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Comment: How important is External Assistance to Cambodia?

Martin Godfrey compares the foreign aid given to Cambodia with that to other

developing countries, and takes a brief look at some of the problems facing the country's

provinces in terms of external assistance.

It cannot be denied that the Cambodian economy is highly dependent on foreign aid.

Total external assistance in 1998, though below levels of a few years earlier, was

worth $418 million, of which technical assistance accounted for $239 million.

Table 1 shows how these figures relate to other important economic quantities.

The most striking aspects of the table are not so much the scale of aid in relation

to Cambodia's population and GDP, as its scale in relation to other sources of foreign

exchange and to the government budget.

Total assistance is equivalent to more than 66 percent, and technical assistance

to 40 percent, of the foreign exchange earnings from domestic exports (mainly garments,

for which 1998 was a good year). Both are much bigger than earnings from exports

of services (mainly tourism, for which 1998 was a terrible year).

In fact, the foreign exchange inflows associated with aid are smaller than this,

but it can still be regarded as equivalent to one of the economy's most important

exports.

In relation to the budget, the dominance of external assistance is even more striking.

Expenditure on technical assistance alone exceeds the total tax revenue raised by

government, and exceeds non-defence expenditure by almost three-quarters.

How does cambodia compare?

Many other countries receive more aid per head than Cambodia. In 1996 (the most recent

year for which comparable data are available), Cambodia is 67th in a list of 166

countries ranked by the World Bank in order of aid per capita (Table 2).

At the top of the table are tiny island economies, with more than $1,000, and in

one case more than $2,000, in aid for each inhabitant. The $44 per head received

by Cambodia is less than that received by Israel ($389), Nicaragua ($212), Bolivia

($112), Albania ($68) and Yugoslavia ($64) and, among Asian countries, Papua New

Guinea ($87) and Laos ($72), among many others.

However, if countries are ranked by aid as a proportion of exports or as a proportion

of government revenue, the picture is very different (Table 3).

Cambodia is near the top of both lists, and is particularly high in the ranking by

aid as a percentage of government revenue. Most of these countries have suffered

a collapse in export earnings and/or in government revenue. About two-thirds of the

countries in the table are African, and more than half of the countries in the table

on one criterion are also in the table on the other.

Countries emerging from conflict of one kind or another are well represented in both

columns, while those in transition from planned to market economies have particular

problems with government revenue.

Cambodia's status as both a post-conflict and a transitional economy puts it in a

doubly difficult position. Table 3 suggests that the way to reduce this kind of dependence

on aid is not to reduce aid, but instead to increase export earnings and government

revenue.

Problems facing the provinces

It is difficult to determine with any degree of accuracy the distribution of external

assistance to particular provinces. Some data are available from the Council for

the Development of Cambodia and the Cambodian Rehabilitation and Development Board

for the period 1994-96. During this period, 56 percent of external assistance was

described as being for "country-wide programmes," with no information available

about its provincial distribution.

Comparison of the remaining 44 percent which was linked to specific provinces against

provincial population distribution suggests that, overall, a disproportionate amount

of aid is received by Phnom Penh.

There is also uneven distribution between other provinces, with some (such as Sihanoukville

and Kompong Speu) appearing to receive more than their share, while others (Mondolkiri

and Kratie, for example) appear to receive much less.

This comparison should be treated with considerable caution. Some provinces in the

north and west of the country were insecure during the 1994-96 period as a result

of fighting between government and Khmer Rouge forces. It is also impossible to determine

whether some of the assistance listed as going to Phnom Penh was not being channelled

through the head office of an organisation based in the capital, which was in turn

disbursing it to other provinces. Nevertheless, it does seem as though there is a

lack of balance in the distribution of assistance across the country.

CDRI is in the middle of a research project on technical assistance and the development

of Cambodian capacity. This is not yet finished, but preliminary findings have already

revealed several problems. Many of them reflect the lack of real "ownership"

of external assistance, by either central or provincial government.

The selection of development projects tends to be donor-driven.

A list of projects is prepared for the Consultative Group meeting, but most of the

initial ideas are likely to have come from donors. The provinces could play a greater

role in this process by generating ideas for new projects, discussing them in provincial

coordinating committees (PCCs), and then sending proposals upwards for consideration

by the Consultative Group.

The role of government in the selection of technical assistance personnel in Cambodia

is small. Donors and NGOs tend to select their own experts, and at most undertake

formal consultation. Provincial government could again use PCCs to promote consultation

between government and donors on new appointments, and on the termination of contracts

of unsatisfactory experts.

There are also problems with government counterparts in technical assistance projects.

At the top, counterparts tend to be overstretched, while at the middle level they

are often missing unless salary supplementation is available. PCCs could be the place

to discuss such problems and to press for realistic supplementation, at least on

a tranisitional basis.

There tends to be pressure on technical assistance experts to "do the job"

themselves rather than to develop local capacity.

Experts write letters, speeches and reports, and often "advise" rather

than teach others how to do these things. (This is connected with the counterpart

problems already mentioned.) To address this issue, the provinces could use PCCs

to develop "codes of conduct" for technical assistance experts, with an

emphasis on capacity development.

Some projects prefer to work outside normal government structures.

Some NGOs bypass government altogether, and give no information to the provincial

government. This leaves the provinces at a disadvantage.

Provincial authorities could press central government for a national policy that

would ensure that all projects relate in some way to government structures, and use

PCCs to obtain information from all projects working in their province.

At the root of most of these problems are inadequate government budgets. This is

why government tends to accept all development projects that are offered, and why

problems arise with counterparts (due to low salaries) and with lack of ownership.

The provinces should press the Ministry of Economy and Finance to raise more revenue

and to pay adequate salaries, and use any revenue raised in the provinces for this

purpose.

References

ï IMF (1999), International Financial Statistics (Washington DC: International Monetary

Fund)

ï World Bank (1998), World Development Indicators (Washington DC World Bank)

This article first appeared in the December issue of the Cambodia Development Review,

published by the Cambodia Development Resource Institute in Phnom Penh, and is reprinted

here with the permission of the publisher. Further information about CDRI and back

issues of the Cambodia Develpment Review are available on the Institute's website

- http://www.cdri.org.kh

The article is based on a presentation made during a seminar for provincial governors

on development issues and conflict management, which was held from 18-22 October

1999, and draws on ongoing research work into technical assistance and the development

of Cambodian capacity. Martin Godfrey is Research Coordinator at CDRI.

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