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Logo of Phnom Penh Post newspaper Phnom Penh Post - Donors' Cart Must Follow the Cambodian Horse

Donors' Cart Must Follow the Cambodian Horse

Donors' Cart Must Follow the Cambodian Horse

With less than ten weeks of office experience, the interim coalition Government of

Cambodia will face its first combined international test of governance next month.

The International Committee on Reconstruction of Cambodia (ICORC) will convene September

8 and 9th in Paris. The Conference, grouping majors donors, will be the first of

its kind to be held since the elections. As all previous aid previous aid commitments

were directed through the Supreme National Council (SNC) and UNTAC, this meeting

will mark the coming of age on the world stage of the new interim government.

It will be important for several reasons apart from its place in history. Since the

signing of the Paris Peace Treaty in October 1991, multilateral efforts have all

been channeled through the SNC, as the sole legitimate authority in Cambodia and

its executing agent, UNTAC. In effect, this meant that outside countries determined

Cambodia's external assistance needs in the light of existing field and their perceived

national interest in helping Cambodia.

The forthcoming demise of the SNC's mandate in September and the subsequent withdrawal

of UNTAC, means that a different player will enter the scene. A player that will

not necessarily act the way the SNC did-a body often hamstrung by the need to strike

consensus among the representative factions, which included the Khmer Rouge.

The interim government needs to make the most of this unique opportunity. Or, as

one of the outlaws counsels in "The Two Gentlemen of Verona", make a virtue

of necessity. Despite the shortness of its life span so far, the new Administration

needs to show that it is master of its own house, aware of its country's priorities

and needs, and worthy of being confirmed as the new Government by the National Assembly

once the Constitution has been passed. If it does not seize this opportunity to show

that it has the ability to co-ordinate all external resources it may run the risk

of being by-passed, as a collective entity, as Donors continue to implement their

own assessments of Cambodia's aid requirements through the aegis of selective government

departments or members of the U.N. family and the NGO community.

This is not simply a "recognition" or power sharing" issue. There

is a more fundamental aspect. That of money injection or, more precisely, badly needed

external finance. Cambodia's current difficulties in managing the economy and in

sustaining the transition process to a fully fledged market system are well known

and much studied. What, perhaps, is less known, is the way these problems have been

compounded by severe and often unjustified delays in the implementation of externally

agreed projects. To date, for bureaucratic or logistical reasons, only 24 percent

of the U.S. $880 million funds pledged at last year's Ministerial Conference in Tokyo

have actually been disbursed in Cambodia!

No one doubts that Cambodia's problems remain urgent. Moreover, they will be exacerbated

by the deflationary impact of UNTAC's withdrawal over the next few months. In short,

if the aid disbursement process continues to be as drawn out as before, then the

domestic situation can only worsen.

With outside help, the interim government is in the process of defining its broad

macro-economic strategy. While the elaboration of such a framework is a necessary

road map for the future, it should not obscure the urgency for rapid external assistance.

Faced by the policy implications stemming from the double transition-from Marx to

market and to a post-UNTAC situation within a couple of months-the interim Government

must ensure that immediate needs are the focus of the meeting, rather than those

with a longer term perspective as has largely been the case these last 18 months.

To do this the Government should enumerate areas where quick action is necessary

if the currently stagnant economy is not to slide back still further. Such an identification

does not mean minimizing the need for basic projects with a long horizon, it is more

a question of letting the current situation determine the priorities. Or, more bluntly,

of not putting the "Donors" cart before the "Cambodian" horse!

As an aid to policy formulation, the following areas should be high on any priority

list. They are not new; what is new is their growing urgency if new growth is not

to be choked off:

Agenda for Action

Budget financing should be top of the list. Any assessment of the Cambodian scene

since 1990 would indicate that the country's central problem is the fundamental fiscal

imbalance. Cambodia, as a result of the problems inherent in any rapid transition

from a Command-type economy to one driven by market forces, has a growing budget

deficit. Liberalization, plus the sudden drying up of assistance from the ex-Communist

bloc, has meant that the previous sources of funding the admittedly then smaller

deficit are no longer available. Today, despite revenue mobilization programs, the

unfounded deficit has grown.

As the government has forewarn its previous option of printing money to make up for

the shortfall, it is faced with the choice-unless external support is forthcoming

to close the budget gap-of presiding over a further decline in activity.

This can hardly be in the interests of the international community. If the government

is to have sufficient time for its new revenue policies to work, if it is to have

the time to redress its macro-economic imbalances and, its consequence, the worryingly

high rate of inflation then, the provision of urgent foreign budgetary assistance

is crucial.

Balance of payments support is an associated element. Cambodia has a balance

of payments gap which it cannot currently finance. At the moment, after having surged

in 1992/2, economic growth has slowed significantly in the first six months of 1993.

Due largely to uncertainly, first during the pre-election phase and then with respect

to the country's prospects post-UNTAC. If there is to be no further decline-which

always impacts those on low incomes-then essential imports must be maintained.

Rapid assistance is thus needed to pay for items such as imported fuel, fertilizers,

investment goods & spare parts, and key inputs to agriculture and manufacturing.

Without commodity aid assistance to pay for these hard currency imports, the Government's

holding strategy will be made even more difficult while the kick-start to reverse

the current stagnation will be that much harder to put into operation.

Infrastructural bottlenecks" The dangerously dilapidated state of infrastructure

is obvious to any visitor. The blanket needs are so widespread that a long term integrated

view is called for. It is also difficult to know where to start. The situation recalls

the film "M.A.S.H." where the hard pressed medics adopted the French "triage"

system. Walking wounded were treated first followed by those who, if patched up,

could return to the front. The third badly injured group were treated as and when

there was time. Cambodia's situation is somewhat analogous. Certain bottlenecks stand

out; it would be counter-productive to the whole socio-economic edifice if they were

allowed to disintegrate any further. Like the walking and lightly wounded , the following

six areas should be given first attention.

Power and Water. The near collapse of Phnom Penh's power supply must be addressed.

If not, every conceivable process that requires electrical energy for its use will

suffer severe setbacks. Equally, if elementary primary health care goals are not

to be undermined, water treatment and increasing the availability of clean piped

water to a wider section of the population should need no justification.

Transport. Road and railway networks urgently require repair, together with

port facilities. The former is the most important if the large rural sector is to

be brought out of its subsistence economy.

Communications. UNTAC's electoral success was largely underpinned by its communication

system. Nothing like it existed in the country none will in the immediate future

if it's taken away. Ways and means to retain and keep in repair this system on UNTAC's

departure need to be explored urgently.

Rural development. Though generally seen in a long term perspective, the widening

urban/rural gap gives a social imperative to action here, even if initially on a

cosmetic level. Quick action projects are needed to at least prevent the gap from

worsening. Simple investments in drinking water, upgrading schools, village electricity,

feeder roads to markets and primary health care on a user basis are proven ways of

having an immediate impact on the productivity of the rural poor.

Private enterprise. The fledgling private sector cannot be left, as yet, to

sink or swim. A thriving private sector would be tangible proof that Cambodia's economic

reform is being handled successfully. At the moment, its dynamic progress from practically

nothing has run into the ground and will be even more constrained by UNTAC's departure.

Help from organizations with a proven track record in private sector development

and in facilitating foreign direct investment, like the International Finance Corporation

(IFC) and the Multilateral Investment Guarantee Agency, is needed at this time of

transition if the sector is to regain its momentum.

Training is related to the foregoing. It has two aspects. If serious long

term private investors are to be attracted, technical assistance to strengthen the

institutional structure and legal framework is an equally urgent priority. Likewise,

Cambodia's stark human skill handicap needs immediate attention. Training, of necessity,

has a built-in lag before results can be seen. The existence of this time-lag indicates

that a concerted start be made soon if the period it will take to reduce this bottleneck

is to be significantly shortened. A plan for critical short term training of current

key personnel coupled with identification and training of the next wave of professional

manager, should be put into operation as soon as it is feasible.

Organizing the required financial & technical inflow calls for appropriate institutional

machinery. Both for the immediate needs referred to previously and to serve as a

vehicle for the future as it is clear that Cambodia will continue to require external

assistance for some time to come. The acting Cambodian government has already taken

action in this regard. A central body has been set up to co-ordinate the Government's

aid priorities and to serve as a focal point for co-ordinating aid.

The IC meeting will probably be but the beginning of a long process. A process

that, for its successful acceptance, needs to fully engage the Cambodian authorities.

Without clear input from the present Cambodian side, there is a risk that, to quote

a quote of Earnest Hemming way, the Conference will "mistake motion for action."