New ADB Strategy for Cambodia Puts Focus on Broad-based Growth and Good Governance

MANILA, PHILIPPINES (22 February 2005) - ADB's new five-year strategy to help reduce poverty in Cambodia, endorsed by its Board of Directors, emphasizes broad-based inclusive growth, governance and institution building, and incorporates a specific focus on Tonle Sap and on supporting subregional efforts within the Greater Mekong Subregion (GMS).

The Country Strategy and Program (CSP) for 2005-2009 proposes a total lending level of about US$104.30 million for 2005-2006, and technical assistance (TA) grants amounting to around $3.5 million a year over the two years. All lending assistance to Cambodia will come from ADB's concessional Asian Development Fund, which assists its poorest member countries in their poverty reduction efforts.

However, as a poor debt-stressed country, Cambodia is entitled to receive up to half of its total ADF assistance in the form of grants.

"With peace and macroeconomic stability now more firmly entrenched, the country has the opportunity to make far-reaching economic reforms to achieve sustained socioeconomic development," says Shyam Bajpai, Country Director for ADB's Resident Mission in Cambodia. "However, all this may be severely undermined if there is no concerted improvement in governance and a greater effort against corruption."

Recent years have seen Cambodia making important progress in ensuring peace and security, rehabilitating institutions, establishing a stable macroeconomic environment, and putting a liberal investment regime in place.

Nevertheless, the development agenda remains daunting. Almost 40% of the population remains below the poverty line, and inequality appears to be increasing. The country's recent economic growth has been narrowly based and has not led to a significant reduction in poverty.

In line with the Government's reform agenda and emerging global challenges, the CSP for Cambodia focuses on three strategic pillars:

  • Broad-based economic growth, through investments in physical infrastructure, development of the financial sector, support for greater regional integration, sustainable development of small and medium-sized enterprises, and investments in agriculture and irrigation
  • Inclusive social development, through basic education, empowering vulnerable groups such as women and ethnic minorities, control of communicable diseases, provision of rural water supply and sanitation facilities, and sustainable management and conservation of natural resources in the Tonle Sap basin
  • Good governance, through improvements in public financial management, strengthening local participation in government, and improving public service delivery

"ADB recognizes that these three strategic pillars are interlinked and mutually reinforcing," adds Mr. Bajpai.

"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."

Among the projects in the pipeline for the next two years are loans for rural water supply and sanitation, the financial sector, for developing transportation infrastructure, and electric power transmission and distribution.

To ensure that the development process is more broad-based and inclusive, the CSP includes a geographic and subregional focus. The strategy will focus on the Tonle Sap region to support one of the poorest and most environmentally-sensitive regions of Cambodia, and on the GMS to benefit from opportunities provided by the program.

A Tonle Sap Sustainable Livelihoods Project is programmed for 2005, as well as a regional project for controlling communicable diseases in the border areas of the GMS. A project for tourism development in the GMS is also in the pipeline for 2006.

To improve the effectiveness of donor assistance, ADB, DFID and the World Bank harmonized their strategies, coordinated their programs, and agreed on areas where one partner has comparative advantage and will take the lead.

As agreed, ADB will be the "lead agency" in four priority sectors - agriculture and water resources, education, finance, and transport.

ADB resumed lending to Cambodia in 1992, and as of 31 October 2004, 32 public sector loans amounting to US$775.70 million and 112 technical assistance grants totaling $73.64 million had been approved.