Progress in the Last Decade
Cambodia's economy is showing resilience in spite of the challenging international economic environment. Economic growth in 2001 was estimated at 6.3 percent, driven by an expanding tourism sector and robust garment exports. In 2001, there was nearly zero inflation. In 2002 inflation continued to be low. The budgetary performance improved in 2001, with a modest increase in revenue and also a modest reorientation of public spending towards the critical social sectors. The prospects this year are broadly favorable, as well, with the Government aiming for a 5.5 percent increase in GDP.
In 2002 the Government made significant progress on several fronts. The National Assembly adopted the Second Socio-Economic Development Plan (SEDP-II), which lays a solid foundation for poverty reduction. The SEDP-II and the Interim Poverty Reduction Strategy Paper provide the framework for a true action plan to reduce poverty. The Government also made significant progress in 2002 by producing strategies for moving forward in a number of key areas, including education, health, governance, and nutrition. These were complemented by on-going efforts to improve public expenditure and revenue management, and define a medium-term expenditure framework.
Current Challenges
Cambodia faces a formidable array of development challenges. This is a post-conflict country where many of the foundations for growth and development -- physical, social, human and economic – have been shattered and need to be restored. Many parts of the country have only recently become accessible as the security situation has eased.
The government has not had sufficient resources to invest adequately in health and education or basic physical infrastructure. Annual per capital income is US$290. Poverty has declined moderately, from 39 percent of the population in 1993-1994 to about 36 percent. While most poverty reduction has occured in Phnom Penh and other provincial towns, 90 percent of the poor live in rural areas. The highest poverty rates are found among households where agriculture is the primary source of income.
Cambodia's recent history of conflict has left the country with a legacy of disadvantaged groups, including internally displaced people, former refugees, war widows, orphans, former child combatants, and people disabled during the wars or by land mines. One in every 250 Cambodians is disabled, and the proportion of amputees -- 1 in every 384 people -- is the highest in the world. Women carry a disproportionate burden of caring for the disabled.
The prevalence of child labor, the rapid growth of the commercial sex industry, and the trafficking of women and children illustrate the difficulties that poor and vulnerable groups -- especially women -- face in securing a more sustainable livelihood. In addition, the growing HIV/AIDS infection rate is a serious threat. The poor, particularly those among the most disadvantaged groups, lack a public voice and have little access to services and opportunities. Both human and physical capital have been depleted by decades of conflict, resulting in severe capacity constraints, and social indicators are among the worst in the region.
Social capital must also be restored, and trust in public institutions reestablished. Allegations of corruption and impunity are widespread. The private sector -- the driving force behind the country's economic recovery and poverty-reducing growth -- is constrained by limited and high-cost infrastructure, uncertain land and property rights, limited access to credit, and a weak and unpredictable regulatory framework.
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Attacking Poverty
Cambodia's leaders have pledged to respond to these challenges and to help improve the lives of the Cambodian people. They are workign to reduce poverty, restore social and economic infrastructure, and build a stable macroeconomic framework. The government has already made encouraging progress in raising revenues. They have launched difficult reforms in the public sector – fiscal management, civil-service restructuring, and military demobilization -- and have agreed to allow the reforms to be closely monitored by local and international donors. Government officials have been willing to engage in this process at the highest levels. For example, the prime minister has begun chairing semi-annual consultations between donors and the government. In addition, the government has contracted with a reputable international non-governmental organization (NGO) to monitor the country's progress in forestry reforms. Government dialogue with private businesses and civil society is increasing.
Cambodia has the potential to develop diverse sources of economic growth: agriculture, natural resources, light industry, and tourism. The country's ability to exploit these resources hinges partly on tackling its physical and human resource constraints but primarily on the government sustaining the momentum of the reforms. Although the reforms may take years to accomplish, they are essential for mobilizing investment and savings and putting Cambodia on a sustainable growth path that will help to reduce poverty.
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World Bank Assistance to Cambodia
The World Bank is assisting Cambodia in building the foundations for sustainable development and poverty reduction. Building these foundations means:
- Supporting good governance, such as reforming legal and judicial systems, restructuring the public sector (including the civil service), and demobilizing the military;
- Building physical infrastructure -- particularly roads, water supply, and electricity -- in rural and provincial areas to increase access to services and productive activities;
- Rebuilding human capital by increasing access to and the quality of health-care services and investing in education and skills development that will contribute to building international capacity and good governance, as well as to better health outcomes, income-generation and competitiveness; and
- Facilitating private sector development in traditional and non-traditional sectors, including supporting rural income generation, through a combination of policy work, encouraging regular constructive dialogue between the government and the private sector, and providing direct support to business ventures.
All of the Bank's interventions focus as much as possible on rural areas, where the majority of the poor live, and on increasing access and opportunities for women – particularly in education. The World Bank is paying particular attention to including disadvantaged groups and to preserving and restoring the country's natural resources and cultural heritage as potential bases for growth. Capacity building will be an integral part of all future work. | Results: Helping Communities Improve Their Quality of Life | Education: Through the Education Quality Improvement Project, teachers, administrators, and communities from Takeo, Kandal, and Kampot provinces are working together to identify school-enhancement activities financed through annual school cluster grants that will improve childrens' education. Some of the activities include building new libraries, investing in education materials, providing teacher training, and improving the environment around schools. An independent impact evaluation concluded that: Average dropout rates declined and promotion rates increased the longer schools participated in the education improvement project. Participation in the project also led to higher scores on literacy and math exams. Teacher-training activities were relatively cost effective when compared to other types of education-development programs.
Environment: The Biodiversity and Protected Area Project is helping Cambodia minimize unsustainable exploitation and degradation of biodiversity by establishing an effective system of national protected areas. The experiences gained from this project are helping the government formulate a long-term strategic vision for the entire national protected areas system, and will help determine which conservation approaches are most effective.
Health: The Disease Control and Health Development Project is helping Cambodia reduce death and sickness from preventable diseases, and also rehabilitate the health system infrastructure. The project includes national program support for malaria, tuberculosis and HIV/AIDS control, as well as basic health-care improvements, including investments in medical equipment and essential medicine.
Agriculture: The Agriculture Productivity Improvement Program is working to boost the productivity of small farmers, which will in turn improve food security and increase rural incomes. Components of the project include investments in agronomy, seed and plant protection; advancing livestock care and production; and improved management of fisheries.
Land: The Land Management and Administration project is helping Cambodia improve land security and promote the development of an efficient land market by providing land holders with titles to their land. These changes will help reduce poverty, stimulate economic development, promote social stability, and improve environmental management. By the end of the project the government expects that about 1 million land titles will be provided to Cambodian families. Moving Ahead -- A Look at the World Bank's Work: The Bank lends money to Cambodia through the International Development Association, which provides interest-free loans to the world's poorest countries. Projects focus on rural infrastructure and rural development because the majority of the poor live in rural areas. The Bank also supports investments in improving health, education, and public sector reform. In addition, a number of projects aim to improve governance and the government's ability to deliver services effectively to the poor through ongoing analytical work on anti-corruption, legal and judicial reform, and capacity building.
In collaboration with the IMF, the Bank helped Cambodia develop a Poverty Reduction Strategy Paper, which the Government completed in 2003 and calls the National Poverty Reduction Strategy. The World Bank adopted this approach in 1999 to help poor countries and their development partners strengthen the impact of their common efforts on poverty reduction. The Bank is currently developing a new Country Assistance Strategy for Cambodia for the years 2005 to 2008. The strategy will have a strong focus on improving governance and will calll attention to the issue as a key obstacle to growth and poverty reduction in Cambodia. Four cross-cutting areas of governance have been identified, including public administration and financial management, local governance and accountability, a framework for private sector development and investment, and access of the poor to productive assets. Some preliminary consultations have been held with civil society, donors, the private sector, and the transitional government.
The International Finance Corporation's Mekong Project Development Facility is supporting the development of private, domestically owned, small- and medium-scale enterprises in Cambodia. One of the Development Facility's priorities is the Hagar Project, an integrated housing and job-training program for destitute women and their children. The project is widely seen as one of Cambodia 's most effective poverty-fighting initiatives. Sponsored by the international Christian NGO Youth, With a Mission, the Hagar Project has developed an excellent track record of helping impoverished women rebuild their lives by learning new skills needed to generate a sustainable income. The Development Facility's assistance is helping scale up its most successful component, a handicraft business currently providing stable employment for 50 low-income women. Changing the Way We Do Business:Cambodia's development partners are working to collaborate more closely with the Government in delivering on its development agenda, and to build the capacity of its institutions. The World Bank is developing its new Country Assistance Strategy in close partnership with the Asian Development Bank and the U.K.'s Department for Foreign Development. In addition, the Bank is working closely with other donors and with civil society organizations in Cambodia on a wide range of issues, including decentralization, forestry sector reform, public sector reform, private sector development. Additionally, the World Bank actively participates in a number of Government-led working groups focused on a range of development issues. The World Bank co-chairs the Consultative Group with the Government which is a periodic meeting of the Government and donors to discuss Cambodia's development progress, challenges, and future needs. |
Back to top Mr. Stephane Guimbert
Acting Country Manager
Cambodia Liaison Office
#113, Preah Norodom Blvd.
Phnom Penh
Cambodia
Telephone: (855-23) 213-538
Facsimile: (855-23)210-504
E-mail: sguimbert @worldbank.org
The Cambodia External Affairs Office
Bou Saroeun, Communications Specialist
Telephone: (855-23) 213-538
Facsimile: (855-23)210-504
Email: sbou@worldbank.org The Washington External Affairs Office
Elisabeth Mealey / Mohamad Al-Arief
Tel: (202) 473-1792 / (202) 458-5964
Fax: 202-522-3405
Email: emealey@worldbank.org / malarief@worldbank.org |
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