AID donors must make "radical changes" in the way assistance is managed

according to a report that says most aid programs have been improperly carried out.

The report "The Reality of Aid: 1996" was presented at the Organizations

of Economic Cooperation and Development (OECD) meeting in Paris June 27. M.S. Shivakumar,

of UNDP-CARERE, wrote the Cambodian section.

He maintains that lack of proper sequencing, consistency and sustainability of programs

has resulted in the overlapping of technical assistance (TA), directed at the symptoms

of the problems rather than the causes.

"The current nature of TA support demands a critical re-examination... toward

capacity development and technical cooperation aimed at supporting nationally formulated

sustainable development programs," he said.

Acknowledging that many positive developments had taken place since 1992, he said:

"there is a need for radical change in the way the TA support and resources

are utilized."

He said that the way that aid is presently handled has become unpopular for both

donors and recipients, therefore a new framework of cooperation was needed.

Aid dialogue concentrated on the 'upstream' level between governments, while local

people were left out altogether, he said.

"It is very difficult to make people understand the relevance of external aid,

technical assistance and the presence of expatriates," Shivakumar said. "Dissemination

of information at the grassroots level is very weak. This has led to non-participation

and the misunderstanding on the role of development aid to Cambodia."

"Distribution of aid leaves much to be desired. About ninety percent of foreign

experts are based in Phnom Penh, so their background, orientation, perceptions and

briefings are different."

One key area of concern is the requirement of the World Bank and Asian Development

Bank for 20 percent counterpart funding from the government for projects financed

by loans. For example, the Royal Government had only been able to honor a little

more than $460,000 of the $2.3 million the ADB had committed it to as its part of

one recent loan. The government had to come up with $8.4 million more by the end

of June this year to ensure the projects could proceed on schedule, he said.

The maximum level of loan funding from the two banks was $150 million a year, and

if that amount was lent the government must come up with $30 million, which would

absorb most of the State budget. He suggested that counterpart funding rules should

not be applied to Cambodia for at least five more years.

As the global decline in aid to poor nations continues, another serious challenge

for the Kingdom - which relies heavily on foreign money - is its burden to pay back

its loans, Shivakumar said.

Borrowing may be normal for countries that could mobilize domestic resources and

had export potential, but it may be too harsh for a nation like Cambodia which had

limited capacity to provide public goods and services, he said.

"Cambodia needs technical assistance in the form of grants, not loans. It is

not prepared to pay it back," Shivakumar said.

"Investments in the public sector may be ineffective because trainees, once

qualified, will simply join the private sector or will try to find employment in

donor financed projects," he said.

Shivakumar said that these issues were controversial, however, he insisted that an

honest debate must begin to allow "opportunities for considerable improvement

in aid allocation priorities".