Cambodia: Third Financial Sector Program - Subprogram 2

Sovereign Project | 42305-023

Summary

The sequence of financial reforms in Cambodia has been guided by the Government's 10-year FSDS. A project preparatory technical assistance (PPTA) for $850,000 ($700,000 from ADB TASF IV) was approved in April 2010 to help the Government update the FSDS 2006-2015 and formulate the next cluster program. IMF and World Bank have recently completed the first financial sector assessment program (FSAP) on Cambodia that will provide useful inputs to the update of the 10-year FSDS. While FSP I has been rated successful by the independent evaluation department (IED), some of the reform measures were not widely enforced due to weak interministerial coordination and capacity constraint. Prepared within the framework of the updated FSDS, the next program cluster (FSP III) will help complete some of the reform programs that commenced during FSP II, strengthen the enforcement of completed activities, and commence reform activities in leasing, capital market, and pension fund.

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Project Name Third Financial Sector Program - Subprogram 2
Project Number 42305-023
Country Cambodia
Project Status Closed
Project Type / Modality of Assistance Loan
Source of Funding / Amount
Loan 3002-CAM: Third Financial Sector Program - Subprogram 2
Asian Development Fund US$ 15.00 million
Strategic Agendas Inclusive economic growth
Drivers of Change
Sector / Subsector Finance - Finance sector development
Gender Equity and Mainstreaming
Description The sequence of financial reforms in Cambodia has been guided by the Government's 10-year FSDS. A project preparatory technical assistance (PPTA) for $850,000 ($700,000 from ADB TASF IV) was approved in April 2010 to help the Government update the FSDS 2006-2015 and formulate the next cluster program. IMF and World Bank have recently completed the first financial sector assessment program (FSAP) on Cambodia that will provide useful inputs to the update of the 10-year FSDS. While FSP I has been rated successful by the independent evaluation department (IED), some of the reform measures were not widely enforced due to weak interministerial coordination and capacity constraint. Prepared within the framework of the updated FSDS, the next program cluster (FSP III) will help complete some of the reform programs that commenced during FSP II, strengthen the enforcement of completed activities, and commence reform activities in leasing, capital market, and pension fund. The expected overall impact of the cluster program is a sound, market-based finance sector to enhance mobilization of financial resources to support sustainable economic growth. The expected outcome of the FSP III is a growing, resilient, and efficient financial system. FSP III was approved in November 2011. The National Bank of Cambodia will be the Executing Agency, and the Ministry of Economy and Finance (MEF) and Ministry of Commerce (MOC) will be the Implementing Agencies.
Project Rationale and Linkage to Country/Regional Strategy

The Government of Cambodia requested a program loan from the Asian Development Bank (ADB) during program consultations in 2009 to support Cambodia's on-going reforms of its finance sector. ADB has supported reforms in Cambodia's finance sector since 1999. As the finance sector moves towards a sound market oriented system, the proposed program will ensure that the momentum will not be lost on reforms initiated under the two ADB Financial Sector Programs (FSP I and II). The development of Cambodia's finance sector is one of five core areas that best support ADB's Strategy 2020 and its goal to reduce poverty in Cambodia. This is in line with the priority outlined in the Government's 5-year National Strategic Development Plan (NSDP) 2006-2010 and the draft NSDP 2011-2013. The proposed program cluster (FSPIII) for a total of $45 million (ADF) was included in the country operations business plan (COBP) 2009-2012.

The development framework for Cambodia's finance sector is based on a 10-year rolling finance sector development strategy (FSDS) of the government. The 10-year strategy was recently updated as the FSDS, 2011- 2020. It is aligned with Cambodia's updated National Strategy and Development Plan, 2009 2013 and Rectangular Strategy, as well as with the country strategy of the Asian Development Bank (ADB) for Cambodia, 2011- 2013. It has incorporated the recommendations of the Financial Sector Assessment Program, 2010 of the International Monetary Fund and the World Bank. Bilateral meetings were held with key stakeholders and were followed by several workshops with government agencies. Development partner coordination was further strengthened during the update of the FSDS. ADB meets regularly with all development partners in the finance sector to discuss current issues and coordinate activities. This informal group of development partners periodically discusses finance issues with relevant business associations and Cambodia's Private Sector Forum. As per the Government of Cambodia's request, the proposed third program is a cluster of three subprograms to implement the first phase of the FSDS, 2011 -2020. These reforms have been discussed with all relevant government agencies, industry associations, and development partners.

Impact A sound, market-oriented finance sector to enhance the mobilization of financial resources
Project Outcome
Description of Outcome A growing, resilient, and efficient financial system
Progress Toward Outcome
Implementation Progress
Description of Project Outputs

Finance sector efficiency enhanced

Finance Sector stability maintained

Confidence and financial intermediation improved

Good governance promoted

Status of Implementation Progress (Outputs, Activities, and Issues)
Geographical Location
Safeguard Categories
Environment C
Involuntary Resettlement C
Indigenous Peoples C
Summary of Environmental and Social Aspects
Environmental Aspects The proposed subprogram 2 will include policy reforms to strengthen Cambodia's financial sector and will have no direct impact on the environment.
Involuntary Resettlement The proposed program will not involve construction or rehabilitation, no land acquisitions will be required, and it has no potential to cause loss of assets, resources or income.
Indigenous Peoples The proposed program is intended to strengthen the overall financial sector and will have no component that will negatively impact indigenous people.
Stakeholder Communication, Participation, and Consultation
During Project Design Wide stakeholder consultation during factfinding from 18-28 July 2011. Prior to that, a series of workshops with government, private sector and development partners were held to discuss the draft financial sector development strategy (FSDS) 2011-2020. The program will be designed within the approved framework of the FSDS 2011-2020.
During Project Implementation The practice for wide consultation among relevant stakeholders has continued during the implementation on the specific issues in the policy matrix.
Responsible ADB Officer Hiroyuki Aoki
Responsible ADB Department Southeast Asia Department
Responsible ADB Division Public Management, Financial Sector and Trade Division, SERD
Executing Agencies
National Bank of CambodiaP.O. Box 25
22-24 Norodom Blvd.
Phnom Penh, Cambodia
Timetable
Concept Clearance 12 Apr 2010
Fact Finding 13 Sep 2012 to 21 Sep 2012
MRM 15 Nov 2012
Approval 14 May 2013
Last Review Mission -
Last PDS Update 25 Sep 2013

Loan 3002-CAM

Milestones
Approval Signing Date Effectivity Date Closing
Original Revised Actual
14 May 2013 26 Aug 2013 22 Nov 2013 31 Dec 2013 - 31 Dec 2013
Financing Plan Loan Utilization
Total (Amount in US$ million) Date ADB Others Net Percentage
Project Cost 15.00 Cumulative Contract Awards
ADB 15.00 14 May 2013 15.22 0.00 100%
Counterpart 0.00 Cumulative Disbursements
Cofinancing 0.00 14 May 2013 15.22 0.00 100%
Title Document Type Document Date
Loan Agreement (Special Operations) for Third Financial Sector Program - Subprogram 2 Loan Agreement (Special Operations) Aug 2013
Third Financial Sector Program - Subprogram 2 Reports and Recommendations of the President Apr 2013

Safeguard Documents

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No documents found.

Evaluation Documents

See also: Independent Evaluation

No documents found.


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