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Cambodia: Good enough governance for sectoral growth?

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... Investment climate surveys in Cambodia Major obstacles to business, ... high transactions costs across value chain to Vietnam/Thailnd * A Strategy for Policy ... – PowerPoint PPT presentation

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Title: Cambodia: Good enough governance for sectoral growth?


1
Cambodia Good enough governance for sectoral
growth?
  • Presented by Kai Kaiser, Senior Economist, Public
    Sector Group, World Bank
  • (Stephane Guimbert, Sophal Ear, Verena Fritz)
  • Applied Inclusive Growth AnalysisJoint Vienna
    Institute
  • Day 4, July 2, 2009

2
Growth Paradox?
  • Rapid Growth
  • Garments Success Story
  • Growth Sustainability Concerns
  • International Competition
  • Challenge of Diversification
  • Weak Governance
  • Weak Aggregate Indicators
  • Self-reported by firms
  • consolidation of ruling party/stability after
    1998
  • first LDC to join WTO (2004)

3
growing with four fragile engines
1
Contribution to growth ()?
Tourism rapid growth. Initially mainly to Siem
Reap and Angkor gradually to Phnom Penh and
Sihanoukville, with further potential
Real estate / construction very rapid growth,
especially in Phnom Penh talks of a bubble
Garments main (only?) export mainly to US
market slow growth in 2007 with competition from
Vietnam further competition (inc. China) in the
future?
Crops rain-fed mainly rice
Legacies of extractive forestry dis-saving in
1990s
4
reaching new heights?
5
weak governance
6
corruption governance
2
Major obstacles to business, as reported by firms
established in Cambodia
Sources Investment climate surveys in Cambodia
7
Growth Analysis Approach
  • CEM
  • Range of background papers
  • Complementary governance political-economy
    analysis
  • Unbundle paradox?
  • Government-donor roundtable 2/2009
  • What were drivers to growth?
  • What are challenges to sustainability?
  • What are binding constraints and policy options?

8
what is really binding?
2
9
Governance Political-Economy Analysis Approach
  • Focus on selection of promising sectors
  • National plans, development partner efforts
  • Understand sectoral governance growth
  • Nature of state-elite business relationships
  • Drivers of growth?
  • Strategies to manage business environment across
    value chain
  • Drawn on country specialist (Sophal Ear)
  • Process of discovery?

10
Sectoral governance for growth?
2
Successful
Garments
Emerging?
Rice
Stunted?
Livestock
11
Garments
  • International Drivers
  • Quotas for labor standards (US brokered, until
    2004 for garments ILO monitoring still ongoing)?
  • Strong international presence in 300
    establishments (95 )
  • Domestic Collective Action
  • Garment Manufacturers Association (GMAC)
  • Relationship w/ Ministry of Commerce, Labor
    Intensive Profile of Sector
  • International Chambers of Commerce
  • Open Issues
  • Sustainability concerns w/ international
    competition
  • Squeezing the golden goose?
  • Value chain limited to assembly

12
Rice
  • International Drivers
  • Increase in food prices
  • Future Everything but Arms (EU Zero Tariffs for
    LDCs)
  • Only Sanitary Phytosanitary
  • Domestic Collective Action
  • Fragmented, Limited Collective Voice
  • Green Trade (state body) National Cambodian
    Rice Millers now have export waver (100 tons)
  • Status
  • Mainly domestic padi production, processed
    reflows from neighboring countries
  • Very limited finance into rice processing
  • Concerns about ability of Cambodian supply chain
    to deliver quality

13
Livestock
  • International Drivers
  • Increase in food prices
  • Malaysian investment (failed)
  • Domestic Collective Action
  • Very Fragmented, Limited Collective Voice
  • Some entry attempt by okhna
  • Status
  • Failure of previous venture (Mong Retth,
    Malaysians)
  • Procdution localized, dominate by cattle
    rustling, high transactions costs across value
    chain to Vietnam/Thailnd

14
A Strategy for Policy Actions in the Cambodia
Setting
  • Potential Sector Profits/Rents Insufficient
  • Sum of poor governance manifests itself on
    various links of the value chain
  • Export opportunities/prices
  • Promote Demand Side/Collective Action
  • Business Organizations (Mandatory/Sectoral
    Monopoly)
  • External Drivers
  • Internal National Regimes
  • Pressure for domestic compliance

15
Open issues
  • Integrity of governance growth narrative
  • Limited selection of sectors (successful
    unsuccessful)
  • Replicability of garments wrt to different
    sectoral value chains
  • Multi-sectoral state growth champions?
  • Focal point acts to enforce credible business
    environment (pending systematic change)
  • Captured/Self-serving institutions
  • Capacity/incentives for this type of institutions
  • Potential discovery of oil gas
  • Impacts on drivers of growth
  • Concentrated rents incentives for state

16
Conclusions
  • Binding constraints lens provides useful
    disciplining device in weak-institutional setting
    like Cambodia where everything can be perceived
    constraint
  • Limited binding constraints may be politically
    counterintuitive
  • Temporal, Need to be forward looking, Balance
    path, perception of all eggs in one basket
  • Value of looking at sector constraints
  • Timing
  • Impacts of Global Economic Crisis

17
Q A
  • Selected References
  • World Bank, (2009), Sustaining Rapid Growth in a
    Challenging Environment, www.worldbank.org/kh/gro
    wth
  • Ear, Sophal, (2009), Sowing and Sewing Growth
    The Political Economy of Rice and Garments in
    Cambodia, Palo Alto, CA Stanford Center for
    International Development Working Paper, No. 384
  • Guimbert, Stephane, 2009, Cambodia 1998-2008 An
    Episode of Rapid Growth, Working Paper (draft)
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