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The World Bank in Cambodia: Reducing Poverty by Addressing

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The World Bank in Cambodia: Reducing Poverty by Addressing
The World Bank in Cambodia:
Reducing Poverty by Addressing
Governance Challenges
Nisha Agrawal, Country Manager, Cambodia
Background Material for the Core Course on
Public Sector Governance and Anti-Corruption
Washington DC, April 23-26, 2007
Overview of Presentation
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What is our mission?
Why a Governance CAS?
What is a Governance CAS--The World
Bank’s CAS for Cambodia (2005-2008)
Our Vision: A Cambodia Free of
Poverty
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Eradicate poverty and hunger (35% still poor)
Achieve universal primary education
Reach gender equality and empower women
Reduce child mortality
Improve maternal health
Combat HIV/AIDs, malaria and other diseases
Ensure environmental sustainability
De-mining, UXO and Victim Assistance
Cambodia: The Country Context
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A decade of high growth (7% per annum)
Moderate progress in poverty reduction
(poverty levels declined from 47 percent to 35
percent during the last decade)
Still one of the poorest countries in the world
with a per capita income of $430 per annum
Many institutions of governance were
destroyed during the last three decades of
conflict and need to be rebuilt
Analytical work pointed to governance being
the main constraint to poverty reduction

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Investment Climate Assessment (ICA)-- documented
the high cost of doing business (2004-2005)
Poverty Assessment –highlighted modest progress in
poverty reduction during the last decade but together
with sharply rising inequality (2006)
Integrated Fiduciary Assessment and PER (IFAPER)
--identified need for critical public financial
management reforms (2003)
Cambodia at the Cross Roads—found that
accountability mechanisms were weak and needed
to be strengthened (2004)
High cost of doing business drives
away investments and jobs
Pattern of growth leading to rising
inequality and slower poverty reduction
7,067
Figure 1: Over the last ten years, living standards amongst the richest fifth of the population have risen
by 45 percent— compared to 8 percent amongst the poorest fifth
real average p.c. consumption (riels p.c. per day) within the geographically comparable sample
7,500
1994
2,932
2,954
2,271
2,077
1,696
1,537
1,336
951
2,500
1,026
5,000
2,228
4,883
2004
0
Poorest
Next
poorest
Middle
Next
richest
Richest Cambodia
Poor public financial management
leading to poor service delivery
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Revenues are inadequate (about 10% of GDP), well
below the average for low income countries (16%)
Fiduciary risks to public funds are high due to
weaknesses in budget formulation, execution and
reporting
Public procurement remains a principal source of
corruption
An underpaid and patronage based civil service is a
recipe for high corruption
CPIA Ratings sum up assessment--Cambodia
lags its peers on governance indicators
1. Macro. Management
16. Transparency, Accountability &
2. Fiscal Policy
Corruption in Public Sector
15. Quality of Public Administration
3. Debt Policy
14. Efficiency of Revenue
Mobilization
4. Trade
13. Quality of Budgetary and
Financial Management
5. Financial Sector
12. Property Rights & Rule-Based
Governance
6. Business Regulatory
Environment
11. Policy & Institut. for Environ.
Sustainability
7. Gender Equality
10. Social Protection & Labor
8. Equity of Pub. Resource Use
9. Building HR
2005 Cambodia
2005 IDA Countries
Maximum
Weak Governance confirmed by a
number of global indicators

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“Governance Matters V: Governance Indicators for
1996-2005” (Kaufmann, Kraay and Mastruzzi, 2006)
(data for 213 countries and territories); Cambodia
ranks very low on all 6 dimensions of governance
“Doing Business” (2007): Cambodia ranked 143 out
of 175 countries in ease of doing business
Transparency International (2006): Cambodia ranked
151 out of 163 countries on the TI Corruption
Perceptions Index 2006
WB Country Assistance Strategy (CAS)
Designed to tackle governance at 3 Levels
1.
2.
3.
At the Country Level--Build back the
institutions of governance that were
destroyed by three decades of conflict
At the Project Level--Protect the funds that
we deliver through our projects
At the Global Level--Work with other
partners—donors, civil society and the
private sector--to address governance
challenges
I. At the Country Level in Cambodia—
focus on 5 themes
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Promote private sector development by reducing
the costs of doing business
Strengthen public financial management
(including management of oil revenues in the future)
Improve natural resources management (securing
property rights to land and access to forests)
Support decentralization and strengthen local
governance
Promote a stronger demand for good governance by
increasing citizens’ voice and participation in the
policy making process
Why these five areas
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High importance for growth and poverty
reduction
Ownership and leadership on the government
side
Comparative advantage/historical
engagement/role of other donors/selectivity
and division of labor
Align all Our instruments to Get
Results: Example from PSD
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Undertook an Investment Climate Assessment (ICA) that
highlighted the need to implement reforms, especially in the
area of trade facilitation (customs, inspection agencies)
(2004)
Reached agreement with Government on 12-point program of
reform (2004)
Designed a Trade Facilitation and Investment Climate
Project ($10 m grant) to help implement the reform program
(2005-2010)
Supported the policy reforms through the Poverty Reduction
Support Operation (PRSO) (2007-09)
Started a new ICA to monitor results, identify new issues and
design future projects (2007)
Align All Our Instruments to Get
Results: Example from PFM
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Undertook a Integrated Fiduciary Assessment and Public
Expenditure Review (IFAPER) to identify weaknesses in
public financial management and highlight the need for
systemic reforms (2003)
Worked with Government to design a 10-12 year program of
reform to bring Cambodia up to regional standards (2004)
Coordinated 11 donors to provide support to the reform
program through the Public Financial Management and
Accountability Project ($14m grant from WB; more from
other partners)
Supported the policy reforms through the Poverty Reduction
Support Operation (PRSO) (FY07-09)
Will undertake a new IFAPER to monitor results, identify
new issues and design future projects (2008)
Results: Cambodia is reforming gradually and
showing improvements in governance
1. Macro. Management
16. Transparency, Accountability &
2. Fiscal Policy
Corruption in Public Sector
15. Quality of Public Administration
3. Debt Policy
14. Efficiency of Revenue
Mobilization
4. Trade
13. Quality of Budgetary and
Financial Management
5. Financial Sector
12. Property Rights & Rule-Based
Governance
6. Business Regulatory
Environment
11. Policy & Institut. for Environ.
Sustainability
7. Gender Equality
10. Social Protection & Labor
8. Equity of Pub. Resource Use
9. Building HR
2004
2005
2006
Maximum
II. At the Project Level—Reducing
Fiduciary Risks
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While governance is a long-term challenge, need to take
immediate measures to protect our project funds in the shortterm
As part of the preparation for the CAS, the World Bank
(together with INT) undertook a “Fiduciary Review”(FR) – a
study to understand weaknesses in the underlying fiduciary
systems that were leading to leakages in our projects
The FR was only the third of its kind in the world (done
proactively) and the only one done in collaboration with the
Government (separate presentation follows on this)
Findings of the FR were publicized and raised awareness on
issues of corruption in WB-funded projects
III. Partnerships with other donors are essential to
take forward the governance agenda
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At the last Consultative Group (CG) Meeting in
March 2006 held in Phnom Penh, “traditional”
donors pledged $600 m to help reduce poverty in
Cambodia; a week later, China pledged another $600
million on its own
The Bank is a relatively small financial player—we
provide $40-50 m per annum—and cannot tackle
governance and corruption challenges alone
We decided to do a joint CAS with ADB, DFID and
UN system and to put governance at the heart of the
joint CAS
Joint CAS with the ADB-DFID-UN
System
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The Cambodia CAS was the first joint CAS in the world
Different donors had been giving very different messages
about the governance challenges facing Cambodia
Took one year of intensive work to understand differences in
perspective and to reach a shared perspective
The analytical section of the four CASes is now identical and
gives a common message on the governance challenges
facing Cambodia
Common donor assistance strategy and program to support
the next NSDP 2010-2015 (??)
Reinforcing messages at the country
and global levels
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Maintain quadripartite relationship in country
formally (joint annual retreats) and informally
(monthly lunches)
Follow up at the HQ levels with regular (annual)
visits to ADB HQ and DFID HQ
Also have a parallel partnership between ADB,
Japan and WB—built through in-country retreats and
tripartite annual meetings in Tokyo
Visits to other key donor capitals to keep all partners
on-message
Using the Bank’s convening power to
keep the spotlight on governance
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As the co-chair of the CG Meeting, the Bank plays a major
role in helping the Government and donors put in place
mechanisms to prioritize the reform program and put
governance and corruption issues at the center of our dialogue
At the CG meeting, a set of Joint Monitoring Indicators
(JMIs) are adopted in a number of governance areas that set
the benchmarks for reforms for the coming years
The JMIs are agreed, monitored, and implemented by 18 joint
government-donor-NGO-private sector Technical Working
Groups (TWG)
Progress is also monitored—and challenges addressed—
through the higher level quarterly meetings of the
Government-donor Coordination Committee (GDCC)
Partnerships with Civil Society and Communities to
build a stronger demand for good governance
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Bank has worked traditionally more on the supply of good
governance rather than the demand side, but this is changing
Demand for Good Governance Project (FY08) to strengthen
state and non-state institutions of accountability (media, labor
unions, Ombudsman office, dissemination of laws,
establishing grievance mechanisms)
Grant of $2 million from LICUS TF (FY07) to build capacity
of civil society on social accountability
Empowerment of the Poor in Siem Riep Project (FY08) to
promote poor people’s organizations (farmers’
organizations, microfinance groups etc) and link them better
to the tourism sector and other sources of growth
WB Group Partnerships with the
Private Sector
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IFC coordinates the Private Sector Forum and its
working groups that facilitate dialogue between the
Government and the private sector
Mekong Project Development Facility (MPDF)
providing policy advice and TA at provincial levels
and to SMEs
WB leads policy dialogue between Government and
donors –in which the private sector participates--on
PSD issues through the technical working groups
WB also beginning dialogue with private sector on
their role as partners with the Bank in fighting
corruption
Lessons from the Design and
Implementation of the Cambodia CAS
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Leadership and ownership matter--Need to find and
back the champions of reform
Long-term agenda requires focus and selectivity
Also requires patience and perseverance—need to
think of 10-15 year horizons
Cannot do it alone--Requires strong investments in
partnerships with all other stakeholders
Requires careful monitoring of results to know if
strategy on track
Tangible results and progress and success possible
and visible, even in the short-term
Thank you for your
attention
Fly UP