FIRST CAMBODIA DEVELOPMENT COOPERATION FORUM, JUNE 20 2007
Observations from the lead DP Coordinator – draft

Thanks

On behalf of EDPs I would like to thank and congratulate our hosts for the extremely good organization of this first Cambodia Development Cooperation Forum. The efficiency with which the CDCF has been run speaks to increasing capacity of RGC to assert national ownership of the development agenda and dialogue with its partners.

CDCF as a forum for genuine dialogue

Many have noted that the Forum has provided an opportunity for a genuine dialogue between the Royal Government and its development partners, with a frank and open exchange of views.
Building on and reinforcing ongoing regular discussion, there has been considerable synergy and convergence between speakers. Indeed, my colleague from the IMF noted that the Government was so responsive that their presentation anticipated and answered most of the questions the Fund had prepared.
On other issues, a clear consensus on fundamental concerns and objectives exists between the Government and its partners, even if there continue to be differences of opinion on the path or pace by which reform should proceed towards those objectives.

Summary of progress and challenges in the last 15 months

This Forum, and the discussions which preceded it, have provided an opportunity to take stock of progress made since we last met15 months ago.

Growth has continued at a very high level (10.8 percent in 2006, and a projected 9 percent in 2007), while inflation has remained low and revenues have grown significantly.
Information from the 2005 Demographic and Health Survey shows marked progress in health outcomes since 2000. Child mortality rates, for example, have fallen by a third; HIV prevalence is now at or below 1 percent.
Around two-thirds of the Joint Monitoring Indicators (JMIs) agreed at the CG meeting in March 2006 have been met either fully (e.g., public financial management reform, strengthening of aid harmonization and alignment) or almost fully (e.g. infrastructure, human development, or private sector development).
However, a number of reforms have shown only very minor progress since March 2006, and have fallen short of JMI targets. Notable amongst these are governance reforms and management of economic land concessions. On the anti-corruption law, whilst there is clearly a lack of consensus regarding a realistic timetable for completion, we welcome both the dialogue that has been possible during the CDCF, and the direction from the Prime Minister that this discussion should continue through direct meetings over the coming months.

Key achievements over the last 2 days

Apart from taking stock of progress over the last year, the CDCF has also provided opportunities for high-level dialogue on key issues of development strategy. On some key issues, these discussions have moved us closer to agreement.

The Prime Minister highlighted the importance of public sector pay for civil service reform, and noted the early success achieved with the Merit-Based Pay Initiative (MBPI) in the Ministry of Economy and Finance. We fully share the Prime Minister’s assessment; and we appreciate his proposal that CAR and the development partners to work together to reach consensus on the framework for salary reform, and to expand the coverage of the MBPI.
Development partners share the Government’s concerns that land is managed fairly and efficiently for sustainable growth and poverty reduction. We are very encouraged to hear that five economic land concessions have had been cancelled for failing to implement the contracts signed with the Government. We welcome the news that a joint Ministerial review will now resolve how much of the land recovered will be allocated to genuinely poor landless households through social land concessions.
The development partners appreciate the Government’s concern to maximize the long-term benefits it obtains from oil and gas. The decision to embed the taxation regime for oil within the Law on Taxation is a welcome move. However, we do not see any contradiction between working to this end, and working to ensure that the resulting revenue flow is then used well for national development.

A number of other initiatives on macroeconomic and private sector development policy were also described, and welcomed by partners. These include:

a report on the status of the draft Law on Concessions, currently before the National Assembly;
good progress on the Customs Law; and
a commitment to avoid Government borrowing on non-concessional terms, even though the recent acquisition of sovereign credit ratings opens up this possibility.

Building on discussion during and prior to the Forum, the CDCF formally endorsed a new set of JMIs agreed for completion before the second CDCF in December 2008. Government and development partners agree on the need for Government ownership of and commitment to the agreed reform actions; even if, inevitably, there has been some frank discussion in the process of formulating these joint monitoring indicators.

Aid effectiveness

The CDCF has also provided a useful opportunity for open and informed discussion about what we, as Cambodia’s development partners, could do better.

We congratulate CDC on the production of the 2007 Aid effectiveness report. This provides an impressive indicator of the Government’s growing capacity to monitor aid flows and lead debates on harmonization and alignment. Participants expressed the hope that in future better data from donors—including the emerging donors—will enable additional RGC-led analysis, and provide a still stronger basis for evidence-based recommendations regarding aid policy and management. The development partners look forward to working with CDC on the forthcoming study on technical cooperation.
Encouragingly, the Aid Effectiveness Report concludes that there has been progress in donor behaviour, although active dialogue and participation has yet to be reflected in better aid practices. There was agreement with the Report’s conclusions that what is required now is not new initiatives, but implementation of existing commitments that define Cambodia’s comprehensive harmonization and alignment agenda. In particular, Government and partners agreed with the principle that there should be a concerted effort to move from project-based to sector-wide approaches to development cooperation, while acknowledging that the pace of this transition will vary between sectors.