Cambodia and Development: Ready for the Opportunity?

1. Cambodia and Development: Ready for the Opportunity? Chay Navuth Tel: (855) 12 489 694 Email: chaynavuth@yahoo.com

2. Cambodia and Development: Ready for the Opportunity? • Development/Development assistance- Cambodia • Hard infrastructure development • Conclusion Contents:

3. Development/Development Assistance- Cambodia Name of donors giving assistance to Cambodia • Australia, Belgium, Canada, China, Denmark, Finland, France, Germany, Japan, The Netherlands, New Zealand, Norway, the Republic of Korea, Thailand, the Russian Federation, Sweden, the United Kingdom, and the United States. • Multilateral donors are: UN agencies (such as UNDP), the Bretton-Woods institutions (World Bank and International Monetary Fund or IMF), the Asian Development Bank (ADB) and the European Union (EU).

4. ODA to Cambodia Sources: CDC 2002, Teramoto et al. 2002 and Conway 1999: 57 Tabel 3.4 - ICORC: the International Committee on the Reconstruction of Cambodia- a ministerial-level meeting;- CG: The other is the Consultative Group Meeting on Cambodia • Pledged: over 5 billion US dollars;Around US$ 4.1 billion or 73.3 percent have been disbursed by the end of 2001 (CDC 2002: 11)

5. Japan ODA to Cambodia • Japan has been the largest donor of IDA to Cambodia since 1992. The volume of Japan’s assistance to Cambodia increased from 450.2 million US$ over the period of 1994-1998 to 500.8 million US$ over the last five years, 1999-2003 (CDC 2004: 11) • Since 2002 on, Japanese ODA has concentrated on four major issues. Those are: 1- economic growth and stable society (support for reforms, basic economic infrastructure, poverty reduction through rural development) 2- Support for socially vulnerable people (education and health care) 3- Response to global issues (environmental conservation, anti-drug measures and so forth); 4- Catching up with the other ASEAN Member Countries. Proportional of Japan’s Total ODA in Cambodia (1991-2001) Distribution of Japan ODA to ASEAN (2001)

6. Government NGOs Donor Community Farmers d NGOs Community Farmers Community Farmers a c Community b Vertical Aspect Support DA/ Development Vertical Mechanisms support to DA or/and Development

7. What was the results? • The proportion of the population in poverty fell from 39% in 1994 to around 36% in 1999, thus falling by only 1% per year. The trends indicate that the estimated proportion of poor people in Cambodia will be 28% by 2015, more than the MDG set at 19.5% (Cambodian Prime Minister Speech 2004) • A main donor- IMF with World Bank also pessimistically reported about the progress of Cambodia as “development between 1993 and 2003, poverty incidence remains high and largely unchanged, with 43 percent estimated to be living below the international dollar-a-day poverty line in 2004” Why with a very huge amount or almost more than 500 million USD a year, the MDG cannot be reached and the poverty remains high and largely unchanged? The answer is…

8. Poverty Line and Villager's Income (US$ per day)

9. How thing is going on in development (assistance) New community Hard infra I’m sure they need these! New tech These three components have to be reshaped otherwise people are suffered from the changed in essential condition, the reshape is made by the outsider & in fragmental basis (especially the modern technology & modern social organization) Human tries to develop & modify the other three elements simultaneously to cope with change Essential condition is changed: ex. Rain, flood, more thunderstorms 3 2 Human in the society are rather passive in trying to cope with change 4 People in the society are active 1 9 9 1 4 • Note: • Social Organization • Essential Condition • Institutional Organization • Technology

10. What should it be? Vertical Mechanisms support to DA or/and Development Government NGOs Donor • Note: • Social Organization • Essential Conditions • Institutional Organization • Technology Horizontal Mechanisms support to DA or/and Development Community Farmers d NGOs Community Farmers Community Farmers a c Community b 4 2 1 3 Vertical and Horizontal Aspects Support DA/ Development

11. 2. Infrastructure Development: an opportunity for Cambodia

12. Another opportunity for Cambodia

13. The agriculture sector in Thailand contributes 12% of the GDP and employs an estimated 40.5% of labor; • The primary food crops produced are bananas, barley, cocoa beans, coconuts, coffee, maize, potatoes, rice, soybeans, sugar cane and wheat. • The primary meat products are beef and veal, buffalo, chicken, duck, goose, lamb and pork. • The total value of agricultural exports in 1998 was $11,471.3 million, while the total value of agricultural imports in 1998 was $3,087.4 million. Agriculture Product: Cambodia, Thailand and Vietnam The agriculture sector in Vietnam contributes 26% of the GDP and employs an estimated 68.5% of labor. The primary food crops produced are bananas, coconuts, coffee, maize, potatoes, rice, soybeans and sugar cane. The primary meat products are beef and veal, buffalo, chicken, duck, horse, and pork. The largest (in value terms) agricultural exports in 1998 were rice, green coffee, fish, rubber and cashew nuts. The total value of agricultural exports in 1998 was $2,784.7 million, while the total value of agricultural imports in 1998 was $952.5 million. • The agriculture sector in Cambodia contributes 43% of GDP; • Employs an estimated 72.6% of labor; • The primary food crops produced are bananas, coconuts, coffee, maize, potatoes, rice, soybeans and sugar cane. • The primary meat products are beef and veal, buffalo, chicken, duck and pork; • The largest (in value terms) agricultural exports in 1998 were rubber, fish, organic material, grape must and soybean. • The total value of agricultural exports in 1998 was $54.1 million, while the total value of agricultural imports in 1998 was $106.9 million.

14. Latest opportunity for Cambodia- China ODA • Present: Products are coming from Thailand and Vietnam. • Soon- from China

15. Latest opportunity for Cambodia- China ODA • Globalization, Chinese style- Africa’s Poorest- but oil rich- countries Opt for China’s unconditional funds • By James Traub (Cambodia Daily Nov 25-26, 2006): • People’s Republic China was becoming, in effect, an alternative source of credits for developing nations. • Western donors, led by IMF, conditioned aid on the achievement of meaningful, and often painful, reform. China, by contrast, offered aid without “conditionality”. • Development through infrastructure has worked in China, but China is not only an authoritarian state; it is also a managerial or technocratic one, in which the ruling party marshals the nation’s energies and capital in the name of development and stability. • Angola, on the other hand, is a semi-functional oligarchy.

16. “One problem is that aid flows create volatility in government revenues that, if poorly managed, will lead to inflation and boom-and-bust cycles in government spending. Secondly, they produce foreign currency earnings that, if not neutralized by monetary policy, will raise the real exchange rate, undermining the competitiveness if other sectors. Third, they can damage institutions (including governance and the legal systems) indirectly- by removing incentives to reform, improve infrastructure, or even establish a well-functioning tax bureaucracy- as well as directly- by provoking a fight to control resource rents” (Klein et al. 2005: 56).

17. HARD INFRASTRUCTURE IS ENOUGH? United Nations report, World Economic and Social Survey 2006, mentioned four key lessons for economic growth in the developing world • the growth of individual developing countries depends not only on their domestic economic policies. It also very much depends on factors beyond the control of individual countries, such as global economic conditions and regional economic environments. • Countries that integrate into dynamic world markets for manufactures and services perform far better than those that only specialise in natural-resource intensive sectors, such as oil and gas. A successful export strategy hinges not on how much countries export, but on what they export and how their export sectors are integrated with other domestic economic activities. The same is true of foreign direct investment (FDI). Countries that benefit most from FDI are those whose domestic firms and institutions also benefit, and thus those that have the requisite absorptive capacity. • Third, macroeconomic stability, investment and growth are mutually reinforcing. But maintaining stability involves not only keeping inflation low, but also, and crucially, avoiding large swings in economic activity, external imbalances and financial crises. • Finally, institutional reform encompasses more than creating markets and guaranteeing property rights. It also includes creating the regulatory and institutional framework that markets require to function well, providing necessary public goods and guaranteeing the fairness of rules. √ X X X

18. Conclusion • It is not likely that Cambodia fully benefits from opportunities given by her neighbors and international communities in the foreseen future unless the development/DA has to be based on vertical and horizontal aspects; • And a successful export strategy hinges not on how much countries export and a good hard infrastructure, but on what they export and how their export sectors are integrated with other domestic economic activities. The same is true of foreign direct investment (FDI). Countries that benefit most from FDI are those whose domestic firms and institutions also benefit, and thus those that have the requisite absorptive capacity; • Opportunities are coming but we are not ready for the opportunities, and consequently the opportunity can become an issue for our development.