PRESS RELEASE

Cambodia: "Reduction Of Fiduciary Risks In World Bank-Funded Projects In Cambodia" Study Completed

March 29, 2005

PHNOM PENH, March 29, 2005 - The Royal Government of Cambodia and the World Bank announced today the completion of the study "Reduction of Fiduciary Risks under World Bank-funded projects in Cambodia."  The first phase of the study was announced in June 2004, and the second phase was announced in September 2004.

The Fiduciary Review is a proactive instrument used to identify which stages of the project cycle may be vulnerable to fraud or corruption and to propose specific measures to minimize it.  The Review contributes to the World Bank's overall anti-corruption strategy in Cambodia and complements the work done through the Integrated Fiduciary Assessment and Public Expenditure Review (IFAPER) and the Country Procurement Assessment Report (CPAR), both of which focus on strengthening the public expenditure and procurement system.

"The study is part of the World Bank's overall strategy to strengthen its supervision and fiduciary responsibilities to its shareholders and is a key component of the World Bank's new overall Country Assistance Strategy (CAS) for Cambodia, which focuses on improvement of the governance environment.  We intend to implement the study recommendations in full partnership with the RGC and other stakeholders," said Ian Porter, Country Director for Cambodia.

Likewise, the Government of Cambodia indicated its strong commitment to the implementation of the study recommendations.  According to Senior Minister Keat Chhon, Minister of Economy and Finance, "As reflected in our June 2004 statement, the Royal Government of Cambodia has jointly agreed with the World Bank to launch this initiative because we want to ensure full transparency to the tax payers of the donor countries and to improve the culture of accountability to our people.  This intention was highlighted when the Government introduced its new Rectangular Strategy, putting good governance at the core.  The Royal Government of Cambodia therefore welcomes any constructive recommendations and prepares to work with the World Bank in the framework of strengthening aid effectiveness to meet the above mentioned objective of the RGC's strategy and, above all, to bring the maximum benefit for our own people."

The study focused on four World Bank-financed projects: Flood Emergency; Rural Investment and Local Governance; Road Rehabilitation; and Biodiversity and Protected Areas.  These projects were selected based on the combination of the following criteria: advanced stage of implementation; various sizes; diversified sectors; centralized and decentralized management arrangements; and utilization of a wide range of procurement methods.  The study team included procurement, financial and project implementation specialists.

The study team uncovered cases of poor quality of execution, weak financial management and indication of possible cases of collusion and fraud.  The study makes an initial set of recommendations on ways to tighten financial and procurement procedures, enhance disclosure and improve the Bank's supervision practices, and includes proposals to help the Government improve its own internal control mechanisms to ensure better enforcement and greater involvement of project beneficiaries and civil society.  Detailed action plans will be developed jointly by the Bank and RGC in consultation with other donors and civil society.

The first stage of the study, completed in August 2004, focused on collecting information on 632 contracts under the four projects mentioned above.  The information was then analyzed to produce a list of 257 contracts with areas of possible concern.  In the time available for the second stage of the study, 120 of these contracts were studied in depth to verify if funds made available for projects activities are being used for the intended purposes with due regard to economy, efficiency and transparency.  The work consisted of a review of available documentation relating to procurement, financial management and implementation; interviews with project staff, contractors, consultants, and beneficiaries; site inspections of completed facilities; and, review of the extent of disclosure to civil society and handling of complaints.

The study team did not investigate any specific cases of alleged fraud or corruption.  However, cases where indications of possible corrupt or fraudulent practices were uncovered are being referred, as per our customary practice, to the World Bank's Integrity Department, who would then carry out a separate investigation if warranted.  The World Bank has established the Integrity Department to respond directly to allegations of corruption or misuse of funds in its portfolio.

Media Contacts
In Phnom Penh
Bou Saroeun
Tel : (855-23) 213-538
sbou@worldbank.org
In Bangkok
Kimberly Versak
Tel : 66-1-875-5064
kversak@worldbank.org
In Washington
Melissa Fossberg
Tel : (202) 458-4145
mfossberg@worldbank.org


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