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The PRSP: Ready or not, an end to poverty?

Children walk along the dike at Anlong Gong, an impoverished area outside Phnom Penh. The government says the PRSP will help them.

Draft poverty reduction plan does the rounds

 

It is arguably the most important topic in Cambodia today, and will likely remain

so far beyond this decade. 'Poverty alleviation' has taken up thousands of hours

of rhetoric and consumed acres of paper from government, donors, NGOs and the international

financial institutions (IFIs).

All will tell you there is no bigger issue, a stance that the statistics bear out:

more than a third of the population live under the poverty line of fifty cents a

day, while only a handful have escaped the poverty trap over the past decade.

The government has committed itself to reducing the number of people living under

the poverty line to 19.5 percent by 2015. To achieve that will require many things,

not the least of which is a decent plan.

The one on the drawing board is the Poverty Reduction Strategy Paper, known as the

PRSP. It is a document that has, in various guises, been almost three years in the

making (see sidebar). The government wants it finished by the end of October.

In the meantime it has released the first draft, on which NGOs, donors, IFIs and

other interested parties are giving their feedback. These will be incorporated in

the second draft, which should be out soon.

Most observers say the first draft needs much more work. The NGO Forum, an umbrella

group of NGOs operating in Cambodia, released its analysis of the document on September

26. Cambodia's Draft PRSP: Has NGO input been included? concludes that it has not.

That is merely its first complaint.

The draft, it states, is "ambitious and unfocused", and "more a 'wish

list' [by ministries] of fundable projects than a true prioritization exercise for

poverty reduction".

It points out that there is very little in the first two chapters of the document

- the nature of poverty in Cambodia, and the UN's Millennium Development Goals -

that matches the rest of the document. The PRSP does not prioritize its aims, and

suffers from poor coordination between ministries.

"There is no clear prioritization of key issues for poverty reduction and there

is no clear framework for integrating all of the sector strategies," the report

states, adding that it also lacks a guiding overall poverty analysis.

It fears that the result will be a poverty reduction map for the next three years

that won't work. NGO Forum's representative Russell Peterson says that if the government

pushed back its self-imposed deadline of October 31, it could consult more widely

then include those suggestions in the final PRSP. The result: a better document for

an issue that is simply too important to be rushed.

The man charged with finalizing the PRSP is Kim Saysamalen, secretary-general of

the General Secretariat of the Council for Social Development (GS-CSD), which is

coordinating the effort.

Saysamalen says there is no need for such handwringing. The draft, he says, is just

that - a draft. The GS-CSD is currently incorporating the numerous comments from

stakeholders and will soon issue a second draft. Only after that, in late October,

will the council issue the final version.

He also dismisses NGO Forum's recommendation that the deadline be pushed back - the

PRSP is behind schedule, he says, and the poor have waited long enough.

"Even if the quality of the first PRSP is not 100 percent ... we can revise

the paper in time for the second PRSP [to begin in 2006]," he says. "It

has already been delayed for one year - how many more years do you want to wait?"

PRSPs are a recent addition to the linked worlds of international economics and acronyms.

Their introduction followed the launch of the highly indebted poor countries initiative

(HIPCs) in 1996, under which a number of the world's poorest nations had some of

their debts written off.

In 1999 the IMF and the World Bank introduced PRSPs, allowing poor countries to qualify

for conces-sional loans provided they drew up a strategy paper to deal with poverty

alleviation.

The PRSPs replaced the IFIs' much criticized Structural Adjustment Policies (SAPs),

whose requirements such as opening up local economies, and slashing government spending

on health and education hurt the poor most of all.

In Cambodia's case there is no element of debt forgiveness. Instead the government

will get a loan from the World Bank to fund part of the program, and hopes donors

will provide cash for the rest.

The World Bank says the size of the loan has not been decided, but will be made within

the context of the overall country program. Decisions will have to be made regarding

the amount of money going into the PRSP versus how much will go into other programs.

"It hasn't been discussed yet with the government," says the Bank's Steven

Schonberger. "The content and the amount will be determined once the PRSP is

completed."

The first tranche of that amount, he says, will likely be available in the second

half of 2003. That timeframe will allow full discussion of policy, and will begin

once the PRSP is completed.

GS-CSD's Saysamalen estimates the three year plan will need around $700 million to

meet its targets, but admits the government is currently uncertain about who will

foot much of the bill.

"We have sent letters to all donors to ask for their willing assistance to the

PRSP process," he says. "Some donors have not yet replied."

Saysamalen says all will become clear once the paper is finalized. In the meantime

his priority is to take on board all comments about the first draft, finish the second

draft, then issue the final paper.

"After that paper is approved we will proceed to mobilize funds and implement

[the PRSP]," he says. "At that moment we will know which ones will be in

the gap, and which ones will be [financed] by bilateral donors."

NGO Forum's Peterson says uncertainty over what will be committed makes planning

and setting priorities much more difficult. It would help if donors specified how

much they would give. Many have not indicated whether they will support the PRSP

or instead continue funding projects of their own choosing.

"In Cambodia no debt relief is being offered, so the amount of budgetary and

donor resources available for the PRSP is not clear," he told a PRSP workshop

in August. "That makes it hard to put limitations on the scope of the PRSP."

Many donors who will likely back the final PRSP are uncomfortable with the draft

as it stands - NGO Forum's concerns about the document's lack of priorities are widely

held.

However the World Bank's Steven Schonberger says the process of prioritization isn't

easy.

"Part of the ownership is that some parts of government will carry that out

more thoroughly than others, but certainly we feel that the effort and the focus

on trying to move towards more prioritization is a good thing," he says.

And IMF head Robert Hage-mann says the government should be given credit for its

efforts.

"Poverty reduction strategies are not easy to devise, especially when great

efforts are being made to bring all stakeholders - especially the poor - into the

process," he says. "The important objective is to get, as much as possible,

a high-quality government-owned strategy paper."

A high-quality strategy paper is what the UK's aid arm DfID is after too. Chris Price

says it is planned that DfID's three year budget for Cambodia of $45 million will

support the PRSP.

"But DfID is urging the Cambodian government to delay [the PRSP] in order to

give themselves more time so that there is better quality in the documents and a

real strategy," he says.

Tom Beloe, DfID's social development advisor, says such support is contingent on

the PRSP having broad ownership - i.e. that government consults widely among

all stakeholders. His impression is that all donors share the concern about ownership

of both the process and the final document.

The head of one major donor agency, who wished to remain anonymous, says the lack

of prioritization in the draft PRSP is obvious. More than that, though, it lacks

a clear strategy and is too widely drawn.

He is also concerned about the bigger picture: that PRSPs are typically foisted on

weak governments by the World Bank and IMF, and consequently are not home-grown development

plans.

"[In contrast] the Asian Development Bank helped this government to draft the

SEDPII - that is a national development plan," he says. "But if the Cambodian

government wants to get some funds from the IMF ... or the World Bank, they have

to submit this PRSP. It is a kind of a conditionality.

"And since the position of the recipient country - and I am talking generally

- is that they are weak," he says, "if they want cancellation of past debt

or a new credit from the IDA they have to draw up this paper. So then is it a real

national development plan or not? This is the question."

Too poor to afford even food: a group of women waits for handouts at the opposition SRP headquarters in August.

He concludes that the country's situation regarding the PRSP and SEDPII is "very

sensitive", and surmises that the government is caught between the ADB, the

World Bank and the IMF. As it needs money from all three for its various development

projects, it is being careful not to offend.

His agency is another that is concerned the PRSP is not owned by the Cambodian government.

Russell Peterson of NGO Forum says there is logic behind that perception.

 

"The World Bank and the IMF are very keen for the PRSP to be 'country-owned',

and the government is very keen to please the World Bank and the IMF," says

Peterson. "The government wants the cash, [and] the World Bank and the IMF want

legitimacy for their loan programs by saying they are based on a country-owned plan."

However both multilaterals, which are sensitive to any allegations of coercion or

bullying, are adamant that both the process and the paper are Cambodia's.

"It is the government's document," says Schonberger of the World Bank.

"We provide our comments on the draft along with others. And once government

finalizes the PRSP, it is final."

And for the government's part, Saysamalen says it does feel it owns the process for

"participation, consultation and finalizing" the PRSP. However, as he points

out, what "we cannot own is the funds - we still rely on externals for that".

As if the arguments over prioritization, money and ownership weren't enough, there

are concerns about the concessional loans the IFIs will provide - because with such

loans come conditions.

The concessional loan that will become available from the World Bank under the PRSP

is called a Poverty Reduction Support Credit (PRSC); that from the IMF is called

the Poverty Reduction and Growth Facility (PRGF).

The current PRGF expires in February 2003, after which date both the Fund and the

World Bank, whose two executive boards assess the final PRSP, will award future loans

based on the PRSP.

Both the Bank and the Fund are coy about the topic of conditionality, but the fact

remains that the IMF's PRGF has trade conditions attached to it. Some observers think

it is highly likely that loan conditions from at least one will contain trade-related

conditions.

The IMF's Hagemann describes such talk as "very premature". Despite that,

the report of a recent IMF mission to Cambodia explicitly linked trade policy to

poverty reduction in its section about the PRSP. It also noted that "reforms

under the [PRSP] are generally believed to be conducive to poverty reduction".

That kind of talk makes NGO Forum nervous, as does its impression that the policies

in the macroeconomics chapter in the PRSP "are largely copied from the RGC's

Memorandum of Understanding with the IMF".

"The PRSP process has not yet provided an opportunity for fresh debate on the

macroeconomic framework and its relation to poverty reduction," the report states.

"The PRSP document should highlight the need for continued debate and avoid

limiting Cambodia's future macroeconomic policy options."

The lack of a Poverty Social Impact Assessment, which the IMF says it won't be carrying

out, is a major concern to NGO Form. Russell Peterson says lessons learned in other

countries have raised a warning flag.

"We have seen the impact of various macro-economic policies on other poor countries

and don't want the same mistakes made in Cambodia. Proper research is needed to get

the right policy mix," he says.

"Trade policy should be decided by sovereign governments in consultation with

their own people, not foisted on them by international financial institutions,"

Peterson concludes.

Kim Saysamalen at GS-CSD says the government feels only that trade-related conditions

attached to the loan must benefit the poor.

"For the moment we don't know [about conditions] - it is still not the time

for that to be considered," says Saysamalen. "There is a trade sector in

the PRSP and we need that to be pro-poor. We expect that."

The World Bank's Schonberger says the PRSP will by its nature focus on policy measures,

but that these measures are intended specifically to support poverty reduction.

"There was quite a lively discussion around the trade issue at the [May] workshop,"

says Schonberger. "But we don't want to be in the business of predicting what's

going to be in a PRSP because we feel that is contrary to the whole spirit of ownership."

NGOs and others are suspicious that trade-related conditions that could harm the

poor will be attached. They don't believe that opening up weak economies too quickly

will help.

Oxfam for one is skeptical of the presumed link between free trade, growth and poverty

reduction. How that growth is shared among the people is of great importance, as

one of its papers on Cambodia points out.

"Although economic growth has been strong, averaging over 4 percent in the 1990s,

rural poverty has fallen very slowly, at only 0.3 percent a year," it states.

It adds that although average income rose by 12 percent between 1993-7, the income

of the poorest one-fifth increased by less than 2 percent. The richest fifth, it

adds gloomily, did almost ten times better.

Saysamalen says the government understands the need for equitable distribution, but

maintains that economic growth is a prerequisite for reducing poverty.

"The government needs to have more health centers for the poor, more schools,

but where does that money come from? To satisfy that we need some type of economic

capital," he says.

Saysamalen maintains that the government's commitment to cutting the poverty rate

to less than one-fifth by 2015 is attainable. However he has higher hopes, and envisions

a country free from poverty by 2020.

To get there will require a precise series of steps that the PRSP and its successors

will outline. And for all the help donors and lenders can provide, he says, the ultimate

weapon with which to beat poverty is a strong economy.

"Growth is the first thing we need to satisfy the poor. The second thing is

equity in distribution, and the third is to improve social conditions for the poor,"

he says. "With no growth there will be no poverty reduction, but with growth

it can reduce 1 percent, 10 percent, 100 percent."

Acronym city

The final PRSP is the last of a much-delayed three stage process filled with acronyms.

The first, which ran from May to October 2000, was known as the interim PRSP (I-PRSP).

It was done by the Ministry of Economy and Finance (MEF) and was completed on schedule.

Time constraints meant that comments from NGOs were not taken into account.

The second stage was to draft the Second Socio-Economic Development Plan (SEDPII).

This job fell to the Ministry of Planning. This document was meant to be passed by

the National Assembly by April 2001, but delays meant that did not happen until July

2002. Again the government ignored many of the recommendations from civil society

and NGOs.

The third and final stage, which was hit by the delay of SEDPII, is meant to be finished

by the end of October this year. The draft Poverty Reduction Strategy Paper (PRSP),

which NGO Forum's report discussed, is what the current argument is about.

Although NGO Forum says the process in the third stage allowed for better consultation,

it is still concerned that input from NGOs might be disregarded, and the opinions

of stakeholders - i.e. the poor - have not been adequately sought. It questions just

how effective a poverty reduction plan can be if it does not take into account such

a broad base of opinion.

The head of one major donor agency, who wished to remain anonymous, asks which development

plan the government plans to follow: SEDPII, PRSP, or the sector plans that some

ministries have drafted.

"There is normally only one national development plan [for a country],"

he says. "But here there are several plans, and there are sector plans also.

So what is the real plan? In that context maybe some aid people are puzzled."

The government's Saysamalen doesn't believe there will be confusion.

"The SEDPII and PRSP are consistent - I don't think they conflict with each

other," he says. Saysamalen explains that the PRSP falls within the wider scope

of the SEDPII. Both though are headed in the same direction.

"The notion and concept for poverty reduction is in SEDPII," he says. "And

for the PRSP they try to keep only the pro-poor activities."

Steven Schonberger of the World Bank says the PRSP should reflect rather than dominate

the poverty reduction strategies contained with-in other development programs.

"We would hope the PRSP is an opportunity to take those strategies and sharpen

their linkage and focus on poverty reduction," he says. "Some of the strategies

have costing, some don't; some have explicit monitoring indicators, some don't. Hopefully

the PRSP will assist in terms of fleshing out some of those distinct strategies."

PRSP and its focus

The draft PRSP and its attachments is almost 200 pages long and divided into eight

chapters. The first chapter is an introduction into the need for a PRSP and its objectives,

the second is an analysis of poverty in Cambodia. Much of the rest is given over

to the poverty alleviation plans of different ministries.

Kim Saysamalen heads the General Secretariat of the Council for Social Development,

which is coordinating the PRSP. He says the focus of the document is determined by

poverty surveys which show the country's farmers are generally worst off.

"The surveys ... [show the poorest] are firstly farmers; secondly those living

in rural areas; third have no opportunity to access basic health services; and fourth

no opportunity to access public education," he says. "Those are the four

main factors that we have to look for."

Ministries whose submissions to the first draft don't have poverty alleviation measures

that fit this profile will be asked to resubmit more focused measures.

"In the second step we ask them to cut out the ones that do not reach the poor.

We need direct intervention to the poor first, then indirect later on," he says.

"We have to ask the line ministries to prioritize for poverty reduction, not

for general development in their sectors."

In short, the ministries have been asked to concentrate on the most pressing poverty

reduction measures, and focus on those over the next three years. GS-CSD will ensure

that there is no overlap between the goals of different ministries. The PRSP will

be the national plan to combat poverty, and act as a framework for existing planning

measures.

The rest of the world

In the United Kingdom the Panos Institute, a thinktank, produced an assessment of

PRSPs, which it notes are used in more than 70 low income countries.

The aim of PRSPs is to concentrate national development efforts on poverty alleviation.

That process, Panos notes, produces one definite benefit: it forces governments to

focus on both the nature and causes of poverty.

Once the government has worked out what it needs to combat poverty and how to do

so, it puts this strategy in a PRSP, which then goes to the IMF and World Bank for

approval. Once that is done, the country qualifies for concessional loans.

Reducing Poverty: Is the World Bank's strategy working? raises questions about the

process involved in drawing up a PRSP, and what the term "participatory"

really means in this context.

"Do PRSPs exclude proper analysis of the impacts of globalization on the poor,

because they assume that economic growth is the principal goal?" the paper asks.

"[And] are they doing what is needed to ensure that the poor benefit from economic

growth?"

Panos also asks how PRSPs will be affected if the trading position of poor countries

gets worse, and questions whether they are truly nationally-owned or simply a "formality",

a hoop that developing nation governments must jump through to access necessary funds.

So do PRSPs work? It is simply too early to tell, says Panos.

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