Chapter II


7.     Since the 7th Consultative Group Meeting held in Phnom Penh on 6-7 December 2004, the Royal Government of Cambodia (RGC) has made significant progress in moving forward to implement the Rectangular Strategy for its current mandate to reduce poverty and to achieve Cambodia’s Millennium Development Goals.

Major Achievements

  1.  Overview
  2.  Macroeconomic Performance
  3.  Monetary and Fiscal Performance
  4.  Government’s Policy Performance

In all its actions and endeavors, the RGC has put forth its best effort to implement the recommendations made at the last CG meeting. A single National Strategic Development Plan (NSDP) for the years 2006-2010 has been prepared in close consultation with all development partners and the civil society to implement the policies outlined in the Rectangular Strategy. A Public Investment Program for 2006-2008 has been prepared to support the implementation of the NSDP. Both of these documents were approved by the Royal Government at a Cabinet meeting on 27 January 2006. The Royal Government urges all development partners (multilateral, international development cooperation partners, private sector, and NGOs) to ensure that their country assistance strategies are aligned with the priorities outlined in the NSDP and their development programs and projects are aligned with the PIP.

8.      Since 1993, overall economic performance has been quite impressive. Between 1993 and 2004, real GDP (in 2000 prices) has grown at an average annual rate of 7.1 percent, and the preliminary estimate indicates that it grew by 7 percent in 2005. There has also been a sharp and noteworthy reduction in poverty levels. The results of the 2004 Cambodia Socio-Economic Survey show that in 56 percent of the rural villages accounting for 65 percent of the rural population and urban areas that were included in same survey in both 1993 and 2004 -- the number of persons living below poverty line declined from an estimated 39 percent to 28 percent or by over 28 percent. The 1993 survey did not cover areas that were inaccessible due to prevailing security conditions.

9.      In a recent study on "Cambodia Poverty Assessment 2005", prepared by the World Bank, an attempt was made to develop an estimate of the poverty level in 1993 for the whole country by making backward projections based on data from the 1993 and subsequent surveys. Based on these backward extrapolations the study estimated the proportion of the population living below the poverty line in 1993 to be 47 percent. Based on this estimate of the poverty level in 1993, the study concluded that population living below the poverty line has declined from 47 percent in 1993 to 35 percent in 2004. It found that, "as average household consumption has risen, Cambodians now have more productive assets and consumer durables and live in better houses. The improvement in living standards has been experienced by the poorest quintile (that is, the poorest 20 percent of the population) as well as the richest quintile -- albeit to a much lesser degree. Similarly, poverty has fallen in the countryside as well as the towns, although the fall has been far greater, and the level of poverty is now far lower, in the towns".

10.     The maintenance of political stability and security in the country is vital to maintain the momentum of Cambodia's march toward improving the living standards of the people, better respect for human rights and sustainable development. For the Royal Government, the most formidable development challenge is the reduction of poverty and improving the livelihoods and quality of life of the growing Cambodian population. Notwithstanding the significant progress that has been made over the last decade, further reduction in poverty levels, in particular in rural areas, and the improvement of the livelihoods and quality of life of a growing population remain a very high priority of the Royal Government. Accelerated development of the agriculture sector that supports the livelihood of more than three-quarters of the work force is a very high priority of the Royal Government. Sustainable economic growth, poverty reduction, and Cambodia’s Millennium Development Goals can not be achieved without a significant improvement in the productivity and diversification of the agriculture sector. Formulation and implementation of the strategy for the development of agriculture and water sectors, as rapidly as possible, is a high priority of the Royal Government. Concerned ministries and development partners now need to give a high priority to completing this task. The Royal Government considers poverty to be a waste of valuable economic resources which is not only morally unacceptable but can also result in social polarization and instability.

11.    The development vision of the Royal Government of Cambodia is to have a socially cohesive, educationally advanced and culturally vibrant Cambodia without poverty, illiteracy and disease.  Realizing this vision will require continued adherence to the values of social justice, human welfare and empowerment of the people and the formulation and implementation of policies to reduce poverty by promoting sustainable economic growth and better governance.

12.    A major development in 2005 that will provide further support to maintain the momentum of economic growth that has been achieved so far is the discovery of oil in the Gulf of Thailand in January 2005. The Royal Government awarded a contract covering an area of 6,278 square kilometers offshore (Cambodia Block A) to a consortium of Chevron Oversea Petroleum (Cambodia) Limited holding 55 percent of the interest, as an operator with Moeco Cambodia Co. Limited, a subsidiary of Mitsul Oil Exploration Co. Limited, and LG Caltex having 30 percent and 15 percent interest, respectively. In January 2005, Chevron announced that its affiliates have discovered oil in four exploration wells. The preliminary results of exploration wells are promising. Chevron plans to drill 10 more wells in 2006. At present, expectations are that production of oil from these wells could begin as early as end of this decade.

13.    The Royal Government is also pleased that under the Multilateral Relief Initiative, the IMF Executive Board made a decision to provide debt relief to Cambodia at its meeting in December 2005. As part of this initiative, the IMF will cancel 100 percent of  Cambodia's borrowing from the IMF up to 1 January 2005 that total US$ 82 million. The Royal Government's sound track record of prudent management of the economy was an important contributing factor in IMF's decision.

14.    The Royal Government is also pleased to report that another milestone in deepening the process of democratization was reached with the free and fair elections of the Senate on 22 January 2006 that were conducted using domestic resources and Cambodian nationals. There were no debates about budgets or the use of foreign experts.

15.     The limited capacities of the legal and judicial system are well known. In spite of these limitations significant progress has been made in drafting the needed Laws in 2005. A total of 45 Laws were approved by the National Assembly in 2005, as compared to a total of 90 Laws over five years from 1993 to 1998. In addition, other Laws have also been submitted to the National Assembly during 2005 that have not yet been approved by the National Assembly. Cambodia's accession to the WTO, in October 2004, requires work on amending existing or the drafting of more than 40 Laws. The Royal Government would like to urge all parties to be realistic in setting time frames for the completion of work on the drafting of Laws taking into consideration the existing capacities of concerned institutions and available resources as well as the complexities of the processes in securing approval of proposed draft Laws at the various levels of the Executive and Legislative branches.

16.     After extensive consultations with development partners in 2003 and 2004, a new government-donors coordination mechanism was put in place in 2005. This new mechanism includes: (i) 18 sector/thematic Joint (government and donor) Technical Working Groups (TWGs); and (ii) a high level Government-Donor Coordination Committee (GDCC) to ensure coordination among the 18 joint TWGs, and to provide policy guidance, to set priorities, and to propose measures to solve problems raised by joint TWGs. At the Pre-CG Meeting held on 10 September 2004, Samdech Hun Sen, the Prime Minister endorsed this proposal and appointed H.E. Keat Chhon, Senior Minister, Minister of Economy and Finance to be the Chair of GDCC. The quarterly meetings of GDCC in 2005 have provided an opportunity to both sides to regularly review progress and be informed about constraints that are being experienced, and enabled them to take necessary actions. More details on this new mechanism are presented in Section 4. The joint TWGs and the GDCC mechanism that has been put in place in 2005 represents a fundamental change in the institutional set up for planning, managing and monitoring progress on the implementation of development assistance to improve ODA effectiveness. Ensuring that this mechanism contributes to improving the process of ODA mobilization, allocation and utilization leading to improved aid effectiveness is a very high priority of the Government.

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