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PRSP consultation: round two shows gaps

PRSP consultation: round two shows gaps

A workshop on the second draft of the Poverty Reduction Strategy Paper (PRSP) saw

wide-ranging views expressed on all aspects of the draft, with the focus on the rural

and economic sectors.

The workshop, which was held on November 12, was a chance for the government, major

donors and NGOs to contribute further to the country's main three-year plan to overcome

widespread poverty.

The PRSP is the government's main strategy to reduce the number of people living

under the poverty line of 50 cents a day from 36 percent to 19 percent by 2015. It

is also a requirement for all countries that want IMF and World Bank loans, which

will be contingent on the two bodies approving the PRSP.

The current draft includes submissions from different ministries, and builds on the

earlier interim PRSP and the second socio-economic development plan (SEDP-II) drawn

up by the Asian Development Bank.

Among the major issues raised by participants were the lack of assessments done on

proposed poverty reduction programs, a misplaced focus on foreign investment rather

than the domestic economy, the need to focus on the rural sector, and the inclusion

of export processing zones (EPZs) as a poverty reduction measure. Some speakers also

called for more consultation with stakeholders.

Kim Saysamalen is secretary-general of the General Secretariat of the Council for

Social Development (GS-CSD), the government's coordinating body for the PRSP. He

said the plan needed to be put in place as soon as possible.

"We cannot delay this schedule any more," Saysamalen said, echoing his

comment earlier this year that the poor had waited long enough for efforts to tackle


He also stressed that the plan's targets needed to be closely monitored. Another

issue was that the disbursement of funds needed to be timely. He also recognized

the need for good governance, decentralization, transparency and accountability in

the process.

The PRSP, he said, would be submitted to the government for approval on December

20, then sent to the World Bank and the International Monetary Fund for approval

by January or February 2003.

Criticisms of the draft came from all quarters. Mam Nhim, representing garment workers'

union NIFTUC, said some aspects designed to attract further foreign investment had

her union concerned.

"The government has planned to reduce wages to make labor cheap," Nhim

said, adding that NIFTUC represents thousands of Cambodian workers. "The trade

union would like to oppose this policy ... [The government] sees that reduction of

salaries is easier than reducing corruption."

That was sharply refuted by a spokesperson from the GS-CSD, whose spokesman said

he was irritated by such talk. The government, he maintained, had no plans to cut


Robert Hagemann, the International Monetary Fund (IMF) representative, strongly criticized

the inclusion of EPZs, which he said could actually reduce government revenue. EPZs

are foreign-controlled zones in Cambodia in which "export-oriented enterprises"

will be set up.. One is already under construction in Koh Kong.

"With respect to trade policy, there is one area in which I think the paper

is wrong," he said. "One has to stretch one's imagination to see export

processing zones as a poverty reduction strategy. I'm arguing and urging drafters

to consider not singing the praises of EPZ as a poverty reduction measure."

Hagemann also said there were shortcomings in the macro-economic framework, which

needed to be more extensive and more clearly spelled out. He also recommended the

medium-term macro scenario be extended by two years beyond 2005.

"The draft has been trimmed to a point where it is almost impossible to tell

what the macro-framework is," he said. "Fiscal policy is not adequately

linked to the medium-term macro framework."

Russell Peterson, NGO Forum's representative, warned that trade related aspects,

which are a condition of the IMF's current loan to the country's central bank, should

not be part of any loan conditions.

"Trade liberalization should not be a condition of either World Bank or IMF

loans, because the rich countries that dominate their boards have their own trading

interests," Peterson said.

The IMF, however, would not discuss loan conditions until negotiations for the program

had taken place. To do so, said Hagemann, would be "putting the cart before

the horse". However he accepted that trade could be part of loan conditions,

especially given Cam-bodia's desire to join the World Trade Organization (WTO).

"As I said at the workshop, it is not impossible that, under a program with

the IMF, a government would be held to adopt policies that are in any event obligations

of the country in connection with its other initiatives," Hagemann told the


NGO Forum's Peterson also criticized the World Bank, stating that it had tried to

make the PRSP process open and participatory, yet its loan condition process was

anything but. He also expressed concerns for the country's democratic process, since

neither the loan conditions nor the PRSP needed National Assembly approval.

"The World Bank has created the new PRSP process which is all very participatory,

but what about their loan conditions?" he asked. "They will still have

policy conditions, but how are those policy conditions arrived at?"

World Bank country head Bonaventure Mbida-Essam was "too busy" to answer

questions on the PRSP.

International NGO Oxfam stated that the PRSP focused heavily on international integration,

but felt Cambodia needed to strengthen its local economy, particularly by investing

in the rural sector.

"There is a need to balance heavy reliance on export-led growth, which relies

on foreign direct investment and EPZs, by stimulating the domestic economy and domestic

demand," said Mia Hyun, senior program officer for Oxfam America.

The NGO also referred to the World Bank's instrument for assessing the impact of

policy options, the poverty social impact analysis (PSIA). The PSIA has not been

used on any of the programs in the PRSP, despite the document stating that the PRSP

process would assess the social implications.

Hyun said it was "critical" that an impact assessment was now carried out

"on various policy options being presented that have potentially negative impacts

for poverty reduction".

"This includes the impact of rapid trade liberalization on small scale producers

and farmers and EPZs," Hyun said.

And NGO Forum noted that tackling the inefficient and corrupt public service ought

to be regarded as the highest priority in order for the PRSP to succeed.

"The three main impediments ... are insufficient wages and allowances, rampant

corruption, and the unpredictable and irregular disbursement of funds," Peterson

told the conference. He said clear indicators for these issues must be included in

the monitoring section of the paper.

A further criticism expressed by participants was that the PRSP document was only

available in English. Chea Vannath from the Center for Social Development joined

other NGOs in calling for copies in Khmer to allow more input from local people.

The government promised it would happen by December 6.

Sok An, Minister for the Council of Ministers, stressed the government's commitment

to continue its reform projects, especially demobilization.

He agreed that coordination between the different ministries was not yet sufficiently

coherent, but said the document was a "testimony of remarkable cross-sectoral

cooperation". He said broader participation "from all spectra, especially

... from the poor" was needed in evaluating the effects of the PRSP.

Sok An added that the government recognized that economic growth alone was insufficient

to reduce poverty, a point applauded by UNICEF. Its country representative, Louis-Georges

Arsenault, said the UN body "welcomes the recognition that to reduce poverty

we need to do more than increase income".

"We caution against using the poverty line as an indicator of poverty, as it

suggests that those living just above the poverty line are not poor," said Arsenault,

who urged the government to get the poor more involved in the PRSP's implementation.


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