The current economic situation in Cambodia"poses a serious threat to medium-term

[defined as a year] sustainability", according to a recently released World

Bank report.

Cambodia remains one of the poorest countries in Asia, according to the report, with

per capita income less than $300, and widespread poverty with 36 percent of the total

population living below the poverty line.

Revenue collection is one of the largest problems facing the government. The World

Bank says that lost revenues in 1996 and l997 amounted to 5-6 percent of Gross Domestic

Product each year, which was about two-thirds of actual budget revenues.

In 1997, it is estimated that the government lost more than $60 million from illegal

logging alone.

The report, entitled "Cambodia Public Expenditure Review: Enhancing Effectiveness

of Public Expenditures", says that in order to make a transition toward sustainable

development with significant poverty reduction and broad-based economic growth, "Cambodia

must substantially upgrade the current weak physical infrastructure and the poor

quality of human resources."

The World Bank says that the government "must decisively implement" a series

of recommendations which include: fully implementing the Law on Taxation, implementing

VAT for the 800 largest taxpayers, removing incentives granted to resource and resource

processing firms, taking "emergency measures" to arrest the deteriorating

situation in the forestry sector by granting no new concessions, and freezing all

new investment in wood processing and establishing mechanisms to prevent illegal

logging and log exports.

The report was based of a World Bank mission to Cambodia in March 1998 and was discussed

with the government in December.