3.  Trends in Development Cooperation

In keeping with the evidence-based theme of this report, this chapter highlights some of the main trends in the provision of development assistance in the period 2006-2008 and also looks forward to 2009 and 2010 (although the data for this latter period is only illustrative). It then combines this data with other analytical work before considering the implications for aid management policy and the H-A-R Action Plan in the context of the Rectangular Strategy and the NSDP.

The application of aid analysis to the overarching development frameworks is particularly necessary at this time as the Rectangular Strategy (phase II) articulates evolving national priorities and the NSDP Mid-Term Review reflects on progress achieved so far. This provides an opportunity for Government and development partners to make any adjustments that are necessary either in the policy framework or to resource programming.

Phase II of the Rectangular Strategy
The second phase of the Rectangular Strategy continues to emphasise peace and stability but also recognises the need to lay the foundations for longer-term sustainable growth at a target rate of 7%. This is intended to support a continued fall in the poverty rate of one percentage point per year and to build on improvements in the social sectors, especially health, education and gender equity. The overall framework of priorities can be summarised as:

• Good governance – anti-corruption; reforms in the legal and judicial sector, public administration, decentralisation and deconcentration, and of the armed forces

• Enabling environment – peace, stability and order; global integration, partnerships with the private sector, civil society and development partners; a favourable macro-economic environment

• Economic growth – promotion of agriculture, physical infrastructure, private sector expansion; and capacity development and human resource management

NSDP Mid-Term Review
The progress and challenges recorded since early 2006 provide a 'practical blueprint' with which to locate the Rectangular Strategy priorities in a more detailed policy framework. The NSDP review includes an up-dated costing table, for example, which reflects the food security and rural growth priority.

Table Three.  NSDP Allocations 2006 – 2010 (USD million)

Source: NSDP 2006 Table 5.2 and NSDP MTR 2008 Table 4.3 (derived)

Other priorities identified to facilitate the achievement of the Rectangular Strategy goals are summarised as:

• Maintaining macro-economic stability in light of global turbulence and ensuring that safety nets are available for those affected by food insecurity

• Enhanced planning and budgeting to ensure optimum resource allocation and implementation, including through aligning external resources and strengthening links between central agencies

• Promoting a sharper focus on agriculture and rural development through complementary investments in rural infrastructure; financial services; and diversification, processing and post-harvest technology

When reflecting on aid effectiveness, the national policy context must at all times be used to reconcile the evidence with progress in achieving these desired outcomes.

Aggregate trends in development cooperation

The overall trend in development cooperation to the end of 2008 is positive (although it must be noted that 2008 figures are still tentative), with total disbursements in 2007 estimated at USD 790.4 million, an annual increase of 11%³. Chart One shows that the rate of growth in development cooperation has also increased over time, which is a notable achievement given the stagnant or even declining global ODA volume.

Chart One.  Disbursements and Projections 2001-2010 (USD million)

Note: 2008 – 2010 omits NGO own resources. 2009-2010 data includes committed funds only.

Chart One also highlights other important features:

1. The estimated 2006 disbursement reported in the 2007 AER was 590.4 million (shown in the hatched area, above). This has now been revised upwards by 20%, i.e. by more than USD 120 million, to USD 713.2 million, principally as a result of recording IMF debt relief of USD 82 million.

2. After a period of declining loan shares in aggregate disbursements the trend was reversed in 2007 as the loan share increased from 19% in 2006 to 28% in 2007 as all loan financiers (ADB, World Bank, IFAD, China, Japan, Republic of Korea and France) increased their lending activity.

3. Data for 2008, 2009 and 2010 is for illustrative purposes only. In all 3 cases the funds provided by NGOs from their own resources have not been included and, for 2009 and 2010 the projections are provisional and apply only to active and pipeline projects (i.e. funds not programmed are omitted).

The source of development cooperation financing is shown in Table Four, below. As in previous years, the largest source of development cooperation in 2007 was from Japan, who contributed USD 122.1 million (15% of the total and an 18% annual increase). Also notable is the significant support provided by China, a 75% annual increase, primarily to the infrastructure sectors. Other noteworthy observations include:

1. Doubling in support (or more) by the World Bank, Denmark, New Zealand and the Republic of Korea

2. Significant increases in percentage terms by Switzerland (50%), Spain (46%), Australia (32%), Finland (16%), UK (14%), USA (14%), Germany (13%) and Canada (10%)

3. Only three partners (UN, GFATM, EC) recorded reduced disbursements, and then only by a few percentage points, underlining the improved stability of most programmes (this disregards the IMF debt relief in 2006 from the analysis, which was a one-off operation).

Table Four.  Disbursements and Projections by Development Partner 2002-2010 (USD millions)

 Note: 2008 data is estimated outturn. Some partners provide indicative 2009–2010 figures for active/pipeline projects only

Chart Two.  Annual changes in development partner disbursements (2006 – 2007)

An important initiative that has benefited from significant cooperation between Government and development partners has been in efforts to strengthen projections that can be used to develop the budget, the Public Investment Programme (PIP) and the Medium-Term Expenditure Framework (MTEF). The NSDP Mid-Term Review (MTR) and the Evaluation of Aid Effectiveness (self assessments and Independent Review) noted that the links between CRDB’s ODA Database and the central planning and budgeting process remain tenuous and the NSDP MTR calls for “more combined and concerted efforts…among the four main central agencies, MoP, MEF, SNEC and CRDB”. The provision of data by development partners, although still incomplete and relating only to projects already active or pipelined, demonstrates, however, that national systems are becoming stronger and that development partners are beginning to respond to the commitments they made in Accra⁴. Continued progress in the context of improving predictability (see discussion, below, under Alignment) will therefore remain a priority for the medium term.

Long-Term Trends in Development Cooperation

Over the period 1992 to 2007, a total of USD 7.86 billion in disbursements has been reported by development partners to Cambodia. These have included contributions of:

• USD 3.1 billion by non-EU bilateral countries (39% of the total)

• USD 2.2 billion (29%) by UN Agencies, IFIs and multilaterals

• USD 1.9 billion (24%) by EU member countries and the European Commission

• USD 1.56 billion (20%) from Japan

• USD 0.65 billion (8%) of core funding (own resources) provided by NGOs

The largest single development cooperation contributor is Japan, which, quite remarkably, has provided 20% of all development cooperation resources in the period 1992-2007. Other major development partners are:

• United States, providing nearly USD 550 million

• European Commission that has provided over USD 500 million

• France that has provided over USD 450 million

• Australia that has provided over USD 330 million

• China, providing over USD 300 million, 75% of which has been disbursed since 2004

Looking forward, it is important to note that new sources of financing are likely to have a considerable impact on the financing profile. Rapid increases by China and the Republic of Korea are noted in Table Four, above, while new cooperation agreements with Qatar and Kuwait, which were concluded in early 2008, will be translated into formal commitments, and then disbursements, primarily to the rural sectors. The profile of support in other sectors will also be affected, for example in health and education, where the Global Fund and the Education For All Fast-Track Initiative, have established themselves as major sources of assistance in their respective sectors in a relatively short time. The future challenge may therefore be framed in terms of managing increased diversity in funding sources (discussed in further detail below), a challenge that is mirrored globally as there are now some 56 official donors and over 230 multilateral agencies and funds (over 100 in the health sector alone), a trend that has been increasing in spite of Paris Declaration commitments to greater efficiency⁵. 

Sectoral trends in development cooperation

The allocation of development assistance has traditionally been directed to soci activities, as can be seen in the pie charts below for both 2006 and 2007. These show the continued high levels of support to both education and health (which sums to USD 144 million in 2006 and 152 million in 2007 when HIV/AIDS

Chart Three.  Sectoral allocations of development assistance 2006 and 2007 (USD millions)

is consolidated with general health sector support). Also noteworthy is the significant increase in rural development and transportation in 2007. It is useful to disaggregate these disbursements in terms of the four main NSDP sectors, and this analysis is presented in Table Five, below.

Table Five. Development cooperation disbursements by sector 2005 – 2008 (USD millions)

Consistent with NSDP priorities, comparing 2005 (the year before the NSDP commenced) with 2007, gender, governance, rural development and HIV/AIDS are the main beneficiaries of aid reallocations, although it is perhaps surprising to witness the declining trends in water & sanitation and in environment & conservation sectors. Notable changes in 2007 compared to 2006 include the beginning of the PRGO budget support operation, an increase in food aid, which may be seen as a positive response to increased food insecurity, and continued growth in investment in the tourism sector, which has been identified as having significant potential for growth and employment.

Support to the provinces

In previous years it has been difficult to present meaningful analysis about provincial disbursements as data quality was a concern (national projects were classified as benefiting Phnom Penh only or data was simply not made available). Efforts to validate this information, with a longer-term view to informing the increased focus on rural development, have resulted in some improvements and some basic analysis is now possible. Table Six, below, shows that overall, development assistance to the ten largest beneficiary provinces in 2007 amounted to USD 329 million, three times higher than the USD 110 million received by the other fourteen provinces combined.

Table Six. Provincial support (USD millions) Province 2005 2006 2007 2008 (est) Phnom Penh 78.9 68.2 70.7 49.7 Kandal 8.6 26.7 53.8 77.9 Sihanoukville 9.9 27.8 44.2 31.9 Siem Reap 43.5 37.2 44.1 31.3 Kampong Cham 12.4 16.0 24.1 28.0 Battambang 15.9 21.7 22.2 27.1 Kracheh 10.5 10.0 18.0 32.0 Kampong Thom 18.3 17.4 17.6 23.9 Prey Veng 12.9 9.7 17.4 27.6 Banteay Meanchey 15.2 15.2 16.7 20.2 Other 102.2 88.1 106.1 490.7 Nationwide 281.7 375.3 355.5 397.2 Total 610.0 713.2 790.4 887.9  Chart Four. Provincial support 2007 (USD per capita)

In total, 55% of total development assistance was disbursed at provincial level in 2007, broadly in keeping with the shares in previous years. Once population is taken into account, the picture changes somewhat. Sihanoukville receives the highest level of per capita support (USD 221), principally because of its large volume of assistance, whereas Mondulkiri receives the second highest amount (USD 140), primarily as a result of its small population. Phnom Penh receives USD 53p.c., marginally below the national average of USD 59p.c., while Takeo, Kampong Cham and Kampong Speu received between USD 10-15 per person in 2007. NGO support to national development An important source of provincial assistance comes from NGOs. While NGO core support comprised about 10% of total development cooperation in 2007, the NGO share in total provincial disbursements was 18%. In some provinces support from NGOs makes up a significant share of total non-government support: 46% of development cooperation resources disbursed in Siem Reap in 2007 derived from NGOs,; for example; 36% in each of Takeo and Koh Kong; 21% in Kompong Chhnang; and 19% in Kampong Cham. The major NGO activities continue to be focused primarily on the social sectors. In 2006 and 2007 approximately two-thirds of NGOs' own resources were directed to health and education, with community welfare and rural development comprising the other main activities. NGOs reported a 50% increase in core fund expenditure in 2007, contributing USD 78 million to national development activities compared to USD 50 million in 2006 (see Table Seven, overleaf). The significant contribution made by NGOs to the national development effort is further emphasised when their important role as implementing partners is augmented to their direct financial contribution. NGOs managed USD 133 million on behalf of development

Source: National Institute of Statistics (2008 provisional census data)

partners in 2006 and USD 106 million in 2007. The main area of activity was in governance but there was also a large share of agriculture, rural development and multisectoral support activity (itself mainly a combination of agriculture, rural development, and water and sanitation). There were also important contributions to gender and culture financed by development partners but, as with governance, these are not activities that NGOs themselves appear to fund directly from their own resources.

The role of NGOs in providing direct services, as well as supporting governance and policy advocacy functions, is very clear, and improved data sharing has allowed their significant contribution to be more fully understood. During 2007 and 2008 there appeared to be more engagement between civil society organisations and Government in general, which can be considered a healthy development given the role identified for civil society during the NSDP Mid-term Review. The recent Evaluation on Aid Effectiveness also observed that civil society has an increased role to play in terms of becoming a more engaged partner in dialogue wherever it is appropriate, as well as in ensuring that the implementation and management of their own activities aspire to the same standards of efficiency and effectiveness as for other forms of development assistance (and observing recent progress in introducing the Code of Ethical Principles and Minimum Standards). Noting that NGOs increased their own expenditure on agriculture and rural development in 2007, as well as managing more resources from development partners in these sectors, the role of NGOs in supporting the implementation of this Rectangular Strategy priority becomes immediately apparent.

Table Seven. NGO sector support 2006 – 2007 (USD million)