DONORS MEET WITH CAMBODIAN GOVERNMENT

TO DISCUSS CONCRETE STEPS TO REDUCE POVERTY

PHNOM PENH, June 21, 2002 — International donors commended the Cambodian Government on progress on the economy and on policy reforms but emphasized the importance of taking further concrete actions to reduce poverty and improve governance.

At the sixth annual meeting of the Consultative Group for Cambodia held June 19 to 21 in Phnom Penh, donors from 22 countries and seven international organizations met with key ministers to review progress on critical reforms over the past year, discuss benchmarks for performance in the coming year, and the need for improved implementation and enhanced partnership to achieve results.

“We need to work on further improvements in governance if we are to make more than a dent in poverty,” said Prime Minister Samdech Hun Sen in his keynote address to open the Consultative Group Meeting, which was held for the first time in the Cambodian capital. The Prime Minister also noted the need to move from strategy and laws to implementation and concrete results. “Indeed, policy reforms across sectors have constituted the substance of our development thrusts. Yet we also realize that while good policies do matter, their rigorous and consistent implementation remains vital.”

Donors complimented the Government on its progress on macroeconomic growth and fiscal stability. The Government estimates 2001 economic growth at 6.3 percent, boosted by robust garment exports and a booming tourist trade led by the country’s complex of monuments, Angkor.

“The macroeconomic growth that Cambodia is experiencing is vital for our efforts towards poverty reduction,” said Senior Minister Keat Chhon, Minister of Economy and Finance, who co-chaired the Consultative Group meeting. The Government and donors emphasized the need for private-sector led growth, the development of small and medium-sized enterprises (SMEs), and financial sector reform and development. In that context, participants emphasized the need for implementing a pro-poor trade strategy and improving the enabling environment for investment based on the recent experiences of the Integrated Framework and for preparation for Cambodia~ s accession to the WTO. Senior Minister Keat Chhon said that “going forward, we need to do more to improve the operating environment for the private sector, both domestic and foreign.”

“Ensuring the poor benefit from the substantial resources committed to development assistance in Cambodia is central,” said meeting co-chair Mr. Ian Porter, World Bank Country Director for Cambodia.

The Consultative Group noted the progress made on a series of 10 action items outlined in the Tokyo meeting last year. There have been commendable achievements in four of those areas: the Auditor-General has been appointed and the National Audit Authority has begun operating; the Land Law has been adopted; the Law on Investment has been submitted to the National Assembly as part of the effort to rationalize investment incentives; and the full-scale demobilization program has been launched.

In four additional areas, forestry, civil service reform, procurement, and budget allocations to the social sectors, there has been some positive progress, but significant gaps remain. And in the final two areas, on the Anti-Corruption Law and the finalization of an action plan for legal and judicial reform, donors were concerned about the slow pace of reform. They welcomed the recent establishment of the Legal and Judicial Reform Council but strongly urged that more progress needs to be achieved. Failure to do so would undermine investor confidence, erode human rights and the rule of law, and diminish the effectiveness of overseas aid.

Going forward, the Consultative Group highlighted the need to make strides on the following fronts: legal and judicial reform, anti-corruption, HIV/AIDS prevention, civil service reform, broadening of the government’s revenue base, sustainable management of forestry concessions, the legal framework for community-based management of natural resources, improved social sector allocations and disbursements, and procurement improvements. Specific benchmarks in each of these areas were prepared based on the efforts of the working groups. In addition, donors had substantive discussions on other key areas, including agriculture, food security, and gender, as well as increased support for SMEs, but agreed more work needed to be done to establish a set of specific, monitorable actions.

Many donors also emphasized the importance of strengthening the framework for free and fair National Assembly elections next year. Donors also expressed their concerns about human trafficking.

Donors focused attention on the overall issue of implementation and on the need to translate strategies, policy pronouncements, and the passage of laws and decrees into effective implementation which enhances the accessibility and quality of services and leads to real results in terms of poverty reduction and the achievement of the other Millennium Development Goals. This will require the development of additional benchmarks and the enhancement of monitoring and evaluation systems. Throughout the meeting, donors stressed the importance of strengthening development partnerships amongst Government, donors, civil society, and the private sector. It was agreed that a joint government-donor working group would be established to review measures to further enhance donor coordination and the effectiveness of external assistance.

Donors agreed that with significant progress on these fronts, Cambodia should be able to continue making the transition to sustainable development, with broad-based economic growth and significant poverty reduction. They also recognized the critical importance of continued support from the international donor community for the Government and people of Cambodia and, in that context, pledged US$635 million in assistance. However, donors emphasized that continued support will depend on accelerated and substantive progress on policy reforms, including urgent attention to issues of anti-corruption and legal and judicial reform.

The donors thanked the Government of Cambodia for hosting and organizing the meeting and welcomed the lively and candid exchange of views. It was agreed that the next Consultative Group meeting would be held in Phnom Penh at the end of 2003.

The Consultative Group meeting. hosted by the Government of Cambodia in Phnom Penh on June 19-21, 2002, was attended by the delegations from 22 countries and seven international organizations. It was co-chaired by Mr. Ian Porter, World Bank Country Director for Cambodia. and Senior Minister Mr. Keat Chhon. Minister of Economy and Finance, who led the Cambodian delegation. Countries and international organizations present were: Australia, Austria, Belgium. Canada, china, Denmark, Finland, France, Germany. India, Japan, Korea, Netherlands, New Zealand, Norway, Russia. Singapore. Spain, Sweden, Thailand, United Kingdom, United States, Asian Development Bank (ADB), European Commission (EC), International Federation of Red Cross and Red Crescent Societies (IFRC). International Monetary Fund (IMF), United Nations Development System (UNDS). the World Bank, and  World Trade Organization (WTO). NGO and private sector representatives also attended the meeting along with observers from the Organization of Economic cooperation and Development (OECD).

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