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p. 11 of 21 BACK | NEXT Executive Summary I. Background II. Overview of Development Issues III. External Development Assistance IV. Priority Sectors for ADB's Future Operations A. Strategic Thrust B. Guidelines for ADB Interventions in Cambodia C. Priority Area One: Rural Economic Development D. Priority Area Two: Human Resource and Social Development E. Priority Area Three: Private Sector Development V. ADB Strategy in Operation

Country Operational Strategy - Cambodia : IV. Priority Sectors for ADB's Future Operations

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A. Strategic Thrust

88. From the overview of development issues in chapter II, it is clear that Cambodia is still at an early stage of development. Pervasive poverty is debilitating the population. Poverty reduction is thus the Government's primary development goal and the principal objective of the ADB program. The strategy is to attack poverty through interventions in three priority areas. The first priority will be pro-poor sustainable economic growth through support of broad-based labor-intensive economic development in populous rural areas where most of the poor live. The second priority will be assistance for basic human or social development to enhance economic growth by boosting labor productivity while improving the distributional effectiveness of economic growth. The third priority will be to promote private sector participation in development by addressing key institutional and infrastructural weaknesses that will improve the geographic balance of economic growth and strengthen the linkages between the rural and urban areas. Appendix 3, Table A3.6, outlines the sectors and subsectors for Asian Development Fund (ADF) interventions consistent with this approach. Appendix 3, Table A3.7, shows the details of the project pipeline that supports this strategy.

89. The COS is designed to capitalize on ADB's relative strengths so as to maximize the impact on poverty of the funds invested in Cambodia. In a small country such as Cambodia, ADB is a significant development partner.²¹ ADB has the ability to commit to a relatively large program composed of public investment projects financed by low-cost loans to ease infrastructure constraints, TA financed by grants to strengthen institutions, and selected private sector investments to encourage private commerce. This allows ADB to extend policy advice and assistance on a broad spectrum of long-term development issues so as to assist the Government to achieve a balanced, comprehensive development program. ADB's ability to attract cofinancing partners further strengthens the impact of its program. Thus the strategy will involve tightly focused interventions across several sectors in support of development goals in the three priority areas.

90. Synergies in the program offer opportunities to enhance the impact of investments and policy dialogue across priority areas. Coordinated policy dialogue across planned interventions in water resources and irrigation, critical wetlands, and water supply and sanitation gives ADB leverage to promote a national water use policy. Social sector policy dialogue will be reinforced through planned interventions in health, education, and rural development. Sector development programs in finance, education, agriculture, and possibly water resources offer ample opportunities to coordinate governance-improving activities in such areas as decentralization and land rights. There are ongoing and planned interventions to improve water supply and sanitation and power supply in key provincial towns, as well as the primary road network to relink these towns. In this way, the strategy promotes balanced regional growth that should mitigate the migration pressure on Phnom Penh as well as provide market anchors for rural economic development.

91. Finally, several ADB investments will benefit the tourism industry directly or indirectly. Ongoing ADB support to improve the international airport at Siem Reap is meant mainly to improve tourist access to the Angkor Wat complex. Current and future efforts to restore the primary road network will greatly enhance access to potential tourism sites throughout the country. In addition, interventions designed to improve banking, water supply and sewage systems, and electricity will increase the level of services that can be offered to international tourists during their stay in Cambodia.

92. This COS is distinctive compared with the previous one. It will focus on poverty reduction over a longer five-year horizon, concentrating investments in the populous rural areas of the Plains and Tonle Sap natural regions where the majority of the poor reside. The COS calls for ADB to facilitate government leadership of sector development in key areas. This entails ADB providing services such as assisting the Government in the development of a long-term strategy of policy reform and investments, initiating coordination efforts with other aid agencies, and sustaining long-term institutional support. The COS also calls for overall performance indicators as well as sector-specific triggers to ensure continued ADB investment in the sector.

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