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Countries and Regions Country Partnership Strategies Document
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Country Strategy and Program Update 2003-2005: Cambodia
II. Implementation of the Country Strategy and ProgramA. Progress under the Poverty Partnership Agreement9. The Poverty Reduction Partnership Agreement (PRPA) was signed in July 2002. The PRPA was written based on SEDP II. The latter was approved by the National Assembly in June 2002, after delays in its preparation due to the need for further consultations called for by civil society and funding agencies. The PRPA itself was also developed through a consultative process involving various rounds of discussions with the Government. Cambodia has made progress in meeting the goals outlined under the Millennium Development Goals, and this has been reflected in the PRPA. B. Progress in the Country Strategy and Program Focus Areas1. Poverty Reduction10. Together with other development partners, ADB has assisted in the formulation of SEDP II, which is the key document for reducing poverty in the country. In formulating the Plan, a participatory poverty assessment (supported by ADB) was undertaken to inform decision makers on the concerns of the poor. SEDP II has three broad goals: (i) long-term, sustainable economic growth of 6-7% a year; (ii) equitable distribution of income at the national level, in the urban and rural areas, and between genders; and (iii) sustainable utilization of natural resources and environmental protection. SEDP II forms the basis for the Poverty Reduction Strategy Paper, which the Government hopes to complete by the end of this year. 2. Rural Economic Development11. Support to rural development continues to be through interventions in different areas. In late 2001, ADB approved a rural development loan for the northwest of the country. The loan, which will mainly finance rural infrastructure, combines decentralized financing mechanisms developed under a program supported by the United Nations Development Programme, Department for International Development, and the Swedish International Development Cooperation Agency, with innovative decentralized planning methods. Rural finance will benefit from the adoption by the Government of Financial Sector Blueprint, and the recently approved loan to support its implementation. 12. Forestry and fisheries remain vital natural resources for Cambodia's predominantly rural population, with its pervasive poverty. In recent years, pressure on these resources has intensified as Cambodia experiences a long period of political stability, along with a liberalized economy and a rapidly expanding postwar population. Recognizing this pressure, the Government, with external assistance, has taken concrete steps to manage these resources in a sustainable manner. This has included the formulation of policies and legal instruments that will promote sustainable forest and fisheries management. The Government is currently in the advanced stages of formulating fisheries legislation, and the National Assembly is deliberating a draft forestry law. In addition, the passage of the Land Law in 2001 and its implementation will assist in resolving environmental governance problems. The Government is keen to promote community-based natural resources management and, hence, it needs to promote community participation and transparency in both forestry and fisheries. 13. For the forestry sector to play its role in the country's economic and social development, and to maximize its impact on rural employment generation and poverty reduction, the following four important matters need to be addressed: (i) combined with a rational forestland classification and strategic plan, the remaining natural forest will have to be delineated and demarcated; (ii) the condition and management of the remaining natural forest will need to be improved to conserve watersheds and biodiversity, and to improve wood and nonwood productivity; (iii) natural forest production will have to be complemented and supplemented by wood production from agro-ecosystems and plantations to meet the growing rural energy and wood product needs; and (iv) the processing industry will have to be rationalized and restructured. ADB is undertaking sector work toward this end, and will continue to work on this in the context of the operational program in natural resources management, including the Tonle Sap development framework. 14. The inland fisheries sector underwent an important change in late 2000, when the Government decided to release more than 50% of fishing lots from private holdings, and turned them over to local communities for management. The decision was made following numerous complaints and reports from villagers that fishing lot owners, and in some instances government fisheries officers, prevented them from conducting subsistence fishing, even in areas designated for communal fishing. The Department of Fisheries had to adopt a new approach, involving the engagement of the fishing communities in the management of the fishing lots. The Department established a Community Fishery Development Office, to be responsible for the implementation of the forthcoming Community Fisheries Subdecree, which is expected to receive approval in 2002. 15. Issues relating to rural development, natural resources management, and environmental management go hand in hand, on and around the Tonle Sap, where the majority of the poor live, and which provides up to 80% of the protein consumed by the poor. The proposed Tonle Sap Environmental Management Project (2002) along with ADB's sector work in agriculture, water, and forestry resources will prepare a Tonle Sap basin development framework. Two loan projects have been included in the program in this context. The development framework will identify investment priorities for sustainable land, water, and forestry resource development for improving livelihoods and reducing poverty in the Tonle Sap basin. 3. Human Resources Development16. Considerable progress has been made with the implementation of the Government's Education Sector Support Program, and ADB's support for this through the Education Sector Development Program, approved in late 2001. This progress was despite some initial delays in the release of government funding through its priority program. The second phase of ADB support is programmed for 2004 or 2005, depending on progress under the first loan. ADB will continue to spearhead reforms in the education sector. Support to the health sector, through a sector-wide intervention supported together with the Department for International Development and the World Bank, builds on the experience gained under the first health project, and is expected to bring substantial improvements in service delivery in the years to come. 17. Recent evidence suggests that the HIV/AIDS epidemic may have reached its peak in Cambodia, with a current estimated prevalence rate of 2.7%, as against 3.3% in 1999. This encouraging development is seen as a direct result of a number of significant government programs supported by aid agencies. Given the nature of the epidemic-which should be seen against the country's development situation, including the poor living conditions of the majority of the population and characterized by low income, low health status, low education, gender discrimination, and limited infrastructure-there is, however, little room for complacency. The Government and its development partners recognize this, and continue to work on an extensive program that views the epidemic not only as a health issue, but also a social and development issue. The National Aids Authority continues to effectively coordinate and promote this approach. ADB has actively supported these efforts in recent years, through grant-financed interventions and inclusion of HIV/AIDS-specific components in relevant projects. The Health Sector Support Project, proposed for approval in 2002, will have an HIV/AIDS component. 18. The Government approved an urban water supply and sanitation policy in 2001. The policy is currently undergoing revision to include policy elements specific to rural water supply and sanitation. This, in turn, will pave the way for a Rural Water Supply and Sanitation Project, proposed for 2003 or 2004. 4. Private Sector Development19. Operations continue to support the development of infrastructure and the promotion of an enabling environment, notably through supporting reforms in the financial sector. In August 2001, the Government adopted the Financial Sector Blueprint for 2001-2010 with ADB assistance. ADB has also supported the establishment of the Mekong Enterprises Fund under the Mekong Project Development Facility, which will provide financing to small and medium-sized enterprises (SMEs). ADB will also further explore possibilities to provide lending and nonlending support to the SME sector. Important steps were taken to improve dialogue between the Government and the private sector, including the establishment of a number of thematic working groups. 20. The Electricity Law, promulgated in early 2001, defined the broad institutional restructuring of the electricity sector. Electricité du Cambodge was corporatized in 1997 and has shown improvements in efficiency and financial performance since then. The Law encourages private participation in the sector and has established the Electricity Authority of Cambodia to license and regulate participants. ADB has begun a project to rehabilitate the most run-down electricity supply systems in eight provincial towns to stimulate the local economies and enhance the markets for adjacent rural produce. The upgraded systems will result in lower costs to consumers, and form a sound distribution network to which local entrepreneurs can connect new generating facilities. 5. Governance21. The Government's firm commitment to governance reform is reflected in its Governance Action Plan, which was approved in 2001. Among the results achieved are the completion of the civil service census and functional reviews, the development of a computerized personnel management and payroll system, the elimination of "ghosts" and redundant workers from the payroll, and the discharge of 16,500 soldiers. The Government has also established an independent National Audit Authority, which is an important step toward controlling widespread corruption. The Government is working on an update of the Governance Action Plan, which will focus more on combating corruption. ADB continues to focus on the four ways in which linkages can be strengthened between state reforms and ADB country program and projects. First, ADB supports activities that are part of the "core" governance reform commitment (support to the Council for Administrative Reform to improve public sector performance, support for the drafting of key legislation governing public access to land and natural resources, and support for public finance reform and audit). The adoption of the Land Law, coupled with the mapping of Phnom Penh and five provinces, has enabled the issuance of around 2,000 land titles to Cambodians. Second, ADB remains committed to supporting the implementation of the Government's decentralization policies. Extensive consultations have taken place, and a 5-year action plan for the Department of Local Administration in the Ministry of Interior was prepared. The loan proposed for 2002 will continue this process. Third, projects in the lending and TA program are consistent with and reinforce the Government's reform commitments in public administration, financial management and accountability, and gender equity. 22. Fourth, the state reform process has major implications for relations between the state and non-state sectors. State reform policy recognizes the important role of the private sector in public service provision and local economic development, and civil society in the development of pro-poor policies and practices by the state. The role of the non-state sector is already evident, not just in the provision of services and infrastructure for rural development, health, and education, but also in fostering dialogue with the state sector on important laws of fundamental importance in poverty reduction. 6. Gender23. Cambodia continues to experience serious gender disparities. Women have less access to health and education services, to paid employment, and to land ownership and other property rights. Growing pressures on agriculture are placing increased pressure on poor rural families to seek out alternative sources of livelihood, especially among women. Women have fewer opportunities to ensure that their views are included in the political process. The Government is committed to addressing gender imbalances (as reflected in the National Policy for Women and SEDP II) and aims to ensure that an appropriate gender focus is integrated into the planning and implementation process. ADB will continue to actively support the Government's policy by direct support to the Ministry of Women's and Veterans' Affairs, in particular its endeavors for economic empowerment of women as well as a sharper focus on gender issues in relevant ADB-supported projects. 7. Subregional Cooperation24. A key element of the enabling environment for private sector development is regional and global integration, which is a high priority of the Government. In addition to participation in the GMS Economic Cooperation Program, Cambodia joined ASEAN and applied for membership of the WTO. The Government sees increased regional integration as one of its key priorities. ADB intends to support continued efforts to broaden Cambodia's reintegration into the global economy by assisting its participation in the GMS Program through TAs and selected investments compatible with ADB's overall program in Cambodia. Furthermore, support will be provided for the first GMS heads of state summit, scheduled for Phnom Penh in November 2002. 25. The first regional project under the GMS Program was the 1998 Phnom Penh-Ho Chi Minh City Highway Project, currently being implemented. For 2002, the Road Network Improvement Project is being prepared. The Primary Road Restoration Project indirectly supports the GMS regional transportation program. In addition to investments financed from the Asian Development Fund, Cambodia will continue to benefit from GMS regional TAs designed to enhance regional development opportunities, encourage trade and investment among GMS countries, resolve or mitigate cross-border issues, and meet common resource and policy needs. Investments in the pipeline include GMS projects in telecommunications and road transport. C. Highlights in Coordination with External Funding and Partnership Arrangements26. With inadequate domestic revenue mobilization, and expenditure and revenue allocation, Cambodia will remain heavily dependent on official development assistance (ODA) for the provision of basic goods and services for some time yet. During 1992-2001, net disbursements of ODA to Cambodia reached $4.1 billion, with 34% from multilateral sources, 58% from bilateral sources, and 8% from nongovernment organizations. The bulk of the ODA is grant aid (82%). In 2001, about $472 million in ODA was disbursed, close to 10% of GDP. This was above the annual average of $443 million for the 1998-2001 period. 27. While ODA continues to be the principal source of financing for the Government's Public Investment Program, coordination among the partners for the effective utilization of this resource remains weak. A major challenge has been the Government's weak absorptive capacity and poor interagency coordination. Though coordination is the mandate of the Council for the Development of Cambodia, there is a need for procedural harmonization between the Council and other key agencies concerned with ODA, including the Ministry of Economy and Finance and the Ministry of Planning. The annual consultative group meetings between the Government and aid agencies serve as the overall aid coordination framework between agencies and between agencies and the Government3. This is supplemented by a number of sector working groups, which meet regularly. 28. As the leading international development finance institution and one of the largest official source of funds in Cambodia, ADB continues to work closely with the Government and coordinates its policy dialogue and operations with the development partners, including aid agencies, nongovernment organizations, and the private sector. ADB's Cambodia Resident Mission has facilitated and promoted improved aid agency coordination through thematic/sector working group meetings, including cochairing some with the Government. ____________________
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