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p. 4 of 21 BACK | NEXT Executive Summary I. Background II. Overview of Development Issues A. Poverty Profile B. Postconflict Issues C. Economic Growth III. External Development Assistance IV. Priority Sectors for ADB's Future Operations V. ADB Strategy in Operation

Country Operational Strategy - Cambodia : II. Overview of Development Issues

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A. Poverty Profile

1. International Comparison

7. Cambodia is among the poorest of ADB's developing member countries (DMCs). In the UN Human Development Report (HDR) 1999, which uses 1997 data, Cambodia ranks 137th out of 174 countries (Table 1). It is among the lowest ranked countries in the medium human development category.³ In Southeast Asia, only the Lao People's Democratic Republic (Lao PDR) ranks lower at 140. Among all DMCs, only Lao PDR, Pakistan (138), Nepal (144), Bhutan (145), and Bangladesh (150) rank lower than Cambodia.

8. A relatively brief life characterized by illiteracy, low income, and poor health is not uncommon among the approximately 12 million citizens of Cambodia. Among DMCs of ADB, only the Lao PDR has a life expectancy as low as Cambodia's 53.4 years. With a 1997 adult literacy rate of 66 percent, Cambodia ranks below all Southeast Asian countries except the Lao PDR. While Cambodia's gross school enrollment rate is comparable with that of other Southeast Asian DMCs of ADB, its income level is below average for the region. Most striking are Cambodia's infant mortality rate (IMR) and maternal mortality rate (MMR), which are the highest in the region.⁴ Total fertility is 4.1 children per woman, down from 5.2 in 1996, and the population is growing at about 2.5 percent annually compared with 1.4 percent for all DMCs of ADB.⁵

2. Extent of Poverty

9. A deeper understanding of the extent of poverty emerges from the Cambodia HDR (CHDR) 1998, which reports a Human Poverty Index (HPI) score of 42.5 percent for Cambodia, one of the lowest in Asia.⁶ By comparison, UN HDR 1999 reports an average score of 25.0 percent for developing countries in Southeast Asia and the Pacific. Although poverty is relatively severe and extensive, with pronounced consumption inequality, a large percentage of the population is grouped close to the poverty line so that economic events or policy changes could significantly alter the percentage of people below the poverty line. CHDR 1997 concludes that, "if perfect targeting were possible, an annual income transfer of [less than $20] per capita-or $190 million for the country-would be required to [raise the poor above this absolute poverty line]. This constitutes approximately 40 percent of the overseas development assistance that Cambodia received in 1995."⁷

10. A consumption-based absolute poverty line for Cambodia can be defined as adequate income to buy a daily 2,100-calorie food basket plus a small allowance for nonfood expenditure. It was estimated that in 1997 about 36 percent of the population, over 4 million people, could not achieve this barest minimum standard of living. However, the average poor household's expenditure fell short of the poverty line by a relatively modest 8.7 percent. Moreover, Cambodian per capita daily food consumption in 1997 averaged only 2,262 calories per day, which typically amounted to about 70 percent of total consumption expenditures.⁸ This barely exceeds the poverty line. These two facts together imply that a large proportion of the population is clustered around the poverty line. Thus, substantial increases or decreases in measured poverty are possible as a result of economic shocks or changes in economic policy.

11. Pervasive poverty is accompanied by substantial income inequality in Cambodia. CHDR 1998 and Sophal et al. (1999) report that the richest quintile in Cambodia had a 1997 HPI of 33.7 percent and per capita consumption expenditure of riel (KR) 5,852, six times higher than that of the poorest quintile with a 1997 HPI of 50.2 percent and per capita consumption expenditure of KR979. The share of food in 1997 total expenditures was 62 percent for the top 20 percent of the population and 75 percent for the bottom 20 percent. The consumption share of the richest 10 percent of the population in Cambodia was over 30 percent while that of the poorest 10 percent was 3.7 percent.

3. Geography of Poverty

12. An examination of the geographic distribution of poverty can help target development interventions so as to maximize the impact on poverty. Three facts emerge from such an exercise. First, urban areas are relatively better-off, although still harboring substantial numbers of the poor. Second, a relatively small percentage of poorest Cambodians live in remote sparsely populated areas. Strategies for targeting these two poor populations, the urban poor and the remote poor, are likely to be different from one that targets the majority of the poor living in relatively populous rural areas-the rural poor. Third, even in the populous rural areas, the incidence of poverty varies significantly between villages, depending on the extent of access to productive land, infrastructure, and social services; and on political representation.

13. There is clearly a large disparity between the urban population (15.7 percent of the total population with an HPI of 34.2 percent) and the rural population (84.3 percent of the population with an HPI of 44.9 percent). Urban per capita consumption expenditure is nearly twice the rural level and the average urban dweller can expect to live five years longer and reach a higher level of educational achievement. The overall incidence of poverty of 36 percent of the population can be broken down into incidences of 11 percent in Phnom Penh, 30 percent in other urban areas, and 40 percent in rural areas.⁹ Using census figures, this translates roughly into 55,000 poor in Phnom Penh, 380,000 in other urban areas, and 3,700,000, or about 90 percent of the poor in rural areas.¹⁰

14. Table 2 indicates the geographic distribution of human development in Cambodia, which sharpens the geographic picture of poverty. Phnom Penh and, to a lesser extent, Krong Prean Sihanouk (Sihanoukville) stand out as populous, relatively high-density, relatively well-to-do urban centers. The rest of the country has HDI scores indicative of low human development. Six provinces have HDI scores below 0.400, indicating higher levels of poverty. Of these, however, only Siem Reap and Kompong Thom have relatively large populations of relatively moderate density. Taken together, Koh Kong, Stung Treng, Ratanak Kiri, and Mondul Kiri account for less than 3 percent of the population. These provinces and Preah Vihear (not ranked) are generally remote, of low population density, and often ethnically distinct from the populations in the more populous areas.

15. The distribution of poverty can also be viewed by natural region as well as by village. The Tonle Sap region has the highest incidence of poverty (38 percent), the second highest average population density (52 persons per square kilometer [p/km2]), and 31 percent of the population. The Plains region has the second highest incidence of poverty (29 percent), the highest average population density (235 p/km2), and 52 percent of the population.¹¹ These two regions clearly have the highest proportion of poor but careful targeting of the poor should also account for the variation in the incidence of poverty across villages. CHDR 1999, which uses data from a 1997 survey of 474 villages deemed statistically representative of the whole country, provides a socioeconomic profile of Cambodian villages.¹² In the sample, stratified by consumption expenditure, 70 percent of the population in the poorest quintile of villages is below the poverty line, while in the richest quintile only 4 percent of the population is below the poverty line.

4. Causes and Characteristics of Poverty

16. In Cambodia, the long period of destructive conflict and instability is probably the main root contributor to the widespread poverty that currently exists. Indeed, those who were displaced, maimed, orphaned, or widowed by the conflict face the greatest hardships. Damage to infrastructure (particularly irrigation systems), land mines, and other security threats contributed to low agricultural production. Execution of educated Cambodians during the Khmer Rouge era contributed to the low levels of human capital that hamper the effective delivery of social and government services. Discrimination (ethnic or gender), however, does not appear to be a principal cause of poverty in Cambodia. CHDR 1999 reports that over 96 percent of villages are principally Khmer so that, even though villages dominated by ethnic minorities (Vietnamese, Chinese, Cham, hill tribes) tend to be poorer, they do not represent the bulk of the poor. Additionally, although there is a large percentage of female-headed households (25 percent), the incidence of poverty among female-headed households is slightly lower than among male-headed households. Thus, even though gender bias clearly exists in Cambodia, it is not, by itself, a major source of poverty.

17. The Cambodian poor, as defined by low incomes and low consumption bundles, generally tend to have less access to productive resources. For example, poorer villages tend to be located where there is less access to natural resources or where there are lower quality natural resources (e.g., less productive land in areas more vulnerable to flood and drought). Moreover, CHDR 1999 reports that the poorer villages have less access to markets (14 percent of villages have a market), infrastructure (43 percent of villages have access to electricity and 23 percent have access to piped water), economic services (11 percent of villages have a bank or credit organization and 4 percent have an agricultural extension worker), and political power (the average village is 9 km from the district town). Richer villages tend to be closer to industrial or commercial enterprises such as brick and tile manufacturing in the northwestern part of the country. Finally, poorer villages tend to have no access to basic educational services (46 percent of villages have primary schools and only 5.4 percent have lower secondary schools) or basic health services (16.2 percent of villages have a clinic).

18. As a result of inadequate access to resources and services, poorer villages tend to depend more on agriculture activities whereas richer villages are more diversified, with trading as the most important economic activity. About 90 percent of the poor belong to households that rely on 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 ends in loss of farm assets such as land. The poor tend to have larger families living under one roof, with younger children and higher dependency ratios (ratios of nonworking to working household members).

19. In part because of greater proximity to health and education services, richer villages have higher educational achievement and health care utilization rates. Poorer villages have higher rates of illiteracy and higher levels of gender disparity in literacy. Richer villages pay higher school fees and have a lower student/teacher ratio. With regard to immunization against measles of children aged 0-5, coverage is 43.4 percent in the richest quintile of villages, and only 22.5 percent in the poorest quintile. In the poorest villages, 92 percent of women deliver children at home; in the richest villages only 26 percent do so.

5. Government Strategy for Poverty Eradication

20. The Government's strategic development goals are summarized in Box 1. Poverty eradication is the Government's primary goal. The central thrust of the Government's poverty eradication strategy is to promote faster economic growth in rural areas, in part by reducing the barriers to participation in economic growth by the poor at the village level. A three-pronged strategy includes 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.¹³ To promote participatory rural development, the Government is expanding a major decentralization effort in which village development committees (VDCs) participate in the planning and management of local development programs and projects. Currently 25 percent of villages have VDCs that are often supported by nongovernment organizations (NGOs) and receive funds from the Central Government and international aid agencies. The Government's goal is to increase the villages with VDCs to 69 percent by the end of 2000.

21. A major goal of the Government's strategy is to increase agricultural productivity so as to boost the incomes of a large portion of the rural poor. Immediate objectives include increased public investment in rural infrastructure, expansion of extension services to support crop and livestock production, legal and regulatory reform to improve security of and access to agricultural inputs such as land and materials, improved natural resource management, and increased availability of rural financial services. The final plank of the Government's poverty eradication strategy is to enhance access to social services, particularly in the rural areas and for women and vulnerable groups. The Government's policy goal is to provide, at no charge to the poor, cost-effective health services, including a minimum package of activity (MPA) and universal education for grades 1-9.

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