A FTER three months in limbo, United States-funded aid programs which were suspended

following the July 5-6 fighting are now shutting down their operations.

At least seven non-government organizations received letters last month explaining

that their funding from the US Agency for International Development (USAID) is being

discontinued.

It was the first clarification of their status since the July coup prompted USAID

to put on hold about $25 million, or two-thirds, of its $38 million aid package to

Cambodia.

"Recent political events in Cambodia and the US government's policy decisions

in the wake of those events have led USAID to a decision to discontinue funding,"

said an Oct 7 termination notice served on one agency.

"Stop all USAID-funded activities, except for actions required to effect an

orderly close out of [your program]," said the letter.

USAID officials have said that humanitarian aid to Cambodia will continue. Funding

in other areas was suspended indefinitely, but until now staff had been kept on the

payroll.

"Implementing grantee operators are now being shut down until such time as the

suspension is lifted," said a US embassy official.

The decision puts the aid projects into "long term suspension", meaning

that agency personnel are terminated and offices either closed completely or operated

by a skeleton staff.

Larger organizations which receive funding from multiple sources will not close their

offices but will need to seek funding from alternative donors.

The USAID clarification follows a German government decision to suspend 31 million

deutsche marks (close to $18 million) in financial aid.

The German and US cuts together will hit the education and health sectors the hardest,

areas which are already undergoing budgetary cuts.

A recent report on Cambodian poverty, released by the United Nations in conjunction

with the government, found that the country was in desperate need of support in these

areas.

One of the largest programs hit by the US cuts is Cambodian Assistance to Primary

Education (CAPE), a $26 million, five-year program which was in its first year of

operation.

Around 40 expatriates and 115 local and provincial staff are being "let go",

while 300 Cambodians who were receiving salary supplements to work as teacher trainers

on the project will return to their positions in the Ministry of Education, said

CAPE head Bob Ressekuie.

The project would have led to the installation of 315 resource centers in cluster

schools across the country and the training of up to 40,000 teachers. Only 49 resource

centers have been built so far.

Without wanting to comment on the impact of CAPE's suspension, Ressekuie said: "We

are disappointed that the program is not continuing."

Ministry of Education officials lamented the shut down of CAPE, saying that the right

of children to education and the quality of Cambodian schooling would suffer as a

result.

"The US government wants to strengthen human rights, democracy, and health.

Without education what does that mean? It makes no sense. How can you improve democracy

and health without education?" said Nath Bun Roeun, who heads the ministry's

teacher training department.

While the CAPE program technically remains in "deep suspension", with both

equipment and materials retained, education workers said that the dismissal of expatriate

experts would hamper a smooth resumption of the project.

"It's a big loss in terms of expertise within the field. They're going to have

to start from scratch again," commented one education worker.

The NGO CARE is another organization which has suffered greatly from the USAID cuts

- it has seen almost 60 percent of its budget slashed.

A $10 million village roads project in the northwest, just days away from being signed,

is one of the projects which have now been dropped.

A $3.2 million environmental management program which CARE shared with the NGO PACT

has also been put aside, said CARE director Graham Miller. Between 90 and 100 local

staff have lost their jobs as a result, but some will be re-employed as the agency

picks up new projects not funded by USAID.

"It hasn't been easy for them [local staff], seeing their friends let go, but

it's been extremely professional," he said.

A number of smaller NGOs which got a large part of their budgets from USAID have

also been hit hard by the cuts, including World Education - which lost a project

in girls and women's education worth over $3 million and a planned multi-million

dollar agriculture project - and World Relief, which had a scheduled $1.3 million

child survival project axed.

While these two NGOs will continue their operations in other areas and are seeking

funding for the canceled projects from other donors, other agencies, such as the

American Bar Association (ABA) and the Cambodian Court Training Project, have folded

completely.

"They have terminated us and we are locking up the store and leaving the country,"

said an ABA representative.

The University of San Francisco's Cambodian Law and Democracy Program, which conducted

business law classes at the Faculty of Business, has had a part of its project "discontinued"

by USAID, said Janet King. Nevertheless, the project organizers are struggling to

keep the project alive through volunteers.

"We are working hard to find volunteers from the expatriate and local community

and to find business support for scholarships. We're very optimistic, we're getting

a lot of people really willing to help," King said.

As for German-funded aid projects, some have been scaled down and others suspended.

German bilateral aid to Cambodia is delivered as both financial support - for medicine,

telecommunications, road building and a credit scheme - and in the form of six technical

assistance projects, the most significant being support for the National Institute

of Public Health. The technical assistance projects are implemented by a German private

agency, GTZ.

Each of the technical assistance projects has been scaled down to a 'minimal program'

which means that long-term advisors have been withdrawn, but the projects will continue

to be run by local staff and short-term German advisors.

"It's extremely difficult. We had a big concept, now we must look at what we

can save," said a GTZ official.

A German Embassy official, however, said that the overall budgets for these projects

had been maintained. "The money will be dispensed but not as quickly,"

the official said.

But the suspension of financial support for two projects - a 15 million deutsche

mark ($8.5 million) rural telecommunications project and the 16 million deutsche

mark ($9 million) essential drugs supply, scheduled to begin in 1998, will have a

more immediate impact.

When a smaller German grant assisting the Ministry of Health to buy essential drugs

- crucial in the fight against malaria, tuberculosis and HIV/AIDS - is exhausted

next year, the "real problems" will start, said Dr Chroeng Sokhan, director

of the department of drugs and supply.

"Together, the national budget and the German donation is just about enough

to cover the drug budget."

But with the country's escalating medical needs - spurred on by an AIDS epidemic

estimated to leave up to a million Cambodians infected in the next nine years - combined

with a shrinking health budget and the suspension of German aid, Sokhan predicts

an annual shortfall in the essential drug budget of $4.7 million.

"This means there will be a third less drugs [available] than before,"

he said. The main losers will be the poor who cannot afford to go to private clinics.

"The [AIDS] epidemic will be more than before, the number of diseases will increase,

the patients will increase," said Sokhan, adding that the ministry had requested

the German decision be reversed.

"We don't want to add health problems to political problems. We will suffer

a lot from this decision. We only want to help the poor people," he said.

While the US and German aid cuts are the most visible sign to date of the international

community's disapproval of the July 5-6 fighting and the brutality which followed,

aid agencies are now warning that the worst is yet to come.

"Not as much money was cut as you might think - the real loss is that future

money will be put on hold," said one NGO director.

"Most donors aren't saying anything, but they aren't doing anything either,"

he said.

Aid workers fear that as current aid disbursements for projects come to an end they

will not be renewed, and that funding will not come through for new projects.

Donors who have expressed concerns about national elections, scheduled for May next

year, and the electoral preparations have adopted a cautious approach to new funding,

said the head of a leading international aid agency.

"The effect will be severe in 1998. People will take a 'wait and see' approach

when existing funding comes to an end."

Ministry of Finance officials remained optimistic about continued bilateral aid but

acknowledged that the government "had some homework to do" to ensure that

foreign aid kept rolling in.

One finance official noted that concerns over elections varied among donor countries

but said that the ministry had put a priority on government expenditure on development

projects which attract "counterpart funding" from international donors.

"We have to help ourselves to help them to help us," he said.