CDC - UNITED KINGDOM BRIEF

CAMBODIA CONSULTATIVE GROUP MEETING, 19-21 JUNE 2002-06-16 UNITED KINGDOM BRIEF

Objectives • Ensure that the Royal Government of Cambodia (RGC) is held to account for progress against the action points agreed at the last CG; • to promote aid effectiveness, including by focusing attention on and commitment by the RGC and donors to the PRSP process; and • to give momentum to action to address governance concerns, particularly corruption, inter alia by action against illegal logging. General Issues • Overall disappointing progress against the action points agreed at the 2001 CG [as set out in EU Development Counsellors’ paper], with only four of ten actions done and at best modest progress in areas judged as “partially done”. • The work undertaken by line ministries as part of the PRSP process, and the contribution by the Donor Working Groups in developing progress benchmarks, will be important to measure progress against the development agenda as a whole. • But demonstrable limits on RGC’s capacity and perhaps willingness to make progress reinforce need for prioritisation. Pattern of increased donor support should not be regarded as a given. We need to see that Government is doing its part. Hence a commitment by the RGC to meeting key specified benchmarks against which progress can be measured will be essential if the CG is to be seen to have made any difference. Session I: Macro/Fiscal Setting Overview • Robust economic growth with low inflation over the last three years has yet to make a discernible impact on poverty reduction in Cambodia. The lack of progress on reforms to the public financial system and to the way public financial resources are managed are important explanatory factors. Budget allocations for priority social sectors have shown a steady increase, but actual disbursements to these sectors still fall well short of original allocations. • Cash and budget management reforms are urgently needed to ensure more efficient and regular disbursement of funds to line ministries and provinces. • Implementing urgently required treasury reforms, i.e. ensuring that all government expenditure and revenue accounts are consolidated under one single Government account, would also demonstrate the RGC’s commitment to a transparent and fully accountable public financial system. Session II: The Poverty Reduction Strategy and its Implementation • The PRSP should be Government owned and written, with participation between and within Ministries, and with Civil Society. The aim is to use this to improve Government — donor — civil society partnership and hence the effectiveness of aid and its delivery with Government policy as set out in the SEDP-II. Over the longer term we support the merger of these planning processes. • The quality of participation should determine how the strategy is judged. As recognised on p.8 of the NGO statement, it must go beyond NGOs, which makes it all the more important that the process is not rushed or driven by an artificial October deadline. • Much poverty measurement has already been undertaken. The resulting poverty analysis should be related to agreed development targets/indicators within the Millennium Development Goals framework. Targets should be clear, and challenging but achievable. • The PRSP should be linked to a medium term expenditure framework at least covering broad budget allocations. There should be a focus on the delivery of services to poor people and to ensuring that economic growth is extended to rural areas. • Welcome progress made on developing an education strategy and work underway in health. This work should be reflected in the PRSP. It is essential that future investments, not least in infrastructure, are made in accordance with these strategies and take into account operations and maintenance costs, including staffing. Welcome the innovative approaches of the Ministry of Health, including in contracting out basic health services in some of the poorest areas. • HIV/AIDS is an example of a cross-cutting issue that needs to be embedded in the PRSP also. RGC deserves credit for the progress made in prevention. The National AIDS Authority, as a multisectoral body, should be under senior level leadership (eg: Council of Ministers) rather than under a sectoral ministry. • Effective and transparent monitoring will be key to ensuring that the PRSP is a living instrument. We welcome the work undertaken by the various Donor Working Groups in conjunction with line Ministries to develop benchmarks for progress as a contribution to this effort. lntersectoral working will be essential. Trade • Trade issues should be mainstreamed and the impact of trade reforms on poverty should be taken into account. In pursuing the objective of WTO accession the Government should carefully assess the potential direct impact of trade policy reforms on poor groups through price changes to liberalised goods and services. • Trade liberalisation, and WTO membership, will only enhance economic growth prospects if the RGC implements complementary policies that improve the overall environment for private investment. An appropriate legal framework, accountability and transparency, and ensuring the rule of law will be critical to achieving a favourable investment climate, but without implementing policies that improve the capacity of poor people to participate in trading activities, e.g. improving the health and education status of poor people, developing rural credit markets and rural infrastructure, it is unlikely that trade liberalisation will result in poverty reduction. It will therefore be important for Government to attach equal weight to these complementary policy needs when incorporating its pro-poor trade strategy into the PRSP. Session III: Review of Governance-Implementation and Links to Poverty Reduction Civil Service Reform and the Governance Action Plan (GAP) • Progress in implementing the GAP has been disappointing. The RGC needs to set clear priorities for action, incorporated into the PRSP. • There is a need to fast track salary reforms and agree these with MoEF. The creation of Priority Mission Groups is at best an interim measure. • Good indicators have been set but now is the time to make progress. • Concrete action is needed to tackle corruption (cf: forestry and land). The passage of an anti-corruption law is still awaited. Simple indicators of corruption could be developed for inclusion in the PRSP. We welcome signs that the National Audit Authority has begun to implement its mandate and urge that its reports be made public. • We urge the Government to endorse the ADB/OECD Anti-Corruption Initiative for Asia-Pacific. • Action on procurement, including moving from monopoly procurement and contracting out of procurement services would be a significant sign of RGC commitment in this area. The introduction of independent audits of Government procurement by a specialist agency would be an important related step. Legal and Judicial Reform • There has been no progress in Judicial and Legal Reform since the last CG. We await a clear strategy and action plan for making progress. The recent establishment of the Council for Legal and Judicial Reform is a positive step but needs to be followed through with action. • Promotion of the rule of law through enforcement and the establishment of an impartial legal system, as well as action to reduce corruption, will be essential for the establishment of a just society. They are also important if the private sector is to flourish as well as to attract external investment, for which the scope of measures to be taken go beyond simply those required for WTO accession. • Relatively straightforward measures, such as streamlining the processes of obtaining permissions and licences, can be taken to reduce the opportunities for corruption. Session IV: Natural Resources Management — Environmental Sustainability for Poverty Reduction • We support and endorse the Working Group Statement on Natural Resource Management. • Performance on forestry has been disappointing. There is evidence that logging is continuing. The criteria for sustainable forest concession management plans have not been made clear. We welcome the appointment of Forest Resource Management, an international consulting firm, to assist with the formulation of criteria and indicators for evaluating forest management plans. Public disclosure of the criteria and indicators, and of the management plans, would help to ensure a transparent approval process. • Investigations against GAT and other forest concessionaires reported to have engaged in illegal logging should be pursued and the concessions cancelled immediately should these cases be proven. Of royalties expected from already felled logs, only a small percentage has reportedly been collected. These are relevant to both the IMF PRGF and World Bank SAC. • We endorse the work being undertaken by the NR Working Group to develop performance indicators and benchmark scorecard indicators in preparation for the 2002 CG, and trust that they will form an objective framework for assessing progress. • Access by poor communities who depend on them to resin trees should be ensured, along with enforcement of the Prime Minister’s commitment to ban resin tree felling. • The continuing problem of land grabbing makes the firm and impartial implementation of the new land law all the more important. NGO statement on land reform (pp. 46-47) is a positive contribution to the process of lend reform. Social and Environmental Impact Assessments should be undertaken in full consultation with the primary stakeholders and civil society prior to agricultural concessions being approved. • Legislative coherence between forest, fisheries and land sectors is necessary to prevent discretionary application of the laws and to provide the necessary protection for poor communities. For example, on resin trees, many are cut in preparation for plantation development (covered by the land rather than forestry law). Session V: Decentralisation and Partnerships and Aid Coordination Decentralisation • The commune elections were a positive step forward and local government bodies have the potential to provide much-needed services to rural communities. Government needs to ensure, however, that councils receive appropriate investment funds and do so in a timely way. • Council regulations currently being designed need to be feasible for local implementation. Similarly, the Ministry of Interior should take advantage of the forthcoming CDRI policy research on the reforms, in order to ensure that lessons are learned and systems are strengthened appropriately. Partnerships • The overall donor effort remains fragmented and poorly coordinated. The Donor Working Groups are of variable quality with limited RGC representation and little participation. Government needs to take a stronger lead in promoting a more coherent development framework. The PRSP has an important role to play in this. • The practical experience gained through development of sectoral approaches in health and education should be built on. Hope that donors will work in support of the finalised health and education sector strategies. • Improvements in the transparency and accountability of Government systems will also be important if donors are to adopt more programmatic approaches, particularly if they are to provide support through government systems. Session VI: External Financing Requirements and Pledging Session • UK provided around £6.3 million (US$ 8.9 million) in the period April 2001 to March 2002. In line with the DFID Country Strategy Paper published in 2000, we expect to increase our spending in Cambodia to around £7.2 million (US$ 10.1 million) in 2002/03. Key areas of support are the Seila programme, health, HIV/AIDS and fiscal governance. • Reflects Cambodia’s status as a poor country recovering from years of conflict. The RGC’s achievement in effecting a transition from post-conflict status to a more conventional development situation is not inconsiderable. The holding of commune elections marked an important forward step. • But two years on and little progress in many key areas which need to be addressed if Cambodia is to lift its population out of poverty let alone catch up with its ASEAN neighbors. • The Government’s success in attracting increasing levels of donor support should not be taken for granted. Nor will such support have any sustainable impact without commensurate commitment on the part of the Government to its own development. Inadequate donor funding or lack of capacity are not acceptable excuses, even if they may in some instances be contributing factors, for lack of progress. Government can do much more to improve revenues (e.g.:collection of royalties on felled logs and taxing of casino earnings) and the quantity, quality, and targeting of its own expenditure.