PROGRESS SO FAR AND CURRENT SITUATION

2.01    In assessing Cambodia's current situation, future needs, potential and prospects from any aspect, Cambodians and the world at large will do well to bear in mind the country's past. Indeed, past progress is a demonstrable indicator of the country's clarity of vision, strength of commitment, sustained and perseverant efforts and its people's resilience to rise from adversities. One has to look not merely at the long distance still ahead and the obvious shortcomings imposed by the past, but equally appreciate the long distance covered in a short period of time of a mere quarter of a century, compared to any other nation in the world that was similarly left severely traumatised and handicapped in unimaginable and unprecedented dimensions.

2.02    Three distinct periods of progress could be seen in Cambodia's recent past. The first was from 1979 when it emerged from almost four years of genocidal oppression. Everything had to start from scratch, from below ground zero. With hope and perseverance, and even in conditions of international isolation, the country was rebuilt and reached a stable stage but scars and legacies still remain including in terms of skilled manpower shortage. The second was from 1993 to 1997, when in mid-1997, the country was suddenly overwhelmed by two unrelated crisis, viz., externally the East Asia economic crisis and internally the sudden divisions and disruptions, both occurring almost simultaneously. The third starting from 1998, with the formation of the second RGC till now, a period of peace, stability and uninterrupted growth and progress. Indeed, while most work up to 1997 were somewhat in the nature of rehabilitation or "Band-Aid" efforts, serious rebuilding work commenced in 1998. While the 'hardware' by way of building physical infrastructure has been proceeding, the 'software' of changing economic and legal systems, reinforcing social capital and institutional development, is by its very nature time consuming.

2.03    A brief overview is worthwhile before more details are looked at. While undoubted progress has occurred on all fronts and positive and progressive changes are evident over the past decade, the major highlights are:

• Restoration of, and vast improvements in, internal peace and security, not easily measurable by any known yardstick, but a crucial foundation for any other progressive activity.

• Democracy taking roots, giving every citizen an equal voice and opportunity to elect leaders at regular intervals, to govern the country, both at the national and sub-national levels.

• Major improvements in observance and enforcement of the rule of law and maintenance of law and social order.

• Vast improvements in personal freedoms and freedom of expression, including through all types of media.

• Spectacular and steady macro-economic growth -- increase in GDP, per capita GDP, containment of inflation --, spurred by private sector investments and assistance from external development partners.

• Better and steadily improving fiscal discipline and management including increased revenues and tilt in expenditure towards social sectors.

• Accelerating integration of Cambodia with the region and the rest of the world.

• Sharp and noteworthy reduction in poverty levels in comparable areas surveyed in 1993 and 2004 (see Box 2.1).

• Measurable improvements in various social indicators such as: expansion of primary education; reduction in mortality rates for both infants and under-five year olds; significant reduction in communicable diseases, spectacular in HIV/AIDS; improved urban access to safe water, and rural access to sanitation; and, reduction in gender disparity in most areas, especially in primary education, adult literacy, and wage employment in agriculture and industry.

2.04  The improvements and progress highlighted above also mask some important facets, which need to be addressed through the NSDP:

• Prevalence of poverty at as high as 45.6% in areas not included in the 1993/94 survey is a matter of concern and needs corrective action (see Box 2.1 below).

• Economic growth and indeed all other progress have occurred not necessarily due to any highly focused attention (though a significant part was played by the favourable conditions engendered by government's positive and progressive macro-economic and social policies), but because any investment or expenditure, however small or unfocused, contributed to spurring growth as the country started from almost ground zero; it is therefore time now to more proactively direct growth.

• Economic growth has been sectorally uneven, directly resulting from phenomenal increase from garment industry, tourism and construction, and therefore leaving it very vulnerable to external shocks; such growth has to broaden and deepen to be sustainable over time.

• Growth has been spatially largely urban based, heavily concentrated in Phnom Penh and tourist destinations such as Siem Reap and Sihanoukville, pointing to the immediate need for more rural focus in the future.

• Despite measurable progress, many health indicators are still low compared to other countries in the region; besides there are also emerging issues such as drug abuse notably among youth.

• Reforms in governance -- public administration, judiciary and sectoral wherever needed -- have not progressed at the required pace to provide necessary conducive climate for much better and equitable growth including attracting long-term private investment in a variety of fields and into the rural areas.

2.05  Poverty: Historic causes, now being overcome, are at the root of low level of development of Cambodia and have left a sizeable proportion of people below the minimum levels of consumption of goods and services needed to keep them above poverty. The causes of poverty are many, myriad and varied, interacting with each other to perpetuate the vicious cycle, viz., remoteness of location; low or no incomes or opportunities; low health and education status, and low or no access to such facilities; lack of physical and productive assets and/or lack of access to such; societal marginalisation and drug issues; and others. Starting in 1979, and successively since 1993 the focus has been on reduction of poverty levels. The Box below provides some details.

2.06  This chapter reviews in more detail some of the highlights of progress made since 2000 till now and surveys the situation, as it exists. It follows the Rectangular Strategy framework and presents developments and position for each element of the rectangles, including cross cutting factors as appropriate.

Good Governance

2.07   Peace, political stability, social order, rule of law, maintenance of law and order, all existing in a dynamic equilibrium are vital and are pre-requisites for not only preserving past achievements but indeed for any meaningful and sustainable growth. Together they constitute "Good Governance" which is rightly at the core of the RS.

2.08  Democracy where people periodically voice their choice of leaders through elections to political and legislative institutions has already taken strong roots in Cambodia. An independent National Election Commission (NEC) organizes and conducts the democratic elections based on full adult franchise. The third general elections were held in 2003 to form a new National Assembly. Widely acclaimed as free and fair in all aspects by independent international observers the results gave more than 50% of seats to one party, but less than 2/3 required to form a government, leading to prolonged negotiations to form a new coalition RGC. Still, despite these delays, the continuing government proceeded full steam ahead with reforms and implementation of the development agenda.

2.09  At the beginning of its third term in July 2004, RGC adopted a comprehensive strategy for the future. Called the Rectangular Strategy, it lays out all aspects of governance and development with Good Governance at the core and the enabling environment, as well as four specific rectangles covering development issues such as Enhancement of the Agricultural Sector, Rehabilitation and Construction of Physical Infrastructure, Private Sector Development and Employment Generation, and Capacity Building and Human Resource Development. Each rectangle has four critical elements to be addressed systematically.

2.10  There is complete internal peace within Cambodia thanks to all parties having chosen the democratic path to reconcile their differences through peaceful means. There is no known measure to evaluate the treasure of peace so essential for any progress. Public order and maintenance of law have improved vastly and crimes have come down sharply. All communities live in fearless harmony and cooperation.

2.11  Highly participatory systems need to be in place for grass root level involvement for any good governance. Cambodia held the first commune level elections in 2002 to elect representatives to form commune councils to govern 1,621 communes in the country thereby introducing effective democracy and improvements in the quality of services at the grass roots level. Again, these elections were upheld as completely free and fair by one and all. The communes have commenced functioning well since then.

2.12    For almost last four years, the RGC has been implementing necessary measures to shift from a centralised to a decentralised system of governance. To this end, election of Commune/Sangkat Councils which is the lowest tier of administration was held in 2002 through a democratic process. Among others, RGC's Seila programme has contributed much to the implementation of RGC's decentralisation policy. So far, several major achievements have been realised such as strengthening of democratic governance, contribution to poverty reduction and capacity building at local levels. This has created a profound impact on deepening and sharpening of the local governance with growing representation, responsibility, participation and accountability.  Accordingly, to promote and instil processes for participatory grass root level decision-making and implementation for development, the Strategic Framework for Decentralisation and Deconcentration (D & D) was approved in June 2005. Containing clear and extensive guidelines and procedures, the framework will help to increasingly devolve responsibilities and resources for development to provincial/municipal, district/khan and commune/sangkat levels. Organic Laws are the prime legal instruments for implementing administrative governance at sub-national levels.

2.13   RGC approved its Governance Action Plan (GAP I) in March 2001. It is a compendium of over one hundred initiatives to improve governance in seven areas that are critical to development and social justice. Most if not all of these initiatives addressed root causes of poor governance and corruption. Through its National Poverty Reduction Strategy (NPRS) approved in December 2002, the Royal Government reaffirmed its commitment to strengthening institutions and to improving governance in four critical cross-cutting areas: legal and judicial reform, administrative reform, democratisation and local governance and the fight against corruption. GAP II, 2005-2008, covering 9 inter-related critical areas of governance that directly impact on poverty reduction, is now being finalised.

2.14  The RGC recognizes that "corruption is an endemic problem worldwide that can only be mitigated through close cooperation among countries. Corrupt activities are the result of opportunity, behaviour and risks. The approach can only be holistic, participative, gradual and sustainable". The higher the unsupervised discretion of an individual entrusted with performing duties while interacting with others, the higher the scope for corruption. Illegal and improper personal gain in cash, materials or services, to either do one's duty or provide favours out of turn, or wrongfully, at public expense leaves corruption clandestine by nature. It is not clearly measurable but its deleterious effects pervade all government activities. RGC has adopted and will pursue a multi-pronged attack on this social and economic evil that stunts equitable growth, discourages private investment and disadvantages the poor. The goal is to reduce all opportunities for corruption through unambiguous laws and procedures, clear transparency, accountability and predictability together with stringent punishment of those detected of corrupt behaviour. Significant advances have been made in the management of government revenues and in the management of natural resources. A draft Anti-Corruption Law, conforming to international best practices, is now under finalisation after wide-ranging and in-depth consultations with all stakeholders. The government has strengthened the National Audit Authority (NAA) and has expanded the scope of implementation of the Public Procurement Sub-Decree to all ministries and agencies. An internal audit system for the whole government apparatus is being set up. With multifarious dimensions of the problem of corruption, long and short-term solutions need to be found in a number of areas, from increasing salaries of government staff, changing of "attitudinal culture", to institutionalising checks and balances, and to punishment of the guilty. 

2.15  The next aspect of Good Governance is an impartial, free, independent, qualified, skilled, capable and effective judiciary and justice system. Starting from the handicap of not having very defined set-ups in many areas, in the interest of improving legal and judicial framework the RGC has been striving to prepare and adopt some essential laws ranging from those relating to human rights to laws on investments and natural resources management. The Strategy for Legal and Judicial Reform was approved in June 2003. Remuneration for judges and prosecutors started to increase in January 2003. Essential basic laws for judicial system are being prepared and discussed. The Royal School of Magistracy and Legal Training Centre are operational. Many other steps are underway. A clear Plan of Action has recently been adopted. This reform area needs to be pursued with vigour and speed.

2.16  Public administration reform is one of the four core governance reforms undertaken by the Royal Government. A skilled, competent, efficient, effective and transparent Civil Service is essential to the Administration becoming a valued and trusted factor and partner in the development of the country. At the end of the genocidal regime in 1979, the State institutions including administration had been decimated. Successive governments took steps to rebuild and strengthen the administration. By the end of its second mandate in 2003, the RGC had laid the foundations for sustainable reforms to make the Administration and Civil Service a trusted development factor and partner. The progress in the last ten years included: the administration was unified, the legal framework was introduced, average salary increased by about 116% since January 2002 excluding family and risk allowances, and innovative systems to manage the workforce and enhance performance were developed.

2.17 The National Programme for Administration Reform (NPAR) is articulated around four strategic objectives: (i) improving the delivery of public services; (ii) enhancing salaries and performance; (iii) developing the capacity institutions; and, (iv) promoting the use of information and communication technology (ICT). The approach is to anchor reforms in Cambodian reality while using best practices and innovative tools like Priority Mission Groups (PMGs) to accelerate special tasks. Reforms like renovations must contend with given elements. Specific initiatives will be designed with six principles in mind: client perspective, ownership, sustainability, macro-economic stability, relativity, tradition and past decisions. Much work lies ahead to reach the overall goals in Public Administration to make it a truly efficient, effective and responsive outfit.

 2.18  Armed Forces Reform and Demobilization is continuing and the share of budget allocated to Defence and Security (including internal security) has declined from 6.7% of GDP in 1994 to 2.5% and would continue around that level. The RGC is strongly committed to military reform with a view to build an armed force of an appropriate size and quality to defend the country in peacetime. Achievements so far have been significant. The organizational structures for the army units, infantry, navy and other special units have been reviewed. The system of promotion has been restructured. The restructuring of functions of lower levels was undertaken carefully. A comprehensive "White Paper" on Defence Policy has recently been issued.

Environment for the Implementation of the Rectangular Strategy

2.19   Apart from advances in peace, stability and social order (already discussed), Cambodia is now getting increasingly integrated into the region by joining ASEAN and participating in all its activities including hosting its summit in 2002. But this participation has to further deepen and mature. RGC has entered into trade agreements with other countries in Asia to increase easy access to outside markets. Globally, an important milestone was reached with Cambodia being admitted to WTO in 2004. This has imposed higher responsibilities to adhere to strict protocols and standards but has equally opened up tremendous opportunities for trade with the world at large on a competitive basis. However, a lot more has to happen to avail of all the trade facilities and broaden the number of products exported from Cambodia, which is now largely confined to garments. Of primary importance is reduction in high transaction costs, which make serious long-term investors shy away from making commitments in Cambodia.

2.20  In its growth since 1993, Cambodia has received immense financial, technical and advisory support from EDPs. Private sector investment, domestic and foreign, has been a driving force for strong growth in GDP. RGC has paid particular attention to further strengthen, deepen and broaden the Partnership in Development with EDPs, private sector and the civil society. In terms of cooperation with private sector, a high level "Government - Private Sector Forum" has been set up and meets regularly. For further strengthening cooperation with EDPs, RGC has set up 18 Joint Technical Working Groups (TWGs) to bring about close coordination among EDPs together with the government. A high level Government Donor Coordination Committee (GDCC) has also been set up to guide the TWGs and review progress on various fronts.  

2.21  Favourable Macro-Economic and Financial Management is a vital environment to pursue good governance and socio-economic progress. The gains made in this field since 1993 and over the last five years have been quite impressive:

• GDP at constant prices grew at an average of 7.0% per year, despite drop in 1997 due to the twin factors already cited, and excessive oil prices in 2004 and 2005. Much of the growth came because of very prudent policies and strict discipline as also from significant private sector led growth in industrial output and constructions. Industrial growth came in a large measure from garment industry. Tourism grew significantly. 

• Per capita GDP grew at an average of about 4.7% in real terms despite significant increase in total population. Starting at CR 897,000 in 1993 it now stands at nearly CR 1,400,000 (2005 estimates).

• Inflation has been kept under strict control and check. While hovering at low levels for many years it crossed 5% in 2004/05 due to higher international oil prices and local drought. In 2005 it will again be at about that level.

• The exchange rate with US$ stood at CR 2,747 per US $ 1 in 1993 and would be about CR 4,128 in 2005.

• Government revenues have grown steadily and will reach 11.8 % of GDP in 2005 allowing for increased government expenditure especially in social sectors.

Table 2.1:  Macro-Economic Growth

Source: National Accounts of Cambodia 1993-2004;  MEF; IMF

2.22  Financial Sector consisting of Banking and Insurance and related activities is in its infancy and is yet to play a significant role in economic growth. Cambodia is still a largely cash-based economy, with most private sector growth being financed by personal funds or borrowings from family and friends. However, the sector has been undergoing needed reforms and is making rapid progress. The National Bank of Cambodia is the Central Bank of the country and is responsible for monetary policy (to maintain price stability to ensure low inflation), managing currency, managing foreign exchange reserves and business, supervision and regulation of commercial banks (most of them private) as well as specialised financial institutions and micro-finance institutions. Among the achievements are:

• Putting in place and implementing a system of on-site and off-site inspections of all financial institutions.

• Liquidation of non-viable banks.

• Privatisation of the Foreign Trade Bank of Cambodia.

• Ongoing review and improvement of existing regulations to ensure proper and efficient enforcement of the law.

• Monitoring implementation by banks of the uniform chart of accounts conforming to international accounting standards.

Enhancement of Agricultural Sector 

2.23   Enhancement of the agricultural sector is the key to poverty reduction and would also contribute enormously to real GDP and macro-economic growth. Poverty incidence is high in rural areas especially those in remote regions. 85% of the population lives in rural communities and over 60% depend on Agriculture, Forestry and Fisheries for their livelihood. Majority of the poor are farmer-headed households. Women make a significant contribution in this sector. Agriculture production is still dependent on vagaries of nature and is prone to decline by drought, flood and pest affectation. These inherent difficulties continue and have to be tackled. Given that the country imports about 70% of its needs for fruits and vegetables, there is immense scope for diversification to meet these needs as well as to produce high-value crops (e.g., fine rice, herbs and spices).  Actual figures for agriculture no doubt show some steady improvements.

2.24  Although production and total contribution from the sector to the overall economy grew during the period, their share in the GDP has fallen significantly, from 45.6% in 1993 to just about 30% in 2005 (estimates). This is attributable mainly to robust growth in industries (particularly garment manufacturing), tourism and construction. Actual year-to-year growth rates in the sector were quite unsteady and uneven, marked by peaks and troughs, reflecting the high reliance on natural factors and susceptibility to climatic factors like drought, floods, etc.  The total area under rice rose from 1.8 million hectares in 1993 to over 2.3 m ha in 2004-05 and paddy yield per hectare has also been increasing steadily (from 1.31 tons in 1993 to 1.97 tons in 2004-2005). The increase so far is due to introduction of high yielding varieties and extension work to improve agricultural practices and techniques. The increase in total yield resulted in surplus rice production over and above needs for seed and for feeding the country's growing population. Such surplus was 416,118 tons in terms of milled rice in 2004-2005. It is to be noted that the yield at present, around 2.0 tons per hectare is still substantially below the potential (3-5 tons) reached in neighbouring countries with similar agro-climatic conditions. Even slight but steady improvements in production would have a tremendous and immediate positive impact on the poverty index.

Table 2.2:  GDP: Agriculture, Forestry and Fisheries 

2.25   Livestock (cattle, buffalo, pigs) are not only important for nutrition levels in the country but cattle and buffalo are also used for draught purposes. The total stock has remained more or less steady (pigs even declining due to increasing imports). The production of poultry has however been growing steadily.

2.26   Fish occupies a crucial position in terms of food, nutrition, and income of millions of Cambodians. Fish catch grew from 108,900 tons in 1993 to about 374,000 tons in 2005, the main increase coming from the steadily growing aquaculture, production from inland and marine fishing remaining somewhat steady. The fisheries sector is undergoing major reforms towards a more poverty-focused approach. This has resulted in a new policy statement for the sector and a Fisheries Development Action Plan, 2005-2008. Up to 2005, 56.46% of fishing lots have been released for small-scale fishing by people. This has reduced conflicts in the sector. So far 440 community fisheries management mechanisms are in place. The Royal Decree on establishment of community fisheries was signed on 29 May 2005, and a Sub-Decree on Community Fisheries Management was promulgated on 10 June 2005. A new Fisheries Law is awaiting approval of the National Assembly.

2.27  Land Reforms are crucial to increase agricultural production by providing titles and security of tenure to people, especially farmers over lands they are legally occupying. Already the increases in population are bringing pressures on land ownership. From every farmer owning some land in early 1980s an estimated 12% of farmers do not own any land at present. However, in other critical areas, some progress has been achieved. An Inter-Ministerial Council for Land Policy was established in 2000. The first phase of government's 15-year Land Administration, Management and Distribution Programme (LAMDP) was approved in 2002. Its goals are to improve land tenure security and promote the development of efficient land markets. The Land Law was enacted in 2001 as a comprehensive law on land and an Interim Land Policy Framework was adopted in 2002. Out of the 2001 estimates of 6-7 million land parcels or plots needing to be issued titles in the country, work has progressed well by issue of several hundred thousands of land titles under the systematic land registration and sporadic land registration processes. A land dispute resolution mechanism through the Cadastral Commission has been established; this Commission resolved 889 cases between 2003 and 2005, out of 3,257 cases.  As part of the Land Reforms programme, the sub-decree on Social Land Concessions, equitably allocating disposable state land for social and economic development, is being implemented. A sub-decree on state land management and a sub-decree on economic land concessions have been issued. A pilot social land concessions project is under preparation and its implementation is expected to commence in 2006. To undertake a large volume of work involved in land reforms and management, training manuals have been prepared and staff trained. The challenges ahead are to formulate and enforce regulations against land grabbing and to ensure land security and equity to the poor.

2.28  Large tracts of arable land are infested by dangerous land mines planted, and unexploded ordnance (UXO) dropped, during past conflicts, which routinely claim lives and limbs of both humans and animals. Mine Clearance is therefore very important for making arable land safe for cultivation and to prevent death and lifelong handicaps caused by severe injuries. The Mine Clearing programme has been in operation for a number of years. Reported annual casualties from landmines and UXOs decreased from 1,743 in 1996 to 797 in 2005 (estimates). The land freed from land mines stood at 1,225 ha in 1993 and increased to 32, 974 ha in 2005 (estimates). Much work still remains to be done.

2.29  Food Security and Nutrition is a cross-sectoral issue. Protein-energy malnutrition rates and micronutrient deficiencies (iron, iodine, vitamin A) in children under age 5 and women are high and 54% of child mortality is estimated to be associated with malnutrition. Inadequate nutrition adversely affects human resource development. Malnutrition imposes higher health costs due to poor health status, and negatively impacts on national labour force quality for the future. Progress in agriculture, animal husbandry, fisheries, market access, rural road communications and in the health sector have helped in improving food security and nutrition during the last five years. However, there is still unevenness across the country between surplus and deficit districts and among different social groups. Domestic capacity for production of iodised salt rose spectacularly from 20 per cent in 2002 to more than 100 percent of national requirement in 2005. A Cambodia Nutrition Investment Plan, 2003-2007 (CNIP) is in place. RGC has activated Provincial Nutrition Coordination Committees in a number of provinces and commissioned the preparation of Provincial Action Plans on Food Security and Nutrition.

2.30   Forestry Reform has been ongoing in the past few years and has reached a critical stage where institutional strengthening and improvement in coordination among all, is a priority. In accordance with the policy for Strategic Forest Management Plans and Environmental and Social Impact Assessments (ESIA) on nearby communities, a broad consultation process with the communities has commenced. From 1999 to-date, forest concessions granted to 17 companies have been cancelled covering a total forest area of 3.5 million hectares in 24 locations. As of now there are only 12 concessionaries, covering a total area of 3.4 million hectares of forests, who are in the process of planning their operations. No new forestry concessions have been issued but small salvage operations and other works have continued in accordance with law.  In pursuing illegal logging operations, 1,469 illicit sawmill plants, 689 timber processing units, 39 medicine vine powder manufacturing units and such others were removed and destroyed and 441 offenders were apprehended and prosecuted. In June 2004, RGC issued an order to prevent, suppress and eliminate forest land clearing and encroachment and has established a National Committee and sub-national committees at the provincial level to implement the order. Additional regulatory instruments and guidelines have been issued to implement the 2002 Forestry Law. A new Independent Monitor to report on forestry crimes and policy implementation has taken over from the earlier one and the work continues. Pilot community initiatives in different parts of the country have commenced and nearly 110,000 hectares have been developed under community forestry arrangements.

2.31 Environment and Conservation are accorded high priority in RGC's efforts for sustainable development to benefit social and economic development of concerned communities. A draft law on Protected Areas is before the National Assembly. This law provides for procedures, guidelines, and regulatory tools for the administration and management of protected areas, protection of rights and traditions of ethnic minorities and creation of protected area communities to seek their participation in the sustainable management and use of natural resources, and use of bio-diversity. A National Biodiversity Action Plan has been adopted and a National Biodiversity Steering Committee has been set up. Wildlife population has shown evidence of increase in some areas. To adequately respond to the urgent needs of climate change, in particular droughts and floods, a draft National Adaptation Programme of Action to Climate Change has been prepared, containing priority actions needed to adapt to climate change in regard to agriculture, water resource management, coastal zone management and human health.

2.32  There are 23 protected areas established under law. Work on producing maps and demarcation of boundaries of 11 protected areas has been completed, boundary poles as markers have been erected and 110 km of roads within protected areas have been rehabilitated. Concerted efforts are being made to protect and conserve critical ecosystems such as the Cardamom Mountains Protected area, three core areas of the Tonle Sap Biosphere Reserve and others. Community engagement in bio-diversity conservation and livelihood development is being promoted in conservation projects, especially through establishment of 69 community-protected areas. A National Committee for Coastal Management has been set up to promote the involvement of provincial authorities and commune councils in coastal management. 30 coastal community-based organizations have been established, 54 ha of mangroves have been replanted and several mangrove species have been identified.

2.33  Water resources form a crucial component of the nation's environment and natural resource base. Cambodia's watercourses - especially those of the Tonle Sap system -- provide the basis for fisheries, irrigated agricultural production, domestic and industrial water supply, hydro-electric potential, and navigation. Even with abundant fresh water resources -- rivers, streams, lakes, and aquifers -- parts of Cambodia suffer from droughts affecting and destroying crops. Construction and improvement of irrigation facilities, flood protection dykes and sea protection dykes are therefore an important priority. Also, Cambodia's water resources are vulnerable to activities in other countries upstream of the Mekong River. A National Policy on Water Resources Management was adopted in January 2004 and a draft Law on Water Resources Management is being considered by the National Assembly.  In the past five years (2001-2005), the achievements have been: 315 irrigation systems for rice cultivation covering an area of 153,149 ha; flood control dykes that provide protection for an area of 113,500 ha; prevention dykes protecting 16,680 ha of cultivable land from sea water intrusion.

2.34  Rural Development is a major crosscutting issue, covering health, education, agriculture, water, sanitation and other sectors. It is central to poverty reduction since 85% of the people live in rural areas, which have high poverty incidence.  RGC has adopted a multi-pronged approach to foster rural development and empower local communities to plan and manage development of their communities. The decentralization and deconcentration of public services delivery, support for participatory decentralized, area-based programmes, and the provision of credit to households and small businesses are some of the highlights of these efforts.

2.35  Till 2005, apart from creating an inventory of all rural roads, rehabilitation or reconstruction work in rural areas included: 22,700 km of rural roads (of which 10,130 km with laterite surface); 3,043 bridges; 11,314 culverts; 44,919 point wells; 697 km of dykes; 584 km of canals; 1,995 reservoirs; 6,505 ponds; 1,874 class rooms; and 17 rural markets.

2.36  The Integrated Rural Accessibility Planning (IRAP) mechanism is meant to better identify priorities and develop proposals for infrastructure and support investment programmes in rural areas. It ranks communities according to their levels of access to basis minimum needs and services so that priority attention could be paid to them for rural development.

2.37 The rehabilitation or reconstruction of 22,700 kms of rural roads have helped many service providers to reach both rural and some remote areas, which now have better access to supplies, services and markets. They have also facilitated greater mobility. Many programs like SEILA have expanded their coverage, now extended to all provinces and communes. During 1998-2003, over 3,000 civil servants and 75,000 elected village representatives have been provided training in a variety of technical areas including participatory planning, financial management, contract administration, bidding and procurement, monitoring and evaluation. The Social Fund, established in 1994, has provided cost-effective assistance to meet demands of rural areas for a variety of schemes -- school buildings, irrigation, commune and district health centres, water wells, bridges and culverts, drainage and sewerage. During 1998-2003, 1,928 projects were approved out of 3,272 applications received. 90.8% of these were in rural areas (15.2% in post-conflict areas) and the rest in urban areas.

2.38  Expansion of low-interest rural credit to drive growth in rural areas has always been a priority. With RGC's encouragement and guidelines, there are now 15 Micro-Finance Institutions working in the rural areas along with 40 operators, specialized banks and the Rural Development Bank. Demand far exceeds supply and the issue of high interest rates is to be urgently addressed.

 Rehabilitation and Construction of Physical Infrastructure

2.39  The backbone to any sustainable development is physical infrastructure -- roads and bridges, railways, ports, electricity generation and network, irrigation, tele-communications, and so on.

2.40  In regard to roads and ports, the focus is on road network, rehabilitating and expanding the deep-sea port at Sihanoukville, and international airport facilities at Phnom Penh and Siem Reap. Priority attention has been paid to rehabilitation and upgrading of primary roads connecting neighbouring countries (Laos, Thailand and Vietnam), major arteries within the country and roads servicing remote rural areas, including bridges and ferry crossings.  

2.41  Between 1998 and 2004, out of a total of 4,695 kms of primary roads (connecting neighbouring countries, provincial capitals and ports) and 6,615 kms of secondary roads (connecting provincial headquarters to district headquarters), a total of 11,310 kms, about 2,100 kms were upgraded (paved); the Kizuna Mekong Bridge at Kampong Cham (February 2002) and Koh Kong bridge (2001) were completed and a number of important roads were reconstructed including rehabilitation of bridges. Many of the secondary roads connecting rural areas were also repaired. With limited resources, road maintenance has been a major priority.

2.42  Sihanoukville deep-sea port located 230 km south-west from Phnom Penh and handling nearly 70% of imports into Cambodia is being upgraded and the first stage is nearing completion (2005).  Not much progress could be made in rehabilitating railways or further upgrading river transport facilities though river transport between Phnom Penh and Siem Reap has improved considerably.

2.43  Private sector is being increasingly involved under BOT terms in creation and improvement of infrastructure. Notable examples are Koh Kong Bridge, National Highway 4, improvements to the Phnom Penh international airport and others.

2.44  Energy: Availability of assured, abundant, low-cost electricity is key to development of the country. High cost of electricity affects all productive sectors and hinders industrial investments and competitiveness. Attracting private sector investment and participation in the generation and distribution of electricity to key provincial and urban centres, rural areas, and putting in place power transmission grids to link Cambodia with neighbouring countries have therefore been high RGC priorities. Total electricity generation in Phnom Penh and provincial towns increased from 163.4 Gwh in 1993 to 759.7 Gwh in 2004. New power plants have been completed. Work is to be completed on several provincial towns' power rehabilitation works. Agreements have been signed and implemented with neighbouring countries to import power for use in border areas. In many district towns private operators provide local energy needs. RGC is also promoting development of cheaper, renewable, alternative energy sources, viz., solar energy (already installed in some areas), wind energy, biogas, and mini-hydro schemes. A very important new development is the discovery of oil and gas resources in some off-shore trial wells already drilled, raising hopes of an abundant source of supply in a few years to provide a boost to economic growth, in turn raising income levels and rapidly reducing poverty. The challenge is to plan well ahead to use this valuable resource, especially associated gas which otherwise traditionally goes waste.

2.45  Information and Communications: In the last five years, improvements in tele-communications have been phenomenal. At the end of 1998 the average tele-density was nationally 0.74 per 100 people and 2.17 in Phnom Penh. This rose to 5.57 and 44.70 respectively at the end of first half of 2005. Nearly 806,200 subscribers use services provided by MPTC and private telephone companies. Over 8,000 subscribers use internet services. However, the still high cost of telecommunications burdens the entire population as well as businesses. Starting from a non-reliable level, the postal services have expanded and are gaining increasing confidence of the public. In terms of keeping people updated about various developments and news, the national TV transmitter has been upgraded and quality of programmes continuously improved. Local TV stations also function in several provincial towns.

Private Sector Development and Employment Generation

2.46   Promotion of private sector as the main engine of economic growth has been the cornerstone of RGC's economic policy from inception and is reiterated in the Rectangular Strategy. The Cambodia Investment Board (CIB) of the Council for the Development of Cambodia (CDC) acts as the focal point to attract and clear private investments in Cambodia. A high level Government - Private Sector Forum was established in December 1999, supported by seven Business -Government Sectoral Working Groups. This process has been further strengthened and deepened by the formation, in August 2004, of a high level Steering Committee for Private Sector Development. This committee is charged with specific responsibilities, including proposing and implementing measures to improve the investment climate, trade facilitation and private sector development.

2.47  Private sector investment in Cambodia has embraced many sectors but most notably, garment industry, tourism and hospitality, construction, banking, aviation, forestry and plantations. As earlier noted, some BOT projects are also handled by the private sector. More recently, private sector has entered the tertiary education sector as well. Yet, flow of investments has been very slow into priority sectors, some with immense export potential and competitive advantages and others with high returns, identified by the government such as agriculture, agro-processing, infrastructure, etc.

Table 2.3:  GDP: Industry & Services

2.48  Almost entirely meant for the export market, garment industry (employing about 330,000 people, predominantly women), generated about 80% of total exports of Cambodia in 2004, rising from a mere US$ 26.2 million in 1995 to a staggering US$ 1,986 million in 2004. Belying many predictions that this would slow down in 2005 because of the multi-fibre agreement coming to an end, garment exports continue to grow at a surprisingly high rate. While this is welcome because of the industry's tremendous contribution to the economy and employment generation, dependence on one product alone could cause sudden ruptures; diversification of the industrial sector is therefore of great urgency.

2.49  The figures in Table 2.3 speak for themselves. Industrial output is growing very fast and is now contributing 28.6% of GDP in 2005, up from 13 % in 1993 and 21.8% in 2000, and set to grow further. Garment sector alone contributes nearly 16% of GDP in 2000.

2.50  Small and Medium Enterprises (SMEs) play a vital role in promoting economic development and creating sustainable employment and incomes closer to the people. They make up 99% of all enterprises and almost half of all employment in the private sector. RGC has adopted a comprehensive SME Development Framework for Cambodia and recently prepared an SME Development Programme. A special SME Secretariat has been set up to implement policies and programmes in this regard.

2.51  The Services sector also grew in absolute terms but its contribution to the GDP in percentage terms is stagnant or even declining. Tourism and related activities boosted the services sector and created a wide variety of employment through multiplier effect. Tourism arrivals into the country, mainly attracted by Siem Reap area, have been showing a steady and strong growth. Compared to 286,524 visitors in 1998, after the sharp decline due to internal events in 1997, the number rose to 466,365 in 2000, was 1.055 million in 2004 and might exceed 1.30 million in 2005, contributing an estimated US$ 600 million in earned foreign exchange. 

2.52  Among those economically active (excluding home-workers, students, income recipients, retired, invalids not working), unemployment rate is on the average low at less than 4% in aggregate terms in Cambodia but this statement masks a high level of underemployment. Of those employed, about 62% are in agriculture, forestry and fisheries (down from 75% in 1999); 9.6% in manufacturing (up from 4.7 in 1999); 13.9% in wholesale and retail trade.

2.53  To improve work conditions and ensure protection of workers' rights a Labour law is in force. Adherence to this law has improved labour conditions. The International Labour Organisation (ILO) of the United Nations, monitoring labour conditions in Cambodia, has declared that the garment and footwear industries in Cambodia are free of forced labour, child labour, or discrimination. RGC has established a Labour Advisory Committee and an Arbitration Council in accordance with the Labour Law. In inspections of over 5,500 enterprises, over 4,000 were found to be in violation of some aspects of the law; cautionary notices were issued to many and fines imposed on some. Over 500 enterprise level unions, 16 federations of trade unions and 1 confederation of trade unions with over 200,000 members were registered. Job seekers are also assisted with finding employment including overseas.

2.54  As part of social services, veterans and retired civil servants continue to receive monthly payments, which have been increased substantially. Victims of natural disasters like floods, drought or fire continue to receive aid. Rehabilitation, vocational training and reintegration assistance is provided to juvenile delinquents and disabled (169,000: of whom 60% are victims of war). After the adoption of Policy for the Elderly in 2003, 194 Elderly Associations have been formed in 12 provinces and cities. In regard to child protection, focus was on the establishment of Community-based Child Protection Network which has benefited many districts, communes and villages.

Capacity Building and Human Resource Development

2.55  This is the most important growth rectangle in the Rectangular Strategy as all development goals indeed converge towards enhancement of the human condition.

2.56  Education is a crucial factor in human development and closely contributes in myriad ways to poverty reduction, including by providing scope for better awareness to avail of opportunities for economic progress. This sector therefore is accorded high-priority in RGC's development agenda. The advances made so far portray a true success story for government's efforts along with full cooperation from EDPs through a SWAP process. In the last five years, an Education Strategic Plan (ESP), 2001-2005 has been developed and is operational to reform the education sector, improve quality of education and expand coverage. RGC's budget allocation to the sector, as part of the PAP scheme, has increased from 10% of total budget in 1997 to 19.5% in 2004 with 20% to be reached in 2005. Over 60% of the allocation is for basic education with an emphasis on pro-poor expenditures. However, there are continuing and persistent problems in regard to adequacy and timeliness in release of budgetary allocations, which need to be quickly overcome.

2.57  Net enrolment in primary schools and in secondary schools, as well as transition rates from primary to lower secondary level, and from lower secondary to upper secondary level have all shown varying degrees of improvement. The growth in girls enrolment in primary schools continues to outstrip that of boys (girls 27% and boys 22% since 1999), reducing the enrolment gender gap. Implementation of ESP is reducing poverty/education gap. However, while the numbers attending schools is an important factor, more attention is necessary to the quality of education as well such as student performance, dropout and repetition rates, pupil-teacher ratio, etc. 

2.58   For enhancing the standards for higher education, where private sector involvement is increasing, RGC has set up an Accreditation Committee to monitor quality of training and to ensure that graduates are capable and of sufficient quality to work for the socio-economic development of the country.

Table 2.4: Education Indicators

2.59   Health:  This sector plays a crucial part in poverty reduction. Absence of good health is both a cause and consequence of poverty. For various historic and other reasons, like inadequacy of capacity including trained manpower, Cambodia's vital health indices are quite low compared to its ASEAN neighbours. However, rapid advances have taken place and cooperation among all stakeholders is very high. Most indices are showing positive improvements in recent years and the CMDGs set for 2015 are likely to be surpassed or reached in some cases. Polio has been eradicated and domestic capacity for production of iodised salt exceeds national need. Still, the challenge remains to provide easier, and less costly, access to the poor and to bridge the continuing urban-rural as well as socio-economic groups divide. Better rural roads and higher pay for civil servants would mitigate some aspects.

2.60  Although significant progress has been achieved in the Health Sector, there is still a long distance to go to reach satisfactory levels of health status, particularly in regard to reduction in maternal mortality and infant mortality rates. The measures being put in place however augur well for the future. The total number of health centres with adequate capacity to provide minimum package of activities (MPA) increased from 386 in 1998 to 832 in 2004, and among a total of 69  referral hospitals (RH), 15 were providing complementary package of activities (CPA) in 2004. The success of disease control measures is demonstrated by: increase in cure/detection of tuberculosis; decrease in incidence and fatality rate of malaria, dengue fever, measles and cholera; and the eradication of poliomyelitis in 2000. The percentage of pregnant women with at least two antenatal care visits increased from 29% in 2002 to 47% in 2004. Still, some of the rates, although declining as shown in Table 2.5 below, continue to be among the highest in this region.  An emerging issue is increasing drug abuse among Cambodian youth in the last few years. To combat this problem, a National Authority for Combating Drugs (NACD) was established in 1995.

2.61  Spectacular decrease in prevalence of percentage of adults tested HIV positive has been achieved along with high levels of HIV/AIDS awareness thanks to the noteworthy synergy through high government commitment, large funds made available by EDPs and full cooperation among all EDPs involved in the field. In 2001, recognising the importance of a multisectoral decentralised response to the HIV epidemic, RGC established the National Aids Authority (NAA), to lead, coordinate and monitor the national response across ministries and all provinces. NAA represents Cambodia's adherence to the principle of three-ones and is responsible for developing and overseeing the implementation of Cambodia's national HIV strategies (2001-2005; 2006-2010). The challenges ahead are to maintain the level of progress and devise strategies to curb the spread of transmissions to families.

Table 2.5: Health Indicators
(Subject to update on receipt of fresh data from CDHS, 2005) 

2.62  The pilot programme to expand basic health services in 5 operational health districts (OD) in partnership with private sector (NGOs) through contract arrangements has been very successful, increasing provision of basic health services from two to three-fold, and reducing in some cases the health expenditure of poor households by 60-70 percent in 3 years (1998-2001). This programme has been expanded to cover 11 ODs in all by 2005. In terms of human resources for the sector, the numbers of students completing training in medical care increased from 109 in 1998 to 559 in 2003 and around 12,000 participants have attended in-service training in MPA.

2.63  The government's budget expenditure for health increased by 264% from 1998 to 2004. Much more needs to be done not only in actual allocations but ensuring that funds are released in time and used well. The needs are very high, since actual total expenditure is still low, excluding the substantial private sector or external partners' direct expenditure.

2.64  The Health Sector Strategic Plan (HSP) for 2003-2007 is being implemented in close cooperation with all external development partners engaged in this sector, adopting a Sector Wide Management (SWiM) approach. It is due for a mid-term review in 2006 when it will be extended to 2010 to coincide with the period of NDSP.

2.65  Gender Equity: A major concern is to bring about an equitable and stable gender balance (between men and women, boys and girls) in access to goods and services and in participation in, and receiving benefits from, the development process at all levels and on all sides -- workforce, policy and political levels, institutions, education, and health care. Gender imbalances are also at the root of poverty levels especially in women (widows) headed households. Gender concerns therefore permeate all actions of the country and are among the major crosscutting issues. Steady improvements have taken place for the past many years but far more still needs to be done with regard to gender mainstreaming and raising levels of consciousness in all spheres, and will be reflected under different sections in this document. Recently, a Domestic Violence Law has been passed. The draft Anti-Trafficking law, now before the National Assembly is expected to be passed in 2006.

2.66  Population: Educated, healthy and vibrant People are the assets, and creators of assets of any nation. People are therefore at the centre of all development efforts as both contributors and consumers. Good Governance provides the climate for people to grow and realize their full potential both for their own benefit and that of society and the country. The goal of Cambodia's National Population Policy is to induce changes in population trends so as to bring the size, composition and distribution of population in line with the needs of sustainable development for poverty alleviation and improvement in quality of life of all Cambodians, and to ensure universal access by all Cambodians to reproductive health services by 2015. Cambodia therefore attaches great importance to supporting the rights of all couples to decide freely and responsibly the number, spacing and timing of their children, and to have access to information, education services and the means to do so. A National Committee for Population and Development (NCPD) has been set up to implement the National Population Policy.

2.67  Cambodia's population suffered severe depletion during 1975-1979 but has been steadily growing since then due to reduction in death rates, increase in longevity, and decrease in infant, under-five and maternal mortality. Though some of these indicators are still high they have come down in the past five years significantly. Table 2.6 below indicates the significant increase in estimated average life expectancy at birth by 6 years for men and 9 years for women, reflecting advances in overall well-being. TFR registered a sizeable decline. And there was improvement towards gender balance, or number of males to females that had drastically declined in 1979 because of the genocidal regime.  A noteworthy feature is the increasing youth population. 60% of the population is now below 25 years of age, and 36.5% in the 10-24 year age group. Youth issues therefore constitute a key concern and challenge, particularly as youth unemployment and migration are rising and there are signs of increasing youth risk behaviour including drug abuse.

Table 2.6: Key Population Indicators

Conclusion

2.68  Various qualitative and quantitative data so far presented and discussed demonstrate how far Cambodia has progressed from below ground zero in 1979, fast tracked since the first mandate of the Royal Government since 1993, and more particularly in the last five years. RGC is committed to consolidate and build upon such significant progress, spectacular in some cases. With its own unwavering commitment along with all Cambodians working for the country, RGC is optimistic and confident that ambitious future goals to take the country forward could and will be achieved. NSDP is about the future of Cambodia as will be further discussed in the following chapters.

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