Global Policy Forum

By Alan Boyd

Countries that rape the environment for high-growth development policies are starting to lose their appeal with global lending agencies after a decade of sustained pressure from the green lobby.

This month the World Bank announced a review of its forestry assistance packages in Cambodia after Phnom Penh expelled a conservation group that was tracking illegal logging activities. The International Monetary Fund and Asian Development Bank are also expected to reconsider their commitments to a regime that has consistently snubbed world opinion.

While none of the international agencies has yet withdrawn aid, the rebuff may block new financing involving tens of millions of dollars that has already been frozen for months by unease over the Cambodian policies.

"The [World] Bank is considering its work in the forest sector in light of numerous factors, including this and other recent developments," World Bank country director Ian Porter said in a statement issued after the expulsion of environmental watchdog Global Witness.

While he did not elaborate, the other developments are believed to center on Cambodia's failure to establish a viable framework for the sustainable management of its depleted forests.

London-based Global Witness was originally contracted by Phnom Penh in 1999 to monitor forestry policies as part of a deal with a group of donor agencies led by the World Bank. Donor agencies linked a US$30 million structural adjustment aid package to reform of the forestry management system, which was being widely abused by vested interests within the government.

Logging concession companies were required to compile environmental-impact plans for their activities by late 2001, but were allowed a 12-month extension after successful government lobbying on their behalf. When the plans were finally released last November, the government, in effect, prevented a public dialogue by allowing only a 19-day public consultation period instead of the six months recommended by the World Bank.

"Early indications are that forest cover has been grossly overestimated, information has been invented and figures fixed," Global Witness researcher Jon Buckrell charged in a series of scathing reports on the apparent breakdown in the monitoring process. "The danger is that substandard plans will legitimize bad practice and that Cambodia's forests will in effect have been stolen from the Cambodian people by a handful of individuals who treat the forest resource as their private property. The fact that the World Bank appears to be sanctioning this is incomprehensible," he said.

Even opposition leader Sam Rainsy, usually a fierce opponent of government policies, has attributed the debacle partly to the complicity of the World Bank. In a letter to World Bank president James Wolfensohn, Rainsy said the agency had refused to issue copies of the impact statements to villagers affected by logging on the grounds of insufficient funds.

Global Witness, widely respected for its dogged pursuit of flaws in the state logging concessions since the mid-1990s, set upon a collision course with the government by calling for the cancellation of all 14 logging concessions. This contradicted the World Bank's own policy, loosely supported by Phnom Penh, of striving to reform the existing licensing system rather than risking protracted legal actions by logging firms.

"The Bank should reconsider its decision to resume funding logging in the light of its experiences in Cambodia. It is madness to throw cash at logging companies in countries where governance is so weak and corruption is rife," said Buckrell.

Tensions with the government boiled over in early December, when police crushed a peaceful gathering by 100 rural community leaders who were demanding a workshop on forestry management. After dutifully reporting the clash through its website, Global Witness was accused of "exaggerating" the ferocity of the police actions and ordered to close its Phnom Penh office. Cambodian leader Hun Sen said shortly afterward that he would sue Global Witness for defamation, despite a joint statement from 18 non-government organizations (NGOs) testifying to the accuracy of the reports.

Evidently worried by the World Bank's response, Hun Sen issued an assurance that his government would continue the forestry reforms and hire another firm to replace Global Witness as forestry policy monitor in Cambodia. The World Bank had already confirmed after the release of the impact statements that the $15 million of the loan still to be disbursed would now be released. But now it may have to reconsider. All structural adjustment packages are contingent upon macroeconomic reforms being achieved by the borrowing country, and there is little evidence that this has occurred in Cambodia.

Repercussions will still be felt in foreign investment circles even if the money is freed up, as Cambodia has already earned bad marks for its poor standards of transparency and for manipulative policies.

Noting the World Bank's checkered track record with the environment, cynics have dismissed its actions as an act of self-preservation rather than a measured commitment to conservation policies. Some observers view the watchdog role accorded to Global Witness and other NGOs as a camouflage for ineffectual monitoring systems and a defense mechanism against the green movement.

"Instead of devoting its resources to counter environmentalists, it chose to co-opt them," American scholar James M Sheehan noted in a 2001 study of the Bank's lending practices. "Although the Bank has been unable to show that the quality of its environmental lending has fundamentally improved, environmental groups, by and large, are more cautious in their criticisms of the Bank ..."

This partnership with NGOs emerged from the reformist drive of Wall Street investment banker James Wolfensohn when he was persuaded by the US to take the helm of a discredited World Bank in 1985. Already a board member of the World Business Council for Sustainable Development, Wolfensohn quickly made his mark by canceling the controversial Arun Dam in Nepal on the advice of a newly installed NGO panel.

Internal procedures were overhauled with the release in 2001 of an Environment Strategy that directly ties development aid to "environment management capacity" in recipient countries. A review committee had found that environmental issues were "yet to be fully mainstreamed into the Bank's operations", and were "only partially successful in supporting environmental sustainability in client countries".

One shortcoming frequently associated with the Bank is a tendency to implement projects in isolation, without due consideration for potential consequences on neighboring communities.

Environmental pressure group Probe International charged in October that the Bank was threatening Cambodia's environment by financing a hydro-electric dam in Vietnam, which shares some of the same river systems. Similar accusations have been made about World Bank support for dams on tributaries of the Mekong River in Laos and China that will adversely affect water levels in Thailand, Cambodia and Laos.

Academic M James Sheehan claimed in his 2001 study that the reformist push since the mid-1980s had been motivated by appeasement and did not reflect any structural changes in the way that the Bank functions.

"Although it has won the acceptance of environmental groups, the World Bank has neither fundamentally reformed its lending practices nor radically changed the kinds of projects that receive its funding.

"Bank projects around the world remain environmentally damaging, and most will continue to be funded despite the Bank's rhetorical embrace of the NGOs' sustainable-development creed," he said.

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