualallowable cut f o r the country, but indicatively 0.5 million cubic meters can be assumed, I n contrast, total fellings, 90%o f which were illegal in 1997, were estimated at over 4 million cubic meters. I t is generally acknowledged that illegal logging has fallen substantially, but there is evidence that it is beginning t o rebound. Logging, including illqal logging, generally focuses on large diameter valuable specimens. Collateral damage (road and track clearance damage to surrounding trees, etc.), and the long term distorting effect of removingsources of high quality regeneration, leavesan intact forest, but one that is significantly reduced in quality and value. Government Policy. Starting in the mid 1990'sGovernment embarked on an attempt t o aggressively develop the commercial and industrial potential o f the resource. This was motivated by a conventional view of the resource as an easy source of public revenue and as a foundation for industrial development as well as by political and corrupt private pecuniary interests. The policy mix included a range o f discredited protectionist measure (log export bans, domestic processing investment requirements) and low royalties. Landallocation was inappropriate, concessionaire selection was noncompetitive and nontransparent, contracts were poorly conceived, local interests were not considered, and monitoring and complianceprovisions were nonexistent. As a result, the concessionsystem was dominated by large foreign interests, with essentially no accountability, very little incentive t o practice sustainable management and Government had no countervailing regulatory capacity or a commitment to requiringacceptable standards of forest management. Bank sector work in 1995 estimated that sustainable revenues from forestry could eventually average $100 million annually, but in practice havenever exceeded $12 million and are now in the neighborhood of $8 million (an impact of the East Asia FinancialCrisis has been depressed timber prices such that a more realistic target for timber revenueswould be around $30 million, especially considering the extent of forest degradation in the intervening years). Government at the highest levels has madenumerous pronouncements on its commitment to forestry reform and, especially, to controlling illegal logging. Delivery on these commitments has been mixed. A t the DFW level, support for Bank assistance is strong and essentially all Bank initiatives have been enthusiastically supported and welcomed. Administrative capacity is seriously limited at both the DFW and MAFF levels limiting follow through. Throughout the Bank's involvement in the forestry sector, an ongoing concern has been the depth and breadth of Government commitment t o sustainable forestry and to due diligence in the management of public lands and forest revenues, Government's implementation and policy failures, while perhaps extreme, are not dissimilar to those seen in other forest rich developing countries. High levels of illegal logging and complicity from the military, senior political leadersand forestry officials are common features of the forestry sector. It was the depth of the problem, the potential of the sector vis-a-vis the poverty of the country, and the consensus among donors that Cambodia Forest Concession Management and Control Pilot Project raised the profile of forestry and made it a priority, Bank Strategy. Following from the initial 1995 sector study, the Bank has attempted t o assist design and introduction of reformed policies and strengthen capacity, while hedging with respect to uncertainties about Government commitment. Because of this reluctance, resources were first provided to Government through the TechnicalAssistance Credit, and through various ad hoc trust fund arrangements. Only in the last year was a LIL project approvedand an implementation support PHRO mobilized. Attention has focused on four aspects: controlling illegal logging; forest management; concessionsystem restructuring; legislative and regulatory reform. ConcessionSystem Restructuring. Government's prior actions t o place essentially the entire commercial resource under flawed concessions has conditioned and hamstrung the entire process. Bank and Government legal specialists have reviewed the concessioncontracts in detail and conclude that, although they are unfair t o Governmentand flawed in various respects, they constitute binding obligations. Inparticular, Bank lawyers arguedstrongly that the Bank should not interfere in the contracts and that the Bank would be exposedto considerable risk by promotingarbitrary terminations or cancellations. Government's Bonk-financed legal advisers recommended that the performance of individual concessionairesagainst various obligations in the contract could be used as the basis t o either force renegotiation or to justify unilateral termination. This would require finding and documenting specific performance lopses related t o financial obligations, forest management or other requirements. A Performance Review exercise was subsequently carried out for Government by AD8 grant-f inanced consultants who identified systemic failure across essentially all concessions (as well as on Government's part). Rattier than specifically identifying concessionsfor cancellation (with two exceptions), the ADB TA proposeda voluntary restructuring process. Building on these findings, Bank SAC conditionality was designed to require Governmentt o pursuea voluntary restructuringprocess with concessionairesand t o cancel for cause nonresponsive concessionaires(this conditionality is due t o trigger inthe Fallof 2001and a series of preparatory actions is underway). The Bank has had extensive discussions with some concessionaireson this program. An industry association has been formed and has broadly endorsed the approach. Concessionaireshave been in discussionwith Government on the requirements of the restructuring process, has negotiated a new standard contract (to be used as the model for bi-lateral negotiations). An industry sponsored study of forest royalties and revenue provisions is ongoing and is a critical ingredient t o the restructuringhenegotiationprocess. Government has unilaterally canceled about 10concession contracts (without consultation with the Bank) for reasons that have generally not been disclosed and which seem t o include inadequacy of a resource capable of supporting commercial operations (an explicit justification in the case of two ADB recommendedcancellations). These have not resulted in any ongoing dispute or claims against Government. Some concessionairesare clearly incapable and/or unwilling t o voluntarily restructure. Others are positioning themselves to assume control o f additional resources through consolidation of land from canceledor abandoned concessions. Others seem intent on operating without regard t o the restructuring initiative and clearly doubt Government's intention t o follow through, I,'l'hc World Bank t d 202-458-2450. cmall: cla#uidao~worldbank.org Cambodia Forest ConcessionManagement and ControlPilot Project Some stakeholders, especially NGOs, are also unconvincedof Government's intentions and are not persuaded by the extended review and renegotiation process. Global Witness, in particular, has on several occasions called for immediate and unilateral concessiontermination on the basis of alleged involvement of concessionaires in illegal logging. Other NGOs have called for greater transparency in the restructuring process and f o r clear definition of the process. Their particular concern is local community issues and consultations. Oonor agencies and the IMF have generally seem t o have been satisfied with the process to date. ADB financed consultants, with whom the Bank and IMF cansu!ted extensively, contributed heavily t o the definition s f the restructuring process. Particularly significant is that the ADB-financed consultants were unableto specif icaily document charges of illegal logging and raised concern that illegal logging would accelerate in the absence of concessionaires. This supports the gradual and, t o the extent possible voluntary strategy being pursued, I t does leave open the risk of concessionaireabuse of the interim period and of Government reneging on the final steps. The risks of concessionaireabuses are small relative t o damage already incurred and the risk of Government default is managed by the tranching of the SAC. ForestManagement.The scientific and technical basis of forest management in Cambodia is extraordinarily weak. I naddition t o there being little knowledgeon forest dynamics on which t o develop harvesting or other management prescriptions, there is no capacity or physical or institutional infrastructure whereby Government can exert itself t o influence forest utilization. I n the absenceof standards for routine and disciplined forest management, illegal logging has become the norm. I n parallel with efforts t o control illegal logging(see below), the Bank has supported development of a package of technical recommendationsand standards covering harvesting, engineering works, biodiversity conservation, social issues, management planningand inventory. These have been developed through technical assistance working in close collaboration with the Department of Forestry and Wildlife (DFW). A comprehensivefirst draft of the "Cambodian Code of Forest Practice" has been prepared in Englishand translated into Khmer as a component of the new regulatory framework for concessionforestry (see below). These general guidelines are intended t o be used by the DFW and concessionairesin the development and evaluation of strategic and operational plans and as the basis for the specification of approvalsand permit conditions. Introductiono f these provisions will be gradual due t o the general nature of these guidelines, the limited capacity of Government staff to interpret field conditions and t o apply judgment with respect t o the application specific features of the guidelines, and becauseof severe constraints on the DFW in terms of mobility, communications,and infrastructure. The recently approved Bank-financed Forest ConcessionManagement and Control Pilot Project LIL ($4.8 miIlion) will further support development of this system through technical assistance, training, provision of equipment and infrastructure. This project is experiencing minor delays due to recruitment problems caused by clearance procedures at the Ministry of Economy and Finance. rl/ega/Loggiiig.Illegal logging is a systematic and predictable result of the flawed policy and operational system for forestry in much of the developing world. I n Cambodia, this has been Forest Concession Managemenr and ControlPilot Project accentuated by the affects of war and unrest and by continuing political instability, As noted, in 1997illegal removals are estimated to have reached as muchas 4 million cubic metersand possibly more, I n the beginning of the Bank's interaction with Governmenton this issue, there was a general effort t o deny and minimize the problem and to blame it on factors outside of Government's control (the Khmer Rouge, neighboring countries). Government's only substantive response t o the problem was reintroduction in 1996 o f a ban on log exports. This was never fully effective, poses various economic efficiency problems and is largely a diversion from the underlying problem, Inaddition, the Prime Minister has made numerous public statements on his determination t o see illegal logging controlled, Government has claimed a 95%reduction in illegal logging. Until this logging seasoil observers, including Global Witness, have not specifically challenged this assertion although there is little data t o support any specific claim. While the long term solution to an illegal logging problem needs to be rooted insound routine sectoral and resource management, the crisis dimensions of Cambodian timber theft call for urgent and specialized measures. Bank-financedtechnical assistance introducedsystematic data collection t o estimate the severity and extent of the problem and the "Prevention/Detection/Suppression" framework as the basis f o r a coherent and sustainable foreit law enforcement approach, Currently, with Bank, FAO, UNDP, DFID, DANIDA and AusAID support, Government hhs put inplace a Forest Crime Monitoring Project (this system is also specifically required under the I M Fand SAC programs), This aims at supporting forest law enforcement by making available ona timely basis information on the general timber theft problem and on specific cases of illegal logging. n , e project provides training, equipment and expert technical assistance (identified by the Bank), A modern ''Case Tracking System" has been instituted, remote sensing information is being routinely assessedand data and reports are being collected from the DFWand Ministry of Environment field staff. The most unusualfeature o f the Forest Crime Monitoring Project is that Government has officially recruited an "Independent Monitor" t o report on the diligence of Government's own efforts. Global Witness, a UK-based NGOwith an established program on Cambodiawas selected t o perform this role. The Forest Crime Monitoring Project encountered substantial start up problems, but has generally proceeded well. The program involves several medium term capacity building activities and procedures for data collection and reporting will require more time to be fully institutionalized. Important issues have emerged on performance of the judicial system inhandling cases o f illegal logging brought by Government, the ability and willingness of Government to respondeffectively t o information on new case and on the conduct by Global Witness of its work as Independent Monitor. Several highprofile cases, where apparently strong evidence was presented in court have been overturned or dismissed by the judiciary, These cases are strongly suggestive of corruption and underminethe motivation of officials and staff to pursue new cases. I n other incidents, Government pursuit of information may have been selective and possibly biased by personal considerations. These are difficult to disentangle from other capacity constraints but merit monitoring. Global Witness has on several occasions, including around the time o f the recent Government/Donor meeting, enflamed the tensions inherently built into the Independent Monitoring I'vclyn Hautiste-hpuidao. I':ASRD, 'I'hc World Rank rLI.201-458-2450, cmaJ. elaFuidao@worldbank.org Cambodia Forest Concession Management and Control Pilot Project arrangement. I t s release of allegations t o the mediawithout notice t o Government, the inclusionof particularly inflammatory language and aspersions against staff and senior officials may have ruptured the arrangement. Various parties are now attempting t o reconcile Government and Global Witness and t o promote agreement on mutuallyacceptable protocols and procedures. RegulationsandLegis/atiun,Government's Bank-f inanced legal advisers providedGovernment with a detailed critique of the legislative framework for forestry development.Cambodianforest law (like much of the rest o f the legal system) is a patchwork of instruments that date back into colonial times. Proposed legislation has Deer! drafted at various time over the past sevenyears by Government, FAO, AOB-financed consultants and others. Satisfactory legislation was a condition of the first IMF program (canceled in 1997)and is required in boththe current IMF program and the SAC. There are purely political aspects t o the legislative process which account for some of the delay, These include rivalry between individualsand agencies. To a significant extent the Cambodian approach t o drafting legislation by a lead technical agency is not conducive t o a successful process for an intersectoral subject such as forestry. Under the SAC, Government adopted a Sub-becree on Forest ConcessionManagement. This establishes the proceduresand mechanismsfor DFW administration of the concessionsystem and incorporates directly or by reference the key products o f Bank-financedtechnical assistance on concessionmanagement. A specific legislativeagenda has not been laid out f o r forestry despite considerable discussionand public debate. Within Government, which has repeatedly and independently expressed a commitment to enactment o f a forestry law (the intent to enact a forest law is clearly implied inthe Constitution, Article 58), there is interest in clarification of the administrative arrangements and assignment of responsibilities for control of public forests. Among other stakeholders, NCOs in particular, there is concern about acknowledgment and respect for local communities use of forest resources. Bank and I M F concerns includethese and additionally relateto the orderly mobilization of the commercial potential of the resource base. I naddition, throughout the drafting process a sometimes curious array o f provisions arise including such arcana as a proposed requirement that registration of a marriagemust be based on evidence that the couplehas planted at least two trees! The current drafting process was assisted by ADB-financed consultants who worked with a DFW drafting team, This team worked largely in isolation until a draft was released f o r public comment in May 2000. The draft that was released was a departure from the version supplied by the consultant and included provisions drawn from a wide variety of sources including colonial and other sources. These consultations were convened under the direction of an Under-Secretary of State of the Ministry of Agriculture, Forestry and Fisheries (MAFF) who assumed ongoing responsibility for the drafting process. There has been a mechanicalapproach t o the drafting process at MAFF: all commentsare noted ond an effort is made to occommodote nearly all contributions, often without reference t o guiding principle or objective. Updated English translations are available only at intervals and the translations have been of exceptionally poor quality. Cambodia Forest Conression Management and Control Pilot Project The Bank has focused substantively, in detailed comments on earlier drafts (available on request), on four issues: definition o f the national forest estate and the clarity and consistency of provisions f o r institutional jurisdiction over forest landand resources; provision for definition of feasible administrative arrangements for management of forest subsequent t o the jurisdictional assignment; various provisions with respect t o economic policies and revenue arrangements; and he need for adequate protection of customary users and use of forest resources. Discussions with responsible officials seem t o find ready agreement on the economic policy issues (provisions on log trade, for example, were revised as suggested by the Bank). Discussions are amicable, but not definitive on administrative arrangements (there is conslstenP recourse by MAFWDFW to language ihat is unclear in translation and which might beadequate for the concession areas but which will be less effective for other forest areas). On the general jurisdictional issue, as inter-sectoral and interministerial issues are involved it has been impossible t o determine the viability of what is proposed by MAFF. Discussion with Ministry of Environment (which has authority under various instruments for parks and protected areas) only serve t o reinforce the sense that existing legislation is unclear and that debate at the interministerial level is liable t o alter the provisions of the MAFF draft. Ministry o f Economy and Finance officials have declined t o discuss work ongoing at the sectoral Ministry. On all these issues, the Bank position has not been t o advance specific strategies or provisions, as various alternatives are feasible and would be satisfactory provided there is clarity and consistency. Integrating comments and suggestions from various sources is a difficult challenge for Government, especially when their own guiding philosophy is so weak. NGOs have consistently complained of limited access t o the drafting process. NGO criticisms have centered on an alleged Government-centric approach t o the sector and on a view that MAFF/DFW are seeking t o control all forest resources at the expense of local communities and nontimber resources. There is some validity in these criticisms, but some go well beyond international norms. FA0 and NGO tends t o recommend detailed and exhaustive definition in the law o f nearly all issues so that future discretion is limited, The Bank and ADB, have tended t o recommend aiming for enabling legislation and retention of discretion for subsequent lower level instruments. Second Generation Issues. Although absorptive capacity is a major constraint, in addition t o the current priorities several additional issues may merit inclusion inthe Bank dialogue with Government, Communitv forestrv, although referred t o in passing inthe SAC and dealt with as a safeguard issue inthe forest concession management context, is an issue that affects livelihoods of much of the rural population living outside of well forested areas. Government policy generally does not provide these people guarantees of access for subsistence purposes and does not providefor effective management o f these resources. Similarly, although the required sums are small, neither Government, the Bank or other donors are providing significant investment resources t o support agroforestry, village woodlots, fruit and orchard production, etc. Investment support for these would best be channeled through decentralized agricultural and rural development operations, but policy dialogue on decentralization of community forestry services and access t o forest resources could be Cambodia Forest Concession Management and Control Pilot Projecl incorporated into SAC I1discussions, Los Export Policy is currently restrictedin relation t o controlling illegal logging.I naddition t o being ineffective as a law enforcement device, the ban is distortionary and reduces revenue potential and exacerbates domestic over processing capacity. A deregulation policy could involve the introduction o f an export tax or other measures, but needs t o be considered in the context o f concessionroyalty reform and strengthened law enforcement. Government is similarly inclined to paternalistic and interventionist policies in the domestic lumber market. An intention is frequently indicated t o exert quantitative controls 0t-1 concessioncires t o force allomtion of timber t o local markets. These art potentially very distorting and could contribute t o corruption and other problems. TOdate efforts in this direction seem largely ineffective, but could becomesignificant obstacles to concession reform. Financialand administrative arranpements for the OFW also need to be reviewed and addressed by Government. Conventional public sector budgeting and civil service terms and conditions will not sustain the level and intensity of management being piloted under the LIL. Should these prove effective, special budgetary and staff remuneration provision will be needed and justified to maintain the concession management system (and the revenues which it will generate). Although centralized supervision and control of concessions by the bFW is essential, the administration of community forestry ought to be inserted into provincial and district rural development and agricultural development. Considerable dialogueand analysis will be needed to reach a consensus with Government on appropriate arrangements. Alternative forest manasement regimes for areas taken from canceled concessions have not been elaborated in depth. DFW management of areas not suited t o community management is a possibility, but Departmental capacity and policy need to be established. Donor Coordination. The Bank has expended considerable effort t o work collaboratively with other donors (especially F A 0 and ADB) and NGOs (especially Global Witness). No other agency has the level or breadth o f investment as the Bank in the sector, the high profile (and concomitant reputational risk), has worked with Government t o visualize a development scenario for the sector, or has been able to mobilize the expertise needed t o formulate specific programs. Nevertheless, FAO, UNDPand ADB are playing increasing, and increasingly disruptive, roles in the donor-Government process. Inboth the forest law discussion and the independent monitoring dispute, FA0 has exacerbated tensions and has not beenable t o provide constructive alternatives or independent assistance. FA0 and UNDP have both been ineffective in administrationof the basic financial and operational support of the Forest Crime Monitoring Project, AD8 was partially effective (with the support of the Bank) in the concessionsystem review technical assistance, but has abandoned the effective work of its legal consultants on the draft forestry low. Other donors, have supported consultants that.havebecome enmeshed in Government compliancewith Bank SAC conditions without consultation with the Bank on TOR or consultant selection. I.:vclyn l~auri~ta-l.n~uid~o, l~~ASl, 'Thc World Hank IC].302-458-2450, cmd: claguidao~worldbank.org Cambodia Forest Concession Management and Control Pilot Project NGOs are becoming increasingly active inthe sector. Local NGOs, including the NGO Forum are relatively constructive and professional, but approach the Government (and especially Government technical staff) ina confrontational manner and with a highly loaded social agenda. International environmental NGOsare becoming increasinglyactive in Cambodia, but are seriously divided over priorities and approach. Conservation International (CI), a US.-based NGO with links to the Bank through the Critical Ecosystems Fund, has proposeda major conservation set aside in the Cardamoms Mountains (inthe southwest). This area is currently under concessionand the financial packageoffered madet o Government by C I could result in difficulties coordinating activities and projects, not t o mention maintaining the coherence of the concessionsystem reform program, The Bank-financed LIL provides Governmentwith a senior Project Advisor who is expected t o assist Government take a more active and decisive role in donor coordination. This should help t o resolve some donor coordination problems, as should the appointment of a Senior Operations Officer t o oversee the rural.portfoliofrom the Phnom Penh Office. Nevertheless, considerable specialist effort will continue to need t o be devoted t o donor coordination. William 8. Magrath Senior Natural Resource Economist East Asia Environment and Social Affairs Unit World Bank Office, Beijing Phone 86-10-6554-3361 Ext. 2630 FAX 86-10-6554-1686 To: Evelyn Bautisto Laguidao Forest ConcessionManagement and Control Pilot Project The World Bank 14th Floor,DiethelmTowerA Telephone:(66-2)252-23057 INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT 93/1 WirelessRoad Facsimile: (66-2)256-7794-5 INTERNATIONAL DEVELOPMENT ASSOCIATION Bangkok10330,Thailand October 4,2001 H.E. Keat Chhon Senior Minister MinistryofEconomy and Finance Phnom Penh, Cambodia Fax No.: 855 23 427 799 H.E.Chan Sarun Minister Ministryof Agriculture, Forestry and Fisheries Phnom Penh, Cambodia H.E. MokMareth Minister Ministry ofEnvironment Phnom Pehn, Cambodia Your Excellencies: IwouldliketotakethisopportunitytoforwardtwonotespreparedfortheWorld Bank relating to Cambodian forestry sector reform issues and to take note of several other topics related to forestry. Comments on the draft CambodiaTimber IndustryAssociation-sponsored Royalty Study. Inresponse to the CTIA initiativetobringsolid analytics to bear on the issue of forest royalties, the Bank commissioned several leading authorities to review the study preparedby KPMG. The attached note summarizes their findings and offers suggestions on how Government and its private sector partners mightproceedto settle ondefensible royaltiesand forest revenue arrangements in the context of forthcoming concession restructuring discussions. Inthe unanimous view of the experts we consulted, the draft study seriously under represents the economic value o f Cambodia's industrial forest resource and needs to be considered cautiously, including with respect to royalty renegotiations. While the attached note does not recommend any specific royalty rate or formula, the comments do suggest at least three importantconsiderations for incorporation into a royalty settlement. One is that, on lands where timber productionoutweighs other potential uses', the basis for forest revenues ought to be the economic value o f ...I2 ' Thisdetermination,while in principal an economic issue, should realisticallybe made separately from royalty rate setting through a forest land allocation and management planningprocess,such as that introduced through the Sub-Decree on ForestConcession Management. Cambodia Forest ConcessionManagement and Control Pilot Project - 2 - Cambodian timber in reference to international forest products prices and not necessarily the profitability o f domestic wood processing by the current concessionaires. Second, in the interest of both Government and its private sector partners, provision should be made for periodic review of revenue arrangements and levels in consideration of evolving domestic and international markets trends, price levels, technologies and other considerations. Third, in addition to the level of the implicit royalty rate, the choice of revenue mechanism is an important consideration that couldhelp to strengthen sector govemance. Inparticular, serious consideration should be given to making fixed charges (such as area fees) an important component of the revenue mix along with charges based on volume harvested. Such combinatitionscan be designed to be revenue neutral and to fairly allocate various risks between Government and concessionaires, while being more transparent and easily monitored andadministered than volume based royalties alone, Environmentaland Social ImpactAssessment Terms of Reference. The second set o f comments, prepared by a Bank consultantwith substantial experience in Cambodia and regulatory practice worldwide, concerns sample terms o f reference (TOR) circulated earlier this year for environmental and social impact assessment o f concession operations. These TOR were preparedprivately on behalfo f concession operators in anticipation o f requirements likely to be imposed by Government in relation to reforms in the concession system, While recognizing the good intent behind the preparation o f these TOR, these comments express serious concern about the value o fthe proposed work and suggest a need for further collaboration between industry and Government inthe planning and assessmentprocess and for serious considerationo fthe way inwhich environmental assessment review and clearance finctions will be organized within Govemment. The comments include a number o f recommendations to take the required work forward, including utilization o f the first phase work for scoping of impacts and consultation with affected communities. With respect to the review and approval process, recommendations are made, such as limitingGovernment agency involvement inthe preparation o f plans and assessments and definition of a transparent review process with specified roles for the Department of Forestry and Wildlife and the Ministry o f Environment on the basis of existing Cambodian law and regulation. Ihopethatboththesesetsofcommentscanbereviewedbygovemment specialists and incorporated into Government's hrther consideration of these issues, If the Bank can provide additional suggestions or comments as you move forward with the concession restructuring process, please do not hesitate to ask. As you know, the ongoing Forest Concession Management and Control Pilot Project (LIL) provides resources to support technical assistance and other support and the Bank has ananged for a technical assistance grant to assist Government in implementation; and Mr.Magrath, our forestry specialist, would be happy to organize whatever additional support and clarification may be needed. ...I3 Cambodia Forest Concession Management and Control Pilot Project - 3 - ' 8 . * . I , F W y , Iwould Liketo congrabGovernmentonthepreparationandadoption ofdraft fionstry legislation. Thedraftlegislationwillgoalongway iohelpingtosolidify thc forestry sector onamtainab1ebasisandtoenhancingtbee~~nomic soc$L and contributionof thensoutce40Cambodiandcvelopment. IrecognizethebaKfworkthat went intothe draftingprocessandtheeffortsthatWQZ madeto consultwidely and effbctivdywithhtertstedpartiesa dJtakebolders.IampleassdthattheBankwasable toprovideassistanceinatimelyfkshionandwant youtoknowthat ifthe Bankcanbeof fbrtherassisCanceasthclegislativeprocessmovesforward,youshouldpleaseletme h Q W . hconsiderationoftheirinterestinthaematlers,1amtakingtheh i of copyingthis lettcrtothe offici& lLstcdbelow. Excellencies, please acceptmybestregards. 2 4 Sincerelyyours, Ianc.Po* CountryDirector,Cambadia EastAsiaaudPacificRegion CC. H.E.SumManit,SeaetaryofW e ,OfficeoftheCouncilofMinisters Mr.TySokhun,Director,DepartmentofForeskyandWildlife Mr.Mario de2h"cq,ResidentRepresena.ve,Ih4F Ms.DombiqwMcAdams,Went'Repnsentstr'vt,UNDP Mr.JeanCla$e Levesseur,ResidentR q ~ v eFA0 , Cambodia Forest ConcessionManagement ana' ControlPilot Project _.-- --. - The World Bank Genapycvae npancTayHiuTsa Belarus Resident Mission eyn. repuatm2A 2A Gertsenash. CJ'CBeTHbI 6;aHK 220030, r. MiHcr Minsk 220030 Republic of Belarus MiXCHapOJIHblEaHK PxnyBnkaSenapycb P s ~ a ~ c r p y ~iuPsueisua i i Tel: 375 (17) 226-52-84 Fax: 375(17) 21143-14 ... 19October, 2001 - H.E.Chan Sarun Minster o f Agriculture, Forestryand Fisheries MinistryofAgriculture, Forestryand Fisheries H.E.Keat Chhon MinisterofEconomyand Finance MinistryofEconomyandFinance H.E.MokMareth Minister of Environment Ministry of Environment Dear Excellencies: Following my recent discussions with Government officials on the forest concession system restructuring process, Ihave taken the opportunity to consult with Bank Management and to review available documentation on the concession restucturing process. This includes the report prepared for Government by White and Case (1997), Asian Development Bank-sponsored reports by Fraser Thomas Limited, (1999, 2000), and reports prepared by Global Witness and the Royal Govement's own reports on forest crime and illegal logging. Ibelieve these reinforce the observations conveyed to Government during my mission and suggest the need for careful and deliberate consideration as Government moves forward with forest concession contract renegotiations and ratification. As you will recall, under the Structural Adjustment Credit agreement, for second tranche release Government has committed to have completed the forestry concession contract review and taken actions based on the outcome of the review, within the framework of Cambodian law and the existing contracts, by: (a) terminating non- performing contracts, where appropriate; (b) requiring other concessionaires to present restructuring programs, satisfactory to IDA; and (c) not awarding any subsequent contracts outside of the scope, rules, and procedures set out in the Sub-Decree on fcrestry concession management. Cambodia 2 .- - -- __ The World Bank recognizes the prudence with which Govemment i s approaching these renegotiations and shares your concem about minimizing the risks associated with unilateral action by Government. Accordingly, we support Government in the continuation of a process that seeks to ensure that only concessionaires prepared to commit to full and complete compliance with Government's approach to economically, environmentally and socially sustainable forestry continue to operate. We are aware, also, o f the additional protections incorporated into the draft model concession contract used as the basis for re-negotiations and general safeguards provided by the Sub-Decree on Forest Concession Management. Nonetheless, Government should apply reasonable commercial standards to the selection of firms to retain and should, as suggestedby Article 4.2 of the Sub-Decree on Forest Concession Management, take due consideration of corporate track record, patterns o f compliance with law, regulation and financial obligations, and capacity to conduct technically sound operations. In this context, we would like to underline the need for Government to take account of well documented instances of serious default and deviation by various concessionaires. These include cases o f convictions for involvement inillegallogging, pursuit of operations without compliance with Governmentregulations and requirement (in particular requirements for environmental assessment and public consultation), and failure to complete technically sound forest management plans. Some o f this experience may have been partly the result o f lax enforcement by Government in the past. In total, however, this pattern suggest that prudent commercial practice would lead to substantially higher rates o f termination and non-renewal than was indicated as likely by Government officials. Concem about the coherence of the restructuring process is, unfortunately, heightenedby issuance of approvals for logging operations inthe balance o f 2001. These . approvals are difficult to understand, in view o f the ongoing negotiations, the incompleteness of management plans and the absence of filings of environmental assessment reports. We suggest that Govemment reconsider its options with respect to these approvals prior to resumptiono foperations inthe upcoming dry season. Moreover, we strongly suggest that Govemment revise the permitting system so that henceforth permits can be issued to coincide with the natural loggingseason(for example October 1 - September 30) as opposed to an arbitrary calendar year. So as to ensure that future Govemment action on concession contracts does not adversely affect compliance with the terms of the Structural Adjustment Credit, we suggest that Government provide the Bank details on individual renegotiated contracts prior to final approval. In addition, may Icall your attention to the Development Credit , Agreement for the Forest Concession Management and Control Pilot Project under which the Government undertakes to provide the Bank an opportunity to review and comment upon any Forest Concession Management Plan prepared under the project. Ihope that you will agree that this will assist Government in ensuring that such approvals are Cambodia Forest Concession Management and Control Pilot Project 3 - . --- ._- appropriate and in accordance with international standards of good forest resource management. Finally, we would like to acknowledge the additional time and effort that these measures may require. Please rest assured that the Bank will make every effort to provide resources under the Forest Concession Management and Control Plot Project and the associated PHRD implementation technical assistance grant. If Ican provide any additional infomation, clarificatior. or assistance, please do nothesitate to ask. Because of their involvement andintense interest inthese issues, Iam takingthe liberty ofcopyingthis letter to those listedbelow. LeadNatural Resob& Economist Environment and Social Development Unit East Asia and the Pacific cc. H.E. Chan TongYves Ty Sokhun Urooj Malik, Asian Development Ban Jean-Claude Levassuer, U.N.F. A. 0. Ben Davies, UK DFID JohnBuckrell, Global Witness Mario de Zamaroczy, IMF Cambodia Forest Concession Management and Control Pilot Project The World Bank 14th Floor, Diethelm Tower A Telephone: (66-2) 252-2305-7 INTERNATIONAL BANK FOR RECONSTRUCTIONAND DEVELOPMENT 93/1 Wireless Road Facsimile: (66-2) 256-7794-5 INTERNATIONAL DEVELOPMENT ASSOCIATION Bangkok 10330,Thailand December 12,2001 H.E. Chan,Sanin Minister of Agriculture, Forestry and Fisheries Ministry ofAgriculture, Forestry andFisheries PhnomPenh, Cambodia ...I..- El I.. .p-..,-_.L,.._.,..L. .. Excellency: -.. --.- . Forest Policv Reforms The World Bank missionthat visitedCambodiafromNovember 27 to December2, 2001, to review developmentsinthe forestry sector has reportedon its findings and recommendationsand Iwould liketo raisewith you some ofthe serious concerns with the current situationand the risksthat they poseto the successof the Government's forest policy reformefforts. These problemscouldadversely affect continuedcompliance with the terms ofthe StructuralAdjustment Credit andofthe IMF PovertyReductionandGrowthFacilityoperations andrequireyour urgent attention. FollowingGovernment's requests, the Bank missionworked with your staff and technical assistanceadvisers. It preparedan assessment ofthe forest crime situationand helpeddevelop proposals relatedto the Forest Crime Monitoringand ReportingProject, themanagementof loggingactivities after December31, 2001andon next steps inthe forest concession contract restructuringprocess. Iattach the results of this work and would appreciate beingkept informedofactions whichthe RoyalGovernment takes or intends to take to follow up on these proposals andaddress the issuesraised. As Iam sure you will agree with us, an urgency has beenadded to the situation becauseof the imminentelapsingofthe 2001 loggingapprovals, the risks of an accelerationofillegal logginginthe current dry season andbecause of the concernsthat Government's intemationalpartnerswill raise at the upcomingPost-CGmeeting in January next year. Illeeal Lozeing Cambodia continues to face a serious timber theft problem.The level of forest crime appears to still be o f worrisome proportionsand higher thani s recognizedin official estimates and involvesconcessionaires, sub-contractors, and others operating within concessionboundaries in disregard of Government standards and required procedures. The inconsistency ofofficial estimates o fcrime and those o f Government's Independent Monitor, GlobalWitness, andother observers is a serious concern and seems to be due to a series of problems involvingthe structure of forest managementcontrol W Telephone: (66-2) 252-2305/07. 256-779214w FAX: (66-2) 256-7795 Cambodia Forest ConcessionManagementand ControlPilot Project - 2 - and compliance, the effectivenessof technical assistance, reluctanceto accept technical assistance, and delays in mobilizingfinancialsupport. Government's decision to authorizeloggingduringthe balanceof this year has also playeda role incomplicating the enforcementproblemandmayhave givenrise to hturerisks of acceleratedabuses. We believethat it is highlyadvisable that Governmentmove quickly to resolve the problemsfacing the Forest Crime Monitoringand ReportingProject by acting on the recommendations madeinAttachment 1. Specifically,it is proposedthat Department of Forestryand Wjldlife (DFW) immediately increaseits field presence,utilizing funding under the World Bank-financedForest ConcessionManagementand ControlPilot project to support trainingand mobilization. It is also strongly suggestedthat DFW immediately move to more effectively separateinvestigationand enforcementactivities,including management ofthe Case Tracking System,to be more independent from routine forest management functions. We also recommendimmediateestablishment of a Working Group, comprisingDFW, the Departmentof Investigation(Dl) (Ministry of Environment),the FocalPoint, GlobalWitness, the FA0 ChiefTechnicalAdviser and the DFW Project Adviser, to commenceweekly work programmingmeetings andto providea mechanism for informationexchangeandgreater cooperationandcoordination in compliancemonitoringand enforcement activities. Also the Case TrackingSystemshould be improvedthroughgreaterprecision anddisciplineindata entry, the ability to distinguishbetweenmajorandminor forest crime, the ability to assignprioritiesto cases for investigation,andthe re-establishment of geo-referencing of forest crime informationinthe DFW component o f the system. Finally, we also recommendrecruitment ofan adviser to the Focal PointCoordinator. The adviser wouldassist the FocalPointinthe reviewandevaluation of submissions from operationalunitsandwould ensurestronger internalquality control priorto reIease of reports. Mana.eement qf Lopping Activities in 2002 Authorizationscurrently inplace permittingconcessionairesto proceedwith loggingactivitiesup to December 31,2001 present several complexitiesandproblems in terms of enforcement of Government's policy of requiringfull compliance with the terms of concession contracts and the Sub-Decreeon ForestConcessionManagementand other laws and regulations. Giventhat no concessions havepreparedand submitted for review andapprovalForest ManagementPlans andEnvironmentaland Social Impact Assessments, we believe that Government shouldenforce a full cessation of loggingafter December 31. Moreover, logstockpiles still inplace in concession areas needto be carefully managedto prevent the co-minglingof illicit new fellings. Accordingly log transport should similarlybe stoppedas of January 1,2002 pending completionof inventoriesof felled logs. These inventories shouldrecordfilldetails of log location, volumes, species, condition, originand other informationneededto allow accurate fiture identification,royalty assessment andtracking, Only after complete inventory,marking, Cambodia Forest Concession Management and Control Pilot Project - 3 - mapping, receipt of full royaltypayment and approval andpublic disclosure o f a detailed log transportplan, should monitoredandcontrolledlog transport be permitted. Government should continuewith preparationof detailed plans for log inventoryandproceedwith definitionof standards andguidelines for log transport that will provide assurancethat additionalillegalloggingdoes not result from the clearanceof existinglog stocks from concessionareas. Theseshouldtake into consideration laws and regulationsgoverningcontrolofstate property, collectionand analysis o f information on log inventoriesinrelationto recordsof past loggingapprovals androyalty payments, and other factors that might influencethe likelihoodof future illegallogginginconcessions and adjacent areas. As agreedwith the mission, attachedas Attachment 2 i s the draft Prakas on the "Implementationof provisionsof the Sub-Decreeon ForestConcessionManagement (suspensionof activities andpermits)" that the missiondiscussedwith technical staff of the Departmentof Forestry andWildlife. We believethat this draft contains the essential elements neededto provideguidance to DFW,other agencies and stakeholdersand should be finalizedas soonas possible. Inthe development o fthe additionalprocedures andstandards, we suggest that efforts bemadeto ensure full andearly public disclosure and interagencyconsultationwithin RGC. Concession Management Contract Restructuring InconsultationswithearlierBankmissions, as well as withother donors, Government has indicatedthat definitiveprogresswas beingmade inthe renegotiations of concessioncontracts and inthe identificationof concessionswith whom it would not be appropriate to continue. As the Bank indicatedinearliercorrespondence, we recognize the value of continueddiscussions with concessionaires which might be able to ultimatelysatisfy Government'srequirements and standards for sustainable forest management. However,we do also believe that Government needsto act definitively with respect to concessionaires that are in clear andpersistent noncompliance andwhich are unlikely to be viable long termpartners. As discussed duringthe mission, Government's LegalAdviser has provideda detailedopinion onthe contractual issuesfacingGovernment andhas draftedtemplates of letters advisingconcessionaires of Government's findingswith respect to contract breachand the remedieswhich Govemment seeks to pursue.These provide a concrete mechanismwhereby Govemment could moveto resolve some ofthe more notable cases of default andabuse by concessionaires andadvancenegotiations with other concessionaires as suggested byearlier World Bank-and ADB-financedadvisers. For convenience, these templates are providedas Attachment 3. We believethat Government shouldfinalize its determinationofwhich concessionaires qualify for immediate termination,andwhich qualify for other approachesand movethe process foward with appropriate notifications. Cambodia Forest Concession Management and Control Pilot Project Withrespectto royaltyandtaxation issuesthat affect negotiationswithseveral concessionaires, pleaserefer to our earliercorrespondenceonthis issue. Themission suggestssome limited amouqt of additionalanalysis andconsultationwithin Government i s nekdedto arrive at a negotiationstanceonroydties and terms that would be commercially viable for bothconcessionaires andGovernment. As discussedwiththe mission, we areconcernedaboutthe impactthat current conflicts over the forest crime monitoringprocessarehaving &d are likelyto continueto haveover the overall program. We wouldlike to take this opportunityto urgeyouto take appropriateactionto resolvethe situation.The WorldBank, alongwithotherpartners, would beWilling to help onthis matter. Becauseoftheir interest inthese issues, Iamtaking the libertyofcopying this conespondenceto the RGCanddonor agency officials listedbelow. Sincerely yours, P+ I a n C. Porter Country Director, Cambodia EastAsia andPacific Region cc: H.E.SokAn, DeputyPrimeMinister H.E.KeatChhon, SeniorMinister ofEconomyandFinance H.E.SumManit,CouncilofMinisters H.E.ChanTongYves, MAFF Mr.TySokhun,DFW Mr.BenDavies,UK-DFID Mi.JonBuckrell,GlobalWitness Mr.Jean-ClaudeLevasseur, FA0 Mr.UroojMalik,ADB Cambodia Forest Concession Management and Control Pilot Project IThe World Bank Washington, D.C. 20433 1818 H Street N.W. (202) 477-1234 INTERNATIONAL BANK FOR RECONSTRUCTION AND OEVELOPMENT Cable`Address: INTBAFRAD INTERNATIONAL DEVELOPMENTASSOCIATION U.S.A. Cable Address: INDEVAS October 3,2002 Mr.Ty Sokhun Director-General Department o f Forestry and Wildlife #40 Preah Norodoni Blvd. Phnom Penh, Cambodia Dear Mr.Ty Sokliun: Subject: Tiirtiber.Sale and Trniisport I'd like to follow on our earlier discussions and talks with members o f your staff regarding the management and control o f existing stockpiles o f felled logs. As you know, Iview the mere presence of these logs in forest areas as demonstrative of the serious weaknesses of forest management controls and forest revenue systems in Cambodia. Moreover, any revisiono f the current prohibition on logtransport risks abuse and fraud and contributing to renewed illegal logging. Nevertheless, Ican understand the interest the Royal Govemment places in proper disposal o f these logs, the fir11 receipt o f the revenues due and the potciitial contribution of this material to local atid export markets, Ialso beiicve that a responsible, credible and transparent process i s feasible and could help set the stage for introduction of improved managanent and control in the future and could also help renew confidence in the Goveminent's commitment to forestry reform. Risks riiid Experiuice Several key principles should drive policy toward transport of parts of the existing inventory of logs in forest areas. These are all related to the disappointing and repeated pattenis observed inearlier episodes of "old" log movement. The persistent cycle of transport of"old" logs and new illicit fellings needs to be broken. A disciplined, well- engineered and transparent program for the existing stockpiles could mark a break from the problems o f the past. One consideration that provides hope that previous experience will tiot be repeated is the work now underway on instituting tighler controls and greater transparency in routine forcst operations. For a system of transport controls to be credible, it must be introduced as this other development work accelerates and kapplied in the field. Siiggesred Oper.alioml Prijiciples In view o f the weak controls and lack of supervision at the time of harvest, Government nccds to give serious consideration to the possibility that some of these logs RCA 248423 0 WUI 64145 U FAX (202) 477.6391 Cambodia Forest Concession Management and Control Pilot Project were illeyally rellcd. Therefore, a substantial burden of proof should be placed on any party claiming possession and secking pcnission to transport. Applicants should provide clear and compelling documentary evidence that harvests were conducted in places and manners authorized by Coveminent, that all royalties, fecs and applicable fines and penalties havc beenpaid in full to the National Treasury, and should submit a full plan describing the intendcd methodof transport, routes, tinting and other details of the proposed transport. Prior to approval o f any transport proposal, the relevant Goveininent agencies, including the Department of Forestry and Wildlife, Ministry of Agriculture, Forestry and Fisheries, Ministry o f Economy and Finance, should evaluate and verify all claims regarding the orisin of the concerned logs and proper receipt o f payment, make the related documentation available for public inspection and comment, and define a transportation monitoringplanto ensure proper transport andto prevent abuse. Inevaluating transport planproposals and setting conditions on pennits, Government should take into consideration three dimensions of the proposed chain of custody process: 1) how does the applicant intend to provide for thc itfetrt$cutiou of the logs beingnioved so that they can be readily and reliably distinguished from illicit material; 2) how will logs whose inovcmenthas been authorized be kept physically segregnted from other logs (and especially logs from new, illicit rcllillgs); and, 3) how will lhe process be clocrrniettteti before, during and after transport? These and other aspects of an acceptable chain of custody system are dcscribed in some detail in the report on "Techtiologiesfor. Wood Trcrckirrg" prcpared on the basis of the meeting sponsored by the World Bank and the Worldwide Fund for Nature held inCambodia earlier this year. Iprovided to you a draft o f this in July and i t is now also available on CD-ROMfroin my office. Considerable judgment will be involvcd inestablishingsound procedures and Ibelieve Government would benefit by convening an accelerated multi- stakeholder consultative process on this issue. Planning is also needed to make provisions for handling o f claims and niaterial for which the submissions o fconcessionaircs or other claimants do not satisfy Government. Where ownership, payment can not be satisfactorily established, or where agreement on transport procedures can not be reached, thc appropriate provisions of Cambodian laws and regulationon forestry and 011State property need to be brought to bear. These questions need to be fully explored and incorporated into a fully documented set o f procedures. Potctitial Techtiicul AppsocicIies As we have discussed, and as the chain of ciistody report makes clear, various tcchnologies, including optical barcodes and other coniputcrizcd technologies are readily available and could be employed by the Department of Forestiy and Wildlife to assist with the current problem. The report also niakes dear that adequate controls are possible with less sophisticated and less expensive technologies provided attention is paid to vulnerabilities and opportunities for abuse. As we have also discussed, the Bank is ready Cambodia Forest Concession Management and Control Pilot Project 'I'y Sokhun -S- October 3, 7002 to assist the Departinent with the iiecessary equipment and technical assistance under the provisions or the credit for the Forest Concession Management and Control Pilot Project and w e will do OUT best to help expedite procurenient and consultant selection as needed. Rcconinr ended Next Steps On the basis of the principlesdiscussed in this letter, prior to any change in existing policy, Government couid consider preparinga detailed proposal for a revised system of controls and pemiits.This should be based on wide and lransparcnt consultationwith concerned stakeholders, including industry, representatives of the Natural Resources Management Working Group, NGOs and others. With serious effort and use of resources currently available to your Department, Ibelieve that a concrete pioposalthat could'gainwide endorsement and support could be prepare in as little as six weeks. This would require designation o f a senior team o f specialists from your Department and from related units of Govemment. They could be assisted by technical advisers already inplace and additional expertise which could be mobilized on a short term basis usingWorld Bank loan resources. The first steps would include designation of an inter-agency team and fonnulation of an initial work plan andbudget. This team would benefit from consultation with the existing Inter-ministerialCommission on Forest Revenue Systems. Iwould be happy to assist you in this in anyway Ican arid will follow up with you and your staffat the earliest opportunity. Because o f their interest in these issues, Iam taking the liberty ofcopying this letter to those listed below. Pleasebe assured on my highest considerations. William B. Magrath Lead Natural Resource Economist Rural Development and Natural Resources Division East Asia and the Pacific cc. Mr. Chheng Kiin Sun Mr.Net Mony Mr.Jean-Claude Levasseur Mr.Urooj MaIik Mr.Robert Hagemann Cambodia Forest Concession Management and Control Pilot Project iheWorld Bank 14thFlcor,DiethelmTower A Telephone: (68-2) 252.2305-7 lMERHAllONALBANK FOR RECONSTRUCTIONAND DNROPMENT 9 3 1 Wlreless Road (662) 2567'792.3 .$NTERNATIONALDEVELOPMENTASSOCIATION Bangkdc 10330, Thailand Facsimile: (W-2)2587794.5 December6,2002 H.E.ChanSarun Minister of Agriculture, Foresy'andFisheries Ministry of Agriculture, Forestryadd Fisheries PhnomPenh, Cambodia F a ;855-23 215982 Excellency : Iamwritingtoexpressmymostseriousconcemsaboutyesterday'sviolenceoutsideof the Department of ForestryandWildlife against people wishingto express views on the recently disclosedforest concessionplans -inputthat, frommy pointof view. ha5kenlegitimateand constructive.This violenceseriouslyunderminescommitments to consultationandtransparency madeby the Government.At a time when the World Bankand others are urgingexpanded consultationon the foresuy proposalsbeforeGovernment, these events do greatharmto the credibility of that process. For me to properlybrief World Banksenior management, Iwouldliketo request specific information from the Government on what hasoccurredand the steps that Government intends to take to preventareoccurrence.Additionally, nextMonday, Mr. PeterStephens, our RegionalCommunicationsAdvisor, will visit PhnomPenhand Iwill ask him, together with our CountryManager,Mr.BonaventureMbida-Essama,to look further into this issueandreportback to me. Your assistanceto them would begreatly appreciated. , Although there are many other issueswe will beraisingwith you separately concerning the World Bank's support to forestry inCambodia,Iamtakingthe opportunity with this letter to convey our deepest concernfor the mostrecentevents.Becauseof their interestinthese matters, I amcopyingthis letterto those listedbelow. Sincerely yours, \ Ian C. Porter CountryDirector, Cambodia EastAsia and Pacific Region cc: H.E.Keat Chhon,SeniorMinisterof Economyof Rinance H.E.SokAn, SeniorMinister,CouncilofMinisters H.E.SumManit, Secretary of State, CouncilofMinisters Mr.Ty Sokhun. Director-General,DepartmentofForestryandWildlife H.E. Dr.Aun PornMonkoath,SecretaryGeneral,Ministryof EconomyandFinance Mr.JeanClaudeLevasseur,ResidentRepresentative,FoodandAgriculture Organizationof the UnitedNations Mr.Urooj MaIkResidentRepresentative,Asian DevelopmentBank, Mr.JohnBuckrell, GlobalWimess Cambodia Forest Concession Management and Control Pilot Project FRX M. Klir'Ci)OM OF CAMBODIA Nation Retfglon Kiag MIlr1stt-yOf Agricahre, Forestry aad Fisheries PhaomPeob, December 18,2002 From:the Minister ofAgriculture, ForestryandFirheries To: Mr.Ian C. Porter, CountryDirector, Cambodia,ErstAyia and Pacific Region Mr.Director, The Minisbyof Agticulture. Forestry and Pisheries acknowIsdgcdrcceipt of your letter dated 6 December 2002. requesting clilrification on the incident took placein front of the Dap-mont of ForestryandWildlife on5 December2002, causedby B p u p ofpeople who dcclarcd &emsclva BS rcpresantativur of local communities king in pmvinces with forest concessions. V ~ e y came to complain abaut *a process of public dibclooure. the consultation on forest concession management and the wcial and mvironmcntaI impact assess" report. The Department of Foreevy and Wildlife @FW)had continuouslyclarikd these issues andthat group afpooplahad confirmed tba.4 they filly undcmtood what D W had explained to them. Neverthcless, they still dmondtdthat the DFW org;mizcd political ronrmworkshop. 8 This &ymn.d protracted from 12:30 until 17:OO on 5 December 2002. At that h e , about 50 drmansrrasors, who wcrc not authorized by the authorities,blacked the accesa to the DFW &m 17:Oo until nearly 20:00,regardlessthc continuous conciliationefforts offered by the Chief ofthe Pam m d a l IIDistrict Council, DJLWPcnh ward. At 28:30, tbe DFW Dirtctor sought the assistance of the autharitiesto facilitate the locked-inBtaff of the dcpartmont to 80 home. When thepolice h v e d at thc department, the pecple gatherod in front of the department werc leaving by thmselves because of rain. The officials 1eA the DFW premises safely. Under such c&ummces. the authorities did not u90 forcc or violence against !he demonstrators. What they didwas toblow the whistle to facilitatethe trafEc. At 20:46 on thc same day, Mr6 Eva Galabw fromGlobalWitIlCS6 wrote a slanderous email to the intunationat media and the donor community, alltging that a woman was missing, about 12 peopIt were injuredand a manbadhis legbroken. She failed to montion&at about 100 officials and foreign expects werc taken hatage# far nearly 3 how. This can be verified with the internationalexpcrts working a?thc DFW, as well 88 a Cambodianlady who ww preventedfiom leaving DFW'Spremises to pick up ha young child from school. After this incidence, on 6 Deoembsr 2002 the spokesperson for the Global Witness, M s b a i e Sharpt, issued a press statanent to echo Mrm. Eva Galabru's email, accusing the police and the milit~~y policc of wing farce, beating and using the electric batons against demonstrators. leading to one dead. " m o r e , the statement requestedthe World Bank KOwithdraw a USSlS million SAC lornto theRoyalGuvtrrrment ofCambodia. According to a report Fromthe ground, a number of representativeso f the Global Witness and NcrOs have barred some fomt concessionaires &om undertaking direct consultations with the local commuNtic8, since they considcr this process as fruitless. Instead. they wmt the "13 to organizs: such consultationsin Phaom Penh. At the m e time. according to the information we rcccivd ffom the Provincial Office of Forcatry and Wildlife, some NGOworkers kave incited thc 18/12 ' 0 2 19:50 TX/RX N0.5471 P.001 Cambodia Forest ConcessiofiManagement and Control Pilot Project FW NO. : Dsc. 18 2062 07:SopM PZ local pcople to protest agahsi forest concession and land concession devtlopmcnt. Mormvm, accordingto B rmark by the Minislry afhtcnor, h i s incident was inttntior\aliy preparedby mmc quarters to spoil the political climate before the generai elcctionr. On 12 Dacambu 2002, the Specid Rcpresentkitive of the UN Secrctw General for Human Rights issued a sktcmeni condemning &e death of a rcptnentative of the fortst community, allegedly caused by the crackdownassociatcdwith the UBC of elecaic baton duringthe rain. Tho two statements by Global Witness and thc Special Representativeof the UKSG for Human Rights werc a slander. The rpoktspcrson0f the Ministryof Lnterior i nfomtd thepublic that the v ideo tape cceived from I Global Wimas, which filmed the demonstration from the beginning until the end did not show any cpisodo o f tho use of violence or electric baton by the police or tbc militarypolice against the demonstrators.Witnesses to this demonstration,includingthe staffmembersof NGOForum,who took part in thc demonstratim, also wed any us0 of violmcc by thc authoritics against the demonstrators. Mr. Hem Sao, who Global W i m a and the Human Right gmup alleged to be eleetracutedby thebaton, WILSnoton the list ofthc rqmsmtative bsntho R t a hVihearhvince. An unidentifd personwas transported to thc Re& Ko~samakHospital, but diedon the wey and rho- who took him 10 the hospitaltold the hospital staff that he was dyjng fiom a heart anack. Somepeoplewere slightly injured due to congestionor slippery duringthe rain. On a different matter, 1 am pleased to inform you that following many meetings within my dcparcmmt and with manydonors, we have decided that more time is netdcd for the process of d e w of the concession plans. Ithcrcfon have instructed my staff that: (a) The periodunder which commentscanbe mcivedfrom the generalpublic be extended to January31,2003. @) The consultationswith the local comunhies behtIdfor as Iongas is necessary,which we have always propoecd in any case. flrcde consultationswill be done on the basis of work plansandt m sofr c f m c tpreparedbythe DFW. pl-c accept,Mr.Director,the ~SSOT~UICOI ofourhighcansideration. cc: --Ministryof --MhliSLrYq OfIice oftheEconomyof Ministers; Council and Finance; Of h t d 0 G W s t of EnVhOnmCnt; -Ministry of Information; -PhnomPdnhMunicipality: --- Departmentof YnspeotionDirectorstc; ForcswyandWildlife DepartmantofAgriculturalLegislation. 18/12 ' 0 2 i 9 : s o TX/BX ~ 0 . 5 1 7 1 P I002 m Cambodia Forest ConcessionManagement and Control Pilot Project On December 5'h, 2002 at 12:30AM there were approximately 50 people from Preah Vihear, Rotanakiri,Mondulkiri,Stung Treng, Kok Kong, Kratie, Pursat, M p o n g nom, Siem Reap and Kampong Cham gathering outside the Department of Forestry and Wildlife demanding for organizing a workshop concerning forest management plans. This gathering did not ask for the permission from the local and competence authority at any level. The illegal gatheringof those people has beenprolongeduntil 5:OO PM. At that time the protesters closed the gate of the Forestry and Wildlife department by not allowing the officials and staffs of the department to leave the office when the working hour was finished.The illegal activity of closing the gate of the Forestry and Wildlife department had continued until 6:30 PM. The Director the Forestry and Wildlife department had proposed competent authority to help the officials to be able to leave the offke and get back home. Acting upon on this proposal, Municipal Police and Military Police department had sent their officials to the Forestry and Wildlife department to help the department's officials to leave the offlce and get back home. When the Poiice and Military Police arrived, the protesters who were gathering outside the Forestry and Wildlife Department had dispersed themselves meanwhile it was raining. After that Forestry and Wildlife Department's officials were able to leave the office andgo back home peacefully. Inthis case, police andmilitarypolice that went to dispersethe crowdneither used'the electric shock batons nor acted any violence on the crowd. They just blew the whistles to facilitate the traffic jam outside the department. The batons which were used by the police andmilitary police at that time were all their everyday usednormalplastic batons. After this event, on the 6' of December 2002 the Global witness issued a statement by condemning police and militarypolice for committing violent beaten and using batons to the crowd o f which led to a dead of a protester, Hem Sao, from Preah Vihear. On December 12', 2002 the United Nations Special Representative of the Secretary for HLUIXUI RightinCambodiahas issueda statementby pointing at Cambodian auth6ntyfor using electric shock batons in the rain which led to a dead o f a representative of forest dependent community. The above two statements, Global Witness's statement and U.N. Special Representative's statement, =e completely exaggerated and contradicted to the fact. Cambodia Forest Concession Management and Control Pilot Project The spokesman of the Ministry of Interior would like to inform national and intemational opinions as the following: - Throughthe video tape reviewing received from the Global Witness, which showed the entire activity of the protesters since the beginningtill the disperse, we have seen no any activity of the police and military police beating or using electric shock batons to the crowd. - Eyewitnesses of the event including NGO Fonun official who attended the demonstration also affirm that no any violent act o f the competent authority to the crowd inthe e+ent o fevening ofDecember 5*, 2002. - Mr. HemSao who was saidbythe GlobalWitness andHumanRightOrganization to be "died because of the electric-shock baton" was not in the name list of the representative of the forest-dependent communities from Preah Vihear province. The victim was taken to Preah Kosamak Hospital. The people who brought the victim to a hospital told the hospital staff that he died because of fainting spell and asked the hospital to preserve the body for one night. - For those who got minor injury inthe incidence were causedby squeezing together and by slippingduringthe rainfall. The Ministry of Interior has noticed that in the past few weeks there are some circles intentionally makingpoliticalatmospheretrouble before the general election to come. For example: the gun shot incident took place at Kampong Speuprovince on November 16'h,2002 which led to dead of Tith Keo Monyroath, second deputy commune chief of Sambo Commune, Samroang Tomg District. Just a very short time after the incident happened; competence authority has actively investigated the case. When the competence authority was investigating, some circles have usedthis incident for their political benefit by calling this case as political motivated case. In contradictory, the result of the investigation through forensics analysis and the confesses made by the offender--Tit Keo Mony Roath's nephew- who accompanied the victim to join the wedding ceremony in Krang Lear village Sabaur commune has indicated that he was the one who predispositionthe gunhand's triggered andledto the death of hisuncle. All activities of the above-mentioned circles have reflected that their intentionis redly to poison the political atmospheres before the general election, the importance historical event of the country, which will be heldinthe few coming month. Once again, the interior ministry would like to reaffirm th Cambodia, with real political good will and determination and spare no efforts to ensure good atmosphere for free and Interior has had strict order to investigate the cases, and send to justice regardless o f criminal activities includi party matters. L Cambodia Forest Concession Management and Control Pilot Project F I APPENDIX 1 I Description of the SatelliteImageryStudy Responseto a letter sent by Eva Galabru, GlobalWiness sou,rce: Forest Concession Mmaqmt. and control P i l o t Projedt - 5th Quarterly Js Report, March - May 2003 (Pxoject Credit No. 3365-W) Cambodia Forest Concession Management and Control Pilot Project Dear Eva, Thank you for sending me your comments. Le! me address them one by one. I) "Thestudy will show mainly changes from forest to m"reSt, but not provide any indication on the condition of the forest": b We can't be more accurate than that insuch a short periodof time. "andin particular whether areas should remain underproduction": b The information provided by this Satellite Imagery Interpretation Study is only one part of the information we are using to evaluate the SFMP. In other words, it is not because the satellite images do not reveal any degradation of the forest that it should remain under production (or the contrary). You seem to overlook that a consistent process has been developed by the DFW that we are assisting to review the SFMPs and ESIAs. Many tools are being used to analyze all the information provided by the companies, for example, to assess the quality and the reliability of the inventories carried out by companies. 2) Thestudy purports to show where logging has occurred in the recent past by examining whether new logging roads have been built since 2000. The assumption behind this is that in order to carry out logging (whetherlegal of illegal) one requires roads, thereforenew roads are an indicator of logging. Theassumption is really only valid only if we are dealing with untouched,pristine forest areas. Whereasin Cambodia most forest areas are intersected by roads, tracks and paths, which are not necessarily detectable with remote sensing, but that nevertheless enable logging to take place. So the study will not show satisfactorily where past logging has occurred. b We have never said that we intendto detect all the placeswhere logginghas occurred.This is nota forest crime monitoring exercise. One of its primary purposes is to evaluatewhether the information provided by the companies in their SFMPs is reliable and relevant. As you said, it will not be possible to detect and to locate all the logged areas, but itwill enable us to identify the most recentand most extensive logging activities. These activities are certainly the ones that affect most of the resource and these activities should be described in the SFMPs. 3) Thestudy is using late 2001, early 2002 images. TWO logging seasons have come and gone, as well as extensiveconversion of forestland in concession and other areas. In the last few months alone, 7,500 hectares of forest have been cleared by a high-ranking governmentofficial in the Samlingconcessionin Snoul, most ofcoupes 3, 4 and 9 of Colexim have been sold and converted, the RCAF Division 12 in the TPPconcessionhave cleared almost all the evergreen forest at the foot of Eastern Phnom Tbeng Mountain and the former security of GAT lnternational have grabbed extensiveparcels of land in the Southern part of the Kompong Thorn concession. Surely the Concession Management and ControlPilot Proiect can affordto buy up-to-dateimages. F The logging suspension started from the beginning of 2002. Most the logging activities in forest concessions stopped at that time even though others are still going on. Thus, changes until early 2002 should provide a rather good estimation of recent logging activities prior to the logging suspension. This can be easily demonstrated when looking at the road nelworks within different concessions: e.g.#Pheapimex - Kompong Thom, Silverroad... Once again the objective is not to evaluate precisely the logged area, but to use the road network as a proxy indicator to evaluate the informationprovided by the concessionaire. b Ifsuch bigchanges happened during the last months, Iwould be very grateful if you would provide us with such evidence (maps). This would be very helpful to the TRT. b I would like to remind you that the former GATFores International concessionan Con es io Ma wasContralPiLtPr official1 cancelled in Cambodia June 2002 and that this cancelled concession IS no! Incfudet in %%emen evajuaton exercise. aoreover, ect I the examples you give rather demonstrate that when legal logging is suspended, illegal logging seems to take over. F In many other tropical countries the forest cover is updated every 5 to 10years. Until now we have 92-93, 96-97, and 2000 (only for concessions) forest Cover interpretationand we will soon have 2002 interpretation. We have enough material to work on and I don't think that purchasing a new set of images will be of any significant help in the preparationof the managementplans. On the other hand, I agree that for your own activities of crime monitoring you should be able to work on updated images. 4) TheDFW GISRS staff prepared all the maps and GlS data for the concessionmanagementplans. It is writtenon the maps submitted by the companies and has been confirmed verbally by concessionaires - who by the way complained rather bitterly about D f W's excessivefees. I believe it is unrealistic for anyone to expect the DfW GIS/RS staff to produce for this On-gOhg study anything different from what they produced for the concessionaires. Surelyyou do realize that this constitutes a classical exampleof conflictof interest. F Nobody has ever disagreed with the fact that the DFW GlSlRS Unit prepared the maps for the concessionaires. Even DFW GIS/RS staff recognize it. F Regarding the 'excessive fees" about which the concessionaires complained, I would just like to remind everybody that the concessionaires were not required to work with the GIS Unit. They could have worked with any one else (or by themselves...) for less cost. b The interpretation of 2000 Satellite Imageryby the DFWis certainlyof good quality and isdefinitelyof better quality than the 96-97 interpretation. That has been acknowledged by GIS and RS professionals. There is a competent team that has the capability to provide reliable work. Moreover, this team will be supervised by an independent specialistwho has neverworked in Cambodia before and he cannot be suspected of having any previous relationships with anyone in the country. I will also supervise some part of the work while the specialist is not in Cambodia. I have already looked at some preliminary results and I am quite pleased with the quality of the work. Indeed, I,myself, have checked the interpretation of the road networks in different concessions. It fits perfectly with the GIS Unit's interpretation. Even better, the road networks are sometimes wider on the GIS Unit interpretation inside and outside of the official coupes. Iwon't repeat the limitations of this study, sinceVincent Fesneau,did that duringhis presentation. Iwould just like to remind you that the objectives of this study are, in a very short Deriodof time,to: -- develop evaluate the forest cover in Cambodia at the beginning of the year 2002; information on some general trends in the evolutionof forest cover from 96-97 to 2002 inside -existing concessions, cancelled concessions, and protectedareas; and provide an estimation of the logged area by using loggingroads as a proxy indicator at the beginningof 2002. This will be used by the TRT to assess the quality of the informationprovided by concessionairesin their SFMPs. --- provide Ithink that it is important toremember that the objectivesof thisstudy are notto: evaluate the level of degradation of forest cover ; monitor illegal logging in Cambodia. (FRM/INDUFOR/SGS has no mandate to evaluate these activities); or a continuous survey of Cambodia's forests. Best regards, Forest Concession Management and Control Pilot Project The World Bank 1818 H Street N.W. (202)477-1234 !VTER.NATlONAL BANK FOR RECONSTRUCTIONAND DEVELOPMENT Washington, D.C. 20433 Cable Address: INTBAFRAO INTERNATIONALDEVELOPMENTASSOCIATION U.S.A. CableAddress: INDEVAS May 21,2003 Mr.Ty Sokhun Director General Department of Forestry andWildlife PhnomPenh, Cambodia Subject: Forest ConcessionManagement and Control Pilot Project DearMr.T y Sokhun: Iwouldliketofollow-upwithyouondiscussionsyouhavehadwithMr.William B.Magrath of the Bank's Cambodia Country Office on how the recommendations of the recent Mid-TermReview Team's (MTR)report canbest be operationalized. t Mid-Tem Review Report. At the outset, Iwould like to say that Ifind that the MTR reflects a solid understanding of the project, its potential contribution and the limitations and constraints that have been faced. Ibelieve it could be the basis for improvedperformance and long lasting development impact and would like to work with you to see project performance improve as the team suggests. It's open acknowledgement of public mistrust and lack of confidence, even as these may not be fully justified, is an important messagefor the Department of Forestry and Wildlife to reflect upon. Broadly read, the review is supportive of the basic thrusts of the project and of the technical quality of much of the work that has been completed. Nonetheless, there are some aspects of the MTR that appear to be in error. For example, the observation that three concession Strategic Forest Management Plans have been accepted and that the concessions are awaiting approval for a resumption of logging (p. l$ Given the sensitivity of this issue, Istrongly suggest that you provide public clarification on the status of these plans and logging approvals. In addition, some of the consultant's recommendations are not well advised in the view of the Bank. The World Bank cannot, for example, support the consultant's recommendation for temporary licensing o f concession operations that might in any way be outside of the procedures envisioned by the Sub-Decree on Forest Concession Management (p. 16). Iwould, instead, suggest that concessionaires be directed to pursue the established planning sequence as rapidly as possible consistent with good technical performance. Application of 5-year Compartment Planning. The MTR refers to a decision by the Department of Forestry and WildIife (DFW)to enforce 5-year compartment planning as an integral part of the concession management system. As Iindicated in my letter of 20 December 2002, Ibelieve attention to mid-range planning issues is essential, and a 5- year compartment plan would be an effective way for these to be addressed. Iam also convinced that the 2002 Forest Law permits the Department of Forestry and Wildlife RCA 24@423. I=pWUI 64145 P FAX (202)477-6391 Cambodia Forest Concession Management and Control Pilot Project -2- May 21,2003 discretion to require concessionaires to pursue sound practice and particularly to require concessionaires to conform to the future planning sequence to which they have committed themselves in their Strategic Plans. As most, if not all concessionaires have indicated that they will prepare 5-year compartment plans if their long-term Strategic Plans are approved, Ibelieve that there i s no effective constraint to application of the full planning sequence. While Iunderstand that you may wish to consult intemally on this matter, Ibelieve that clear and public confirmation that the full planning sequence will be applied i s essential for the successfulimplementation of the balance of the project. Community Consultations. Ifully support the MTR recommendation that a Community Forestry Specialist be recruited under the project as soon as possible to ensure that adequate procedures and processes ape pursued in future concession planning and control work. To operationalize this recommendation, Isuggest that you consider preparation of something along the lines of a "Social Issues for Forest Concessions Sourcebook". This would give concessionaires, the public and your staff practical guidance on incorporation of social issues into concession operations from the planning through to logging and post logging stages. This could build on the recommendations made in "Social Forestry Guidelines for Forest Concessions'' (Fortech, 1998) and could be based on a consultancy, training program and pilot activities that could be implemented in the next 5 months. Isuggest that you consider consulting systematically with interested NGOs and others on implementation of such a program. Field Patrols and Supervision. Similarly, I fully endorse the MTR proposal that project resources be used more aggressively and visibly to support the presence of the DFWinforest areas including bothongoing andcancelled concession areas. To thisend, it would be appropriate for DEW to assign project-financed vehicles, equipment and staff to work in the field with NGOs and others, including those with whom you are already working in partnership. In any case, it is important to be able to demonstrate that the project is enabling DFW to exert controls on resource use through a field presence. I suggest you consult with WildAid and Conservation International or others of your choice, andor develop your own program for field activities that the project can support and present it to the Bank as soon as possible using the MTR estimate of cost of mobile forest crime enforcement units (Annex 4) as a point of departure. Forest Estate Delineation and Boundary Setting. It is unfortunate that the MTR consultants were not able to utilize the results of the ongoing satellite imagery assessment of changes in forest cover and forest degradation. This could have added considerably to the authority with which the team was able to offer an opinion on the overall performance of the concession system and the role of this project in strengthening it. Itis, nonetheless, important that this ongoing work be completed and made available as part of the public debate on forestry in Cambodia. Looking further ahead, the current project should make every effort to support the data collection, mapping and other work needed to establish a workable permanent forest estate (including, but not limited to concession areas). In this direction, Isuggest that you consider carefully any possibilities of cooperating, with the resources available through this project, with other agencies of the Royal Government and particularly the Ministry of LandManagement on work related to forest mapping and demarcation. In addition, Isuggest that you make an effort to identify ways to ensure Cambodia Forest ConcessionManagement and Control Pilot Project -3- May 21,2003 that concessionaires shoulder a reasonable share of the burden of boundary demarcation as part of the concession planning and operations processes, and work with other concerned agencies of Govemment to establish procedures and protocols for the necessary mapping and field work. From the Bank perspective, costs for such activities, within eligible expenditure categories under the Credit, could be financed by the Credit if agreed in advance. . Also, even if an extension of the entire project i s not possible, it could be possible to extend the closing date for these specific activity if needed. Public Afuirs Capacity. Part of the mistrust and suspicion that characterizes the Cambodian forestry sector, Ibelieve, is due to the limited availability of timely and accurate information. in my opinion, the Department of Forestry and Wildlife has not received adequaterecognition for its efforts in this regard, for example, the disclosure last November of concession Strategic Forest Management Plans and Environmental and Social Impact Assessments. Nevertheless, more needs to be done. As proposed in the MTR, DFW should establish under the project a designated public affairs unit with terms of reference that include dissemination and disclosure of information and documentation on forest concession management and other forestry issues. This could be organized to be in line with and help fulfill obligations on the Forest Administration under Article 6, paragraph Dof the 2002Forest Law. Work Plan and Extension Program. These recommendations are summarized in the attachment to this letter and Ihope will help you plan your next steps. As an immediate step forward, Isuggest that your Department prepare a detail work plan, including key activities and anticipated delivery dates, estimated budget, procurement plan and consultant terms of reference, for the next 6 months of the project that addresses the specifics of the MTR recommendations, particularly those highlighted above. This would build on the already approved program for the Forest Crime Monitoring and Control component, which you might also wish to extend, especially with respect to field activities and the possible needto finance the services of a new Independent Monitor of Forest Crime Monitoring and Reporting. We hope that you would be in a position to submit such a work plan to the Bank no later than 26 June 2003. As you know, Mr.Magrath is in Cambodia and i s available to work with you and your team on the necessary documentation requested above and to conclude an agreement with you on targets. Ihave also made plans for a World Bank Social Scientist and consultant Forester to visit Cambodia in June to help review your proposed work plan and to assist as necessary with Terms of Reference, consultant recruitment and other support as needed. On the basis of delivery targets inthe work program you submit, Isuggest that we consult further no later than 15 October 2003 to assess progress and to determine whether the project has begun to move forward satisfactorily and, if so, whether an extension of the closing date is warranted. This review would coincide with the scheduled work of the multi-donor Forestry Sector Review and would take into consideration the views of a broad range of stakeholders on the impact and performance of the project. As input to the Bank's consideration of an extension of the project, Iencourage you and your team to think as broadly as possible of the investment needs of the forestry sector as a whole Cambodia Forest Concession Management and Control Pilot Project -4- May 21,2003 and submit by 15 October 2003 a proposed design for a one- or two-year extension of the project that would address the most important sectoral development constraints that you see facing forestry. 1 suggest that your team move ahead immediately with assistance from your technical advisers with the ongoing work of the project, and at the same time undertake the suggested activities summarized in the attached table, including preparing for the Bank's review in June of the detailed work plan related to the key recommendations of the Mid-Term Review. Please let me know of any questions or concerns that you have or consult with Mr.Magrath at your convenience. Because of their interest and involvement in these issues, Iam taking the liberty of copying those listed below on this letter. Sincerely, MarkD.Wilson Director RuralDevelopment and Natural Resources Sector Unit EastAsia andPacific Region cc. H.E.Chan Sarun, Ministerof Agriculture, Forestry andFisheries H.E.Keat Chhon, Senior Minister ofEconomy andFinance H.E.hChhun Lim,Minister of LandManagement Mr.CheahSamAng,ProjectDirector, Department ofForestry andWildlife Mr.Urooj Malik, Country Director, AsianDevelopment andCo-Chair WGNRM Mr.Jean-ClaudeLevasseur,Representative,U.N.FoodandAgriculture Organization and Co-Chair WGNRM Cambodia Forest ConcessionManagement and Control Pilot Project -5- May 21,2003 SUGGESTEDACTIONSTO OPERATXOli LIZERECOMMENDATIONS r OF' EMID-TERM LEEVIEW Issuflopic Suggested MainProject ProposedFirst Bank Support or ActivitylProduct Component Step Date Participation 5-year Confirmationof Planningand Press Release lune 1, Compartment applicationof 5-year lnventory or other public 2003 Planning Compartment Plan statement requirement Community Pilot activities Planningand Terms of June 10, Bank Social Consultations leadingto Inventory Reference 2003 Scientistto assist "Sourcebook" or and review other guidelines on community/social concerns in concessionplanning andoperations Project-supported ForestCrime Terms of June 10, BankForestry and Supervision field patrols Monitoring and Reference 2003 Specialist to Prevention advise and review Programfor project Planningand Terms of June 10, Assistance Delineationand supported Inventory Reference 2003 availableunder Boundary cooperation with Bank-financed Setting other key land Land agenciesfor setting Managementand policy and giving Administration operational Project directionsto Departmentof Forestry and Wildlife and concessionaires Public Affairs Designationof Planningand Terms of June 10, Assistance Capacity responsibilityfor Inventory/ Reference 2003 available from public affairsand Bank's External information Concession Affairs dissemination Control Specialists function within Departmentof Forestryand Wildlife Short-termwork Project Proposed June 26, Extension planand Terms of Management Budget and 2003 Program Referencerelatedto Consultant the above Selectionand Procurement Plan Plan for Project with Project Proposed October I Extensionof Closing Management Budget and 15,2003 Date Work Plan Cambodia Forest Concession Management and Control Pilot Project QualityEnhancementReview CambodiaForestry Summary Since 1995 the Bankhas beenclosely associatedwith attemptsto reform the forestry sector inCambodia. This includes a forest policy assessment in 1996 andtwo lending operations, a SAC and a LILin2000. Despite tangible successes donor andNGO criticism o fthe Bank's work has been strong. Both groups have challenged the outcome o fthe Bank-Government work, as well as the processby which itwas carried out. The mainthrust oftheir criticismis that the Bankhasnotbrought adequatepressureto force reforms---we havebeentoo tolerant of foot-dragging by government. Critics acknowledge, however, that the Bank's presencei s critical to bringing about change. Successesinclude (1) a reduction by 4 million hectares of areainconcessions withreal progress toward good managementofthe remaining 2.5 millionand (2) a substantial empowerment of civil society and donors intheir battle to create a transparent forestry industryoperating withinthe public interest. Goodforest governanceis far from being achieved, however, andmuchwork remains to be done at boththe institutional level and inthe forest. While Donors andNGOsare impatientwiththe perceived slow rateof progress, the panel's judgment i s that reform inthis difficult areai s probably occurring as rapidly as can be expected, andwould not be movingat all without the Bank's involvement. Despite these successes, the Bank's image, and indeedthe Bank's effectiveness has suffered from the following: (1) the inability o fthe country team to coalesce around a shared strategy on substanceandonprocess, (2) the early termination o fthe FAO/UNDP Forest Crime Monitoring andReporting Project due to the breakdown o frelations betweenthe Forest Crime Monitor, Global Witness, and Government (3) not having in place a clear andwell-articulated vision o fhow the recently-liberated 4 millionhectares are to be occupied, and (4) an insufficiently well-articulated Bank commitment to non- concessionaire forest users, especially the ruralpoor inand near the forest. The panel concludes that the LIL and SAC have had limitations as instruments inaddressing the long-term structural nature o f Cambodia's forest governance problem. Nevertheless carefully selectedforest-related SAC conditionality, that are squarely onthe larger governance agendaandare completely under government control, should continue to be considered inforthcoming SACS, We recommend extending the LILandusing the remainingfunds to (1) carry out aerial andfield surveysto verify the current statusofthe forest and establisha clear baseline for additional work, (2) analyze options for non-concession landuse, witha focus on poverty, equity, traditional rights, and biodiversity protection(3) carry out a participatory ICR to work with stakehoidersto develop a consensusaround next steps, and (3) maintainpressure on concession reform. Cambodia Forest Concession Management and Control Pilot Project Interms ofthe htureof the Bank's involvement inforestry we notethe forest sectoris of strategic importance to achieve gains on the top two agendaitems inCambodia, governance andpoverty reduction. Bank efforts inthese areas will require a commitment bythe regionalandcountry managementworking incooperationwiththe Task Teamand EXT inorder to develop andcontinuously refine a single coherent view on the substance andthe process ofour forest sector strategy, andto develop and implementa proactive communications andpartnership-building strategy. Successes "he Bank's 1995 Forest Policy assessmentprovideda soiid diagnosis o f tne state of the forest sector inCambodia and led to a correct focus on concessionpolicy reform and forest governance. Subsequent TA and lending was, therefore, appropriately focused on reformingthe concessionssystem and controllingillegal logging. The 1996 Forest Policy Assessment identifiedover 6 millionhectares under concessions from some.30 concessionaires. Over halfof these concessions hadbeen established in 1995 and 1996under unclear criteria and amongwidespread allegations of cronyism. Actual concession implementation variedwidely. Inaddition to lack o ftransparency in allocation, no systematic control o f concessionmanagementwas inplace, harvest was far above sustainable levels and government was receiving only a small fi-action o f economic rent. Important progresshasbeenmade, although key elements couldbereversed at any time. Followingdiscussion with Bank and Government lawyers, it was decided that no matter how irregular the allocation andmonitoring system, existing contracts mustbe respected'. Conditionality inthe SAC and support to DFW under the LILfor the first timeputteeth inthe sustainability languageinthe contracts. This has reducedthe concession area from 6.2 millionto 2.6 million, with additional reductions pending. As remaining concessionaireshave not respondedina timely mannerto the requirements of government, a loggingbanwas imposed effective January 2002. While there is evidence that illegal logginghas continued on some concessions, and government has created a loophole through the economic landconcessions, there i s no doubt that other concessions have suspendedoperations and overall logvolume i s greatly reduced. Onthe institutional fi-ont anew forest law was drafted and passedthatallocated institutional responsibility for forest land and establishedprinciples supporting transparent management inthe public interest2. These Bank activities have significantly exposed and challenged the control o fvested interests and empowered civil society and donors to hold government accountable. Specific examples include the cancellation of concessions, public disclosure of concessiondocuments, and greatly enhancedtransparency includingthird party monitoring. 'It is noteworthy that the decision of the Bankto respect these contracts was very unpopular with the Donor and NGO community, and contributedto widespread suspicionthat the Bank would not take on vested interests. * This law also createdthe legal figure o f community forests. Cambodia Forest Concession Management and Control Pilot Project Current Problems For the Bank's critics the glass is half empty. Illegal loggingi s widespread, including on cancelled concessions, there i s no clear plan for what to do with the landunder cancelled concessions, andthe government continues to be a hesitant partner. Because o fthe Bank's leadership inthe reform effort ittends to beheldresponsible for the glass not being full. Inaddition there is a widespread view among donors andNGOsthat through its emphasis onthe concessions model the Bankhas gotten too close to vested interests in government and the industry, failed to employ its remedies when appropriate, and not seriously entertained altemative community-based models. It should be noted, however, that both correspondencereviewed and conversationwith the representative o f Global witness indicate that despite criticisms of the Bank's performance, they indicated they do not want the Bank to exit. Diagnosis Inthe panel's judgment boththe image andthe effectiveness o fthe Bankisbeing seriously undermined bythe inability ofthe country team to develop andcoalesce around a shared strategy on substance andon process. This requires (1) a dynamic reform agenda that evolves as progress is made and, (2) a strategy to buildeffective and realistic partnerships with the critical stakeholders. The Bank's programhas come up short in both areas. Lack of evolution of the reform agenda. Althoughthe reform agenda started off right-there was no alternativebut to work on concession reform in 1996-the Bankhas fallen behind the curve as this agenda progressed. In particular, the Bank has not been fully preparedto discuss alternatives outsidethe concessions model as 4 millionhectares were removed from concessions as a result of the success o fthe concession reform strategy. On the other hand, the Bank's work program inthis area i s constrained as the Government has beenhesitant to take on the issue andpresently lacks the capacity to address it (apart from law enforcement). Although alternatives such as community-based models hadbeen discussedinternally and analytical work on social forestry issues has been ongoing through a PHRD TA grant, the Bank didnot keep pace with the demands andexpectations ofthe public, NGOanddonor community. Consequently, options were not fully developed and discussed with government andstakeholders. This inability to keep up with the demand by producing and disseminating substantive results inthis area, only strengthenedthe perception that the Bank was somehow too close to vested interests inthe area ofconcessions. Failure of the country team to develop and coalesce arounda shared strategy. The lack o fclarity on where we want to go has impeded agreement on how to get there, in particular how to deal with government, donors andNGOs. Widening the base of issues that the Bank is viewed to be working on inforest policy would create more points of contact with the substantial agenda o fpotential Donor andNGOpartners. Inadditionthe Cambodia Forest Concession Management and Control Pilot Project Bankteam needsto agreeonhow to managerelationshipswithkey stakeholders: e.g. how to deal with the few skeptic NGOswho are not likemindedinterms o fprocess and outcomes; whenthe Bank i s to lead, when it should let others take the lead. Donors andNGOswant the Bank to take the lead on analytical work, and indialogue with government. The team needs to agreeon astrategyto generatebroad ownership in the former, and to better explain our limitations inthe latter. On analytical work especially, everyone on the team needsto understandthat inCambodia, even more than inother countries, theBankneedsto balancehighstandardsofanalytical rigor with a process that strengthenspartnerships.This also holds true for project implementation. Responsibility and accountability for this strategy and its implementation must be shared bythe countrymanagementteam andthe TTL. Their interest andparticipation inthe QERhas demonstrated ahigh-levelofcommitment to the work andsignals that the neededelements are comingtogether for this to occur. Failureo fthe environmental crimes project. The coherence o fthe Bank-ledreform has been badly damagedby the earlytermination ofthe FAO/UNDP Forest Crime Monitoring andReportingProject due to the breakdown o frelations between the Forest CrimeMonitor, GlobalWitness, and Government. This left a fundamental legmissing from the concessionsreformpackage. Inretrospect that Bank should have allocated moreresources to the project (see discussion o f instruments below) andadequately funded andensuredimplementation ofacomponent so fundamental to overall success3. Credibility. Doubts raised concerning the economic viability ofconcessions andthe Bank's downgrading of foregone revenue estimates have done some harmto our credibility. Thesereflect bothreduced timber prices since the 1996analysis, andbetter knowledge with regard to the productivity of the forest. Bankinstruments. The panel feels that the earlyESWandTA reports were o f generally highquality. As suggestedabove, our analytical work didnot adequately evolve as the concessionsituation changed. Bank work on the ground suffered from insufficient resourcesresultingfrom the choice o f a LILY which inany case was not structured as a learning andinnovation exercise. As suggestedabove, the absenceo f Bank control in implementing the forest crimes component turned out to havebeena serious error. The use o fthe SAC to carry governance conditionality within the context of the forest sector was fully appropriate and coherent with the loans governance objectives. The link to general conditionalitythrough the development letter was amistake fully recognized by management. Recommendations. Stay involvedinthe forest sector inCambodia. This sector i s ofcritical importance both for institutional and governance reform and for povertyreduction. Forest sector reform is inmanyways critical to governance and institutionalreform. First, as well 3 Cambodia Forest Concession Management and Control Pilot Project documented inthe Bank's 2003 WDR, the OED Forest Sector Review and the work of Paul Collier and others, poor governanceofnatural resourcewealth helps finance corruption and abuse of power inother segmentso fsociety, diverts entrepreneurial talent to "take not make", andpermits government to be less responsive to its citizens. Were the Bankto exit from the forestry sector at this time it would hurt the Bank's credibility and effectiveness not only inthe forest sector, but inthe overall countryprogram. ExpandESW on alternatives for the forest sector inCambodia, and includemajor stakeholders to the extent possible. This might include a learningICR for the LIL. In order to ensure ownership and to generateconsensuson the way forward this should be donejointly with our major stakeholders. Lnview o fthe ongoing reduction o fconcession land, and emerginginterest incommunity-based models, solid analysis is needed o f(1) the potential for communitybasedforestry and(2) alternative concession and community basedsystems. Current estimates are that 80-90 thousandhectares are under community forestry. Indicativecalculations by GTZ apparently indicate that nearly 9 million hectares (out o fsome 10-11million o ftotal forest) have potential for community forestry. Clearly much analytical work is needed. Use remainingresourcesfromthe extension of the LIL to establish a new baselineof forest conditionsand to strengthen partnerships. Carry out anaerial photography- based forest assessmentcomplemented with field measurementsandsurveys. This survey should includeidentification of logging activities, sample forest inventories, and a mapping o fcommunities. This would establish an updatedbaseline for considering future forest options. Its design and implementation should ensurethat information generatedi s ofhighquality and, inthe interests o f complete transparency, hlly available to the public, includingboth the sourcedata (air photos) andthe accompanying analyses. Keeppressureon concession reform. The Bank mustkeep pressureon concession reform. This includes ensuring through Bank no objections the highest international standardsinmanagement plans (including social and sustainability criteria), as well as fully professional monitoring and evaluation ofperformance. Continue to useAdjustment conditionalityto achieveimprovements in forest sector governance. Forest sector governance is critical to the largerissueso finstitutional development andnational governance. Adjustment conditionality should focus on very well-defined govemance improvements that are completely under the control o f government. Develop a strategic communicationsstrategy and implementit. The communications strategy needsto fidfill three functions: (1) communicate the Bank's strategic thinking effectively to stakeholders and help to manage expectations, (2) guarantee effective communication and dialogue betweenthe Bank and stakeholders to develop a coherent, sharedimplementation strategy, includinga better understanding o fthe limitations of each o fthe partners, and (3) to develop the incipient local civil society into an effective constituency for institutional change. The Bank needs to shift its alliances and dialogue Cambodia Forest Concession Management and ControlPilot Project from dependenceoninternational NGOsandDonorsto one involving an increasingly national constituency. Cambodia Forest Concession Management and Control Pilot Project From: Steven N.Schonberger on 07/29/2004 07:13 PM ZE7 EASRD To: Perer Jipp/Person/Wor Id Bank@WorIdBank, Kimberly Versak/Person/Wor Id Bank@WorldBank cc: Mudita Chamroeun/Person/WorId BankBWorldBank, Hoonae Kim/Person/World BankBWorldBank, William B. Magrath/Person/WorId Bank@WorldBank,Nisha Agrawal/Person/World Bank@WorldBank, Peter L. Stephens/Person/World Bank@WorldBank,Ian C. Porter/Person/World BankBWorldBank bcc: Subject: Meeting with GW Given the tone of the latest letter, Iwent t o see GW Mike Davis and Markus with Mudita. - - GW indicated following: 0 They feel that "nothing has changed" despite assurancefrom Ianand NIsha that we would work in concert with the other donors and the results of the Indpt. Review 0 Bank is trying t o salvage the concessionsystem as the main management system for production forests at all costs, in part at least t o justify the money we've already sunk into concessionsreform. While the concessions have been reduced this has nothing to do with the LIL (areas logged out) which is focusing on supporting continued concessions in the six concessionswhich represent virtually all of the commercially valuable areas. 0 We have been pushing log transport independently of FA and the other donors 0 The WB has endorsed that six concessions go forward through the LIL 0 Our advocacy of the concessionsystem demonstrates that we are not sincere in our indications that we would work with the other donors based on the results of the indpt. review which recommendedstopping the concessionsystem Iresponded: 0 I n terms o f transport, we responded to a request from govt. and discussed this with the other donors. We were not asked for approval but for our views on how this could be done. 0 I n terms of concessions,it is clear that we are not advocating this system for expansion but simply supporting an orderly wind down from the initial situation. This is confirmed by the provisions of the Subdecree on Forest Concessions (with which we have indicated our agreement) which stipulates that the cancelled concessions cannot be rebid out for forest concessions. 0 IdisagreedthothesixconcessionsrecommendedbyTRTconstitutetheonlyviableareasin Cambodia. The fact that the TRT recommendedthe largest and politically most connected concesssion - Pheapimex - forcancellation is encouraging. - 0 We have worked in close collaboration with the other donors on all aspects including the proposedtransport and SFMP review As the lead technical donor in the sector, we are often in the position of presenting the situtation t o the group to clarify govt.'s position and suaqesting ways forward, but we do so with the expectation that others will challenge these Cambodia Forest Concession Management and Control Pilot Project views and this in fact does happen. We recognize that not all donors may be able t o fully capture the issues being discussedat the time or may reconsider afterwards, but in this case the donors concerned should indicatedtheir reservations or uncertainties as input t o the process rather than express outside the consultative process that they are not sure if they agree or not. This hardly constitutes major dissensionamongst donors. The disagreement in terms of concessions is now focused on whether it is reasonable to expect that any of the existing concessionaires will act or can be managed t o act consistent with sustainable forestry practices. WB believes that this is possible if the SFMPsare reasonably good, while GW does not believe this is possible given the types of abuses which these firms engaged in previously. We have not endorsed anything regarding the SFMPs. The technical review team works for government and our responsibility is to ensure good TORS,qualified applicants and a transparent selection process. We have under the LIL the right t o comment on the TRT results and we have chosen t o join the other donors in supporting an independent review of the SFMPs recommendedt o continue. We are awaiting these results before we indicate our agreement or disagreement with the TRT and have not reviewed the plans or the TRT comments independently at this point. I f we have concerns regarding the indpt. review, we will review directly the concerned plans. e As regards the independent review, we agreed that our future engagement in forestry would be guided by the sector review, but not in the sense of following all recommendations but rather that this would be the basis for discussionand reaching concensus with other stakeholders on how we focus our future support. We are preparing comments t o discuss with others. We se:ems t o haveagreed on the following: e While focusing on concessionsas the key issuesome years back seemed the right way t o go, our own internal review agrees with the concerns of several stakeholders that we should have maintained a broader approach t o forest resource management, particularly as the issue of pose-concessionmanagement systems begant o emerge. This was highlighted in our internal QER and shared at the forest review workshop. We are expanding on the previous support for partnership type approaches including to WCS and Wild Aid. We hoped to also support FA0 community forestry but govt. did not agree t o use credit funds for this. We agree that moving forward the emphasis should be on alternative managemetnsystems, including experiments with partnership forestry, combined with efforts t o bring as much transparency and accountability t o the annual coupe system in the mean time. If doesnotprovideareasonableplanfortransportofexistinglogs,weshould Government indicate clearly that we do not support the proposed transport given the risks. If govt. chooses not t o transport, we will all accept that decision. I n the case that govt. chooses t o transport, the Bank TA should focus, inter alia, on ensuring the royalty status of the logs. e If ontheindpt.evaluationandourownreview,noneoftheSFMPsqualifyforrenewal, based the concessionsystem should be concluded. WB would consider the program succussful in supporting an orderly process, introducing practical mechanisms of transparency and Cambodia Forest ConcessionManagement and Control Pilot Project technical requrements which are pioneering in the Cambodia context and we would consider this sufficient accomplishment. Where we may end up disagreeing: a If proposesalogtransportplanwhichincorporatesthesuggestionsfromusandthe govt. donor working group, then we would be supportive and GW would remain opposed. 0 If indpentreviewoftheTRTrecommendationsand/orourownreviewconcludesthat the some of the plans should go ahead, we will be supportive and GW wiii be opposed. As WB and GW are about the only agencies dedicating significant time to forestry, it behooves us to work to help others clarify the areas where we disagree and why, rather than personalize the issue or imply there is some kind o f conspiracy going on which is frankly counterproductive. As the indpt. review emphasized, the primary dialogue and accountability should be with govt. and not between donors or donors and NGOs. The later simply distracts from focusing on the very difficult, big picture issues and frankly plays into the hands of the vested interests opposed to reforms. GW appealed that we not focus our efforts on trying t o fix what is already in place and bad (concessions, Tumring) which they feel is hopeless or easily deviated, but instead focus on introducing examples of new good alternatives which might gain momentum. While the meeting was often tense, overall there was a sense that we are on the same side but . there are still some specific issues over which we disagree and depending on how govt. acts. we may end up on different sides of these issues. I nthat case, we know that they will use their advocacy tools as they have, but emphasized that we will keep our eye on the bigger pictureand as long as they do as well there will be scope t o work together. The ride going forward will depend on what happens with the transport and SFMPs. Important that we keep our role relative t o govt. clear in our discussions with govt., donors and NGOs, as well as letters, aide memoires, etc. as GW really wants to paint this as all W8 unilateral decisions rather than WB responding to RGC initiatives which is what the donors still believe (accurately) t o be the case, If some concessionscontinue, we'll just have to ride it out and meanwhiletake more leadership on the development of alternative management options and help lead the charge in insistingon transparency and accountability in the annual coupe process. Peter - thiswas all based on my involvement in your discussions during the last missionand with Bill during the SFMP review mission. I f any major errors, let me know and I'llconvey t o GW. Regards Cambodia Forest Concession Management and Control Pilot Project Forestry ConcessionManagementand Control Pilot Project ANNEX5 DETAILED CHRONOLOGY OF KEY EVENTS June 1997 Foregty studieitand i Policy (2 nical 1999 Assistance (TA) Proj July 1 roj 2000 ,June 5,2000 "FCMCl?P Approved July 6, 2000 FCMCPPDevelopment Credit Agreement siqned GOwnespondence d one by WCS-withFA a October 20,2000 ua Grant appioved ing implementation February8,2001 ement in project activities 113 Cambodia November 13,2002 Governmentoppositionpoliticianswrite to Bank President about forestry issues NGO-ledWorkshops ts of . c,omments sub'mitted December 5,2002 Crowdin front of FA building on SFMPlESlA consultations dispersed by police December 19,2002 Bankvs& concern Julv 21.2003 SFMPlESlA consultations nt and consuitation February 3,2005 Bank seeks complementary donor support to complete of Independent Review of SFMPslESlAs 114 Forestry Concession Management and Control Pilot Project ANNEX6. CAMBODIA'SFQRESTMANAGEMENTREGULATORYREGIME 1. A successful forest regulatory regime needs to provide managers and regulators with the legal, regulatory, contractual and other bases on which to compel resource users to abide by acceptable standards and practices in the conduct o f forestry operations in a wide range of potential circumstances. Regulatory systems should avoid unnecessarily rigid prescriptions and allow for flexible decision-making through well planned and monitored adaptive management and research. Room must be made for practical decisions to be based on local site conditions, the progress o f forest stand development, needs o f local users, site-specific biodiversity conservation considerations, and technical innovation. Guidance to regulators and operators must express clear expectations and should be written in such a way as to reduce the chance of misinterpretation. In developing countries, practical consideration must be given to: the skills and sensitivities of operators and field regulatory staff; the communications, mobility and other logistical capacities o f controlling agencies; the range and types o f equipment, forest types, terrain, weather and other aspects of the local forest industry.Inlight o f the wide gap that exists between conventional logging practices and acceptable standards in most developing countries, regulatory regimes will need to be carehlly and pragmatically sequenced in order to promote and encourage incremental improvement ina practical manner. 2. Since 1997, the regulatory regime for forest management in Cambodia has been developed incrementally through three linkedefforts: 0 Forest concession management studies under the Technical Assistance Project (1997 to 1999); 0 Asian Development Bank-supported Sustainable Forestry Project (2000 to 2002); and, 0 Forest ConcessionManagement and Control Pilot Project (2002 to the present). 3, The regulatory regime consists o f six specific components: overarching national legislation; legal regulations; legal standards o f sustainable forest management; a three- tiered planning process; planning and operational guidelines that provide direction to the forest planning process at all levels; and contracts, permits and licenses. 4. Forest planning processes generally fhction at a number o f levels, reflecting a range o f spatial scales and time horizons. Technical guidance embodied or reflected in various reference material, as well as standard accepted forestry, engineering, social and environmental practice, are usually not, in themselves, mandatory requirements but become enforceable when stipulated inan approved license, plan, permit or contract. 5. The components o f the regime are described below: 115 Cambodia 0 National Legidation. An "umbrella" forest law (RGC Forest Law 2002) that establishes the long-term intent o f forest management, and enables government to: 0 create a permanent forest estate to be managed by a designated, responsible agent o f government (the ForestAdministration); 0 define acceptable and sustainable uses o f forest resources; establish procedures for environmental protection and the conservation o f natural forest diversity; 0 protect the traditional rights o f forest-dwelling people to access and use the forest; 0 establish criteria andprocedures for the zoning and allocation o f forest lands; 0 allocate forest lands to different uses (ie., commercial concessions, community forestry, annual felling coupes, etc.); 0 regulate and control forest use andharvest; 0 collect fees and royalties onpublic use and harvest o f forest resources; 0 define illegal activities inthe forest, and establish enforcement procedures and penalties for non-compliance; and 0 regulate and control the transport, conversion and processing o f forest products. 0 Legal Regulations. Legal regulations pursuant to the Act (Le., Sub-Decree on Forest Concession Management 2000, Sub-Decree on Community Forestry 2003) that establish: o broadmanagement direction for different uses; o procedures for application and approval to use the forest and forest resources; o legal contracts and/or agreements between government and forest users establishing enforceable terms and conditions for resource use (Le. model Concession Agreement); o standards for forest planning andmanagement; and o procedures for the monitoring o f compliance, and enforcement actions and penalties to be applied incases o f non-compliance. 0 Legal Standards. Legal standards o f sustainable forest management for each major forest zone, establishing: long-term forest and ecosystemmanagement objectives for the zone; the nature and rates o f acceptable use, and royalty rates due to government; and mandatory forest management practices (i.e. silvicultural systems, rate-of-cut constraints) that apply nationwide. 0 Planning Process. A three-tiered planning process, defined by planning guidelines (see below) and providing the basis for Government approval and permitting and for compliance monitoring and enforcement, consisting o f the following levels. 116 Forestry ConcessionManagement and Control Pilot Project o Long-term (25-year) strategicforest management plans, which include: - broad sustainable forest management, environmental and social objectives - for the concession; delineation of forest zones to define both protection areas (biodiversity reserves, protected area buffer zones and corridors, watershed protection areas, riparian reserves, fragile areas, traditional non-timber forest product areas important to local communities, and areas o f cultural or historical - importance) andthe net operable working forest by major forest type; a scientifically calculated medium- and long-term sustainable yield on the net operable working forest; - appropriate silvicultural systems and harvesting techniques for different -- forest andterrain types; environmental and social impact management and monitoringprograms; ongoing community disclosure, consultation and participation programs; - and inventory, monitoring andevaluation programs. o "Rolling ''3-5year compartmentplans, which include: -- medium-termaccess planning, management anddecommissioning; more focussed community consultation leading to refined environmental - and cultural resourcezoning; and medium-termsilviculture andsite rehabilitationoperations. o Annual coupe plans, guided by operational guidelines (see below), which describe: ------ harvesting methods and equipment; operational inventory results; tree numbersand volumes to be retained and removed; locationanddesign o f forest access; tree marking and log tracking methods; on-site environmental and cultural resource protection and biodiversity - conservation; regeneration and stand-tending activities; and methods and results o f annual community consultation programs. 0 Guidelines. This comprises a set o f planning and operational guidelines that provide direction to the forest planning process at all levels-strategic, compartment and coupe. Guidelines have been developed to give direction to planning through a range o f field circumstances and site conditions, and thus not all of the prescriptions may apply to a specific area. InCambodia, guidelines have been prepared relating to planning, inventory, community consultation and participation, biodiversity conservation, watershed and riparian zone delineation and protection, reduced impact logging, access management (road design, construction, maintenance and de-commissioning), and forest engineering. Planning guidelines have now been consolidated in a Forest Planning Handbook covering all levels of concessionplanning-strategic, compartment and coupe. 117 Cambodia e Contracts, Permits and Licenses. Linking the above elements into an operable control system i s rigorous and methodical documentation o f the controlling agency's evaluation and acceptance o f the operator's plans. This documentation mustrecordandverify the expectedadequacy of the proposed action, asjudged in light o fsite-specific conditions andthe overall objectives ofmanagement. For this reason, guidelines are not mandatory in themselves, but the prescriptions they contain become enforceable when stipulated in approved plans at the strategic, compartment and coupe levels. 6. Environmental and Social Impact Assessment of Forestry Concession Management. Environmental and social impact assessment o f forestry projects should be integral to the underlying forest planning process. However, because o f obligations mandated by the Law on Environmental Protection and NaturalResource Management, it i s a separate process requiring parallel documentation. At a fundamental level, traditional ESIA fulfills a number of functions that are not substantially different from those required to develop a sustainable strategic forest managementplan: e Scope potential impacts basedon an initial project design; 8 Establish a reliable environmental and social baseline against which to measure future change; e Establish environmental and social objectives, standards and performance indicators; e Avoid or reduce impacts through early consideration inplanning and design; e Identifyand quantify benefits andresidual impacts or risks (i-e., those that cannot be avoided or mitigated); 8 Establish monitoring programs, with "thresholds" that will trigger management action; 8 Consult with affected communities and accommodate their needs in the managementplan; and e Provide guidance to more detailed planning which, in turn, will lead to operational approvals and implementation. 7. Inlight of the foregoing, ESIA inforest resource management should focus less on "academic" impact analysis, and more on ensuring that forest management planning avoids or minimizes environmental and social impacts by: Settingclear and appropriate goals, objectives andprinciples for sustainable forest managementactivities; 118 Forestry Concession Management and Control Pilot Project Ensuring that government policies, legislation, regulations and institutional organization support and facilitate sound, sustainable natural resource management; 0Ensuring that management activities directed at natural ecosystems are as consistent as possible with the ecological processesthat create and maintainthose systems; 0 Limiting site disturbance, soil degradationand watershed disruptionthrough good operational practices; 0 Incorporating long-term community co-management, planning and development programs into program designthrough constructive public consultation processes; 0 Providing potential beneficiaries with the skills and information necessary to participate effectively inthe project; and, 0 Establishing well-conceived environmental and social monitoringprograms. 119 Forestry ConcessionManagement and Control Pilot Project ANNEX7 REFERENCES Ashwell, David; Miller, Frank & Diimmer, Ignas. 2004. 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