ADB Waters Down Plans to Amend Mistakes in Cambodia

Newly approved plans by the Asian Development Bank (ADB) to fix mistakes it made on a $143 million railway project appear to water down recommendations proposed by the Bank’s own review panel, and could impose the costs of the plan on the very families who lost land to the project.

The ADB’s independent compliance review panel added the recommendations to a report looking into a Bank project to rehabilitate Cambodia’s dilapidated railway system. The report said the Bank was to blame for failing to prevent thousands of families from ending up worse off after they were forced to give up all or part of their land.

The Bank’s board of directors approved the report—but only after watering down the recommendations—late last month, and released its decision on Friday.

Some recommendations were watered down even before reaching the board, according to an early draft document.

The draft calls on the ADB to give the families affected by the railroad project a total additional $3 million to $4 million in compensation because of the mistakes it made, and for the ADB to provide the money itself.

“Since the compensation deficits that have occurred have been found to result largely from ADB’s noncompliance with its own policies, ADB should secure funding for this scheme,” the draft reads.

The version of the report that reached—and was finally approved by—the board had that line removed. It still recommends another $3 million to $4 million for the families, but suggests the money come from a loan to the government.

The approved recommendations also call on the ADB to help the families with the new loans they were forced to take on because of the Bank’s mistakes. But rather than paying off those loans, the ADB would only offer to replace them with yet another loan at a lower interest rate.

Those families will also have to use the extra compensation they get from the new loan the government is expected to take on to pay off their private loans.

David Pred of the NGO Inclusive Development International, which co-filed the complaint that triggered the report, called the use of new loans to fix its mistakes “obscene.”

“There is a massive disconnect between the ADB’s official acknowledgment that people have suffered serious harm as a result of ADB’s failure to follow its policies, after years of denial, and the board now demanding that the Cambodian government pay to bring the project into compliance,” he said.

“It is even more obscene that the poor families who are now drowning in debt because they weren’t properly compensated will not have their debts written off by the project but only given new loans with better terms. This really redefines the meaning of moral hazard,” he added.

As a piecemeal measure to help resettled families who have lost out on money-making opportunities because of their evictions, they are already being offered a program to earn additional income. They can take classes on motorcycle repair, for example, or pick up chickens to rear and sell.

The recommendations that reached the ADB board suggested putting more money into the program and guaranteeing it for another five years. The recommendations approved by the board say the program should continue, but leave out any mention of more money or a five-year guarantee.

Before approving the recommendations, the board also added a line insisting that any remedies for people hurt by the project will only be made “with the consent of [the Government of Cambodia].”

That means the government may be asked to agree to a loan to make up for mistakes the ADB made.

In 2011 the World Bank admitted that its own mistakes on a land titling project in Cambodia hurt thousands of families it was supposed to aid, but later said it could do little to help because the government would not cooperate. Instead of cooperating, the government watched the World Bank freeze all new lending to the country.

The government has not yet had to decide whether it is willing to help the ADB fix its mistakes. A more detailed action plan laying out precisely how the ADB and government will implement the recommendations it has approved is not due until the end of March.

Last week, however, the head of Cambodia’s railway department, Ly Borin, was dismissive of another loan to pay the families more compensation.

“Who would borrow that much money to pay out?” he said.

Karen Palmer, an ADB spokesperson, said the loan was only a suggestion.

“The [review panel] recommends that ADB require the Government of Cambodia to establish a remedial action program to compensate affected resettled households. It suggests that the source of funding for such a program should be an ADB loan or other source of funds, but it does not require an ADB loan,” she said.

The ADB did not reply to questions about why the recommendations in the report had been watered down.

Thach Ye, who lost his Phnom Penh home to the project and now lives with his family at one of the project’s resettlement sites, said more loans would do him little good.

He said the ducks and chickens he bought with a $450 loan from the ADB as part of the income restoration program all died after a spate of bad weather. He ended up taking out another $1,600 loan from a private bank to pay back the ADB and try his hand at pig farming instead.

“The chickens and the ducks all died, so I don’t know what to do,” he said. “It’s hard here. I cannot find work or anything to do to make money.”

Khuon Prum Sarith, who moved to the same site and still owes $2,600 on a $6,000 loan he had to take out to build a new home, said the ADB should pay off their debts, not just offer them better interest rates.

“Everything is the ADB’s fault,” he said. “They promised the people here that they would have good lives, but the people’s lives have only got worse after moving here.”

(Additional reporting by Phorn Bopha)

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