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The World Bank in Cambodia: Reducing Poverty by Addressing Governance Challenges

The World Bank in Cambodia: Reducing Poverty by Addressing Governance Challenges. Nisha Agrawal, Country Manager, Cambodia Background Material for the Core Course on Public Sector Governance and Anti-Corruption Washington DC, April 23-26, 2007. Overview of Presentation.

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The World Bank in Cambodia: Reducing Poverty by Addressing Governance Challenges

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  1. The World Bank in Cambodia: Reducing Poverty by Addressing Governance Challenges Nisha Agrawal, Country Manager, Cambodia Background Material for the Core Course on Public Sector Governance and Anti-Corruption Washington DC, April 23-26, 2007

  2. Overview of Presentation • What is our mission? • Why a Governance CAS? • What is a Governance CAS--The World Bank’s CAS for Cambodia (2005-2008)

  3. Our Vision: A Cambodia Free of Poverty • Eradicate poverty and hunger (35% still poor) • Achieve universal primary education • Reach gender equality and empower women • Reduce child mortality • Improve maternal health • Combat HIV/AIDs, malaria and other diseases • Ensure environmental sustainability • De-mining, UXO and Victim Assistance

  4. Cambodia: The Country Context • A decade of high growth (7% per annum) • Moderate progress in poverty reduction (poverty levels declined from 47 percent to 35 percent during the last decade) • Still one of the poorest countries in the world with a per capita income of $430 per annum • Many institutions of governance were destroyed during the last three decades of conflict and need to be rebuilt

  5. Analytical work pointed to governance being the main constraint to poverty reduction • Investment Climate Assessment (ICA)-- documented the high cost of doing business (2004-2005) • Poverty Assessment –highlighted modest progress in poverty reduction during the last decade but together with sharply rising inequality (2006) • Integrated Fiduciary Assessment and PER (IFAPER) --identified need for critical public financial management reforms (2003) • Cambodia at the Cross Roads—found that accountability mechanisms were weak and needed to be strengthened (2004)

  6. High cost of doing business drives away investments and jobs

  7. Pattern of growth leading to rising inequality and slower poverty reduction Figure 1: Over the last ten years, living standards amongst the richest fifth of the population have risen by 45 percent—compared to 8 percent amongst the poorest fifth real average p.c. consumption (riels p.c. per day) within the geographically comparable sample

  8. Poor public financial management leading to poor service delivery • Revenues are inadequate (about 10% of GDP), well below the average for low income countries (16%) • Fiduciary risks to public funds are high due to weaknesses in budget formulation, execution and reporting • Public procurement remains a principal source of corruption • An underpaid and patronage based civil service is a recipe for high corruption

  9. CPIA Ratings sum up assessment--Cambodia lags its peers on governance indicators

  10. Weak Governance confirmed by a number of global indicators • “Governance Matters V: Governance Indicators for 1996-2005” (Kaufmann, Kraay and Mastruzzi, 2006) (data for 213 countries and territories); Cambodia ranks very low on all 6 dimensions of governance • “Doing Business” (2007): Cambodia ranked 143 out of 175 countries in ease of doing business • Transparency International (2006): Cambodia ranked 151 out of 163 countries on the TI Corruption Perceptions Index 2006

  11. WB Country Assistance Strategy (CAS) Designed to tackle governance at 3 Levels • At the Country Level--Build back the institutions of governance that were destroyed by three decades of conflict • At the Project Level--Protect the funds that we deliver through our projects • At the Global Level--Work with other partners—donors, civil society and the private sector--to address governance challenges

  12. I. At the Country Level in Cambodia—focus on 5 themes • Promote private sector development by reducing the costs of doing business • Strengthen public financial management (including management of oil revenues in the future) • Improve natural resources management (securing property rights to land and access to forests) • Support decentralization and strengthen local governance • Promote a stronger demand for good governance by increasing citizens’ voice and participation in the policy making process

  13. Why these five areas • High importance for growth and poverty reduction • Ownership and leadership on the government side • Comparative advantage/historical engagement/role of other donors/selectivity and division of labor

  14. Align all Our instruments to Get Results: Example from PSD • Undertook an Investment Climate Assessment (ICA) that highlighted the need to implement reforms, especially in the area of trade facilitation (customs, inspection agencies) (2004) • Reached agreement with Government on 12-point program of reform (2004) • Designed a Trade Facilitation and Investment Climate Project ($10 m grant) to help implement the reform program (2005-2010) • Supported the policy reforms through the Poverty Reduction Support Operation (PRSO) (2007-09) • Started a new ICA to monitor results, identify new issues and design future projects (2007)

  15. Align All Our Instruments to Get Results: Example from PFM • Undertook a Integrated Fiduciary Assessment and Public Expenditure Review (IFAPER) to identify weaknesses in public financial management and highlight the need for systemic reforms (2003) • Worked with Government to design a 10-12 year program of reform to bring Cambodia up to regional standards (2004) • Coordinated 11 donors to provide support to the reform program through the Public Financial Management and Accountability Project ($14m grant from WB; more from other partners) • Supported the policy reforms through the Poverty Reduction Support Operation (PRSO) (FY07-09) • Will undertake a new IFAPER to monitor results, identify new issues and design future projects (2008)

  16. Results: Cambodia is reforming gradually and showing improvements in governance

  17. II. At the Project Level—Reducing Fiduciary Risks • While governance is a long-term challenge, need to take immediate measures to protect our project funds in the short-term • As part of the preparation for the CAS, the World Bank (together with INT) undertook a “Fiduciary Review”(FR) – a study to understand weaknesses in the underlying fiduciary systems that were leading to leakages in our projects • The FR was only the third of its kind in the world (done proactively) and the only one done in collaboration with the Government (separate presentation follows on this) • Findings of the FR were publicized and raised awareness on issues of corruption in WB-funded projects

  18. III. Partnerships with other donors are essential to take forward the governance agenda • At the last Consultative Group (CG) Meeting in March 2006 held in Phnom Penh, “traditional” donors pledged $600 m to help reduce poverty in Cambodia; a week later, China pledged another $600 million on its own • The Bank is a relatively small financial player—we provide $40-50 m per annum—and cannot tackle governance and corruption challenges alone • We decided to do a joint CAS with ADB, DFID and UN system and to put governance at the heart of the joint CAS

  19. Joint CAS with the ADB-DFID-UN System • The Cambodia CAS was the first joint CAS in the world • Different donors had been giving very different messages about the governance challenges facing Cambodia • Took one year of intensive work to understand differences in perspective and to reach a shared perspective • The analytical section of the four CASes is now identical and gives a common message on the governance challenges facing Cambodia • Common donor assistance strategy and program to support the next NSDP 2010-2015 (??)

  20. Reinforcing messages at the country and global levels • Maintain quadripartite relationship in country formally (joint annual retreats) and informally (monthly lunches) • Follow up at the HQ levels with regular (annual) visits to ADB HQ and DFID HQ • Also have a parallel partnership between ADB, Japan and WB—built through in-country retreats and tripartite annual meetings in Tokyo • Visits to other key donor capitals to keep all partners on-message

  21. Using the Bank’s convening power to keep the spotlight on governance • As the co-chair of the CG Meeting, the Bank plays a major role in helping the Government and donors put in place mechanisms to prioritize the reform program and put governance and corruption issues at the center of our dialogue • At the CG meeting, a set of Joint Monitoring Indicators (JMIs) are adopted in a number of governance areas that set the benchmarks for reforms for the coming years • The JMIs are agreed, monitored, and implemented by 18 joint government-donor-NGO-private sector Technical Working Groups (TWG) • Progress is also monitored—and challenges addressed—through the higher level quarterly meetings of the Government-donor Coordination Committee (GDCC)

  22. Partnerships with Civil Society and Communities to build a stronger demand for good governance • Bank has worked traditionally more on the supply of good governance rather than the demand side, but this is changing • Demand for Good Governance Project (FY08) to strengthen state and non-state institutions of accountability (media, labor unions, Ombudsman office, dissemination of laws, establishing grievance mechanisms) • Grant of $2 million from LICUS TF (FY07) to build capacity of civil society on social accountability • Empowerment of the Poor in Siem Riep Project (FY08) to promote poor people’sorganizations (farmers’ organizations, microfinance groups etc) and link them better to the tourism sector and other sources of growth

  23. WB Group Partnerships with the Private Sector • IFC coordinates the Private Sector Forum and its working groups that facilitate dialogue between the Government and the private sector • Mekong Project Development Facility (MPDF) providing policy advice and TA at provincial levels and to SMEs • WB leads policy dialogue between Government and donors –in which the private sector participates--on PSD issues through the technical working groups • WB also beginning dialogue with private sector on their role as partners with the Bank in fighting corruption

  24. Lessons from the Design and Implementation of the Cambodia CAS • Leadership and ownership matter--Need to find and back the champions of reform • Long-term agenda requires focus and selectivity • Also requires patience and perseverance—need to think of 10-15 year horizons • Cannot do it alone--Requires strong investments in partnerships with all other stakeholders • Requires careful monitoring of results to know if strategy on track • Tangible results and progress and success possible and visible, even in the short-term

  25. Thank you for your attention

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