Catalog

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p. 20 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 V. ADB Strategy in Operation A. Issues Cutting Across Priority Area Interventions B. Absorptive Capacity C. Modalities of ADB Operations D. Risk Factors for ADB Operations E. Performance Indicators for ADB Operations

Country Operational Strategy - Cambodia : V. ADB Strategy in Operation

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D. Risk Factors for ADB Operations

159. Three types of risks are to be considered for ADB operations in Cambodia. The first is political risk. If political stability is not maintained, then security cannot be improved and economic progress will not be forthcoming. Although for a very long time the prospects for the future have not looked more promising than they are now, this risk is not insignificant. The next five years are critical transitional years for the nation and recent gains will need to be consolidated through a combination of prosperity-engendering economic growth and national reconciliation. By fostering a firm and frank partnership between ADB, the Government, other aid agencies, and other stakeholders in Cambodia, and by strengthening the country's regional ties, ADB may play a positive role in minimizing this risk.

160. A second related risk is that the massive reform effort will falter, adversely affecting development, the development impact of ADB operations, and the capacity of the Government to sustain operations. ADB can minimize this risk by closely monitoring the reform progress, along with other aid agencies, and supporting improved governance through capacity building, through close monitoring of project and TA implementation, and through firm guidance and the use of leverage on reform issues. Two facets of this risk are worth highlighting. One is that if environmental reforms lag, environmental degradation could have a long-term impact on growth potential. The other is that if fiscal reforms lag, the availability of counterpart funds, operation and maintenance funds, and debt service might well be in jeopardy.

161. A third risk is that ADB will underestimate the difficulty of implementing a broad-based development program under conditions now faced in Cambodia. Placing a higher emphasis on poverty reduction, undertaking wide-ranging policy dialogue, moving toward closer aid agency coordination, and tighter monitoring of program governance will require more efforts from the staff. In particular, ADB should recognize the extra time and effort that will be required of staff in Education, Health and Population Division (West), Forestry and Natural Resources Division (West), Programs Division (West) 3, and Transport and Communications Division (West), to support facilitative roles in education, roads, and water resources and a large program in governance. Closer coordination will also generally require a larger staff at the Cambodia Resident Mission with the appropriate skill mix for policy dialogue. One way in which ADB can mitigate this risk is to make strategic partnerships with other aid agencies that have higher personnel-to-funds ratios.

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