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Tearing down the ‘bric’ walls

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Double-edged sword: projects such as the Boeung Kak lake development have come at a cost to society. Photograph: Bloomberg

Amid the pomp and circumstance as Cambodians bade a final farewell to King Father Norodom Sihanouk, little attention, understandably, was paid to some development news announced just two weeks earlier.

On January 17, Deputy Prime Minister and Minister of Economy and Finance Keat Chhon signed agreements with the Asian Development Bank (ADB) for $230 million in grant and loan agreements to promote “inclusive growth” in Cambodia.

This followed a December announcement by the ADB of a three-year pipeline of $525 million — including more than $491 million in concessional loans — to advance Cambodia’s development.

As with many such announcements, there was talk of scaling up development initiatives and building sustainable economic growth.

Chhon referred to the January agreements as “a significant milestone in the 20-year partnership between the Royal Cambodian Government and the ADB”.

Focused on poverty reduction, the ADB remains one of Cambodia’s largest multilateral development partners, having provided more than $1.2 billion in assistance since 1966, much of it since 1992.

Japan and the US are the largest shareholders in the ADB.

If recent history is to be our guide, however, perhaps a little scepticism is warranted.

For three years, I served under Barack Obama and George W Bush as the US ambassador to the ADB.

As a member of the ADB’s board of directors, I had the opportunity to meet not just with Prime Minister Hun Sen and other officials, but to engage with civil society and everyday citizens.  

Travelling across Cambodia, I also gained a better understanding of the strengths and shortcomings of ADB-financed efforts, whether to address the consequences of unrestrained development near Tonle Sap lake or to foster so-called “economic growth corridors”.

Too often, despite the best intentions, there was a lack of focus. Limited resources were spread too thinly, and greater vigilance was needed to ensure greater transparency in procurement, as well as full compliance with social and environmental safeguards.

For Cambodia and its development partners, an inconvenient truth remains.

The prescription for economic growth in the world’s least developed nations is straightforward: improve the bureaucracy, regulate fairly, intervene rarely and stamp out corruption. Investment, business confidence and growth will follow.  

But as Cambodia’s citizens look to a new chapter in their nation’s history, they may well ask not just where past development assistance dollars have gone and what they have achieved, but also four much broader questions: is Cambodia’s bureaucracy hindering or fostering the Kingdom’s economic growth?  

Whether in Phnom Penh or Washington, a real fight against bureaucracy must include assessing what works and what doesn’t, then getting rid of the latter. Service quality — not just size — matters when it comes to government.  

How are regulations impacting on job creation?

This remains a critical question as more and more Cambodians move from rural to urban areas.

Some level of regulation is essential, but rules need to be consistent and enforced fairly, transparently and equally if everyday citizens and outside investors are to have the confidence to create the jobs essential for Cambodia’s future.  

When is government intervention appropriate?

Governments in Asia have often sought to pick winners and losers, distorting markets and hurting competition in the process.

China, Cambodia’s big neighbour and patron to the north, provides numerous examples of interventions gone awry, leading to inefficiency and unintended consequences. Interventions, if any, should be limited and a last resort.

What more can be done to root out corruption?

Corruption and cronyism go hand-in-hand around the world.

Cambodia ranks a striking 157th out of 176 rated countries and territories on Transparency International’s 2012 Corruption Perception Index, which looks at perceived levels of public-sector corruption.  

Vietnam is ranked 123rd, Laos 160th and Myanmar 172nd  —  a poor showing for the much-touted Lower Mekong sub-region.

Allegations of favouritism must be investigated, institutions strengthened and individuals held accountable if people are to have any confidence in the public sector.

The ADB says obstacles to growth in Cambodia include a narrow economic base; high costs and poor infrastructure; limited access to social services; inadequate access to natural resources and affordable finance; and governance.

Moving forward, however, will also require policymakers to commit to tearing down new walls of bureaucracy, regulation, interventionism and corruption that are being built.

This lower-case “bric” may well pose the biggest challenge to Cambodia’s development, just as it may hinder progress in the larger BRIC economies of Brazil, Russia, India and China.

More than another World Bank program or an ADB loan, grant or technical assistance, what Cambodia needs most is a policy environment that will foster job growth and drive the economy forward.

A focus on innovation, infrastructure improvements and a thriving private sector will be critical to the nation’s future.

Without question, the people of Cambodia deserve no less than this. What a fitting tribute to the King Father that would be.

Curtis S Chin, a former US ambassador to the Asian Development Bank, is a senior fellow of the Asian Institute of Technology.

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