YANGON (Reuters), May 17 (TIWN):- Aid groups and human rights advocates have warned the World Bank that a $100 million development project it is planning for Myanmar’s conflict-riven Rakhine State could worsen tension there.

The World Bank last week published the first details of a proposal to fund cash-for-work programmes, and support small businesses in one of Myanmar's poorest regions, through the government.

The western state was where Myanmar’s military unleashed a campaign in response to insurgent attacks in 2017 and drove out 730,000 Rohingya Muslims, a minority in Rakhine that is denied Myanmar citizenship and faces severe restrictions.

A conflict with another insurgent group, the Arakan Army, which recruits from the mainly Buddhist Rakhine ethnic group, has displaced more than 30,000 since late last year.

“It is difficult to imagine how meaningful recovery and development are possible in Rakhine without addressing the underlying human rights issues that currently impact every aspect of life for communities,” more than a dozen international non-governmental organisations (NGOs) in Myanmar said in a letter to the World Bank’s Myanmar office.

The letter, dated April 9, was obtained by Reuters.

The project would be the first major aid pledge for Rakhine State since the Rohingya exodus and a boost for Myanmar leader Aung San Suu Kyi, who has faced international criticism for her handling of the conflict there.

A U.N. fact-finding mission, which has called for top Myanmar generals to be prosecuted for crimes against humanity and genocide, said this week it had seen no evidence Myanmar was trying to resolve the crisis or facilitate the safe return of refugees.

Suu Kyi, for her part, has said development is key to resolving Rakhine's multiple crises. The proposal stems from a meeting between Suu Kyi and the bank's vice president for East Asia and Pacific, Victoria Kwakwa, in July last year.

In written answers to Reuters' questions, the World Bank said it shared the concerns over unresolved human rights issues in Rakhine.

The bank said it had condemned violence there and was providing Bangladesh with support to address the needs of Rohingya refugees until returns could be voluntary, safe and dignified.

"At the same time, we do not believe the international community can simply turn its back on the development needs of people in Rakhine State," the bank said, pointing to the "extremely pressing" needs there.

The project had not yet been approved by the bank's board, it said.