Cambodia told to repay aid money

The Bank said contracts worth $64m for spending on sanitation, land management and transport infrastructure had been mishandled.

It has frozen funding on three critical projects after finding evidence of ongoing corruption.

The government has yet to respond to the World Bank's decision.

'Sufficient evidence'

In the past, Cambodia has argued that cutting funding on a permanent basis would damage its own reform efforts.

Following a year-long investigation, the World Bank said it had uncovered "sufficient evidence" to substantiate allegations of fraud and corruption involving projects it was funding.

""It is vital that the government deals head-on with corruption.""
World Bank statement

The World Bank, which spent $244m in Cambodia last year, identified corruption as the major obstacle to economic development in 2003.

It has since been working with the government to try and root out abuses and improve governance.

'Difficult decision'

Three projects have been suspended until the World Bank is convinced that the government has taken action to correct past abuses and to minimise the risk of future fraud.

Schemes affected include road building in rural areas, providing access to safe drinking water and securing greater ownership of land for poor farmers.

"Suspending disbursements on these three projects has been a difficult but important decision," the World Bank said in a statement.

"The World Bank has concluded that the important work of these projects cannot continue until the fraud and corruption problems that have been identified are addressed."

It pledged to work with the authorities to tighten regulations and improve disclosure but it also called for penalties to be strictly enforced to discourage wrongdoing.

"It is vital that the government deals head-on with corruption."

The World Bank's relationship with Cambodia, which after decades of civil war is one of the poorest countries in South East Asia, has been strained in recent years.

Cambodia was forced to repay $2.8m in 2003 after the World Bank threatened to withdraw funding, and it has so far resisted calls to introduce anti-corruption legislation.

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