ASIAN DEVELOPMENT BANK

CAP: CAM 2004-01

COUNTRY ASSISTANCE PROGRAM EVALUATION

FOR

CAMBODIA

January 2004

CURRENCY EQUIVALENTS Currency Unit riel (KR) 1992 KR1.00 $1.00 = = $.0005 KR2,000.0 1995 $.000408 KR2,450.8 2000 2003 (as of 31 August) $.000261 $.000261 KR3,832.6 KR3,835.0

ABBREVIATIONS ADB ADF ADTA AIDS ASP CAP CAPE CARM CDC CG COS CPI CPP CPR CSP CSPU DFID DMC DP EA EdC EIA ESDP ESP ETSW FDI FSB FSPL GAP GDP GMS HDI HPI HIV HRD HRSD IES IMF IS km LTSF MDG MEF MFI Asian Development Bank Asian Development Fund advisory and operational technical assistance acquired immunodeficiency syndrome Agriculture Sector Program country assistance program country assistance program evaluation Cambodia Resident Mission Council for the Development of Cambodia Consultative Group country operational strategy core poverty intervention Cambodian Peoples Party country portfolio review country strategy and program country strategy and program update Department for International Development developing member country development partner executing agency lectricit du Cambodge environmental impact assessment Education Sector Development Program Education Strategic Plan economic, thematic and sector work foreign direct investment Financial Sector Blueprint Financial Sector Program Loan Governance Action Plan gross domestic product Greater Mekong Subregion human development index human poverty index human immunodeficiency virus human resources development human resources and social development impact evaluation study International Monetary Fund interim strategy kilometer Long-Term Strategic Framework Millennium Development Goal Ministry of Economy and Finance microfinance institution

ii MOE MOEYS MOH MOP MOWVA MTEF MTS MTSF NAA NBC NGO NPRD NPRS OED PCR PI PIP PMU PPAR PPR PPTA PR PRGF PRPA PRS PSD RCSP RETA SARS SRA SEDP-I SEDP-II SME SWAp SWIM TA TCR TPAR TVET UNICEF WSS WTO Ministry of Environment Ministry of Education, Youth and Sports Ministry of Health Ministry of Planning Ministry of Womens and Veterans Affairs medium-term expenditure framework Medium-Term Strategy Medium-Term Strategic Framework National Audit Authority National Bank of Cambodia nongovernment organization National Program to Rehabilitate and Develop Cambodia National Poverty Reduction Strategy Operations Evaluation Department project completion report poverty intervention public investment program project management unit project performance audit report project performance rating project preparatory technical assistance poverty reduction Poverty Reduction and Growth Facility Poverty Reduction Partnership Agreement Poverty Reduction Strategy private sector development Regional Cooperation Strategy and Program regional technical assistance severe acute respiratory syndrome Special Rehabilitation Assistance First Socioeconomic Development Plan Second Socioeconomic Development Plan small and medium enterprise sectorwide approach sectorwide management technical assistance technical assistance completion report technical assistance performance audit report technical and vocational education and training United Nations Childrens Fund water supply and sanitation World Trade Organization

NOTES (i) (ii) The fiscal year (FY) of the Government ends on 31 December. In this report, $ refers to US dollars.

Operations Evaluation Department, CE-7

CONTENTS Page iii xiii INTRODUCTION EVALUATION FRAMEWORK AND METHODOLOGY A. B. III. A Proposed Comprehensive Evaluation Framework: Linking the Strategic, Program, and Project/Sector Levels Methodology: Five Evaluation Criteria 1 2 2 4 4 4 5 5 7

EXECUTIVE SUMMARY MAPS I. II.

EVALUATION OF COUNTRY STRATEGY: RESPONSIVENESS A. B. C. Responsiveness of Country Strategy to Asian Development Bank Strategies Responsiveness of Country Strategy to National Development Strategies Responsiveness of Country Strategy to Countrys Socioeconomic Issues

IV.

EVALUATION OF COUNTRY ASSISTANCE PROGRAMS: RESPONSIVENESS A. B. Responsiveness of Country Assistance Programs to Country Strategy Objectives: Program Balance and Coherence Responsiveness of Country Assistance Programs to Asian Development Banks Strategic Thrusts: Addressing Poverty Reduction

7 10 11 12 35 44 45 47 48 49 50 51 51 52 53 53 53 54

V.

EVALUATION OF COUNTRY ASSISTANCE PROGRAMS: EFFECTIVENESS A. B. Impacts of Lending and Nonlending Programs by Sector/Theme Development Effectiveness: Progress toward Achieving Country Strategy Objectives

VI.

EVALUATION OF COUNTRY ASSISTANCE PROGRAMS: PORTFOLIO AND STAKEHOLDER PERFORMANCE A. B. C. D. E. F. Portfolio Performance of Lending and Nonlending Programs Aid Coordination Asian Development Bank Performance Government Performance Nongovernment Organization Role Exogenous Factors

VII.

SUMMARY EVALUATION RESULTS AND RATING A. B. C. D. E. Responsiveness/Relevance Effectiveness/Efficacy Efficiency Sustainability Institutional Development Impacts and Other Performance

ii F. VIII. Overall Rating 54 54 55 55 56 57 60

CONCLUSIONS A. B. C. D. E. Key Strengths Key Weaknesses Lessons Learned Implications for Future Strategy and Programs of the Asian Development Bank Recommendations for the Government

APPENDIXES 1. 2. 3. 4. 5. 6. Background to Cambodias Socioeconomic Performance and National Development Strategies, and Asian Development Bank Strategies Description of Country Strategy and Assistance Programs for Cambodia Portfolio Performance of Lending Program Complementarity of Funding Agency Strategies and Assistance Programs Governments Financial Capacity and Sustainability Prospects by Sector A Simple Mathematical Presentation of a Country-Led, Results-Based Development Framework 62 78 96 98 102 103

EXECUTIVE SUMMARY Cambodias movement toward democracy began with the May 1993 elections, following the 1991 Paris Peace Accord. As the country was being ruled by the first elected Government, which was a coalition between the Cambodian Peoples Party (CPP) and FUNCINPEC, the Khmer Rouge became isolated in border areas and the insurgency continued. By the end of 1996, the power struggle between CPP and FUNCINPEC intensified. This culminated in the withdrawal of the first Prime Minister in July 1997, and subsequent freezing of aid programs of many funding agencies. Elections were held in July 1998, resulting in another coalition Government headed by a single Prime Minister from CPP. International support was regained, with resumed assistance for rehabilitation and reforms from various funding agencies as well as admission to the Association of Southeast Asian Nations in April 1999. After the recent July 2003 elections, CPP has gained 73 seats in the 123-seat national assembly. Since CPP did not acquire two thirds of the seats to form a one-party government as per the countrys constitution, FUNCINPEC and the Sam Rainsy Party share the remaining seats. The long period of war and political conflicts in the past devastated the country physically and debilitated its human resources base, making Cambodia one of the poorest countries in the world. In 1992, when the Asian Development Bank (ADB) pioneered lending assistance to the country through a special rehabilitation project under the guidance of the interim strategy, Cambodias gross domestic product (GDP) per capita was $219 and the poverty incidence was about 40%. A full-fledged country operational strategy (COS) was prepared in 1995, focusing on steady poverty reduction. The third period of the COS was prepared in 2000, also focusing on poverty reduction. However, after a decade of development and proliferation of external assistance, Cambodia remains one of the poorest countries, despite achieving reasonably high average economic growth of 6.5% per year over 19922002. In 2002, GDP per capita ($296) was only marginally higher than in 1992 ($219). The poverty incidence in 19972000, the most recent years for which official data exist, was 36% compared with 39% in 1993. The United Nations Development Programmes human poverty index was 42.8% (ranking 73rd out of 94 countries) in 2001, and the human development index was 0.556 (ranking 130th out of 175 countries). To be able to reduce poverty substantially, the high annual average growth rate of 6.5% achieved so far has to be sustained, with pro-poor, sustainable development for progressive distributional impacts. This is unlikely as growth started to decline to 5.5% in 2002, and is expected to be around 45% in 2003 and 2004 due to numerous structural constraints and exogenous factors (e.g., floods, droughts, and political disruptions). These constraints, which appear to have limited Cambodias competitiveness potential in terms of achieving sustainable economic growth, include (i) weak governance as reflected in low revenue collection and lack of transparency in collection, with an increased fiscal deficit from 3.5% of GDP to 6.5% over 1992 2002; (ii) low agriculture growth (with an annual average contraction of 0.7% in 20002002) because of insufficient access to essential inputs and rural infrastructure, and lack of agriculture diversification and commercialization; (iii) narrow-based economic growth, concentrated in garments exports (33% of GDP and 73% of total exports in 2002) and tourism (8% of GDP in 2002); (iv) high import content of garments (more than 50% in 2002) and tourism (76% in 2002); (v) difficulties for small and medium enterprise (SME) development due to lack of credit and skills; (vi) insufficient incentives to attract more foreign direct investments due to a poor transport system, high production costs (e.g., electricity tariffs, telecommunications cost, and labor cost usually paid in dollars), inadequate labor skills, and the high transaction costs of conducting business associated with weak governance, such as a lack of judicial, legal, and regulatory frameworks conducive to private sector development (PSD); and (vii) too low

iv domestic savings (averaging 10% of GDP in 19982002) to mobilize capital for expanding domestic demand and market. Unless these constraints are dealt with rigorously, sustainable poverty reduction will not be easy to achieve. The objective of this Country Assistance Program Evaluation (CAPE) study is to assess the performance of ADBs COS and country assistance programs (CAPs) for Cambodia during 19922002, and to derive lessons and recommendations so as to increase development effectiveness of the future country strategy and program (CSP), which has replaced the COS and CAPs. During 19922002, the CAPs lending program covered 26 public sector loans to Cambodia, totaling about $675 million from the Asian Development Fund (ADF) resources and averaging about $61 million per year. The CAPs nonlending program covered 29 project preparatory technical assistance (PPTAs) for about $15 million, and 68 advisory and operational technical assistance (ADTAs) for about $52 million. There were 48 regional technical assistance under the Greater Mekong Subregion (GMS) Program for about $40 million, and some studies under economic, thematic and sector work (ETSW). Since there has been no systematic framework/approach for evaluating the performance of COS and CAPs, this study develops a comprehensive evaluation framework. The framework allows for an integrated evaluation at the strategic, program, and project/sector levels. At the strategic level, the COS performance is assessed in terms of responsiveness of its objectives to ADBs strategic thrusts, national development strategies, and the countrys socioeconomic issues to determine how well the COS was formulated (i.e., whether the COS has targeted the right things, with the right choice of objectives). At the program level, the CAPs performance is assessed in terms of (i) responsiveness of the CAPs lending and nonlending programs to the COS objectives to determine how well the CAPs have translated the COS into a balanced and coherent program; (ii) responsiveness of the CAPs lending program to ADBs strategic thrusts to determine whether the CAPs have done the right things in terms of project design in addressing ADBs poverty reduction mandate; (iii) contributions of the CAPs lending and nonlending programs to achieving the COS objectives to determine development effectiveness of the CAPs or how well the CAPs have put the COS into practice (i.e., whether things have been done right/well), using the evaluation results of the impacts of the CAPs lending and nonlending programs at the project/sector level as the main input; and (iv) other performance, such as portfolio and stakeholder performance, including aid coordination, and ADB and government performance. Within the evaluation framework above, the CAPs performance is assessed using five evaluation criteria: (i) responsiveness/relevance to the COS objectives, (ii) effectiveness/efficacy in achieving the COS objectives, (iii) efficiency in resource utilization, (iv) financial sustainability prospects, and (v) institutional development impacts and other performance. Since the COS is broad by nature, its performance can only be assessed by the responsiveness/relevance criterionin terms of responsiveness of its objectives to ADBs strategic thrusts, national development strategies, and the countrys socioeconomic issues. This study also introduces a systematic evaluation rating to draw conclusion on the overall performance of the COS and CAPs. Evaluation Findings (i) Strategic Level. The findings of the COS performance indicate that the objectives/priority areas of the three periods of the COS were highly responsive to both ADBs strategic thrusts and national development strategies. In relation to the countrys socioeconomic issues, overall, they are regarded as responsive,

v rather than highly responsive, for two reasons: (i) the current 2000 COS treated governance as an implicit agenda, cutting across some sectors. Since it is widely recognized that weak governance is a key constraint to achieving sustainable economic growth and poverty reduction, it should be spelled out explicitly as one of the COS priority areas, in addition to cutting across sectors; and (ii) the 2000 COS assumed that agriculture growth is the only source of sustainable economic growth. While agriculture growth should continue to be one of the COS priority areas and one of the sources driving sustainable economic growth, it should not be the only source. Reliance on only one sector, frequently affected by natural calamities, is risky, and may deprive Cambodia of potential opportunities to diversify and strengthen the economy. The private sector should be relied on as the engine of sustainable economic growth in any sectors/subsectors in which the country has good potential, including agriculture, but not limited just to that sector. Overall, the combined three periods of the COS are regarded as having the right choice of priority areas in relation to ADBs strategic thrusts, national development strategies, and the countrys socioeconomic issues. The priority areas of the 2000 COS, however, should be adjusted in the new CSP to explicitly address governance and the role of other potential sectors/subsectors, in addition to agriculture, through PSD in driving sustainable economic growth. (ii) Program Level. The findings of the CAPs performance at the program level involve many aspects, some of which utilize evaluation results at the project/sector level, as follows: The findings on the responsiveness of the CAPs lending and nonlending programs (19922002) to the COS objectives indicate that although the CAPs were somewhat dominated by the transport sector, they can generally be regarded as responsive to the COS objectives. This is because of the urgent need to restore and rehabilitate the road network in the early years. Thus, the CAPs are considered as having translated the COS reasonably well into a relatively balanced program. However, in terms of program coherence, the spread across 10 sectors/subsectors suggested by the 2000 COS reflects a loose program structure with piecemeal resource allocation to some priority sectors, such as finance, which plays an important role in stimulating PSD. Future resources need to be prioritized for more coherent and effective results, using ADBs comparative advantage (e.g., sector performance and extent of ADB interventions in that sector relative to other funding agencies), together with the countrys needs. Based on the evaluation findings on the CAPs impacts at the project/sector level (chapter V.A), which indicate ADBs comparative advantage by sector/theme, the CAPs existing 10 sectors might be narrowed down to around 6 as follows: (a) agriculture and rural development/infrastructure; (b) natural resources and environmental management for sustainable rural livelihoods improvement in the Tonle Sap basin; (c) the social sector, mainly education; (d) finance/trade; (e) physical infrastructure, mainly integrated with the GMS Program; and (f) governance, mainly public financial management, decentralization, and anti-corruption. Governance should be treated as a separate theme in its own right, in addition to cutting across sectors, such as finance and physical infrastructure, to promote transparency and accountability conducive to facilitating PSD. Other themes, such as gender and capacity building, should be considered as cutting across sectors. The Government

vi indicated to the CAPE mission that ADB should consider phasing out of the health sector given the perceived prominent role of the World Bank. Alternatively, since the health sector performs reasonably well, ADB might try to increase the value of its interventions in this sector by limiting its assistance to the Tonle Sap basin in support of ADBs Tonle Sap strategy for a sharper poverty reduction focus. Due to the overlapping nature of some outcomes of the health sector with those of the water supply and sanitation (WSS) sector and to the World Bank major role in urban water supply, assistance to the health sector could perhaps be integrated with rural WSS in the Tonle Sap basin. The findings on the responsiveness of the CAPs lending program to ADBs strategic thrusts show that after ADBs adoption of poverty reduction as the overarching objective, there was a significant shift in project design from focusing on economic growth as the primary objective (75%) to focusing on poverty intervention (90%). This helped increase the proportion of project beneficiaries classified as poor. Thus, the CAPs lending program is considered highly responsive to the change in ADBs strategic thrusts, implying that the CAPs have done the right things in terms of project design in conforming to ADBs poverty reduction mandate. The assessment on the contributions of the CAPs lending and nonlending programs to achieving the COS objectives utilizes the assessment results of the CAPs impacts at the project/sector level by synthesizing such results under each of the COS priority areas to determine development effectiveness of the CAPs in achieving the COS objectives. The COS covered three periods, but treated as one single period by combining their priority areas, which are common and overlapping. Thus, the COS overriding (first-order) objective can be identified as the shift from rehabilitation to poverty reduction. Its priority areas (second-order objectives) include (i) capacity building and institutional strengthening, (ii) human resources and social development (HRSD), (iii) agriculture growth and rural development, and (iv) sustainable economic growth and PSD. At this stage, this CAPE study can only assess the achievement of some intermediate sector outcomes under each of the COS objectives. Progress toward achievement, rather than actual achievement, of the COS objectives can only be assessed because (i) some of the COS objectives are broad and long term by nature and can be cumulatively affected by many structural factors, so it is not feasible to quantify to what extent they have been improved by the sector outcomes achieved so far; (ii) the outcomes of ADBs and other funding agencies assistance are hard to distinguish; (iii) they are prone to exogenous factors; and (iv) the number of completed projects is small and it is too early to assess achievement as many sector outcomes are still evolving. The findings on development effectiveness of the CAPs lending and nonlending programs during 19922002 in achieving the COS objectives indicate that (a) for the capacity-building and institutional-strengthening objective, results are less effective as the majority of the stand-alone, capacity-building ADTAs focused on improving individual technical skills. Outcomes in terms of improved management and resourcing systems for effective functioning of institutions as a whole, as well as institutionalized skill transfers, were not achieved. Critics of institutional development failure in

vii Cambodia have argued that improved governance or public sector reform is a prerequisite for successful institutional strengthening. However, governance was not addressed as a priority area in the COS; (b) for the HRSD objective, results are considered highly effective due to the substantial achievement in terms of improved quality of basic education; for the agriculture growth objective and the sustainable economic growth and PSD objective, the achievement of some sector outcomes is still evolving, but is effective so far because useful outcomes have been achieved, and further achievements are expected; and for the overriding poverty reduction objective, although the achievement of the sector outcomes under the four COS second-order objectives is mixed, it is dominated by effective and evolving results. Thus, the CAPs overall achievement of these sector outcomes can be regarded as effective so far, and still evolving/improving. The pro-poor design of some of the CAPs lending assistance under the HRSD and agriculture growth objectives has contributed to some aspects related to poverty reduction in the project areas. These included, for example, 40% increase in primary school enrollment in the poorest 300 communes, and 30% increase in household incomes of the rural poor as a result of increased access to rural roads. In sum, the CAPs have put the COS into practice generally well so far. They have good potential to contribute to poverty reduction in the long run, provided that future assistance rigorously addresses the numerous structural constraints to sustainable economic growth mentioned earlier, simultaneously with pro-poor sustainable development.

(c)

(d)

The findings on the CAPs portfolio performance indicate that portfolio performance (contract awards, disbursements, audit compliance, and implementation progress) of the CAPs ongoing lending and nonlending programs continued to be good and was above the ADB-wide average. Thus, it is considered satisfactory. The findings on the CAPs performance in aid coordination indicate partly satisfactory results due to (i) lack of an agreed development agenda among funding agencies, and (ii) the complicated government structure of aid coordination. This has resulted in piecemeal activities and duplicative efforts, particularly in the parallel preparation of the World Bank-supported National Poverty Reduction Strategy and the ADB-supported Socioeconomic Development Plan-II. Funding agencies should coordinate more closely and encourage government leadership in developing a country-led, comprehensive development framework. This framework should be results-based, driven by intermediate target indicators in the sectors under agreed priority areas, linked to the overriding poverty reduction objective and other millennium development goals (MDGs). With this framework, assistance can be divided among funding agencies to reach intermediate sector targets in a coherent manner. The findings on ADB performance indicate that ADBs role and early assistance have been highly appreciated by the Government, and that ADB generally performed well mainly in project administration, policy dialogue, and program

viii formulation. This is reflected in ADBs lead role in some sectors and the adoption of a number of long-term development modalities, including the sectorwide approach in education, sectorwide management in health, program clusters in finance, continued program loans in agriculture and education, a geographic focus on the Tonle Sap basin, and TA clusters in public financial management. Thus, ADB performance is regarded as satisfactory. The findings on government performance indicate that the Government generally performed well at the project level in terms of implementation and compliance. At the program level, the major concern lies in government limited absorptive capacity due to weak revenue generation. Overall, government performance is regarded as satisfactory, though at the lower end of the range because more efforts are needed to generate more revenue, utilize revenue more efficiently, and improve the aid coordination system. Summary Evaluation Findings and Rating (i) Responsiveness/Relevance. At the strategic level, the objectives/priority areas of the combined three periods of the COS are found to be highly responsive to ADBs strategic thrusts and national development strategies. But they are regarded as responsive, rather than highly responsive, to the countrys socioeconomic issues because the 2000 COS did not address governance explicitly and assumed that agriculture development was the only source of sustainable economic growth. At the program level, the CAPs lending and nonlending programs are found to be responsive to the COS priority areas in terms of program balance, though loosely structured with too many sectors. The CAPs lending program in terms of project design is found to be highly responsive to the shift in ADBs strategic thrusts to focusing on poverty reduction. Overall, the COS and CAPs during 19922002 are considered responsive/relevant, implying that both the COS and CAPs have generally done the right things, with the right choices of objectives. Effectiveness/Efficacy. Although the effectiveness of the CAPs lending and nonlending programs during 19922002 is found to be mixed in achieving sector outcomes under each of the four COS objectives, more successful cases are found than less successful ones and many outcomes are still evolving. Thus, the CAPs overall achievement of these sector outcomes is regarded as evolving and effective/efficacious so far, with potential to contribute to achieving the COS objectives in the future. This indicates that the CAPs have generally done things right/well. Efficiency. Findings include various aspects of efficiency in resource utilization. At the project level, most of the projects were completed as planned, with minimum delays and full utilization of project facilities. In the Agriculture Sector Program, counterpart funds were used efficiently as they were earmarked for continued implementation of the reform measures after loan closing. Three education projects generated high internal and external efficiency. Two physical infrastructure projects had high economic internal rates of return and were prepared without PPTAs, thus saving both time and monetary costs. At the program level, the program size, averaging about $61 million per year, is considered efficient given the desired outcomes achieved so far. It also

(ii)

(iii)

ix compares favorably with the average ADF lending to other countries of similar population sizes. Thus, the CAPs are considered efficient in resource utilization. (iv) Sustainability. At the project level, although the completed projects are found sustainable by project completion reports and project performance audit reports, the prospects at the program level are not very promising due to government financial constraints. The share of defense and security in total current expenditure, though declining, has remained high, at almost 30%, and so has the share of the others category (almost 30%). The rapid increase in the share of the others category raises concern over the lack of transparency in the activities being funded. Thus, financial sustainability prospects for the CAPs completed projects is regarded as less likely (partly satisfactory). Institutional Development Impacts and Other Performance. The majority of the capacity-building ADTAs are found to focus on individual staff than on institutional development and skill transfers. However, other performance is found to be satisfactory. For example, portfolio performance was above the ADBwide average. ADB performance is satisfactory mainly in terms of project implementation, program formulation, policy dialogue, and its lead role in some sectors, though aid coordination remains weak. However, ADB, the Department for International Development, and the World Bank have started working together to harmonize their country strategies and programs, and to improve the working group system. Government performance is also satisfactory, especially in terms of project implementation and compliance, though at the lower end of the range as more efforts are needed to increase revenue, use revenue more efficiently, and improve the aid coordination system. Although the results under the institutional development impacts and other performance of the CAPs are mixed, given many positive results and efforts to improve aid coordination, overall results are considered moderate (satisfactory). Overall Rating. Based on the five evaluation criteria above, the overall COS and CAPs for Cambodia during 19922002 are considered successful.

(v)

(vi)

Key Strengths (i) Responsiveness and Timeliness. The Government appreciated that ADB responded quickly to the countrys emergency and development needs. ADB was the first donor to provide a lending assistance in 1992 for massive rehabilitation in response to Cambodias emergency needs, followed by assistance to facilitate Cambodias transition to a market-based economy. Long-Term Development Modalities. The CAPs adopted a number of longterm commitment modalities in education, health, finance, agriculture, natural resources management, and public financial management. Efficient Program Size. The size of the CAPs, averaging $61 million per year for loans, is considered efficient in producing the desired outcomes. It compares favorably with the average ADF lending to other countries of similar population sizes.

(ii)

(iii)

x (iv) Regional Capacity. The GMS Program has strong potential to contribute to achieving sustainable economic growth. This is demonstrated by the outcomes of its assistance in improving the transport network and customs regimes between Cambodia and neighboring countries. Policy Dialogue. Successful policy reforms resulted from continued efforts of policy dialogue. The presence of the Cambodia Resident Mission (CARM) helped facilitate the passage of various laws (Banking Law, Audit Law, Forest Law, and Land Law), and other policy reforms required under the program loans. Portfolio Performance Management. The presence of CARM helped facilitate progress in portfolio performance, including the annual conduct of the joint country portfolio review with the World Bank, and the administration of five delegated projects.

(v)

(vi)

Key Weaknesses (i) Failure to Explicitly Address Governance in the COS Priority Areas. Improved governance through public sector reform was not addressed explicitly as one of the priority areas in the 2000 COS. Weak Aid Coordination. Weak aid coordination has led to (a) piecemeal development results, duplicative efforts, and overburdening of the Government; (b) inconsistencies in the implementation of some policy reforms; and (c) absence of collective dialogue with the Government to put pressure on improving governance to control corruption. Weak Capacity Building and Institutional Strengthening Design. The CAPs provide no direction as to what the ideal capacity building approach should be. Lack of Intermediate Sector Indicators in the CAPs to Monitor Progress toward the COS Objectives and MDGs. Although all projects and ADTAs are required to identify intermediate output and outcome indicators, no effort has been made at the program level to establish summary indicators for monitoring the progress toward achieving the COS objectives and MDGs. Inadequate Knowledge Management. There is no systematic management of knowledge to compile and disseminate information and lessons learned from past experience.

(ii)

(iii)

(iv)

(v)

Lessons Learned (i) Development Effectiveness Reduced by Weak Governance. The lack of a clear strategy and substantial efforts to reform the public sector and improve governance early has lessened the institutional development impacts of many ADTAs. Development Effectiveness Reduced by Weak Aid Coordination. Ineffective aid coordination is shown to have reduced the institutional development impacts of many ADTAs.

(ii)

xi (iii) Development Effectiveness Reduced by Narrow Approach to Institutional Strengthening. Since many of the stand-alone, capacity-building ADTAs have narrowly focused on improving technical skills at the individual level, institutions as a whole have remained weak. Skill transfers were not institutionalized. Development Effectiveness Achieved through Long-Term Commitment. The successful experience of ADB assistance in the education sector demonstrates the value of long-term, comprehensive, well-coordinated lending and nonlending programs through the sectorwide approach. Other long-term modalities adopted in other sectors also have good promise. Difficulties to Evaluate the CAPs Performance due to the Lack of Intermediate Sector Outcome Indicators Linked to the COS Objectives. Without a set of such indicators in the CAPs, this CAPE study has encountered difficulties in evaluating the CAPs performance as many project and technical assistance completion reports tended to rate projects and technical assistance based on achievement of outputs, not outcomes.

(iv)

(v)

Implications for Future Strategy and Programs of ADB (i) Need to Explore Cambodias Potential in Other Subsectors to Enhance Competitiveness and Sustainable Economic Growth. With Cambodia joining the World Trade Organization and subsequent repercussions on its garments exports and trading system, such impacts can be cushioned by assisting the Government, through ETSW, in developing a competitiveness strategy to explore potential subsectors for SME development and attracting more foreign direct investments required for greater employment and export diversification impacts. Need to Adjust the Priority Areas of the 2000 COS to Allow Sustainable Economic Growth to be Achieved not only through Agriculture, but also through PSD in Other Potential Subsectors. In the new CSP, improved agriculture growth should continue to be one of the COS priority areas and one of the sources driving sustainable economic growth, but not the only source. To rely only on one sector, frequently affected by natural calamities, is too risky. A riskcushioned strategy is needed. Need to Adjust the Priority Areas of the 2000 COS to Address Governance Explicitly, Backed by Sufficient Assistance in the CAPs. Public sector reform to improve governance and fight corruption should be spelled out as one of the COS priority areas in the new CSP, backed by sufficient assistance in the CAPs. Need for a More Focused and Coherent Program. For more effective results, a more focused program is needed. As mentioned earlier, the 10 sectors/subsectors identified in the 2000 COS and adopted by subsequent CAPs should be narrowed down to about 6, based on ADBs comparative advantage and the countrys needs. Need to Improve Aid Coordination. More needs to be done, particularly in pursuing collective policy dialogue to avoid inconsistencies in the adoption of policy reforms, and to put pressure on the Government to fight corruption.

(ii)

(iii)

(iv)

(v)

xii (vi) Need for a Broader Design for Institutional Strengthening. A broader design for institutional strengthening, focusing on improving institutions as a whole, is needed, with a skill transfer and exit strategy developed. Need for a Targets-Driven/Results-Based CSP to Internalize MDGs. A set of intermediate output and outcome target indicators for each sector should be established in the new CSP, linked to the COS priority areas and MDGs. Need to Increase the Role of Nonlending ETSW. The role of ETSW should be increased to develop Cambodias competitiveness strategy and conduct other analyses, such as identifying investment activities suitable for GMS cooperation, and demonstrating net benefits of GMS projects accrued to Cambodia and in adopting regional versus national approach to enable Cambodia to become well integrated into the regional/global system. Need for a Well-Integrated GMS Program with the CSP. Now that a GMS strategy and the Regional-CSP have been developed, implementation of the Regional-CSP in close coordination with the CSP is needed to ensure actual integration with the core program. Need to Optimize the Role of Nongovernment Organizations. The role of nongovernment organizations should be optimized by getting them involved more in future projects, such as SME development and other areas as appropriate. Need to Improve Knowledge Management. A knowledge management system should be established (e.g., through CARM web site) to disseminate necessary information and lessons learned to the country team to improve project/technical assistance design and implementation. Need to Mobilize Additional Resources. Given the decline in ADF resources, ADB should help the Government mobilize additional resources through increased cofinancing.

(vii)

(viii)

(ix)

(x)

(xi)

(xii)

Recommendations for the Government. The Government should (i) generate more revenue, especially through improved tax collection and administration, to finance capital and current expenditures; (ii) adjust the structure of public expenditure to be more pro-poor; (iii) increase efficiency and transparency in budget utilization; (iv) facilitate the passage and implementation of the Anti-Corruption Law, and commit to fight corruption; (v) explore ways to institutionalize skill transfers for sustainability of the training acquired under capacity-building TAs; (vi) improve the organizational arrangements for more effective aid coordination; and (vii) lead the countrys development agenda by developing a comprehensive, results-based development framework as the basis for coordinating all external assistance to avoid piecemeal results, and to increase development effectiveness in reaching the MDGs in a coherent manner.

I.

INTRODUCTION

1. The overall objective of this Country Assistance Program Evaluation (CAPE) study1 is to assess the performance of the country operational strategy (COS) and country assistance programs (CAPs) of the Asian Development Bank (ADB) for Cambodia during 19922002, and to derive lessons and recommendations so as to increase development effectiveness of future assistance. Based on ADBs new business processes, the COS and CAPs for each developing member country (DMC) have been combined into the country strategy and program (CSP) since 2001. For Cambodia, the annual CSP Update (CSPU) has been prepared for 3 years, while the full CSP will be prepared in 2004. Although Cambodia has been a bank member country since 1966, the evaluation period in this study starts from 1992, when ADB resumed its operations,2 with the Special Rehabilitation Assistance project.3 2. So far, ADB has adopted three periods of the COS to guide its assistance in Cambodia. The first period evolved from the 1992 Interim Strategy (IS), with rehabilitation as its strategic objective in response to the countrys emergency need (Appendix 1, section A). It had three priority areas: physical infrastructure, social infrastructure, and capacity building and institutional strengthening. The second period was a full-fledged COS prepared in 1995, focusing on steady poverty reduction, with four priority areas: capacity building and institutional strengthening, sustainable economic growth, increased access to growth benefits, and environmental protection. The third period is the current COS prepared in 2000, focusing on poverty reduction, with three priority areas: sustainable economic growth through agriculture and rural development, human resources and social development (HRSD), and creating an enabling environment for private sector development (PSD). 3. During 19922002, the CAPs lending program covered 26 public sector loans to Cambodia, totaling about $675 million from the Asian Development Fund (ADF) resources and averaging about $61 million per year (Appendix 2, Table A2.1). Of the 26 loans, 4 were program loans and 4 were under the Greater Mekong Subregion (GMS) Program. The CAPs nonlending program covered 29 project preparatory technical assistance (PPTAs) for about $15 million (Table A2.2), and 68 advisory and operational technical assistance (ADTAs) for about $52 million (Table A2.3). There were 48 GMS regional technical assistance (RETAs) for about $40 million (Table A2.4), and some studies under economic, thematic and sector work (ETSW) (Table A2.5). 4. This study develops a comprehensive evaluation framework, linking the strategic levels performance to that of the program and project/sector levels. Within this framework, five evaluation criteria (relevance, efficacy, efficiency, sustainability, and institutional development impacts) are applied to assess the COS and CAPs performance. These are the Operations Evaluation Departments standard evaluation criteria used to assess the performance of individual projects and technical assistances (TAs) after completion. The data and information used in this CAPE come from various sources, including an extensive desk review of existing evaluation documents: (i) project completion reports (PCRs) and project performance audit reports (PPARs) for completed projects, (ii) project performance ratings (PPRs) for ongoing
1

This CAPE report is prepared by S. Hutaserani, Principal Evaluation Specialist, Operations Evaluation Department. The author, who also developed the evaluation framework in chapter II, would like to thank E. Suzuki, G. Walter, and S. Curry for contributing to refining the framework. Before 1992, ADB had provided only one loan to Cambodia (in 1970): ADB. 1970. Report and Recommendation of the President to the Board of Directors on a Proposed Loan and Technical Assistance to the Royal Government of Cambodia for Phnom Penh High Voltage Transmission. Manila. ADB. 1992. Report and Recommendation of the President to the Board of Directors on a Proposed Loan and Technical Assistance to Cambodia for Special Rehabilitation Assistance. Manila.

2 projects, and (iii) technical assistance completion reports (TCRs) and technical assistance performance audit reports (TPARs) for completed TAs. These are supported by information collected from other relevant ADB, funding agencies, and government documents. Since there are only five completed projects evaluated by PCRs so far, this study also collected additional information of ongoing and newly-completed projects through interviews and focus group discussions with key stakeholder groups4 during the CAPE mission5 to support the evaluation. 5. Chapter II presents the evaluation framework and methodology used in this study. Evaluation of the COS performance is undertaken first, in chapter III, at the strategic level. Evaluation of various aspects of the CAPs performance is given in chapters IVVI, at the program level, part of which utilizes evaluation findings at the project/sector level from chapter V.A. Overall evaluation results and rating are presented in chapter VII, and conclusions in chapter VIII, in which key strengths, weaknesses, lessons learned, and recommendations for ADB and the Government are drawn. Among the appendixes, Appendix 1 provides background information on the countrys socioeconomic issues, national development strategies, and ADB strategies. Appendix 2 provides background information on the COS priority areas and the CAPs structure by sector. II. 6. A. EVALUATION FRAMEWORK AND METHODOLOGY

This chapter presents the evaluation framework and methodology used in this study. A Proposed Comprehensive Evaluation Framework: Linking the Strategic, Program, and Project/Sector Levels

7. Since there has been no systematic framework/approach for evaluating the performance of COS and CAPs, this study develops a comprehensive evaluation framework (Figure 1). The framework allows for an integrated evaluation at the strategic, program, and project/sector levels. At the strategic level, the COS performance is assessed in terms of responsiveness of its objectives to ADBs strategic thrusts, national development strategies, and the countrys socioeconomic issues to determine how well the COS was formulated (i.e., whether the COS has targeted the right things, with the right choice of objectives). At the program level, the CAPs performance is assessed in terms of (i) responsiveness of the CAPs lending and nonlending programs to the COS objectives to determine how well the CAPs have translated the COS into a balanced and coherent program; (ii) responsiveness of the CAPs lending program to ADBs strategic thrusts to determine whether the CAPs have done the right things in terms of project design in addressing ADBs poverty reduction mandate; (iii) contributions of the CAPs lending and nonlending programs to achieving the COS objectives6 to determine development effectiveness of the CAPs or how well the CAPs have put the COS into practice (i.e., whether things have been done right/well), using the evaluation results of the impacts of the CAPs lending and nonlending programs at the project/sector level as the main input; and (iv) other performance, such as portfolio and stakeholder performance, including aid coordination, and ADB and government performance.

This study did not intend to conduct a systematic survey, but collected first-hand and up-to-date information through interviews and focus group discussions with key informants from various stakeholder groups, including relevant government and funding agencies, nongovernment organizations (NGOs), and some beneficiary groups. The mission team was led by S. Hutaserani. Mission members consisted of a group of international and domestic consultants, who assisted in collecting data/information and preparing preliminary input drafts used as a source of information in this report. Thus, this framework is an objectives-, performance-, or results-based evaluation framework.

Figure 1: A Proposed Comprehensive Evaluation Framework for Country Strategy and Assistance Programs: Linking the Strategic, Program, and Project/Sector Levels

ADB's Strategic Thrusts Strategic Level

National Development Strategies & Plans

Country's Socioeconomic Issues

1992

COS

1995 2000 19921995

CAPs

19962000 20012002 Other Funding Agencies' Contributions

Program Level

Exogenous Factors

Government's Contributions

ADB's Contributions

Aid Coordination

NGOs' Contributions

Results of Overall Assistance

Project/ Sector Level ADTAs PPTAs RETAs ETSWs 3

Loans

ADB = Asian Develelopment Bank; ADTA = advisory and operational technical assistance; CAP = country assistance program; COS = country operational strategy; ETSW = economic, thematic and sector work; NGO = nongoverment organization; PPTA = project preparatory technical assistance; RETA = regional technical assistance.

B.

Methodology: Five Evaluation Criteria

8. Within the evaluation framework above, the CAPs performance is assessed using five evaluation criteria: (i) responsiveness/relevance to the COS objectives, (ii) effectiveness/efficacy in achieving the COS objectives, (iii) efficiency in resource utilization, (iv) financial sustainability prospects, and (v) institutional development impacts and other performance. Since the COS is broad by nature, its performance can only be assessed by the responsiveness/relevance criterionin terms of responsiveness of its objectives to ADBs strategic thrusts, national development strategies, and the countrys socioeconomic issues. This study also introduces a systematic evaluation rating to draw conclusion on the overall performance of the COS and CAPs. III. EVALUATION OF COUNTRY STRATEGY: RESPONSIVENESS

9. This chapter assesses the COS performance in terms of responsiveness of its objectives in each of the three periods to (i) ADBs strategic thrusts, (ii) national development strategies and plans, and (iii) the countrys socioeconomic issues to determine how well the COS was formulated (i.e., whether the COS has done the right things, with the right choice of objectives). Strategic-level recommendations are derived at the end of section C. A. Responsiveness of Country Strategy to Asian Development Bank Strategies 1. Interim Strategy 1992

10. The overriding objective of the 1992 IS was to assist in the rehabilitation of Cambodia in three priority areas: (i) physical infrastructure, (ii) social (human) infrastructure, and (iii) capacity building and institutional strengthening in macroeconomic management and development planning (Appendix 2, para. 2). The 1992 IS made no reference to ADBs Medium-Term Strategic Framework (MTSF) (19921995), but was guided by the provisions of the Paris Peace Accord as Cambodia was still in a post-conflict mode. Yet, its priority areas were broadly consistent with those of the MTSF, which emphasized policy support, capacity building for development management, and creating infrastructure and services (Appendix 1, para. 23). It was also during this time that ADB took a broader mandate by encouraging improved policy environments in DMCs. Thus, the 1992 IS is considered responsive to ADBs strategic thrusts at that time. 2. Country Operational Strategy 1995

11. Steady poverty reduction was identified as the overriding objective of the 1995 COS, to be achieved through four priority areas: (i) capacity building and institutional strengthening in development planning and project-related activities, (ii) sustainable economic growth, (iii) increased access to the growth benefits, and (iv) environmental protection (Appendix 2, para. 3). The 1995 COS was formulated in the context of the MTSF (19951998). Although it did not discuss much of the MTSF, its four priority areas were highly consistent with those of the MTSF, which included economic growth, human development, poverty reduction, women in development, and environmental protection (Appendix 1, para. 23). However, while poverty reduction was one of the MTSFs strategic thrusts at that time, the 1995 COS made it the overarching objective, reflecting its long-term vision. Thus, the 1995 COS is regarded as highly responsive to ADBs strategic thrusts at that time.

5 3. Country Operational Strategy 2000

12. Poverty reduction was identified as the overriding objective of the 2000 COS, to be achieved through three priority areas: (i) sustainable economic growth through labor-intensive agriculture and rural development, (ii) HRSD, and (iii) creating an enabling environment for PSD (Appendix 2, para. 4). Governance was identified as a crosscutting theme. Although the 2000 COS did not make any explicit reference to any ADB strategies, its overriding objective and priority areas were highly consistent with ADBs Poverty Reduction Strategy (PRS) of 1999, which identified poverty reduction as the overarching goal, with three strategic pillars: pro-poor, sustainable economic growth; good governance; and social development (Appendix 1, para. 25). These three pillars later became the core strategic areas of ADBs Long-Term Strategic Framework. The 2000 COS differs from the Long-Term Strategic Framework in that while the former identified governance as crosscutting and PSD as a priority area, the latter made governance a core area and PSD a crosscutting theme. Confusion between priority areas and complementary crosscutting themes aside, the 2000 COS is regarded as highly responsive to ADBs strategic thrusts at that time. 13. In sum, based on the results of the three periods, the combined period of the COS is regarded as highly responsive/relevant to ADBs strategic thrusts (para. 178). B. Responsiveness of Country Strategy to National Development Strategies

14. The 1992 IS provided for rehabilitation assistance in the context of the Paris Peace Accord, without any national plan at that time. Cambodias first planning document, the National Program to Rehabilitate and Develop Cambodia (NPRD) (19941995), was actually assisted by an ADB TA in 1992 (Appendix 1, para. 13); the 1995 COS was prepared with extensive reference to it. Thus, the 1995 COS priority areas were highly responsive to those of the NPRD, which included the need to increase government absorptive capacity, restore economic stability and security, and support physical and human infrastructure, while having sustainable economic growth with equity as the overriding objective. The same TA also assisted in preparing the countrys first medium-term Socioeconomic Development Plan (SEDP-I) (19962000) (Appendix 1, para. 15). It is not surprising that the 2000 COS priority areas were highly responsive to those of SEDP-I, which focused on agriculture and rural development, HRSD, and good governance, with poverty reduction through private sector-led growth as the overriding objective. 15. In sum, based on the results of the three periods, the combined period of the COS is regarded as highly responsive/relevant to Cambodias national development strategies and plans (para. 178). C. Responsiveness of Country Strategy to Countrys Socioeconomic Issues 1. Interim Strategy 1992

16. The degree of relevance of a development strategy would depend on the depth of its reach into the core of prevailing socioeconomic problems. After the restoration and subsequent maintenance of peace and political stability, the problems confronting Cambodia included seriously depleted stocks of physical infrastructure and human resource skills, low government absorptive capacity, and a fragmented financial sector7 (Appendix 1, paras. 24). The COS to
7

The problem in the financial sector was addressed by the International Monetary Fund.

6 Cambodia evolved in response to these post-conflict problems, with the 1992 IS to provide emergency rehabilitation of physical and human infrastructure, supported by capacity building and institutional strengthening. However, the strategy of front-loading capacity-building assistance was not without risk. Crucial prerequisites for success were not in place then, especially public sector reform with appropriate structure of civil service incentives, and adequately prepared civil servants to absorb the training provided. Yet, given the political constraints at that time and the need to get the rehabilitation program under way, the 1992 IS is considered responsive to the countrys socioeconomic issues. 2. Country Operational Strategy 1995

17. A development strategy is considered more relevant if it can respond to the existing socioeconomic problems and foreseeable future problems. The 1995 COS was prepared to facilitate Cambodias transition to a market-based system (Appendix 1, paras. 56). Its priority areas thus focused on long-term development issues, rather than quick rehabilitation, including sustainable economic growth, equal distribution, environmental protection, and continued improvement of government absorptive capacity. Again, although capacity building was emphasized in this COS without prior public sector reform to improve governance, it is understandable for this period, which was still dominated by political struggles and unstable government. The 1995 COS had two distinct long-term visions: (i) steady poverty reduction as its overriding objective, even before ADBs adoption of the PRS in 1999, to address the high poverty incidence of about 40% at that time; and (ii) environmental protection as one of its priority areas to address the pervasive problem of depleting natural resources, including illegal logging.8 Thus, the 1995 COS is considered highly responsivenot only to the countrys socioeconomic issues at that time, but also to foreseeable future issues. 3. Country Operational Strategy 2000

18. The 2000 COS identified poverty reduction as its overriding objective, with three priority areas: sustainable economic growth through agriculture growth, HRSD, and PSD. The objective and priority areas of the 2000 COS generally reflected the prevailing socioeconomic problems, especially high poverty and slow progress toward its reduction, low agriculture growth, poor social indicators, and weak legal and regulatory frameworks for PSD (Appendix 1, paras. 711). However, the 2000 COS had two weaknesses. First, improved governance, which has been widely regarded as a prerequisite for successful institutional strengthening and efficient macroeconomic management, was treated as an implicit agenda cutting across sectors. This period, when the political situation was fairly stable compared with the first two periods, was the right time to start embarking on public sector reform, which should have been explicitly spelled out as one of the COS priority areas. Second, one of the COS priority areas was sustainable economic growth through agriculture growth. Experience shows that rapid economic growth over the past decade has been driven by the private sector in garments, construction, and tourism (Appendix 1, para. 10). Thus, the private sector should be relied on as the engine of sustainable economic growth in any sector/subsector that the country may have good potential in, including agriculture, but not limited just to that sector. Agriculture growth has been low, averaging 2.7% over 19922002 and contracting by 0.7% annually in the past 3 years, as it has been hampered by natural calamities and many structural constraints, which require more time and effort to overcome. To rely only on agriculture growth as the major source of sustainable
8

Unfortunately, this priority area was not much supported by the corresponding period of the CAPs (19962000) as only one ADTA was provided, although the subsequent period of the CAPs (20012002) began to pick up with a series of support measures for environmental and natural resources management in the Tonle Sap basin.

7 economic growth may deprive Cambodia of potential opportunities to diversify and strengthen the economy to achieve broad-based, sustainable economic growth. Agriculture should continue to be one of the COS priority areas and one of the sources of sustainable economic growth, but not the only source. It should be developed hand-in-hand with other promising sectors/subsectors. However, since the 2000 COS generally addressed the countrys socioeconomic issues at that time, it could be regarded as responsive to these issues. But it cannot be considered highly responsive to these issues because (i) it did not explicitly address governance as one of its priority areas, and (ii) it assumed that agriculture growth was the only source of sustainable economic growth. 19. In sum, based on the results of the three periods, the combined period of the COS is regarded as responsive/relevant to the countrys socioeconomic issues during 19922002 (para. 178). In other words, the overall three periods of the COS are generally considered well formulated, targeting most of the right choice of priority areas, though not completely. 20. Recommendations. (i) The new CSP should adjust the priority areas of the 2000 COS to address governance explicitly so that macroeconomic management can be improved as a prerequisite for sustainable economic growth.9 (ii) With Cambodia joining the World Trade Organization (WTO) and subsequent repercussions on its garments exports and trading system, it is time that potential sectors/subsectors were explored to diversify exports and the economy, and to build up a strong competitiveness position before the opportunities are missed (potential sectors/subsectors are given in footnotes 38 and 39). With the need to recognize the twin roles of agriculture and other potential sectors/subsectors in driving sustainable economic growth, the new CSP should also revise one of the 2000 COS priority areas, with the aim that sustainable economic growth should be achieved not only through agriculture growth, but also through the creation an enabling environment for PSD in other promising sectors/subsectors to promote small and medium enterprises (SMEs) and attract more foreign direct investments (FDIs) for greater employment generation and export diversification impacts (para. 206). IV. EVALUATION OF COUNTRY ASSISTANCE PROGRAMS: RESPONSIVENESS

21. This chapter assesses the CAPs performance in terms of responsiveness of their lending and nonlending programs to the COS objectives and ADBs strategic thrusts. A. Responsiveness of Country Assistance Programs to Country Strategy Objectives: Program Balance and Coherence

22. Since the COS has three periods, they can be combined into one whole period by combining their common and overlapping priority areas. This results in the following four objectives/priority areas of the COS over the entire period (19922002): (i) capacity building and institutional strengthening, (ii) HRSD, (iii) agriculture growth and rural development, and (iv) sustainable economic growth and PSD. This section assesses the CAPs performance in terms of responsiveness of their lending and nonlending programs to the COS objectives to determine how well the CAPs have translated the COS into a balanced and coherent program. This is done by assessing whether the ADF resources allocated to the CAPs projects and ADTAs,10 approved during 19922002, were relatively balanced across the COS objectives and
9

Explicit recognition of governance will make the COS more consistent with the Poverty Reduction Partnership Agreement signed in July 2002 (Appendix 1, para. 20). 10 For the nonlending program, only ADTAs are assessed because PPTAs normally result in loans, which are assessed under the lending program.

8 across sectors under each objective. Program coherence in the form of sectors spread is also examined. Recommendations for a more coherent program are made at the end of the section. 23. For the lending program, Table 1 shows that the CAPs provided no project under the COS capacity-building objective; most of the assistance for this objective was in the form of ADTAs. The HRSD objective and the agriculture growth objective were addressed equally, with about 25% of the total loan amount allocated to each. The remaining 50% was for the sustainable growth and PSD objective. However, when the projects are broken down further by sector, Table 2 shows that more than half of this proportion was allocated to the transport sector (36% of the total loan amount).11 This sector was the focus of ADB assistance during the first two periods under the 1992 IS and 1995 COSboth through the Special Rehabilitation Assistance (SRA) and other projects, including three under the GMS Program and one for emergency flood rehabilitation. Considering the fact that the sustainable growth objective is inclusive of the projects for rehabilitation and the need for continued development of the national road network, the lending program is considered generally balanced for the countrys needs, although the allocation to the finance sector is too small (3%). 24. For the nonlending program through ADTAs, Table 1 shows a more balanced program across the four COS objectives than the lending counterpart. About 28% of the total ADTA amount was allocated to the capacity-building objective, whereas almost the same amounts were allocated to the HRSD and agriculture growth objectives (14% and 18%, respectively). The remaining 40% was allocated to the sustainable growth objective in order to accompany the larger amount of loans provided under this objective. When this proportion is broken down by sector, Table 2 shows that the pattern follows that of the lending program as a large part (22% of the total ADTA amount) was for the transport sector, and 7% for the finance sector. 25. In sum, although the CAPs lending and nonlending programs during 19922002 were somewhat dominated by the transport sector, they can generally be regarded as responsive/relevant to the COS objectives (para. 178). This is because of the urgent need to restore and rehabilitate the road network in the early years. In other words, the CAPs are considered as having translated the COS generally well into a relatively balanced program. However, in terms of program coherence, the spread of the ADF resources across 10 sectors/subsectors suggested by the 2000 COS12 reflects a loose program structure with piecemeal resource allocation to some priority sectors, such as finance which plays an important role in stimulating PSD. These findings point to the need to prioritize future resources for a more coherent program. 26. Recommendations. (i) Given the low allocation of both loans and ADTAs to the finance sector and its important role in stimulating PSD, this sector should be given more attention in future assistance, not only for improving the countrys financial sector in itself, but also for improving legal and regulatory frameworks conducive to PSD in SMEs and FDIs, as well as for stimulating domestic savings. (ii) Given the loose program structure, with resources spreading across 10 sectors/subsectors, future resources should be prioritized for more effective results, using ADBs comparative advantage (e.g., sector performance and extent of ADB interventions in that sector relative to other funding agencies), together with the countrys needs. As such,
11

The proportions of loans and TAs in some sectors in Table 2 differ slightly from those in Appendix 2, Tables A2.1 A2.3 due to the reclassifications of some loans and TAs, including the multisector ones, to their corresponding sectors (see the note of Table 2 for detailed explanation). 12 Including agriculture, rural development, water resources, environmental management, education, health, water supply, roads, power, and finance.

Table 1: Composition of Approved Loans and Technical Assistance by Objective of the Three Periods of Country Strategy Combined (19922002) Loans $'000 PPTAs $'000 ADTAs $'000

COS Objective Capacity Building & Institutional Strengthening HRSD Agriculture Growth & Rural Development Sustainable Economic Growth & PSD Total

No.

No.

No.

0 8

0 30.8

0 172,300

0 25.5

0 9

0 31.0

0 4,700

0 31.4

20 14

29.4 20.6

14,343 7,368

27.8 14.3

26.9

162,510

24.1

11

37.9

6,625

44.3

11

16.2

9,451

18.3

11 26

42.3 100.0

340,500 675,310

50.4 100.0

9 29

31.0 100.0

3,645 14,970

24.3 100.0

23 68

33.8 100.0

20,375 51,537

39.5 100.0

ADB = Asian Development Bank, ADTA = advisory and operational technical assistance, COS = country operational strategy, HRSD = human resources and social development, No. = number, PPTA = project preparatory technical assistance, PSD = private sector development. Note: The two multisector emergency loans are classified under the sustainable economic growth objective in terms of number. However, in terms of values, their three components on HRSD, agriculture, and transport and power are distributed to their corresponding objectives. Source: Recalculated from relevant ADB databases.

Table 2: Composition of Approved Loans and Technical Assistance by Sector (19922002) Loans $'000 PPTAs $'000 ADTAs $'000

Sector Capacity Building & Institutional Strengthening Social Sector Agriculture, Rural Dev. & Natural Resources/Env. Mgt. Transport Energy Finance Others (Tourism) Total

No.

No.

No.

0 8

0 30.8

0 172,300

0 25.5

0 9

0 31.0

0 4,700

0 31.4

20 14

29.4 20.6

14,343 7,368

27.8 14.3

7 6 2 2 1 26

26.9 23.1 7.7 7.7 3.8 100.0

162,510 239,900 65,000 20,000 15,600 675,310

24.1 35.5 9.6 3.0 2.3 100.0

11 6 2 1 0 29

37.9 20.7 6.9 3.4 0 100.0

6,625 2,245 600 800 0 14,970

44.3 15.0 4.0 5.3 0 100.0

11 9 5 7 2 68

16.2 13.2 7.4 10.3 2.9 100.0

9,451 11,354 4,595 3,690 736 51,537

18.3 22.0 8.9 7.2 1.4 100.0

ADB = Asian Development Bank, ADTA = advisory and operational technical assistance, Dev. = development, Env. = environmental, Mgt. = management, No. = number, PPTA = project preparatory technical assistance, TA = technical assistance. Note: The proportions of loans and TAs in some sectors in this table differ slightly from those in Appendix 2, Tables A2.1A2.3 due to the following: (i) in this table, the two multisector loans are classified under the transport sector in terms of number because transport is the biggest component; but in terms of values, they are distributed to their corresponding sectors; (ii) the commune council loan and decentralization PPTA are classified under the rural development sector; (iii) each of the four multisector ADTAs is classified under the sector in which the ADTA had the biggest component; and (iv) the ADTA on private sector assessment is classified under the finance sector. Source: Recalculated from relevant ADB databases.

10 ADB should be involved only in the sectors in which ADB has performed well with a clear lead role relative to other funding agencies, and in which the Government has expressed needs. Based on the evaluation findings on the CAPs impacts at the project/sector level (chapter V.A), which indicate ADBs comparative advantage by sector/theme, the CAPs existing 10 sectors might be narrowed down to around 6 (detailed justifications are given in the paragraph on lessons and recommendations for each sector/theme in chapter V.A, especially for the health and water supply and sanitation [WSS] sectors). These may include (a) agriculture and rural development/infrastructure; (b) natural resources and environmental management for sustainable rural livelihoods improvement in the Tonle Sap basin; (c) the social sector, mainly education; (d) finance/trade; (e) physical infrastructure, mainly integrated with the GMS Program;13 and (f) governance, mainly public financial management, decentralization, and anticorruption. (iii) Governance is too important to be considered only as cutting across sectors, such as finance and physical infrastructure, to promote transparency and accountability. It should also be treated as a separate theme in its own right. This will be consistent with the strategic-level recommendation suggested earlier (para. 20). It will also be consistent with the CAPs pipeline (20032006) proposed in the 2003 CSPU, in which there will be one program loan and some ADTAs specifically for improving governance through decentralization. (iv) Other themes, such as gender and capacity building, should be considered as cutting across sectors. (v) The Government indicated to the CAPE mission that ADB should consider phasing out of the health sector given the perceived prominent role of the World Bank. Alternatively, since the health sector performs reasonably well (paras. 6770), ADB might try to increase the value of its interventions in this sector by limiting its assistance to the Tonle Sap basin in support of ADBs Tonle Sap strategy for a sharper poverty reduction focus. Due to the overlapping nature of some outcomes of the health sector with those of the WSS sector and to the World Banks major role in urban water supply, assistance to the health sector could perhaps be integrated with rural WSS in the Tonle Sap basin. B. Responsiveness of Country Assistance Programs to Asian Development Banks Strategic Thrusts: Addressing Poverty Reduction

27. This section assesses the CAPs performance in terms of responsiveness of their lending program to ADBs strategic thrusts to determine whether the CAPs have done the right things in terms of project design in addressing ADBs poverty reduction mandate. This is done by assessing how responsive the project design was to the change in ADBs strategic thrusts to focusing on poverty reduction. The project classification system, required in the Report and Recommendation of the President, was changed after ADBs adoption of the PRS (Appendix 1, para. 28). Prior to 2001, the classification was based on projects primary and secondary objectives in accordance with the five strategic thrusts of the old MTSFnamely economic growth, poverty reduction (PR), human development, women in development, and environmental protection.14 Since 2001, the classification has been based on poverty reduction

13

However, this does not rule out secondary roads due to the countrys needs for improved linkages between primary roads and rural roads, as well as to ADBs comparative advantage in the road sector (para. 82). 14 According to the old ADB guidelines for project classification, revised in March 1995, projects with PR as their primary objective must fulfill one of the two following conditions in terms of project design: (i) at least two thirds of project beneficiaries are poor, or (ii) the components designed specifically to benefit the poor account for more than 50% of the total project cost. For projects with PR as their secondary objective, the proportion of beneficiaries who are poor is reduced to one third in the first condition, or the proportion of the project cost allocated to the components benefiting the poor is reduced to 20% in the second condition.

11 focus,15 including core poverty intervention, poverty intervention (PI), and other development intervention, as well as thematic focus. 28. Since there are two periods of ADBs strategic thrusts for the classification of project design, the 26 projects approved during the entire period of 19922002 are divided accordingly. Prior to 2001, Table 3 classifies the 16 projects approved during 19922000 by their primary objective based on the old MTSF classification. It shows that 75% of the projects were designed for promoting economic growth, while 21% for human development and only 4% for poverty reduction (one project). This was due to the need for physical infrastructure development and rehabilitation at that time. From 2001, Table 4 classifies the 10 projects approved during 2001 2002 by their poverty focus based on the current classification. It shows that there was a marked shift in project design toward poverty reduction, with 90% of the projects focusing on PI. Table 3: Project Classification by Asian Development Bank's Strategic Thrust
(19922000) Strategic Thrust Economic Growth Human Development Poverty Reduction Total Number 10 5 1 16 % 62.5 31.3 6.3 100.0 $'000 363,600 100,000 20,000 483,600 % 75.2 20.7 4.1 100.0

Source: Recalculated from Appendix 2, Table A2.1.

Table 4: Project Classification by Asian Development Bank's Strategic Thrust

(20012002) Strategic Thrust Poverty Intervention Other Development Intervention Total Number 8 2 10 % 80.0 20.0 100.0 $'000 171,710 20,000 191,710 % 89.6 10.4 100.0

Source: Recalculated from Appendix 2, Table A2.1.

29. In sum, with the significant shift in project design toward the poverty reduction focus in the second period, the CAPs lending program is regarded as highly responsive/relevant to the change in ADBs strategic thrusts (para. 178), implying that the CAPs have done the right things in terms of project design by conforming to ADBs poverty reduction mandate. V. EVALUATION OF COUNTRY ASSISTANCE PROGRAMS: EFFECTIVENESS

30. This chapter assesses the CAPs performance in terms of contributions of their lending and nonlending programs to achieving the COS objectives to determine development effectiveness of the CAPs, or how well the CAPs have put the COS into practice (i.e., whether things have been done well). To do this, the impacts of the CAPs lending and nonlending

15

According to the new ADBs guidelines for project classification, November 2000, projects classified as poverty intervention (PI) in terms of project design must have the proportion of beneficiaries who are poor larger than the countrys poverty incidence, and in no case less than 20%. For projects to be classified as core poverty intervention, the proportion of beneficiaries who are poor is increased to at least 50%.

12 programs have first to be assessed at the project/sector level (section A), the findings of which are fed into the program level, linked to the COS objectives (section B). A. Impacts of Lending and Nonlending Programs by Sector/Theme

31. This section assesses the impacts of the lending and nonlending programs provided under the CAPs (19922002) by sector/theme in terms of achievement of sector outcomes/objectives. Although delivery of outputs is a prerequisite for achievement of outcomes, it does not ensure any achievement of the latter. Good projects/TAs should not only deliver outputs, but also be able to achieve outcomes. Sample output indicators may include increased proportions of people having access to irrigation, rural roads, education, and health services; while outcome indicators may include increased agriculture productivity, incomes, and schooling completion rate, and reduced mortality rate. Some studies consider outcomes as intermediate impacts. For Cambodia, where the CAPs started only a decade ago and about 10 projects have been completed (5 of which newly completed in 2003), the project impacts that can be assessed are intermediate impacts and still evolving/improving. As such, outcomes and impacts are used interchangeably in this report. 32. The impact assessment below is based mainly on the findings from existing evaluation documents.16 However, since there are only five completed projects evaluated by PCRs, information collected from the interviews and focus group discussions during the CAPE mission is also used to assess ongoing and newly-completed projects whenever applicable. Appendix 2, Table A2.1 shows that of the 26 projects approved during 19922002, and of the 5 completed and evaluated by PCRs, 3 were evaluated by PPARs as well. The PCRs/PPARs generally found these projects to be successful. The PCR ratings consist of three successful and two highly successful projects, whereas all the three PPAR ratings are successful. Appendix 2, Table A2.3 shows that of the 68 approved ADTAs, 25 have been evaluated by TCRs and 8 by TPARs (4 of them have been evaluated by both). The TCRs/TPARs generally found these ADTAs to be successful: the TCR ratings consist of one highly successful, one partly successful, and the rest generally successful; the TPAR ratings consist of one highly successful, two partly successful, and five generally successful. 33. The 2000 COS recommended 10 sectors/subsectors (footnote 12) for subsequent CAPs to follow. With some further breakdown, the number of sectors/themes assessed below is 14. However, it does not mean that this number should be retained. At the end of each subsection below, lessons and recommendations at the project/sector level are drawn. Some sectors/themes are recommended to be integrated or dropped, based on evaluation findings in terms of ADBs comparative advantage (e.g., sector performance and extent of ADB interventions in that sector relative to other funding agencies), together with the countrys demand. These findings are used as the input to the recommendations on sector prioritization at the end of chapter IV.A (para. 26). 1. Agriculture

34. About 80% of Cambodias population of 13.5 million live in rural areas and earn their living in the agriculture sector. The sector has been faced with numerous constraints, including
16

These documents include PCRs/PPARs for completed projects, and TCRs/TPARs for completed ADTAs. As mentioned in footnote 10, for the nonlending program, only ADTAs are assessed because PPTAs normally result in loans, which are assessed under the lending program. As for the nonlending program under the GMS, RETAs are assessed.

13 inadequate access to agriculture inputs (e.g., improved seeds, fertilizer, research and extension, credit, irrigated areas, and land tenure), roads, markets, and opportunities for diversifying crops and increasing value added for agriculture products. Coupled with the extreme fluctuations of the weather (frequent floods and droughts), agriculture productivity has been low (2 tons of rice yield per hectare), leading to contraction of agriculture growth rate by 0.7% annually in the past 3 years (20002002) (Appendix 1, Table A1.1). 35. Appendix 2, Tables A2.1A2.3 show that during 19922002, the CAPs component for agriculture, rural development and water resources (irrigation), and natural resources and environmental management combined consisted of 6 loans for $129.2 million, 10 PPTAs for about $6.1 million, and 11 ADTAs for $9.5 million. These amounts corresponded to 19%, 41%, and 18% of the total amounts of loans, PPTAs, and ADTAs, respectively. 36. In agriculture alone, during 19922002, the CAPs provided one loan (Agriculture Sector Program [ASP]) for $30 million, two PPTAs for $1.6 million, and three ADTAs for $2.6 million. These amounts corresponded to 4%, 11%, and 5% of the total amounts of loans, PPTAs, and ADTAs, respectively. The ASP, approved in 1996, aimed to remove key constraints to agriculture growth through 14 policy reform measures to improve farmers access to markets, credit, technical advice, land tenure, and other inputs. The ASP assumed that such improvements would lead to improved sector outcomes, including food security, agriculture productivity, rural employment, farm incomes, and export earnings. 37. The ASP was completed and evaluated by both a PCR and PPAR as successful as it delivered many outputs, such as (i) implementation of all the reform measures as planned; (ii) potential sustainability of benefits of some key reform measures, especially the revised Land Law and the new funding mechanisms for operation and maintenance of irrigation and rural roads, as a result of strong government ownership associated with the long process of consultations and participation; and (iii) efficient use of resources as counterpart funds were earmarked for continued implementation of the reforms after loan closing. However, the PPAR noted that some of the ASP measures, such as fertilizer pricing formulas and the management plan of the Agricultural Input Company, did not have any impact as fertilizer was sold at market prices by private traders and the Agricultural Input Company has had no business activities over the past few years. Improvements in access to agriculture inputs alone might not lead to achieving outcomes (e.g., farm incomes) if rice prices were not favorable, which was the case over the past 5 years. Moreover, the end of the rice export ban was insufficient to increase rice exports. The PPAR also noted that the ASP would have achieved greater institutional impact if it had included institutional reform as well as capacity building in policy planning for senior staff of key government agencies, such as the Ministry of Agriculture, Forestry, and Fisheries. In terms of outcomes (as opposed to outputs), the achievement has been mixed, i.e., while food security has improved significantly,17 other target indicators were not met as agriculture growth declined (from 1% in 1996 to an annual average of a 0.7% contraction in 20002002), agriculture exports fell, and farm incomes remained low. However, these indicators were also largely affected by exogenous factors, such as heavy floods and droughts. 38. Considering the fact that the ASP was formulated during a very difficult timewhen there were severe shortages of capable staff and about one third of the country inaccessible due to the presence of the Khmer Rouge, poor roads, and land minesthe delivery of the outputs in terms of the implementation of the 14 reform measures can be regarded as
17

Improved food security did not only result from the ASP, but also from the combined efforts of the Food and Agriculture Organization and the World Food Programme.

14 satisfactory because it assisted Cambodia in the transition to a market-oriented economy. If such reforms had not been initiated in a timely fashion, the development impact might have been less. For example, one of the ASP major reforms was the revision of the Land Law. Passed in August 2001, it has put down a legal basis for land reform. This is expected to facilitate not only agriculture production and productivity, but also long-term investments in the country, since secure land titles can be used as financial collateral. Information from the CAPE mission indicates that ADB assistance in the revision of the Land Law has been appreciated by various stakeholder groups. It also indicates that a subsequent ADTA on Implementation of Land Legislation18 has been instrumental in the implementation of the revised Land Law because it assisted in establishing mechanisms for resolving land ownership disputes. This is a good example of ADBs Law and Policy Reform program. 39. One of the two PPTAs in this sector was in the forestry subsector (Sustainable Forest Management). However, the TA did not result in a loan, and there was no subsequent assistance to this subsector. The TA was evaluated by a TCR as successful because it had delivered outputs for forestry reform, including a review of Cambodias forest concession approach to forest management and a draft of the revised Forestry Law, passed in July 2002. 40. In sum, the effectiveness of the CAPs component for the agriculture sector in achieving sector outcomes has been mixed, with one outcome achieved (increased food security). However, the outputs delivered by the ASP in terms of the implementation of various reform measures, especially the revised Land Law, have good potential to contribute to achieving future outcomes (e.g., improved agriculture productivity and growth), particularly with continued assistance through follow-up program and project loans. 41. Lessons and Recommendations. (i) The ASP experience shows that successful legal reforms can be achieved through a long process of participatory consultations with all stakeholder groups, and that earmarking counterpart funds after loan closing helps continue and sustain the policy reforms initiated. (ii) Follow-up support through the two ADTAs to facilitate the implementation of the revised Land Law is appropriate as it will ensure continuity of support from policy making through implementation. Funding agencies generally place too much emphasis on passing new laws, which are rarely implemented. (iii) The one-off support to forestry, though successful, represents a divergence from the core area of agriculture that ADB has been supporting. (iv) A long-term commitment through the new program and project loans in agriculture is appropriate as it will help consolidate and extend the reforms achieved under the ASP. (v) Since the ASP omitted reforms on institutional restructuring of key government agencies, these issues should be addressed in the follow-up program. (vi) To increase impact synergies, the lending and nonlending assistance for agriculture should be considered as sectorally integrated with that for rural development and water resources (irrigation). Thus, as suggested by the PPAR, an overall integrated sector development strategy should be developed, through ETSW, to provide a coherent direction for future assistance to achieve integrated sector outcomes (e.g., increases in productivity, agriculture growth, agriculture diversification, food security, rural employment, and rural incomes) in a complementary manner. 2. Rural Development and Water Resources

42. The relationship between increased access to rural roads and irrigation on the one hand and poverty reduction on the other is well recognized. There are over 28,000 kilometers (km) of

18

The TA has not yet been evaluated by a TCR. There is another follow-up ADTA to facilitate the implementation of the revised Land Law (Implementation of Land Legislation, Phase II) in 2003.

15 rural roads19 in Cambodia. Only 50% of rural households have access to rural roads. Yearround irrigated areas constitute only 20% of total cultivated areas. During 19922002, the CAPs component for rural development consisted of four loans (one of which was related to water resources) for $88.3 million,20 seven PPTAs for $3.5 million, and four ADTAs for $3.8 million (Appendix 2, Tables A2.1A2.3). These amounts corresponded to 13%, 24%, and 7% of the total amounts of loans, PPTAs, and ADTAs, respectively. 43. Only one project (Rural Infrastructure Improvement), approved in 1995, has been completed recently. It aimed at improving physical infrastructure and reducing poverty in rural areas. It has not yet been evaluated by a PCR, but information from the CAPE mission reveals that the project generated substantial outputs and outcomes. The outputs included the rehabilitation of 1,172 km of rural roads, 1,405 crossing structures, 187 bridges, 144 school buildings (576 classrooms), 133 hand-pump wells, 71 school latrines, and 15 rural markets. The project made basic social services (health care, skills training, literacy, credit, and extension services) accessible to the rural poor. Since the start of the project, more than 4 million workdays of employment have been generated on road rehabilitation and routine/periodic maintenancemore than triple the appraisal estimate. This has provided incomes to more than 300,000 workers. The project also enhanced the mobility and employment opportunities of the rural poor in farming and nonfarming activities, thus contributing to achievement of outcomes. For example, about half of the households interviewed had higher household incomes (increased by about 30%) after road construction, because it became easier for them to transport their products to markets (two hours instead of the whole day) and more time was left to do other jobs. 44. One interesting design feature of the project was the development of decentralized implementation authority and utilization of local resources (labor and private contractors/ manufacturers). This helped build the capacity of local people and their authority, as well as generate employment and incomes for them. These implementation arrangements have now been applied in some ongoing projects in this sector (Stung Chinit Irrigation and Rural Infrastructure, Northwestern Rural Development, and Emergency Flood Rehabilitation). The impacts of these projects cannot be assessed at this stage, but there have been no implementation problems so far, except for some delays in the first project due to the change in project scope from rehabilitation to reconstruction. 45. One ongoing project (Rural Credit and Savings), aimed at providing rural credit to the poor through licensed microfinance institutions (MFIs)mostly nongovernment organizations (NGOs)has encountered low disbursements. This was due to fewer than expected NGOs applying for licenses, and limited demand for funds from the licensed NGOs (of which there were only three). Finally, $15 million of the $20 million total loan amount (75%) was cancelled at the Governments request. This generated concern over the design and timing of the project. During the time of project formulation, the necessary financial conditions and environment for successful project implementation, together with the required capacity of the Rural Development Bank and MFIs, were not in place. Many NGOs found the eligibility criteria to be too stringent and preferred to operate outside the system.

19 20

This includes tertiary and subtertiary roads. The former consists of 4,000 km, linking district centers to each other. Two loans under the multisector category (Special Rehabilitation Assistance, and Emergency Flood Rehabilitation) each had a component on irrigation of $10 million and $7.1 million, respectively. The latter also had a component on rural roads of $6.2 million.

16 46. In sum, the effectiveness of the CAPs component for the rural development sector in achieving sector outcomes has been mixed, with less effective outcomes in the ongoing Rural Credit and Savings project but substantial outcomes in the completed Rural Infrastructure Improvement project. 47. Lessons and Recommendations. (i) The decentralized management and utilization of local resources in the completed project (Rural Infrastructure Improvement) provided a useful lesson for implementation, which has been replicated in the three ongoing projects in this sector. (ii) Future assistance for rural development should focus on improving water resources, rural livelihoods, and labor-intensive rural road network to support successful agriculture production and marketing. Thus, it should be considered as integrated with the agriculture sector to achieve integrated sector outcomes (e.g., increased productivity, agriculture growth, agriculture diversification, food security, rural employment, and rural income) in a complementary manner. (iii) The large cancellation of the rural credit loan was caused by fewer than expected NGOs applying for licenses to operate as MFIs, and by low credit demand from the licensed MFIs. This is associated with both low demand from the poor, and nonconducive eligibility criteria and credit rules/regulations for MFIs to onlend to the poor. Successful experiences in some DMCs in South Asia point to the important role of small unlicensed MFIs in reaching out to the poor, while their operating activities are regulated under the central banks rules. This implies that both eligibility criteria and rules/regulations for MFIs should be more conducive to onlending. Rural microfinance operations should be part of the countrys integrated rural and urban financial system. Adequate capacity building for the Rural Development Bank and MFIs is also needed. 3. Natural Resources and Environmental Management

48. Cambodia has long been mired in overexploitation of natural resources and environmental degradation (e.g., illegal logging, and depleting fisheries and other sources of livelihoods). During 19922002, the CAPs component for this sector included one loan (Tonle Sap Environmental Management), approved in 2002, for about $11 million, one PPTA for about $1 million, and four ADTAs for about $3 million (Appendix 2, Tables A2.1A2.3). These amounts corresponded to 2%, 7%, and 6% of the total amounts of loans, PPTAs, and ADTAs, respectively. 49. The nonlending assistance for environmental management started as early as 1994 and again in 1996, with two capacity-building ADTAs not attached to any loan. The first TA (Strengthening Environmental Impact Assessment Procedures and Capabilities) helped build capacity of the Ministry of Environment (MOE) to prepare and implement environmental plans and establish management framework involving the use of environmental impact assessment (EIA). An EIA Department was established in MOE, and a new Law for Environmental Protection and Natural Resources Management was passed by the National Assembly. Information from the CAPE mission points to modest sustainability impacts of the TA. Although the TA delivered the outputs of trained staff as planned, most of the staff trained now work for NGOs or as consultants to projects. Moreover, the training seemed to occur in an organizational vacuum, during which MOE was not organized, equipped, resourced to do very much. The second TA (Institutional Strengthening and Expanding Environmental Impact Assessment Capacity) built on the first TA to assist MOE in expanding EIA capacity in line ministries by delivering outputs of trained staff, environmental units, and data management and policy instruments for EIA at line ministries. However, MOE is not empowered under the above law to hold up a proposed project if an EIA is unfavorable. Thus, ADB nonlending assistance seems to be less effective in achieving the outcomes in terms of improved environmental management.

17 The assistance would have had greater impact if it had been designed to link the EIA to broader institutional development capacity of MOE over the longer term. 50. However, no other lending or nonlending assistance was provided to this sector until 2002, when the Tonle Sap Environmental Management project, together with the attached ADTA, was approved. The project was an important initiative based on a region-specific approach, aimed at developing systems and capacity for sustainable management and conservation of natural resources and biodiversity in the Tonle Sap Biosphere Reserve Region, with a special focus on fisheries. Since the project has just started, it is too early to assess its impact. The region includes all or part of 8 of the 24 provinces of Cambodia and covers 67,000 square km (38% of the countrys total area). It is a major source of livelihoods as the lakes fisheries provide up to 80% of the protein intake for Cambodian people, 50% of whom depend on the lakes resources, directly or indirectly. But the lakes ecosystem has been threatened with over exploitation of fish and other resources. Poverty incidence in the region, ranging between 40-60%, is higher than the national level of 36%. 51. Given the importance of the region, the Tonle Sap basin strategy was formulated in October 2003 to support the CSP (20042006) in forming the basis for setting priorities and planning assistance in the Tonle Sap basin over the next 5-10 years. The development objectives of the strategy are to foster, promote, and facilitate (i) pro-poor, sustainable economic growth; (ii) access to assets; and (iii) management of natural resources and the environment. The strategy is based on three underpinning principles: (i) sustainable livelihoods, (ii) social justice, and (iii) a basin-wide approach. Operations of the strategy will be based on (i) a longterm perspective, (ii) selectivity and concentration of resources, (iii) working in partnerships, (iv) country ownership and delegation, (v) two-way information exchange, and (vi) judicious use of funding modalities. The strategy focuses on two core areas. In respect of rural development and the environment, it aims to expand the knowledge base on which the sustainable utilization and preservation of the basin depend, address ways in which the livelihoods of the communities can be enhanced, improve catchment management, and strengthen the regulatory and management framework and institutional structures at local and national levels that are needed to support development. In the field of human development, it provides targeted support in health and education. Crosscutting themes ensure that attention is paid to vulnerable groups, governance, resource cooperation, and the private sector. Implementation of the strategy would afford a significant and positive contribution to more effective basin management; offer possibilities for cooperation with local, provincial, and national stakeholders to balance everincreasing demands on the lake resources; and encourage continuity, give confidence to stakeholders, and present opportunities to resolve current and future challenges. This geographical concentration of ADB resources can also catalyze bilateral and other multilateral endeavors. The strategy marks the introduction of basin-level strategic planning in Cambodia and is expected to channel 30-40% of ADB loans and TAs in the pipeline. 52. In sum, although the first two ADTAs for MOE seem to be less effective in achieving the outcomes of improved environmental management, it is too early to assess the impacts of the CAPs component for this sector as the only project approved during 19922002 has just started. The project, together with its attached ADTA, has strong potential to produce significant impacts in the future due both to its region-specificity with a sharper poverty reduction focus, and to a planned series of assistance to the region based on the Tonle Sap basin strategy. 53. Lessons and Recommendations. (i) The assistance to MOE would have had greater institutional impact if it had started off with an institutional diagnosis to examine the legislative and policy frameworks, work programs, resources, capacity, and influence of the agency. To

18 increase cost-effectiveness, the assistance should have started in a modest way and be longterm in linking EIA management to broader development of institutional management capacity of MOE. (ii) The geographic approach, focusing on the Tonle Sap basin with a series of interventions, provides a good example of efficient utilization of scarce ADF resources to gain a sharper poverty focus. (iii) With the geographic focus on the Tonle Sap basin, environmental management and natural resources management should be considered as one integrated sector aimed at improving various aspects of rural livelihoods, including social inclusion, in a sustainable and environmentally balanced manner. 4. Education

54. In the early years of the CAPs, the basic (primary and lower secondary) education system was characterized by low access, poor quality, and low internal efficiency. Even in 1997, primary gross enrollment was about 85% secondary gross enrollment about 20%, grade 1 dropout rate 6.8%, grade 1 repetition rate 39%, grade 6 dropout rate 10%, and grade 6 repetition rate 15%. During 19922002, the CAPs component for the education sector consisted of four loans for $78 million, three PPTAs for $1 million, and seven ADTAs for $5 million (Appendix 2, Tables A2.12.3). These amounts corresponded to 12%, 7%, and 10% of the total amounts of loans, PPTAs, and ADTAs, respectively. 55. During the rehabilitation period, only one project in the education sector (Basic Skills) was provided, in 1995, together with its associated PPTA and ADTA, as emergency assistance. The project aimed at reducing the human resources bottleneck in technical and vocational education and training (TVET). It was completed and assessed by a PCR as successful, since it generated both outputs and outcomes in the TVET subsector.21 After the rehabilitation period, the education sector strategy focused on basic education. This started off with an ADTA on Emergency Training of Teachers in 1993, which trained teacher trainers to play a catalytic role in future teacher training. It also prepared the Education Sector Study, which was used by a subsequent ADTA on Basic Education Management and Coordination as a basis for preparing the Basic Education Investment Plan (19952000). The Plan was, in turn, used by the Ministry of Education, Youth and Sports (MOEYS) as the basis for preparing the Textbook Master Plan (19962001) for primary and lower secondary education. 56. One of the three loans for basic education (Basic Education Textbook), approved in 1996, was completed. It aimed to assist in nationwide implementation of the Textbook Master Plan. It was cofinanced by the United Nations Childrens Fund (UNICEF) on a parallel basis, and evaluated by a PCR as highly successful due to substantial outputs and outcomes generated. The outputs included (i) better learning and teaching opportunities through increased access to quality textbooks by about 3 million primary and secondary students in 6,000 schools nationwide, and to teacher guides and training by about 70,000 teachers (through the UNICEF component); (ii) increased institutional capacity of the countrys textbook publishing in a sustainable manner by creating a public-private partnership for printing; (iii) increased recurrent education budget share during 19962001 (from 10.2% to 14.8%); (iv) increased nonsalary recurrent education budget share (from 24.7% to 29%); and (v) improved aid planning,
21

Including (i) development of new TVET curriculum relevant to industrys immediate needs; (ii) increased enrollment and cost recovery; (iii) establishment of the National Vocational Training Center, National Training Board, and costsharing National Training Fund; (iv) strengthening of management capacity of the Department of TVET; (v) employment generation and increased rural income through the expanded rural outreach training programs to disadvantaged groups; and (vi) provision of training for health personnel, and establishment of a personnel information system for the Ministry of Health, which is now sustainable as it is being used in a 10-year plan work force in health care delivery services and budget allocation.

19 management, and monitoring system for the education sector as a whole by assisting in the establishment of the Program Management and Monitoring Office, and institutionalizing its functions (e.g., in aid coordination, program review, project identification, appraisal, monitoring, and evaluation) within regular MOEYS planning operations. This achievement is of particular interest because it formed the basis for subsequent adoption of the sectorwide approach (SWAp), through which MOEYS has been in the drivers seat in coordinating aid agencies in the education sector to maximize the potential outcomes of assistance programs. 57. The outcomes included improved quality and efficiency of education through (i) increased grade 6 and grade 9 pass rates during 19972001 (from 75% to 83%, and from 40% to 50%, respectively); and (ii) reduced grade 1 and grade 6 dropout rates during 1997 2001 (from 6.8% to 1.7%, and from 10% to 1.5%, respectively) and repetition rates (from 39% to 12%, and from 15% to 3.2%, respectively). Although these impacts might not be entirely attributable to ADBs and UNICEFs assistance alone, both have been the major and continuing funding agencies in basic education at the national level. 58. Two subsequent ADTAs (Secondary Education Investment Plan, and Education Strategic Support) were instrumental in facilitating the SWAp process, the MOEYS-led policy review, and the preparation of the Education Strategic Plan (ESP) (20012005) and the Education Sector Support Program, which is a 5-year rolling program for implementing the ESP. The ESP was further linked to Cambodias commitment to achieving the Millennium Development Goals (MDGs) and Education For All by 2015. In line with the ESP and the Education Sector Support Program, the CAPs provided the Education Sector Development Program (ESDP) in 2001, consisting of a program loan and a project loan. The program loan aimed at assisting MOEYS to reform the education sector through education financing reform, removal of access barriers, quality and efficiency improvement, decentralized management, and deconcentration of services delivery. The project loan aimed at providing facilities development and capacity building. The pro-poor ESDP were designed in close coordination with other major funding agencies using the SWAp. Although ongoing, it has generated substantial outputs and outcomes. The outputs included: (i) increased access to primary school enrollment by 0.5 million poor students; (ii) decentralized education management in more than 6,000 schools and 183 district offices; and (iii) an increased recurrent education budget share from 14.8 in 2001 to 18.4% in 2002. The outcomes included increased promotion rates to the next primary and secondary grades for 650,000 students, saving the Government and parents an estimated $16 million annually. 59. In sum, given both the substantial nationwide and community-specific impacts, the CAPs component for the education sector is regarded as highly effective in achieving sector outcomes. The success has been the result of ADBs long-term commitment, with a series of well-coordinated lending and nonlending programs adopted through the SWAp. This programmatic approach enabled MOEYS to take the lead role, with clear sector strategy and investment programs to coordinate aid agencies in a complementary and integrated manner. 60. Lessons and Recommendations. (i) The successful design and implementation of the SWAp in the education sectorwhich engaged relevant stakeholders and systematically linked sector policy, strategy, and resourceshas been an outstanding achievement as it has secured sustainable reforms in the sector. (ii) This should be replicated in other sectors as appropriate; (iii) Future assistance in this sector should consolidate what has been achieved in basic education, particularly in terms of improving the quality at the primary level and increasing both access and the quality at the secondary level. Attention should also be given to providing

20 learning and training opportunities to a large number of dropout and out-of-school youths, especially women, in underserved areas. 5. Water Supply and Sanitation

61. Access to safe water and improved sanitation has been poor in Cambodia (30% and 17%, respectively, in 2000) (Appendix 1, Table A1.2). Inadequate potable water supply and poor sanitation system have resulted in deteriorating health conditions. During 19922002, the CAPs component for the WSS sector consisted of two loans for $40 million, three PPTAs for $2.1 million, and three ADTAs for $1.1 million (Appendix 2, Tables A2.1A2.3). These amounts corresponded to 6%, 14%, and 2% of the total amounts of loans, PPTAs, and ADTAs, respectively. 62. One of the three ADTAs (Urban Development Strategy Study), provided in 1995, was assessed by a TCR as only partly successful because the outcome in terms of the capacitybuilding objective was not achieved, as the agency selected to be the executing agency (EA)22 had no technical staff and no regulatory planning and coordination functions. However, the output in terms of report preparation on urban development strategy was delivered and found satisfactory. In 1996, the first of the two projects (Phnom Penh Water Supply and Drainage) was approved. It has just been completed and has not yet been evaluated by a PCR. It aimed at supplying reliable and safe drinking water to about 1.5 million people in Phnom Penh by 2005 and at preventing flooding of contaminated water for 230,000 people. Information from the CAPE mission indicates that the project delivered useful outputs, including installation of water supply transmission mains, rehabilitation of a water distribution system, upgrading of drainage canals and a pumping station, increased access to safe water and improved sanitation, and provision of capacity building to the Phnom Penh Water Supply Authority. An ADTA (Institutional Support to the Water Supply Subsector), provided in the same year, also delivered useful outputs, including reports and a plan to assist the Ministry of Industry, Mines and Energy in transforming the Unit of Potable Water Supply into a financially autonomous legal entity. It also provided training. Anticipated outcomes, including reduced incidence of waterborne diseases, are yet to be achieved. 63. The second project (Provincial Towns Improvement), approved in 1999, aimed at improving water supply in six provincial towns to benefit 350,000 people, installing a waste management system in an additional town (Sihanoukville) to serve 50,000 people, and improving community sanitation for 1,500 urban poor households in three of these towns. The project is ongoing. However, it has already seen a cost overrun of about 23% of the total project cost due to the change in the scope of civil works for the water supply and waste management system. A supplementary loan was processed in 2003 to finance the shortfall. 64. The CAPE mission observed that project implementation in this sector is rather complicated as there are quite a few government and funding agencies involved. Thus, building up coordination and consensus on policy reforms requires greater effort. Concerned government agencies include the Ministry of Industry, Mines and Energy; the Ministry of Public Works and Transport; the Ministry of Land Management, Urban Planning and Construction; and the Ministry of Water Resources and Meteorology as the lead water sector agency. Among funding agencies, the World Bank plays a major role in urban water supply and in the drafting of the National Water and Sanitation Policy. There is no clear sector strategy (i.e., whether it should be urban or rural WSS) to provide direction for ADBs coherent involvement in the sector.
22

The National Committee for Regional Planning, Urban Planning and Construction.

21 The CAPs have been providing two loans in urban WSS, while the pipeline proposes a loan in rural WSS. 65. In sum, the effectiveness of the CAPs component for the WSS sector in achieving sector outcomes is mixed and still evolving. The first project has just been completed and meaningful outcomes cannot really be assessed at this stage. 66. Lessons and Recommendations. (i) One way to avoid the problem of cost overrun is to provide adequate funding under PPTA to prepare detailed design and to estimate project cost properly, rather than doing it under the loan. (ii) Due to the scarcity of the ADF resources, ADB should try to reallocate the resources for a more coherent program based on ADBs comparative advantage (e.g., sector performance and extent of ADB involvement in the sector relative to other funding agencies), together with the countrys demand, to achieve synergies of outcomes. Given that many government and funding agencies have been involved in the WSS sector, with the World Bank playing a prominent role in urban water supply, and that it is rather difficult to influence policy reforms, this sector might not be worth pursuing. Alternatively, ADB might try to increase the value of its interventions in this sector by limiting its assistance to rural WSS in the Tonle Sap basin to facilitate sustainable rural livelihoods improvement in support of ADBs Tonle Sap strategy. (iii) Due to the overlapping nature of some outcomes of this sector with those of the health sector (e.g., reduced incidence of waterborne diseases and, hence, reduced mortality), a WSS sector strategy should be prepared first, through ETSW, as a crosssectoral strategy with the health sector. This will increase synergies and cost-effectiveness in achieving the combined outcomes of both sectors, which are part of the MDGs. 6. Health

67. Cambodias health indicators have been poor, with slow improvements. For example, the maternal mortality rate fell from 590 to 440 per 100,000 live births in 19952001, and the infant mortality rate fell from 91 to 64 per 1,000 live births in 19922001 (Appendix 1, Table A1.2). Worse, child malnutrition increased from 38% to 45% (19922001). The proportion of children 1223 months fully immunized was 39% in 2000. During 19922002, the CAPs component for the health sector consisted of two loans for $40 million, two PPTAs for $1 million, and three ADTAs for $1.1 million (Appendix 2, Tables A2.1A2.3). These amounts corresponded to 6%, 7%, and 2% of the total amounts of loans, PPTAs, and ADTAs, respectively. 68. The first project (Basic Health Services), approved in 1996, has recently been completed. It supported the implementation of the Health Coverage Plan by strengthening the health care delivery system at the community and district levels in five provinces, covering 40% of the countrys population. Its objective was to reduce preventable mortality and morbidity, particularly among poor young women and children. The key feature of the project was the testing of innovative mechanisms to support the Ministry of Healths (MOHs) health sector reform through contracting in and contracting out of health services delivery to international NGOs.23 The project has not yet been evaluated by a PCR. Information from the CAPE mission

23

Under contracting in, private contractors (international NGOs) were hired to provide only management of district heath services, while the staff and inputs were still provided by the Ministry of Health. Under contracting out, private contractors (also international NGOs) were hired to have full responsibility for services delivery with their own staff and inputs.

22 indicates that the project has delivered many outputs,24 including (i) increased number of health centers from 78 to 285, though the quality of services needs improvement; (ii) development of training courses in basic management and provision of training to district health managers in project provinces, which is now being provided nationwide; (iii) development of an integrated supervisory checklista supervisory instrumentfor supervision of health centers, for provincial supervision of district referral hospitals, and for provincial supervision of the districts; and (iv) increased utilization of health centers for curative care from 7.1% to 17.6%. A comparison among contracting-in, contracting-out, and control districts shows that the use of preventive and curative health services increased to 1.7 contacts per capita per year in contracting-out districts, 1.2 in contracting-in districts, and 0.8 in control districts. Health services coverage indicators (e.g., child immunization, antenatal care, antenatal tetanus immunization, and Vitamin A supplementation of children) were also the highest in contracting-out districts (158%, 402%, 400%, and 21%), followed by contracting-in districts (82%, 233%, 149%, and 18%) and the lowest in control districts (56%, 160%, 149%, and 25%). This implies that there have been high efficiency gains in the contracting-out system because more poor people get better and more health care services at less cost. These outputs are expected to result in achieving outcomes of decreased mortality and morbidity in the future. 69. The second project (Health Sector Support), approved in 2002, is ongoing; it is cofinanced by the Department for International Development (DFID) and the World Bank. It aimed at providing basic health services to, and at preventing and controlling communicable diseases in poor and disadvantaged groups in 21 provinces, with 9 provinces financed by ADB. Although its impacts cannot be assessed at this stage, there are two useful design features. First, it utilized the sectorwide management (SWIM) approach25 to coordinate funding agency assistance in support of the Health Sector Strategic Plan. Second, it integrated the tasks of the project management unit (PMU) into the MOH system. 70. In sum, the effectiveness of the CAPs component for the health sector in achieving sector outcomes is still evolving. The achievement of many outputs by the first project has strong potential to achieve the associated outcomes in the future. Although the impacts of the second project cannot be assessed yet, the project was designed to build on the pilot contracting-out experience of the first project, and is expected to extend the potential impacts of the first one. 71. Lessons and Recommendations. (i) The SWIM approach, initiated in the ongoing health project, provides a good example of implementation of a sector-wide plan, which can be considered as a step toward the SWAp. (ii) The move away from a discrete PMU to an integration of PMU tasks into the MOH system, with capacity-building support reaching down to regional and local levels, is an important initiative for successful capacity building and creating government ownership. This should be replicated in other sectors as appropriate. (iii) Since the World Bank role has been perceived by the Government as prominent in the health sector, the Government indicated to the CAPE mission that ADB should consider phasing out of this sector and concentrating in the education sector. Alternatively, since the health sector performs reasonably well, ADB might try to increase the value of its interventions in this sector by limiting its assistance to the Tonle Sap basin, integrated with rural WSS, for a sharper poverty reduction
24

S. Keller and J. Schwartz. 2001. Final Evaluation Report: Contracting for Health Services Pilot Project. Phnom Penh. 25 The SWIM approach is a modality in which the line ministry plays the lead role in formulating sector policy and strategy and managing aid agencies, so that concerned funding agencies use common sector strategy under mutually agreed arrangements. It differs from the SWAp in that it does not integrate externally-funded projects into the routine budgetary process. It can be considered as a step toward the SWAp.

23 focus. (iv) As suggested in the preceding subsection, due to the multidimensional nature of the health sector outcomes (e.g., decreased infant, child, and maternal mortality), which can also be achieved through improving WSS, a cross-sectoral strategy between these two sectors should be prepared first, through ETSW, in order to increase impact synergies. 7. Finance

72. Cambodias financial sector is still at a rudimentary stage, with limited financial intermediation and low public confidence. The rates of banking intermediation are among one of the lowest in the world, with bank loans and deposits accounting for only about 8% and 12% of gross domestic product (GDP), respectively. These have been a key constraint to PSD and sustainable economic growth. During 19922002, the CAPs component for the finance sector consisted of one cluster program loan (with two subprograms) for $20 million, one PPTA for $0.8 million, and seven ADTAs for $3.7 million (Appendix 2, Tables A2.1A2.3). These amounts corresponded to 3%, 5%, and 7% of the total amounts of loans, PPTAs, and ADTAs, respectively. 73. In 2000, a PPTA for the Financial Sector Development Program was provided not only to prepare the Financial Sector Program Loan (FSPL), but also to assist the Government in producing an output in terms of a master plan for three phases of financial development over 10 years (20012010)the Financial Sector Blueprint (FSB). Both the Government and the private sector were heavily involved in the FSB preparation. This resulted in (i) government adoption of the FSB as an official long-term Financial Sector Development Plan, and inclusion in the Governments overall reform agenda of establishing a more market-based and privatesector led economy; and (ii) funding agency adoption of the FSB as a basis for aid coordination in the financial sector. 74. The FSB also serves as the financial sector strategy for ADB operations in Cambodia. The cluster FSPL, consisting of three back-to-back Subprograms IIII to be implemented within 3 years starting in 2001, was prepared based on the FSB. The FSPL aimed at developing a market-based financial system through (i) enhancing banking intermediation and public confidence by establishing and strengthening banking supervision; (ii) establishing legal and regulatory frameworks for insurance development; (iii) laying the foundation for the development of interbank and money markets through public-private partnerships; and (iv) developing financial market infrastructure by establishing common accounting standards and enforcement mechanisms. These are expected to stimulate PSD. Subprogram I has just been completed, and has not yet been evaluated by a PCR. Information from the CAPE mission reveals that the Subprogram I resulted in both outputs and outcomes. Outputs included the reforms carried out, such as (i) the foundation for a modern financial system laid out, (ii) a robust framework of banking supervision and prudential regulations put in place, (iii) effective accounting and auditing systems established, and (iv) a legal infrastructure developed with a draft law on commercial enterprise. These led to outcomes such as increased public confidence in the banking system as reflected in (i) increased nonenterprise deposits to $122 million or 29% as of June 2002 over June 2001, and (ii) decreased average interest rates from 18% per annum in 20002001 to 16% in 2002. Although these outcomes are not likely to be the results of ADB assistance alone, ADB has been a major funding agency, along with the International Monetary

24 Fund (IMF),26 in the banking sector, particularly in banking supervision. The ongoing Subprogram II of the FSPL continued the reform efforts to include the insurance sector, and interbank and money market development. Three ADTAs were provided to support the FSPL. 75. In sum, the CAPs component for the finance sector is considered effective in contributing to sector outcomes based on the achievement of the FSPL Subprogram I. More outcomes are expected after the completion of the remaining subprograms. 76. Lessons and Recommendations. (i) The program cluster approach adopted in the FSPL is an appropriate modality for providing long-term assistance for sequenced reforms in a situation where the sector has been hampered by numerous constraints. (ii) The role of the finance sector is crucial in improving financial governance and stimulating PSD through provision/revision of legal and regulatory frameworks to attract more private investments. (iii) Given the countrys low domestic savings rate (averaging 10% of GDP in 19982002), which has been a major factor constraining the achievement of sustainable economic growth, the FSPL component on insurance development is appropriate as it will help build up domestic savings. (iv) Promoting public confidence through strengthening the regulatory and supervisory frameworks, financial infrastructure, and human resources should be the focus of future assistance. This will increase domestic financial resources mobilization and facilitate PSD, which is particularly important in light of low FDIs. 8. Transport

77. Cambodias transport infrastructure suffered from two decades of war and civil strife. About 7,700 km of the primary road network (including national and provincial roads) constructed during the 1950s were severely damaged. Road transport accounts for 65% of all passenger traffic and 70% of all cargo traffic in the country. During 19922002, the CAPs component for the transport sector consisted of four loans for $173 million, six PPTAs for $2.2 million, and seven ADTAs for $4.6 million (Appendix 2, Tables A2.1A2.3). These amounts corresponded to 26%, 15%, and 9% of the total amounts of loans, PPTAs, and ADTAs, respectively. Three of the four loans in this sector are part of the GMS Program, totaling $105 million (Appendix 2, Table A2.1, note d). 78. In addition to the four loans classified under the transport sector, there are two multisector loansSRA, approved in 1992, and Emergency Flood Rehabilitation, approved in 200027whose biggest component is the transport sector.28 The latter is ongoing but has already rehabilitated 425 km of national roads, while the former was the first ADB loan to Cambodia after resumption of ADB operations, aimed at rehabilitating the urgently needed infrastructure. It was completed and evaluated by a PCR and a PPAR as successful. The transport component contributed to economic recovery through the rehabilitation of 560 km of national roads and Sihanoukville port, which facilitated the inward and outward flows of goods and prolonged the life of the jetty for another 10 years.

26

The International Monetary Fund has also been assisting Cambodia in some aspects of the banking system (e.g., bank re-licensing program) through its Poverty Reduction and Growth Facility. Under this program, the capital base of the banking system was strengthened, alongside a consolidation in the number of banks from 31 in 2000 to 17 in 2002. 27 The transport sector accounted for $32.3 million (48% of the total loan amount of $67.7 million) of the first loan, and for $30.9 million (56% of the total loan amount of $55 million) of the second loan. 28 Assistance for rural roads is assessed under subsection 2.

25 79. Three of the four loans classified under the transport sector are for national roads improvement (GMS: Phnom Penh-Ho Chi Minh City Highway, approved in 1998; Primary Roads Restoration, approved in 1999; and GMS: Cambodia Road Improvement, approved in 2002), and the other one for airport improvement (Siem Reap Airport, approved in 1996). The first two of the three road projects were almost completed. The former was part of the GMS Program, aimed at increasing economic integration and stimulating economic growth by encouraging movements of trade, people, and traffic flows between Cambodia and Viet Nam. The latter aimed at improving the primary road network. Information from the CAPE mission indicates that the former reconstructed/rehabilitated 255 km of national roads, whereas the latter reconstructed damaged sections of about 490 km of the primary road network and bridges along these roads. Altogether, these road projects and the road component of the first multisector project have produced both outputs and outcomes. The outputs included many kilometers of national roads built/rehabilitated, which helped facilitate movements of people and economic activities. The outcomes included reduced travel time by more than half, leading to reduced transport costs both for individuals and agriculture products, and more time saved to work for additional income. For example, travel time by light vehicles from Phnom Penh to Battambang, which was about 12 hours before the start of the rehabilitation, now takes about 5 hours. 80. The Siem Reap Airport project has just been completed and has not yet been evaluated by a PCR. It was part of the GMS Program, aimed at promoting tourism development, hence, economic growth through improving the airport capacity. Information from the CAPE mission reveals that the domestic terminal constructed under the project was used for international passengers. However, the project contributed to tourism development, with increases in the number of tourists visiting Siem Reap due to increased direct flights from GMS countries. 81. In sum, the CAPs component for the transport sector is considered effective in achieving sector outcomes based on the performance of the completed and nearly completed projects assessed above. One major concern raised over the road component in the completed SRA project was the lack of proper maintenance, so sustainability is questionable. Although the road maintenance fund was created and the Government had agreed that it would be used solely for maintenance of the road network (with at least 10% reserved for rural roads), actual disbursements from the fund to the Ministry of Public Works and Transport and the Ministry of Rural Development have to date failed to live up to expectations. 82. Lessons and Recommendations. (i) Future assistance in the transport sector should not be diverted from the road subsector, in which ADB has a comparative advantage. (ii) For the GMS: Phnom Penh-Ho Chi Minh City Highway project, specific protocols and subsidiary agreements needed to implement the agreements to facilitate cross-border movement are yet to be finalized. (iii) Since much of the national road network has been reconstructed/rehabilitated, future assistance in the road subsector should focus on improving linkages between national and rural road networks, with consideration of public-private partnerships. (iv) Given the subsectors potential benefits from GMS cooperation (e.g., improved trade and tourism through improved regional road network), future assistance for the national road network should be limited under the GMS Program integrated with the national CAPs. (v) a condition to ensure effective use of the road maintenance fund for sustainability of ADB road projects should be established prior to providing future assistance for this subsector.

26 9. Power

83. Cambodias electricity infrastructure suffered from years of neglect due to two decades of political turmoil and civil war. Power capacity has been inadequate, with high system losses and unreliable supply. Thus, the countrys household electrification rate has been low (15%) and tariff rates high ($0.120.16 per kilowatt hour for domestic consumers and more than $0.20 per kilowatt hour for business firms compared with $0.040.08 in other GMS countries). This is one of the reasons deterring PSD, including FDIs, thus weakening the countrys competitiveness position. During 19922002, the CAPs component for the power sector consisted of two loans for $46.8 million,29 two PPTAs for $0.6 million, and four ADTAs for $1.4 million (Appendix 2, Tables A2.1A2.3). These amounts corresponded to 7%, 4%, and 3% of the total amounts of loans, PPTAs, and ADTAs, respectively. 84. The first project (Power Rehabilitation), approved in 1994, aimed at improving the physical power generation and distribution systems to meet increasing demand through construction of a diesel power station in Sihanoukville; rehabilitation and expansion of mediumand low-voltage distribution systems in Sihanoukville, Siem Reap, and Phnom Penh; and provision of a modern accounting system, training, and a technical training center for lectricit du Cambodge (EdC). The project was completed and evaluated by a PPAR as successful as it had generated both outputs and outcomes. The outputs included (i) installation of a new 5 megawatts generating plant at Sihanoukville; (ii) installation of low- and medium-voltage, overhead and underground distribution cables and associated equipment in Sihanoukville, Siem Reap, and Phnom Penh; (iii) construction of a new technical training center for EdC; (iv) upgrading of management, financial, and technical skills of EdC staff in preparation for corporatization of EdC; and (v) introduction of a commercially based accounting system in the provincial offices. The outcomes included (i) meeting consumer demand, with first-time connections to 26,800 consumers; (ii) corporatization of EdC in 1997; and (iii) reduction of system losses and lower retail tariffs. The second project is ongoing.30 85. In sum, the CAPs component for the power sector is considered effective in achieving sector outcomes in the completed project. However, there remain many key sector policy issues (e.g., high tariffs, high power generation cost incurred to EdC due to high taxation and heavy reliance on oil-fired power generation, and difficulties in collecting large arrears from government agencies), which need to be resolved before long-term impacts can be achieved. 86. Lessons and Recommendations. (i) Since there remain many key sector issues mentioned above, assistance to this sector should always include a policy component in project design to address some of these issues. (ii) For the issues that cannot be resolved easily in the medium-term (e.g., high tariffs and taxation), an alternative is to import cheaper electricity from neighboring countries, such as Viet Nam. As such, future assistance to the power sector should be part of the GMS Program and integrated with the core CSP. (iii) Future assistance should also aim at strengthening the capacity of the Electricity Authority of Cambodia, which is an independent regulator, to establish an appropriate legal and regulatory framework to encourage
29

In addition to these two loans, the power sector was one of the components ($18.2 million or 27% of the total loan amount of $67.7 million) in the SRA project, approved in 1992. The project was assessed by a PCR and PPAR as successful. The power component increased generating capacity in the capital and reduced system losses, with reliable power supply benefiting households and facilitating PSD. 30 The project (Provincial Power Supply), approved in 2000, aimed to promote economic growth in seven provincial towns by upgrading the distribution systems and reducing the price of electricity supply. The project is expected to meet consumer demand in the area, with new connections to more than 15,000 households and improved quality of supply to 21,000 households.

27 public-private partnerships and regulate private rural electricity enterprises to operate more effectively and competitively for the benefits of consumers. 10. Greater Mekong Subregion Program

87. The GMS Program, initiated in 1992, aims at achieving cooperation and accord among the six countries through which the Mekong River passes31 in planning and promoting subregional economic development, which is important for promoting economic growth. There are four loans belonging to the GMS Program, totaling $120.6 million (Appendix 2, Table A2.1, note d). Three of the four loans were assessed under the transport sector above, while the other one is for tourism development and still in the start-up mode. The nonlending program under the GMS is in the form of RETAs. The impacts of the GMS RETAs are summarized below based on the results of the Impact Evaluation Study (IES) of ADBs Program of Subregional Economic Cooperation in the Greater Mekong Subregion. Conducted in 1999, the IES assessed 21 GMS RETAs in seven sectors: transport, telecommunications, energy, tourism, environment, human resources development (HRD), and trade and investments (Appendix 2, Table A2.4, note a). 88. The summary assessment results of these RETAs for 19921999 indicate that the GMS Program has provided member countries with the opportunity to develop a shared vision of the future development of the region. It has been most effective when it focused on activity-based initiatives to secure reforms and agreements on measures to reduce barriers inhibiting cooperation, which were a major distinguishing and widely appreciated feature of the GMS approach.32 It has provided important infrastructure projects. Progress has also been made in mobilizing cofinancing for major projects. A sustained high level of participation in ministerial meetings signified a strong ownership of the GMS process. Given the need for widespread consultations in reaching agreements and securing political approval from multiple governments for GMS activities, its overall progress was considered satisfactory by most central agencies. 89. Despite the progress, the following concerns were raised by the IES. (i) The GMS Program during 19921999 was not guided by any strategic framework, starting off with an emphasis on basic infrastructure provision that broadened to cover other sectors with seemingly equal priority. Thus, limited financial and staff resources were dispersed across sectors, and cross-sectoral synergies were not developed. (ii) Linkages between the GMS Program and national programs were weak because there was little evidence that GMS priorities were included in the CAPs for GMS member countries. (iii) Although strong national ownership of the GMS process is felt at the ministerial level, national ownership at the project level in sectors other than infrastructure was found to be poor, largely because of inadequate stakeholder participation in project identification and design due to differences in capacity and resources across member countries. For example, in the environment sector, weakness in Cambodias technical expertise had reduced the effectiveness of subregional training, and insufficient financial resources had limited the usefulness of interventions, especially in the installation of databases. (iv) Lack of effective institutional mechanisms for monitoring GMS projects and for sharing information in a timely manner to facilitate regulatory and institutional reforms. (v) There was no clear distinction drawn between what is done most effectively at the regional level and at the national level.

31

Cambodia, Lao Peoples Democratic Republic, Myanmar, Thailand, Viet Nam, and Yunnan Province of the Peoples Republic of China. 32 This activity-based approach contrasts with the rule-based approach of other regional organizations, such as the Association of Southeast Asian Nations Free Trade Area, and World Tourism Organization.

28 90. However, some of these concerns have been tackled since the IES. For example, a GMS strategic framework33 for 20012010 was formulated with ADB assistance and endorsed by the GMS Ministers during the 10th GMS Ministerial Conference in Yangon, Myanmar in November 2001. The framework stresses a more multisectoral and holistic approach to increase synergies across sectors, with five strategic thrusts: (i) strengthening infrastructure linkages through a multisectoral approach, (ii) facilitating cross-border trade and investments, (iii) enhancing private sector participation and its competitiveness, (iv) HRD, and (v) promoting sustainable use of shared natural resources with environmental protection. To implement the GMS strategy and to link the GMS Program with national programs, a draft initiating paper of a 3-year rolling Regional Cooperation Strategy and Program (RCSP) has recently been developed for 20042006 with four strategic thrusts in line with the CSPs for the GMS member countries: (i) pro-poor, sustainable economic growth; (ii) PSD; (iii) HRD; and (iv) environment and shared natural resources management. 91. In sum, the nonlending programs under the GMS Program can be considered as effective given the satisfactory progress made so far, together with the efforts made in response to the IES key recommendations in formulating the GMS strategic framework and RCSP. However, more effort is needed to accommodate the remaining recommendations. 92. Lessons and Recommendations. (i) Since the GMS strategy and RCSP have been developed, implementation of the RCSP in close coordination with the CSP is needed for actual integration with the core program. (ii) As the GMS strategy stresses a more holistic approach to regional cooperation, there is a need to improve project/RETA design to address multisectoral issues in an integrated manner in order to maximize returns from ADB investments. For example, the GMS Program may focus on infrastructure investments (transport and power links), while ensuring maximum tourism, environmental, social, and trade benefits from such investments. (iii) GMS projects/RETAs should address differences in institutional capacity and needs across members countries by preparing needs and capacity assessment as part of project design. (iv) Effective monitoring and information systems should be established for GMS projects to facilitate regulatory and institutional reforms among member countries in a timely manner. 11. Private Sector Development

93. The principle of the market economy relies on the role of the private sector as the main engine driving economic growth. The prolonged period of war and internal conflicts not only destroyed public sector institutions, but also the private sectors capacity and confidence. The lack of proper legal and regulatory frameworks, together with the lack of laws and contracts enforcement, has imposed high transaction costs for doing business in Cambodia. This has led to low private investments (both domestic and FDIs) and threatened the competitiveness position of Cambodia, required for sustainable economic growth. Annual FDIs decreased from $204 million to $150 million between 1997 and 2001 (Appendix 1, Table A1.1). During 1992 2002, the CAPs lending component for PSD can be considered as integrated with the finance sector through the FSPL to promote various financial reforms conducive to PSD (para. 74), and separately through a loan for tourism ($15.6 million). The nonlending component consisted of three ADTAs for $0.9 million (2% of the total ADTA amount) (Appendix 2, Table A2.3). 94. The tourism loanGMS: Mekong Tourism Development (Cambodia)approved in 2002, is in start-up mode and is part of the GMS Program. Two ADTAs were provided earlier to
33

ADB. 2001. Building on Success: A Strategic Framework for the Next 10 Years of the GMS Program. Manila.

29 strengthen the Ministry of Tourisms capacity in tourism planning. The TAs delivered some outputs used as a basis for project design, including (i) provision of training, (ii) a plan for further institutional strengthening of priority areas in the tourism sector, (iii) a guideline for selection and appointment of official representative in foreign countries, (iv) a draft legal framework (Tourism and Entertainment Law) for sector development, and (v) establishment of industry associations for tourism. Another ADTA (Private Sector Assessment), approved in 2002, delivered the following outputs: a situational analysis of SME development, a framework for designing a SME program loan (planned in the pipeline for 2004), and a SME strategy for Cambodia. 95. In sum, if PSD is considered as integrated with the FSPL, the CAPs component for PSD is regarded as effective to date in achieving the expected outcomes under the FSPL (para. 75). However, the outcomes are still evolving as the FSPL is ongoing. It is too early to assess the impacts of assistance in tourism development since the project has just started. 96. Lessons and Recommendations. (i) Since the problems deterring PSD lie mostly in the lack of appropriate legal and regulatory frameworks, particularly in the financial/trade sector, future assistance related to PSD should be provided through the finance/trade sector. Lending assistance may be provided to develop SMEs in the areas in which Cambodia has strong potential or a comparative advantage both in the agriculture (agro-based activities) and nonagriculture sectors. (ii) For larger employment generation and export diversification impacts, more FDIs are needed. Nonlending assistance (ADTAs) may be provided through the finance/trade sector to create an enabling environment to attract more FDIs, particularly in terms of enforcement of contracts, governance of licensing and inspection, and process of regulations and incentives. (iii) Potential areas for SME and FDI promotion should be explored through ETSW. 12. Capacity Building and Institutional Strengthening

97. After a prolonged period of war and internal unrest, Cambodias public institutional infrastructure was left in a state of disarray. Both the 1992 IS and 1995 COS recognized the need to build institutional capacity of the countrys public agencies. During 19922002, the CAPs component for stand-alone, capacity-building assistance in macroeconomic and external aid management, and development planning consisted of 13 ADTAs for $10 million (20% of the total ADTA amount) (Appendix 2, Table A2.3). This subsection assesses only this group of ADTAs because it forms a major part of all ADTAs and forms the majority group of all standalone, capacity-building ADTAs. Other groups of stand-alone, capacity-building ADTAs addressing specific issues (such as PSD, gender, and governance) are assessed separately under such themes. Capacity-building ADTAs belonging to specific sectors are assessed under such sectors as most of them were attached to projects and generally aimed at improving the EA capacity for effective project implementation. 98. With the need to revive and stabilize the economy, the key assistance for capacity building has been in the areas of macroeconomic management and development planning. It consisted of a series of large stand-alone ADTAs, started in 1992. Four of them (Strengthening Macroeconomic Management; Statistical System Development; Strengthening Capacity in Development Planning; and Capacity Building in Development Planning, Phase II) were evaluated by one TPAR. The first one, for $3.9 million, still ranks as ADBs fourth largest TA ever. Although it aimed at building capacity in many areas (development planning, national statistics, public finance, and money and banking), its focus was to strengthen the planning capacity of the Ministry of Planning (MOP). The TPAR rated it as successful, mainly because it had delivered useful outputs. These included provision of training in the preparation of the

30 NPRD, SEDP-I, and a draft public investment program (PIP) for 19961998, which was a 3-year rolling process of medium-term programming of public investment projects with line ministries.34 However, outcomes in terms of institutional development and sustainability were not achieved because MOP lost a number of its functions after a new government was installed in 1993. The initiative on the PIP had been diffused to the Ministry of Economy and Finance (MEF), the Council for the Development of Cambodia (CDC), line ministries, and funding agencies (Appendix 1, para. 16). As a result, project planning with prioritized budget ceilings was not well coordinated. 99. The third TA (Strengthening Capacity in Development Planning) was rated by the TPAR as borderline successful because it had delivered useful outputs of institutionalizing the PIP in MOP and teaching line ministries some disciplines in their preparation of new investment projects. But outcomes in terms of institutional development and sustainability were not achieved as the issue of duplicating planning functions remained. The fourth TA (Capacity Building in Development Planning, Phase II) also delivered useful outputs of training provision in development planning, SEDP-II preparation, and PIP continuation. It was rated by the TPAR as only partly successful because it did not achieve outcomes in strengthening linkages of the PIP with the actual budget process. It also had little institutional impact, with progressive fragmentation of the countrys planning function and inadequate monitoring of SEDP-II and PIP. 100. The second TA (Statistical System Development), which followed up on the statistics component of the first TA, was rated by the TPAR as successful because it had produced both outputs and outcomes. The outputs included production of economic statistics, provision of training for the National Institute of Statistics (under the MOP) in statistics and data collection and analysis, and drafting of the Statistical Law (approval was impending). However, achievement of outcomes was mixed. Although institutional strengthening of the National Institute of Statistics had been achieved as the TA was efficiently managed, with continuity of consultants and good supervision from ADB, sustainability is problematic because the Government has been unable to regularize budget funding for operational costs of missions and continuous data collection. 101. Another related TA (Strengthening External Aid Portfolio Management) was evaluated by a TCR as successful mainly because it had delivered useful outputs of training provision to about 500 government officials from various agencies in practical aspects of project management, and improving reporting and monitoring activities through the development of a client/server-based management information system. However, outcomes in terms of institutional development and sustainability have not been achieved because skill transfers are yet to be institutionalized to avoid day-to-day dependence on consultant support. 102. In sum, the CAPs component for capacity building and institutional strengthening for the majority of stand-alone, capacity-building ADTAs is considered less effective in achieving the outcomes of institutional strengthening impacts. These ADTAs, particularly in macroeconomic and external aid management and development planning, had delivered the outputs related to capacity building at the individual level, with improved technical skills, but achieved less in terms of outcomes.

34

A surplus fund from this TA was used to support the preparation of the Participatory Poverty Assessment of Cambodia, and the preliminary drafting of SEDP-II. Additional funding of SEDP-II came from the TA on Capacity Building in Development Planning, Phase II.

31 103. Lessons and Recommendations. (i) Skill transfers need to be institutionalized for sustainability of the training acquired. Capacity-building assistance should develop a skill transfer and exit strategy, which should be regularly monitored during implementation. (ii) Capacity building will be most effective if it is demand-drivenprovided to agencies with the willingness to change and benefit from such training. It would also be effective if provided to agencies with a dominant role in the areas of assistance to ensure sustainability. (iii) Capacity building is most sustainable in a long-term, continuous assistance program to ensure that a critical mass starts to perform well. (iv) It is important to equate capacity building with institutional strengthening, rather than just training to enhance individuals technical skills. Thus, an institutional diagnosis should be prepared first to understand the entire organizational system (e.g., the way an organization works, its regulatory framework, management system, and resourcing, as well as its changing role) prior to providing a comprehensive kind of assistance to improve management and organizational structure for more effective functioning. (v) One way to have greater institutional impact and sustainability prospects is to make PMUs or project implementation units part of the regular organizational framework of concerned agencies, so that they will not disappear after TA/project completion. (vi) Another way is to train the trainers who should be senior staff of concerned agencies or staff from domestic research institutes. This will also make the training more cost effective. 13. Gender

104. Two decades of civil war and strife placed extraordinary strains on the status of women in Cambodia, aggravating gender disparities in access to social services, paid employment, and productive resources. Women account for 90% of garment workers in Phnom Penh and 54% of agriculture and fisheries workers in the country, but only 9% of senior managerial positions. During 19922002, the CAPs component for gender consisted of three ADTAs for $1.3 million (3% of the total ADTA amount) (Appendix 2, Table A2.3). There was one PPTA for $0.6 million, which did not result in a loan (Table A2.2). 105. ADB was the first funding agency to assist in gender matters, starting out with an ADTA (Women in Development) in 1994, followed by a PPTA (Employment Promotion for Women) and two more ADTAs (Capacity Building for the Ministry of Womens and Veterans Affairs [MOWVA], and Sustainable Employment Promotion for Poor Women). The last TA is ongoing. A TPAR evaluated the first and third TAs as successful, and the second (PPTA) as only partly successful, mainly because it did not lead to a loan as it had been designed without full consideration of the capacity of MOWVA to administer the proposed loan. However, it delivered outputs of useful training and an employment promotion plan for women. For the first and third TAs, the successful results were drawn mainly from their successful delivery of outputs. The outputs of the first TA included (i) many reports, including the National Policy for Women; (ii) provision of training for mainstreaming gender; and (iii) establishment of the Secretariat of State for Womens Affairs, which was later upgraded to the Ministry of Womens Affairs in 1996, and to MOWVA in 1998. The third TA, which built on the first TA, produced the following outputs: (i) many reports and plans, including an organizational reform plan, gender mainstreaming plan, and HRD assessment and database; (ii) managerial and technical training for MOWVA; and (iii) establishment of Cambodias National Council for Women and gender focal points in 12 line ministries. 106. Achievement of outcomes of gender mainstreaming is still an ongoing process. Based on the outputs of the three TAs, MOWVA succeeded in mainstreaming gender in the countrys national plans, including the National Poverty Reduction Strategy (NPRS) and SEDP-II, linked to the budgetary framework in a medium-term expenditure framework. For example, cross-

32 sectoral gender issues and quantitative targets for gender equity and the empowerment of women were set out in the NPRS. In the SEDP-II, gender inequalities were identified in relation to overall national development objectives, and gender mainstreaming was included in the guidelines for decision making. However, gender mainstreaming in line ministries has not yet been widely achieved except in the Ministry of Agriculture, Forestry and Fisheries and in MOEYS. This is due to the absence of MOWVA staff with sufficient sector qualifications and expertise to provide credible advice to line ministries on gender mainstreaming policies, and to the complicated bureaucratic structure of MOWVA. However, the ongoing TA is trying to address these issues. 107. In sum, the effectiveness of the CAPs component for gender in achieving the outcomes of gender mainstreaming is evolving, with the achievement of gender mainstreaming in the NPRS and SEDP-II linked to budgetary processes. The gender mainstreaming in line ministries is ongoing and will require more qualified MOWVA staff with sector expertise to work closely with the ministries. The ongoing TA is expected to facilitate the achievement of these outcomes. 108. Lessons and Recommendations. (i) Assistance for MOWVA had stopped after the second TA in 1995 to resume again in 1999 and 2002. A start/stop approach is unlikely to be efficient as momentum is lost. (ii) Prior to providing a PPTA for a loan in the pipeline, the selected EA should have enough capacity to implement a project. (iii) The ongoing TA should work closely with line ministries and ensure sufficient capacity building provided for MOWVA staff in key sectors to mainstream gender in line ministries. It should also address the issue of MOWVAs complicated organizational structure. (iv) Future assistance for gender should cut across sectors by incorporating gender issues in the design of individual projects, regardless of sectors, at the project formulation stage. Various gender issues should be addressed, including vulnerability, social inclusion, and empowerment. (v) Some government officials, who used to attend meetings on gender issues at ADB, observed that the audience and panel on gender consisted mostly of women. Gender issues should not only be of particular concern by ADB female staff, but also male staff. 14. Governance and Corruption

109. Cambodias public institutional system, as well as its judicial and legal systems, was destroyed in two decades of political turmoil and civil war. Corruption problems have been rampant, posing a serious threat to sustainable development and poverty reduction. The governance and corruption missions conducted with the assistance of the World Bank reveal the following four major findings: (i) Areas of weak governance: the sample households and enterprises felt that public corruption was the leading governance problem; public transparency was a powerful anti-corruption tool; and public services were particularly poor in the areas of the judiciary, customs and tax collection, public assets management, and police and road services. (ii) Results of weak governance and corruption: the sample households and enterprises felt that these results included poor quality of public services, informal payments incurred, losses of government revenue through tax evasion, diversion of revenue to own uses, and deterrent of FDIs. (iii) Source of weak governance: the sample public officials felt that the following were key factors influencing performance and integrity: low wages and delayed payment, lack of appropriate match between wages and assigned tasks, lack of transparent budget management, lack of efficient information flows, and lack of incentives and performance evaluation. (iv) Measures to enhance governance: the sample public officials expressed strong support for governance reforms and anti-corruption measures, including payment of living wages for public officials, establishment of the practice of declaring assets on a regular basis,

33 establishment of a personnel management system conducive to improved performance motivation, and improved monitoring of government activities by civil society. 110. The above mission findings were used as one of the inputs by the Government in the preparation of the Governance Action Plan (GAP) (2001). Another input was ADBs ETSW on Cambodia: Enhancing Governance for Sustainable Development,35 prepared in close consultation with the Government, private sector, and civil society. The GAP identified two categories of governance reforms in the areas critical to Cambodia's development. The first category involved governance reforms in five key areas: (i) widespread corruption; (ii) lack of appropriate judicial and legal frameworks through which basic rules of fairness and predictability are established; (iii) ineffective public administration characterized by a large structure of civil service with too low wages and excessive influence of party politics; (iv) ineffective public finance system characterized by low revenue collection and lack of transparency in revenue utilization; and (v) gender inequality, reflecting social injustice inhibiting poverty reduction. The second category involved governance reforms in two specific policy issues: (i) demobilization of the armed forces, now being assisted by the World Bank; and (ii) natural resources and environmental management, including land, forestry, and fisheries management, now being assisted by ADB, World Bank, and others. In March 2003, the Government endorsed the Organisation for Economic Co-operation and Development-ADB Action Plan against Corruption in Asia and the Pacific. Although a number of actions in the GAP have been implemented and GAP-II is in preparation, the Government has made slow progress in passing the AntiCorruption Law and strengthening the judicial system. The weak judicial system has led to lack of enforceability of laws and contracts. 111. In addition to the ETSW, during 19922002, the CAPs component for governance has been consistent with the two categories identified by the GAP above. These included the second specific governance policy issues on natural resources and environmental management (through ongoing ADTAs on land and fisheries management); and the five key governance areas: (i) widespread corruption (through two ADTAs on auditing); (ii) lack of judicial and legal framework (through two ADTAs on procurement and an ongoing cluster FSP); (iii) ineffective public administration (through a recently approved loan and some ADTAs in the pipeline on decentralization); (iv) ineffective public finance system (through an ongoing cluster TA on public financial management); and (v) gender inequality (through four ADTAs on gender). 112. The governance-related ADTAs that belong to specific sectors/themes are grouped and assessed under such sectors/themes. Thus, this section assesses only four stand-alone, governance-related ADTAs, approved during 19922002, which did not belong to any specific sectors/themes. These four TAs accounted for $2.9 million (6% of the total ADTA amount) (Appendix 2, Table A2.3). 113. ADB involvement in governance started as early as 1994 and 1995, when two of the four TAs (Establishment of a Central Procurement Office and Regulations and Procedures for Procurement of Goods, and Institutional Strengthening of the Department of Public Procurement), intended to improve procurement governance, were provided. Information from the CAPE mission reveals that the TAs were successful in delivering useful outputs, including provision of training, establishment of necessary procurement regulations and procedures, and drafting of a procurement law. However, outcomes in terms of passage and implementation of the draft law were not achieved. The Government did not proceed to legislation, preferring to
35

T. Kato, J. Kaplan, C. Sophal, and R. Sopheap. 2001. Cambodia: Enhancing Governance for Sustainable Development. ADB: Manila.

34 issue a Subdecree on Implementing Rules and Regulations Governing Public Procurement, and allowing responsibility for procurement to spread throughout the public sector. 114. The third TA (Developing Capacity in Audit and Inspectorate Function), provided in 1996, aimed at developing an auditing standard, and establishing an effective audit and inspectorate function independent from the executive branch of the Government. The TA was found by a TCR to be highly successful as it produced substantial outputs and outcomes. The outputs included (i) provision of training to a team of counterpart staff; (ii) establishment of the concept of an independent government auditing authority for the first time; and (iii) drafting of an Audit Law. The outcomes, as a result of the passage of the Audit Law, are still evolving. These included (i) enhanced transparency and accountability associated with the establishment of the National Audit Authority (NAA) and of internal audit functions in government agencies, and (ii) assurance of sustainability as the counterpart team trained under the TA had been transferred to NAA to function as the key senior technical audit group. 115. The fourth TA (Strengthening Public Financial Management [TA cluster]) is ongoing, so the impacts cannot be assessed yet. It is expected to improve governance in public financial management by supporting the modernization of fiscal (budget) management and audit. The TA will strengthen capacity of the newly established NAA, MEF, and priority ministries in expenditure management and in designing a medium-term expenditure framework to link medium-term development objectives to the annual budget process. In addition, ADB and the World Bank have jointly prepared a document, Integrated Fiduciary Assessment and Public Expenditure Review, outlining the necessary actions for improving revenue mobilization, reducing fiduciary risk to public funds, rationalizing public expenditure policy and management to better focus on high-priority areas, and undertaking comprehensive civil service reform. 116. In sum, the effectiveness of the CAPs for governance in achieving reform outcomes in the key governance areas is still evolving, with significant outcome achievement through the implementation of the Audit Law. Its implementation directly links to anti-corruption, as it was often cited by the Government and funding agencies as a significant contribution to fighting corruption. The ongoing assistance in public financial management and decentralization is expected to reinforce the outcomes achieved so far. 117. Lessons and Recommendations. (i) Experience shows that reform actions involving passage of legislation need sufficient time to allow for consensus building and explanation to stakeholders. TAs of this type should build in a period of time for experts to transfer skills and return to revise draft laws and policies as in the case of the Audit Law. (ii) The TA cluster approach adopted for public financial management is an appropriate modality to address constraints in a sequencing and synchronizing manner. (iii) The CAPs seem to be more reflective of the countrys socioeconomic issues than the COS in terms of addressing governance issues. The CAPs provided assistance for governance not only as a crosscutting component in selected projects in some sectors, but also as stand-alone ADTAs and a project36 to address some governance issues directly. (iv) There is a need to pursue governance issues not only at the project level, but also at the policy dialogue level to ensure government commitment, particularly to addressing widespread corruption. The large structure of civil service with low salaries is generally viewed as causing subsistence corruption, in which people are corrupt out of dire need. But a much more problematic type of corruption is high level, institutionalized corruption which diverts substantial resources from government
36

ADB. 2002. Report and Recommendation of the President to the Board of Directors on a Proposed Loan and Technical Assistance Grant to the Kingdom of Cambodia for the Commune Council Development Project. Manila.

35 revenue. This type of corruption needs strong government commitment to resolve. (v) Strong government commitment is also needed to facilitate the passage and implementation of the Anti-Corruption Law. B. Development Effectiveness: Progress toward Achieving Country Strategy Objectives

118. The results of the impacts of the CAPs lending and nonlending programs by sector/theme evaluated in section A are fed into this section by synthesizing them under each of the COS objectives (subsections 15) to determine the CAPs development effectiveness in making progress toward achieving the COS objectives. Recommendations for more effective results of interventions are made at the end of each subsection. Since the COS has three periods, they are combined into one whole period by combining their common and overlapping objectives. As a result, the first-order (overriding) objective can be identified as the shift from rehabilitation to poverty reduction, with the following four second-order objectives (priority areas): (i) capacity building and institutional strengthening, (ii) HRSD, (iii) agriculture growth and rural development, and (iv) sustainable economic growth and PSD. A logic model classifying the projects and ADTAs under each of these objectives is shown in Figure 2. 119. At this stage, this section can only assess the achievement of some intermediate sector outcomes under each objective of the COS. In other words, only progress toward achievement rather than actual achievement of the COS objectives can be assessed for the following reasons: (i) since some of the COS objectives are broad and long term by nature (e.g., agriculture growth, and sustainable economic growth), they can be cumulatively affected by many structural factors, so it is not feasible to quantify to what extent they are improved by the sector outcomes achieved so far; (ii) it is also not feasible to distinguish the extent to which the COS objectives have been attained as a result of the outcomes from ADB assistance versus those from other funding agencies, unless ADB assistance is region-specific or ADB is the major funding agency in that particular sector; (iii) the outcomes are also prone to exogenous factorssome factors that have already affected them include frequent floods and droughts, the 1997 political disruptions, the Asian financial crisis, and loss of tourism due to severe acute respiratory syndrome; and (iv) the insufficient number of completed projects (five of which have been evaluated by PCRs and the other five recently completed in 2003), together with the short time span since completion, makes it too early to assess the achievement as many sector outcomes are still evolving and are in the process of contributing to achieving the COS objectives. 120. Given the reasons above, it is also not feasible at this stage to assess the contributions of the CAPs lending and nonlending programs to achieving the COS overriding poverty reduction objective. What can be done is to examine the extent to which project design addressed poverty reduction. This is done at the end of each subsection below, prior to the paragraph on recommendations. According to ADBs project classification system (November 2000), poverty issues are multidimensional. As such, project design that can be regarded as contributing to poverty reduction should address one or some of the following poverty dimensions: (i) well-being (food security, nutrition, shelter, basic health, social security, and immediate assistance in emergency situations); (ii) economic opportunities (access to productive resources, employment, economic infrastructure, and markets); (iii) knowledge (education, training, skills, information, and technology); and (iv) rights (empowerment, participation, justice in terms of legal protection and equal treatment under the law, and social protection).

36

Figure 2: A Logic Model for Evaluation of Loans and Advisory and Operational Technical Assistance under Country Assistance Programs (19922002) by Objective of the Three Periods of Country Strategy Combined

From Rehabilitation to Poverty Reduction

Capacity Building & Institutional Strengthening

0% Loans

HRSD

Agriculture Growth & Rural Development

Sustainable Economic Growth & PSD

50% - Power Rehabilitation (94) - Provincial Power Supply (00) - Financial Sector Program (Subprogram I) (01) - Financial Sector Program (Subprogram II) (02) - Siem Reap Airport (96) - GMS: Phnom Penh-Ho Chi Minh City Highway (98) - Primary Roads Restoration (99) - GMS: Cambodia Road Improvement (02) - Special Rehabilitation Assistance (92) - Emergency Flood Rehabilitation (00) - GMS: Mekong Tourism Development (02)

26% - Basic Skills (95) - Basic Education Textbook (96) - Education Sector Development (01) - Education Sector Investment Project (01) - Basic Health Services (96) - Health Sector Support (02) - Phnom Penh Water Supply & Drainage (96) - Provincial Towns Improvement (99)

24% - Agriculture Sector Program (96) - Rural Infrastructure Improvement (95) - Rural Credit & Savings (00) - Stung Chinit Irrigation & Rural Infrastructure (00) - Northwestern Rural Development (01) - Tonle Sap Environmental Management (02) - Commune Council Development (02)

ADTA = advisory and operational technical assistance, AIDS = acquired immunodeficiency syndrome, GMS= Greater Mekong Subregion, HIV = human immunodeficiency virus, HRSD = human resources and social development, PSD = private sector development, TA = technical assistance.

Figure 2Continued

From Rehabilitation to Poverty Reduction

Capacity Building & Institutional Strengthening

28% ADTAs - Strengthening Macroeconomic Management (92) - Statistical System Development (94) - Strengthening Capacity in Development Planning (95) - Capacity Building in External Aid Management (96) - Capacity Building in Development Planning, Phase II (97) - Strengthening External Aid Portfolio Management (99) - Statistical System Development, Phase III (99) - Institutional Support for National Economic Policy Management (01) - Engagement of a Poverty Consultant at the Cambodia Resident Mission (02) - Dissemination of the National Poverty Reduction Strategy (02) - Seminar on Bank's Operational Policies and Procedures in Cambodia (92) - Training Seminar in Bank Policies and Procedures (96) - Improvement of Project Implementation in Cambodia (99) - Women in Development (94) - Capacity Building for the Ministry of Women's and Veterans' Affairs (99) - Sustainable Employment Promotion for Poor Women (02) - Establishment of a Central Procurement Office and Regulations and Procedures for Procurement of Goods (94) - Institutional Strengthening of the Department of Public Procurement (95) - Developing Capacity in Audit and Inspectorate Function(96) - Strengthening Public Financial Management (TA Cluster) (01)

HRSD

Agriculture Growth & Rural Development

Sustainable Economic Growth & PSD

40% - Strengthening the Institutional and Legal Framework for the Energy and Mineral Sectors (94) - Power Sector Manpower Development and Training (94) - Developing the Strategy for the ADB's Involvement in Cambodia's Power Sector (99) - Develop a Strategy for Management of Provincial Power Supplies (00) - Institutional Strengthening of the Centre for Banking Studies and State-Owned Banks' Staff Training (95) - Strengthening Capacity in the Trade and Industry Sectors (96) - Enhancing Banking Skills (97) - Capacity Building for Banking and Financial Management (01) - Improving Legal Infrastructure in the Financial Sector (02) - Improving Insurance Supervision (02) - Transport Rehabilitation Study (93) - Developing a Planning Capability in the Ministry of Public Works and Transport (95) - Institutional Strengthening of the State Secretariat of Civil Aviation (96) - Project Preparation and Implementation Assistance to the Ministry of Public Works and Transport (99) - Strengthening the Maintenance Planning and Management Capabilities at Ministry of Public Works (99) - Capacity Building in Public-Private Partnerships for Transport (00) - Transport Sector Strategy (01) - Project Implementation in the Transport and Agriculture Sectors (92) - Project Management Coordination and Project Implementation in the Power and Education Sectors (93) - Extension of Project Implementation Assistance under the Special Rehabilitation Assistance Loan (95) - Strengthening Tourism Planning (99) - Building Capacity in Tourism Planning (00) - Private Sector Assessment (02)

14% - Emergency Training of Teachers (93) - Basic Education Management and Coordination (95) - Capacity Building for Technical and Vocation Education and Training (95) - Textbook Publishing Planning and Management (96) - Secondary Education Investment Plan (99) - Education Strategic Support (00) - Performance Management in the Education Sector (02) - Managing Basic Health Services (96) - Capacity Building for HIV/AIDS Prevention and Control (00) - Reaching the Rural Poor with Primary Health Care (02) - Water Supply and Sanitation Sector Needs Assessment Study (93) - Urban Development Strategy Study (95) - Institutional Support to the Water Supply Subsector (96) - Integrated Social Sectors Study (02)

18% - Agricultural Development Options Review (93) - Agricultural Policy Reform Support (96) - Implementation of Land Legislation (00) - Strengthening of the Ministry of Rural Development (95) - Rural Credit Review (96) - Capacity Building for Rural Financial Services (99) - Capacity Building in the Ministry of Water Resources and Meteorology (99) - Strengthening Environmental Impact Assessment Procedures and Capabilities (94) - Institutional Strengthening and Expanding Environmental Impact Assessment Capacity (96) - Improving the Regulatory and Management Framework for Inland Fisheries (02) - Capacity Building of the Inland Fisheries Research and Development Institute (02)

37

38 1. Capacity-Building and Institutional-Strengthening Objective

121. The capacity building objective was a common second-order objective (priority area) for the 1992 IS and 1995 COS, signifying the need to rebuild the peoples capacity and countrys institutional system, which had disintegrated in two decades of civil war. This was reflected in large shares of ADTAs (in value terms) provided in the first two periods of the CAPs. Although the 2000 COS did not specify capacity building as one of its second-order objectives, the third period of the CAPs also witnessed a large share of ADTAs for this purpose. 122. The main evaluation findings in subsection A.12 point to the conclusion that over the whole period 19922002, the majority of the stand-alone, capacity-building ADTAs (20% of the total ADTA amount), particularly in macroeconomic and external aid management and development planning, were able to deliver many useful outputs (e.g., training provided, and reports and plans produced). But they were less effective in terms of achieving outcomes (e.g., improved management and organizational systems conducive to results-based performance). This was because most of the TAs equated capacity building with improving technical skills at the individual level, rather than improving the functioning and resourcing systems at the institutional level for the entire organization. Even at the individual level, in many cases, the skills trained had not been internalized before the consultants left. Critics of institutional development failure in Cambodia have argued that improved governance or public sector reform, particularly civil service reform, is a prerequisite for successful capacity building and institutional strengthening.37 The ineffective civil service system has been characterized by too low salaries, bloated civil service, lack of motivation, and party politics. 123. Although improved governance was not considered explicitly as one of the COS objectives in any of the three COS periods (but implicitly, as an unwritten agenda, cutting across some sectors in the 2000 COS), the CAPs provided some capacity-building ADTAs for improved governance, particularly in procurement, audit, and public financial management. However, given the small number and low value of these TAs, the outcomes achieved to date (e.g., improved transparency and accountability associated with the establishment of NAA and of internal audit functions in government agencies), which resulted from the passage of the Audit Law, are still evolving (subsection A.14). 124. In sum, the progress of the CAPs toward achieving the capacity-building objective of the COS is generally regarded as less effective because the institutional development outcomes were not achieved by the majority of the stand-alone, capacity-building ADTAs, particularly those in macroeconomic and external aid management and development planning. 125. In terms of potential contributions of the CAPs to poverty reduction through TA design, the linkages between capacity-building TAs and poverty reduction are weak because, by nature, the TAs had to focus on providing training to government agency staff, rather than to the poor. 126. Recommendations. The design flaw in the majority of the stand-alone, capacitybuilding ADTAs, which focused on improving individual technical skills, should be replaced by a broader approach, focusing on institutionalizing skill transfers and on improving organizational management and budgeting systems. Without effective organizational systems, individuals are unlikely to function well even though they have acquired better technical skills. However, this
37

Godfrey, M., C. Sophal, T. Kato, et. al. 2000. Technical Assistance and Capacity Development in an AidDependent Economy: The Experience of Cambodia. Cambodia Development Resource Institute Working Paper No. 15. Phnom Penh.

39 broader approach does not ensure significant institutional development impacts unless it is preceded by various aspects of public sector reform to improve governance, in particular civil service reform (footnote 37). Provision of a program loan and some ADTAs in the CAPs pipeline (20032006) for decentralized public sector management is appropriate, but a close link with civil service reform to be assisted by the World Bank should be established. Without proper administrative and remunerative structures of the civil service system, decentralization alone is unlikely to result in sustainable outcomes. ADB should closely coordinate with the World Bank for the right timing of the program loan. 2. Human Resources and Social Development Objective

127. The HRSD objective was explicitly identified as one of the second-order objectives of the 2000 COS, but implicitly assumed under the social infrastructure objective of the 1992 IS and under the increased access to growth benefits objective of the 1995 COS. During the rehabilitation period, the key concern over the HRSD issue was human resources bottleneck associated with a missing generation of skilled people. As such, a project and an ADTA were provided for this purpose, which contributed to reforms in TVET. After that, projects and ADTAs for the education sector focused on basic education. 128. The CAPs lending and nonlending programs that addressed the HRSD objective covered several sectors, including education, health, and WSS. The main evaluation findings in subsections A.4A.6 indicate that during 19922002, the well-coordinated series of projects and ADTAs for the education sector, adopted through the SWAp, were highly successful in building up a strong basic education subsector. Some of the outputs included (i) increased access to textbooks by about 3 million primary and secondary students in 6,000 schools nationwide, and to teacher guides and training by about 70,000 teachers (cofinanced by UNICEF); (ii) increased access to enrollment in primary schools by 0.5 million poor students; and (iii) increased recurrent education budget share from 10.2% in 1996 to 18.4% in 2002. Some of the outcomes included greater education quality and efficiency in various aspects: (i) increased promotion rates to the next primary and secondary grades for an additional 650,000 students, saving the Government and parents an estimated $16 million annually; and (ii) reduced grade 1 and grade 6 dropout rates during 19972001 (from 6.8% to 1.7%, and from 10% to 1.5%, respectively) and repetition rates (from 39% to 12%, and from 15% to 3.2%, respectively). There is only one recently completed project each in the health and WSS sectors. The outputs produced so far are expected to contribute to achieving sector outcomes in the future. 129. In sum, the CAPs progress toward achieving the HRSD objective of the COS is considered highly effective due to the substantial outcomes achieved in the education sector as a result of the long-term commitment of the CAPs though a series of well-coordinated lending and nonlending programs adopted under the SWAp. 130. In terms of potential contributions of the CAPs to poverty reduction through project design, projects addressing HRSD are regarded by ADBs project classification system (November 2000) as contributing to poverty reduction through improving knowledge (education and training) (para. 120). The ESDP and the Health Sector Support project were classified as PI in terms of project design, while the Basic Health Services project had PR as its secondary objective in project design (Appendix 2, Table A2.1). The former implies that the proportion of project beneficiaries who were poor was larger than the countrys poverty incidence (footnote 15). The latter implies that the components designed to benefit the poor accounted for at least

40 20% of the total project cost (footnote 14). The pro-poor design of the ESDP has contributed to some aspects related to poverty reduction in the project areas (e.g., the additional 0.5 million children enrolled in primary schools constituted about 40% increase in primary school enrollment in the poorest 300 communes). Thus, the CAPs lending and nonlending programs under the HRSD objective of the COS have potential in contributing to poverty reduction in the future, at least in the project areas. 131. Recommendations. Now that much has been achieved in terms of access to primary education, future assistance should build on the previous achievement by (i) improving the quality of primary education, especially reducing the remaining high repetition rate at grade 1; (ii) providing demand-driven training opportunities to a large number of dropout and out-ofschool youths at the community level, particularly in the areas required for agro-based SME development; and (iii) improving both access and quality of secondary education, which is the level of education necessary for building up a competitive workforce, while exploring publicprivate partnership options. In the health sector, since the World Banks role has been perceived as prominent by the Government, the Government indicated to the CAPE mission that ADB should consider phasing out. Alternatively, given ADBs satisfactory health sector performance to date, ADB might try to increase the value of its involvement in the health sector, as well as in rural WSS, by concentrating its assistance in the Tonle Sap basin. Gender should be mainstreamed for greater impacts on improved social inclusion and peoples capabilities. 3. Agriculture Growth and Rural Development Objective

132. The agriculture growth and rural development objective was explicitly identified as one of the second-order objectives of the 2000 COS, but implicitly assumed under the physical infrastructure objective of the 1992 IS and under the sustainable economic growth objective of the 1995 COS. After a decade of development, agriculture growth has actually declined from 1.9% in 1992 to a contraction of 2.7% in 2002 (averaging a 0.7% contraction in 20002002), part of which can be explained by exogenous factors such as frequent floods and droughts. Numerous structural constraints also play a role, including insufficient access to rural roads, credit, land, irrigation, and other inputs; and lack of agriculture diversification and commercialization. 133. The CAPs lending and nonlending programs that addressed the agriculture growth objective covered several other sectors, such as rural development and water resources, and natural resources and environmental management. The main evaluation findings in subsections A.1A.3 indicate that during 19922002, the only completed program loan in the agriculture sector contributed to the food security outcome. Other outcomes (e.g., improved agriculture productivity and growth) are yet to be achieved. However, considering the fact that it was formulated during a very difficult time, with severe shortages of capable government staff and about one third of the country was still inaccessible, the delivery of outputs in terms of the implementation of various reform measures, including the revised Land Law, is regarded as satisfactory because it assisted Cambodia in the transition to a market-based economy. Subsequent implementation of the revised Land Law, together with the continued assistance through follow-up program and project loans, is expected to facilitate agriculture growth. In the rural development sector, there is also only one recently completed project for improving rural infrastructure. A number of outputs generated (e.g., rehabilitation of 1,172 km of rural roads, 144 school buildings, and 15 rural markets) had led to achievement of outcomes, e.g., travel time saved (2 hours versus the whole day) and more time left for work. In this sector, the scope of one ongoing project on rural credit had been reduced substantially, with a large portion of the loan (75%) canceled, due to (i) the application of stringent rules to NGOs attempting to become

41 licensed MFIs, and (ii) limited demand for funds from the MFIs. Many NGOs preferred to operate outside the system. This raised concern over the design and timing of the project, during which the necessary financial conditions and environment for successful project implementation were not in place. In the natural resources and environmental management sector, the project in the Tonle Sap region has just started. 134. In sum, except for the ongoing project on rural credit, which has encountered a large loan cancellation due to low disbursements, some useful outcomes have been achieved by the completed projects and potential outcomes are expected. Thus, the CAPs achievement of these sector outcomes under the agriculture growth objective of the COS can generally be regarded as evolving and effective so far. 135. In terms of potential contributions of the CAPs to poverty reduction through project design, projects addressing agriculture growth are regarded by ADBs project classification system (November 2000) as contributing to poverty reduction through improving economic opportunities (increased access to productive resources, employment, economic infrastructure, and markets) (para. 120). One of the projects assessed above (Rural Infrastructure Improvement) had PR as its secondary objective in terms of project design (Appendix 2, Table A2.1), implying that the components designed to benefit the poor accounted for at least 20% of the total project cost (footnote 14). The pro-poor design of this project, which increased peoples access to rural roads and markets, has contributed to some aspects related to poverty reduction in the project areas (e.g., increased household incomes of the rural poor by about 30%). The revised Land Law under the ASP is expected to provide land tenure and ownership to millions of poor people after its implementation. Thus, the CAPs lending and nonlending programs under the agriculture growth objective of the COS have potential in contributing to poverty reduction in the future, at least in the project areas. 136. Recommendations. To enhance the likelihood of these outcomes contributing to the agriculture growth objective, the following should be done: (i) facilitating the implementation of the revised Land Law; and (ii) rigorously addressing the various structural constraints (para. 132) in the future CSP to enhance agriculture productivity and competitiveness, while focusing on pro-poor sustainable development at the same time, through improved natural resources and environmental management for sustainable rural livelihoods. The latter is already being addressed and planned in the pipeline, with the focus on the Tonle Sap basin. 4. Sustainable Economic Growth and Private Sector Development Objective

137. It is widely recognized that sustainable economic growth is a necessary, though not sufficient, condition for sustainable poverty reduction. The sustainable growth objective was explicitly identified as one of the second-order objectives of the 1995 COS, but implicitly assumed under the physical infrastructure objective of the 1992 IS and under the PSD objective of the 2000 COS. After a decade of development, Cambodia has achieved a reasonably high annual economic growth, averaging 6.5% during 19922002 (Appendix 1, Table A1.1). The growth, however, slowed down to 5.5% in 2002 and is expected to be around 45% in 2003 and 2004, depending on the performance of agriculture, exports, and FDIs. In addition to the exogenous factors, many structural constraints appeared to have limited Cambodias competitiveness potentialboth in the agriculture and nonagriculture sectorsthus preventing economic growth from being sustained. These constraints include (i) low agriculture growth (with an annual average contraction of 0.7% in 20002002) because of insufficient access to essential inputs and rural infrastructure, and lack of agriculture diversification and commercialization; (ii) narrow-based economic growth, concentrated in garments exports (33%

42 of GDP and 73% of total exports in 2002) and tourism (8% of GDP in 2002); (iii) high import content of garments exports (more than 50% in 2002) and tourism (76% in 2002); (iv) low levels of labor-intensive FDIs ($150 million in 2001) and too few SMEs due to a poor transport system, high production costs (e.g., electricity tariffs, telecommunication cost, and labor cost usually paid in dollars), inadequate labor skills, and the high transaction costs of conducting business associated with weak governance (e.g., lack of judicial, legal, and regulatory frameworks conducive to PSD); and (v) too low domestic savings (averaging 10% of GDP in 19982002) to mobilize capital for expanding domestic demand and market. 138. The CAPs lending and nonlending programs that addressed the sustainable economic growth objective covered several sectors/themes, including finance, transport, power, the GMS Program, and PSD. The main evaluation findings in subsections A.7A.11 indicate that during 19922002, the outcomes achieved under the FSPL Subprogram I (e.g., increased public confidence in the banking system as reflected in increased nonenterprise deposits and decreased average interest rates), which resulted from the adoption of various legal and regulatory reform measures, are well on the way to facilitating PSD and, hence, economic growth. The outcomes (e.g., travel time saved by more than half, and reduced transport cost) achieved under the three road projects, two of which belong to the GMS Program, together with the road component of the SRA project, are expected to help stimulate economic growth by facilitating more movement of people, trade, and other economic activities. The power projects outcomes (e.g., reduced system losses) are also expected to help facilitate economic growth through increased electricity supply to meet consumer demand in the project areas. 139. In sum, given the results assessed above, the CAPs achievement of the sector outcomes under the sustainable economic growth objective of the COS can generally be regarded as evolving and effective so far. 140. In terms of potential contributions of the CAPs to poverty reduction through project design, projects addressing sustainable economic growth are regarded by ADBs project classification system (November 2000) as contributing to poverty reduction through improving economic opportunities (increased access to productive resources, employment, economic infrastructure, and markets) (para. 120). One of the projects assessed above (Primary Road Restoration) had PR as its secondary objective in terms of project design, while the GMS: Cambodia Road Improvement was classified as PI in project design (Appendix 2, Table A2.1). The former implies that the components designed to benefit the poor accounted for at least 20% of the total project cost (footnote 14). The latter implies that the proportion of project beneficiaries who were poor was larger than the countrys poverty incidence (footnote 15). Thus, the CAPs lending and nonlending programs under the sustainable economic growth objective of the COS have potential in contributing to poverty reduction in the future, at least in the project areas. 141. Recommendations. To enhance the likelihood of these outcomes contributing to the sustainable economic growth objective in the future, the following should be done: (i) rigorously addressing the structural constraints inhibiting sustainable economic growth (para. 137) in the future CSP; and (ii) given the structural constraints of (a) low agriculture growth over the past decade, which was also affected by the vagaries of the weather; (b) high concentration of economic growth in garments exports and tourism over the past decade; and (c) the high import content of both garments exports and tourism, ADB should assist Cambodia through ETSW to explore other sectors/subsectors (both agriculture-related and nonagriculture), which show strong potential in driving sustainable economic growth, and to develop a competitiveness strategy for Cambodia to realize this potential.

43

142. It is particularly crucial to do so at this stage as the country has recently joined WTO, with the phasing out of the garment export quota by 2005, and the adoption of other forms of trade liberalization. There is no other way to cushion such changes, but to enhance the countrys competitiveness position and strengthen PSD by exploring and developing more potential subsectors.38 Some of these subsectors should be supporting subsectors for tourism and garments in order to reduce their import content.39 Once the right subsectors have been identified, ADB should assist in developing some of these subsectors through SMEs development, especially agro-based ones. But to gain much larger employment generation and export diversification impacts, PSD through labor-intensive FDIs needs to be strengthened. ADB should provide nonlending assistance in the finance/trade sector for policy reforms and improving legal and regulatory frameworks to attract more private FDIs. 5. Overriding Objective: From Rehabilitation to Poverty Reduction

143. Two decades of war and political conflicts had devastated Cambodia and reduced the country to a post-conflict society by the time of the signing of the Paris Peace Accord in October 1991. The country had various problems requiring emergency resolution, including seriously depleted stocks of physical and human infrastructure, low government absorptive capacity, and a fragmented financial sector (Appendix 1, para. 2). The 1992 IS evolved in response to these problems, thus identifying rehabilitation as its first-order objective. Three second-order objectives, through which the corresponding CAPs would operate at that time, were identified as physical infrastructure, social infrastructure, and capacity building. The rehabilitation stage was replaced by a transition stage during the mid-1990s, when the World Bank redefined Cambodia from a post-conflict to normal society and ADB provided a full-fledged 1995 COS (Appendix 1, para. 5). The overriding objective was, therefore, changed from rehabilitation to poverty reduction, which has been maintained in the current 2000 COS. The second-order objectives of both periods of the COS thus focused more on long-term development issues (e.g., sustainable economic growth, agriculture development, and HRSD) to facilitate transition to a market-based system and poverty reduction, rather than emergency rehabilitation in physical and social infrastructure. However, there is a lack of clarity in the COS as to how the achievement of these second-order objectives will contribute to the overriding poverty reduction objective. 144. After a decade of development and proliferation of external assistance, Cambodia remains one of the poorest countries in the world, despite achieving a reasonably high average economic growth of 6.5% per year over 19922002. In 2002, GDP per capita ($296) was only marginally higher than in 1992 ($219). Poverty incidence during 19972000, the most recent years for which official data exist, was 36% compared with 39% in 1993. The human poverty index was 42.8% (ranking 73rd out of 94 countries) in 2001, while the human development index was 0.556 (ranking 130th out of 175 countries). To be able to reduce poverty substantially, the high annual average growth rate of 6.5% achieved so far has to be sustained, with pro-poor, sustainable development for progressive distributional impacts. This is unlikely as growth started to decline to 5.5% in 2002, and is expected to be around 45% in 2003 and 2004 due to
38

Current statistics show that the subsectors that have good potential to grow include toys, footwear, food processing, and electronics/electrical appliances. 39 Information from the CAPE mission reveals that coffee and tea plantations/production can be a promising supporting subsector for the tourism sector. At present, both coffee and tea are grown in Rattanakkiri in the northeast of the country. Unfortunately, Cambodia cannot derive any benefit from them because there has been no support either for their production or marketing. As a result, most of the products are smuggled to Viet Nam at low prices and exported from there.

44 the numerous structural constraints mentioned in para. 137. Unless these constraints are dealt with rigorously, sustainable poverty reduction will not be easy to achieve. 145. In terms of the CAPs achievement of sector outcomes under each of the four secondorder objectives of the COS, although the assessment in subsections 14 shows mixed results (e.g., less effective in achieving the capacity-building objective, highly effective in the HRSD objective, and evolving and effective so far in the remaining two objectives), they are dominated by the effective and evolving results, rather than the less effective ones. Thus, the CAPs overall achievement of these sector outcomes under these objectives can generally be regarded as evolving and effective/efficacious so far (para. 179). In other words, the CAPs have put the COS into practice reasonably well in terms of program and project formulation and implementation, with things generally done right. 146. The CAPs achievement of sector outcomes under each of the four second-order objectives of the COS is expected to contribute to the COS overriding poverty reduction objective. However, since it is not feasible to identify the extent of such contributions at this stage due to the reasons given in para. 119, what can be done is to examine the linkages of each of the four second-order objectives to the overriding poverty reduction objective through project design to determine the proportion of project beneficiaries who are poor. As examined in subsections 14, some of the projects assessed so far either had PR as their secondary objective or focused on PI in terms of project design. In addition, the pro-poor design of some projects have contributed to some aspects related to poverty reduction in the project areas (paras. 130 and 135). These results imply good prospects in contributing to poverty reduction in the future, at least in the project areas. 147. Recommendations. To enhance the likelihood of these outcomes contributing to achieving the second-order objectives of the COS and, hence, its overriding poverty reduction objective, the future CSP should (i) rigorously address the structural constraints to achieving sustainable economic growth (para. 137); (ii) address pro-poor, sustainable development at the same time; (iii) provide more assistance to improve governance; and (iv) establish a set of measurable intermediate target indicators for both outputs and outcomes by sector, classified under each of the COS objectives and linked to poverty reduction and other MDGs. This will assist in the monitoring and evaluation of the achievement of the COS objectives. It will also help clarify how the achievement of the second-order objectives will lead to the overriding poverty reduction objectives and other MDGs. At present, the absence of such indicators by sector, linked to each of the COS objectives, makes it difficult for this CAPE study to evaluate the CAPs performance. This study has to establish many outcome indicators on its own and tried to collect primary data for such indicators in order to justify the evaluation. Although both projects and ADTAs are required to provide target indicators in their logical frameworks, often the indicators were incomplete, and many outcome indicators were not used by PCRs/TCRs. Many PCRs/TCRs ended up rating the projects or TAs as effective/successful, based mainly on the achievement of outputs, rather than outcomes. VI. EVALUATION OF COUNTRY ASSISTANCE PROGRAMS: PORTFOLIO AND STAKEHOLDER PERFORMANCE

148. This chapter assesses other aspects of the CAPs performance, such as portfolio and stakeholder performance. The latter includes aid coordination, and ADB and government performance. Much of the development outcomes achieved in many DMCs generally resulted from cumulative efforts of stakeholders or development partners (DPs) (Figure 1). It is generally not feasible to distinguish the extent to which these outcomes resulted from the assistance of a

45 specific DP, unless there has been only one major DP in that sector, or if the assistance is region specific. Moreover, the presence of exogenous factors can also deter the achievement of expected outcomes or reduce the potential results of the outcomes that have been achieved earlier. Thus, it is important to assess stakeholder performance, while taking into account the role of exogenous factors. Recommendations are made at the end of each section below. A. 149. Portfolio Performance of Lending and Nonlending Programs This section assesses portfolio performance of the CAPs ongoing projects and TAs. 1. Loan and Technical Assistance Portfolio Performance

150. As of 31 December 2002, the loan portfolio for Cambodia consisted of 23 ongoing public sector ADF loans, 21 of which were project loans, with a net loan amount of $526 million.40 Three loans were delegated to the Cambodia Resident Mission (CARM) for administering in 2002.41 There were 8 PPTAs and 19 ADTAs ongoing in the TA portfolio for Cambodia, totaling $16.1 million. As for TA resource utilization, Appendix 2, Table A2.2 (note a) shows that two PPTAs did not lead to loans mainly because the EAs did not have sufficient capacity to implement the projects. However, since only 2 out of the 29 PPTAs did not result in loans (10% in value terms), the PPTA resources can just about be said to have been utilized efficiently, although they would have been better utilized if the issue of insufficient EA capacity had been addressed before a PPTA was proposed for inclusion in the project pipeline. 2. Project Performance Ratings

151. As of 31 December 2002, the overall rating of the ongoing loans in the portfolio was found to be generally satisfactory; two loans were rated by PPRs as highly satisfactory42 and the rest satisfactory in terms of achieving development objectives. In terms of implementation progress, two loans were rated as highly satisfactory,43 one partly satisfactory,44 and the rest satisfactory. According to the ADB report cited in footnote 40, there was one problem loan (the partly satisfactory loan) and one potential problem loan45 out of the 23 ongoing loans. Thus, the proportion of the loans considered at risk was 9%. The portfolio performance in terms of PPRs of ongoing loans in Cambodia as of 31 December 2002 was slightly better than the regional average and much better than the ADB-wide average (Appendix 3, Table A3.1). 3. Financial Performance

152. Contract Awards. Appendix 3, Table A3.2 shows that the contract award ratio of all active loans in 2002 ($64 million) was 86% of the projected $75 million. The contract award ratio of project loans ($45 million) was slightly lower81% of the projected $55 million. There were

40

ADB. 2003. Annual Report on Loans and Technical Assistance Portfolio Performance for the Period Ending 31 December 2002. Manila. 41 However, as of December 2003, two more loans were delegated to CARM, totaling five delegated loans (Appendix 2, Table A2.1, note a). 42 Including the Basic Education Textbook Project and the Financial Sector Program (Appendix 2, Table A2.1). 43 Including the Basic Skills Project and the Basic Education Textbook Project (Appendix 2, Table A2.1). 44 This refers to the Rural Credit and Savings Project (Appendix 2, Table A2.1). It was rated as partly satisfactory because $15 million was cancelled due to lack of demand from credit-operator NGOs (para. 45). 45 This refers to the Provincial Towns Improvement Project (Appendix 2, Table A2.1). It was identified as a potential problem loan in 2002 due to long delays at the beginning, although it had a satisfactory rating.

46 delays in obtaining award approvals from EAs and MEF. However, the contract award ratio of all active loans in 2002 was 24%, above the ADB-wide average of 18% for ADF loans. 153. Disbursement Ratio. Table A3.2 also shows that in 2002, Cambodias disbursement performance of all active loans was good at $79 million, or 106% of the projected $74 million. For project loans only, disbursements reached $59 million, or 108% of the projected $55 million. The disbursement ratio of all active loans was 30% in 2002, higher than the ADB-wide average of 22%. Without the fast-disbursing program loans, the ratio was lower for project loans (26%). A comparison of Cambodias and the ADB-wide disbursement ratio trends of all active loans is shown in Appendix 3, Table A3.3 and Figure A3.1, in which Cambodias overall disbursement ratio trend was generally better than the ADB-wide average. It peaked at 37% in 1995 before declining sharply to 7% in 1997 due to the freezing of aid programs of many funding agencies following the withdrawal of the first Prime Minister during that year. After the new elections and the formation of the new government in 1998, the ratio increased to 21%, reaching 30% in 2002. When the fast-disbursing program loans are not included, Table A3.3 and Figure A3.2 show that Cambodias disbursement ratio trend of project loans was still better than the ADB-wide average. The trend was lower than when the fast-disbursing program loans were included, except for 19971999 when there were no program loan disbursements. 154. Audit Compliance. The timeliness of submission of audited project accounts and agency financial statements improved slightly in 2002 from 2001. Of the 13 loans requiring submission of audited accounts, 11 fully complied with the relevant covenants, 1 complied late (within 6 months), and 1 did not comply. This issue was also addressed in a joint portfolio action plan. 4. Country Portfolio Review

155. ADB, through CARM, has conducted an annual joint country portfolio review (CPR) with the Government and the World Bank twice. This found that project implementation, especially disbursement performance, had improved in recent years. However, capacity building was still required, mainly to train staff, improve project readiness, harmonize local bidding documents and procedures, and standardize operating guidelines and manuals. Other issues that led to poor implementation performance included poor performance by consultants and contractors, the improper use of imprest accounts, the late release of counterpart funds, and centralized decision making with regard to the approval procedure of payment to contractors. A joint portfolio action plan was prepared to address these issues. A working group was also formed to meet regularly to monitor progress of the joint action plan. 156. In sum, although Cambodia may have two projects at risk (9% of the portfolio in 2002) compared with none in 2001, these were offset by another 9% of the portfolio which was rated by PPRs as highly satisfactory in both development objectives and implementation progress. Other aspects of Cambodias portfolio performance (contract awards, disbursements, and audit compliance) continued to be good and were above ADB-wide average, with the joint efforts in the CPR. Cambodias overall portfolio performance is considered satisfactory (para. 184). 157. Lessons and Recommendations. (i) Prior to identifying a loan for inclusion in the pipeline and its PPTA, the readiness of the agency selected as the EA to implement the loan should be ensured so that the TA will result in the loan. (ii) The partly satisfactory rating in terms of implementation progress of the ongoing project on rural credit also points to the nonreadiness of the countrys financial environment at that time, e.g., conducive rules and regulations for NGOs to become licensed MFIs.

47 B. Aid Coordination

158. Given Cambodias heavy dependence on external assistance, with most of the fiscal deficits financed by foreign grants and borrowings, strong aid coordination is needed to enhance development effectiveness of the overall assistance. Although overall strategies and objectives of funding agencies may be considered collective in moving toward the countrys objectives (Appendix 4), collective actions or coordination among them remain weak. This is due to the lack of an agreed development agenda, and to the complicated government structure of aid coordination (Appendix 1, para. 16). Two government agencies are responsible for aid coordinationMEF coordinating loan activities, and CDC (under MEF) coordinating grant activities. There is also an Inter-Ministerial Steering Committee to Strengthen Development Cooperation Partnership, established in 2001, chaired by a vice chairperson of CDC. MEF and CDC do not always communicate effectively and are sometimes bypassed by funding agencies, which go directly to the Council of Ministers or the Prime Minister. In the absence of a clear overall framework for funding agency activities, duplicative efforts and piecemeal activities have spread across the country and sectors. One instance of duplicative efforts led to parallel preparation of the World Bank-supported NPRS and the constitutionally required SEDP-II supported by ADB (Appendix 1, para. 21)both of which are government official documents for poverty reduction. For a time, two officials in MOP were responsible for the separate preparation of SEDP-II and NPRS, with the latter ultimately transferred to the Council for Social Development, chaired by MOP. The failure to simply extend SEDP-II to form the NPRS highlights the weakness of funding agency coordination. However, ADB has been working closely with the Government to make NPRS aligned with SEDP-II and with the Governments existing development strategies. 159. Since 1996, the World Bank has been leading the coordination of the Consultative Group (CG) meetings. The mid-term CG meetings, co-chaired by the Government, have been under the rotating chairpersonship of ADB and the United Nations Development Programme, in close collaboration with the World Bank. The CG meetings concentrate on five reform areas/sectors: (i) governance, focusing on anti-corruption and legal/judicial reform; (ii) public administration reform; (iii) fiscal management reform; (iv) social development reform; and (v) natural resources management reform, which has tended to concentrate on forestry issues. Each of these sectors has a working group that meets quarterly with the Government. Recently, one additional working group (on partnership), chaired by the Government, was added. ADB used to be an informal co-chair of the forestry working group, but due to its minimal role in the forestry subsector, has withdrawn from this role in order to use its time more productively. 160. In sum, existing aid coordination remains weak and is regarded as partly satisfactory (para. 184). However, ADB, DFID, and the World Bank are now working closely to improve the CG working group system and harmonize their country strategies and assistance programs. 161. Recommendations. Funding agencies have overburdened the Government either with piecemeal activities or different/duplicative agendas. Thus, all concerned DP groups should coordinate more closely at the strategic level to enable the Government to be in the drivers seat in developing a country-led, holistic/comprehensive development framework. The framework should be results-based, driven by intermediate output and outcome targets46 in the sectors under agreed second-order strategic objectives, linked to the overriding poverty reduction objective and other MDGs. This will allow the progress toward achieving the intermediate sector targets, second-order objectives, and overriding poverty reduction objective and other MDGs to
46

These targets and their associated indicators to be specified should be consistent with SEDP-II and NPRS.

48 be monitored over time and adjusted as needed. With this framework, assistance can be divided among DPs to reach subsets of the intermediate sector targets in various stages in a coherent and complementary manner.47 This results-based framework should then be adopted as the framework for preparing the CSP so that a subset of intermediate sector target indicators under ADB assistance will be specified, with clear linkages to the MDGs (through the second-order objectives) as a way to internalize MDGs. The results-based framework can also be used as a mechanism to prioritize sectors by selecting the sectors with good performance in reaching the outcome results.48 C. Asian Development Bank Performance

162. ADB early assistance to Cambodia since November 1992, before the 1993 elections, was greatly appreciated by the Government. Since ADB resumed its operations, it has generally been regarded by the Government as the lead funding agency in Cambodia due to (i) early assistance during the hardship period, especially as the first funding agency to provide an emergency loan; (ii) continued assistance with a clear lead role in some social and physical infrastructure sectors; and (iii) an understanding of the needs of the country and people. 163. At the project level, ADB performance was generally found to be satisfactory in the five completed projects evaluated by PCRs (three of which were evaluated by PPARs as well). The main reasons lie in expeditious project preparation and approval, flexibility in adjusting financing plans to accommodate local budget constraints, and facilitation of project implementation through frequent review missions, regular meetings with EAs, and annual joint CPR mission conducted by CARM and the World Bank since 2001. However, more attention to ADB staff continuity in project design and implementation should be paid to improve both ADB and project performance. In terms of project design, it is generally considered satisfactory, except for two projects.49 There was also a significant shift in project design to increase the proportion of project beneficiaries who are poor, in response to ADBs adoption of PRS. In the nonlending program, ADB performance in the 8 ADTAs evaluated by TPARs and the 25 ADTAs evaluated by TCRs was generally found to be satisfactory, mainly because TA implementation was closely monitored and supervised through multiple review missions. However, one TPAR on four ADTAs in development planning and national statistics regarded ADB performance as only partly satisfactory due to a failure to undertake an institutional assessment of the changed roles of MOP after the 1993 elections. 164. At the program level, ADB performance is considered satisfactory in terms of policy dialogue and program formulation. Successful engagement in wide-ranging policy dialogue, facilitated by the presence of CARM, has led to the passage of various laws (Banking Law, Audit Law, Forest Law, and Land Law) as part of ADBs Law and Policy Reform program. Program formulation is regarded as satisfactory because of the long-term commitment, with a clear lead role in a number of sectors/subsectors. These results also benefited from the creation
47 48

A simple mathematical presentation of this framework is in Appendix 6. The use of this framework will also be consistent with the operating principles of ADBs Long-Term Strategic Framework, which stresses (i) country leadership of the development agenda, (ii) long-term approach to development assistance, (iii) strategic partnership to ensure greater selectivity and complementarity, and (iv) development of intermediate target indicators toward achieving the long-term goals to measure the impacts of operations (Appendix 1, para. 27). 49 One project (Rural Credit and Savings) encountered a large loan cancelation (75% of the total loan amount) due to fewer than expected NGOs applying for licenses (para. 45). Another project (Provincial Towns Improvement) encountered a less serious design problem in terms of cost overrun (23% of the total project cost) due to the change in the scope of civil works (para. 63).

49 of the country team. The Government and other funding agencies appreciated ADBs lead role in coordinating funding agencies in some sectors, especially the education sector in which a long-term programmatic approach, through the SWAp, was used. Through the SWAp, ADB initiated a sequence of well-designed ADTAs, prior to projects, by providing long-term technical experts to develop the necessary technical and planning capacity in MOEYS, and prepare the education sector strategy and action plan with key MOEYS staff to ensure government ownership. A strong link was established with MEF to ensure budget availability. The action plan identified phased and costed investment activities, through which funding agencies could coordinate more closely to select activities for assistance in a coherent manner to avoid duplication, with MOEYS being in the drivers seat. 165. In addition, ADBs lead role in the road and finance sectors, as well as in public financial management, decentralization, and water resources, has also been well recognized. ADB has been active in the road sector since the beginning due to the rehabilitation focus at that time. In the finance sector, the FSB and the FSPL completed subprogram provided useful legal and regulatory frameworks to facilitate PSD. ADBs role has been increasing in agriculture and natural resources, in which key policy reforms were provided through the ASP, including the revised Land Law. Continued reform efforts in agriculture are being made through a follow-up program loan with an attached project. In natural resources, a geographic approach, led by ADBs Tonle Sap basin strategy, has been adopted for sustainable rural livelihoods improvement. In health, there has been continued coordination with NGOs as subcontractors for services delivery, and funding agencies as cofinanciers (DFID and the World Bank). The SWIM approach is used in the ongoing health project, with a common sector strategy and mutually agreed management arrangements among funding agencies and MOH. As for cofinancing, out of the 26 projects approved in 19922002, 10 were cofinanced. 166. In sum, based on the assessment above, overall ADB performance both at the program and project levels is regarded as satisfactory (para. 184), but more efforts are needed to improve ADB performance below. 167. Recommendations. In addition to enhancing strategic alliances through increased coordination at the strategic level (para. 161), ADB should try to coordinate more with key funding agencies at two more levels: (i) At the dialogue level, collective policy dialogue should be pursued with the Government to avoid inconsistencies in the implementation of policy reforms, and to put pressure on them for improved governance and corruption control. (ii) At the technical working group level, detailed intermediate target indicators by sector should be worked out, and cofinancing possibilities explored. However, the following constraints have been observed: (a) lack of management and technical capacity in line ministries, hindering them from leading funding agency coordination in each sector; (b) lack of technical/program staff from funding agencies, including ADB, in the field to facilitate regular working group meetings in particular sectors; and (c) lack of staff continuity in funding agencies, including ADB, due to frequent transfers. The following actions should be considered: (a) providing in-house technical experts to give long-term management and technical training with skill transfers to relevant line ministries, and professional advice to key government agencies (e.g., MEF); and (b) relocating some technical/program staff and activities to Cambodia, and avoiding frequent staff transfers. D. Government Performance

168. At the project level, government performance was generally found to be satisfactory in the five completed projects evaluated by PCRs (three of them were evaluated by PPARs). This was mainly because in the three projects evaluated by PPARs, loan covenants were satisfied

50 and, except in the SRA project, counterpart funds were available on time. The PCRs of the remaining two completed projects found compliance with loan covenants, government ownership, adequate provision of audited accounts and counterpart funds, documentation of project implementation, and progress reports. In the nonlending program, government performance in the 8 ADTAs evaluated by TPARs and the 25 ADTAs evaluated by TCRs was generally found to be satisfactory in terms of ownership, management, and provision of logistical support and counterpart staff. However, one TPAR on four ADTAs in development planning and national statistics regarded government performance as partly satisfactory because the Government was a passive receiver and had failed to resolve the duplication of the PIP functions in concerned government agencies. 169. At the program level, overall government performance improved during the 1990s as macroeconomic management strengthened, and familiarity with ADB requirements and procedures increased. The major concerns in regard to government performance lie in the government ineffective organizational arrangements for aid coordination (para. 158), and limited absorptive capacity resulting in part from weak revenue generation, which limits the amount of counterpart funds and current budget for sustaining the projects. 170. In sum, considering both the project and program levels and the fact that the Government has been trying to improve revenue (from 6% of GDP in 1992 to 11% in 2002), government performance can be regarded as satisfactory (para. 184), but at the lower end of the range because fiscal deficit remains high (increasing from 3.5% of GDP to 6.5% over this period). 171. Recommendations. More efforts are needed from the Government to (i) generate more revenue, particularly through improved tax collection and administration; (ii) reallocate public expenditure toward the priority sectors; (iii) increase efficiency and transparency in budget utilization; and (iv) reduce the complicated organizational arrangements for more effective aid coordination. E. Nongovernment Organization Role

172. During 19922001, NGOs provided 8% of the total external assistance to Cambodia in terms of disbursements (Appendix 4, Table A4.1). In 2003, there are about 200 international NGOs and more than 800 domestic NGOs of varying sizes registered with the Ministry of the Interior. In 1986, international NGOs formed the NGO Forum on Cambodia in Europe, which was relocated to Phnom Penh in 1994. Prior to the 1993 elections, in 19791981, international NGOs concentrated on providing emergency relief operations. In 19821992, they focused on supporting the rehabilitation efforts and providing assistance to the Vietnamese-backed government. After the 1993 elections, they returned to a more traditional role and were joined by a growing number of domestic NGOs, which had been active in the areas of human rights and democracy prior to the 1993 elections. Given their heavy involvement during the difficult times, they have become an important voice for civil society. Current activities of both international and domestic NGOs span most sectors, including health, social and rural development, and womens affairs. International NGOs also provide training for domestic NGOs. 173. The NGOs collective role in promoting socioeconomic development has been recognized by the Government and the funding agency community. NGOs also have representation in the CG meetings and work as DPs in some funding agencies projects. However, there are bound to be some tensions between them as NGOs seek to maintain an independent stance, permitting themselves criticism of funding agencies and an advocacy role

51 on chosen issues. A 2001 World Bank report on civil society suggested that ADB and the World Bank have a comparative advantage in working with the Government to improve its capacity to engage with civil society. A report in the same year prepared by the NGO Forum on behalf of the Asian NGO Coalition recommended that ADB, IMF, and the World Bank (i) clearly define what they mean by participation and consultation and how they can be measured, (ii) be more active in sharing information about their activities, and (iii) facilitate NGO participation in steering committees that oversee activities supported by them. 174. In sum, NGOs have been playing an important role in Cambodia, as a voice of civil society. ADB established the NGO Center at headquarters in February 2001 and, through a participatory consultation process, formulated a new regional framework50 for more effective cooperation among ADB, governments, and NGOs, and for greater involvement of NGOs and civil society in the design, implementation, and monitoring of ADB programs and projects. CARM holds periodic meetings with the NGO community and has an officer designated as the NGO focal point. 175. Recommendations. Although NGOs have so far been involved in many ADB projects to Cambodia,51 ADB should try to optimize the role of NGOs by involving them more in future projects, such as SME development and other areas as appropriate. F. Exogenous Factors

176. Over the past decade, Cambodias macroeconomic performance was held back by many exogenous factors: (i) a slowdown in economic growth from 6.8% in 1997 to 3.7% in 1998 due to the 1997 political disruptions, resulting from the withdrawal of the first Prime Minister and subsequent freezing of assistance programs of many funding agencies (including ADB), aggravated by the 1997 Asian currency crisis; (ii) a contraction in agriculture growth of 0.7% annually in 20002002, due partly to frequent floods and droughts; and (iii) 20% fewer tourist arrivals in the first half of 2003 (and hence lower revenue collection), due partly to riots in January in Phnom Penh and the fears of severe acute respiratory syndrome in the early months of the year. VII. SUMMARY EVALUATION RESULTS AND RATING

177. This chapter summarizes the evaluation findings of the COS and CAPs performance. As mentioned in para. 8, the COS performance can only be assessed in terms of responsiveness (chapter III), while the CAPs performance can be assessed in terms of all five evaluation criteriaresponsiveness (chapter IV), effectiveness (chapter V), institutional impacts (chapter V) and other performance (chapter VI), efficiency, and sustainability. The CAPs performance in terms of efficiency and sustainability has not been assessed in any of these chapters, but is assessed in sections CD below.

50 51

ADB. 2003. ADB-Royal Government of Cambodia-NGO Cooperation: A Framework for Action 20032005. Manila. Including involvement in (i) the two health projects as subcontractors for services delivery; (ii) the Rural Credit and Savings project as MFIs; (iii) the Phnom Penh-Ho Chi Minh City Highway, Primary Road Restoration, and Emergency Flood Rehabilitation projects to monitor the implementation of the resettlement action plans, and to educate contractors workers and villagers on the human immunodeficiency virus/acquired immunodeficiency syndrome; and (iv) the Northwestern Rural Development project to undertake capacity building and livelihood programs.

52 A. Responsiveness/Relevance

178. At the strategic level, the objectives/priority areas of the combined three periods of the COS are found to be highly responsive to ADBs strategic thrusts and national development strategies (paras. 13 and 15). But they are regarded as responsive, rather than highly responsive, to the countrys socioeconomic issues because the 2000 COS did not address governance explicitly and assumed that agriculture development was the only source of sustainable economic growth (para. 19). At the program level, the CAPs lending and nonlending programs are found to be responsive to the COS priority areas in terms of program balance (para. 25), though loosely structured with too many sectors. The CAPs lending program in terms of project design is found to be highly responsive to the shift in ADBs strategic thrusts to focus on poverty reduction (para. 29). Although there are three highly responsive cases and two responsive cases (Table 5), the COS and CAPs during 19922002 are considered responsive/relevant because the two responsive cases are the most important characteristics of the COS and CAPs.52 This implies that both the COS and CAPs have generally done the right things, with the right choices of objectives. Table 5: Summary Evaluation Results and Rating
Overall Results a Rating Scale R 2 HR HR R R HR E Et LL
c

Evaluation Criteria 1. Responsiveness/Relevance of COS and CAPs - Responsiveness of COS to ADB's Strategic Thrusts - Responsiveness of COS to National Dev. Strategies - Responsiveness of COS to Country's Socioeconomic Issues - Responsiveness of CAPs to COS Objectives - Responsiveness of CAPs to ADB's Strategic Thrusts 2. Effectiveness/Efficacy of CAPs 3. Efficiency of CAPs 4. Sustainability for CAPs 5. Institutional Dev. Impacts and Other Performance of CAPs Overall Rating

Weight 0.20

WRb 0.4

2 2 1 2

0.25 0.20 0.20 0.15

0.5 0.4 0.2 0.3 1.8d

M S

ADB = Asian Development Bank, CAP = country assistance program, COS = country operational strategy, Dev. = development, E = effective/efficacious, Et = efficient, HR = highly responsive/relevant, LL = less likely (partly satisfactory), M = moderate (satisfactory), OED = Operations Evaluation Department, R = responsive/relevant, S = successful, WR = weighted rating. There are four rating scales for each evaluation criterion: 3 = highly successful/satisfactory, 2 = successful, 1 = partly successful, and 0 = unsuccessful.
b a

OED's rating system is adopted as follows: WR > 2.5 means highly successful, 2.5 >=WR=>1.6 means successful, 1.6 > WR => 0.6 means partly successful, and WR < 0.6 means unsuccessful.

Other performance includes portfolio and stakeholder performance (aid coordination, and ADB and government performance). The full score of WR for overall rating is 3.0.

52

A good COS should really reflect the countrys socioeconomic issues, and good CAPs should reflect the COS priority areas.

53 B. Effectiveness/Efficacy

179. Although the effectiveness of the CAPs lending and nonlending programs during 1992 2002 is found to be mixed in achieving sector outcomes under each of the four COS objectives, more successful cases are found than less successful ones and many outcomes are still evolving. Thus, the CAPs overall achievement of these sector outcomes is regarded as evolving and effective/efficacious so far (para. 145), with potential to contribute to achieving the COS objectives in the future. This indicates that the CAPs have generally done things right/well. C. Efficiency

180. Findings include various aspects of efficiency in resource utilization. At the project level, most of the projects were completed as planned, with minimum delays and full utilization of project facilities. Some projects had cost savings after completion. The ASP demonstrated efficient use of resources as counterpart funds were earmarked for continued implementation and monitoring of the reform measures after loan closing. Three education projects generated high internal and external efficiency. Two physical infrastructure projects had high economic internal rates of return and were prepared without PPTAs, thus saving both time and monetary costs. At the TA level, most of the 25 completed ADTAs evaluated by TCRs were found to utilize the given resources efficiently to achieve the desired results. The eight completed ADTAs evaluated by TPARs were generally found to be efficient, with four efficient, two highly efficient, and two less efficient cases. The PPTA resources were also generally utilized efficiently, though 2 out of 29 PPTAs did not lead to loans. 181. At the program level, ADB has been adopting the performance-based allocation system for ADF-borrowing countries since 2001 to ensure greater efficiency in resources utilization. The base-case lending level can be adjusted upward or downward by up to 20%, depending upon better or poorer economic and portfolio performance than the base case.53 An annual average of $64 million was proposed as the base-case lending for 20032005, and $58 million for 2004 2006. The decrease, however, did not imply poorer performance than expected, but tighter ADF resources. In terms of actual lending to Cambodia, its annual average was about $54 million prior to 2001, and $96 million during 20012002, averaging about $61 million over 19922002. The actual lending level to Cambodia is considered efficient given the desired outcomes achieved so far. It also compares favorably with average ADF lending to other DMCs of similar population sizes. Overall CAPs lending and nonlending programs during 19922002 are considered efficient in terms of resource utilization. D. Sustainability

182. At the project/TA level, many completed projects and ADTAs were considered by PCRs/PPARs and TCRs/TPARs as having reasonable prospects of financial sustainability. At the program level, however, the overall prospects are not very promising due to government financial constraints. Although government revenue rose from 6% to 11% of GDP during 1992 2002, total expenditure rose more from 9.5% to 17.6%. The fiscal deficit thus increased from 3.5% to 6.5%, most of which has been financed by external grants and borrowings. While

53

Under the base-case scenario, macroeconomic stability is maintained, the execution of budget implementation for each of the four priority sectors is in line with overall budget performance, portfolio performance is in line with the agreed-upon targets, and progress is made in forest management and prevention of illegal logging.

54 relying heavily on external financing, the Government has limited capacity to provide current funds for investment projects as current expenditure increased only slightly from 9.2% to 10% of GDP over 19922002. 183. Appendix 5 shows that during 19942002, the Government tried to reallocate current expenditure away from defense and security (with a decreased share, from 62% to 28%) toward priority sectors. Although the shares of education, health, and agriculture/rural development and natural resources doubled (from 9% to 18%, 5% to 10%, and 2% to 4%, respectively), their monetary values remained low. The rapid increase in the share of the others category (from 14% to 28%) raises concern over the lack of transparency in the activities being funded. Moreover, many current expenditure items are included under capital expenditure, and funding agency-supported projects may finance some current expenditure. Further, since the countrys disbursement procedures are not very efficient, many funding agency-supported projects are operated outside the budget, with implications for sustaining the projects after completion. Thus, overall financial sustainability prospects for the CAPs completed projects are considered less likely (partly satisfactory). More efforts are needednot only to increase revenue, but also to restructure more public expenditure toward the priority sectors as well as increase efficiency and transparency in budget utilization. E. Institutional Development Impacts and Other Performance

184. Most of the support for institutional development was provided through nonlending ADTAs, some of which were attached to projects, while many were stand-alone. Although some TAs, such as those attached to education projects, might have produced large capacity-building and institutional development impacts, the majority of the stand-alone ADTAs are found to be less effective in doing this as they tended to focus on improving individual technical skills (para. 102). However, other performance (portfolio and stakeholder performance) is found to be satisfactory. Various aspects of portfolio performance continued to be satisfactory and were above the ADB-wide average (para. 156). ADB performance is satisfactory mainly in terms of project implementation, program formulation, policy dialogue, and its lead role in some physical and social sectors (para. 166), though aid coordination remains weak (para. 160). However, ADB, DFID, and the World Bank have started working together to harmonize their country strategies and programs, and to improve the CG working group system. Government performance is also satisfactory, especially in terms of project implementation and compliance, though at the lower end of the range as more efforts are needed to increase revenue, utilize revenue more efficiently, and improve the aid coordination system (para. 170). Although the results under this criterion of the CAPs performance are mixed, given many positive results and efforts to improve aid coordination, overall results are considered moderate (satisfactory). F. Overall Rating

185. Based on the evaluation findings summarized under the five evaluation criteria above, the overall COS and CAPs for Cambodia during 19922002 are considered successful. VIII. CONCLUSIONS

186. This chapter identifies key strengths and weaknesses of the COS and CAPs, and draws lessons and makes recommendations at the strategic and program levels.

55 A. Key Strengths

187. Responsiveness and Timeliness. Responsiveness and timeliness of the COS and CAPs to the countrys development needs have been highly appreciated by the Government. ADB was the first funding agency to provide lending assistance in 1992 for massive rehabilitation in response to Cambodias emergency needs, in physical and social infrastructure, at the time when the country had virtually no financial or skilled human resources. This was followed by large nonlending support to set the macroeconomic planning of the country on the right course. In 2000, when the country experienced a once-in-100 years flood, ADB quickly developed a big emergency flood relief project. In normal times, ADB assistance has also been responsive to the countrys development needs. 188. Long-Term Development Modalities. The significant achievement of development outcomes in the education sector, through the adoption of the SWAp, demonstrates the value of long-term, comprehensive, and well-coordinated lending and nonlending programs. A new program loan planned in the pipeline is appropriate in consolidating the policy reforms achieved under the current ESDP. In the health sector, the SWIM, which is a step toward the SWAp, is adopted. The finance sector pioneered the cluster FSPL, sequencing the lending program to achieve a set of long-term goals, with its second phase planned in the pipeline. In the agriculture sector, a new program loan with a project component are provided in 2003 for continuation of policy reforms. The adoption of a geographic focus on the Tonle Sap basin, with a series of interventions, will facilitate sustainable rural livelihoods improvement. In public financial management, a TA cluster approach is adopted. 189. Efficient Program Size. The size of the CAPs over the years, averaging $61 million per year for loans, $1.4 million for PPTAs, and $4.7 million for ADTAs, is considered efficient in producing the desired outcomes. The loan size compares favorably with the average ADF lending to other DMCs of similar population sizes. It is also considered sufficient to enable ADB to exercise influence for essential policy reforms, especially in the agriculture, education, and finance sectors in which program loans have been provided. 190. Regional Capacity. The GMS Program has strong potential to contribute to achieving sustainable economic growth. This is demonstrated by the outcomes of its assistance in improving the transport network and customs regimes between Cambodia and neighboring countries, together with its planned assistance, which includes provision of cheaper electricity from Viet Nam. 191. Policy Dialogue. Successful policy reforms resulted from continued efforts of policy dialogue. The presence of CARM helped facilitate the passage of various laws (Banking Law, Audit Law, Forest Law, and Land Law), and other policy reforms required under the program loans. 192. Portfolio Performance Management. Cambodia has had strong portfolio performance (contract awards, disbursements, audit compliance, and implementation progress) compared with other countries in the region and the ADB-wide average, except in 1997 when it was affected by political instability. The presence of CARM helped facilitate progress in portfolio performance, including the annual conduct of the joint CPR with the World Bank, and the administration of five delegated projects. B. Key Weaknesses

193. Failure to Explicitly Address Governance in the COS Priority Areas. Ineffective public sector institutions and corruption are generally regarded as the biggest constraints to

56 sustainable economic growth. Improved governance through public sector reform was not addressed explicitly in the 2000 COS as one of its priority areas. This is particularly important in the case of Cambodia where public institutions were destroyed during the long period of civil war. 194. Weak Aid Coordination. Ineffective aid coordination has led to (i) piecemeal development results, duplicative efforts, and overburdening of the Government; (ii) reduced opportunities for mobilizing cofinancing; (iii) inconsistencies in the implementation of some policy reforms; and (iv) absence of collective dialogue with the Government to put pressure on improving governance to control corruption. 195. Weak Capacity-Building and Institutional-Strengthening Design. The CAPs provide no direction as to what the ideal capacity-building and institutional-strengthening approach should be. As a result, many ADTAs focused on providing training to build up technical capacity at the individual level, while ignoring institutional strengthening, with the result that institutions as a whole failed to function effectively. Moreover, there was lack of demand and readiness on the government side to institutionalize skill transfers for sustainability purpose. In some cases, consultants spent too much time producing policy and planning documents, leaving little capacity built. 196. Lack of Intermediate Sector Indicators in the CAPs to Monitor Progress toward the COS Objectives and MDGs. Although all projects/ADTAs are required to identify measurable, intermediate output and outcome indicators in the project/TA frameworks, no effort has been made at the program level to establish a summary output and outcome indicators based on the project/TA frameworks by sector under the corresponding second-order objectives (priority areas) of the COS for monitoring the progress every few years toward achieving the COS objectives and MDGs. Such an absence means that the CAPs lack clarity on how the lending and nonlending programs under the 10 sectors/subsectors can work coherently to achieve the COS overriding poverty reduction objective through its second-order objectives. 197. Inadequate Knowledge Management. There is no systematic management of knowledge to compile and disseminate information and lessons learned from past experience in order to improve future design and implementation of projects and TAs. C. Lessons Learned

198. Based on the evaluation findings at the strategic and program levels in chapters IIIVI, this section derives lessons at both levels. Lessons learned at the project/sector level have already been identified for each sector/theme at the end of chapter V.A. 199. Development Effectiveness Reduced by Weak Governance. The lack of a clear strategy and substantial efforts to reform the public sector and improve governance early lessened the institutional development impacts of many ADTAs. 200. Development Effectiveness Reduced by Weak Aid Coordination. Ineffective aid coordination reduced the institutional development impacts of many ADTAs, particularly to MOP on the preparation of the PIP and SEDP-II. The PIP was not used as an effective budget planning tool due to the competitive role of other government agencies. SEDP-II was superseded by the World Bank-led NPRS. 201. Development Effectiveness Reduced by Narrow Approach to Institutional Strengthening. Since many of the stand-alone, capacity-building ADTAs narrowly focused on

57 improving technical skills at the individual level, institutions as a whole have remained weak in terms of the management, operational, functioning, and budgeting systems. 202. Development Effectiveness Achieved through Long-Term Commitment. The successful experience of ADBs assistance in the education sector demonstrates the value of long-term, comprehensive, well-integrated lending and nonlending programs through the adoption of the SWAp. Other long-term modalities adopted in other sectors/subsectors also have good promise. 203. Difficulties in Evaluating the CAPs Performance due to the Lack of Intermediate Sector Outcome Indicators Linked to the COS Objectives. Without an established set of such indicators in the CAPs, this CAPE study has encountered difficulties in evaluating the CAPs performance as many PCRs/TCRs tended to rate projects/TAs as successful, based mainly on achievement of outputs rather than outcomes. Thus, the CAPE mission had to collect and identify many outcome variables on its own to justify the evaluation results and rating. D. Implications for Future Strategy and Programs of the Asian Development Bank

204. This section identifies development challenges as implications for the new CSP, based on the recommendations at the strategic and program levels provided at the end of various sections/subsections in chapters IIIVI. 205. Need to Explore Cambodias Potential in Other Sectors/Subsectors to Enhance Competitiveness and Sustainable Economic Growth. With Cambodia joining WTO and subsequent repercussions on its garments exports and trading system, the impacts can be cushioned by assisting the Government in developing a competitiveness strategy to explore potential sectors/subsectors (both agriculture-related and nonagriculture) for SMEs development and attracting more FDIs required for greater employment and export diversification impacts (footnote 38). Due to the heavy import content of garments and tourism, sectors/subsectors that support these two sectors should receive special attention (footnote 39). 206. Need to Adjust the Priority Areas of the 2000 COS to Allow Sustainable Economic Growth to be Achieved not only through Agriculture, but also through PSD in Other Potential Subsectors. In the new CSP, agriculture growth should continue to be one of the COS priority areas and one of the sources driving sustainable economic growth, but not the only source. To rely only on one sector, which is frequently affected by natural calamities, is too risky. A risk-cushioned strategy is needed. The proposed adjustment in the priority areas of the 2000 COS is shown in the form of a logic model in Figure 3. It stratifies the proposed COS objectives into three layers, linked to the lending and nonlending programs planned in the pipeline for 20032006. The more the layers, the clearer it shows how the lending and nonlending programs will contribute to the first-order objective, which should be sustainable poverty reduction, rather than just poverty reduction as in the 2000 COS. This can be achieved through two second-order objectives, which should reinforce each other, i.e., (i) broad-based, labor-intensive, sustainable economic growth with increased competitiveness; and pro-poor, sustainable development.

(ii)

58

Figure 3: A Sample Logic Model for Classification of Loans and Advisory and Operational Technical Assistance in the Pipeline (20032006) by Proposed Country Strategy's Objective

Sustainable Poverty Reduction

Broad-Based, Labor Intensive, Sustainable Economic Growth with Increased Competitiveness

Pro-Poor, Sustainable Development

Improved Governance through Public Sector Reform

Private Sector Development & GMS Cooperation

Agriculture Productivity & Competitiveness

Sustainable Rural Livelihoods through Natural Resources & Env. Mgt.

Increased Social Inclusion & Capabilities through HRSD

Loans

5%

58%

14%

14%
- Chong Kneas Environmental Improvement (04) - Tonle Sap Sustainable Livelihoods (06) - Rural Water Supply and Sanitation (03)a

9%
- Education Sector Development Program II (05)

- Decentralized Public Sector Management Program (06)

- Agriculture Sector Development Program (03) - GMS Power Transmission (03) - Agriculture Sector Development Project (03) - Financial Sector Program (Subprogram III) (04) - Northwest Irrigation Sector (04) - SME Sector Development Program (04) - Second Power Distribution (05) - GMS Telecommunications Backbone, Phase I (05) - Financial Sector Program II (Subloan I) (06) - Restructuring of Royal Railway of Cambodia & Rehabilitation of Track (06) - Transport Infrastructure Development (06)

ADTAs

38%

18%

21%
- Implementation of Land Legislation, Phase II (03) - Supporting Policy and Insitutional Reforms in the Agriculture Sector (03) - Master Plan for Agriculture Research (03) - Community Self-Reliance and Flood Risk Reduction (04) - Enabling Activities to Implement the Stockholm Convention on Persistent Organic Pollutants (05)

15%
- Study on Built Structures on Tonle Sap Fisheries (03) - Tonle Sap Management Organization (03) - Capacity Building of the Tonle Sap Harbor Management Authority (04) - Capacity Building for Decentralized Development of Rural Water Supply and Sanitation (03) - Health Financing for the Poor (04)

8%
- Education Sector Management (05)

- Harmonization of Implementation - Capacity Building for the Electricity Procedures (03) Authority of Cambodia (03) - National Statistics Development (03) - SME Sector Development Program (04) - Capacity Building in Policy Monitoring - Financial Sector Program Implementation (05) and Implementation (04) - Enhancing the Resettlement Legal - Establishment of a Railway Framework and Capacity Building (04) Authority in Cambodia (06) - Review of Communes/Sangkat Boundaries (04) - Decentralized Public Sector Management---Service Delivery (04) - Decentralized Public Sector Management---Policy and Administrative Reform (04) - Strengthening the Capacity of Government Audit Institution (05)

ADTA = advisory and operational technical assistance, Env. = environmental, GMS = Greater Mekong Subregion, HRSD = human resources and social development, Mgt. = management, SME = small and medium enterprise. The supplementary loan on Provincial Towns Improvement is not included here.

59 The former second-order objective (sustainable growth) can be achieved through three thirdorder objectives: (i) (ii) (iii) improved governance through public sector reform, creating an enabling environment for PSD and GMS cooperation, and agriculture productivity and competitiveness.

The latter second-order objective (sustainable development) can be achieved through two thirdorder objectives: (i) sustainable rural livelihoods improvement through natural resources and environmental management in the Tonle Sap basin,54 and increased social inclusion and capabilities through HRSD.

(ii)

With these proposed five third-order objectives (priority areas) for the COS, the six sectors for the CAPs proposed in para. 26 have almost a one-to-one correspondence with these COS objectives. An exception is the objective on PSD and GMS cooperation, which will include two sectorsfinance/trade and physical infrastructure. 207. Need to Adjust the Priority Areas of the 2000 COS to Address Governance Explicitly, Backed by Sufficient Assistance in the CAPs. Public sector reform to improve governance and fight corruption is too important to be treated only as an implicit agenda, cutting across sectors. It should also be spelled out explicitly as one of the COS priority areas (Figure 3), backed by sufficient assistance in the CAPs. In fact, the CAPs pipeline (20032006) provides for a program loan and some ADTAs in public sector reform without being part of projects/TAs in other sectors (para. 126), while the Poverty Reduction Partnership Agreement also explicitly addresses governance. Therefore, the new CSP should adjust the 2000 COS priority areas accordingly so that the COS will be consistent with the CAPs and the Poverty Reduction Partnership Agreement, though it should be the COS that leads the CAPs. Assistance for anti-corruption is also needed, but an analysis should be carried out first to enhance understanding of various aspects of corruption in the Cambodian context. 208. Need for a More Focused and Coherent Program. For more effective results, a more focused program is needed, based on ADBs comparative advantage (e.g., sector performance and extent of ADB involvement in that sector relative to other funding agencies), together with the countrys demand. Thus, the 10 sectors/subsectors identified in the 2000 COS and adopted by subsequent CSPUs (20012003) might be narrowed down to around 6 (para. 26). 209. Need to Improve Aid Coordination. There are positive signs of improved aid coordination as ADB, DFID, and the World Bank have started to work together to harmonize their country strategies and programs, and to improve the working group system. However, more needs to be done, particularly in pursuing collective policy dialogue to avoid
54

The assistance to the Tonle Sap basin should not only be emphasized in terms of outputs to be achieved in the short and medium term (e.g., increased access to various productive resources). Its longer-term outcomes (e.g., increased food security, sustainable natural resources management, rural employment, and incomes) should also be equally emphasized. This implies that all of the COS objectives/priority areas and the CAPs interventions should have both short- and medium- as well as long-term prospects.

60 inconsistencies in the adoption of policy reforms, and to put pressure on the Government to fight corruption. 210. Need for a Broader Design of Institutional Strengthening. A broader design of institutional strengthening, focusing on improving the management, operational, functioning, and budgeting systems of institutions as a whole, is needed for better performance. An institutional diagnosis should be conducted first. A skill transfer and exit strategy should also be developed, and regularly monitored during implementation. 211. Need for a Targets-Driven/Results-Based CSP to Internalize MDGs. A set of intermediate output and outcome target indicators for each sector should be established in the CSP, linked to the COS priority areas and, thereby, to the MDGs. This will allow the CSP to be results-based such that progress toward achieving the MDGs can be monitored over time, and adjusted in time if something goes wrong. 212. Need to Increase the Role of Nonlending ETSW. The role of ETSW should be increased to (i) develop a competitiveness strategy (para. 205); (ii) analyze various aspects of corruption (e.g., nature, intensity, and antecedents) to be used as background information for effective assistance in anti-corruption; (iii) develop a cross-sectoral (sectorally integrated) strategy for the health and WSS sectors to increase synergies in reaching the overlapping sector outcomes if assistance in these sectors will continue in the future (e.g., in the Tonle Sap basin); and (iv) identify investment activities suitable for GMS cooperation, and demonstrate net benefits of GMS projects accrued to Cambodia and in adopting a regional versus a national approach to enable Cambodia to become well integrated into the regional/global system. 213. Need for a Well-Integrated GMS Program with the CSP. Now that the GMS strategy and RCSP have been developed, implementation of the latter, in close coordination with the CSP, is needed to ensure actual integration of GMS activities with the core program. Periodically, ADB should assess its role to maintain a catalytic function in the GMS initiatives by encouraging member countries to subsequently develop national ownership (e.g., through private sector involvement). 214. Need to Optimize the Role of NGOs. The role of NGOs should be optimized by getting them involved more in future projects, such as in SME development and other areas as appropriate. 215. Need to Improve Knowledge Management. A knowledge management system should be established (e.g., through the CARM web site) to compile and disseminate information on lessons learned so that these will be applied in the future. 216. Need to Mobilize Additional Resources. Given the decline in the ADF resources, ADB should help the Government mobilize additional resources through increased cofinancing. E. Recommendations for the Government

217. This section identifies development challenges for the Government, based on the recommendations provided at the end of relevant sections/subsections in chapters V and VI. 218. The Government should (i) generate more revenue, especially through improved tax collection and administration, to finance capital and current expenditures; (ii) adjust the structure of public expenditure to be more pro-poor; (iii) increase efficiency and transparency in budget

61 utilization; (iv) facilitate the passage and implementation of the Anti-Corruption Law, and commit to fight corruption; (v) explore ways to institutionalize skill transfers for sustainability of the training acquired under capacity-building TAs; (vi) improve the organizational arrangements for more effective aid coordination; and (vii) lead the countrys development agenda by developing a comprehensive, results-based development framework as the basis for coordinating all external assistance to avoid piecemeal results, and to increase development effectiveness in reaching the MDGs in a coherent manner.

62

Appendix 1

BACKGROUND TO CAMBODIAS SOCIOECONOMIC PERFORMANCE AND NATIONAL DEVELOPMENT STRATEGIES, AND ASIAN DEVELOPMENT BANK STRATEGIES A. Assessment of Socioeconomic Performance and Issues

1. This section assesses the socioeconomic performance of Cambodia during 19922002. The analysis is divided into three periods, in accordance with their distinct characteristics: (i) rehabilitation and restoration (19921995), (ii) transition and disruptions (19961998), and (iii) consolidation and structural change (19992002). Key issues identified in each of the three periods are used in chapter III.C in the main text, as a reference in assessing whether the priority areas identified in each period of the country operational strategy (COS) were responsive to the countrys socioeconomic issues at that time. 1. Rehabilitation and Restoration (19921995)

2. The long period of war and political conflicts left Cambodia with the following emergency issues: (i) fragmented financial sector; (ii) seriously depleted stocks of physical and human infrastructure, including the Governments low absorptive capacity and inadequate labor skills; and (iii) more than 350,000 returned refugees and 350,000 internally displaced persons and demobilized soldiers. The signing of the Paris Peace Accord in October 1991 marked the beginning of the rehabilitation of the Cambodian economy and society, including the restoration of relations with the international community. The overall thrust was reflected in the Asian Development Banks (ADB) early assistance to the country in 1992 to assist in special rehabilitation (footnote 3, main text). 3. Restoration of political stability was also needed. With the United Nations (UN)sponsored general elections in May 1993, a shaky coalition was formed between the Cambodian Peoples Party (CPP) and FUNCINPEC,1 which involved the appointment of two prime ministers. One of the important reforms prior to the elections took place in the financial sector. It was the opening up of the banking system to competition from foreign banks in 1989, frequently in joint-venture arrangements with the National Bank of Cambodia (NBC). After the first private commercial bank was established in 1991, the number of banks increased rapidly, thus contributing to the rapid increase in money supply of 214% and inflation of 102% in 1992 (Table A1.1). The Government began implementing a macroeconomic stabilization program in 1993, supported by the International Monetary Funds (IMF) Systemic Transformation Facility. It also formulated a broad national development strategy in March 1994 (subsection B.1). Meanwhile, problems in the banking system persisted, leading to several bank failures in the mid-1990s. It was not until IMF launched the enhanced structural adjustment facility, later referred to as the Poverty Reduction and Growth Facility (PRGF), and the World Bank the Structural Adjustment Program, covering 19941996, when these problems were addressed squarely. However, Cambodia seemed to have lost a few years in terms of financial development.2

An abbreviation of the French for National United Front for an Independent, Neutral, Peaceful, and Cooperative Cambodia. The experience of Cambodia during this period had profound consequences on the subsequent status of its financial sector. The hyperinflation and trouble in the banking system reduced confidence in the riel and brought about the phenomenon of dollarization. While hardly acknowledged, the high level of dollarization in Cambodia, combined with government policy to de-dollarize, has adversely affected the progress of financial development. Banks are caught in a dilemma arising from the conflict between NBCs intention to de-dollarize and the reality posed by wide acceptance and strong confidence in the dollar.

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4. The stabilization program was successful in maintaining a reasonably high economic growth rate, averaging about 6.8% per year over 19921995 (Table A1.1), with increasing revenue (from 6.0% to 7.8%) and falling inflation (from 102% to 7.8%). Because of increased development needs, the overall budget deficit widened (from 3.5% of gross domestic product [GDP] to 7.3% over this period), with a large increase in the share of capital expenditure (from 0.3% of GDP to 6.2%). Much of the development and economic growth during this period was driven by the rehabilitation of physical infrastructure as reflected in the fastest growth rate in construction, averaging about 20% per year, compared with other subsectors. As for social infrastructure, although it also needed immediate attention, one side effect of implementing a stabilization and structural adjustment program was a cut in social sector expenditure, including important subsectors such as health and education. This was aggravated by increased defense expenditure due to security concerns posed by the Khmer Rouge threat, which became isolated in border areas. 2. Transition and Disruptions (19961998)

5. This period marked Cambodias transition to a market-based system, beginning with a great deal of promise. The United States and the European Union granted Normal Trade Relations status to Cambodia in 1996 and 1997, sparking a surge in foreign direct investments, from $151 million in 1995 to $294 million in 1996 (Table A1.1), most of which was concentrated in the garments subsector. The share of garments exports increased markedly from 3% of total exports in 1995 to 16% in 1996. The World Bank also redefined its relationship with Cambodia from that of dealing with a post-conflict society to a normal client relationship in 1996. The Government promulgated the first medium-term plan in January 1997 (subsection B.2), committing to full transition to a market-oriented economy, and to reducing poverty. During this period, the Government implemented various policy reforms, including a new central bank law to give NBC a clearer mandate to maintain price stability, a new public enterprise law to reform public enterprises, and an open-skies policy to benefit an already booming tourism industry. 6. Despite the reform efforts, the main issues for this period involved (i) continued lack of physical infrastructure and human resources base, including the Governments low absorptive capacity and labor skills; (ii) weak governance because of corruption and power struggles between the leading political parties, resulting in low revenue collection (about 8% of GDP), especially from forestry, rubber, and taxation; (iii) environmental degradation with depletion of natural resources, especially in relation to illegal logging; (iv) high poverty incidence, with only a slight decline in the proportion of the population living below the poverty line from 39% in 1993 to 36% in 1997 (Table A1.2); and (v) a slowdown economic growth (averaging 5.2% per year compared with 6.8% in the first period, Table A1.1) due partly to a sharp drop in agriculture growth (from 3.3% in 1995 to 1.0% in 1996) resulting from natural calamities (e.g., heavy floods and droughts), and partly to political and economic disruptions. The political disruption resulted from a power struggle between CPP and FUNCINPEC that intensified by the end of 1996, culminating in the withdrawal of the first Prime Minister in July 1997, and subsequent freezing of assistance programs of many funding agencies. IMF closed its resident representative office owing to governance issues related to illegal logging. The situation was worsened by the economic disruption resulting from the 1997 Asian financial crisis. The riel tumbled against the dollar, economic growth declined from 6.8% in 1997 to 3.7% in 1998, and inflation almost doubled to 14.8%. The political impasse was resolved when elections were held in July 1998, resulting in another coalition government headed by a single Prime Minister from CPP, which was the senior partner of the coalition.

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3.

Consolidation and Structural Change (19992002)

7. In March 1999, the last of the Khmer Rouge leaders was seized by government forces, marking the end to the tragic legacy of the Khmer Rouge regime, which began in March 1970. The new government, formed after the 1998 elections, had gained international support, with resumed assistance for reforms from various funding agencies as well as admission to the Association of Southeast Asian Nations in April 1999. 8. The second medium-term plan, together with a new long-term strategy, was promulgated in June 2002, with a specific focus on poverty reduction (subsection B.3). A key policy measure during this period was the introduction of the value-added tax in 1999 to replace the turnover tax and consumption tax on imports, combined with improvement in the tax structure and administration under IMFs new PRGF (19992002), which brought about increased revenue (from 8% of GDP in 1998 to 11% in 2002, Table A1.1). Another critical measure was the implementation of the banking and financial institutions law in 1999, which provided a fundamental framework for banks operations and NBCs supervisory functions. The Land Law was enacted in July 2001 to address the issue of insecure land ownership, which had been an impediment to rural development and the use of land as collateral in financial transactions. Given political stability and the proliferation of plans, programs, and policies, the economy has been consolidated, with a rapid economic growth of about 7.3% per year over 19992002. The rapid growth was driven by the industry sectormainly the garments and construction subsectorswith an average annual growth rate of more than 20% compared with 0.4% in the agriculture sector, and 6.3% in the services sector during 19992002. The rapid growth was accompanied by significant structural change as reflected in a declining agriculture sector share (from 47% of GDP in 1998 to 36% in 2002) and a rising industry sector share (from 18% of GDP to 28%), while the services sector share remained roughly constant (36%). 9. Despite the achievement, economic growth slowed at the end of the period (5.5% in 2002 compared with an annual average of 7.8% during the preceding 3 years), and is expected to remain roughly at this level in 20032004. One of the key issues often cited as inhibiting sustained economic growth is continued weak governance and corruption. This has led to weak macroeconomic management as reflected in poor revenue performance, though slightly better than in earlier years. Forestry revenue was partially captured in the budget. In spite of pressure from IMF, World Bank, and nongovernment organizations, revenue from log exports did not flow through the budget. Delay in the privatization of rubber plantations resulted in the smuggling of rubber exports of about 30% because its exports were left under the control of provincial governors.3 During this period (19992002), the fiscal deficit rose from 3.8% of GDP to 6.5% (Table A1.1), most of which was financed by external assistance. On the expenditure side, the share of defense and security expenditure was about 40% of current expenditure in 19992000, while that of the combined priority sectors (agriculture and rural development, education, and health) was about half as much (24%). The full military demobilization program initiated in late 2001, with World Bank support, is expected to lead to significant budget reallocation toward the priority sectors. More than 40% of current expenditure has been taken up by salaries of civil servants. However, staff salaries remained so low that the civil service system has been very ineffective and heavily influenced by party politics. Salary supplementation is sought by all available means, with widespread corruption. This type of corruption is generally viewed as subsistence corruption, where people are corrupt out of dire need. A more problematic type of corruption is high level institutionalized corruption which diverts substantial resources from government revenue.
3

World Bank. 2000. Cambodia: Country Assistance Evaluation. Washington, DC.

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10. During this period, in addition to the governance issue, many other key structural constraints emerged, which had led to Cambodias weak competitiveness position both in the agriculture and nonagriculture sectors, thus inhibiting economic growth from being sustained. These structural issues included (i) low agriculture growth (which has in fact shown an average annual contraction of 0.7% over 20002002) due to insufficient access to rural roads, credit, land, irrigation, and other inputs; to lack of agriculture diversification and commercialization; and to uncontrollable weather; (ii) narrow-based economic growth, concentrating in tourism (8% of GDP in 2002) and garments exports (33% of GDP and 73% of exports in 2002);4 (iii) high import content of tourism (76% in 2002) and garments exports (more than 50% in 2002); (iv) low numbers of small and medium enterprises (SMEs) and low levels of foreign direct investments ($150 million in 2001) due to a poor transport system, high production costs (e.g., electricity tariffs, telecommunications cost, and labor cost usually paid in dollars), high transaction costs of conducting business associated with weak governance (e.g., lack of judicial, legal, and regulatory frameworks that would be conducive to private sector development [PSD]); (v) low domestic savings (averaging 10% of GDP over 1998-2002) and capital mobilization; (vi) overexploitation of natural resources and the environment, thus diminishing the sources of livelihoods for the poor, particularly around the Tonle Sap basin; and (vii) weak social inclusion and human resources base, including high population growth of about 2.5% per year over 19992002 and a population size of 13.5 million. All of these constraints contributed to Cambodias remaining high poverty. 11. Poverty in Cambodia is among the highest in the world. In 2002, Cambodias GDP per capita was $296. Other recent poverty indicators include a human development index of 0.556 (ranking 130th out of 175 countries) and a human poverty index 42.8% (ranking 73rd out of 94 countries) in 2001, while the most recent official data on poverty incidence was 36% in 19972001 (Table A1.2). Other recent poverty-related indicators in 2001 include adult literacy of 68.7%; primary and secondary school gross enrollment rates 90% and 23%, respectively; life expectancy at birth 57.4 years; child malnutrition 45%; infant mortality rate 64/1,000 live births; and maternal mortality rate 440/100,000 live births. To be able to reduce poverty substantially, the annual average growth rate of about 6.5% achieved over the entire period of 19922002 has to be continued in the long run, with diversification and equal distribution. This implies that the country will need to achieve broad-based, sustainable economic growth and sustainable development at the same time. The latter will ensure continued pro-poor access to and progressive distribution of the growth benefits. B. National Development Strategies and Plans

12. This section discusses Cambodias national development strategies and plans formulated during 19922002. Coincidentally, there are three sets of strategies and plans which can be considered as roughly corresponding to the three periods of the countrys socioeconomic situations analyzed in the preceding section, though not exactly covering the same years. These are (i) National Program to Rehabilitate and Develop Cambodia (NPRD), 19941995; (ii) First Socioeconomic Development Plan (SEDP-I), 19962000; and (iii) Long-Term Triangle Strategy, 20012015; SEDP-II, 20012005; and National Poverty Reduction Strategy (NPRS), 2003 2005. Priority areas of these national plans are listed below, which are used in chapter III.B in the main text, as a reference in assessing whether the COS priority areas in each of the three periods were responsive to the countrys national development plans at that time.

During 19922002, the annual average growth rate of tourism was about 16%, and garments about 35%.

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1.

National Program to Rehabilitate and Develop Cambodia

13. After the 1993 elections, the NPRD (199495)5 was prepared with ADB assistance.6 The overriding objective of the NPRD was to achieve sustainable economic growth with equity and social justice, with the focus on (i) increasing government absorptive capacity, (ii) restoring macroeconomic stability, (iii) improving security, and (iv) direct support to physical infrastructure and human resources development. The NPRD was not a development plan, but a development strategy to present to the international community as a coherent framework of the Governments commitment. 14. The NPRD focus areas are considered responsive to the socioeconomic issues during this period, in which both physical and social infrastructure needed immediate rehabilitation, while macroeconomic stability and security needed restoration (subsection A.1). Measures to ensure macroeconomic stability stated in the NPRD became elements of the PRGF and Structural Adjustment Program. 2. First Socioeconomic Development Plan

15. The SEDP-I (19962000),7 assisted by ADB (footnote 6) and promulgated in January 1997, was the first integrated medium-term, 5-year program of national development within the market economy context. Its broad objective was to reduce poverty through rapid, private sector-led economic growth with equity and social justice, while having an average economic growth target of 7.5%. Its priority areas included (i) broad participation in the development process; (ii) widening access to social services, especially among women and vulnerable groups; (iii) macroeconomic stability and creation of institutions and policies necessary for prudent, long-term economic management; (iv) public sector reform of the administrative and judicial institutions; (v) substantial investments in physical infrastructure, particularly rural roads; (vi) upgrading of human skills and adaptation; (vii) development of the productive base through raising rice yields, promotion of livestock production, and diversification and commercialization of the agriculture sector; (viii) generation of employment through labor-intensive manufacturing for export, promotion of SMEs, and tourism development; (ix) sustainable utilization of the natural resources base; and (x) reintegration of the economy into the regional and global systems. 16. The priority areas of the SEDP-I are considered responsive to the socioeconomic issues during this period, when the economy needed to move toward a market-based system with high economic growth, while maintaining equity through poverty reduction (subsection A.2). However, in terms of preparation and implementation, the review of the SEDP-I conducted as part of the preparation of the next plan indicated the following lessons: (i) most parts of the plan were drafted by consultants without much consultation with line ministries or other major stakeholders due to the urgency of the situation; (ii) a formal monitoring and reporting system, which should establish a good quality database, and identify key performance indicators and responsible monitoring and reporting agencies, was lacking; (iii) the average actual economic growth achieved of 6.7%8 over 19962000 fell short of the target of 7.5%, mainly because of the
5

7 8

Kingdom of Cambodia. 1994. National Program to Rehabilitate and Develop Cambodia. Phnom Penh. The Government submitted the NPRD to the International Committee for the Reconstruction of Cambodia in March 1994, and a supporting document to implement the NPRD in March 1995. ADB. 1992. Technical Assistance to the Kingdom of Cambodia for Strengthening Macroeconomic Management. Manila (TA1694-CAM approved on 21 April 1992 for $3.9 million). Kingdom of Cambodia. 1997. First Five-Year Socioeconomic Development Plan (19962000). Phnom Penh. This figure is based on the recently revised national accounts.

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disruptions caused by the 1997 domestic political crisis and, to a lesser extent, the 1997 regional financial crisis; (iv) the large and growing inequality associated with observed growth patterns reduced the possibility that growth alone can foster durable poverty reduction; and (v) the annual budget allocation was not in line with the target allocation,9 which reflected the twin facts that the plan did not control the annual budget and that public investment projects were in large part undertaken on the basis of what aid flows were available from funding agencies. The Public Investment Program (PIP) of the capital budget and the annual budget (capital and recurrent) were prepared on parallel tracks, with the Ministry of Planning responsible for the former and the Ministry of Economy and Finance (MEF) for the latter. In addition, the Council for the Development of Cambodia, under MEF, held separate discussions with line ministries on the PIP priorities to be presented to the funding agencies Consultative Group meetings. The failure to coordinate these efforts meant that the aid flows, PIP, and annual budget were not integrated. If development strategies were to be implemented effectively, PIP should have been a genuine investment programming tool linked to the annual capital and recurrent budget preparation. 3. Long-Term Triangle Strategy, Second Socioeconomic Development Plan, and Poverty Reduction Partnership Agreement

17. After the 1998 elections, the Government announced the Long-Term Triangle Strategy (20012015),10 with the vision to create a cohesive and advanced country, free from the grip of poverty, illiteracy, and disease. The first side of the triangle was to restore peace, stability, and security. The second side was to integrate Cambodia into the region and normalize relationships with the international community, and the third side was to promote economic and social development through extensive reform programs. Progress on the second side was made with Cambodias regaining of its seat at the UN, accession to the Association of Southeast Asian Nations, and commencement of the process of accession to the World Trade Organization. The development agenda under the third side was elaborated in various plans and programs, discussed below. 18. The Interim Poverty Reduction Strategy Paper approved in October 2000, was prepared with the objective of promoting faster economic growth in rural areas for poverty reduction. The Triangle Strategy, combined with the Interim Poverty Reduction Strategy Paper and SEDP-I, formed the basis for the SEDP-II (20012005),11 assisted by ADB12 and promulgated in June 2002. The broad objective of the SEDP-II is to reduce poverty through broad-based, sustainable economic growth led by the private sector, with equitable distribution of income at the national level, between rural and urban areas, and between genders. Its average economic growth target is around 67%. Its priority areas include (i) fostering broad-based, sustainable economic growth with equity, with the private sector in the lead role; (ii) improving the access of the poor to education, health, water and sanitation, power, credit, markets, information, and appropriate technology; (iii) promoting sustainable management and use of natural resources and the environment; and (iv) improving the governance environment through effective implementation of the Governance Action Plan.

Specifically, the target of channeling 65% of public investments to projects in rural areas and 35% to projects in urban areas over 19962000 was not achieved, with almost the exact opposite results obtained. 10 Documented in Kingdom of Cambodia. Council for the Development of Cambodia, and Cambodian Rehabilitation and Development Board. Phnom Penh. 11 Kingdom of Cambodia. 2002. Second Five-Year Socioeconomic Development Plan (20012005). Phnom Penh. 12 ADB. 1997. Technical Assistance to the Kingdom of Cambodia for Capacity Building in Development Planning, Phase II. Manila (TA 2976-CAM approved on 31 December 1997 for $0.91 million).

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19. The priority areas of the SEDP-II are considered responsive to the socioeconomic issues during this period, in which poverty incidence and unequal access to basic social services remain high, with overexploitation of natural resources and the environment (subsection A.3). In preparing the SEDP-II, efforts were made to avoid the lapses in the SEDP-I, and included (i) initiating a consultative and participatory process during the SEDP-II formulation; (ii) establishing an effective monitoring system; and (iii) improving the budgetary preparation process by introducing a medium-term expenditure framework, assisted by ADB,13 in key line ministries (e.g., agriculture, rural development, education, and health) to ensure effective linkages among the SEDP-II, PIP, and annual budget, so that actual public expenditure is driven by policy priorities and disciplined by budget realities. 20. The Governments Triangle Strategy and SEDP-II, together with ADB Long-Term Strategic Framework (LTSF) (subsection C.2), became the basis on which the Poverty Reduction Partnership Agreement (PRPA) was reached in July 2002 between the Government and ADB. The PRPA affirms the commitment of both parties to the eight Millennium Development Goals (MDGs) (subsection C.3). It serves as a framework for ADBs future country strategy and program, and formalizes a program of actions for effective poverty reduction. Its long-term goal is sustainable economic growth and poverty reduction, with the following medium-term objectives: (i) agriculture and rural development, and natural resources management; (ii) human and social development; (iii) PSD and regional cooperation; and (iv) governance and public sector reform. It specifies targets and indicators to reach these objectives. Short-term interventions to implement PRPA are also identified, including (i) increasing access to and quality of social services, (ii) promoting agricultural and rural development, (iii) restoring the transport network, (iv) developing the financial and private sectors, (v) strengthening governance and public administration, and (vi) mainstreaming gender and ethnic minority concerns. 4. National Poverty Reduction Strategy

21. Five months after the PRPA was signed, the Government promulgated the NPRS (20032005)14 in December 2002. The NPRS presents priority poverty reduction actions in (i) maintaining macroeconomic stability; (ii) improving rural livelihoods; (iii) expanding job opportunities; (iv) improving capabilities (health, nutrition, education, safe water, and sanitation); (v) strengthening institutions and improving governance; (vi) reducing vulnerability and strengthening social inclusion; and (vii) promoting gender equity. An action plan matrix consists of strategic objectives, estimated costs of actions, progress targets and indicators linked to the MDGs, and responsible agencies. The formulation of the NPRS was a requirement for gaining access to IMFs and the World Banks concessional loans. It ran parallel to the formulation of the SEDP-II and extended beyond the latters completion, with participatory workshops running through 2002. The Government has stated its intention of implementing the SEDP-II and NPRS in order to achieve the long-term vision of its Triangle Strategy, and to combine the two documents into one in the preparation of the next medium-term plan in 2005. C. Asian Development Bank Strategies and Strategic Thrusts

22. This section discusses various ADB strategies developed since the early 1990s to guide ADB operations. These strategies are classified under two periods in subsections C.1 and C.2
13

ADB. 2001. Technical Assistance to the Kingdom of Cambodia for Strengthening Public Financial Management (TA Cluster). Manila (TA 3634-CAM approved on 22 February 2001 for $1.2 million). 14 Kingdom of Cambodia. 2002. National Poverty Reduction Strategy. Phnom Penh.

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prior to and after the adoption of poverty reduction as the ADB overarching goalas follows: (i) a series of three-year rolling Medium-Term Strategic Framework (MTSF) papers, from 1992 until 1995, which covered 19951998; and (ii) Poverty Reduction Strategy (PRS), 1999; LTSF, 20012015; and Medium-Term Strategy (MTS), 20012005. Strategic thrusts of these ADB strategies are listed below, which are used in chapter III.A in the main text, as a reference in assessing whether the COS priority areas in each of its three periods are responsive to ADB strategies at that time. Responsiveness of the country assistance programs (CAPs) to ADB strategies are assessed in chapter IV.B in the main text. Subsection C.3 discusses ADB corporate commitment to the MDGs, which guides ADB operations. 1. A Series of Medium-Term Strategic Framework Papers

23. ADB strategic priorities for the 1990s were outlined in the 1989 panel report, The Asian Development Bank in the 1990s.15 The report emphasized the need to (i) balance ADB focus on economic growth with social infrastructure development, (ii) improve the living standards of the poorest groups, (iii) protect the environment, and (iv) reorient the public sector. Based on these emphases, a series of 3-year rolling MTSF papers16 were prepared from 1992 until 1995 (covering 19951998). The MTSF specified five strategic thrusts to guide the preparation of COSs and CAPs for developing member countries (DMCs), including support of (i) economic growth, (ii) human development, (iii) poverty reduction, (iv) women in development, and (v) environmental protection.17 It also redefined ADB operating role from being project financier to project financier and catalyst of policy change and capacity development due to the lesson learned that it was virtually impossible to have good projects in a poor policy environment. Four priority areas were identified for ADB operations: (i) policy support; (ii) capacity building for development management; (iii) creating and strengthening productive capacity, infrastructure, and services; and (iv) regional cooperation. 24. To ensure implementation of the MTSF five strategic thrusts through COSs and CAPs for DMCs, a system of project classification was adopted during that time to classify projects by their primary and secondary objectives in accordance with the five strategic thrusts. 2. Poverty Reduction Strategy, Long-Term Strategic Framework, and Medium-Term Strategy

25. Poverty reduction became the overarching goal of ADB in 1999 when the PRS18 was approved. The PRS identified three strategic pillars to guide the preparation of COSs and CAPs for DMCs: (i) pro-poor, sustainable economic growth; (ii) good governance; and (iii) social development. It also specified three sector priorities: (i) agriculture and rural development, (ii) social sectors, and (iii) infrastructure and finance. In addition, it emphasized the need to develop a PRPA with each DMC (subsection B.3), together with medium-term target indicators to monitor progress toward long-term development goals. Shortly after the PRS was approved, the PSD Strategy19 was approved in March 2000 to promote private sector-led growth and its

15 16

ADB. 1989. The Asian Development Bank in the 1990s: Panel Report. Manila. ADB. The Banks Medium-Term Strategic Framework. Manila (19921995). 17 These five strategic thrusts were abbreviated as EG, HD, PR, WID, and EP, respectively, for the purpose of project classification. 18 ADB. 1999. Fighting Poverty in Asia and the Pacific: The Poverty Reduction Strategy. Manila. 19 ADB. 2000. PSD Strategy: Promoting the Private Sector to Support Growth and Reduce Poverty. Manila.

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contributions to poverty reduction. These two strategies formed the major building block for the LTSF (20012015)20 approved in March 2001. 26. The LTSF identifies three core strategic areas for ADB operations: (i) sustainable, broadbased economic growth, including investments both in physical and social infrastructure, with environmentally sound development; (ii) inclusive social development, including investments in social support programs to improve equity and empowerment for women and disadvantaged groups; and (iii) governance for effective policies and institutions, including support for public sector reform, and legal and judicial reforms. These three core areas are complemented by three crosscutting strategic themes aimed at promoting (i) PSD, (ii) regional cooperation and integration, and (iii) environmental sustainability. 27. The LTSF also identifies the following four strategic operating principles for implementing ADB strategic thrusts to ensure a strong country focus, and selectivity of assistance programs: (i) ensuring country leadership and ownership of the development agenda and priorities; (ii) taking a long-term approach to development assistance, particularly in the prioritized sectors and areas to ensure greater selectivity; (iii) enhancing strategic alliances and partnership to ensure greater selectivity and complementarity; and (iv) measuring development impacts of assistance programs by developing indicators for short- and medium-term targets toward achievement of long-term development goals. To translate these strategic operating principles into concrete forms of assistance programs, the LTSF emphasizes innovations in modalities, which involves doing different things and doing things differently, including (i) a cluster approach, which involves sequencing lending and nonlending assistance to a particular sector to achieve a defined set of long-term goals, thus supporting a long-term development approach and greater selectivity; (ii) a sectorwide approach to ensure larger development impacts and increased government ownership in that sector; and (iii) new partnership modalities (e.g., with nongovernment organizations, civil society groups, and local governments) to support partnership development. 28. The LTSF is to be implemented through a set of three MTSs,21 the first one of which, approved in September 2001, covers 20012005. It echoes the strategic thrusts and operating principles of LTSF for the country strategy and programs to implement. Following the adoption of the PRS, the system of project classification has been changed from classifying projects by their primary and secondary objectives in accordance with the old MTSF five strategic thrusts, to classifying by (i) poverty focus under three categories: core poverty intervention, poverty intervention, and other development intervention;22 and (ii) thematic focus under seven categories: economic growth, environmental protection, good governance, gender and development, human development, PSD, and regional cooperation.23 3. Millennium Development Goals as a Corporate Commitment

29. The MDGs are a series of goals, targets, and indicators agreed to at the Millennium Summit of 189 UN member countries, in September 2000, for tackling poverty worldwide by 2015. ADB endorsed the MDGs in April 2002 as a corporate commitment to poverty reduction. The MDGs evolved from the International Development Goals for poverty reduction, which were formerly agreed to by UN member countries. ADB adopted the International Development Goals
20

ADB. 2001. Moving the Poverty Reduction Agenda Forward in Asia and the Pacific: The Long-Term Strategic Framework of the Asian Development Bank (20012015). Manila. 21 ADB. 2001. Medium-Term Strategy (20012005). Manila. 22 Abbreviated as CPI, PI, and ODI, respectively. 23 Abbreviated as EG, ENV, GG, GD, HD, PSD, and RC, respectively.

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through its PRS, LTSF, and MTS, which formed the basis for ADB commitment to the MDGs. The MDGs consist of eight goals: (i) eradicating extreme poverty and hunger; (ii) achieving universal primary education; (iii) promoting gender equality and empowering women; (iv) reducing child mortality; (v) improving maternal health; (vi) combating human immunodeficiency virus/acquired immunodeficiency syndrome, malaria, and other diseases; (vii) ensuring environmental sustainability; and (viii) developing a global partnership for development. The last goal is generally for more-developed countries to adopt as a means to achieving the first seven goals. Each of these goals has corresponding targets, totaling 18, and a number of indicators for each target. The MDGs as applied to Cambodia are shown in Table A1.3, in which the baseline value and expected medium- and long-term values for each indicator is specified.

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Table A1.1: Country Economic Indicators (19922002)

Fiscal Year 1996 1997 1998 312 286 252
a

Item

1992

1993

1994

1995 322

1999 275

2000 279

2001 283

2002

A. Income and Growth 1. GDP per capita ($, current 219 261 274 prices) 2. GDP Growth (%, in constant prices) 7.1 4.1 9.0 - Agriculture 1.9 (1.0) 11.2 - Industry 15.7 13.1 17.2 - Services 8.5 11.2 (2.0) 3. Sectoral Shares - Agriculture 47.8 47.3 48.4 - Industry 13.2 12.9 14.5 - Services 39.1 39.8 37.0 B. Savings and Investments (market prices) 1. Gross Domestic Investments 11.8 15.9 14.5 2. Gross National Savings 10.7 1.3 7.8 C. Money and Inflation 1. Consumer Price Index (yearly average) 101.7 75.1 (0.5) 2. Money Supply (M2) 214.0 34.0 35.0 D. Government Finance 1. Revenue 6 4.3 8.5 2. Expenditure and Onlending 9.5 9.1 14.2 3. Overall Fiscal Balance (excluding grants) (3.5) (4.8) (5.8) E. Balance of Trade/Payments b 1. Current Account Balance (% of GDP) (10.0) (10.1) (12.8) c 2. Merchandise Exports ($ million) 265 283 490 c 3. Merchandise Imports ($ million) 443 471 744 4. Trade Balance ($ million) (179) (188) (255) 5. Merchandise Export ($) Growth (annual % change) 24.5 7.0 73.1 6. Merchandise Imports ($) Growth (annual % change) 81.0 6.2 58.0 7. Garments Exports ($ million) 2 8. Garments Exports (% of merchandise exports) 0.4 9. Foreign Direct Investments ($ million) 33 54 69 F. External Payments Indicators 1. Gross Official Reserves 30 71 70 ($ million) 2. External Debt Service (% of exports of goods and services) 3. Total External Debt (% of GDP) (excluding Russian and US debt) G. Memorandum Items 1. GDP (current prices, KR billion) 2,583 6,666 6,986 2. Exchange Rate (KR/$, average) 1,267 2,689 2,545 3. Population (million) 9.3 9.5 10.0

296

6.9 3.3 23.2 8.4 50.3 15.0 34.6 18.2 6.9

5.0 6.8 3.7 1.0 6.4 5.8 5.2 19.6 (2.5) 7.8 3.4 4.8 (% of GDP) 47.2 47.0 47.1 15.7 17.1 17.9 37.0 35.8 34.9 (% of GDP) 15.1 15.1 11.9 6.6 10.2 9.1 (annual % change) 7.2 8.0 40.0 16.6 (% of GDP) 8.3 8.9 14.7 12.8 (6.4) (3.9) 14.8 15.7 8.1 13.5 (5.4)

10.8 3.4 19.3 10.9 44.9 19.1 35.9 17.0 10.1

7.0 (1.5) 30.7 5.7 39.6 23.3 37.0 17.3 10.6

5.7 2.2 12.9 4.2 37.5 25.6 36.8 21.2 10.1

5.5 (2.7) 17.7 4.5 35.5 28.0 36.4 22.2 10.9

7.8 44.0 7.8 15.1 (7.3)

4.0 17.3 10.1 13.9 (3.8)

(0.8) 26.9 10.3 15.3 (5.0)

0.2 20.4 10.5 16.0 (5.5)

3.3 31.1 11.1 17.6 (6.5)

(13.1) (15.8) (8.1) (12.5) (13.5) 854 644 862 816 1,016 1,187 1,072 1,092 1,179 1,490 (333) (428) (231) (364) (474) 74.3 (24.6) 59.5 28 3.2 151 110 (9.7) 102 15.8 294 164 33.9 1.9 279 32.3 204 262 23.2 7.7 (5.4) 8.0 392 48.1 121 390 17.9 11.2 24.6 26.3 564 55.5 144 422 14.2 12.3

(12.3) 1,396 1,935 (539) 37.4 29.9 1,012 72.5 126 484 10.1 11.0

(9.7) 1,525 2,052 (528) 9.3 6.1 1,142 74.9 150 548 3.8 11.3

(9.8) 1,767 2,311 (544) 15.9 12.6 1,294 73.2 663 3.4 11.3

8,294 9,024 9,927 11,609 13,131 13,810 14,544 15,667 2,451 2,624 2,991 3,774 3,814 3,859 3,924 3,921 10.5 11.0 11.6 12.2 12.5 12.8 13.1 13.5

= not available, GDP = gross domestic product, US = United States. a Provisional. b Excluding official transfers. c Some imports are reexported to neighboring countries, such as Viet Nam. Sources: Cambodian Investment Board, International Monetary Fund, Ministry of Economy and Finance, National Bank of Cambodia, National Institute of Statistics, staff estimates.

Appendix 1

73

Table A1.2: Country Social Indicators

Item A. Population Indicators 1. Total Population (million) 2. Annual Population Growth Rate (% change) B. Social Indicators 1. Total Fertility Rate (births per woman) 2. Maternal Mortality Rate (per 100,000 live births) 3. Infant Mortality Rate (below 1 year per 1,000 live births) 4. Life Expectancy at Birth (years) - Female - Male 5. Adult Literacy (%) - Female - Male a 6. Primary School Gross Enrollment Rate (%) - Female a 7. Secondary School Gross Enrollment Rate (%) - Female 8. Child Malnutrition (% below age 5) 9. Population Below Poverty Line (national, %) 10. Population with Access to Safe Water (%) 11. Population with Access to Sanitation (%) 12. Public Education Expenditure (% of GDP) 13. Human Development Index - Rank 14. Gender-Related Development Index - Rank C. Poverty Indicators 1. Poverty Incidence 2. Percent of Poor to Total Population - Phnom Penh - Other Urban - Rural 3. Poverty Gap 4. Poverty Severity Index 5. Inequality (Theil L Index) 6. Human Poverty Index - Rank 1985 7.5 3.2 Period 1990 8.6 2.7 Latest Year 13.5 (2001) 2.5 (2001)

4.6 (1987) 145 46 29 (19801985) 42 (19701975) 35 (19701975) 10 (19701975) 6 (19701975) 20 (19801985)

4.5 (1992) 4.7 (2001) 590 (1995) 440 (2001) 91 (1992) 64 (2001) 50 (1992) 57.4 (2001) 59.4 (2001) 55.2 (2001) 35 68.7 (2001) 58.2 (2001) 80.5 (2001) 90.0 (2000) 84.0 (2000) 23.0 (2000) 7.0 (2000) 38 (1992) 45 (2001) 39 (1993) 36.1 (19972000) 36 (19881991) 30 (2000) 14 (19881991) 17 (2000) 0.70 (1991) 1.9 (2001) 0.186 0.556(2001) th 148 130 out of 175 0.551(2001) th 105 out of 144

39.0 (1993) 11.4 (1993) 36.0 (1993) 43.1 (1993) 9.2 (1993) 3.1 (1993) 0.33 (1993)

36.1 (1997) 11.1 (1997) 29.9 (1997) 40.1 (1997) 8.7 (1997) 3.1 (1997) 0.48(1997) 42.8 (2001) rd 73 out of 94

= not available, ADB = Asian Development Bank, AIDS = acquired immunodeficiency syndrome, GDP = gross domestic product, HIV = human immunodeficiency virus, UNDP = United Nations Development Programme. a Gross enrollment ratio (GER) is defined as the number enrolled in a level of education, whether or not they belong in the relevant age group for that level. GER is expressed as a percentage of the population in the age group 610 years for primary school, 1113 years for lower secondary school, and 1416 years for upper secondary school. Sources: ADB. 2003. Country Strategy and Program Update (20042006): Cambodia. Manila; UNDP. 2003. Human Development Report. New York.

Table A1.3: Millennium Development Goals and Cambodias Targets

MDG Goal
Goal 1 Eradicate extreme poverty and hunger

74

MDG Targets
Target 1 Halve, between 1990 and 2015, the proportion of people whose income is less than $1 a day Target 2 Halve, between 1990 and 2015, the proportion of people who suffer from hunger

MDG Indicators

Cambodias Baseline
1. 36% (1999)

Cambodias 2015 Targets

1. 31% in 2005 & 19.5% in 2015

Appendix 1

1.Proportion of population below $1 a day (percentage of the population living on less than $1 a day at 1993 international prices) 2. Poverty gap ratio at the $1 a day poverty line 3. Share of poorest quintile in national consumption 4. Prevalence of underweight in children (under 5 years of age) 5. Proportion of population below minimum level of dietary energy consumption 6. Net enrollment ratio in primary education 7. Proportion of pupils starting grade 1 who reach grade 5 8. Literacy rate of 15- to 24-year-olds

2. 8.7% (1997) 3. Gini coefficient 0.48 (1997) 4. 50.3% (19961998) 5. 3.3% (19961998)

4. 26.2%

Goal 2 Achieve universal primary education

Target 3 Ensure that, by 2015, children everywhere, boys and girls alike, will be able to complete a full course of primary schooling

6. 85.5% in 2000 7. Completion rate for primary school 45% (2000) 8. 36% of adults illiterate (2000) 9. 46 per 100 in primary; 35.4 in lower secondary; 33.7 in upper secondary (1999/2000)

6. 100%

Goal 3 Promote gender equality and empower women

Target 4 Eliminate gender disparity in primary and secondary education preferably by 2005 and in all levels of education no later than 2015

9. Ratio of girls to boys in primary, secondary, and tertiary education

9. 100 at all levels

10. Ratio of literate females to males among 15- to 24-year-olds 11. Share of women in wage employment in the nonagricultural sector 12. Proportion of seats held by women in national parliament Goal 4 Reduce child mortality Target 5 Reduce by two thirds, between 1990 and 2015, the under-5 mortality rate 13. Under-5 mortality rate 14. Infant mortality rate

13. 125 per 1,000 (2000) 14. 89.5 per 1,000 (2000); 64 per 1,000 (2002)

15. Proportion of 1-year-old children immunized against measles

Table A1.3Continued

MDG Goal
Goal 5 Improve maternal health

MDG Targets

MDG Indicators

Cambodias Baseline
16. 440 per 100,000 (2001)

Cambodias 2015 Targets

16. 250

Goal 6 Combat HIV/AIDS, malaria, and other diseases

Goal 7 Ensure environmental sustainability

Target 6 Reduce by three quarters, between 1990 and 16. Maternal mortality ratio 2015, the maternal mortality ratio 17. Proportion of births attended by skilled health personnel Target 7 Have halted by 2015 and begun to reverse 18. HIV prevalence among 15- to 24-year-old the spread of HIV/AIDS pregnant women 19. Contraceptive prevalence rate Target 8 20. Number of children orphaned by HIV/AIDS Have halted by 2015 and begun to reverse 21. Prevalence and death rates associated with the incidence of malaria and other major malaria diseases 22. Proportion of population in malaria-risk areas using effective malaria prevention and treatment measures 23. Prevalence and death rates associated with tuberculosis 24. Proportion of tuberculosis cases detected under the directly observed treatment, short-course case detection and treatment strategy Target 9 Integrate the principles of sustainable 25. Change in land area covered by forest development into country policies and programs and reverse the loss of environmental resources Target 10 Halve, by 2015, the proportion of people without sustainable access to safe drinking water Target 11 Have achieved, by 2020, a significant improvement in the lives of at least 100 million slum dwellers

18. 2.8% (1549 years, 2000) 19. 19% (2000)

19. 100%

26. Land area protected to maintain biological diversity 27. GDP per unit of energy use 28. Carbon dioxide emissions (per capita)

25. 74% in 1969 to 58% in 1997. 25. Average annual deforestation rate 2 561km (1990 2000) 26. National Environmental Action Plan 1999 28. 0.1 (1998)

26. Reversal of environmental resource loss

29. Proportion of population with sustainable access 29. 30% (2000) to an improved water source Appendix 1 30. Proportion of population with access to improved sanitation 31. Proportion of population with access to secure tenure 30. 17% (2000)

75

Table A1.3Continued

MDG Goal
Goal 8 Develop a global partnership for development This goal is generally for more developed countries to adopt as a means to achieving the first seven goals.

MDG Targets
Target 12 Develop further an open, rule-based, predictable, nondiscriminatory trading and financial system (includes a commitment to good governance, development, and poverty reduction both nationally and internationally) Target 13 Address the special needs of the least developed countries (includes tariff- and quota-free access for exports enhanced program of debt relief for HIPC and cancellation of official bilateral debt, and more generous ODA for countries committed to poverty reduction) Target 14 Address the special needs of landlocked countries and small island developing states

MDG Indicators
Some of the indicators listed below will be monitored separately for the least developed countries, Africa, landlocked countries, and small island developing states. Official Development Assistance 32. Net ODA as a percentage of DAC donors gross national income 33. Proportion of ODA to basic social services (basic education, primary health care, nutrition, safe water, and sanitation) 34. Proportion of ODA that is untied 35. Proportion of ODA for environment in small island developing states 36. Proportion of ODA for the transport sector in landlocked countries

Cambodias Baseline

Cambodias 2015 Targets

76
Appendix 1

Market Access 37. Proportion of exports (by value, excluding arms) admitted free of duties and quotas Target 15 38. Average tariffs and quotas on agricultural Deal comprehensively with the debt problems products and textiles and clothing of developing countries through national and 39. Domestic and export agricultural subsidies in international measures in order to make debt OECD countries sustainable in the long term 40. Proportion of ODA provided to help build trade capacity Target 16 Debt Sustainability In cooperation with developing countries, develop and implement strategies for decent 41. Proportion of official bilateral HIPC debt and productive work for youth canceled 42. Debt service as a percentage of exports of Target 17 goods and services In cooperation with pharmaceutical 43. Proportion of ODA provided as debt relief companies, provide access to affordable, 44. Number of countries reaching HIPC decision essential drugs in developing countries and completion points Target 18 In cooperation with the private sector, make available the benefits of new technologies, especially information and communications Other 45. Unemployment rate of 15- to 24-year-olds 46. Proportion of population with access to affordable, essential drugs on a sustainable basis 47. Telephone lines per 100 people 48. Personal computers per 100 people

Table A1.3Continued ADB = Asian Development Bank, AIDS = acquired immunodeficiency syndrome, DAC = development assistance committee, GDP = gross domestic product, HIPC = heavily indebted poor countries, HIV = human immunodeficiency virus, MDG = Millennium Development Goal, ODA = official development assistance, OECD = Organization for Economic Co-Operation and Development, UNDP = United Nations Development Programme. Sources: UNDP. 2001. United Nations Millennium Development Goals, Cambodia 2001. Phnom Penh; ADB. 2003. Country Strategy and Program Update (2004 2006): Cambodia. Manila; ADB. 2001. Report and Recommendation of the President to the Board of Directors on Proposed Loan to the Kingdom of Cambodia for the Education Sector Development Program. Manila.

Appendix 1

77

78

Appendix 2

DESCRIPTION OF COUNTRY STRATEGY AND ASSISTANCE PROGRAMS FOR CAMBODIA 1. The description of the country strategy is in section A in terms of the priority areas identified in each of its three periods, including the 1992 interim strategy (IS), 1995 country operational strategy (COS), and 2000 COS. The description of the country assistance programs (CAPs) is in section B in terms of the structure of lending and nonlending programs by sector under the corresponding periods of the COS (i.e., the CAPs for 19921995 under the 1992 IS, for 19962000 under the 1995 COS, and for 20012002 under the 2000 COS). Section C describes the structure of the pipeline of future CAPs for 20032006 to provide background information, although the pipeline is not included in the evaluation in the main text A. Country Strategy (1992, 1995, 2000) 1. Interim Strategy 1992

2. Cambodia has been a member of the Asian Development Bank (ADB) since 1966. ADB had provided one loan to Cambodia in April 1970 before it ceased operations there in April 1975, but resumed during the rehabilitation period under the IS, 1 proposed in March 1992. The 1992 IS evolved from the provisions of the Paris Peace Accord signed in October 1991. Its strategic objective was to assist in the immediate rehabilitation of Cambodia in the following emergency priority areas: (i) physical infrastructure development; (ii) social (human) infrastructure development; and (iii) capacity building and institutional strengthening in key economic sectors, master plans, sector studies preparation, and macroeconomic management. Four sectors identified for the CAPs included transport, agriculture, power, and education. 2. Country Operational Strategy 1995

3. The 1995 COS,2 approved in October 1995, was the first full-fledged ADB COS for Cambodia prepared under the guidance of ADB Medium-Term Strategic Framework. It analyzed Cambodias socioeconomic situation and national development strategy at that time (i.e., the National Program to Rehabilitate and Develop Cambodia) to determine the problems as the basis for identifying the objectives, priority areas, sectors, and crosscutting themes for ADB assistance. Steady poverty reduction was identified as the COS strategic objective to be achieved through four priority areas: (i) capacity building and institutional strengthening in project implementation and management and in policy formulation and development planning; (ii) sustainable economic growth; (iii) increased access to growth benefits; and (iv) environmental protection. The 1995 COS recommended seven sectors/subsectors for subsequent CAPs (19962000), namely agriculture, rural development, transport, power, education, health, and water supply and sanitation. The crosscutting concerns included poverty reduction, human resources development, women in development, and private sector development (PSD).

1 2

ADB. 1992. Cambodia: Proposed Program of Assistance During Transitional Period. Manila. ADB. 1995. Country Operational Strategy Study for the Kingdom of Cambodia: Developing the Capacity for Reconstruction and Development. Manila.

Appendix 2

79

3.

Country Operational Strategy 2000

4. The 2000 COS,3 approved in July 2000, was prepared mainly under the guidance of ADBs Poverty Reduction Strategy. It took into account Cambodias national development strategies and plan at that time (i.e., Triangle Strategy, Interim Poverty Reduction Strategy Paper, and First Socioeconomic Development Plan), together with the prevailing socioeconomic problems. In line with the overarching objective of poverty reduction of both the Government and ADB, the 2000 COS identified poverty reduction as its strategic objective to be achieved through three priority areas: (i) pro-poor, sustainable economic growth through broad-based, labor-intensive agriculture and rural development; (ii) human resources and social development; and (iii) creating an enabling environment for PSD. The 2000 COS identified governance as the primary crosscutting concern. Other crosscutting concerns included gender equality, environmental protection, and regional cooperation. It also identified 10 sectors/subsectors for subsequent CAPs (from 2001), including agriculture, rural development, water resources, environmental management, education, health, water supply, roads, power, and finance. B. Country Assistance Programs (19922002) 1. Overall Past Assistance Programs (19922002)

5. During 19922002, ADB provided lending products of 26 public sector loans to Cambodia, totaling about $675 million from the Asian Development Fund resources and averaging about $61 million per year (Table A2.1). Of the 26 loans, 4 were program loans (2 subprograms in the finance sector and 1 each in the agriculture and education sectors), and 4 were under the Greater Mekong Subregion (GMS) Program (Table A2.1, note d) for about $121 million. During 19922002, ADB also provided nonlending products and services to Cambodia, including 29 project preparatory technical assistance (PPTAs), totaling about $15 million (Table A2.2); 68 advisory and operational TAs (ADTAs), totaling about $52 million (Table A2.3); 48 GMS regional TAs (RETAs), totaling about $40 million (Table A2.4); 4 and some economic, thematic, and sector works (ETSWs) (Table A2.5). 5 6. The lending composition in Table A2.6 and Figure A2.1 shows that the transport sector received the biggest share (26% in value terms), followed by the social sector6 (23%) and the agriculture sector7 (19%), reflecting the urgent need to restore transport network, rebuild the human resources base, and strengthen the productive agriculture sector in rural areas where most of the poor live. The multisector also received a large share (18%) because it comprised two special loans 8one for special rehabilitation, which was the first loan after ADBs resumption of operations in Cambodia, and the other for emergency flood rehabilitation. 9 Table
3 4 5 6 7 8

ADB. 2000. Cambodia: Enabling a Socioeconomic Renaissance. Manila. During 19922002, there were also a number of non-GMS RETAs, totaling about $27 million. During 20012002, there were five grants under the Japan Fund for Poverty Reduction, totaling $9.1 million. Including education, health, and water supply and sanitation. Inclusive of rural development and water resources, and natural resources and environmental management. ADB. 1992. Report and Recommendation of the President to the Board of Directors on a Proposed Loan and Technical Assistance to the Kingdom of Cambodia for Special Rehabilitation Assistance. Manila (Loan 1199[SF] approved on 26 November 1992 for $67.7 million); ADB. 2000. Report and Recommendation of the President to the Board of Directors on a Proposed Loan to the Kingdom of Cambodia for Emergency Flood Rehabilitation Project. Manila (Loan 1824[SF] approved on 21 December 2000 for $55.0 million). If the components of these two multisector loans are distributed to the corresponding sectors, the share of transport will become much larger (36%), reflecting the real and emergency need to rehabilitate and restore physical infrastructure, while the share of the social sector will increase to 26% and that of agriculture to 24%. The share of energy will increase from 7% to 10% because the power system also needed restoration.

80

Appendix 2

A2.6 and Figure A2.2 show that PPTAs, like loans, were also dominated by the three key sectorsagriculture, social, and transportat 41%, 31%, and 15%, respectively. ADTAs had a different composition as they were dominated by the others sector (30%), followed by the multisector (20%), agriculture (18%), and the social sector (14%) (Table A2.6 and Figure A2.3). That the others sector received the largest share of ADTAs reflected the urgent need to build up institutional capacity in various areas, including policy planning, macroeconomic management, statistical system, project implementation, etc. The large multisector share implied the need for ADTAs to assist in the implementation of the two special loans. Most ETSWs were sector assessment and strategy papers. 2. First Period of Past Assistance Programs (19921995)

7. In the first period of the CAPs, based on the 1992 IS, 10 the lending program was dominated by the multisector (48%) due to the project for special rehabilitation, followed by the energy, agriculture, and social sectors at 20%, 18%, and 14%, respectively (Table A2.7). The nonlending program of ADTAs was also dominated by the multisector (37%) to accompany the project for building up capacity in project implementation and management (Table A2.8). The others category also accounted for a high proportion (26%) due to the need to build up capacity in various other areas, such as policy planning, macroeconomic management, etc. The social sector accounted for 15%, and agriculture and transport for 10% and 8%, respectively. 3. Second Period of Past Assistance Programs (19962000)

8. In the second period of the CAPs, based on the 1995 COS, the lending program shifted the focus away from special rehabilitation in the multisector (with the share decreased to 16% from the first period) toward transport (36%) and the social sector (23%), while agriculture maintained its share (19%) (Table A2.7). As for the nonlending program of ADTAs, support for capacity building in various areas under the others category increased to 32% (Table A2.8), confirming the emphasis on capacity building in the 1995 COS. The shares of agriculture and the social sector increased to 33% and 18%, respectively. 4. Third Period of Past Assistance Programs (20012002)

9. In the third period of the CAPs, based on the 2000 COS, there was a marked reallocation of the lending program toward the social sector (30%) and finance (10%) compared with the second period (Table A2.7), conforming to the emphasis on human resources development and PSD in the 2000 COS. The share of agriculture remained almost the same (20%), while that of transport decreased to 26%. The others category accounted for 13% as it involved projects for decentralization and GMS tourism development. The nonlending program of ADTAs also shifted toward finance (30%) to support PSD (Table A2.8). The share of the others category increased to 37%, reflecting the continued support to capacity building, especially in public financial management. The share of agriculture declined to 18%; and so did the share of the social sector, which declined to 4%.

10

Actually, the IS was developed for the purpose of providing the Special Rehabilitation Assistance loan in 1992, with some ADTAs. It was not really intended to provide a framework for subsequent loans and TAs. However, in the absence of a formal COS at that time, any loans and TAs approved prior to the formal 1995 COS can roughly be considered to be under the framework of the IS.

Appendix 2

81

C.

Pipeline of Future Assistance Programs (20032006)

10. As presented in the country strategy and program update (CSPU) 2003, 11 ADB will provide lending products of 17 Asian Development Fund loans to Cambodia during 20032006 for about $338 million, and averaging about $85 million per year (Table A2.9). Of the 17 loans, there will be 6 program loans1 in the agriculture sector; 2 in the finance sector (1 is Subprogram III of the ongoing Financial Sector Program, and the other is the second phase of the Financial Sector Program); 1 in trade for small and medium enterprise sector development; 1 in education, which is the second phase of the ongoing Education Sector Development Program; and 1 in governance for decentralized public sector management. ADB will also provide nonlending products and services of 13 PPTAs for about $10 million (Table A2.10), and 23 ADTAs for about $12 million (Table A2.11). 12 11. The lending composition in the pipeline is shown in Table A2.12 and Figure A2.4, in which the subregional category is the largest (30%), followed by agriculture (23%), the social sector (16%), and finance (10%).13 Transport alone, excluding subregional activities, accounts for 9%. Compared with the past lending composition (19922002) in Table A2.6, there is a significant shift in focus toward subregional cooperation under the GMS, agriculture, and finance. The shares of the social sector and transport fall substantially because part of transport is classified under the GMS cooperation. The shift toward agriculture, together with finance, is more in line with the emphasis of the 2000 COS. 12. Table A2.12 shows the composition of PPTAs in the pipeline, which is dominated by agriculture (40%), followed by the social sector (16%), transport (15%), and subregional (12%) (Figure A2.5). Compared with the past PPTA composition (19922002) in Table A2.2, the shares of agriculture and transport remain constant, while that of the social sector falls by half. In the case of ADTAs, Table A2.12 shows that the others category still dominates as in the past period, accounting for 38%, followed by substantial increases in the share of agriculture (28%), and finance (9%) (Figure A2.6). The share of the social sector remains roughly the same (16%) as in the past, while those of the power and transport sectors become zero because their ADTAs are classified under subregional cooperation, which accounts for 9%. The others category in the ADTA pipeline consists largely of support for capacity building in public sector management and decentralization, in addition to capacity building in other areas.

11 12

ADB. 2003. Country Strategy and Program Update (20042006): Cambodia. Manila. The amounts to be provided by ADB for both PPTAs and ADTAs in the pipeline are still tentative as a few of these TAs are shown in the CSPU 2003 to have a zero contribution from ADB, but positive contributions from other sources. Given the tentative nature of the sources of funding, the amounts of PPTAs and ADTAs quoted here are from the column of the total funding specified in the CSPU 2003, rather than from the column of ADB funding, in order to avoid the problem of a zero value for some TAs. 13 The CSPU 2003 classifies three loans to be under the others category: (i) Chong Kneas Environmental Improvement , (ii) SME Sector Development , and (iii) Decentralized Public Sector Management. This classification is not consistent with the CSPU 2003 TA classification, in which the TAs for the SME loan are classified under the finance sector. Thus, for consistency, while taking into account the nature of these loans, this report reclassifies these loans as follows: (i) the Chong Kneas project to the agriculture sector, (ii) the SME program to the finance sector, and (iii) the decentralization program to remain under the others sector. Another inconsistency in the CSPU 2003 classification is that the following three loans are classified under the subregional category: (i) GMS Power Transmission, (ii) GMS Telecommunications Backbone, and (iii) Restructuring of Royal Railway of Cambodia and Rehabilitation of Track. But their associated TAs are classified under the energy and transport sectors, leaving no TAs under the subregional category. Thus, for consistency, this report also reclassifies the TAs associated with these three loans from the energy and transport sectors to be under the subregional category.

82

Appendix 2
Table A2.1: List of Approved Loans by Sector (19922002)

19922000 20012002 Prim./Sec. Pov./Thematic Loan No. Title Objectives Classification Agriculture, Rural Dev. & Natural Resources/Environmental Mgt. - Agriculture 1. 1445(SF) Agriculture Sector Program EG Subsector Total - Rural Development a 2. 1385(SF) Rural Infrastructure Improvement EG/PR 3. 1741(SF) Rural Credit and Savings PR 4. 1753(SF) Stung Chinit Irrigation and Rural Infrastructure EG/PR a 5. 1862(SF) Northwestern Rural Development PI/HD Subsector Total - Natural Resources/Environmental Mgt. 6. 1939(SF) Tonle Sap Environmental Management PI/ENV Subsector Total Sector Total Energy 7. 1345(SF) Power Rehabilitation EG EG 8. 1794(SF) Provincial Power Supply Sector Total Finance 9. 1859(SF) Financial Sector Program (Subprogram I) ODI/PSD 10. 1951(SF) Financial Sector Program (Subprogram II) ODI/PSD Sector Total Social Sector - Education 11. 1368(SF) Basic Skills HD/WID 12. 1446(SF) Basic Education Textbook HD PI/HD 13. 1864(SF) Education Sector Development PI/HD 14. 1865(SF) Education Sector Investment Project Subsector Total - Health 15. 1447(SF) Basic Health Services HD/PR 16. 1940(SF) Health Sector Support PI/HD Subsector Total - Water Supply & Sanitation 17. 1468(SF) Phnom Penh Water Supply and Drainage HD/EP 18. 1725(SF) Provincial Towns Improvement HD/PR Subsector Total Sector Total Transport d EG 19. 1503(SF) Siem Reap Airport a GMS: Phnom Penh-Ho Chi Minh City 20. 1659(SF) d Highway EG 21. 1697(SF) Primary Roads Restoration 22. 1945(SF) GMS: Cambodia Road d Improvement Sector Total Multisector 23. 1199(SF) Special Rehabilitation Assistance a 24. 1824(SF) Emergency Flood Rehabilitation Sector Total Others 25. 1953(SF) Commune Council Development 26. 1969(SF) GMS: Mekong Tourism d Development Sector Total
a

Approved Amount % $'000

Approval Completion Rating Date Date PCR PPAR

30,000 30,000 25,100 20,000 16,000 27,200 88,300

20-Jun-96 4

05-Sep-00

28-Sep-95 31-Dec-02 27-Apr-00 30-Jun-05 5-Sep-00 27-Nov-01 13 31-Dec-06 30-Jun-07

10,910 10,910 129,210 28,200 18,600 46,800

21-Nov-02 2 19 15-Dec-94 5-Dec-00 7

31-Dec-07

30-Jun-00 HS 30-Jun-04

10,000 10,000 20,000

15-Nov-01 30-Jun-03 28-Nov-02 3

31-Dec-04

20,000 20,000 20,000 18,000 78,000 20,000 20,000 40,000

30-Aug-95 31-May-02 S 20-Jun-96 31-Oct-01 HS 4-Dec-01 29-Feb-04 4-Dec-01 31-Dec-06 12 20-Jun-96 31-Dec-02 21-Nov-02 31-Dec-07 6
c

20,000 20,000 40,000 158,000 15,000 40,000 68,000

26-Sep-96 31-Mar-03 17-Dec-99 30-Jun-05 6 23 12-Dec-96 31-Mar-03 15-Dec-98 21-Sep-99 26-Nov-02 26 26-Nov-92 21-Dec-00 18 3-Dec-02 12-Dec-02 4 28-Feb-06 30-Jun-08 30-Jun-97 31-Dec-03 S S
b

30-Apr-03 31-Jul-03 31-Dec-06

EG/PR PI/RC

50,000 173,000 67,700 55,000 122,700

EG EG/PR

PI/GG PI/RC

10,000 15,600 25,600

Total 675,310 100 ADB = Asian Development Bank, CARM = Cambodia Resident Mission, Dev. = development, EG = economic growth, ENV = environment, EP = environmental protection, GG = good governance, GMS = Greater Mekong Subregion, HD = human development, HS = highly successful, Mgt. = management, No. = number, ODI = other development intervention, PCR = project completion report, PI = poverty intervention, Pov. = poverty, PPAR = project performance audit report, PR = poverty reduction, Prim. = primary, PSD = private sector development, RC = regional cooperation, S = successful, Sec. = secondary, WID = women in development.
a

Appendix 2
Table A2.2: List of Approved Project Preparatory Technical Assistance by Sector (19922002) Approved Amount Approval PPTA Date No. Title $ % Agriculture, Rural Dev. & Natural Resources/Environmental Mgt. - Agriculture a 3152 1. Sustainable Forest Management 980,000 31-Dec-98 2. 3695 Agriculture Sector Development Program 600,000 31-Aug-01 Subsector Total 1,580,000 11 - Rural Development 3. 2059 Rural Infrastructure Improvement 98,000 9-Feb-94 4. 2554 Community Irrigation Rehabilitation 100,000 9-Apr-96 5. 2592 Stung Chinit Water Resource Development 800,000 25-Jun-96 6. 2818 Rural Credit and Savings 600,000 26-Jun-97 7. 3275 Study for Stung Chinit Water Resources Development 150,000 13-Oct-99 8. 3489 Rural Development 600,000 29-Aug-00 9. 3758 Northwest Irrigation Sector 1,200,000 31-Oct-01 Subsector Total 3,548,000 24 - Natural Resources/Environmental Mgt. 10. 3997 Chong Kneas Environmental Improvement 997,000 22-Nov-02 Subsector Total 997,000 7 Sector Total 6,125,000 41 Energy 11. 2629 Power Rehabilitation II 450,000 20-Aug-96 12. 3256 Update of Power Rehabilitation II Project Preparation Study 150,000 17-Sep-99 Sector Total 600,000 4 Finance 13. 3467 Financial Sector Development Program 800,000 7-Jul-00 Sector Total 800,000 5 Social Sector - Education 14. 2067 Skills Development 100,000 11-Mar-94 15. 2121 Basic Education 100,000 12-Jul-94 16. 3463 Education Sector Development Program 800,000 27-Jun-00 Subsector Total 1,000,000 7 - Health 17. 2223 Basic Health Services 300,000 7-Dec-94 18. 3653 Second Basic Health Services 700,000 3-May-01 Subsector Total 1,000,000 7 - Water Supply & Sanitation 19. 2280 Urban Water Supply and Sanitation 600,000 4-Jan-95 20. 2689 Integrated Urban Development 800,000 20-Nov-96 21. 3688 Rural Water Supply and Sanitation 700,000 23-Jul-01 Subsector Total 2,100,000 14 - Gender a 2503 22. Employment Promotion for Women 600,000 22-Dec-95 Subsector Total 600,000 4 Sector Total 4,700,000 31 Transport 23. 2197 Airports Improvement 500,000 3-Nov-94 24. 2722 Transport Network Improvement (with supplementary) 985,000 19-Dec-96 25. 3852 Economic Analysis for the GMS Cambodia Road 150,000 4-Apr-02 Improvement Project 26. 3854 Environmental Assessment for the GMS Cambodia Road 60,000 11-Apr-02 Improvement Project 27. 3855 Resettlement Study and Social Impact Assessment for the 150,000 11-Apr-02 GMS Cambodia Road Improvement Project 28. 3868 Engineering Design Update for the GMS Cambodia Road 400,000 21-May-02 Improvement Project Sector Total 2,245,000 15 Others 29. 3836 Decentralization Support Program 500,000 15-Feb-02 Sector Total 500,000 3 Total 14,970,000 100 ADB = Asian Development Bank, Dev. = development, GMS = Greater Mekong Subregion, Mgt. = management, No. = number, PPTA = project preparatory technical assistance, TA = technical assistance, TCR = technical assistance completion report, TPAR = technical assistance performance audit report. a These TAs did not lead to loans. The TCR for TA 3152 rated it as generally successful. TCR was not prepared for TA 2503, but a TPAR was prepared with a partly successful rating. Source: Regrouped from relevant ADB databases.

83

84

Appendix 2
Table A2.3: List of Approved Advisory and Operational Technical Assistance by Sector (19922002) Approved Amount $ % Approval Date Rating TCR TPAR

ADTA No. Title Agriculture, Rural Dev. & Natural Resources/Environmental Mgt. - Agriculture 1. 1971c Agricultural Development Options Review 2. 2591c Agricultural Policy Reform Support 3. 3577c Implementation of Land Legislation Subsector Total - Rural Development 4. 2406c Strengthening of the Ministry of Rural Development 5. 2601c Rural Credit Review 6. 3270c Capacity Building for Rural Financial Services 7. 3292c Capacity Building in the Ministry of Water Resources and Meteorology Subsector Total - Natural Resources/Environmental Mgt. 8. 2078c Strengthening Environmental Impact Assessment Procedures and Capabilities 9. 2723c Institutional Strengthening and Expanding Environmental Impact Assessment Capacity 10 3993 Improving the Regulatory and Management Framework for Inland Fisheries 11. 4025 Capacity Building of the Inland Fisheries Research and Development Institute Subsector Total Sector Total Energy 12. 2241c 13. 2243c 14. 3298c 15. 3453c

515,000 1,500,000 600,000 2,615,000 1,500,000 100,000 1,450,000 796,000 3,846,000

27-Oct-93 GS 20-Jun-96 13-Dec-00 5 28-Sep-95 4-Jul-96 5-Oct-99 10-Nov-99 GS 7

550,000 1,000,000 540,000 900,000 2,990,000 9,451,000

13-Apr-94 GS 19-Dec-96 GS 21-Nov-02 11-Dec-02 6 18

Strengthening the Institutional and Legal Framework for the Energy and Mineral Sectors Power Sector Manpower Development and Training Developing the Strategy for the ADB's Involvement in Cambodia's Power Sector Develop a Strategy for Management of Provincial Power Supplies Sector Total

595,000 500,000 150,000 150,000 1,395,000

14-Dec-94 GS 15-Dec-94 16-Nov-99 8-Jun-00 3

Finance 16. 2330c 17. 18. 19. 20. 21. 2570c 2796c 3769 3861 4020

Institutional Strengthening of the Centre for Banking Studies and State-Owned Banks' Staff Training Strengthening Capacity in the Trade and Industry Sectors Enhancing Banking Skills Capacity Building for Banking and Financial Management Improving Legal Infrastructure in the Financial Sector Improving Insurance Supervision Sector Total

340,000 600,000 400,000 1,000,000 800,000 400,000 3,540,000

10-May-95 GS 14-May-96 GS 19-May-97 GS 13-Nov-01 4-May-02 6-Dec-02 7

Social Sector - Education 22. 1889c Emergency Training of Teachers 23. 2331c Basic Education Management and Coordination 24. 2516c Capacity Building for Technical and Vocation Education and Training 25. 2555c Textbook Publishing Planning and Management 26. 3169c Secondary Education Investment Plan 27. 3415c Education Strategic Support 28. 3858 Performance Management in the Education Sector Subsector Total - Health 29. 2567c Managing Basic Health Services 30. 3511c Capacity Building for HIV/AIDS Prevention and Control 31. 4016 Reaching the Rural Poor with Primary Health Care Subsector Total - Water Supply 32. 2031c Water Supply and Sanitation Sector Needs Assessment Study 33. 2281c Urban Development Strategy Study 34. 2669c Institutional Support to the Water Supply Subsector Subsector Total Sector Total

1,300,000 500,000 980,000 600,000 650,000 150,000 800,000 4,980,000 499,000 600,000 39,000 1,138,000 100,000 500,000 500,000 1,100,000 7,218,000

14-May-93 GS 10-May-95 27-Dec-95 GS 15-Apr-96 GS 8-Mar-99 GS 15-Mar-00 18-Apr-02 10 8-May-96 GS 3-Oct-00 GS 6-Dec-02 2 27-Dec-93 4-Jan-95 PS 24-Oct-96 GS 2 14

Appendix 2
Table A2.3Continued ADTA No. Title Transport 35. 1866c Transport Rehabilitation Study a 36. 2416c Developing a Planning Capability in the Ministry of Public Works and Transport a 37. 2706c Institutional Strengthening of the State Secretariat of Civil Aviation 38. 3164c Project Preparation and Implementation Assistance to the Ministry of Public Works and Transport 39. 3257c Strengthening the Maintenance Planning and Management Capabilities at Ministry of Public Works 40. 3414c Capacity Building in Public-Private Partnerships for Transport 41. 3651c Transport Sector Strategy Sector Total Multisector 42. 1794c 43. 1878c 44. 2370c 45. 3952

85
Rating TCR TPAR HS PS

Approved Amount $ % 1,319,400 800,000 550,000 150,000 735,000 150,000 850,000 4,554,400

Approval Date

31-Mar-93 GS 2-Oct-95 12-Dec-96 3-Feb-99 21-Sep-99 15-Mar-00 27-Apr-01 9

Project Implementation in the Transport and Agriculture Sectors Project Management Coordination and Project Implementation in the Power and Education Sectors Extension of Project Implementation Assistance under the Special Rehabilitation Assistance Loan Integrated Social Sectors Study Sector Total

4,200,000 3,200,000 2,600,000 150,000 10,150,000

26-Nov-92 GS 23-Apr-93 25-Jul-95 29-Oct-02 20

Others (Capacity Building in Various Areas) - Macroeconomic Management & Development Planning 46. 1694c Strengthening Macroeconomic Management b 47. 2261c Statistical System Development b 48. 2488c Strengthening Capacity in Development Planningb 49. 2645c Capacity Building in External Aid Management 50. 2976c Capacity Building in Development Planning, Phase IIb 51. 3287c Strengthening External Aid Portfolio Management 52. 3293c Statistical System Development, Phase III 53. 3721 Institutional Support for National Economic Policy Management 54. 3955 Engagement of a Poverty Consultant at the Cambodia Resident Mission 55. 4037 Dissemination of the National Poverty Reduction Strategy 56. 1802c Seminar on Bank's Operational Policies and Procedures in Cambodia 57. 2600c Training Seminar in Bank Policies and Procedures 58. 3160c Improvement of Project Implementation in Cambodia Subsector Total - Private Sector Development 59. 3200c Strengthening Tourism Planning 60. 3454c Building Capacity in Tourism Planning 61. 4030 Private Sector Assessment Subsector Total - Gender 62. 2157c Women in Development d 63. 3327c Capacity Building for the Ministry of Women's and Veterans' Affairs d 64. 3947 Sustainable Employment Promotion for Poor Women Subsector Total - Governance 65. 2150c Establishment of a Central Procurement Office and Regulations and Procedures for Procurement of Goods 66. 2427c Institutional Strengthening of the Department of Public Procurement 67. 2566c Developing Capacity in Audit and Inspectorate Function 68. 3634 Strengthening Public Financial Management (TA Cluster) Subsector Total Sector Total Total

3,855,200 1,200,000 850,000 595,000 910,000 750,000 1,000,000 550,000 15,000 80,000 26,000 96,000 150,000 10,077,200 150,000 586,000 150,000 886,000 546,000 400,000 400,000 1,346,000 600,000 520,000 600,000 1,200,000 2,920,000 15,229,200 51,537,600

21-Apr-92 22-Dec-94 GS 19-Dec-95 13-Sep-96 31-Dec-97 2-Nov-99 GS 10-Nov-99 GS 19-Sep-01 30-Oct-02 16-Dec-02 11-Dec-92 3-Jul-96 27-Jan-99 20 4-Jun-99 GS 14-Jun-00 13-Dec-02 2 20-Sep-94 GS 8-Dec-99 GS 24-Oct-02 3 14-Sep-94 17-Oct-95 8-May-96 22-Feb-01 6 30 100 HS

S S S PS

S S

86

Appendix 2

Table A2.3Continued
ADB = Asian Development Bank, ADTA = advisory and operational technical assistance, AIDS = acquired immunodeficiency syndrome, Dev. = development, GS = generally successful, HIV = human immunodeficiency virus, HS = highly successful, Mgt. = management, No. = number, PPTA = project preparatory technical assistance, PS = partly successful, S = successful, TA = technical assistance, TCR = technical assistance completion report, TPAR = technical assistance performance audit report.
a b c d

Included in TPAR (TE-35: ADTAs for Institutional Strengthening in Transport Planning and Administration, approved in August 2001). Included in TPAR (Selected TAs for Development Planning and National Statistics, approved in September 2003). Completed (54 ADTAs).

Included in TPAR (TE-46: Gender and Development in Cambodia, approved in February 2003). This TPAR also includes one PPTA (TA 2503: Employment Promotion for Women, for $600,000, approved on 22 December 1995), which did not lead to a loan. Source: Regrouped from relevant ADB databases.

Appendix 2

87

Table A2.4: List of Regional Technical Assistance under GMS Program (19922002)
Amount ($'000) 270.0 5,260.0 200.0 100.0 94.5 977.6 78.0 30.0 130.0 3,000.0 600.0 1,665.0 180.0 100.0 3,000.0 2,500.0 770.0 600.0 50.0 600.0 550.0 150.0 1,000.0 1,600.0 800.0 125.0 50.0 1,650.0 950.0 610.0 800.0 600.0 600.0 150.0 900.0 750.0 600.0 800.0 150.0 700.0 500.0 600.0 500.0 800.0 1,600.0 1,000.0 1,000.0 500.0 40,240.1 Approval Date 9-Mar-92 10-Jun-93 10-Dec-93 18-May-94 6-Jun-94 9-Feb-95 20-Sep-95 2-Oct-95 23-Oct-95 9-Nov-95 18-Apr-96 9-May-96 29-May-96 18-Jul-96 23-Jul-96 22-Aug-96 28-May-97 9-Jun-97 18-Jun-97 24-Jun-97 26-Aug-97 17-Sep-97 31-Dec-97 20-Mar-98 30-Jun-98 29-Sep-98 14-Oct-98 22-Dec-98 16-Jul-99 16-Dec-99 22-Dec-99 28-Dec-99 29-Dec-99 17-May-00 10-Jul-00 17-Nov-00 7-Dec-00 14-Dec-00 21-Dec-00 2-Nov-01 21-Dec-01 21-Dec-01 17-May-02 25-Oct-02 11-Dec-02 19-Dec-02 19-Dec-02 19-Dec-02

RETA No. 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15. 16. 17. 18. 19. 20. 21. 22. 23. 24. 25. 26. 27. 28. 29. 30. 31. 32. 33. 34. 35. 36. 37. 38. 39. 40. 41. 42. 43. 44. 45. 46. 47. 48. 5487a 5535a 5557 5577 5582 5622a 5643a 5645a 5647a 5649a 5681 5684a 5686a 5691a 5693a 5697a 5738a 5739 5741a 5743a 5749a 5751 5771a 5783a 5794 5807a 5810 5822a 5850a 5881 5886 5893 5899 5915 5920 5951 5958 5961 5970 6004 6017 6020 6032 6056 6069 6083 6084 6091

Title Studies on Subregional Cooperation Among the Countries in Indochina, Myanmar, PRC and Thailand Promoting Subregional Cooperation among Cambodia, PRC, Lao PDR, Myanmar, Thailand and Viet Nam Regional Conference for Biodiversity Conservation Preparation of Country Project Implementation Profiles for Viet Nam and Cambodia Workshop on Vegetable Workshop Research and Development in Cambodia, Lao PDR and Viet Nam Subregional Environmental Monitoring and Information System Subregional Electric Power Forum GMS Meeting of Telecommunications Officials GMS Regional Program to Train Trainers in Tourism in the GMS GMS Infrastructure Improvement Cooperation in Employment Promotion and Training in the GMS Subregional Environmental Training and Institutional Strengthening in the GMS Mitigation of Nonphysical Barriers to Cross-Border Movement of Goods and People Thailand-Cambodia-Viet Nam Southern Coastal Road Corridor Promoting Subregional Cooperation Among Cambodia, PRC, Lao PDR, Myanmar, Thailand and Viet Nam Se Kong-Se San and Nam Theun River Basins Hydropower Development Study East Loop Telecommunications Project in the GMS Media for the Disadvantaged Third Meeting of the Subregional Telecommunications Forum Mekong/Lancang River Tourism Planning Study Cross-Border Movement of Goods and People in the GMS Cooperation in the Prevention and Control of HIV/AIDS in the GMS Poverty Reduction and Environmental Management in Remote GMS Watersheds Strategic Environmental Framework for the GMS Study of Health and Education Needs of Ethnic Minorities in the GMS Tourism Skills Development in the GMS Regional Training Course in Financial Management for Water Supply and Sanitation Utilities in DMCs Protection and Management of Critical Wetlands in the Lower Mekong Basin Facilitating the Cross-Border Movement of Goods and People in the GMS Preventing HIV/AIDS among mobile populations in the GMS GMS Promoting Subregional Cooperation among Cambodia, PRC, Lao PDR Mekong/Lancang River Tourism Infrastructure Development Subregional Environmental Monitoring and Information Systems Phase II Establishment of Backbone Telecommunications Network Project Phase I Regional Indicative Master Plan on Power Interconnection in the GMS SME Growth and Development in the Mekong Region Roll-back Malaria Initiative in the GMS Promoting Subregional Cooperation in the GMS Phase IV Drug Eradication in the GMS GMS Telecommunications Sector Policy Formulation and Capacity Building Capacity Building for National Institutions Involved in the GMS Program Facilitating Cross-Border Trade and Investment for SME Development in the GMS Support to the GMS Summit of Leaders and Related Activities GMS Phnom Penh Plan for Development Management National Performance Assessment and Subregional Strategic Environment Framework in the GMS ICT and HIV/AIDS Preventive Education in the Cross-Border Areas of the GMS Promoting Subregional Cooperation among the Kingdom of Cambodia, PRC, Lao PDR Capacity Building for Resettlement Risk Management Total

ADB = Asian Development Bank, AIDS = acquired immunodeficiency syndrome, DMC = developing member country, GMS = Greater Mekong Subregion, HIV = human immunodeficiency virus, ICT = information and communication technology, No. = number, PDR = Peoples Democratic Republic, PRC = Peoples Republic of China, RETA = regional technical assistance, SME = small and medium enterprise. a Included in the ADB. 1999. Impact Evaluation Study of Asian Development Bank's Program of Sub regional Economic Cooperation in the Greater Mekong Sub region. Source: Relevant ADB databases.

88

Appendix 2

Table A2.5: List of Economic, Thematic and Sector Work (19922002) Title Country Economic Reviews 1. Country Economic Review 2. Country Economic Update Country Economic Reports 3. Country Profile 4. Country Risk Assessment Poverty Analysis 5. Poverty Analysis 6. Participatory Poverty Assessment 7. Poverty Reduction Partnership Agreement Policy and Strategy Papers in Various Sectors 8. Using Both Hands: Women and Education in Cambodia 9. Women in Development Briefing Paper 10. Human Development Crosscutting Concerns 11. Assessment of Social Statistics and Indicators 12. Private Sector Development 13. Financial Sector Roadmap 14. Environment Profile and Assessment 15. Environments in Transition 16. Enhancing Governance for Sustainable Development 17. Social Sector Profile 18. Governance Issues and Assessment 19. Financial Sector Blueprint 20. Water Resources Sector Review 21. Deposit Insurance Development Plan 22. Agriculture Sector Development
ADB = Asian Development Bank. Source: Relevant ADB databases.

Completion Year

1996, 1998, 1999, 2000 2000, 2001, 2002

1995, 1997 1998 2001 2001 2002 1995 1996 1996 1998 1998 1999 2000 2000 2000 2001 2001 2001 2002 2002 2002

Appendix 2

89

Table A2.6: Composition of Approved Loans and Technical Assistance by Sector (19922002)
Loans $'000 PPTAs $'000 ADTAs $'000

Sector Agriculture, Rural Dev. & Natural Resources/ Environmental Mgt. Energy Finance Social Sector Transport Multisector Others Total

No.

No.

No.

6 2 2 8 4 2 2 26

23.1 7.7 7.7 30.8 15.4 7.7 7.7 100.0

129,210 46,800 20,000 158,000 173,000 122,700 25,600 675,310

19.1 6.9 3.0 23.4 25.6 18.2 3.8 100.0

10 2 1 9 6 0 1 29

34.5 6.9 3.4 31.0 20.7 0 3.4 100.0

6,125 600 800 4,700 2,245 0 500 14,970

40.9 4.0 5.3 31.4 15.0 0 3.3 100.0

11 4 6 13 7 4 23 68

16.2 5.9 8.8 19.1 10.3 5.9 33.8 100.0

9,451 1,395 3,540 7,218 4,554 10,150 15,229 51,537

18.3 2.7 6.9 14.0 8.8 19.7 29.5 100.0

ADB = Asian Development Bank, ADTA = advisory and operational technical assistance, Dev. = development, Mgt. = management, No. = number, PPTA = project preparatory technical assistance. Source: Recalculated from relevant ADB databases.

Figure A2.1: Composition of Approved Loans by Agriculture, Sector (19922002) Rural Dev. & Others Natural 4% Multisector Resources/ 18% Environmental Mgt. 19% Energy 7% Finance 3% Transport 26% Social Sector 23%

Source: Calculated from Table A2.6.

Figure A2.2: Composition of Approved Project Preparatory Technical Assistance by Sector (19922002) Others Agriculture, 3% Transport Rural Dev. & 15% Natural Resources/ Environmental Mgt. 41%

Figure A2.3: Composition of Approved Advisory and Operational Technical Assistance by Sector (19922002) Agriculture, Rural Dev. & Others Natural 30% Resources/ Environmental Energy Mgt. 3% 18% Finance 7% Social Sector 14% Transport 9%

Social Sector 31% Finance 5%

Energy 4%

Multisector 20%

Source: Calculated from Table A2.6.

Source: Calculated from Table A2.6.

90

Appendix 2

Table A2.7: Composition of Approved Loans by Sector in Three Periods 19921995 $ '000 19962000 $ '000 20012002 % $ '000

Sector Agriculture, Rural Dev. & Natural Resources/ Environmental Mgt. Energy Finance Social Sector Transport Multisector Others Total

No.

No.

No.

1 1 0 1 0 1 0 4

25.0 25.0 0 25.0 0 25.0 0 100.0

25,100 28,200 0 20,000 0 67,700 0 141,000

17.8 20.0 0 14.2 0 48.0 0 100.0

3 1 0 4 3 1 0 12

25.0 8.3 0 33.3

66,000 18,600 0 80,000

19.3 5.4 0 23.4 35.9 16.1 0 100.0

2 0 2 3 1 0 2 10

20.0 0 20.0 30.0 10.0 0 20.0 100.0

38,110 0 20,000 58,000 50,000 0 25,600 191,710

19.9 0 10.4 30.3 26.1 0 13.4 100.0

25.0 123,000 8.3 0 55,000 0

100.0 342,600

ADB = Asian Development Bank, Dev. = development, Mgt. = management, No. = number. Source: Recalculated from relevant ADB databases.

Table A2.8: Composition of Approved Advisory and OperationalTechnical Assistance by Sector in Three Periods 19921995 $'000 19962000 $'000 20012002 % $'000

Sector Agriculture, Rural Dev. & Natural Resources/ Environmental Mgt. Energy Finance Social Sector Transport Multisector Others Total

No.

No.

No.

3 2 1 6 2 3 6 23

13.0 8.7 4.3 26.1 8.7 13.0 26.1 100.0

2,565 1,095 340 3,926 2,119 10,000 7,051 27,096

9.5 4.0 1.3 14.5 7.8 36.9 26.0 100.0

6 2 2 6 4 0 10 30

20.0 6.7 6.7 20.0 13.3 0 33.3 100.0

5,446 300 1,000 2,999 1,585 0 5,237 16,567

32.9 1.8 6.0 18.1 9.6 0 31.6 100.0

2 0 3 1 1 1 7 15

13.3 0 20.0 6.7 6.7 6.7 46.7 100.0

1,440 0 2,200 293 850 150 2,941 7,874

18.3 0 27.9 3.7 10.8 1.9 37.4 100.0

ADB = Asian Development Bank, Dev. = development, Mgt. = management, No. = number. Source: Recalculated from relevant ADB databases.

Appendix 2

91

Table A2.9: List of Expected Loans in the Pipeline by Sector (20032006) Expected Loan Amount ($'000)

Title 2003 Agriculture, Rural Dev. & Natural Resources Mgt. 1. Agriculture Sector Development Program Agriculture Sector Development Project 2. Social Sector 3. Provincial Towns Improvement/ Supplementary Loan 4. Rural Water Supply and Sanitation Subregional 5. GMS Power Transmissiona Subtotal 2004 Agriculture, Rural Dev. & Natural Resources Mgt. Northwest Irrigation Sector 6. 7. Chong Kneas Environmental Improvement Subtotal Finance & Trade 8. Financial Sector Program (Subprogram III) 9. SME Sector Development Program Subtotal 2005 Energy 10. Second Power Distribution Social Sector 11. Education Sector Development Program II Subregional 12. GMS Telecommunications Backbone, Phase Ia Subtotal 2006 Agriculture, Rural Dev. & Natural Resources Mgt. 13. Tonle Sap SustainableLivelihoods Finance & Trade 14. Financial Sector Program II (Subloan I) Transport 15. Transport Infrastructure Development Subregional 16. Restructuring of Royal Railway of Cambodia & Rehabilitation of Track a Others 17. Decentralized Public Sector Management Program Subtotal Total

Poverty Thematic Classification Priority

Division

CPI CPI PI PI ODI

GG/GD GG/GD GG/GD GG/GD RC/PSD

MKAE MKAE MKSS MKSS MKID

25,000 4,700 6,300 18,000 45,000 99,000

PI PI

EG ENV/HD

MKAE MKAE

18,000 15,000 33,000 10,000 15,000 25,000

ODI PI

PSD/GG EG/PSD

MKGF MKGF

ODI PI ODI

EG/PSD HD RC/PSD

MKID MKSS MKID

26,000 30,000 15,000 71,000

CPI ODI PI ODI

ENV/HD PSD/GG EG/GD RC/PSD

MKAE MKGF MKID MKID

15,000 10,000 30,000 40,000

PI

GG

MKGF

15,000 110,000 338,000

ADB = Asian Development Bank; CPI = core poverty intervention; Dev. = development; EG = economic growth; ENV = environment; GD = gender and development; GG = good governance; GMS = Greater Mekong Subregion; HD = human development; Mgt. = management; MKAE = Mekong Agriculture, Environment and Natural Resources Division; MKGF = Mekong Governance, Finance and Trade Division; MKID = Mekong Infrastructure Division; MKSS = Mekong Social Sector Division; ODI = other development intervention; PI = poverty intervention; PSD = private sector development; RC = regional cooperation; SME = small-and-medium enterprise.
a

Under GMS Program. Source: Regrouped from ADB. 2003. Country Strategy and Program Update (20042006): Cambodia. Manila.

92

Appendix 2

Table A2.10: List of Expected Project Preparatory Technical Assistance in the Pipeline by Sector (20032006)
Expected Loan Year Expected PPTA Amount ($'000) ADB Others Total

Title

Division

2003 Agriculture, Rural Dev. & Natural Resources Mgt. 1. Tonle Sap Sustainable Livehood 2005/06 Finance & Trade 2. SME Sector Development 2004 Social Sector 3. Second Education Sector 2005 Subregional 4. Power Distribution and GMS Transmission 2003/04/05 Subtotal 2004 Agriculture, Rural Dev. & Natural Resources Mgt. 5. Tonle Sap Lowland Stabilization 2007 Finance & Trade 6. Financial Sector Development Program II 2006 Subregional 7. Restructuring of Royal Railway of 2006 Cambodia & Rehabilitation of Track Subtotal 2005 Agriculture, Rural Dev. & Natural Resources Mgt. 8. Water Resources Sector Development 2007 9. Rural Income Enhancement 2007 Social Sector 10. Health Sector Support II Transport 11. Transport Infrastructure Development 2006 Others 12. Decentralized Public Sector Management 2006 Subtotal 2006 Agriculture, Rural Dev. & Natural Resources Mgt. 2008 13. Tonle Sap Watershed Management Subtotal Total

MKAE MKGF MKSS MKID

0 500 600 730 1,830

1,200 0 0 0 1,200

1,200 500 600 730 3,030

MKAE MKGF MKID

300 500 500 1,300

300 0 0 300

600 500 500 1,600

MKAE MKAE MKSS MKID MKGF

800 700 600 1,000 600 3,700

0 0 400 500 300 1,200

800 700 1,000 1,500 900 4,900

MKAE

800 800 7,630

0 0 2,700

800 800 10,330

ADB = Asian Developmen Bank; Dev. = development; GMS = Greater Mekong Subregion; Mgt. = management; MKAE = Mekong Agriculture, Environment and Natural Resources Division; MKGF = Mekong Governance, Finance and Trade Division; MKID = Mekong Infrastructure Division; MKSS = Mekong Social Sector Division; PPTA = project preparatory technical assistance; SME = small and medium enterprise. Source: Regrouped from ADB. 2003. Country Strategy and Program Update (20042006): Cambodia. Manila.

Appendix 2

93

Table A2.11: List of Expected Advisory and Operational Technical Assistance in the Pipeline by Sector (20032006)
Expected ADTA Amount ($'000) ADB Others Total

Title 2003 Agriculture, Rural Dev. & Natural Resources Mgt. 1. Implementation of Land Legislation, Phase II 2. Supporting Policy and Institutional Reforms in the Agriculture Sector 3. Study on Built Structures on Tonle Sap Fisheries 4. Master Plan for Agriculture Research 5. Tonle Sap Management Organization Social Sector 6. Capacity Building for Decentralized Development of Rural Water Supply and Sanitation Subregional 7. Capacity Building for the Electricity Authority of Cambodia Others 8. Harmonization of Implementation Procedures 9. National Statistics Development Implementation Subtotal

Division

OGC MKAE MKAE MKAE MKAE

600 1,000

0 0
300

600 1,000 300 300 150

0
300 150

0 0

MKSS

600

0
240

600

MKGF

0
500 150 3,300

240

CARM ERDI

0 0
540

500 150 3,840

2004 Agriculture, Rural Dev. & Natural Resources Mgt. 10. Capacity Building of the Tonle Sap Harbor Management Authority MKAE 11. Community Self-Reliance and Flood Risk Reduction MKAE Finance & Trade 12. SME Sector Development Program MKGF Social Sector 13. Health Financing for the Poor MKSS Others 14. Capacity Building in Policy Monitoring and Implementation MKOC/CARM Enhancing the Resettlement Legal 15. Framework and Capacity Building MKID 16. Review of Communes/Sangkat Boundaries MKGF 17. Decentralized Public Sector ManagementService Delivery MKGF Decentralized Public Sector 18. ManagementService Delivery Policy and Administrative Reform MKGF Subtotal

0 0
500 200

400 300

400 300 500 400

0
200

800 400 300 400

400 300

1,200 700 300 600

0
200

400 3,000

200 2,000

600 5,000

94

Appendix 2

Table A2.11Continued
Title 2005 Agriculture, Rural Dev. & Natural Resources Mgt. 19. Enabling Activities to Implement the Stockholm Convention on Persistent Organic Pollutants Finance & Trade 20. Financial Sector Program Implementation Social Sector 21. Education Sector Management Others 22. Strengthening the Capacity of Government Audit Institution Subtotal 2006 Subregional 23. Establishment of a Railway Authority in Cambodia Subtotal Total Division Expected ADTA Amount ($'000) ADB Others Total

MKAE MKGF MKSS

150 600 500

200

350 600 1,000

0
500

MKGF

600 1,850

0
700

600 2,550

MKID

800 800 8,950

0 0
3,240

800 800 12,190

ADB = Asian Development Bank; ADTA = advisory and operational technical assistance; CARM = Cambodia Resident Mission; Dev. = development; ERDI = Development Indicators and Policy Research Division; Mgt. = management; MKAE = Mekong Agriculture, Environment and Natural Resources Division; MKGF = Mekong Governance, Finance and Trade Division; MKID = Mekong Infrastructure Division; MKOC =Mekong Operations Coordination Division; MKSS = Mekong Social Sector Division; OGC = Office of the General Counsel; SME = small and medium enterprise. Source: Regrouped from ADB. 2003. Country Strategy and Program Update (20042006): Cambodia. Manila.

Appendix 2

95

Table A2.12: Composition of Expected Loans and Technical Assistance in the Pipeline by Sector (20032006)
Loans $'000 PPTAs $'000 ADTAs $'000

Sector Agriculture, Rural Dev. & Natural Resources/ Environmental Mgt. Energy Finance & Trade Social Sector Transport Subregional Others Total

No.

No.

No.

5 1 3 3 1 3 1 17

29.4 5.9 17.6 17.6 5.9 17.6 5.9 100.0

77,700 26,000 35,000 54,300 30,000 100,000 15,000 338,000

23.0 7.7 10.4 16.1 8.9 29.6 4.4 100.0

5 0 2 2 1 2 1 13

38.5 0 15.4 15.4 7.7 15.4 7.7 100.0

4,100 0 1,000 1,600 1,500 1,230 900 10,330

39.7 0 9.7 15.5 14.5 11.9 8.7 100.0

8 0 2 3 0 2 8 23

34.8 0 8.7 13.0 0 8.7 34.8 100.0

3,400 0 1,100 2,000 0 1,040 4,650

27.9 0 9.0 16.4 0 8.5 38.1

12,190 100.0

ADB = Asian Development Bank, ADTA = advisory and operational technical assistance, Dev. = development, Mgt. = management, No. = number, PPTA = project preparatory technical assistance. Source: Recalculated from ADB. 2003. Country Strategy and Program Update (20042006): Cambodia. Manila.

Figure A2.4: Composition of Expected Loans by Sector Agriculture, Others (20032006) 4% Rural Dev. & Natural Resources/ Environmental Mgt. 23% Energy 8%

Subregional 30%

Transport 9%

Social Sector 16%

Finance & Trade 10%

Source: Calculated from Table A2.12.

Figure A2.5: Composition of Expected Project Preparatory Technical Assistance by Sector (20032006) Others 9% Subregional 12% Agriculture, Rural Dev. & Natural Resources/ Environmental Mgt. 40%

Figure A2.6: Composition of Expected Advisory Technical Assistance by Sector (20032006) Agriculture, Rural Dev. & Natural Resources/ Environmental Mgt. 28% Finance & Trade 9% Social Sector 16%

Others 38%

Transport 15%

Social Sector 16%

Finance & Trade 10%

Subregional 9%

Source: Calculated from Table A2.12.

Source: Calculated from Table A2.12.

96

Appendix 3

PORTFOLIO PERFORMANCE OF LENDING PROGRAM Table A3.1: Project Performance Ratings (as of 31 December 2002) (%) Implementation Progress Development Objectives HS S PS U HS S PS U
9 8 7 87 88 82 4 3 9 0 1 2 9 6 5 91 92 90 0 2 5 0 0 >1

Group
Cambodia Mekong Region ADB-wide

ADB = Asian Development Bank, HS = highly satisfactory, PS = partly satisfactory, S = satisfactory, U = unsatisfactory. Source: ADB. 2003. Annual Report on Loan and Technical Assistance Portfolio Performance for the Period Ending 31 December 2002. Manila, staff estimates.

Table A3.2: Financial Performance Indicators

Item 1998 Proj. Actual
29.1 29.1 0.0 29.3 29.3 0.0 21.5 23.9 0.0 28.4 28.6 (0.2)

1999 Proj. Actual

88.4 74.4 14.0 46.6 32.6 14.0 18.4 13.6 96.1 17.0 17.0 0.0 26.2 26.2 0.0 17.2 19.0 0.0 24.9 25.0 (0.2)

2000 Proj. Actual

92.6 78.6 14.0 50.8 36.8 14.0 24.1 18.7 98.5 114.4 100.8 13.6 50.8 37.3 13.5 19.1 14.8 95.0 49.3 36.0 13.3

2001 Proj. Actual

41.9 41.9 0.0 56.8 56.8 0.0 19.2 19.2 0.0 40.7 40.7 0.0 48.3 48.3 0.0 18.7 18.7 0.0 46.4 46.7 (0.3)

2002 Proj. Actual

74.6 55.0 19.6 74.2 54.6 19.6 27.0 22.2 66.8 64.4 44.5 19.9 78.9 59.0 19.9 30.3 25.6 67.8 76.4 56.8 19.6

Contract Awards ($ million) 30.4 - Project Loans 30.4 - Program Loans 0.0 40.8 Disbursements ($million) - Project Loans 26.8 - Program Loans 14.0 a 29.9 Disbursement Ratio (%) - Project Loans - Program Loans b Net Resources Transfer ($ million) - Project Loans - Program Loans

= not available, ADB = Asian Development Bank, Proj. = projected. Note: Figures may not add or be exact due to rounding. a Disbursement ratio = disbursements during the period/(undisbursed net loan balance at the beginning of year + effective loan amount approved during the period). b Net resources transfer = (disbursements from public sector loans) - (principal repayments + interest during construction + service charges). Source: ADB. 2003. Annual Report on Loan and Technical Assistance Portfolio Performance for the Period Ending 31 December 2002. Manila, staff estimates.

Appendix 3

97

Table A3.3: Disbursement Trends (19922002)

Item CAM Active Loans ($ million) - Project Loans - Program Loans CAM Disb. ($ million) - Project Loans - Program Loans CAM Disb. Ratio (%) - Project Loans - Program Loans ADB-wide Disb. Ratio (%) - Project Loans 1992 1.0 1.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 15.5 13.7 1993 64.5 64.5 0.0 5.4 5.4 0.0 8.3 8.3 0.0 15.7 15.3 1994 59.2 59.2 0.0 12.0 12.0 0.0 20.3 20.3 0.0 18.8 17.3 1995 1996 1997 1998 1999 2000 2001 2002

98.3 157.3 98.3 128.9 0.0 35.9 35.9 0.0 36.5 36.5 0.0 18.4 17.8 28.4 32.1 17.1 15.0 20.4 13.5 49.7 17.7 17.4

156.5 136.6 152.0 156.5 122.5 137.7 0.0 10.7 10.7 0.0 6.9 7.6 0.0 25.6 18.6 0.0 29.3 29.3 0.0 21.5 23.9 0.0 29.3 19.8 0.0 26.2 26.2 0.0 17.2 19.0 0.0 22.2 17.6

266.0 258.6 260.2 251.5 258.6 230.9 14.2 50.8 37.3 13.5 19.1 14.8 95.0 20.5 18.3 0.0 48.3 48.3 0.0 18.7 18.7 0.0 20.5 19.4 29.4 78.9 59.0 19.9 30.3 25.6 67.8 22.2 16.3

ADB = Asian Development Bank, CAM = Cambodia, Disb. = disbursements. Source: Recalculated from relevant ADB databases.

Figure A3.1: Disbursement Ratio Trends of All Active Loans (19922002)

40 35 30 25 20 15 10 5 0 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002

CAM Disb. Ratio ADBWide Disb. Ratio

Source: Calculated from Table A3.3.

Figure A3.2: Disbursement Ratio Trends of Project Loans (19922002)

40 35 30 25 20 15 10 5 0
1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002

CAM Disb. Ratio

ADBWide Disb. Ratio

Source: Calculated from Table A3.3.

98

Appendix 4

COMPLEMENTARITY OF FUNDING AGENCY STRATEGIES AND ASSISTANCE PROGRAMS 1. Table A4.1 shows overall external assistance, including technical assistance (TAs), projects, and others combined, in terms of disbursements provided to Cambodia by various funding agencies during 19922001.1 The total annual amount of assistance rose from $250 million in 1992 to $518 million in 1996 before dipping in 1997 because of political instability, and rising again to reach $472 million in 2001. The resulting total cumulative assistance over the entire 10-year period of 1992-2001 is about 4 billion. Bilateral agencies accounted for 58% of the total cumulative assistance, followed by multilateral agencies (34%), and nongovernment organizations (8%). Of the bilaterals, Japan has been the largest funding source, accounting for 22% of the total cumulative assistance, followed by France and the United States (about 7% each). There is not much difference among the shares of the multilaterals, with United Nations agencies accounting for 9% of the total cumulative assistance due to an early involvement in Cambodia, followed by the European Union (8%), Asian Development Bank (7%), World Bank (almost 7%), and International Monetary Fund (3%). 2. Japans bilateral assistance, through the Japan International Cooperation Agency, focuses on fostering Cambodias self-reliance in the Mekong river basin and the Association of Southeast Asian Nations region. In 2002, eight priority areas were identified, in order of priority: (i) good governance, (ii) improved conditions for economic growth, (iii) improved social and economic infrastructure, (iv) health sector development, (v) education sector development, (vi) agriculture and rural development, (vii) demining and support for disabilities people, and (viii) environmental management. 3. The United States, through the United States Agency for International Development, initially emphasized meeting basic human needs and supporting the United Nations-led initiatives to establish a freely elected government. By the mid-1990s, the program focused on achieving democratic governance and sustainable economic growth. The strategic objectives for 20022005 include: (i) increasing competition in Cambodian political life; (ii) strengthening the nascent health delivery system, and promoting the delivery of well-targeted interventions addressing human immunodeficiency virus/acquired immunodeficiency syndrome, maternal and child health, and infectious diseases situations; and (iii) developing a new life skills curriculum. The health sector is the main focus. 4. The United Nations Development Programmes Social Economic Improvement through Local Agencies program for decentralization planning, financing, and management began in 1996. It was conceived to support the Governments strategy for rural development as outlined in the first Socioeconomic Development Plan. The Social Economic Improvement through Local Agencies program initially targeted four communes in two provinces in which to develop local capacity in small-scale planning, project implementation, and liaising with government agencies. By 2001, it extended to 11 provinces and 318 communes. The United Nations Development Programmes first country cooperation framework (19972000) focused on (i) sustainable human development, (ii) poverty eradication, (iii) gender equality, and (iv) special development situations. The subsequent country cooperation framework (20012005) focuses on (i) improved governance and development management at the national level, including public administration reform and aid coordination; and (ii) continued capacity building for participatory development and poverty reduction at the local level.

Data are available only in disbursed amounts, rather than in approved amounts of assistance.

Appendix 4

99

5. The International Monetary Fund focused its assistance on supporting macroeconomic stabilization through its Poverty Reduction and Growth Facility, formerly known as the Enhanced Structural Adjustment Facility. The World Bank has also modified its strategy over time. During 19921996, when Cambodia was considered to be in a post-conflict situation, the emphasis was on rehabilitation and building capacity for macroeconomic management. In 1997, the objectives of its second country assistance strategy included (i) sustained economic growth, (ii) improved fiscal performance, (iii) implementation of legal reforms, and (iv) improved human resources base. The World Bank conducted a country assistance evaluation2 in 2000 to assess its role in Cambodia during 19921999. The study concluded that the World Bank strategic objectives were relevant and its programs consistent with achieving those objectives. However, the study noted that project design and implementation were flawed, the efficacy in achieving the strategic objectives was mixed, and the programs were marginally satisfactory. At that time, the sustainability of the World Bank involvement was considered uncertain due to the extreme circumstances in the country, including the political fluidity, the gravity of the governance problems, and the fragility of the macroeconomic situation. At present, the World Bank assistance is guided by the 2002 country assistance strategy, prepared jointly with the International Finance Corporation, with the main objective of building the foundations for sustainable development and poverty reduction. These foundations are: (i) good governance, including an efficient and accountable public administration and credible legal and judicial frameworks; (ii) greater access for the poor to basic social services and economic opportunities; and (iii) a policy environment for private sector development. 6. In sum, given the general agreement in the international funding community on the key socioeconomic issues in Cambodia and the areas in which strategic interventions are required, the strategies and objectives of the various funding agencies have many common aspects, although there are differences in the prioritization of the objectives and the elements of the strategies. For example, poverty reduction, sustainable economic growth, and human resources development are common objectives. Some emphasize good governance, but with different elementssome are quite explicit about corruption, while others simply highlight the need to improve regulatory frameworks. Both the Asian Development Bank and the World Bank have underscored the need to enhance private sector development. As regards sector breakdown of the total cumulative external assistance in terms of disbursements over 19922001, Table A4.2 shows that it covers all key sectors with large proportions, dominated by the others sector (33%), which consisted mostly of TAs for macroeconomic management, development administration, etc. This is followed by the social sector (27%), agriculture and natural resources (22%), transport (13%), and energy (5%). The large shares of macroeconomic management, the social sector, agriculture and natural resources, and, to some extent, transport reflect funding agencies common objectives, which coincide with Cambodias socioeconomic issues. Overall, funding agencies strategies and objectives in Cambodia are regarded as collective in addressing the countrys objectives, while their sector assistance programs are complementary as they spread across all key sectors.

World Bank. 2000. Cambodia: Country Assistance Evaluation. Washington, DC.

100

Appendix 4

Table A4.1: External Assistance to Cambodia by Funding Agency (1992-2001) Cumulative Disbursements (19922001) $ million % 293.3 311.8 118.7 383.5 270.0 1,377.4 7.1 7.6 2.9 9.3 6.6 33.5

Major Funding Agency Multilateral Agencies ADB EU/EEC IMF UN Agencies World Bank Subtotal Bilateral Agencies Australia Belgium Canada China Denmark France Finland Germany Japan Netherlands New Zealand Norway Republic of Korea Russian Federation Sweden Thailand United Kingdom United States Other Bilateral Agencies Subtotal NGOs (Core Resources Only): Subtotal Total

1992 0.0 32.1 0.0 13.3 0.0 45.4

1993 12.3 19.1 8.8 31.0 0.1 71.2

1994 12.4 9.2 21.2 26.2 40.0 109.0

1995 37.9 28.9 42.3 31.0 29.6 169.6

1996 49.2 57.6 0.4 50.3 40.4 198.0

1997 18.4 36.8 0.0 42.7 28.1 126.0

1998 36.5 49.3 0.0 49.5 29.3 164.6

1999 26.9 28.3 11.5 45.3 26.7 138.6

2000 51.1 27.9 11.5 49.4 32.7 172.7

2001

48.7 22.7 23.0 44.9 43.1 182.3

10.5 1.9 5.8 0.9 4.0 5.8 1.7 2.6 66.9 17.2 0.0 7.9 0.0 5.1 13.4 7.6 7.0 35.6 9.8 203.7 1.1 250.2

15.9 2.2 6.6 0.9 5.9 32.3 0.7 2.5 102.0 11.1 0.0 3.1 0.0 3.7 15.0 0.2 5.1 33.8 4.4 245.4 5.3 321.9

13.8 1.0 4.5 7.1 5.8 35.8 0.6 3.3 95.6 10.0 0.2 0.8 0.0 2.1 10.1 0.0 7.1 31.7 1.6 231.1 17.9 358.0

27.5 2.7 4.3 3.1 5.1 62.2 0.0 13.9 112.4 3.4 0.3 0.9 0.0 1.0 25.3 0.1 10.7 45.1 4.4 322.6 21.1 513.3

20.2 2.0 3.2 10.9 20.8 42.9 0.0 9.6 111.0 11.5 0.2 1.4 0.3 0.3 16.1 1.1 4.1 28.8 0.0 284.3 35.8 518.1

27.3 1.7 4.2 9.5 5.1 26.5 0.1 10.1 59.8 3.3 0.0 2.1 0.0 0.3 17.4 2.2 2.3 30.5 5.0 207.3 49.9 383.2

18.2 3.2 4.8 14.3 4.5 23.2 0.3 9.8 71.4 5.7 1.0 1.0 0.1 0.3 13.5 0.7 9.9 30.4 0.5 212.6 56.1 433.3

18.4 4.8 2.6 3.0 2.7 18.6 0.7 12.3 88.0 6.1 0.8 1.0 1.0 0.3 10.8 0.6 9.4 23.0 2.0 206.1 55.0 399.7

29.4 2.6 0.8 2.6 3.5 27.8 3.3 12.2 106.0 4.9 1.0 1.3 0.7 0.9 14.1 0.4 13.0 17.6 0.0 242.3 51.9 466.8

19.9 1.3 5.2 16.3 2.8 36.0 1.2 10.0 100.0 3.6 0.7 1.2 1.2 0.3 13.1 0.4 8.7 23.8 0.0 246.0 43.6 471.8

201.1 23.3 41.9 68.6 60.3 311.1 8.5 86.5 913.2 76.8 4.3 20.8 3.3 14.3 148.8 13.4 77.3 300.3 27.6 2,401.3 337.6 4,116.4

4.9 0.6 1.0 1.7 1.5 7.6 0.2 2.1 22.2 1.9 0.1 0.5 0.1 0.3 3.6 0.3 1.9 7.3 0.7 58.3 8.2 100.0

ADB = Asian Development Bank, CDC = Council for the Development of Cambodia, EEC = European Economic Community, EU = European Union, IMF = International Monetary Fund, NGO = nongovernment organization, UN = United Nations. a In disbursed amount. b Provisional. Source: CDC. 2001. Development Cooperation Report . Phnom Penh, staff estimates.

Appendix 4

101

Table A4.2: External Assistance by Sector (19922001) Sector Agriculture & Natural Resources Energy Industry Social Sector Transport Othersb Total
a b

Cumulative Disbursements $ million % 902.0 189.0 0.7 1,109.0 541.0 1,374.7 4,116.4 21.9 4.6 0.0 26.9 13.1 33.4 100.0

In disbursed amount.

Including macroeconomic management, development administration, trade, disaster preparedness, and humanitarian aid and relief. Source: Council for the Development of Cambodia. 2001. Development Cooperation Report. Phnom Penh.

102

GOVERNMENT'S FINANCIAL CAPACITY AND SUSTAINABILITY PROSPECTS BY SECTOR

Appendix 5

Items 1. GDP (at current price, KR billion) 2. Overall Expenditure (KR billion) National Treasury Operations -Current Expenditure -Capital Expenditure External Financing 3. Current Expenditure (KR billion) Agriculture, Rural Development, & Natural Resources Industry & Energy Finance Social Sector -Education, Youth, & Sports -Health -Others Transport Defense & Security Others 4. Current Expenditure (% of GDP) Agriculture, Rural Development, & Natural Resources Industry & Energy Finance Social Sector -Education, Youth, & Sports -Health -Others Transport Defense & Security Others 5. % of Current Expenditure Agriculture, Rural Development, & Natural Resources Industry & Energy Finance Social Sector -Education, Youth, & Sports -Health -Others Transport Defense & Security Others
GDP = gross domestic product. a Provisional Source: Ministry of Economy and Finance, staff estimates.

1994 6,985.6 1,659.4 745.0 662.4 82.6 914.4 662.4 14.1 4.9 10.9 61.6 30.0 34.4 7.5 409.7 89.2 9.5 0.2 0.1 0.2 0.9 0.4 0.5 0.1 5.9 1.3 100.0 2.1 0.7 1.6 9.3 4.5 5.2 1.1 61.9 13.5

1995 8,293.8 2,079.1 820.9 717.5 103.5 1,258.1 717.5 17.1 4.7 10.6 73.8 26.1 42.4 8.0 436.8 97.9 8.6 0.2 0.1 0.1 0.9 0.3 0.5 0.1 5.3 1.2 100.0 2.4 0.7 1.5 10.3 3.6 5.9 1.1 60.9 13.6

1996 9,024.3 2,256.5 897.1 789.8 107.3 1,359.4 789.8 20.2 8.6 17.4 80.6 42.6 49.3 7.0 434.4 129.7 8.8 0.2 0.1 0.2 0.9 0.5 0.5 0.1 4.8 1.4 100.0 2.6 1.1 2.2 10.2 5.4 6.2 0.9 55.0 16.5

1997 9,927.4 2,035.8 907.0 810.6 96.4 1,128.9 810.6 18.5 3.3 17.7 84.3 45.6 54.5 7.0 445.8 134.0 8.2 0.2 0.0 0.2 0.8 0.5 0.5 0.1 4.5 1.4 100.0 2.3 0.4 2.2 10.4 5.6 6.7 0.9 55.0 16.6

Fiscal Year 1998 1999 11,609.4 13,131.0 2,686.1 2,908.5 1,050.9 1,330.0 929.4 1,095.9 121.5 234.1 1,635.2 1,578.5 929.4 1,095.9 19.0 26.6 3.0 4.1 32.1 42.7 102.0 43.8 52.0 6.4 481.3 189.9 8.0 0.2 0.0 0.3 0.9 0.4 0.4 0.1 4.1 1.6 100.0 2.0 0.3 3.4 11.0 4.7 5.6 0.7 51.8 20.3 149.8 75.4 68.6 11.8 474.9 241.9 8.3 0.2 0.0 0.3 1.1 0.6 0.5 0.1 3.6 1.8 100.0 2.4 0.4 3.9 13.7 6.9 6.3 1.1 43.3 22.1

2000 13,809.5 3,393.2 1,548.3 1,215.5 332.8 1,844.9 1,215.5 34.8 5.5 41.5 165.8 101.8 88.4 24.6 459.3 293.7 8.8 0.3 0.0 0.3 1.2 0.7 0.6 0.2 3.3 2.1 100.0 2.9 0.5 3.4 13.6 8.4 7.3 2.0 37.8 24.1

2001 14,543.9 3,780.5 1,707.2 1,415.6 291.5 2,073.3 1,415.6 47.4 6.0 19.3 209.2 129.7 97.6 26.1 428.3 451.9 9.7 0.3 0.0 0.1 1.4 0.9 0.7 0.2 2.9 3.1 100.0 3.4 0.4 1.4 14.8 9.2 6.9 1.8 30.3 32.0

2002a 15,667.2 3,996.2 1,922.4 1,574.1 348.3 2,073.8 1,574.1 65.1 7.0 39.9 289.7 164.4 113.1 22.3 438.3 434.4 10.0 0.4 0.0 0.3 1.8 1.0 0.7 0.1 2.8 2.8 100.0 4.1 0.4 2.5 18.4 10.4 7.2 1.4 27.8 27.6

Appendix 6

103

A SIMPLE MATHEMATICAL PRESENTATION OF A COUNTRY-LED, RESULTS-BASED DEVELOPMENT FRAMEWORK 1. The use of the proposed country-led, performance-, objectives-, or results-based development framework, driven by target indicators, will require the Government to exercise leadership over the countrys long-term, comprehensive development agenda. This will be accompanied by broad-based participation by all groups of stakeholders or development partners (DPs) to build consensus. The use of this framework will facilitate aid coordination as it requires funding agencies to collectively assist the Government to maximize the welfare of the countrys population over a selected time horizon, T, as shown below:

m a x ( , g , k ; )
T

subject to

F ( , g , k ; ; x1t , x2 t ......., x nt )

x
i =1

it

= Lt ; x it 0

where:

- countrys welfare function, which is a weighted combination of various Millennium Development Goals (MDGs); - measure of poverty reduction; measure of improved income distribution (e.g., Gini coefficient); other MDG indicators (e.g., improved infant mortality rate); a set of intermediate sector target indicators for the MDGs under a subset of T; economic structure that shows relationship and trade-offs among the various intermediate indicators and amount of external assistance allocated to each sector i at time t, x it ; total available external assistance.

g k

F () -

2. The operationalization of this framework would require that the Government agree with other DPs on the (i) MDGs and intermediate sector target indicators for each MDG, (ii) priorities and trade-offs among these targets, (iii) time horizon to reach these targets and the MDGs, and (iv) division of assistance among DPs so that these targets and the MDGs can be reached in a coherent and complementary manner.

ASIAN DEVELOPMENT BANK BOARD OF DIRECTORS DEVELOPMENT EFFECTIVENESS COMMITTEE

Chairpersons Summary of the Committees Discussion on 2 March 2004 of the Country Assistance Program Evaluation for CAMBODIA (Sec.M9-04)
ADBs New Independent Feedback-and-Review Process 1. The Country Assistance Program Evaluation (CAPE) for Cambodia is the first report issued by the Operations Evaluation Department (OED) in its independent capacity, effective starting 1 January 2004, as reporting directly to the Board of Directors through its Development Effectiveness Committee (DEC) instead of to the President of the Asian Development Bank (ADB). Accordingly, the CAPE for Cambodia has been subjected to the new feedback-and-review process instituted for the independent OED. 2. Under the new process, all reports by OED are circulated simultaneously to the Board of Directors and the Management and, on behalf of the Board, the DEC reviews the reports, discussing in Committee session those major reports that it elects to discuss in full. The CAPE for Cambodia is the first OED report selected for full discussion by the DEC under the new process, which enhances the responsibility and accountability of the Board for the development effectiveness of ADB operations. Before Committee discussion of the report, Management was allowed the time and opportunity to respond to recommendations made in the report and, in this case, had decided that no response was necessary. This Chairpersons Summary of the Committees discussion of the report completes the internal ADB process for considering the recommendations of the report. This summary of the Committees deliberations is publicly disclosed in the interest of increased transparency and public accountability. Key Points Made by the Committee on the CAPE for Cambodia 3. The Committee can broadly endorse to the Board the conclusions of the CAPE for Cambodia, in particular the lessons learned and the implications for the future operational strategy and program of ADB in Cambodia. The Committee recommends that these lessons and implications be specifically considered in formulating the next country strategy and program (CSP) for Cambodia. 4. Among the lessons and implications discussed, the Committee places high importance on the following. The priority areas in the CSP should be adjusted to achievement of sustainable economic growth by Cambodia not only through agriculture (which may remain the primary sector) but also through private sector development in other potential sectors.

Public sector reform to improve governance should be made an explicit priority in the CSP, backed by sufficient assistance from ADB. The need to improve aid coordination should be explicitly addressed, particularly to avoid inconsistencies in the adoption of policy reforms and to give synergy to supporting the Government in fighting corruption. The CSP should internalize the Millennium Development Goals for Cambodia and be more targets-driven and results-based, including intermediate output and outcome target indicators for each priority area and sector. ADB should actively assist the Government to mobilize resources in addition to Asian Development Fund (ADF) resources through increased cofinancing.

5. At the same time, the Committee recognizes that the CAPEs coverage includes an initial past period when the country was in a post-conflict situation and ADB had just resumed operations. In applying lessons learned to the next CSP, the starting point should be the future context, while taking account of the past. ADBs future operational programs in Cambodia should be based on a strategy that considers options identified through independent evaluation of the past and present, driven by the countrys future development requirements and priorities as well as areas of comparative advantage for ADB. 6. At the Committees discussion of the CAPE for Cambodia, Committee members also expressed views on a range of aspects, including the following. The country assistance program evaluation framework pioneered in the report, which allows for an integrated evaluation at the strategic, program, and project/sector levels, is much appreciated and could be used as a model for other CAPEs. However, the rating system that has been applied in this report needs further review for robustness before it can be applied as a standard for other CAPEs as a tool to support an overall assessment of the country assistance programs relative success. Country capacity building efforts supported by ADB, in general, range from institutional and structural levels to the level of individual staff training. Future initiatives and programs, and their evaluation, would benefit from a more formal definition of capacity building in the context of ADB operations.