Countries and Regions

	Table of Contents
p. 5 of 8 BACK | NEXT Executive Summary I. Current Development Trends and Issues II. The Government's Development Strategy III. ADB's Development Experience IV. ADB's Strategy V. ADB's Assistance Program VI. Risks and Performance Monitoring and Evaluation Appendixes

Country Strategy and Program 2005-2009: Cambodia

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IV. ADB's Strategy

A. Summary of Key Development Challenges

58. ADB’s overarching goal in Cambodia is sustainable poverty reduction. The binding constraints to poverty reduction remain numerous, and include inadequate and narrowly based economic growth, limited access to and poor quality of social services, landlessness, lack of access to natural resources, social exclusion, poor governance, and endemic corruption. The key development challenges include: increasing opportunities for economic advancement, improving livelihoods and reducing vulnerability, and facilitating participatory governance at all levels.

B. Country Strategy and Program Strategic Focus

59. To respond to the above, ADB's strategy will focus on supporting broad-based economic growth, inclusive social development, and good governance. A focus on the Tonle Sap basin to address geographical disparities in development, and subregional focus to benefit from the broader opportunities provided by ADB’s GMS program are also included. Figure 1 outlines the country strategy and program's (CSP) strategic focus.

60. Broad-based economic growth. Broad-based economic growth is essential to sustain poverty reduction and increase government revenues so that public services can be properly financed. While economic growth has been fairly strong in the past decade, it has been limited to a few sectors and has had a limited impact on the poor. Cambodia needs to resolve numerous structural constraints to growth, including a limited number of new sources of growth, infrastructure bottlenecks, a weak and shallow financial system, a low skills base, and weaknesses in governance. ADB will work to support the enabling conditions for pro-poor, private-sector-led sustainable growth through investments in physical infrastructure, development of the financial sector, support for greater regional integration, sustainable development of SMEs, and investments in agriculture and irrigation.

61. Inclusive Social Development. Although Cambodia has made progress in increasing the depth and quality of its human capital, the country's MDG indicators remain among the worst in the region. Although coverage of basic services has expanded, the quality of services is low. The CSP will help improve the welfare of the poor by enhancing livelihoods and reducing vulnerability by increasing access by the poor to assets (both physical and natural) and by strengthening human capital. Specifically, ADB will focus its support on improving education, empowering vulnerable groups such as women and ethnic minority groups, controlling communicable diseases, providing rural water supply and sanitation facilities, and promoting community-based sustainable management and conservation of natural resources in the Tonle Sap basin.

62. Good Governance. Weak governance remains a key obstacle to achieving faster economic growth and reducing poverty in Cambodia. In response, ADB will adopt an increasingly proactive role in governance initiatives through its projects. In its future assistance program, ADB will focus on governance directly by:

1. improving accountability and service delivery
2. supporting legal, regulatory and policy reforms
3. strengthening institutional capacity building
4. improving efficiency and effectiveness of project implementation

Through this approach, ADB will help the government to achieve a gradual, incremental and (to the extent possible) irreversible improvement in governance practices on several fronts.

63. ADB recognizes that these three strategic pillars (broad-based economic growth, inclusive social development, and good governance) are interlinked and mutually reinforcing. Unless institutions in Cambodia are strengthened, economic growth will falter and vulnerability will increase. Economic growth and private sector development will lay the foundation for good governance, by creating a strong constituency for transparency and rule of law. Social stability is both a by-product and a necessary pre-condition for economic growth and good governance.

1. Sector Selectivity

64. Sector interventions in ADB’s future assistance program to Cambodia, within the context of a reduction in ADF resources, will be based on the following criteria:

• the binding constraints to poverty reduction
• the identification of priorities from consultations with stakeholders
• ADB’s comparative advantage; past performance in particular sectors
• a realistic assessment of Government’s commitment to reform
• the likely extent of interventions by other development partners in particular areas

Notwithstanding tremendous country needs, and an increase in the number of activities brought on by the GMS program, ADB will make a concerted effort to be more selective with its interventions to improve the effectiveness of its assistance. However, as ADB is one of the largest donors in Cambodia (in terms of funding and sector involvement), exiting from a sector would require careful consideration and cooperation with other donors to ensure adequate cover for the funding shortfall. Such an understanding has been reached with the World Bank in the health sector, and ADB will gradually pull out of the sector with the World Bank increasing its presence in health. Exiting from the health sector has enabled ADB to support rural water supply and sanitation, a sector that is critical to achieving the MDGs. ADB’s involvement here is intended to be catalytic, in that it will attempt to draw in the Government and other donors into this important sector which currently lacks adequate funding. ADB, DFID, and the World Bank have also harmonized their strategies, coordinated their programs, and agreed on areas where one partner has a comparative advantage and will take the lead. This approach has been extensively discussed with, and has the full backing of, the Government. The “lead agency” will also provide support for the Government to develop and implement sector strategies. ADB will take the lead role in four priority sectors:

1. agriculture and water resources
2. education
3. finance
4. transport

In areas where one partner takes the lead role in helping the government formulate the sector strategy and program, the others will play a supporting role by continuing to undertake technical assistance and investment lending and also by participating in national dialogue on development policies and related concerns in the relevant sector. Thus, ADB will continue to support the power sector (where the World Bank will take the lead).

2. Non-Governance Thematic Priorities

65. Private Sector Development. ADB will help the Government improve the climate for private sector development through a combination of investments, and policy, institutional and regulatory reforms. Towards this end, ADB’s interventions will be designed to further relieve key infrastructure bottlenecks (especially in transport and power) that increase the cost of doing business. They will also promote human resources development (education and vocational and/or skills training) for a more productive labor force, and financial sector reforms to reduce the cost of and increase access to finance. In future, there will be a sharper focus on privatesector initiatives with a high poverty reduction impact. Specifically, ADB will support SMEs to increase their productivity, competitiveness, and employment generation potential. Private sector operations will also be undertaken as and when opportunities arise. While prospects for developing private sector operations are currently limited, future possibilities in trade facilitation, and in the rail, road and financial sectors are being actively explored by ADB’s Private Sector Operations Department. ADB’s support may take the form of direct loans, equity financing, or credit enhancement products.

66. Gender. Discrimination against women because of sociocultural reasons remains an issue of concern. ADB will continue to focus its operations on creating economic opportunities for women and enhancing their livelihoods. More specifically, it will:

1. intensify mainstreaming of gender concerns in ADB projects by strengthening operational relationships between line ministries and the Ministry of Women’s Affairs (MoWA)
2. contribute to gender equality and empowerment through targeted interventions in education, agriculture, natural resource management, rural development, and SME development
3. continue to strengthen MoWA’s policy analysis and advocacy capacity
4. promote regional links and collaboration with other GMS countries to address the vulnerability of women to human trafficking, migration, and crossborder communicable disease

67. Environment. ADB’s will aim at the sustainable use of natural resources to enhance livelihoods and reduce poverty. Given its natural wealth and importance to sustaining the population of Cambodia, the Tonle Sap will remain an area of special focus, and interventions will emphasize community-based natural resource management, within an integrated basinwide approach. ADB will promote improvements to the information systems that are crucial for environmental management, and support institutional capacity building of agencies responsible for environment and natural resources at both national and local levels. Within the Tonle Sap basin, ADB will support development of alternative livelihood systems for communities whose current activities are incompatible with the preservation of the environment. Although the focus will be on the Tonle Sap basin, environmental sustainability will be addressed in all sector projects through strict adherence to ADB’s environmental assessment process. In future, there will be an increased focus not just on monitoring the individual impacts of projects, but on their cumulative impacts.

3. Geographical Focus

68. To improve the development impact of its assistance program, ADB will increasingly focus some of its interventions on the Tonle Sap basin, to enable greater synergies among different interventions, and to focus support for poverty reduction and environmental management on one of the poorest and environmentally most sensitive regions of Cambodia (see Appendix 3). The Tonle Sap basin includes all or part of 8 of Cambodia's 24 provinces and covers 80,000 square kilometers (44% of Cambodia's total area)²⁰ with a combined population of 3.6 million, one third of Cambodia’s total population.

69. ADB's focus on the Tonle Sap basin has several implications. First, ADB will develop interventions to improve environmental stewardship and livelihoods in the Tonle Sap basin. Second, ADB will ensure that, whenever feasible, subnational projects (i.e., projects without a national focus) will be located within the Tonle Sap basin. In particular, ADB will gradually move some of its interventions in agriculture, power, and rural water supply and sanitation to the Tonle Sap basin. While ADB will continue to support transport projects throughout the country, many of these will be located in the Tonle Sap basin. ADB will, however, retain flexibility to look at this geographical focus within the context of other donors’ programs in the Tonle Sap. The transition to the Tonle Sap basin will be gradual, and will probably not be completed during the 2005–2009 CSP period.

4. Synergy with the GMS Program

70. Given the high incidence of poverty in many GMS countries, and the complementarity of the Cambodia CSP and the regional cooperation strategy and program for the GMS,²¹ greater efforts will be made in future to strengthen the synergy between the CSP and the broader opportunities provided by the GMS program. Towards this end, the projects identified for Cambodia in the regional cooperation strategy and program shall periodically be reviewed to ensure integration and support for the achievement of the outcomes identified in the CSP. While projects in the transportation, power, telecommunications, and tourism sectors will continue to receive attention given their positive role in promoting growth, there will also be an emphasis on addressing institutional capacity weaknesses to ensure sustainability of project benefits. There will be a focus on promoting livelihoods and reducing vulnerability through projects on flood management and mitigation and on minimizing the negative social consequences of increased mobility, such as the transmission of communicable diseases. The CSP's focus on environmental stewardship of the Tonle Sap basin will have positive implications for the GMS, since the Tonle Sap basin is key factor in the sustainability of the Mekong River basin.

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