Regions and Countries

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p. 18 of 47 BACK | NEXT Developing Asia and the Pacific The global economy Newly industrialized economies Central Asian republics, Azerbaijan and Mongolia People’s Republic of China Southeast Asia Cambodia Indonesia Lao People’s Democratic Republic Malaysia Myanmar Philippines Thailand Viet Nam East Timor South Asia The Pacific

Cambodia

Economic performance

Economic growth: Real GDP growth was 4.5 percent in 2000. The slowdown in growth relative to the previous year was a consequence of the adverse effects of the worst floods in 70 years on agriculture, which offset a robust expansion of industry and services. Double-digit growth of real industrial value added resulted from a continued rapid expansion of textile exports to Europe, Japan, and US. The gradually improving political climate strengthened locally financed investment and further expanded construction activities. The services sector expanded partly because of increasing domestic consumer confidence and also because of the rising popularity of the Angkor complex, which fueled swift growth in tourism. The floods cost the country about $150 million, equivalent to 5 percent of GDP. The rural sector was especially hard hit, with 400,000 hectares of rice cultivation lost. In 2000, timber production accounted for a declining share in Cambodia’s economy as the export of timber products was curbed by stricter environmental laws and the country’s move to encourage more value-added exports.

Employment: Unemployment rates remain low at 6 percent, although it is estimated that 46 percent of the population work as unpaid family laborers. The real wages of unskilled laborers are estimated to have fallen from 5 percent to 10 percent between 1997 and 1999.

Inflation: Average annual consumer price inflation was about -0.8 percent in 2000, down from 4.0 percent in 1999. The impact of rising fuel prices and housing costs was offset by falling prices of food items. The riel was fairly stable, depreciating by only about 1 percent against the US dollar in 2000. Although total liquidity rose by over 20 percent in 2000, the velocity of money fell, preventing the expansion from becoming inflationary. Double-digit growth in both foreign currency deposits and private sector credit indicated increased confidence in the economy.

Fiscal balance: In FY2000 (ending 31 December), the Government generated public saving equivalent to 1.7 percent of the GDP. Revenues (excluding grants) increased marginally from 11.5 percent of GDP in FY1999 to 11.6 percent in FY2000, while total expenditures increased from 15.9 percent of GDP to 17.2 percent. While the budget deficit increased from 4.4 percent to 5.6 percent of GDP in FY2000, foreign financing was more than sufficient to cover this gap, and total domestic debt decreased.

External sector: Exports (excluding reexports) surged to $980 million in 2000, compared with $710 million in 1999. Textile exports continued to grow rapidly, while exports of timber and rubber declined as a result of new forestry reforms. Imports during the same period grew from $940 million to $1.2 billion, leading to a small increase in the trade deficit. Transfers, foreign direct investment, and official loans were more than adequate to cover the current account deficit and to increase gross official reserves from $422 million in 1999 to $490 million in 2000.

Domestic policies: In 2000, the Government continued to implement policies for strengthening macroeconomic management and economic governance. Fiscal policy reforms focused on strengthening revenue collections and improving budget execution. In the financial sector, the National Bank of Cambodia launched a structural reform that included cancelling licenses of nonviable banks. In the external sector, the Government focused on ensuring compliance with the ASEAN Free Trade Area and on pursuing efforts necessary for eventual membership in the World Trade Organization.

ADB operations

Operational strategy: ADB’s operational strategy for Cambodia focuses on economic growth and poverty reduction, in line with the Government’s own priorities. Three priority areas have been identified. First, to support broad-based economic development of rural areas, ADB will lead in facilitating water resource management, while supporting rural development, critical wetlands protection, and agriculture sector reform. Second, to assist human and social development, ADB will facilitate a sector approach in education and provide complementary support in health and water supply. Third, to bolster private sector development, ADB will support the development of the nation’s road network, while taking a key role in the financial sector and a supportive role in energy. In addition, ADB will provide strategic support to governance in economic planning, public finance management, and legal reform.

Policy dialogue: Policy dialogue with the Government continued on land management, public financial management, and financial sector reform. The consultative group of funding agencies focused on regular policy dialogue with the Government in forestry management, public administration reform, demobilizing military personnel, social sector development, and legal and judicial reform.

Loans and technical assistance: In 2000, ADB approved four loan projects totaling $109.6 million: Rural Credit and Savings, Stung Chinit Irrigation and Rural Infrastructure, Provincial Power Supply, and Emergency Flood Rehabilitation. ADB also approved nine technical assistance grants totaling $4.4 million: three for project preparation, and six for capacity building.

Project implementation: Since joining ADB in 1966, Cambodia has received 17 loans, of which 13 were active at the end of 2000. Contract awards totaled $114.4 million, bringing the cumulative figure to $288.2 million. The contract award ratio was 56.2 percent, higher than the ADB-wide average of 21 percent. Disbursements during the year totaled $50.8 million, bringing cumulative disbursements to $203.1 million. The disbursement ratio was 19.1 percent, lower than the ADB-wide average of 20.5 percent.

Overall, portfolio implementation in Cambodia improved in 2000, compared with 1999. However, the 2000 country portfolio review found that, while improvements were evident for many of the points in the action plan, only partial compliance had been achieved for some, most notably in increasing delegation of authority for contract awards, disbursement approvals, and contract variation approvals. In this regard, further delegation of approval authority in line ministries would facilitate more efficient project implementation. To eliminate front-end delays to projects, the Government has agreed to improve the implementation readiness of new projects.

In 2000, the Cambodia Resident Mission recruited additional staff members, allowing it to take a greater role in project administration.

   

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