Regions and Countries

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p. 3 of 22 BACK | NEXT I. Country Performance Assessment A. Economic Performance Assessment B. Poverty Assessment C. Assessment of Socio-Environmental Performance D. Governance: Sound Development Management E. Implementation Assessment II. Poverty Reduction and Country Operational Strategy III. Sector Strategies IV. Regional Cooperation V. Donor Activities and Aid Coordination VI. Cofinancing and Catalyzing External Resources VII. ADB’s Operational Program VIII. Economic and Sector Work IX. Local Cost Financing

Country Assistance Plans - Cambodia : I. Country Performance Assessment

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B. Poverty Assessment

10. Once relatively prosperous, Cambodia endured a period of prolonged civil conflict — including four years under the Khmer Rouge regime, which dismantled much of the existing social, political, and economic institutions. During these lost decades, in which many other Southeast Asian countries were taking great strides in poverty reduction, Cambodia was isolated and socioeconomic conditions deteriorated. Now rejoining the international community, the country suffers pervasive poverty. Using a consumption-based poverty line defined as adequate income to buy a daily 2,100-calorie food basket plus an allowance for non-food expenditure, about 36.0 percent of the 1997 population, about 4 million people, were classified as poor. However, a large proportion of the population is clustered around the poverty line indicating a potential for significant changes in the incidence of poverty over the next decade.

11. There are several geographic characteristics of interest concerning poverty in Cambodia. First, urban areas are relatively better off. The incidence of poverty is 11.0 percent in Phnom Penh, 30.0 percent in other urban areas and 40.0 percent in rural areas. About 90.0 percent of the poor live in rural areas. Second, most of the poor are concentrated in two areas of the country. The Tonle Sap Region has the highest incidence of poverty (38.0 percent), the second highest average population density (52 persons per square kilometer [p/km 2 ]), and 31.0 percent of the population. The Plains Region has the second highest incidence of poverty (29.0 percent), the highest average population density (235 p/km 2 ), and 52.0 percent of the population.¹

12. Third, the Cambodia Human Development Report (CHDR) 1999 provides survey evidence that the incidence of poverty varies considerably across villages.² In the poorest quintile of surveyed villages, stratified by consumption expenditure, 70.0 percent of the population was poor while in the richest quintile only 4.0 percent of the population was below the poverty line. Thus, to maximize developmental impact, rural areas of the Tonle Sap and Plains Regions should be targeted generally for poverty interventions. However, for particular interventions, careful targeting of the poorer villages in these areas will be required.

13. Specific elements of effective poverty interventions depend on the specific characteristics of poverty in Cambodia. As would be expected, CHDR 1999 survey results indicate that the Cambodian poor generally tend to have less access to productive resources and to lack basic economic and social services. Poorer villages tend to be located where there is less productive land in areas more vulnerable to flood and drought. In some areas, investments in water resource management will substantially improve agricultural productivity and reduce poverty. In other areas, the scope for improvement is limited and diversification into non-agriculture activities will be an important element of a poverty alleviation program.

14. Weak property rights compound the problem of inadequate productive resources for the poor. Landlessness is not currently considered pervasive in Cambodia, except for groups in special circumstances such as returning refugees. The average farm family has access to about 1.0 hectare of land. But few of these families hold land titles, which limits access to credit and leaves them vulnerable to eviction by powerful interests involved in land speculation and timber extraction. Since land is the most critical factor of production in this predominantly agrarian society, secure land rights are a vital element of protection for the poor. The draft land law, developed with Asian Development Bank (ADB) assistance and through extensive stakeholder dialogue, is expected to facilitate land titling and registration.³

15. Pervasive poverty in Cambodia is clearly indicated by the paucity of basic economic and social infrastructure. CHDR 1999 survey results indicate that only 14.0 percent of villages have a market, 43.0 percent have access to electricity (at least in some households), 11.0 percent have a bank or credit organization, and 4.0 percent have an agricultural extension worker. Only 23.0 percent of villages have access to piped water, 46.0 percent have primary schools, 5.4 percent have lower secondary schools, and 16.2 percent have a clinic.

16. Not surprisingly, because of greater proximity to health and education services, higher educational achievement and health care utilization rates characterize well-off villages. Poorer villages have higher rates of illiteracy and higher levels of gender disparity in literacy. Richer villages pay higher school fees and have lower student/teacher ratios. In the poorest villages, 92.0 percent of women deliver children at home while in the richest villages, only 26.0 percent deliver at home. The poor tend to have larger families living under one roof, with younger children and higher dependency ratios (ratios of non-working to working household members).

17. As a result of inadequate access to resources and services, poorer villages tend to depend more on subsistence agriculture activities whereas richer villages are more diversified with trading as the most important economic activity. About 90.0 percent of the poor belong to households that rely upon subsistence agriculture as the primary source of income. These people often suffer from basic food insecurity, manifested as seasonal hunger in the months prior to the major harvest sometimes leading to a cycle of indebtedness that can end in loss of farm assets such as land.

18. The Government’s (first) Socioeconomic Development Plan 1996-2000 (SEDPI) described a poverty reduction strategy emphasizing faster economic growth in rural areas, in part by reducing the barriers to participation in economic growth by the poor at the village level.⁴ A three-pronged strategy included decentralization to increase efficiency and equity of development activities, increased agricultural productivity to enhance incomes, and improved access to social services to ensure broad-based economic development. SEDPI also stressed the importance of developing a labor-absorbing industrial base through improvement of the conditions for private sector investment.

19. There was mixed success in reducing poverty in the 1990s, in part because of internal security problems that discouraged investment in rural areas and the political crisis in 1997- 1998 that sharply reduced economic growth and investment. Dependent on emergency assistance to ensure an adequate food supply in the early part of the decade, Cambodia now produces sufficient amounts of food to avoid widespread famine. However, the pace of agricultural growth was inadequate in the last several years. High population growth rates coincided with low rates of investment in agriculture and inadequate labor absorption in industry and services. As a result, there was a 16.0 percent reduction in agricultural labor productivity between 1994 and 1996. In addition, there was a lack of progress prior to 1999 in increasing Government’s contribution to social expenditures because of low revenue collections and high security expenditures.

20. If recent improvements in internal security are maintained and reform momentum is sustained, the enhanced ability of government and aid agencies to increase service delivery and economic development in rural areas offers the potential for significant poverty reduction in the next decade. With ADB assistance, the Government is currently preparing the (second) Socioeconomic Development Plan 2001-2005 (SEDPII), which will stress poverty reduction as the primary goal of the Government’s development program.

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