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A personal grasp of poverty

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World Bank representative Qimiao Fan talks to the Post's Robert Carmichael.

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ROBERT CARMICHAEL

Qimiao Fan: Cambodia has seen tremendous growth in the past decade - the government must now protect those gains. 

REDUCING POVERTY ‘CRITICAL'

I was born, grew up and was educated in a poor village in central-south China, so I have seen first-hand the impact of poverty on people. But I have also seen how people can get out of poverty and what kinds of public policy can help people get out of poverty. So for me, poverty reduction is not just something nice to do - poverty is something I have lived with in my early childhood and I am very passionate about. The mission of the World Bank to reduce poverty is critically important. And in many ways, that is why I have chosen to come to Cambodia, particularly as this is a post-conflict country and still one of the poorest in the region.

You have visited 14 provinces around the country to see conditions on the ground. What stands out?

Cambodia has only had peace and stability in the last 10 years, and as a post-conflict country it has made tremendous progress in terms of economic growth and poverty reduction.

I spent time visiting villages, schools, health clinics, and also went to rice millers and talked to people along the roadside. You are seeing quite a lot of new houses being built in the countryside, and other people are expanding and improving their houses.

What is also striking having lived in China as a child in the '60s and '70s is the amount of goods available in the markets - be they locally produced vegetables or imported electronic goods. Everything is available here.

You also see new schools being built, and almost every commune now has a health clinic. I have also seen a lot more roads. These roads may not look that great, but if you talk to a farmer they help to reduce the time and cost it takes to get his vegetables and his pig to the market. And more importantly, when his children get sick he can take them very quickly to the health clinic.

These visits confirm the progress one can see through the statistics. Cambodia has been growing since 1998 to 2007 by an average of about 9.8 percent of GDP. That is a huge achievement and would rank Cambodia number six or seven in the world for the decade. For a post-conflict country to be able to sustain growth at that level for a decade is remarkable.

With that growth, you see the associated reduction in poverty. In 2004, the rate was 35 percent, and by 2007 that was reduced to 30.1 percent. That is almost a 5 percent reduction in three years. And if you look at mortality rates and primary enrolment rates, and the gap between girls and boys in primary enrolment rates, [they have all improved].

The second thing is that there are enormous challenges. You still have more than 4 million people living under the poverty line, and even more just above the poverty line. So if there are major shocks - illness, drought, flooding, a slowdown in the economy - they could be pushed back below the poverty line.

Access to public services has improved tremendously, but the quality of public services is still a problem and will take many years to improve.

Most parts of the countryside don't have electricity and clean drinking water or sewerage. Some villages don't have access roads, and if they

do, the quality is pretty bad.

The third point is that these challenges are made much more difficult by the global economic crisis. The key is for the government to make sure that the gains made in the past decade are protected.

What was most encouraging?

For me it is seeing how local governance has improved. Coming from China and having worked in Africa, this is the most striking thing. In all my trips, I talk to the commune councils - this is democracy at the grassroots level.

All parties are sitting there, and they are not speaking with one voice - naturally - but they are working together as the local elected body to make decisions as to whether to build an access road or an irrigation canal or a school building. That participatory approach is the most encouraging thing for me to see.

The second thing that is a great hope is that anyone you talk to wants a better life for themselves and, more importantly, for their children.

The desire for people to educate their kids is very encouraging.

The third thing is the impact infrastructure has on people's lives. When infrastructure is done right, it can help improve lives tremendously.

  IT IS EXTREMELY IMPORTANT FOR GOVERNMENT TO INVEST A LOT MORE IN RURAL INFRASTRUCTURE.

And the most troubling?

There is widespread poverty, but agriculture and rural development are going to be the key sectors for further poverty reduction - they have to be because, with 85 percent of people [living in rural areas], that's where most of the poor live. We need to do a lot more.
The government recognises that agriculture is a top priority, but I think a lot more can be done in terms of agricultural development - investing in rural infrastructure, particularly irrigation, rural electrification, clean water and rural roads.

And the other thing to reduce poverty is better rural services, particularly health. It is not enough to have access.  The quality of the service [is important]. Investments in rural infrastructure are extremely important, and in the short term can provide jobs to the poorest people.

And these sorts of infrastructure will position Cambodia much better when the economy globally rebounds. So I think it is extremely important for the government to invest a lot more - and I do mean a lot more - in rural infrastructure.

The bank's country economist Stephane Guimbert wrote about the unsustainable use of natural resources - a key issue for more than 10 years. What are your thoughts?

We don't know much yet about the potential for extractive industries [minerals, oil, gas]. But we do know Cambodia has abundant resources.  These are very important assets for the Cambodian people.

There are good examples of how some natural resources can be better managed - for example, land. The World Bank and other partners have been supporting government with the land titling project, where close to 1 million land titles were issued in the last few years. Land security is such an important thing for the poor.

For the extractive industries, we share the concerns of many observers. The government needs to put in place a transparent and reasonably good legal and regulatory framework for natural resources. We don't have that.

Second is the issue of capacity. When you don't know how to design and negotiate production-sharing agreements, it is very difficult to manage natural resources like oil and gas effectively and transparently.

The third thing the government should start to do is build their own capacity and put systems in place to allow them to use these revenues in a transparent way - for example, by adopting the principles of the Extractive Industries Transparency Initiative [EITI].

Which the government initially said it would sign, and now refuses to.

I don't think they have rejected it. They are making progress and have just set up a working group that is now doing an action plan to help them build the capacity to do it.

Isn't this just a delaying tactic by the government? If it followed the EITI's  prescriptions, the people of Cambodia, whose resources these are, would get a fairer deal.

We would all like the government to sign on to the EITI. Signing on to it is easy. But whether it will be useful depends on whether the government has the capacity to abide by those principles.

We have been involved with the government with a very ambitious public financial management system. Cambodia is used to having pretty much no budget, but now they have a reasonably credible budget and budget process. But that also requires officials to have the capacity to do those things, and you don't have a lot within every ministry.

How long will that take, and why has it taken so long?

It is a gradual and continuous process and will take a few years to put in place.

I agree that to do these things you need strong commitment and leadership in government. Second, you have to remember that this is a country that in terms of government institutions was almost rebuilt from scratch 10 years ago.

There is capacity needed in all sectors. If you have political commitment from all parties, it can be done quickly. But I also recognise that in all these - particularly in the extractive industries - we have competing and vested interests that would resist the implementation and establishment of a transparent legal and regulatory framework.

The global economic crisis is a good opportunity for them to say that we have a couple of years to put these things in place. It can be done.

Is the government doing enough to reduce poverty?

Everyone would like to see any government in the world do a better job in reducing poverty. But in every country, poverty reduction competes with other priorities. You have to give the government credit for stellar growth over the past decade, and that has translated into poverty reduction.

We have seen many post-conflict countries slip back into conflict. The fact that Cambodia was able to sustain rapid growth and significant poverty reduction has helped it to stay in peace and have stability - that is extremely important. The challenge now is for the government to protect the gains.

The government needs to put in a social safety net to protect the poor and the unemployed. Some will go back to rural areas, and that's why  it needs to invest in rural areas. In the short term, they need to ensure these people have enough food to eat, a place to sleep and - to the extent they can - to provide training so they can find other jobs.

Has the bank revised its estimates since February?

We are in the process of revising our forecast. It is clear 2009 is going to be very challenging.

Whether or not it is minus half a percent is not that important - that misses the point of the impact. [Whatever the reduction] it is a huge deceleration in growth with a tremendous impact on employment and therefore income level.

When you had growth of 10 percent, the country was able to absorb a lot of the new job entrants into the garment, tourism and construction sectors. Today we are seeing over 50,000 net job losses in the garment sector, and maybe the same in the construction sector.

The other side is this is a very young population - you will have another quarter-million people entering the labour market in the next year.

Put that together, and you will have maybe half-a-million people needing jobs. And when the economy is not growing, you are not going to see job growth.

That is why it is so important that the government focuses on these issues and puts in place a social safety net - and they are doing that. But a lot more can be done.

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