[for public release] 

World Bank 

Cambodia: Forest Concession Management and Control Pilot Project 

Inspection Panel Investigation Report and Management Report and Reccomendations 

United States Position 

Board Date: June 29, 2006 

We appreciate the work of the Inspection Panel, and find the Panel's report on the Cambodia Forest 

Concession Management and Control Pilot Project to be thorough and balanced. We also appreciate the 

Bank’s effort to engage in an environmentally and socially risky sector in a challenging governance 

environment, as well as Management’s forthright acknowledgement of the Panel’s findings. 

We are particularly concerned about the Bank’s decision to use a Learning and Innovation Loan (LIL) 

for this project. We understand that the original decision to do so was likely prompted by a desire to 

move forward quickly, but the use of this mechanism permitted circumvention of certain safeguards that 

would have otherwise applied. The assumption by the Bank that concessionaires would undertake 

appropriate environmental assessments was optimistic, at best, and ultimately proved to be mistaken. 

Further, an LIL should be designed to explicitly test innovative approaches, incorporate mechanisms for 

mid-course corrections, and identify broader applications for lessons learned. However, the model used 

for this LIL (improving the existing forestry concession system) was essentially the same that the Bank 

has used in several other countries and involved no new concepts. Moreover, the Bank clung to the 

model almost until project closure, despite mounting evidence that concession reform was not going to 

be successful in the prevailing governance environment. Management’s response is candid in 

acknowledging the project’s shortcomings, but the proposed scope for bringing the project into 

compliance is of questionable value now that the project is completed. 

We agree, however, that it is important for the Bank to remain actively engaged in Cambodia’s forest 

sector. The Bank’s involvement to date created a pause in granting concessions that did not have 

sustainable management plans, and its future involvement would at a minimum shine a light on whatever 

forest management system comes next. Thus, we urge Bank staff to work with the government of 

Cambodia to protect the people who depend on forest products for their life and livelihood, and to better 

protect the environment of the country. Although “country dialogue” may be helpful, it will not be 

sufficient for continuing engagement. We hope that an appropriate operational instrument can be 

identified in coordination with other donors. The recommendations of the 2004 Independent Forest 

Sector Review provide a good basis for considering a broader range of management options, including 

working with community partners. We are sympathetic with the argument that past World Bank 

involvement has had the unintentional effect of legitimizing the existing concession system, including 

the current set of players. Thus, a key criterion for selecting future private sector partners should be their 

demonstrated willingness and ability to undertake meaningful consultations with affected communities, 

and to produce accurate and detailed environmental and social analyses. We also strongly strong support 

the plan to work with the Government of Cambodia and other stakeholders in the Technical Working 

Group for Land to implement the Land Law provisions regarding the protection of indigenous 

communities 

Finally, we recognize that some observations and recommendations from the Panel have potential 

implications for the Bank’s ongoing review of its forest sector strategy. We encourage the Panel to 
communicate relevant observations and implications, from both this inspection and the one conducted for 

Democratic Republic of Congo, in a manner that preserves the Panel’s independence but serves to better 

inform the Bank’s strategy.