World Bank Reaffirms Commitment to Support Reform in Cambodia through Poverty Reduction and Growth Operation
Phnom Penh, 18 July, 2007—The World Bank’s Board of Executive Directors has reaffirmed its support for Cambodia’s reform effort by approving the Poverty Reduction and Growth Operation (PRGO). This is the first of three operations that focus on the “good governance” reform program laid out in the Government’s National Strategic Development Plan (NSDP), 2006-2010. Through the first PRGO, the World Bank will provide a US$ 15 million grant for budgetary support for the implementation of the NSDP.
The World Bank’s Country Assistance Strategy for Cambodia, endorsed by the Board in May 2005, follows the
Government’s strategy by recognizing governance issues as the primary obstacle to growth, poverty reduction, and aid effectiveness. Speaking after the Board meeting in Washington, World Bank Vice President, for the East Asia & Pacific region Mr. Jim Adams said he hoped the PRGO program would bring three benefits for Cambodia. “Firstly, we foresee higher rates of growth and poverty reduction through an improved investment climate, higher agricultural productivity and more effective public service delivery. Secondly, a reform dialogue with Government that’s focused on governance and results, and thirdly, greater alignment of development partner policies and financial support.”
Senior Minister of Economy and Finance, H.E. Keat Chhon, said, the impact of the first PRGO had been substantial.
“Implementing the first in a series of three operations of the PRGO has led to significant achievements in a number of the reform programs as well as better harmonization and alignment of the development partners’ support for the Government’s National Strategic Development Plan.”
Since the early 1990s Cambodia has enjoyed high average economic growth—8.4 percent from 1994-2006—which drove significant poverty reduction. In 2004, 35 percent of Cambodians lived below the poverty line, down from an estimated 47 percent a decade earlier. The PRGO supports the next phase of policy and institutional reform, including: facilitating trade and diversifying exports, guaranteeing land tenure, increasing access to land for the rural poor, and making the budget a credible management tool while reducing fiduciary risk to public funds.
“This program creates an opening to accelerate the reform agenda put forward in the NSDP, especially in dealing with challenging issues of governance,” said Mr. Ian Porter, Country Director for Cambodia.
The NSDP outlines development goals and priorities that are based on targets set through the Cambodian Millennium Development Goals. In supporting this, the PRGO focuses on three core areas: private sector development, public financial management, and land and natural resources management.
Mr. Porter said, in the last few years, Cambodia had made important progress in each of these areas with the successful completion of reform measures, including:
-The development of new administrative procedures to process and inspect imports and exports
-The establishment of special economic zones
-Improved public financial management systems through stronger public procurement, streamlining budget execution procedures, and making greater use of the banking system to process revenues and expenditures
-Introduction of a merit-based pay initiative in the Ministry of Economy and Finance
-Improving the regulatory framework for state land management and economic land concessions, and
-Increasing transparency around management of land concessions by greater dissemination of information to the public.
H.E. Dr. Hang Chuon Naron, Secretary General of the Ministry of Economy and Finance, which managed the operation, reinforced the usefulness of the instrument in support of the reform agenda. “The PRGO is also an important tool to achieve the motto of the Royal Government’s strategy on economic growth, employment for people, equity and social justice, and strengthening efficiency in the public sector by implementing the reform programs in a deeper and more comprehensive manner.”
Ms. Nisha Agrawal, Country Manager for Cambodia said the PRGO would help harmonize and better align the efforts of Cambodia’s development partners.
“The PRGO-supported policy and institutional reform measures are drawn from the Joint Monitoring Indicators agreed at the Cambodia Development Cooperation Forum of June 2007,” she said. “By helping development partners to harmonize around the same reform program, the PRGO will reduce transaction costs for the Government.”
Discussions with other development partners on co-financing the PRGO are at an advanced stage. Besides the World
Bank’s grant of US$ 15 million for the PRGO, which will represent approximately 30 percent of the Bank’s portfolio in Cambodia going forward, the European Commission is planning to provide approximately 35 percent of its annual portfolio as co-financing to the PRGO. The Japanese Bank for International Cooperation is also considering financial support of the operation, as are the UK’s Department for International Development and the Canadian International Development Agency.
The approval of the PRGO follows the recent agreement between the Royal Government and the World Bank on the
Government’s repayment of funds related to misprocurement in the portfolio. To strengthen the management of World Bank supported projects in Cambodia, the Government will also be implementing good governance action plans for all World Bank supported projects and using an independent procurement agent to reduce the likelihood of misprocurement in the future.
(Source: The World Bank Newsletter, Volume 5, Number 8, August 2007)