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Cambodia: Staff Report for the 2007 Article IV Consultation—Informational Annexes

Author(s):
International Monetary Fund
Published Date:
August 2007
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ANNEX I Cambodia: Fund Relations

As of May 31, 2007

I. Membership Status: Joined: 12/31/1969; Article VIII

II. General Resources Account:

SDR MillionPercent Quota
Quota87.50100.00
Fund Holdings of Currency87.50100.00

III. SDR Department:

SDR MillionPercent Allocation
Net cumulative allocation15.42100.00
Holdings0.110.71

IV. Outstanding Purchases and Loans:

SDR MillionPercent Quota
PRGF arrangements00

V. Financial Arrangements:

ApprovalExpirationAmount ApprovedAmount Drawn
TypeDateDate(SDR Million)(SDR Million)
ESAF/PRGF10/22/199902/28/200358.5058.50
ESAF05/06/199408/31/199784.0042.00

VI. Projected Obligations to Fund: (SDR Million; based on existing use of resources and present holdings of SDRs):

Forthcoming
20072008200920102011
Principal00000
Charges/Interest0.330.650.650.650.65
Total0.330.650.650.650.65

VII. Multilateral Debt Relief Initiative

As part of the Multilateral Debt Relief Initiative the IMF Executive Board on January 5, 2006 approved relief on 100 percent of debt incurred by Cambodia to the IMF before January 1, 2005. This resulted in all Cambodia’s outstanding debt to the IMF, a total of SDR 56.8 million (about US$82 million) being forgiven. The authorities intend to spend the resources over a number of years, initially on rural irrigation projects. The National Bank of Cambodia (NBC) transferred the full MDRI proceeds to the Ministry of Economy and Finance, effective March 2006.

VIII. Safeguards Assessment:

Under the Fund’s safeguard assessment policy, the NBC is subject to a full safeguard assessment with respect to the successor PRGF Arrangement. The assessment was completed in March 2004 and specific measures were proposed to address weaknesses in financial reporting, internal audit and internal control systems. An update is expected to be undertaken in the second half of 2007.

IX. Exchange Rate Arrangement:

Cambodia officially follows a managed float with no pre-announced exchange rate path, although in recent months the arrangement has resembled a de facto peg to the dollar. The official exchange rate, which is expressed in Riels per U.S. dollar, applies to all official external transactions conducted by the government and state enterprises and is used for accounting purposes by the National Bank of Cambodia. It is determined by the foreign exchange market, with the rate adjusted to be within 1 percent of the market rate on a daily basis. On May 31, 2007, the official exchange rate was CR 4,059 per U.S. dollar and the market rate CR 4,061 per U.S. dollar.

Cambodia accepted the obligations of Article VIII, Sections 2, 3, and 4 on January 1, 2002. Cambodia maintains an exchange system that is free of restrictions on the making of payments and transfers for current international transactions.

X. Article IV Consultation:

Cambodia is subject to the provisions on consultation cycles approved on July 15, 2002. The Executive Board concluded the last Article IV consultation on July 7, 2006 (Country Report No. 04/328).

XI. Technical Assistance:

There are currently two resident advisors in Cambodia: a Banking advisor and a multi-sector Statistics advisor. The Regional Technical Assistance Strategy sees continued substantial technical assistance being delivered to Cambodia, focused on public financial management, customs administration, the financial sector and economic statistics. The overall level of input will however decrease slightly as the emphasis moves further away from full-time resident advisors towards subject-specific short-term inputs. A summary of recent technical assistance inputs is at Table 1.

XI. Resident Representative:

The resident representative office was closed in October 1997, and re-opened at end-October 1999. Mr. Nelmes is currently the Resident Representative.

Table 1:Cambodia—Summary of Technical Assistance Provided by the Fund May 2003–May 2007
PurposeAssistance and Timing

(person-months)
Fiscal
• Customs administrationMay 2003; (½)
• Budget advisorJuly-August 2003; (½)
• Revenue mobilizationAugust/September 2003; (1)
• Tax policy and administrationAugust-October 2003; (2)
• Customs administration expertOctober-November/Dec. 2003 (1½)
• Tax administrationNovember 2003; (¼)
• Budget advisorDecember 2003; (7)
• Tax administration expertFebruary 2004; (2)
• Tax administration follow-upFebruary-March 2004; (½)
• Tax and Customs administration ITFebruary 2004-April 2005 (4 ¾)
• Customs administrationMarch 2004-May 2005 (4 ¾)
• Budget managementDecember 2003-June 2004 (6)
• Tax administration expert on audit circulars and trainingJuly-November 2004 (4)
• Treasury advisorJune-November 2004 (6)
• Tax and Customs administration follow-upSept. 2004 (3/4); February 2005 (3/4)
• Treasury AdvisorJanuary-August 2006 (21)
• Tax Policy (oil, gas)June 2005 (1½)
• Tax administration missionJuly 2005 (1½)
• Customs administration expertOctober 2005, January 2006 (1½)
• Tax ComputerizationOctober 2005 (1)
• Customs administration and computerization peripatetic visitsMay 2006 – May 2007 (6)
• Petroleum TaxationSeptember 2006 (1)
• Public Financial Management Review missionDecember 2006 (1)
• Chart of Accounts implementationDecember 2006 (1)
Monetary
• Banking, accounting and foreign exchange managementApril 2003; (2)
• Banking supervision expertNovember 2003; (6+12+2)
• Banking, accounting and foreign exchange managementDecember 2003; (1)
• AccountingMay 2004 (3/4)
• Mission on Central Bank internal auditMay 2004; February 2005; June 204 (3)
• AML/CFT LegislationJuly 2004 (1/2)
• Prakas on AML/CFTOctober 2004 (1/2)
• Banking supervision, reserve management and TA reviewSeptember 2004 (3)
• Central bank restructuringJanuary 2005 (1)
• Banking supervisionFebruary 2005 (2)
• Seminar on Draft Law on Negotiable InstrumentsMarch 2005 (1/4)
• Central bank operations and banking supervision missionJuly 2005 (3)
• Banking advisorJuly 2005 – July 2007 (24)
• Payment System RegulationOctober, December 2005 (2)
PurposeAssistance and Timing (person-months)
Monetary
• Bank SupervisionOctober 2005; April 2006; December 2006 (3)
• Central Bank RestructuringJanuary 2006 (1)
• Monetary operations missionAugust 2006 (1½)
• Internal audit visitsFebruary 2006; August 2006; May 2007 (3)
• Payment systemApril 2006 (1)
Statistics
• Balance of payments compilation expertMarch-May 2003; (3)
• Producer price statisticsJuly-August 2003; (1)
• Consumer price indexOctober 2003; (½)
• GFS follow-upDecember 2003; (½)
• Multisector statistics advisorJanuary 2004; (6)
• Balance of payments statisticsMarch 2004 (½)
• Producer price statisticsJune 2004 (½)
• Multisector statistics advisorNovember 2004 – November 2007(36)
• Government finance statisticsApril 2005 (½)
• Government finance statisticsFebruary 2006 (½)
Legal
• AML/CFTDecember 2003; (¼) May 2006 (¼)
• Anti-CorruptionAugust 2005 (½)
Annex II. Cambodia: Relations with the World Bank Group18

(As of May 2007)

The Royal Government of Cambodia’s (RGC) Rectangular Strategy for Growth, Employment, Equity and Efficiency in Cambodia (2004) identifies improved governance as “the most important precondition to economic development with sustainability, equity and social justice.” This analysis accords with that set out in the World Bank Group’s 2005–2008 Country Assistance Strategy (CAS) (May 2005), which stresses the need to improve governance in order to maximize the impact of development efforts. The CAS activities are intended to contribute to six objectives, which are clustered under two over-arching pillars. Activities under Pillar 1 are intended to help implement improvements in governance that are needed if Cambodia is to meet the Cambodia Millennium Development Goals (CMDGs). To this end, the CAS establishes four objectives.

  • Addressing aspects of economic governance that raise the cost of doing business, deter investment and trade, and hold back broad-based private sector development.
  • Supporting policy and institutional reforms that help the rural poor receive more benefits from sustainable natural resources management, by improving transparency and accountability in the governance of natural resources and land in particular.
  • Addressing core issues of public financial management (PFM) as fundamental for improved service delivery, by supporting the Government’s PFM Reform Program and the formulation of strategies for reform of civil service pay and employment.
  • Promoting accountability by supporting decentralization and promoting citizens’ partnerships for better governance.

Pillar 2 of the CAS allocates World Bank resources to supporting the strategy development and investments needed to attain the CMDGs. To these ends, the Bank Group first will encourage the emergence of poverty-focused approaches to the formulation and implementation of public policy by supporting the new National Strategic Development Plan (NSDP 2006–2010). Second, where there are clear gaps in critical infrastructure and human development sub-sectors, the Bank Group will support the emergence of a nationally-owned vision and strategy through the provision of analytical and investment services.

V. Pillar 1: Improving Governance to Attain the CMDGs

A. Private Sector Development

The Government has made some significant progress in improving the private sector investment climate but more work needs to be done, particularly on the structural reforms needed to support sustainable, private sector-led growth In addition to providing private sector-related technical support to the Government through assistance to the Government Private Sector Forum, the Bank Group, including the IFC, the Foreign Investment Advisory Service, and the Public Private Infrastructure Advisory Facility, has continued to provide inputs to the Government’s Private Sector Development Strategy through an investment climate assessment and value chain analysis. The objective of this effort has provided focus on a three-fold strategy aimed at removing impediments to productivity growth, to help diversify the economy, and to increase the role of the private sector in service delivery. The 2004 Investment Climate Assessment findings identified overlapping trade facilitation, inspection, and licensing processes of various agencies as contributing to an excessive regulatory burden and a high incidence of corruption. In light of these findings, the Bank is focusing its efforts on operationalizing the reform recommendations through the 2005 Trade Facilitation and Competitiveness Project (TFCP) with participation from other donors, including the European Commission, AusAID, and IMF. Its key component will streamline import and export processes, and the Bank and Fund are working together on customs automation. Solid progress has been made in the customs automation work, resulting in part from joint Bank-Fund efforts. The Customs and Excise Department is expected to adopt a Single Administrative Document (SAD) in the third quarter of 2007 and to pilot the ASYCUDA Customs Automated System by end-2007. A sector-wide approach (SWAp) on private sector development is being reviewed in line with other donors to provide a unified input into supporting required reforms in private sector development.

Work is also being done on labor standards and relations with the objective of supporting stronger and more equitable private sector growth. Working conditions monitoring (Better Factories Cambodia) is being supported under the TFCP and a component on developing more effective labor dispute resolution processes is slated for inclusion in the forthcoming Demand for Good Governance Project (FY08).

At the level of micro-enterprise the Bank is developing a project called Empowerment of the Poor in Siem Reap (EPSR). The EPSR project seeks to improve incomes and capacities of the poor in Siem Reap by more effectively linking their livelihoods to the province’s growth engine - the tourism industry.

B. Natural Resources Management

With 85 percent of the population living in rural areas, and 79 percent of the poor mainly depending on agriculture and natural resource for their livelihoods, economic growth and poverty reduction will to a large extent depend on reviving the rural economy. The objectives of the Land Management and Administration Project (2002) are to reduce poverty, promote social stability, and stimulate economic development. The specific objectives of the project are to improve land tenure security and promote the development of efficient land markets. These objectives are achieved through: (i) development of national policies, the regulatory framework, and institutions for land administration; (ii) issuance and registration of titles in urban and rural areas; and (iii) establishment of an efficient and transparent land administration system. A proposed Land Allocation for Social and Economic Development Project (FY08) is under preparation. In June 2005, the Bank completed a Rural Sector Strategy Note (RSSN), which aimed to identify critical rural development issues and options to address them.

C. Public Financial Management

The joint WB-ADB Integrated Fiduciary Assessment and Public Expenditure Review, 2003 (IFAPER) found that though Cambodia had made some progress in reforming public expenditure policy and management, it would have to make much more progress on fiscal, fiduciary, and institutional challenges in order to implement its development agenda. In comparative perspective, Cambodia’s PFM system ranks below average, indicating the need for substantial upgrading.

The Government launched its Public Financial Management Reform Program (PFMRP) in December 2004. The PFMRP comprises a detailed, sequenced, and time-bound action plan, a performance management framework, and measures to address organizational reform, including staff incentives. Over the past two years the Ministry of Economy and Finance (MEF) has made good progress. Major reforms measures commenced implementation in January 2007, including: a significant streamlining of budget execution procedures, the introduction of program budgeting, and adoption of a new chart of accounts. These follow on significant reforms in 2005: the amount of customs revenue collected through the banking system increased (from zero in 2004 to nearly 1/3 in 2006); more than ¾ of all Tax Department revenue is now collected through the banking system; about ¾ of Treasury payments to suppliers in Phnom Penh and Sihanoukville are now made by check instead of cash; the stock of old expenditure arrears has been reduced by over 40 percent; the procurement process has been streamlined, tightened, and made more competitive with the passing of a new sub-decree in late 2006; the Government has set up internal audit departments in a dozen line ministries, and, for the first time in Cambodia, a pilot program has been launched to pay civil servants through commercial banks instead of by cash.

A joint effort of eleven of Cambodia’s development partners committed to assist in strengthening the Government’s ability to lead and implement this agenda and to provide fully coordinated support via a sector wide approach (SWAp). The Bank is supporting the PFMRP, including oil revenue management, through the Public Financial Management and Accountability Project (June 2006). In addition, the Bank leads the donor group and manages a Multi-Donor Trust Fund to support the program on behalf of AusAID, DFID, and the EC. The collaborative approach is supported by the Public Expenditure and Financial Accountability (PEFA) secretariat, as envisioned in the recent Bank-Fund board paper.19 The Fund has provided extensive TA to the RGC in tax and customs administration and selected areas in budget management and Treasury operations. The Bank and Fund have established a productive working relationship on PFM.

The IFAPER also found serious problems afflicting the civil service: low and compressed pay, low skills, and thus low capacity. Low public sector wages provide a breeding ground for corrupt practices and are a leading cause of Cambodia’s relatively poor standing on public sector performance. The Bank’s Country Policy and Institutional Assessment (CPIA) ranks Cambodia in the fourth lowest quintile among low income countries on issues pertaining to public sector management and institutions.

However, despite the Bank’s provision of a significant amount of grant funding in 2004 for the Council for Administrative Reform to carry out an agreed set of studies that would provide the analytical foundation for reform, progress has been minimal. The pace of civil service reform—and the resources that the Government has devoted to it—do not appear to match the seriousness of the problems caused by Cambodia’s weak civil service. Donors believe that reform of public administration is essential if there is to be progress in implementing the Rectangular Strategy and NSDP, and are appealing to the Government to consider how this work can be reinvigorated.

The Bank is working with government ministries and other donors to pilot accelerated pay and employment reform in high priority sectors. The Merit Based Pay Initiative (MBPI), which is an official Government program, has recently been agreed and is now being implemented first in MEF. The MBPI provides for substantial increases in remuneration for a small group of officials in MEF (about 10 percent in 2007) selected based on merit and performance management. The MBPI aims to introduce the principles and practices of meritocracy into the Cambodian civil service.

D. Decentralization and Accountability

Cambodia’s framework of accountability, derived from the Constitution, is based on three key relationships of accountability: (i) between elected officials and those responsible for delivering essential services to citizens; (ii) between citizens and the state; and (iii) between those who deliver services and the citizens who receive these services. The work under this objective is concerned with all three of these relationships. The primary investment vehicle will be projects at the commune level—the lowest level at which citizens interact with the state, elected representatives, and service providers. Analytical work and partnerships will support the evolving vision for deconcentration and decentralization and will contribute to establishing an enabling environment for civic engagement.

The Bank’s primary investment support to decentralization is through the ongoing Rural Investment and Local Governance Project (RILGP, FY03-FY06), for which additional financing of about $36 million will be provided in FY08, and a future planned RILGP II. RILGP supports improved local governance as a foundation for sustainable development and poverty reduction by strengthening the newly decentralized development process at the commune level and providing grants for priority rural infrastructure and related public goods identified through this local planning process. RILGP II (2009) will be the Bank’s main lending support to the new decentralized mechanisms once they are clarified. In addition, the Bank is developing a Demand for Good Governance (DFGG) project for FY08. The DFGG project’s objective is to promote good governance by building the capacities of institutions, and supporting programs and coalitions that promote, mediate, respond to or monitor demand for good governance. In doing this the DFGG project will focus on: (i) governance at the sub-national level; (ii) labor dispute resolution; (iii) media; and (iv) legal awareness. The project will involve separate funding windows for state and non-state institutions and encourage partnerships across them to enhance effectiveness.

VI. Pillar 2: Supporting Strategy and Investments to Attain the CMDGs

This work also falls under the following sub-components:

A. Poverty-focused Public Policy

Cambodia Equity Report and Related Initiatives. The Bank, with inputs from local research partners, CDRI (Cambodia Development Resource Institute), and IRL (Indochina Research Limited) has led the production of the Cambodia Equity Report, to be released at the forthcoming CDCF Meeting in June 2007. The topic for the Equity Report was suggested by the RGC following the March 2006 CG meeting at which the problem of rising inequality was discussed. The report will analyze dimensions of inequality in Cambodia, such as income and consumption, access to health and education services, control over assets and land, the impact of formal and informal institutions on inequality, the changing aspect of gender-based inequality, as well as examine inequality trends in urban and rural contexts. The analysis is based primarily on the 2004 Cambodia Socio-Economic Survey (CSES) and the 2006 Cambodian Health and Demographic Survey (CDHS), complemented by mixed methods research into local variations and household poverty dynamics (the Moving out of Poverty Study).

National Strategic Development Plan (NSDP). An NSDP Secretariat, chaired by the Ministry of Planning (MOP) with inputs from the Supreme National Economic Council (SNEC), is charged with coordinating the implementation, monitoring, and evaluation of the RGC’s five year plan, the National Strategic Development Plan (NSDP, 2006–2010), approved by the National Assembly in May 2006. The NSDP, which constitutes the RGC’s second poverty reduction strategy, guides the implementation of the vision laid out in the Government’s Rectangular Strategy (RS) and the Cambodian MDGs. The WB and the UN Resident Coordinator serve as co-lead donor facilitators for the Technical Working Group on Planning and Poverty Reduction (TWG-PPR), and coordinate all donor inputs and advice to the MOP regarding NSDP implementation, such as producing the Annual Progress Report, developing the Ministry of Planning Strategic Plan (MPSP), and supporting capacity building initiatives for stakeholders involved in the NSDP process. The TWG-PPR is also contributing to aid effectiveness and donor coordination around the NSDP by initiating discussions on moving toward a Program Based Approach (PBA) for the Ministry of Planning.

B. Investment and Analytical Services for Infrastructure and Social Service Delivery

Social Sector Policy Dialogue. In the health sector the key policy issues under discussion are: (i) improved effectiveness of health financing through improved sector wide planning and budgeting processes, equity funds (access to health services for the poor), and contracting with NGOs for improved service delivery and outcomes; and (ii) pay and employment reform in the Ministry of Health. The recent joint health sector performance review established maternal and child health as health priorities. The Bank, along with other partners, is preparing a Health Sector Support Program (II) that will focus on these priorities. In the education sector the Bank has been an active contributor to the Education Strategic Plan and the Education Sector Support Program. The key policy issues the Bank is focusing on are: (i) disparities in education participation rates by different regions, income groups, and gender; (ii) inefficiency and poor quality in education service delivery at primary, secondary, and tertiary levels; (iii) weak local management capacity; (iv) lack of reliability in education finance disbursements; and (v) pay and employment reform. The Bank, along with other partners, is helping Cambodia access significant volumes of additional funding for basic education under the Education for All Fast Track Initiative for which Cambodia has recently become eligible. Both the education and health sectors have undertaken public expenditure tracking surveys, which provide insights into ensuring that these additional funds for health and education are spent in a transparent manner and reach the intended beneficiaries.

Energy Sector Strategy. Donors are currently supporting the Government to develop a coherent energy sector strategy and implementation plan. The work consists of three phases. The first phase focuses on the issues identification and was completed in 2006. The key findings are documented in the World Bank report “Cambodia--Energy Sector Strategy Review: Issues Paper,” which reviews the issues in several subsectors including electric power, rural electrification, renewable energy, petroleum industry, and coal mining. Currently, a Hydropower Development Master Plan is being developed and the Power Development Plan was recently updated. The Bank has just completed preparation of a GMS Power Trade Project (FY07) that will enable Cambodia to buy electricity from Vietnam and Laos. Due to the urgency of the emerging oil and gas sector issues, the donor community has recently been organized to provide coordinated policy advice and technical support to the government. The proposed donor work program covers several aspects of the oil and gas sector, including sector policy, sector structure, legal framework, fiscal framework, transparency and revenue management. Oil and Gas ‘Sector Policy Notes’ have been prepared and distributed, and the Bank is supporting Cambodia’s endorsement of the Extractive Industries Transparency Initiative (EITI) through the PRGO program.

The Poverty Reduction and Growth Operation (PRGO) Program

PRGO-1, the first in a series of three annual operations, selectively focuses on the key reform areas of private sector development (PSD), public financial management (PFM), and land and natural resources management (LNRM) (subsequent PRGOs would broaden the coverage to other priority sectors).20 The PRGO process is designed to strengthen the linkage between results and donor assistance. The operation is supporting the implementation of the policy agenda laid out in the RS and the NSDP. The PRGO is linked closely to the joint monitoring indicators (JMIs) agreed at the 2004 and 2006 CG Meetings so that the reform program remains government-owned and led and supported by the entire donor community collectively (viz., the prior actions for PRGO-1 are a subset of the CG Meeting JMIs).

The prior actions for PRGO-1 focus on key issues in each of the three areas: in LNRM the prior actions address the issues of state land management and economic land concessions; in PSD the prior actions focus on trade facilitation and investment law; in public financial management the prior actions focus on budget process and treasury operations, procurement, and meritocratic pay and employment reform.

Staffs have coordinated closely on the Fund’s policy dialogue and the PRGO program. Though there are several areas where the PRGO program and the Fund’s dialogue overlap—LNRM, PSD, and PFM—the Bank and Fund have ensured that their interventions are complementary and mutually reinforcing, while not overlapping on any specific areas. Comprehensive consultations are on-going, most recently taking place during the Fund mission in May 2007, but continuing at the country office level on a regular basis.

Lending Operations and Non-lending Instruments

Proactive portfolio management continues to be a very high priority for the Bank Group. Following the 2004–2005 Fiduciary Review carried out in partnership with the Royal Government of Cambodia, the World Bank’s Institutional Integrity Department (INT) carried out separate investigations in 2005–2006. The INT investigations substantiated allegations of corruption, collusion, and fraudulent practices on several contracts under seven projects (four active21 and three closed22). As a result the Bank declared several contracts “misprocured” in June 2006. In addition the Bank temporarily suspended23 disbursements under three projects (LMAP, PRIP and PPUWSSP) and established action plans for the concerned Government agencies to execute in order to lift the suspensions. These action plans were completed in January 2007 and the Bank lifted the suspensions on all three projects in the first half of February 2007. In addition, the Royal Government of Cambodia decided to establish and implement anti-corruption actions plans for all active and future Bank-financed operations. The Bank is actively assisting all concerned agencies to complete these actions plans by the end of June 2007. One of the strongest portfolio measures being implemented consists of the hiring of a specialized consultancy firm to act as a procurement agent for the Government.

Overall disbursement under the portfolio has been much lower than previous years due to the suspension of disbursement on three projects.

Non-lending instruments and operations (credits and grants) are described in the following tables.

World Bank’s Main Non-Lending Services: Issues and Instruments(Recently completed and ongoing, May 2007)
IssueInstruments
Civil Service ReformIFAPER (2003), and grant on civil service reform (closed).
EnvironmentCambodia Environment Monitor (2003), Phase II Cambodia, Lao PDR and Vietnam Poverty-Environment Nexus Study (ongoing), Environment Monitor (2006).
GenderCambodia Gender Assessment (2004) and grant on gender (closed).
GovernanceAnnual Report to the CG Meeting (2004).
Human DevelopmentDemand Side Incentives in Education Impact Evaluation (ongoing), Civil Service Reform for Teachers (ongoing), “Quality Basic Education for All” study on determinants of schooling participation (2005), Social Protection Policy Note (2006), Safeguards Research (2006), Child Labor Study (2006), Health Sector Study (ongoing), and Health Sector Wide Management Review (2006).
InfrastructureUrban Water and Sanitation Strategy (2006).
Legal and Judicial ReformJustice for the Poor phase one study (2006); Justice for the Poor phase two (ongoing).
Poverty Reduction and EconomicsPoverty Reduction Strategy Trust Funds (ongoing), Moving out of Poverty study (2007), National Poverty Assessment (2006), Cambodia Equity Report (2007), and Sources of Growth (2008).
Private Sector Development and TradeFIAS report on FDI (2001), Integration and Competitiveness Study (2002), Private Sector Development Strategy/Investment Climate Assessment (2004), Investment Climate Assessment (2007), and PPIAF grant to develop an interim regulatory framework (ongoing).
Public Financial ManagementIFAPER (2003), IDF grant on public sector reform (closed), Country Procurement Assessment Report (2004), Fiduciary Review (2005), Public Expenditure Tracking Survey—Education (2005), Public Expenditure Tracking Survey - Health (2007), grant to assist the National Audit Authority (ongoing), ROSC on private sector accounting (2007), and grant to assist with development of private sector accounting capacity (closed).
Rural and AgricultureRice Value Chain Study (2002), PSIA on social land concessions (2004), Rural Sector Strategy Note (2005), Land Taxation and Valuation Study (2005), and Land Policy and Strategy (FY06).
IDA: Commitments and Disbursement to Cambodia(In millions of dollars, as of May 9, 2007)
ProjectEffective DateCommittedDisbursed
Credits:
Biodiversity and Protected Areas Management ProjectMay 3, 20001.912.00
Economic and Public Sector Capacity Building ProjectFebruary 10, 20035.501.40
Education Sector Support ProjectAugust 17, 20058.002.91
Health Sector Support ProjectAugust 14, 200317.206.77
Land Management and Administration ProjectJune 19, 200224.2013.60
Provincial and Peri-Urban Water and Sanitation ProjectNovember 16, 200316.906.98
Provincial and Rural Infrastructure ProjectMarch 16, 200420.0012.90
Rural Investment and Local Governance ProjectSeptember 16, 200321.9017.90
Rural Electrification and Transmission ProjectMarch 29, 200540.003.20
Road Rehabilitation Project [Closed]June 14, 199944.3144.47
Agriculture Productivity Improvement Project [Closed]June 20, 199721.7820.02
Cambodia: Flood Emergency Rehabilitation Project [Closed]June 4, 200135.0037.03
Forest Concession Management and Control Pilot Project [Closed]October 20, 20004.824.68
Social Fund II Project -IDA31791[Closed]September 27, 200110.0010.61
Social Fund II Project - IDA31790 [Closed]July 7, 199925.0023.22
Social Fund Project - IDA27390 [Closed]December 21, 199520.0018.42
Education Quality Improvement Project [Closed]December 20, 19995.004.87
Northeast Village Development Project [Closed]November 11, 19995.004.68
Urban Water Supply Project [Closed]June 2, 199830.9630.10
Demobilization and Reintegration Project [Closed]July 1, 200218.400.68
Structural Adjustment Credit Project [Closed]March 28, 200030.0030.00
Disease Control and Health Development Project [Closed]June 23, 199730.4026.80
Phnom Penh Power Rehabilitation Project [Closed]December 20, 199540.0035.13
Economic Rehabilitation Credit Project [Closed]December 18, 199540.0037.46
Technical Assistance Project [Closed]March 23, 199517.0015.98
Emergency Rehabilitation Project [Closed]January 13, 199462.7062.70
Total Credits595.98474.51
Grants:
Provincial and Peri-Urban Water and Sanitation Project [H034]November 16, 20033.000.39
Health Sector Support Project [H015]August 14, 20037.804.92
Health Sector Support Project [016]August 14, 20032.000.98
Education Sector Support Project [H161]August 17, 200520.003.85
Cambodia Trade Facilitation and CompetitivenessDecember 12, 200510.001.60
Biodiversity and Protected Areas Project [GEF TF023524]March 7, 20002.752.75
Renewable Energy Development Project [GEF TF053036]March 29, 20055.800.40
Demand for Good Governance Project [Q5540]January 15, 20071.100.10
Public Financial Management Reform Program [MDTF054547]August 11, 20057.002.27
Cambodia Public Financial Management and Accountability [H2410]May 14, 200714.00-
Total Grants73.4517.26
Source: BW/Project Portal/ISR as of 05/09/2007 9:50 AM
Source: BW/Project Portal/ISR as of 05/09/2007 9:50 AM
Annex III. Cambodia: Relations with the Asian Development Bank

From 1992 through 31 December 2006, the Asian Development Bank (AsDB) approved $960.4 million in low-interest loans (including $49.8 million in grants in 2005 and 2006) to Cambodia to finance 33 projects and 8 structural reform programs. To date 17 loan projects, for a total of $487.6 million, have been completed:

  • (i) the Special Rehabilitation Assistance Project [approved in 1992];
  • (ii) Power Rehabilitation Project [approved in 1994];
  • (iii) Agriculture Sector Program [approved in 1996];
  • (iv) Basic Skills Project [approved in 1995];
  • (v) Rural Infrastructure Improvement Project [approved in 1995];
  • (vi) Basic Education Text Book Project (approved in 1996);
  • (vii) Basic Health Services Project [approved in 1996];
  • (viii) Phnom Penh Water Supply and Drainage Project [approved in 1996];
  • (ix) Siem Reap Airport Project (approved in 1996);
  • (x) Financial Sector Program, Subprogram I [approved in 2001];
  • (xi) Financial Sector Program, Subprogram II [approved in 2002]
  • (xii) Education Sector Development Program [approved in 2001]; and
  • (xiii) Emergency Flood Rehabilitation Project [approved in 2000];
  • (xiv) Provincial Power Supply Project [approved in 2000];
  • (xv) GMS: Phnom Penh to Ho Chi Minh City Highway Project [approved in 1998];
  • (xvi) Primary Roads Restoration Project [approved in 1999]; and
  • (xvii) Rural Credit and Savings Project [approved in 2000]

The sector composition and loan/grant amounts of the remaining active portfolio is as follows: agriculture and natural resources ($73.6 million); education ($63.0 million); energy ($64.3 million); finance ($10.0 million); health, nutrition and social protection ($29.0 million); industry and trade ($35.6 million); law, economic management and public policy ($17.8 million); multi-sector ($43.2 million); transport and communication ($92.0 million); and water supply, sanitation and waste management ($44.3 million).

During the same period, the AsDB also designed and administered 141 technical assistance projects amounting to $ 91.4 million. They were financed through grants from AsDB’s Technical Assistance Special Fund ($32.6 million), the Japanese Special Fund ($38.7 million), and other sources ($20.1 million). In 2006, the AsDB approved two loans: Second Power Transmission and Distribution ($20.0 million) and GMS: Rehabilitation of the Railway in Cambodia ($42.0), and one grant: Commune Council Development, Phase II ($7.8 million).

AsDB’s overarching goal in Cambodia is sustainable poverty reduction. AsDB’s Country Strategy and Program (CSP 2005–2009) will focus on: (i) broad-based economic growth through investments in physical infrastructure, development of the financial sector, sustainable development of small and medium-scale enterprises, and investments in agriculture and irrigation; (ii) inclusive social development through basic education, empowering vulnerable groups such as women and ethnic minorities, control of communicable diseases, the provision of rural water supply and sanitation facilities, and community-based sustainable management and conservation of natural resources in the Tonle Sap Basin; and (iii) good governance through improving accountability and service delivery, supporting legal, regulatory and policy reforms, strengthening institutional capacity building, and improving efficiency and effectiveness of project implementation. A focus on the Tonle Sap basin to address geographical disparities in development, and a subregional focus to benefit from the broader opportunities provided by AsDB’s Greater Mekong Sub-region program are also included. Four cross-cutting themes, namely governance, private sector development, gender, and the environment are also proposed to support the poverty reduction objectives of the country strategy.

The CSP was developed based on wide ranging consultations with the Government, donors, civil society, and the private sector. In particular, AsDB, the World Bank, the United Kingdom’s Department for International Development (DFID), and the UN agencies undertook a joint strategic planning process for their country strategies which resulted in shared analysis and assessments.

AsDB: Loan/Grant Commitments and Disbursements to Cambodia, 1992–2006(In millions of U.S. dollars) as of December 31, 2006
Loan

Approvals
Contract

Awards/

Commitment
Disbursements
1 199267.70.00.0
2 19930.04.45.4
3 199428.235.912.2
4 199545.128.135.9
5 1996105.015.332.1
6 19970.041.510.7
7 199840.029.129.3
8 199988.017.026.2
9 2000109.6114.450.8
10 200175.240.748.3
11 2002116.564.478.9
12 200398.361.973.3
13 200465.062.476.7
14 200552.01196.484.5
15 200669.82244.755.8
2007
17 (Projected)(79.0)3(44.7)(55.8)
TOTAL:960.4682.9639.5

Loans amount to $10 million and grants to $42 million

Loans amount to $62 million and grants to $7.8 million

Loans amount to $47.0 million and grants to $32.0 million

Loans amount to $10 million and grants to $42 million

Loans amount to $62 million and grants to $7.8 million

Loans amount to $47.0 million and grants to $32.0 million

Annex IV. Cambodia: Statistical Issues

43. Despite significant shortcomings in some areas, core economic and financial data provided to the Fund are generally adequate for surveillance. In March 2002, metadata were posted on the Dissemination Standards Bulletin Board, and Cambodia began participation in the Fund’s General Data Dissemination System (GDDS).

44. Extensive technical assistance from the IMF, UNDP, AsDB, and World Bank has contributed to substantial improvements in the macroeconomic statistics. A long-term IMF advisor has worked in the National Institute of Statistics (NIS) since October 2001 (with a one-year interruption) to assist the authorities in upgrading economic and financial statistics. A new Statistics Law was passed by the National Assembly in March 2005. Technical assistance from the UNDP will facilitate the implementation of the Statistics Law provisions in relation to establishing governance, coordination, and dissemination mechanisms, as well as general statistical training.

National accounts and price statistics

45. Annual and quarterly official GDP estimates are produced with support from the AsDB’s peripatetic expert and a long-term IMF advisor. The national accounts series was updated in 2006 incorporating new household survey data and leading to an upward revision in growth rates. Final estimates for the national accounts for 2006 were published in May, 2007 and first quarter estimates for 2007 were published in June 2007. Nevertheless, the quality of GDP estimates remains hampered by the lack of comprehensive and reliable sectoral information.

46. The NIS provides a monthly CPI with a five-week lag; this series was recently updated with new expenditure weights and rebased to July-December 2000 = 100. Since July 2000, the NIS has compiled a quarterly urban CPI for five major provincial cities and Phnom Penh. A quarterly producer price index has been developed, with support from STA and financing from the AsDB. The experimental producer price index was released in April 2005, and a manual entitled “Cambodian Prices Statistics: Concepts, Sources and Methods” was recently published. However, compilation of the PPI has been discontinued owing to resource constraints.

Government finance statistics

47. The Ministry of Economy and Finance provides monthly fiscal data (broadly based on GFS standards) with a four-week lag. There remain, however, certain weaknesses with regard to the reliability of source data, coverage, and the economic and functional classifications of expenditure. Data on donor-financed projects are available with a considerable lag. Some of these issues are currently being addressed. With the support of a Treasury advisor (FAD) and a Statistical Advisor (STA), in 2007 the authorities implemented a reform of the government accounting system and budgetary nomenclature based on the classification of the Government Finance Statistics Manual 2001. Initial teething problems with the implementation of these new procedures have slowed fiscal reporting in the first half of 2007. In addition, several STA missions to improve GFS compilation procedures and assist with the implementation of the new methodology have taken place in recent years, the latest in February 2006.

48. In 2005, the authorities resumed providing monthly fiscal data for publication in IFS after a pause of several months, and for the first time reported data for publication in the Government Finance Statistics Yearbook.

Monetary and financial statistics

49. The National Bank of Cambodia (NBC) provides monthly data on the monetary authorities and deposit money banks with a four-week lag. In addition to the accounts of the monetary authorities and deposit money banks, the NBC also compiles the sectoral balance sheet and the survey for central bank and other depository corporations in accordance with the methodology recommended in the IMF’s Monetary and Financial Statistics Manual. Since August 2005, the NBC has reported monetary and financial statistics to STA using the Standardized Report Forms (SRFs).

External sector statistics

50. The NBC is responsible for compiling balance of payments statistics. Customs data have substantial coverage and valuation problems arising from the nonrecording of no dutiable imports, underreporting of re-exports, and weaknesses in customs controls. While there have been improvements in the quality of foreign direct investment data, private capital flows are believed to be large and not fully captured in the official data. A range of international transactions by enterprises, such as payments for imported services, income payments, and portfolio investment abroad are not included in the data. In January 2003, the authorities implemented an International Transactions Reporting System (ITRS) to collect data on international transactions made through the banking system to improve balance of payments estimates. An STA balance of payments statistics mission in March–May 2004 reviewed source data used for compiling the balance of payments and recommended improvements; the multisector statistics advisor currently residing in Cambodia is assist in improving the external sector statistics. Gross external debt data are provided by the Ministry of Economy and Finance, but public and publicly guaranteed debt by maturity, the external debt service schedule, and timely information on disbursements by bilateral donors are not available.

Cambodia: Table of Common Indicators Required for Surveillance(As of June 26, 2007)
Date of

latest

Observation
Date

Received
Frequency

of

Data 6
Frequency

of

Reporting 6
Frequency

of

Publication 6
Exchange RatesMay 2007Jun. 2007MMM
International Reserve Assets and Reserve Liabilities of the Monetary Authorities1Dec. 2006Jan. 2007DD, two day lagN/A
Reserve/Base MoneyApr. 2007May. 2007MM, 5 week delayM
Broad MoneyMar. 2007May. 2007MM, 5 week lagM
Central Bank Balance SheetApr. 2007May. 2007MM, 5 week lagM
Consolidated Balance Sheet of the Banking SystemMar. 2007May. 2007MM, 5 week lagM
Interest Rates2May 2007Jun. 2007MM, 5 week delayM
Consumer Price IndexMay. 2007Jun., 2007MM, 5 week lagM
Revenue, Expenditure, Balance and Composition of Financing3 - General Government4Sep 2006Nov. 2006MM, 6–12 week delayM
Revenue, Expenditure, Balance and Composition of Financing3- Central GovernmentJan. 2007Mar. 2007MM, 6–12 week delayM
Stocks of Central Government and Central Government-Guaranteed Debt5Dec. 2004April 10, 2005MM, 6–12 week delayM
External Current Account BalanceQ4. 2006Apr. 2007QMissions, emailA
Exports and Imports of Goods and ServicesQ4, 2006Apr. 2007QMissions, emailA
GDP/GNPQ4 2006June 2007AMissions, emailA
Gross External DebtDec. 2004Mar. 2005MM, 3 month lagA

Includes reserve assets pledged or otherwise encumbered as well as net derivative positions.

Both market-based and officially-determined, including discount rates, money market rates, rates on treasury bills, notes and bonds.

Foreign, domestic bank, and domestic nonbank financing.

The general government consists of the central government (budgetary funds, extra budgetary funds, and social security funds) and state and local governments.

Including currency and maturity composition.

Daily (D), Weekly (W), Monthly (M), Quarterly (Q), Annually (A), Irregular (I); and Not Available (NA).

Includes reserve assets pledged or otherwise encumbered as well as net derivative positions.

Both market-based and officially-determined, including discount rates, money market rates, rates on treasury bills, notes and bonds.

Foreign, domestic bank, and domestic nonbank financing.

The general government consists of the central government (budgetary funds, extra budgetary funds, and social security funds) and state and local governments.

Including currency and maturity composition.

Daily (D), Weekly (W), Monthly (M), Quarterly (Q), Annually (A), Irregular (I); and Not Available (NA).

18Prepared by World Bank staff.
19“Bank/Fund Collaboration on Public Expenditure Issues,” February 14, 2003.
20Negotiations on PRGO-1 were successfully completed on April 24, 2007, and the Bank hopes to send the operation to the Executive Directors for approval in early FY08, after agreement has been reached with the Government on repayment on misprocured contracts.
21Biodiversity and Protected Areas Management Project (BPAMP); the Land Management and Administration Project (LMAP); Provincial and Rural Infrastructure Project (PRIP); and Provincial and Peri-Urban Water Supply and Sanitation Project (PPWSP).
22Flood Emergency and Rehabilitation (FERP), Forestry Concession Management and Control Pilot Project (FCMCPP), and Agricultural Productivity Improvement Project (APIP).
23Suspension is a remedial measure available under all World Bank legal agreements. It can be exercised by the Bank in a number of situations, including when the borrower is not fulfilling its obligations under the legal agreement. Suspension entails a temporary freeze on the Bank’s financing of implementation; it does not mean that the Bank withdraws from the project. Rather, the Bank steps up its supervision, dialogue, and other activities to help the Government in its efforts to meet the conditions for lifting the suspension.

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