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Logo of Phnom Penh Post newspaper Phnom Penh Post - Cambodia takes scolding, $500 million from donors

Cambodia takes scolding, $500 million from donors

Despite the government failing to fulfil many previously set benchmarks, international donors pledged $504 million dollars in aid to Cambodia for next year, but warned that future support will directly hinge on real changes in 2005.

In his closing remarks at the annual government-donor Consultative Group (CG) meeting, the World Bank's Ian Porter, likened Cambodia's situation to the Robert Frost poem The Road Not Taken, which describes a difficult choice between two forest paths.

"Cambodia, like the poet, cannot travel both roads. Moving forward from a crossroad means clearly choosing a road ... it means decisively rejecting the road of business as usual and definitively going forward in the right direction," said Porter, Cambodian country director of the World Bank.

The metaphor of Cambodia at a crossroads has been a recurring motif in the lead up to this month's CG meeting, with unprecedented pressure on the government to live up to its rarely-met, annual reform promises.

"Both the amount and composition of future pledges will be a function of Cambodia's performance on its reform agenda," said Porter.

Ulrik Helweg-Larsen, Danish ambassador, affirmed that sentiment when he spoke about aid effectiveness on behalf of the donor community, telling the CG, "If such progress [on reforms] is not forthcoming, donors may explore ways of reaching the poor directly."

The CG meeting is an annual forum for donors and the government to discuss the development of Cambodia, pledge the next year's aid and set performance benchmarks. It was held at Government Palace on December 6 and 7.

The government, which had requested $500 million from donors, said it was pleased with the outcome of the meeting and would try to utilize donor money "in a transparent and accountable manner."

"On behalf of the Royal Government, I would like to assure you that we remain committed to maximize the benefits of your assistance for the socio-economic development of our country and to reduce poverty," said Keat Chhon, Minister of Economy and Finance and co-chair of the CG.

The donor community, led by the other co-chair of the CG, the World Bank, also said the meeting had been successful and welcomed the government's resolve to reducing poverty and meeting its Millennium Development Goals.

"What we need now is action. As good friends of Cambodia, development partners stand ready to support the Royal Government in a genuine reform effort," Porter said in his closing statement to the meeting.

Most government and donor sources contacted by the Post said that this year's CG meeting reflected a stronger commitment by the government and a more coordinated effort by donors, with many optimistic of real change for Cambodia.

Douglas Gardner, UN resident coordinator for Cambodia, cited the greater cooperation between donors and the government, the prospect of anti-corruption legislation and a better system for monitoring benchmarks as some of the most important outcomes of the CG.

"These [benchmarks] were done in a period of consultation, over a three month period, they were agreed on in the CG, they were built around the government's Rectangular Strategy and we have a mechanism in place that will look at these on a quarterly basis," said Gardner.

Political commentator Lao Mong Hay was hopeful that the strong stance taken by the donors might force reform in the government and avoid Cambodia being left behind the international community.

"It's about time they [donors] made that kind of statement and put that message across to our government," said Mong Hay, Head of Legal Unit for the Center for Social Development.

But despite months of preparatory work for the CG, several benchmarks for 2005 were still being discussed as the Post went to print and were expected to be finalized by the end of the month. The exact sticking points were not clear.

However, some observers remained skeptical that promises made at the CG meeting would translate into results.

"It's a repackaging of the same old system that hasn't seemed to work before," said one Phnom Penh based diplomat involved in the CG meeting.

Global Witness, which has criticized the World Bank for its role in Cambodia's disastrous forest concession program, described the CG as a "lot of hot air but nothing concrete."

"The Cambodia Government must find the whole donors group process hilarious," said John Buckrell, lead campaigner for Global Witness. "Each year they fail to meet their benchmarks and yet the donors give them money."

Explaining the numbers

This year's pledge of $504 million appeared to be a dramatic drop from 2002, when donors pledged $635 million, but the World Bank said changes to the definition of overseas direct assistance (ODA) were responsible for the lower figure.

The new definition of ODA does not include Cambodia's share of funding to regional initiatives, funding to NGOs and avoids double counting money given through the United Nations, making accurate comparisons with other countries possible in the future, said Porter.

Under the new definition of ODA, the 2002 pledge would have been $514 million.

There was no CG meeting in 2003 due to the year-long negotiations to form a coalition government.

It is unclear whether aid money flowing into Cambodia through regional, NGO and UN programs will be similar next year.

Funding pledges from multinational organizations like the World Bank and Asian Development Bank decreased this year as their support is tied to performance, but extra money from bilateral country donors made up for the cut.

The World Bank pledged $45 million, down from $70 million in 2002, while the ADB will contribute $105 million over 2005 and 2006.

Japan remained Cambodia's biggest donor, saying it will have spent $123 million in the twelve months before March 2005. This breaks down to approximately $57 million in grants, $34 million in technical assistance and $27 million in loans.

The United States expects to contribute more than $44 million in 2005 and Australia pledged $29 million.

France would disburse $33 million in aid in 2005, according to a statement from the European Union, which listed other pledges as: Belgium $12 million, Denmark $12 million, Germany $17 million, Sweden $28 million, UK $28 million and the European Commission $40 million.

Gov't gains 'modest'

In summing up the government's "modest" progress in 2004, donors acknowledged the many unmet benchmarks and high levels of corruption and poverty in Cambodia.

"Progress in natural resources management - suspension of forest concession and improvements in public disclosure - was offset by continuation of illegal logging and visible governance failures associated with the misuse of state resources," stated the CG's closing press release.

Donors noted the government's achievements in the field of HIV/AIDS, but said specific budgetary goals in the social sectors had not been met and reform to the judiciary system, public administration and financial management remained weak.

During the CG meeting, the government circulated a single A4 page listing of its "specific GAP [government action plan] achievements" which consisted mostly of vague progress reports and included questionable claims.

For example, the section title "administrative reform" included the following: "ghosts have been eliminated and the integrity of the database maintained"; "salaries have been increased by 44 percent"; and "ways to accelerate improvements in remuneration and introduce performance enhancing mechanisms are being investigated."

Benchmarks for 2005

While the benchmarks for the coming year are still being negotiated, several indicators drafted in an informal report to the CG meeting were mentioned again in the final press release and are highly likely to remain as benchmarks.

Likely benchmarks for the year 2005 include:

    * passing an anti-corruption law that complies with international best practice

    * the prosecuting of key corruption cases

    * passing the penal code and civil code

    * phasing out of donor-supported salary supplements to civil servants

    * establishing a "Single Window" for processing import/export documentation

    * increase spending on education to 3.27 percent of GDP and actually disburse 95 percent of that budget

    * pass a road law

    * passing the domestic violence law

    * passing the anti-trafficking law

New partnership model

Donors were careful to take on their share of blame for Cambodia's lack of progress in key areas and announced changes to the governor-donor relationship which aim to better coordinate aid delivery.

"There are numerous examples in Cambodia of how the behavior of donors, both individually and collectively, has resulted in ineffective aid - and of how aid actually has made matters worse by undermining the capacity of state institutions and preventing the evolution of a coherent government vision for long-term development," said Ulrik Helweg-Larson, in his presentation to the CG on aid effectiveness.

With more than 500 projects and programs under way in Cambodia, Helweg-Larson said the risk of duplication was immense and the multitudes of meetings and steering committees put a strain on both the government and donors.

"Project implementation units, which are highly inefficient ways of using scarce human and financial resources ... have been described as 'islands of excellence in a sea of government failure'," said Helweg-Larson.

As part of a wider harmonization program, the government will merge the three existing development strategies into a single blueprint, with joint government-donor technical working groups (TWG) to monitor development efforts in 17 sectors.

A new body, the Government-Donor Coordination Committee, will be established to "provide high level policy dialogue and facilitate resolution of complex issues identified by the TWGs."

This new committee will release quarterly reports and will meet next on March 7, 2005.

Keat Chhon, co-chair of the CG, said that monitoring the implementation of reform was "an important responsibility of the concerned government ministries and agencies," and that mismanagement of such a large sum of money would difficult to disguise.

"If the elephant dies, we cannot hide it by putting a rice threshing basket [in front of it]," Chhon told journalists.

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