The%20World%20Bank%20in%20Cambodia:%20Reducing%20Poverty%20by%20Addressing%20Governance%20Challenges

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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

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Overview of Presentation

• What is our mission?
• Why a Governance CAS?
• What is a Governance CAS--The World Banks CAS
  for Cambodia (2005-2008)

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Our Vision A Cambodia Free of Poverty

• 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

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Cambodia The Country Context

• 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

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Analytical work pointed to governance being the
main constraint to poverty reduction

• 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 Roadsfound that
  accountability mechanisms were weak and needed
  to be strengthened (2004)

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High cost of doing business drives away
investments and jobs
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Pattern of growth leading to rising inequality
and slower poverty reduction
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
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Poor public financial management leading to poor
service delivery

• 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

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CPIA Ratings sum up assessment--Cambodia lags its
peers on governance indicators
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Weak Governance confirmed by a number of global
indicators

• 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

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WB Country Assistance Strategy (CAS) Designed to
tackle governance at 3 Levels

1. At the Country Level--Build back the institutions
   of governance that were destroyed by three
   decades of conflict
2. At the Project Level--Protect the funds that we
   deliver through our projects
3. At the Global Level--Work with other
   partnersdonors, civil society and the private
   sector--to address governance challenges

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I. At the Country Level in Cambodiafocus on 5
themes

• 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

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Why these five areas

• 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

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Align all Our instruments to Get Results Example
from PSD

• 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)

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Align All Our Instruments to Get Results Example
from PFM

• 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)

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Results Cambodia is reforming gradually and
showing improvements in governance
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II. At the Project LevelReducing Fiduciary Risks

• While governance is a long-term challenge, need
  to take immediate measures to protect our project
  funds in the short-term
• 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

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III. Partnerships with other donors are essential
to take forward the governance agenda

• 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
  playerwe provide 40-50 m per annumand 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

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Joint CAS with the ADB-DFID-UN System

• 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 (??)

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Reinforcing messages at the country and global
levels

• 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 WBbuilt through in-country retreats
  and tripartite annual meetings in Tokyo
• Visits to other key donor capitals to keep all
  partners on-message

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Using the Banks convening power to keep the
spotlight on governance

• 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 monitoredand challenges
  addressedthrough the higher level quarterly
  meetings of the Government-donor Coordination
  Committee (GDCC)

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Partnerships with Civil Society and Communities
to build a stronger demand for good governance

• 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 peoples organizations
  (farmers organizations, microfinance groups etc)
  and link them better to the tourism sector and
  other sources of growth

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WB Group Partnerships with the Private Sector

• 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

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Lessons from the Design and Implementation of the
Cambodia CAS

• Leadership and ownership matter--Need to find and
  back the champions of reform
• Long-term agenda requires focus and selectivity
• Also requires patience and perseveranceneed 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

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Thank you for your attention