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Annual Report 2001

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Cambodia

Economic performance

Growth in Cambodia was led by the textiles and tourism subsectors, which remained strong in 2001, although both were vulnerable to the global economic downturn. Price inflation in 2001 was negligible. As a result of low inflation, the exchange rate remained stable. The Government maintained a conservative fiscal policy. Spending for health and education increased substantially in 2001. Cambodia’s current account deficit of 6.6% of GDP was offset completely by official transfers and concessional loans to the Government. Exports grew in 2001 despite the global economic slowdown. Overall economic growth in Cambodia was 5.3%. Few benefits of economic growth have reached the poor, with much of the growth concentrated in urban areas. More opportunities need to be created for the poor as the country undergoes agricultural transformation. Government investments in health and education have increased substantially in recent years. Cambodia, still recovering from more than 20 years of conflict, needs continued investment in infrastructure to ensure sustained economic growth.

ADB operations

Operational strategy: ADB’s operational strategy focuses on economic growth and poverty reduction in line with the Government’s own priorities. Three priority areas have been identified. First, to support broad-based development of rural areas, ADB coordinates efforts in water resource management, while supporting decentralization, rural development, natural resource management, and agriculture sector reform. Second, to assist human and social development, ADB facilitates a sectorwide approach in education and provides complementary support in health and rural water supply. Third, to promote private sector development, ADB supports the improvement of the nation’s road network, while playing a key role in the area of financial sector reform, and a supportive role in the energy sector. In addition, ADB provides strategic support to governance, focusing on economic planning, public finance, decentralization, and legal reform while ensuring appropriate gender focus in all interventions.

Policy dialogue: ADB and the Government continued policy dialogue on land management, public financial management, civil service reform, decentralization, financial sector reform, natural resource management, education, and governance reforms, including anticorruption. The consultative group of funding agencies held regular policy dialogue with the Government on forestry management, public administration reform, demobilizing military personnel, and legal and judicial reform. The Government’s 5-year socioeconomic development plan, approved by the Cabinet in late 2001 and scheduled for submission to the National Assembly in 2002, will pave the way for a partnership agreement on poverty reduction with ADB.

Loans and technical assistance: Four loans totaling $75.2 million were approved in 2001 for the financial sector program, rural development of the northwestern region, and education sector development (program loan and project loan). Eight technical assistance grants totaling $6.8 million were approved in 2001. Four were advisory: strengthening public financial management (technical assistance cluster), formulating a transport sector strategy, providing institutional support for national economic policy management, and building capacity for banking and financial management. Four were for preparing projects on basic health services, rural water supply and sanitation, agriculture sector development program, and the northwest irrigation sector.

Project implementation: Since joining ADB in 1966, Cambodia has received 21 loans, of which 17 were active at the end of 2001. Contract awards totaled $40.7 million, bringing the cumulative figure to $328.7 million. The contract award ratio was 19.2%, higher than the ADB-wide average of 14.8%. Disbursements during the year totaled $48.4 million, bringing cumulative disbursements to $251.4 million. The disbursement ratio was 18.7%, lower than the ADB-wide average of 20.5%.

Portfolio performance in Cambodia continued to improve in 2001 and most of the agreed actions of the 2000 country portfolio review were achieved. A joint country portfolio review was conducted for the first time between the Government, ADB, and World Bank, and an action plan was prepared for improving portfolio performance. It included the establishment and use of a common set of portfolio performance indicators and project readiness criteria. Standard operating guidelines for project implementation, financial management, and staff training were adopted with a work plan to operationalize these activities in 2002.

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