Catalog

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p. 9 of 21 BACK | NEXT Executive Summary I. Background II. Overview of Development Issues III. External Development Assistance A. Existing Strategy and Impact Assessment B. Other Assistance and Aid Coordination IV. Priority Sectors for ADB's Future Operations V. ADB Strategy in Operation

Country Operational Strategy - Cambodia : III. External Development Assistance

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B. Other Assistance and Aid Coordination

1. Overview of Assistance Programs

77. External assistance finances a substantial proportion of Cambodia's public investment program (about 75 percent of the $100 million of fiscal capital expenditures in 1998) as well as a large program of technical assistance, budgetary support, and emergency relief. Over the period 1992-1998, 41 percent of $2.75 billion in external assistance was categorized as capacity building and project preparatory TA, 31 percent was for investment projects, relief aid was 17 percent, and budgetary support was 11 percent. The major intention of assistance has thus been to provide TA to weak public institutions. Through this assistance and through budgetary support, the international community supports the process of rebuilding a civil society and reshaping a market economy. At the same time, through project assistance, much-needed human and physical capital investments are funded. Appendix 3, Table A3.3 compares past disbursements with planned allocations over 2000-2002, highlighting trends toward increased investments in rural areas, education, and especially in health.

78. Because of the major role of aid in Cambodia, aid coordination is essential for both policy consistency and efficiency of operations. In 1992-1998, the major contributors, by disbursement, were Japan ($625 million), France ($245 million), US ($237 million), UN agencies ($236 million), European Commission ([EC] $207 million), World Bank ($175 million), ADB ($161 million), Australia ($137 million), and Sweden ($113 million). NGOs, of which some 400 are operating in Cambodia, accounted for $187 million. These major aid agencies recently agreed to meet with the Government on a quarterly in-country basis to assess progress on the pledged reform agenda. Aid agency working groups were also formed in key areas of reform. Appendix 3, Table A3.4 provides details of the currently programmed investment projects, funding agencies, and planned disbursements for 2000-2002, revealing the greater number of aid agencies involved in education and especially health. Appendix 3, Table A3.5, provides a sector matrix of aid agency operations.

79. Japan, the major aid agency in Cambodia, plans a program of about $100 million per year in eight priority areas: agriculture/rural development (water resources and meteorology, animal husbandry); health (tuberculosis, mother and child health); education (primary and higher education); mine clearance (equipment and assistance for the mine-disabled); governance (support for civil law reform at the Ministry of Justice, support for the Ministry of Social Affairs, Labor, Vocational Training, Youth and Recreation; support for MWVA and for police reform at the Ministry of Interior); economic development (support for market reform and improvement of the taxation system); social infrastructure (transportation [roads, bridges, ports], electricity); and natural resource management (forestry). Activities are primarily in the Plains region.

80. France, a large player in Cambodia through Agence Française de Développement (AFD), is a cofinancing partner of ADB. AFD is primarily involved in rural development (rural credit to smallholder rubber plantations, silk production, agricultural diversification, water resource management) and in the development of the Siem Reap region (water supply, electricity, preservation of Angkor Wat). Activities are primarily in Pursat, Battambang, and Siem Reap.

81. UN agencies are primarily involved in rural development and humanitarian activities. The major United Nations Development Programme (UNDP) intervention is the Cambodia Area Rehabilitation and Regeneration (CARERE) project in the northwest and Ratanak Kiri, which focuses on decentralized integrated rural development (agriculture, education, health, water and sanitation) with the participation of provincial, communal, and village development committees. Other UNDP activities include support for macroeconomic management and governance, social sector development, and natural resource management. The Food and Agriculture Organization (FAO) is primarily involved in research, statistics development, and capacity building. The World Food Programme (WFP), through its work-for-food programs, is constructing rural roads, irrigation canals, and other small-scale, labor-intensive projects. The International Labour Organisation provides technical supervision for the labor-based rural infrastructure projects of WFP, CARERE, and Sweden. UNICEF, the World Health Organization (WHO), and the United Nations Educational, Scientific, and Cultural Organization (UNESCO) are also active in Cambodia.

82. The EC is involved in nine areas in Cambodia including rural development (domestic water supply, irrigation, agriculture extension, rural credit) in the Plains region through PRASAC, in primary education through PASEC, and in health through support of programs for sexually transmitted diseases, malaria, and reproductive health.¹⁹ The Australian Agency for International Development (AusAID) is primarily involved in agriculture through the Cambodia-Australia Agricultural Extension Project (CAAEP), the Cambodia-IRRI-Australia Project, and the Agricultural Quality Improvement Project. AusAID is also involved in the health sector with a large national health center project and support for immunization and HIV/AIDS. AusAID is a principal supporter of the national mine clearance program and also supports activities in education, governance, and humanitarian relief. The United States Agency for International Development (USAID) is currently limited to a relatively small humanitarian program. Sweden plans 1999-2001 activities that are closely coordinated with UN activities in rural infrastructure, primary education, and mine clearance.

83. Past and ongoing World Bank Group assistance in Cambodia includes two social funds, economic management, road restoration, HIV/AIDS prevention, forestry management, environmental protection, rural credit provision, power rehabilitation, agricultural productivity improvement, rural development, water supply rehabilitation, and educational quality improvement. IMF approved a three-year $81.8 million PRGF arrangement for Cambodia in October 1999 to support the Government's economic program for 1999-2002. The primary focus of the PRGF program is fiscal reform including improvements in revenue collection and increased social spending.

84. The World Bank's Country Assistance Strategy, anticipating a $40 million per year program and covering the period 1 July 1999-30 June 2003, emphasizes facilitating roles in governance, water supply and sanitation, and public utilities. In addition to these investments and a Structural Adjustment Credit, the World Bank plans investments in education, forestry, biodiversity, microfinance, tourism, energy, cultural resource management, and rural development. The World Bank also plans capacity building in governance, accounting and auditing, demobilization, water and energy, public expenditure, poverty monitoring, private sector promotion, and environmental management.

2. Role of Aid Agencies in Development

85. The international community is reassessing its role in assisting the development of Cambodia. With the importance of emergency assistance and rehabilitation giving way to thoughts of sustainable development, policy reform and long-term capacity building are becoming more critical. In assessing the impact of aid to Cambodia over 1992-1995, McAndrew (1996) draws several conclusions.²⁰ First, aid inflows during this period may have overwhelmed the country's absorptive capacity without making sufficient effort to increase it. The use of international consultants and the habit of bypassing the Government in favor of direct interventions do not build the latter's capacity to direct its own development program. Indeed, it was often said that the consultants, aid agencies, and NGOs represented a parallel government in Cambodia. While there is little doubt that Cambodia will need substantial TA for some time to come, the focus must now shift toward capacity building.

86. Second, the tendency of aid agencies to cluster investments in Phnom Penh and other urban areas is understandable because of security concerns. However, with the new peace settlement, it is incumbent upon both the Government and the aid agencies to redirect efforts to the rural areas where poverty is greatest, despite the increased implementation problems this might imply. Third, with the trend in developmental assistance of grants and humanitarian aid decreasing in relative importance as loans and capital investments increase, greater care must be taken to ensure that aid funds are put to effective and productive use. While the aid agencies may view these loans as concessional, they in fact represent a huge potential obligation for the Government if development plans go awry.

87. Fourth, because of the imperative for productive investments, the need for improved aid coordination and development planning is critical. The large scale of aid activities in Cambodia and the extent of poverty cry out for true cooperation rather than competition among the aid agencies. This is especially true because of the need to emphasize policy reform. While a diversity of opinions on development issues is not necessarily bad, the insistence on policy reform as a condition of aid means that donors must make great efforts not to insist on inconsistent policy reforms. In addition, planning would be easier if aid agencies could make a greater effort to plan over a longer-term horizon.

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