The World Bank's regional update, released in March, attributes Cambodia's high growth

rates in 2005 to a dramatic shift in agricultural growth - from minus 2 percent in

2004 to 17 percent in 2005, said Robert Taliercio, World Bank Senior Country Economist.

"What we have seen in 2005 is the volatility of the agricultural sector driving

a very high annual growth rate," he said. "High growth in agriculture coupled

with better-than-expected performances in the garments sector and tourism, generated

a very impressive real GDP growth rate.

"Cambodia's agricultural sector seems to be characterized by a boom-and-bust

cycle," he said. "It is a highly erratic sector, it depends mostly on weather

conditions."

But a boom-and-bust agricultural growth cycle has negative ramifications for the

majority of Cambodia's poor, who rely on agriculture as their primary source of income,

said Nisha Agrawal, World Bank Country Manager.

"High fluctuations in agricultural growth rates create a lot of vulnerability

for poor people," she said. "A new agricultural policy - linked to an irrigation

policy - is urgently needed to point the way forward."

Taliercio said the government is aware steps are needed to ensure growth is sustainable.

"The government has noticed that a lack of rural infrastructure is a major impediment

to allowing sustained agricultural development," he said. "[The high growth

in agriculture] is good news, is great news, but it is not necessarily sustainable.

The question now is how do you make the sector sustainable in terms of growth?"

Developing rural infrastructure, coordinating irrigation projects, and resolving

land title disputes were the key steps recommended by the report, and have also been

recognized by the government as crucial to achieving sustainable agricultural growth.

"On these three issues it is technical capacity, not political support, which

is impeding development," Taliercio said.

The report cited the narrow base of Cambodia's economic growth - garment manufacture,

tourism and (sometimes) agriculture - as a cause for concern, with growth rates slowing

during 2005 in all sectors save agriculture.

The report highlights areas where improv ement has manifestly been due to improved

government policy and performance.

"The growth in tax revenue - from 11.3 percent of GDP [gross domestic product]

to 11.7 percent of GDP - is a major achievement," Taliercio said. "It is

a result of increasing compliance, and that requires political backing."

The World Bank aims to encourage further government reform, and consequently ties

its loans to Cambodia's continued improvement in certain key areas.

Talierco said the World Bank has shifted from "structural adjustment" to

the new Poverty Reduction Support Operation (PRSO).

"You will only get reform in areas the government is interested in reforming,"

he said. "The PRSO is trying to build ownership and work with reformers... We

are working to build a common understanding of the goals we are working towards."