81787 REAL GDP GROWTH 12 TOURIST ARRIVALS (Y/Y % 30 RIGHT SCALE) 10 20 GARMENT EXPORTS (Y/Y % CHANGE, RIGHT SCALE) 8 10 6 0 4 -10 2 0 -20 2006 2007 2008 2009 2010 2011 2012 THE WORLD BANK SEPTEMBER 2013 RESILIENCE AMIDST A CHALLENGING ENVIRONMENT C AMBODIA E CONOMIC U PDATE SEPTEMBER 2013 @ All rights reserved This Cambodia Economic Update is a product of the World Bank. The findings, interpretations, and conclusions expressed in the Update  are those of World Bank staff, and do not necessarily reflect the views of its management, Executive Board, or the governments they represent. The World Bank does not guarantee the accuracy of the data included in this work. PREFACE AND ACKNOWLEDGEMENTS The Cambodia Economic Update is a product of the staff of the World Bank. It was prepared by Sodeth Ly, and reviewed and edited by Enrique Aldaz-Carroll, Poverty Reduction and Economic Management (PREM) Sector Department, Cambodia Country Office, the World Bank. The Poverty Team, led by Samsen Neak, contributed the poverty section for the Update. The team worked under the guidance of Mathew A. Verghis, Lead Economist and Sector Manager, PREM Sector Department, and Alassane Sow, Country Manager for Cambodia. The Update is produced bi-annually to provide up-to-date information on macroeconomic developments in Cambodia. The Update is published and distributed widely to the Cambodian authorities, the development partner community, the private sector, think tanks, civil society organizations, non-government organizations, and academia. The Update is timed to coincide with the six-monthly publication of the East Asia Economic Updates by the East Asia PREM Department of the World Bank. We received valuable comments and suggestions from PREM colleagues, namely Douglas M. Addison, Shabih Ali Mohib, and Young Hwan Cha. Good comments and suggestions were also received from Ralph van Doorn, Economic Policy & Debt Department. We are highly grateful for insightful comments and suggestions provided by James Seward, the Financial and Private Sector Department. Simeth Beng, Human Development Sector Department also contributed some suggestions. Linna Ky helped format the Update and provided excellent logistical and administrative support for its preparation and the publication. We are very grateful to the Cambodian authorities for their cooperation and support in the preparation of the Update. For information about the World Bank and its activities in Cambodia, please visit www.worldbank.org/kh. To be included in the email distribution list of the Cambodia Economic Update and related publications, please contact Linna Ky (lky@worldbank.org). For questions on the content of this publication, please contact Saroeun Bou (sbou@worldbank.org). 1 Contents A. ...................................................................................................................1 Executive Summary.. B. Global Environment....................................................................................................................4 World Economic Growth.........................................................................................................4 World Commodity Prices.........................................................................................................5 C. The Cambodian Economy...........................................................................................................6 Real Sector..................................................................................................................................6 Agriculture...............................................................................................................................6 Rice production........................................................................................................................7 Garments..................................................................................................................................8 Construction and Real Estate...................................................................................................9 Tourism....................................................................................................................................9 Employments and Labor costs.................................................................................................9 Balance of Payments................................................................................................................10 Inflation....................................................................................................................................13 Monetary Sector..........................................................................................................................15 Gross International Reserves...................................................................................................16 Net Foreign Assets...................................................................................................................16 Monetary Aggregates, Interest Rates and Exchange Rates. .....................................................17 Exchange Rate.........................................................................................................................18 The Banking Sector. .................................................................................................................19 Fiscal Sector................................................................................................................................21 Revenue and Its Main Components.........................................................................................21 Fiscal Balance..........................................................................................................................24 Sectorial Spending...................................................................................................................25 D. ..................................................................................................................................26 Conclusion. E. Special Focus: Poverty................................................................................................................27 Annex 1 World Economic Indicators.........................................................................................................31 Annex 2 ..........................................................................................................32 Cambodia: Key Indicators. Annex 3 Cambodia: Domestically Financed Sectoral Spending...............................................................33 BOXES Box 1. Fabric Imports and Garment Exports...............................................................................8 Box 2. Full Dollarization.............................................................................................................15 Box 3. Debt Sustainability...........................................................................................................22 A. Executive Summary 1. Four years after the onset of the Global Financial Crisis, the world economy continues to struggle. According to the June 2013 Global Economic Prospects, the global economic environment remains fragile, although the balance of risks is now less skewed to the downside than it has been in recent years. The US has been signaling an exit from quantitative easing. Developing country currencies have come under pressure, and their interest rates have been on the rise, contributing to inflation and weaker growth. This may complicate in particular those economies that have seen big increases in credit during the period when interest rates were low, or where current account and government deficits are high. Developing economies remain the main driver of global growth, but their output has slowed compared with the pre-crisis period. 2. The Cambodian economy remains robust amidst the challenging global economic environment, and prospects for meeting the growth projection of 7 percent in 2013 appear favorable. Real GDP growth was 7.3 percent in 2012. The GDP growth has been driven by a sustained strong agriculture sector growth, resilient exports, rebounding construction activity, and a robust tourism sector. However, going forward, the slower growth in China and prolonged sluggish growth in the United States and the European Union may affect demand for Cambodian products and services, and represents an external downside risk. 3. Garment exports have expanded by 18 percent year on year as of June 2013. The tourism sector continues its high growth trajectory. Tourist arrival number reached 19 percent year on year by June 2013. Adaptation to changes in destination markets for garments, expanded cultivated area, and a diversification in sources of tourism have helped Cambodia’s three key engines of GDP growth sustain their momentum. 4. With moderate imports and robust exports, the current account deficit is projected to be narrower. 1 This year’s current account deficit excluding official transfers is projected to be around 9 percent of GDP, as opposed to 10.1 percent of GDP in 2012. The capital and financial account surplus continues as foreign direct investment remains sustained over the first half of 2013, and investor interest appeared to be strong during the election period, unlike in past elections. It is unclear yet how big an impact the political uncertainty post-elections is having on foreign direct investment. By June 2013, the gross international reserves reached US$ 3.6 billion, compared to US$ 3.5 billion by the end of 2012. 5. In June 2013, year on year inflation picked up, reaching 2.9 percent due to slightly elevated foods prices. Inflation is projected to remain at low single digit figures during the short term. The Consumer Price Index (CPI) eased in 2012, dropping to 2.5 percent by the end of 2012, compared to 4.9 percent in 2011 due to stabilization of the main 1 Current account deficit excluding official transfers 4 1 product categories, in particular food prices, which represent 43 percent weight of the inflation basket. 6. The Dollar has appreciated since the second quarter of this year; and this has forced the Central Bank to intervene. By June 2013, a loss of about US$ 150 million of Central Bank’s international reserves was recorded. The exchange rate depreciated and reached Cambodian Riel 4,062 per US Dollar in June 2013. 2 The Riel is pegged to the US Dollar, and the exchange rate has been hovering around Riel 4,000 per Dollar. The financial deepening continues and a growing number of banks are entering the Cambodian market. Competition among banks has contributed to narrowing the US Dollar interest rate spread, and driving some efficiency into the market. However, there are also significant risks to having a large number of banks due to supervision capacity challenges. 7. During the first five months of 2013, domestic revenue continues to improve but at a slower pace, rising only at 9.6 percent year on year, compared to 24.7 percent in 2012. 3 Public expenditure performance, however, appears slower. Therefore, budget deficit (excluding grants) should remain as budgeted at around 5.4 percent of GDP. Fiscal management remains appropriate and supportive of macroeconomic stability but there is significant room for domestic revenues to be further improved and for greater efficiency in spending. In 2012, Cambodia restored its fiscal space, thanks to a high growth of revenue, estimated to reach 14.4 percent of GDP in 2012, compared to 13.1 percent in 2011. Government, however, continues to depend heavily on donors whose funds account for almost 80 percent of the total public investments or 34 percent of the total public outlays. 8. Budget allocations for key social sectors like health and education are trending downward in relative terms. 4 The shares of the health and education sectors in total domestically financed spending decreased to 8.7 percent and 10.3 percent in 2011 from 9.8 percent and 14.2 percent in 2007, respectively. The shares of general administration, defense and security sectors combined risen very quickly, reaching 60 percent of the total spending in 2011 from 44.3 percent in 2007, reflecting increasing demand for security and defense related expenditures. In percentage of GDP, domestically financed spending for the health sector is slightly trending upward, rising to 1.3 percent in 2011 from 1.0 percent in 2007 while the spending by the education sector has remained at 1.6 percent of GDP since 2007. A recent report found that Cambodia’s public spending on education is only half that of its peers; and there is inefficient spending in the health sector. 5 9. The overall debt sustainability outlook remains favorable. The 2012 joint Word Bank/IMF DSA shows that Cambodia’s debt distress rating remains low. The Government’s policy of avoiding non-concessional borrowings has been a key factor to 2 Official mid-point exchange rate 3 Preliminary fiscal data for 2013 4 2012 Sectoral spending data are not available yet 5 2011 Integrated Fiduciary Assessment and Public Expenditure Review (IFAPER), the World Bank. 5 2 sustainable debt management. Cambodia’s external public debt and publicly-guaranteed debt stock is estimated to reach 30.1 percent of GDP in nominal terms by the end of 2012. 10. As a result of the rapid pace and pattern of growth that shared benefits to a larger number of people, Cambodian poverty has fallen sharply. Economic growth broadened over the past years thanks in large part to the sustained growth in the agricultural sector favored by increases in rice prices in the global markets. The percentage of poor people was more than halved within seven years down to around 20 percent in 2011. Despite this large poverty reduction, the vast majority of the families who were lifted out of poverty were so only by a small margin, implying that those families moved from being poor to being just near-poor. 11. In sum, the key messages include: (a) sustain robust growth by promoting diversification and enhancing competitiveness; (b) maintain banking and financial stability with effective supervision; and (c) improve fiscal management by increasing revenue and more efficient spending. The Update is organized into five sections. Section A provides an executive summary. Section B introduces the global economic environment and outlook. Section C discusses in detail the Cambodian Economy. Section D offers suggestions and way forward. The Update ends with Section E, presenting key findings of the recent Cambodia poverty assessment. 6 3 second half of 2012 has continued. The B. Global Environment 6 improvement reflects progress toward fiscal sustainability in the Euro Area. This World Economic Growth is in tandem with the extraordinary monetary policy steps undertaken by major 1. The global economy is transitioning central bankers that have flooded markets toward a more stable period, but slower with liquidity. growth. Financial conditions in high- income countries have improved, and risks 5. Developing countries are leading a are down. However, their growth rates are rebound in activity, but their growth expected to slowly accelerate, with GDP eased in the first quarter this year. The expanding only 1.2 percent this year, but turnaround, which began in the East Asia firming to 2.0 and 2.3 percent in 2014 and & Pacific Region, has spread more widely. 2015 respectively (Annex 1). It is projected Developing countries have benefited from that the aggregate GDP of developing quantitative easing, which stimulates high- countries will grow by a solid 5.1 percent income-country GDP, lowering borrowing this year and by 5.6 and 5.8 percent in costs, and avoiding a financial-sector 2014 and 2015 respectively. meltdown. Moreover, the increased liquidity has not produced excessive capital 2. Challenges, however, are quite diverse. flows. They include inflationary pressures and asset price bubbles, and weaker than pre- 6. The pickup in growth in the first crisis growth rates, in addition to the quarter of 2013 has eased. This reflects challenges that the eventual withdrawal of China’s rebalancing efforts, the Yen quantitative easing may bring. depreciation, lower commodity prices, capacity constraints in many developing 3. Inflation pressures remain subdued. economies, and a gradual tightening of Despite the monetary stimulus and an macroeconomic policies. As a result, the acceleration in developing-country growth sharp recovery in trade appears to be in the last quarter of 2012, inflation losing momentum. Developing-country pressures remain relatively subdued, import demand slowed, and both export although East Asia, the Middle East & and import demand from high-income North Africa, and South Asia are showing countries turned negative. Once high- signs of rising inflation. income countries are less actively pursuing quantitative easing, or beginning to unwind 4. Capital flows to developing countries long-term positions, interest rates are likely have also recovered in nominal terms. to rise. They are close-to-peak levels, and the recovery of bank flows suggests the worst 7. The US has recently been signaling an effects of Euro Zone deleveraging on exit from quantitative easing, and developing countries have passed. speculation about the timing of the exit Financial market conditions have has been shaking financial markets. stabilized, and substantial improvement in Yields on US treasuries have already risen, global financial conditions since the making these less-risky assets much more attractive than they have been in the past. 6 June 2013 Global Economic Prospect (GEP), the World Bank 7 4 As a result, money has been flowing back reduced production costs due to lower into the Dollar. Developing country energy and fertilizer prices. currencies have come under pressure, and their interest rates have also been on the 10. A decline in commodity prices has rise; and this is contributing to inflation been considered as a new risk. While and weaker growth. Less investment, and the decline would benefit global GDP, it slower growth going forward may affect could put stress on the current accounts those countries that have experienced and fiscal balances of commodity increases in credit during the period when exporters. The recent decline in industrial interest rates were low, or where current commodity prices is, perhaps, signaling an account and government deficits were end to the upward phase of the high. commodity cycle. Policy makers in commodity-exporting countries need to take a close look at the potential World Commodity Prices consequences of a sharper-than-anticipated decline in commodity prices, for growth, 8. Over the past year, energy and metal government finances, and their external prices have been easing in response to financing needs. However, an exit from new capacity. This appears to be in quantitative easing by the United States, if response to supply and demand-side it occurs, may reverse the decline. substitution, induced by high commodity prices. Since 2000, capital expenditures by major firms in oil and metal markets have quintupled. Demand suppression has also been at work. The combination of increased supply and weak demand has resulted in a buildup in global stocks. As a result, despite the strengthening of the global economy, the prices of most industrial commodities have been declining, e.g. metal prices are down 30 percent since their February 2011 peak. 9. Commodity prices are expected to continue to ease over the medium term. The World Bank forecasts the price of a barrel of oil to ease to US$ 102 in 2013, and to US$ 101 in 2014. Similarly, metal prices are expected to decline in real terms by 3.7 and 1.4 percent in 2013 and 2014, respectively. Food prices are also projected to decline (7.7, 6.0, and 5.5 percent over 2013–15), reflecting a gradual improvement in supply conditions, and 8 5 Real GDP Growth C. The Cambodian Economy (Y/Y % change) 14% Real Sector 12% 10% 11. Prospects for meeting the growth 8% projection of 7 percent in 2013 appear 6% favorable. The economy remains resilient 4% and overall macroeconomic outlook 2% remains positive, having sustained 0% 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 Proj. agricultural growth with favorable weather conditions, continued strong performance Source: National Institute of Statistics, and Staff estimates of the tourism sector, and a resilient garment sector. The sustained agricultural Contribution to real GDP growth growth helped cushion shocks, while well- (In percent) adapted garment exports quickly 16.0 Agriculture 16.0 recovered, and successfully diversified 12.0 Industry Services 12.0 tourist markets supporting robust tourism Others sector growth: these are the reasons why 8.0 Real GDP growth 8.0 the economy bounced back quickly from 4.0 4.0 2008 – 2009 Global Economic Crisis. The outlook, however, depends on the external 0.0 0.0 environment, which remains fragile, although the balance of risks is less tilted -4.0 -4.0 2004 2005 2006 2007 2008 2009 2010 2011 2012 toward the downside; and on the domestic Source: National Institute of Statistics political environment, given the uncertainty after the July 2013 general elections. In Agriculture terms of sectoral contribution, the agriculture sector contributed 15.0 percent 12. Agriculture growth is projected to to the real GDP growth in 2012, compared remain sustained in 2013 due to to 11.3 percent in 2011 and 18.3 percent in favorable weather conditions. By the 2010. Industry sector’s contribution to the end of August 2013, the Ministry of real GDP growth was 35.6 percent in 2012, Agriculture, Forestry and Fisheries down from 54.9 percent in 2011, and 56.5 (MAFF) reported rice planning area percent in 2010. The services sector increase of 11 percent compared to the contributed 42.5 percent in 2012 up from same period last year. Agricultural growth 26.8 percent in 2011 and 21.7 percent in at constant prices was 4.3 percent in 2012, 2010. comparable to the 2011 and 2010 growth rates of 3.1 percent and 4.0 percent, respectively. The main agricultural production is in rice crops, which continue to provide a contribution of about 10 percent of the total real growth during the last three years (2010-2012). Due to sustained agriculture growth, after years of agriculture and irrigation investments, the real growth has now 9 6 been largely influenced by the garment and tourist Rice production sectors. (In mln of metric tons, and y/y % change of total production) Wet season Dry season Y/Y % change (right scale) Tourist arrivals, garment exports & real growth 10.0 10.0 (In percent) 9.0 9.0 Real GDP growth Tourist 8.0 8.0 12 arrivals (y/y 30 7.0 7.0 Garment exports (in 12 mma, right volume, y/y 12 mma, scale) 6.0 6.0 10 right scale) 5.0 5.0 20 4.0 4.0 8 10 3.0 3.0 2.0 2.0 6 1.0 1.0 0 4 0.0 0.0 2006 2007 2008 2009 2010 2011 2012 -10 2 Source: Ministr y of Agriculture, Forestry, and Fisheries 0 -20 14. Due to weaknesses in rice milling 2006 2007 2008 2009 2010 2011 2012 Source: Cambodian authorities capacity and financing, Cambodia exports most of its rice surplus Rice production unprocessed, in paddy form. The surplus is estimated at 4.7 million tons in 13. Contribution by expanding cultivated 2012 by MAFF and paddy rice exports are areas of rice crops accounts for up to 80 not recorded. Cambodia has recently percent of the annual rice production started to export milled rice. During the increase during the last four years. Yield first six months of 2013, milled rice contributes the remaining 20 percent. An exports were more than double those of important development is the increase in the same period last year, reaching 185 share of the dry seasonal rice production thousand metric tons and generating US$ (due to increased access to irrigation 136 million, a 28 percent increase year on systems in dry season), which has gradually year. 7 Milled rice exports, mostly destined grown to 23.3 percent of the total annual for Europe, have benefited from rice production in 2012, from 18.5 percent Everything but Arms arrangement under in 2003. Less weather-dependent dry the EU’s Generalized Scheme of season rice cultivation plays a major role in Preferences. 8 In 2010, the Government, stabilizing the annual rice output. pursuing its rice policy, set up a milled rice export target of up to 1 million metric tons by 2015. Since then both public and private financing has gone to agriculture and agricultural processing. Total credits by the banking system to the agriculture sector and agriculture processing has more than 7June 2013, rice exports data, Ministry of Commerce. 8Everything but arms provides a “bonus” of about EUR 175 per metric ton of milled rice exports. 10 7 doubled, rising to US$ 573 million in 2012 Garment exports from US$ 221 million in 2010. 9 (YTD in US$ million (left) & Y/Y % change of 12mma (right)) US market EU market Japan Others 4,500 40 Garments 4,000 Y/Y of 12 mma 30 3,500 15. Garment exports growth accelerated 3,000 2,500 20 further during the first half of 2013, 2,000 10 reaching 18 percent year-on-year. The 1,500 0 1,000 garment export industry has adapted to 500 -10 export market conditions to grow. Export 0 -20 strategies, focusing on lower-end garment products Feb-12 Mar-12 Jun-12 Sep-12 Dec-06 Dec-07 Dec-08 Dec-09 Dec-10 Dec-11 Jan-12 Oct-12 May-12 Jul-12 Aug-12 Nov-12 Dec-12 Apr-12 for the United States (US) market and higher-end Source: General Department of Customs and Excises products for the European Union (EU) market, with the comparative advantage of low labor costs, have allowed the industry to grow. Garment 16. The U.S. remains the largest garment exports grew 7 percent and 31 percent year export market destination for on year in 2012 and 2011, respectively. Cambodia, but its share continues to shrink. The US market captured US$ 1,930.5 million (or 45 percent) of the total Box 1. Fabric Imports and Garment Exports garment exports of US$ 4,274 million in Imports of fabric, a leading indicator for 2012 (see the figure above). The EU garment production and exports, continue to market is second, generating US$ 1,409.8 grow since the 2008 – 2009 Global Economic Crisis. In 2012, the fabric imports grew by 20 million (or 33 percent). Benefiting from percent year on year in value terms, supporting a 10 Everything but Arms arrangement under percent year on year growth of garment exports; and the EU’s Generalized Scheme of the percentage changes of fabric imports closely in Preferences, the EU market share of the tandem with those of garment exports continue (see the figure below). This reflects persistent absence of Cambodian garment exports gained import substitution of inputs for the garment sector quickly, capturing 33 percent in 2012, from and therefore, further gains from value chain of 29 percent in 2011, and 23 percent in 2010; garment products remain unrealized. while the US market shrank from 60 percent in 2010, to 51 percent in 2011, and to 45 percent in 2012. Japan has rapidly emerged as a garment export market destination for Cambodia, and the Japanese market generated US$ 137 million in garment exports in 2012, compared to only US$ 24 million in 2010. In volume terms, exports to the US market also dropped from 68 percent in 2010, to 60 percent in 2011, and to 53 percent in 2012; while the EU market share rose to 26 percent in 2012, from 24 percent in 2011, and 18 percent in 2010 (see the figure below). 9 2012 Annual Report, National Bank of Cambodia 11 8 Garment exports Tourism (YTD million of Doz (left) & Y/Y % change of 12mma (right)) US market Japan EU market Others 18. Tourist arrivals during the first five 140 growth rate (right) 35 30 months of 2013 reached 1.79 million, or 120 25 19 percent year on year increase. Tourist 100 20 15 arrival numbers, as a proxy for the tourism 80 60 10 sector performance, has shown a quick 5 40 0 recovery, and now continues its high 20 -5 growth trajectory. Tourist arrivals reached -10 0 -15 3.58 million visitors, representing 24 percent year on year growth in 2012, Jan-12 Feb-12 Apr-12 Nov-12 Mar-12 Sep-12 Jun-12 May-12 Jul-12 Aug-12 Oct-12 Dec-06 Dec-07 Dec-08 Dec-09 Dec-10 Dec-11 Dec-12 Source: General Department of Customs and Excises compared to 15 percent growth in 2011. Successful diversification of tourism Construction and Real Estate markets, attracting arrivals from Eastern Europe, East Asia and the Pacific regions, 17. Approved investments in construction has resulted in continued high growth in rose quickly during the first six months the tourism sector. Establishing new direct of 2013. 10 The monthly construction flights from the different regions of the approval skyrocketed in June 2013, world also supports a higher year on year reaching US$ 1.4 billion from US$ 126 growth of arrivals by air (which is seen as million in January 2013, bringing the total “quality growth” tourism), from 13.5 construction investment approval during percent in 2011 to 16.3 percent in 2012. the first six months to US$ 1.93 billion. High growth in the tourism sector allows While construction and real estate activity trade, hotel, and restaurant subsectors has largely concentrated on smaller and combined to contribute more than 15 more dispersed residential and commercial percent to the total real growth during areas, latest developments suggest that by 2010 – 2012 period. mid-2013, there were early signs of bubbles in the real estate sector in the urban areas and domestic credits played a much bigger Tourist arrivals role in financing the sector. 4.0 (YTD in million (left), & Y/Y % change of 12mma (right)) 50 3.5 Number of Tourist 40 Monthly construction approval 3.0 arrivals Tourist arrivals (In million of US dollars) 2.5 30 growth rate 2.0 (right scale) 1,600 1.5 20 1,400 1,200 1.0 10 1,000 0.5 Millions 800 0.0 0 600 Feb-12 Mar-12 Jun-12 Sep-12 Dec-05 Dec-06 Dec-07 Dec-08 Dec-09 Dec-10 Dec-11 Jan-12 Oct-12 May-12 Jul-12 Aug-12 Nov-12 Dec-12 Apr-12 400 200 Source: Ministry of Tourism 0 Jan-13 Feb-13 Mar-13 Apr-13 May-13 Jun-13 Employments and Labor costs Source: Ministry of Land, Urbanization and construction 19. The agriculture sector employs up to 10Construction projects approved by the Ministry of Land and Urbanization 55.8 percent of the total employed and Construction. 12 9 population (7.9 million out of 14.1 million 29.1 percent in 2004. The services sector population). 11 Of the total rural employment, continues to provide sustained the agriculture sector provides 66.7 percent, while employment at around 17 percent for the the rest is provided almost equally by the industry rural areas, whereas the share has gradually and services sectors. This reminds policy declined in the urban areas, in particular makers that agriculture should not be the Phnom Penh, dropping to 73.7 percent in only focus when it comes to improving 2011 from 80.9 percent in 2004. living conditions and reducing poverty in the rural areas. 22. The minimum wage for garment factory workers has recently increased 20. The industry sector is absorbing by 31 percent, after a 22 percent increasingly large proportions of the increase in 2010. From May 2013, the labor force. It provided up to 16.9 percent monthly minimum salary is US$ 80, of total employment in 2011, compared to compared to US$ 61 effective July 2010, only 13.3 percent in 2004. The share of and US$ 50 starting from 2008. 12 This employment provided by the industry sector in seems to be in contrast to the deceleration Phnom Penh rose quickly (close to a one-percent of a number of selected labor costs increase per year), from 17.8 percent in 2004, surveyed for the monthly inflation basket, reaching 24 percent in 2011. This suggests a which remain eased since the Global move toward “industrialization” in the Financial Crisis (see the figure below). capital city, supported by rural - capital labor migration. In the rural areas the share Selected labor costs has also improved, but at a much slower Housing maintenance (Y/Y % change) Cleaning, repair & lent clothing pace, reaching 16 percent in 2011 from 13 Personal care Medical outpatient 20 20 percent in 2004, suggesting that the industrialization process in the rural areas 15 15 is much slower. 10 10 5 5 Employment provided by the industry 0 0 30 sector and by region -5 -5 (% of total employment) 25 -10 -10 Jan-07 Nov-07 Apr-08 Jan-12 Sep-08 Feb-09 Nov-12 Mar-06 Jun-07 Mar-11 Jun-12 Jul-09 May-10 Aug-06 Oct-10 Aug-11 Dec-09 20 15 Source: National Institute of Statistics 10 5 Balance of Payments - Exports Phnom Penh Other rural Phnom Penh Other rural 2004 2011 23. Thanks to further acceleration of Source: CSES 2011, National Institute of Statistics garment exports, total exports are projected to improve in 2013. Exports of 21. The employment share of the services sector has only slightly changed, 12 While Cambodia’s minimum wage remains low, the country’s productivity declining to 27.3 percent in 2011 from (output per worker = value added per person employed) lags far behind its neighbors. Cambodia’s output per worker is about one-half that of Vietnam, and only one-fifth that of Thailand. See 2010 Labor and Social Trends in 11 Cambodian Socio-Economic Survey (CSES) 2011, National Institute of Cambodia, International Labor Organization and the National Institute of Statistics Statistics for details. 13 10 goods are projected to grow at 15 percent Total Imports year on year in 2013, compared to 11.4 (In million of USD) percent in 2012. Exported garment 9,000 Imports o/w petroleum o/w garment inputs products accounted for 75 percent of total 8,000 domestic exports in 2012. Exports of 7,000 footwear and agricultural products, such as 6,000 5,000 rubber and milled rice, are picking up, but 4,000 remain relatively small. Exports, which 3,000 shrank by 14 percent in 2008, recovered 2,000 quickly since the Global Economic Crisis, 1,000 and grew at 30 percent and 34.4 percent 0 2007 2008 2009 2010 2011 2012 year on year in 2010 and 2011, respectively. Source: National Bank of Cambodia Total Exports Main imported products Exports o/w garment Y/Y % change garment (r. scale) (In billion of riels and % of total, 2012) 7,000 40.0 Others, 12,936.1 , 43% 6,000 30.0 5,000 20.0 4,000 10.0 3,000 Medicine, 0.0 438.1 , 1% 2,000 Cigarette, 1,000 -10.0 651.8 , 2% Fabric , 8,767.0 Motor vehicle, Petroleum, , 29% Foodstuff, 2,437.6 , 8% 3,800.2 , 13% 0 -20.0 436.5 , 1% Construction 2007 2008 2009 2010 2011 2012 materials, Source: National Bank of Cambodia 994.8 , 3% Imports Trade Balance 24. Imports growth is projected to be 25. With moderate imports and robust moderate in 2013. Imports of goods are exports, this year’s trade deficit should projected to grow at 13 percent year on be narrower in relative terms. The trade year in 2013, compared to 18.7 percent in deficit is projected to be around 13 percent 2012 due to slower consumption goods of GDP in 2013, as opposed to 14 percent imports. Fabric for garment production, of GDP in 2012. The widening trade petroleum, motor vehicles, and construction deficit in 2012 was attributed to higher materials continue to be the main imported items, imports growth of 15 percent while accounting for about 50 percent of total imports. exports only climbed by 11.4 percent. The Fabric imports alone cover about 30 imports growth was driven mainly by a 15 percent of the total imports, while percent rise in petroleum imports, a 36 petroleum imports account for 15 percent percent increase in motor vehicle imports, of the total. Other main imported products and a 35 percent increase in construction include medicines, foodstuff, cigarettes, materials imports. fertilizer, beverages, electronics, and household items. 14 11 Trade balance, net services, and net income Overall balance (In percent of GDP) (In percent of GDP) 10 12.0 Financial account Current account (incl. off. transfers) 5 8.0 Overall balance 0 4.0 -5 0.0 -10 -15 -4.0 -20 2007 2008 2009 2010 2011 2012 -8.0 2007 2008 2009 2010 2011 2012 Trade balance Net services Net income Source: National Bank of Cambodia Source: National Bank of Cambodia 27. Compared to other countries in the Current Account and Capital region, Cambodia continues to run Balances relatively large current account deficits as a percentage of GDP. The large 26. The current account deficit is projected current account deficit that Cambodia runs to be narrower. This year’s current is needed to help fuel investment and account deficit excluding official transfers growth until the domestic financial system should be around 9 percent of GDP, as can take over more fully. However, it also opposed to 10.1 percent of GDP in 2012. increases Cambodia’s vulnerability and The capital and financial account surplus susceptibility to external shocks. 13 continues as foreign direct investment Mobilizing official sector loans and remains sustained over the first half of attracting non-official sector investments, 2013, and the overall balance of payments in particular foreign investments, have remains positive with increasing been effective ways of maintaining international reserves. By June 2013, Cambodia’s positive overall balance of international reserves already reached US$ payments. 3.6 billion, as opposed to US$ 3.5 billion by the end of 2012. Foreign direct investment continued to grow over the first half of 2013, and investor interest appeared to remain strong during the election period, unlike in past elections. It is unclear yet how big an impact the political uncertainty post-elections is having on foreign direct investment. 13 Cambodia’s small, open, and highly dollarized economy is vulnerable, and susceptible to external shocks. Moreover, with large current account deficits, the economy requires correspondingly large capital account surpluses to finance the deficits. As a result, capital inflows, in particular foreign direct investments, are necessary to maintain Cambodia’s positive overall balance of payments. Cambodia imports 100 percent of its petroleum products, which account for almost 15 percent of the total imports in value terms. As discussed in Box 1, further gains from value chain (of garment product) remain unrealized, forcing the country to depend entirely on imported fabric and other inputs for its garment production. Fabric import accounts for close to 30 percent of the total imports. 15 12 Current account balances - a regional Inflation comparison (Y/Y % change, Phnom Penh) (including official transfers, % of GDP, 2011) 60 60 CPI 25.0 50 Food & non-alcol. sub-index 50 40 Transport & telecom sub-index 40 20.0 Excl-food sub-index 15.0 30 30 20 20 10.0 10 10 5.0 0 0 0.0 -10 -10 -5.0 -20 -20 -10.0 -30 -30 Philippines Singapore Lao PDR Malaysia Vietnam Cambodia Indonesia Thailand Apr-06 Apr-07 Apr-08 Apr-09 Apr-10 Apr-11 Apr-12 Oct-06 Oct-07 Oct-08 Oct-09 Oct-10 Oct-11 Oct-12 Jan-06 Jul-06 Jan-07 Jul-07 Jan-08 Jul-08 Jan-09 Jul-09 Jan-10 Jul-10 Jan-11 Jul-11 Jan-12 Jul-12 Source: National Institute of Statistics Source: World Development Indicator, World Bank and Cambodian authorities 29. The inflation rates of Cambodia’s main Inflation import countries also remain low. Cambodia’s small and open economy is a price 28. In June 2013, year on year inflation taker, which, together with high dollarization and picked up, reaching 2.9 percent due to large trade deficits, render the macroeconomic policy slightly elevated foods prices. 14 Inflation makers almost defenseless against exchange rate is projected to remain at low single digit pass-through and imported inflation. Therefore, figures during the short term. After the stable prices in Cambodia’s main import food and oil price shocks preceding the partners in recent years have contributed to Global Financial Crisis, inflation has low inflation in Cambodia. declined, and continues to be subdued. Inflation eased to 2.5 percent year on year Regional inflation by end-2012, from 4.9 percent in 2011. (Y/Y % change) 25 Cambodia - PP CPI Vietnam 25 Prices of both food and fuel have risen and fallen, Thailand China more or less in tandem in recent years. Modern 20 20 agriculture uses oil products to fuel farm 15 15 machinery, to produce fertilizers, and to 10 10 transport farm inputs and outputs. In addition, as oil prices rise, it increases the 5 5 demand for biofuels, often made from 0 0 corn and other agricultural products. Oct-10 Oct-11 Oct-12 Jan-10 Jul-10 Jan-11 Jul-11 Jan-12 Jul-12 Apr-10 Apr-11 Apr-12 Source: National Institute of Statistics 30. The food component is the main driver of Cambodia’s consumer price index. It represents 43.3 percent weight in the inflation basket of goods and services. The food price shocks that occurred during the period between 2007 and 2008 pushed inflation to peak at over 35 percent year on year in May 2008 (see the figure below). In addition to food prices, changes in prices 14 June 2013 CPI, the National Institute of Statistics, Ministry of Planning. of selected goods and fees in the CPI 16 13 basket are discussed below to see how they recreational and cultural fees, show only also influence inflation. moderate volatility (see the figure below). Contributions of food to 12-month Inflation Changes in selected fees (CPI, Phnom Penh) (Y/Y % change) 40.0 40 Electricity, gas, and other fuels 40 35.0 Others Transport 30.0 Transportation sub-index 30 Recreation & culture 30 25.0 Food sub-index Education 20.0 Housing & utilities sub-index 20 20 15.0 Food CPI (eop) prices 10.0 10 10 shocks 5.0 0.0 0 0 -5.0 -10.0 -10 -10 Jan-06 Nov-06 Apr-07 Jan-11 Sep-07 Feb-08 Nov-11 Apr-12 Mar-10 Sep-12 Jun-06 Jun-11 Jul-08 May-09 Oct-09 Aug-10 Dec-08 -20 -20 Jan-07 Nov-07 Apr-08 Jan-12 Sep-08 Feb-09 Nov-12 Mar-06 Jun-07 Mar-11 Jun-12 Jul-09 May-10 Aug-06 Oct-10 Aug-11 Dec-09 Source: National Institute of Statistics 31. Changes in prices of selected goods, Source: National Institute of Statistics namely household furnishing, appliances, construction materials and 33. Inflation measured in Riel and US medical supplies in the CPI basket Dollar terms are very similar. As the have decelerated. Stable prices of goods economy is highly dollarized, it is have returned since 2010 after the impacts important to look at the “inflation in US of the Global Financial Crisis and food Dollar terms” as well. 15 The figure below crisis subsided; this contributed to shows that, in general, inflation measured moderate and low inflation during 2011 in Riel and Dollar terms are quite similar and 2012. due to stable Riel versus Dollar exchange rate, thus allowing those who receive income in USD and in CR almost exactly Changes in prices of selected goods (Y/Y % change) the same purchasing power. Household furnishing Construction materials Personal care appliances Medical supplies & appliances 40 40 Inflation in US Dollar terms 35 35 40.0 40.0 30 30 35.0 CPI (eop) 35.0 25 25 30.0 CPI in $ terms (eop) 30.0 20 20 15 15 25.0 25.0 10 10 20.0 20.0 5 5 15.0 15.0 0 0 10.0 10.0 -5 -5 5.0 5.0 -10 -10 0.0 0.0 Jan-07 Nov-07 Apr-08 Jan-12 Sep-08 Nov-12 Mar-06 Feb-09 Jun-07 Mar-11 Jun-12 Aug-06 Jul-09 May-10 Oct-10 Aug-11 Dec-09 -5.0 -5.0 -10.0 -10.0 Jan-06 Nov-06 Apr-07 Jan-11 Sep-07 Feb-08 Nov-11 Apr-12 Mar-10 Sep-12 Jun-06 Jun-11 Jul-08 May-09 Oct-09 Aug-10 Dec-08 Source: National Institute of Statistics 32. As expected, the selected fees for Source: National Institute of Statistics utilities consumption and transport, closely linked to oil prices, exhibit rather extreme volatility. Some other selected fees, which are not directly related 15 “Inflation in US dollar terms” eliminates the effect of the changes in the to oil prices, including educational, exchange rate of the Cambodian Riel against the US dollar in the consumer price index. So, it measures inflation as if it is in a fully dollarized economy. 17 14 Monetary Sector October 2012. While the banking system remains liquid and adequately capitalized, 34. The monetary sector plays an the high growth of private sector credit, of increasingly important role as financial approximately 30 percent year on year deepening continues. A growing number since mid-2011, raises a financial risk of banks (rising from 35 banks in concern. 17 The credit growth does not December 2011 to 40 banks in April 2013) appear to be concentrated in a single or a are entering the Cambodian market, few sectors, and driven also by agriculture despite the tripling of capital requirements sector financing underpinning improved effective January 1, 2011. 16 Improved value addition in agriculture production confidence in the banking sector has and exports. It, however, is believed to resulted in rising foreign currency deposits, partly fuel the robust recovery and vibrant reaching US$ 6.6 or 18.8 percent year on activity of the real sector in which early year growth by June 2013, as opposed to signs of bubbles were observed during the US$ 5.9 billion, or 24 percent year on year first of 2013. growth by the end of 2012. Private sector deposits rose quickly, amounting to US$ 35. Persistently high dollarization 6.6 billion, or 19.6 percent year on year continues to undermine the country’s growth by June 2013, as opposed to US$ 6 ability to conduct the monetary policy. billion or 25 percent year on year. Credit to The monetary policy is constrained by high the private sector has also grown at a very dollarization, while the use of local rapid rate i.e. over 30 percent year on year currency is very limited. The Cambodian for a third year, amounting US$ 6.2 billion. Riel (CR) is pegged to the US Dollar, and The high credit growth triggered an has been targeted to be around Riel 4,000 increase in the reserve requirement rate, per Dollar. Due to high dollarization, the from 12 percent to 12.5 percent, in exchange rate between the Dollar and the Riel no longer fully retains its original meaning, since it matters only for prices of Riel-denominated goods Box 2. Full Dollarization and services that represent a small portion of the economy. With a highly dollarized economy, Do disadvantages of full dollarization outweigh the benefits? The Central Bank has long been the Central Bank has very limited monetary promoting the use of the local currency, Riel, to reduce policy tools, leaving fiscal policy as the gradually the level of dollarization. However, in spite of main instrument to implement various measures that were taken in the past to “de- dollarize” the country, the trend is still towards even macroeconomic policy. There are recent greater dollarization. High dollarization undermines the positive developments, the establishment implementation of monetary policy. The costs of of a national clearing house and the dollarization also include interest income loss on dollar introduction of a new financial security, denominated money stock held by the people, and seigniorage loss.a Estimated annual seigniorage forgone negotiable certificates of deposits (NDCs). as broad money grows is as much as US$ 100 million.b The inter-bank market, however, remains to be established. a. Seigniorage is the difference between the value of money and the cost to produce and distribute it. b.Bank staff estimates. See also March 2007, Dollarization in Cambodia by Tal Nay Im and Michel Dabadie 16 A minimum capital is 150 billion riel (US$ 36.5 million equivalent). 18 15 Gross International Reserves international reserves. In June 2013, gross international reserves, however, dropped by about US$ 150 million, 36. Gross international reserves reached reaching only US$ 3.6 billion, compared to US$ 3.6 billion by June 2013. The its peak of US$ 3.75 billion in April, largely accumulation of international reserves reflecting recent invention to prevent continues, due mainly to the inflows of nominal depreciation of the Riel as the foreign direct investments. However, the Dollar has lately appreciated. Net foreign reserves remains low by regional standards, and assets of deposit money banks (DMBs) adds another risk dimension to the economy as the have also risen. Deposit money banks Central Bank cannot serve as lender of last resort experienced a period of negative net due to dollarization. The reserves can only foreign assets in late 2008 through early cover approximately 3.6 months of goods 2009, when there was a sharp drop in and services imports. 18 And in terms of foreign assets, more than offsetting a percentage of private sector deposits, the decrease in foreign liabilities with banks’ gross international reserves have been reserves buildup during the Global declining gradually, from 86 percent by the Financial Crisis (see the figure below). 20 end of 2006 to only 54 percent by June 2013, because of rapidly rising deposits of NBC's and DMBs' Net Foreign Assets (In millions of USD) the private sector. Unrestricted FC deposits NBC's GIR gold NBC's GIR non-gold DMB's NFA (r.scale) 6,000 800 Gross International Reserves Coverage 700 5,000 GIR in months of following year's imports (right scale) 600 GIR in percentage of private sector deposits 500 4,000 110 4.5 400 100 3,000 300 4.0 90 200 2,000 80 100 3.5 0 70 1,000 3.0 -100 60 0 -200 50 Jan-13 Feb-13 Apr-13 Mar-13 Jun-13 May-13 Dec-05 Dec-06 Dec-07 Dec-08 Dec-09 Dec-10 Dec-11 Dec-12 2.5 40 Note: FC: foreign currency, GIR: gross internatinal reserves, NFA: net foreign assets, DMB: 30 2.0 deposit money bank Source: National Bank of Cambodia (NBC) Jun-13 Dec-05 Dec-06 Dec-07 Dec-08 Dec-09 Dec-10 Dec-11 Dec-12 Source: National Bank of Cambodia and Bank staff estimates 38. The Central Bank’s Net Domestic Assets (NDA) reduce on the back of Net Foreign Assets 19 rising government deposits. 21 This is mainly underpinned by an overriding 37. The Central Bank’s Net Foreign Assets principle of balanced budget of the fiscal (NFA) continue to increase, due position. The Government is not only mainly to the accumulation of the avoiding domestic bank financing, but also 18 Gross international reserves relative to following year’s imports of goods and services. 20 This reflected bank deleveraging during the Global Financial Crisis.. 19 Net foreign asset (NFA) is the balance on the foreign assets account, 21 Net Domestic Assets (NDA) are the sum of net domestic credit (claims which is the sum of the foreign assets of the monetary authorities and on government, claim on DMB‘s and claims on domestic sector) and other DMB‘s less any foreign liabilities. items (net). 19 16 accumulating government deposits as impacts of the 2008-2009 Global revenue collection improves. 22 In the late Economic Crisis. See section 3 on fiscal 80s to early 90s, fiscal deficits led to a sector for more details. recourse to Central Bank financing (net claims on the government was 51 percent Net Credit to the Gov't from the Banking System of the total domestic credits in 1993), (NCG) 0 (in billion of riels) resulting in increased Central Bank’s net domestic assets, and hyperinflation. -500 -1,000 NCG Net Domestic Assets of the Central Bank -1,500 NDA of the NBC (in billion of riels) NBC's NDA (% change y/y, r. scale) -2,000 0 80.0 70.0 -2,500 Fiscal stimulus -1,000 60.0 implemented -3,000 -2,000 50.0 -3,000 40.0 -3,500 Sep-06 Feb-07 Mar-09 Sep-11 Feb-12 Jun-05 Apr-06 Dec-07 Oct-08 Jun-10 Apr-11 Dec-12 Jan-05 May-08 Jul-07 Jan-10 May-13 Nov-05 Aug-09 Nov-10 Jul-12 30.0 -4,000 20.0 -5,000 10.0 Source: National Bank of Cambodia 0.0 -6,000 -10.0 Monetary Aggregates, Interest Rates -7,000 -20.0 and Exchange Rates Jan-06 Nov-06 Apr-07 Jan-11 Sep-07 Feb-08 Nov-11 Apr-12 Mar-10 Sep-12 Feb-13 Jun-06 Jun-11 Jul-08 May-09 Oct-09 Aug-10 Dec-08 Broad money Source: National Bank of Cambodia 40. Foreign currency deposits, mainly US 39. Net Credit to the Government (NCG) Dollar deposits, continue to account for once again reduced, and by June 2013, 96 percent of the broad money. 24 This it reached the pre-crisis level in reflects a persistent high dollarization of absolute terms. 23 This is due to the buildup of the economy. The share of foreign currency government deposits, which also strengthens the deposits in the total deposits peaked at over 98 Central Bank’s reserves position that can be used percent during late 2007 and early 2008 as a buffer against any future external shocks. associated with large scale capital inflows that Note that, with substantial savings in place, occurred several months before the bursting of real the Government was able to introduce a estate bubbles. Foreign currency deposits fiscal stimulus amounting to about 2 dropped by almost US$ 200 million in percent of GDP, mitigating the negative November 2008 to US$ 2.2 billion, from US$ 2.4 billion in September 2008 as the 22 Fiscal deficit has its implications for economic stability. The sources of economy was hard-hit by the Global fiscal deficit financing have different impacts. Borrowing from central bank is inflationary, while borrowing from deposit money banks crowds out Economic Crisis. private sector investments, in turn affecting economic output. Borrowing from the non-banking public by issuing securities would exert pressure on interest rates, and increase domestic public debt. Foreign financing leads to external debt burden. Cambodia’s fiscal deficit is financed by foreign financing. However, this doesn’t lead to a heavy external debt burden, due to the terms of the financing, which remain concessional. 24 Broad money (M2): the widest measurement of the money supply that includes narrow money (M1) (currency in circulation and current account 23Net Credit to the Government (NCG) is equal to credits to the deposits), savings, and time deposits. Note that US Dollar in circulation is government minus government deposits. excluded, as it cannot be captured. 20 17 Composition of Broad Money 70 Contribution to Broad Money growth 35,000 (In billion of Riels) 60 Riel in circulation 30,000 Riel in circulation Riel deposits 50 25,000 Riel deposits Foreign currency deposits 40 20,000 Foreign currency deposits Impact of 30 the Global 15,000 20 Economic Crisis 10,000 10 5,000 0 0 -10 Apr-07 Apr-08 Apr-09 Apr-10 Apr-11 Apr-12 Apr-13 Aug-07 Aug-08 Aug-09 Aug-10 Aug-11 Aug-12 Dec-06 Dec-07 Dec-08 Dec-09 Dec-10 Dec-11 Dec-12 Sep-05 Sep-06 Sep-07 Sep-08 Sep-09 Sep-10 Sep-11 Sep-12 Jan-05 May-05 Jan-06 May-06 Jan-07 May-07 Jan-08 May-08 Jan-09 May-09 Jan-10 May-10 Jan-11 May-11 Jan-12 May-12 Jan-13 May-13 Source: National Bank of Cambodia Source: National Bank of Cambodia Exchange Rate Contribution to Broad Money Growth Nominal Exchange Rate 41. Broad money growth has been largely driven by foreign currency deposits. By 42. The Dollar has appreciated since the June 2013, broad money grew at 18.8 second quarter this year; and this has percent year on year, and rising foreign forced the Central Bank to intervene. A currency deposits contributed 83 percent loss of about US$ 150 million of the of the growth. Rapidly rising foreign Central Bank’s international reserves was currency deposits during the period recorded. The Riel depreciated and covering late 2007 and early 2008 reached Riel 4,062 per Dollar in June 2013. contributed up to 90 percent to broad Thanks to the Central Bank’s intervention, money growth; and as a result broad the Cambodian Riel versus the US Dollar money growth peaked, increasing by more exchange rate remains stable, hovering than 60 percent year on year. The rises and around Riel 4000 per US Dollar. While the falls of foreign currency deposits are largely de jure regime may be classified as a mirroring foreign capital inflows and outflows to managed float with the official rate the small, open, and highly dollarized Cambodian adjusted (through sales and purchases of economy. US Dollar) to be within a narrow band of the market rate on a daily basis, continued anchor of the exchange rate at Riel 4,000 per US Dollar can be seen as a peg. 25 Official exchange rates (end of period) were CR 3,995 and CR 4,039 per US Dollar in 2012 and 2011, respectively. The exchange rate intervention is one of the few monetary instruments that the Central Bank has at its disposal to stabilize prices of Riel-denominated goods and services. 25 The band appears to be ±1 percent of the market rate surveyed on a daily basis. The Central Bank, however, does not explicitly mention it. 21 18 Nominal exchange rates products. The real effective exchange rate 140 (Index 2005 = 100) 14 (REER), however, has appreciated slightly Riels per since 2006. 130 Thai Baht 13 120 12 Effective exchange rates Riels per 140 (Index 2005 = 100) 140 110 11 USD 100 10 130 130 NEER index 90 Riels per 90 120 120 Vietnamese 80 Dong 80 110 Index (Riels 110 70 70 per USD) Jan-06 Jul-06 Jan-07 Jul-07 Jan-08 Jul-08 Jan-09 Jul-09 Jan-10 Jul-10 Jan-11 Jul-11 Jan-12 Jul-12 Jan-13 100 100 Source: Central banks (Cambodia and Thailand) and Vietnam's ministry of finance 90 90 REER index 80 80 43. The exchange rate intervention, Jan-06 Jul-06 Jan-07 Jul-07 Jan-08 Jul-08 Jan-09 Jul-09 Jan-10 Jul-10 Jan-11 Jul-11 Jan-12 Jul-12 Jan-13 however, is not sufficient to achieve a de-dollarization objective, if any, given Source: IFS and Bank staff estimates the predominant role of the Dollar. The popularity of the US Dollar, which is The Banking Sector almost a global currency, versus the Riel, is Credits to and Deposits by the clear, despite Cambodia’s stable Private Sector macroeconomic performance. The Dollar has been a reliable store of value, the most 45. Deposits by the private sector widely accepted means of international accelerated since early 2010; similarly, transactions, and the dominant currency in credit growth (year on year) also picked financial markets. up soon after, and then outpaced the Nominal Effective Exchange Rate and deposit growth since early 2011. Broad Real Effective Exchange Rate money as a percentage of GDP rose to 51 percent of GDP in June 2013, from 20 44. The peg has resulted in substantial percent by the end of 2005. As financial deprecation of the nominal effective deepening continues, the loan to deposit ratio has exchange rate (NEER) of the Riel as risen substantially, reaching over 80 percent by the the US Dollar depreciates. 26 Weaker end of 2012, compared to only about 60 percent by local currency (and US Dollar) should have the end of 2005. During the same period, the rendered Cambodia’s exports more credit to capital ratio has jumped, reaching competitive, as the country has diversified close to 300 percent from about 200 its exports with export destinations beyond percent. the United States; and has exported products more than just garments, including footwear and agriculture 26 NEER is the unadjusted (while REER is inflation adjusted) weighted average value of the local currency relative to all major currencies being traded. The weights are determined by the importance Cambodia places on all other currencies traded. 22 19 Credits by type of business Credit and Deposit by the Private Sector (In billion of riels, EoP) 18,000 Mortgage Real Estate Actvities Credit to the Private sector deposits ($ million, left) 16,000 Construction Retail Trade private 7,000 120 sector y/y Credit to private sector ($ million, left) 14,000 Wholesale Trade Manufacturing change (right 6,000 100 12,000 Agriculture scale) Private 10,000 5,000 80 sector 8,000 deposits y/y 4,000 change (right 60 6,000 scale) 4,000 3,000 40 2,000 0 2,000 20 Dec-08 Dec-09 Dec-10 Dec-11 Dec-12 Source: National Bank of Cambodia 1,000 0 0 -20 Credits by type of business (in billion of US dollar, 2012) Jun-07 Jun-08 Jun-09 Jun-10 Jun-11 Jun-12 Dec-06 Dec-07 Dec-08 Dec-09 Dec-10 Dec-11 Dec-12 Others, Agriculture, Manufacturi Source: National Bank of Cambodia 1.28 , 23% 0.57 , 10% ng, 0.55 , 10% Credit by type of business 46. By December 2012, credits going to agriculture were US$ 0.57 billion. This Wholesale Trade, 1.05 represents 10 percent of the total credits to Real estate , 18% the private sector by end-2012, compared related, 0.96 , 17% Hotels and Restaurant, Retail Trade, to only US$ 100 million, or 5 percent of 0.35 , 6% 0.93 , 16% the total credits, at end-2008. Agriculture sector financing contributed as high as 21 47. Competition among banks has percent of the credit growth in 2011, contributed to narrowing the weighted second only to retail financing which average US Dollar interest rate accounted for 25 percent of the credit spread. 27 The spread, which is the growth. In 2012, the contribution to credit difference in nominal deposit and lending growth by agriculture financing moderately rates, shrank to 7.17 percent in December decelerated to 14 percent, while the 2012 from 11.92 percent in January 2007. contribution by wholesale financing, in The spread, however, remains large contrast, rose to 33 percent. By December compared to that in other South East 2012, wholesale trade financing received Asian countries. The US Dollar nominal the largest share, US$ 1.05 billion (or 18.4 lending rate has drastically dropped to 11.7 percent), and retail trade financing, at US$ percent from 16.6 percent during the same 0.93 billion (or 16.3 percent) was second. period. During the period of food price shocks preceding the Global Financial Crisis, US Dollar real deposit rates were largely negative, due to high inflation. 27 Interest rate spread is the interest rate charged by banks on loans to private sector customers minus the interest rate paid by banks. The spread discussed above is between weighted average of 12-month US Dollar fixed deposit and 12-month US Dollar lending rates 23 20 Weighted average US dollar interest rates1 billion). 29 This represents a revenue-to- Lending rate Real lending rate GDP ratio of approximately 14.4 percent, Deposit rate Real deposit rate the highest level achieved so far. The 20 20 achievement outperforms the annual 15 15 increase target of 0.5 percent revenue-to- 10 10 GDP ratio set by the Public Financial 5 5 Management Reform Program. The 0 0 revenue-to-GDP ratio, however, remains -5 -5 relatively low compared to average regional -10 -10 performance. Central government revenue -15 -15 covers 91 percent of the total (or 13.2 Dec-06 Dec-07 Dec-08 Dec-09 Dec-10 Dec-11 Dec-12 1 Weighted 12-month US Dollar depost and 12-month US Dollar lending rates percent of GDP) while provincial revenue Source: National Bank of Cambodia accounts for the remaining 9 percent. Indirect taxes, mainly domestic and import Interest rates* value added taxes (VAT) and excises, (2012, % per annum) contributed the largest share of 45 percent DEPOSITS LENDING RATE RATE of the total domestic revenue in 2012. Cambodia 1.33 13.13 Trade tax, consisting mostly of import Indonesia 1.97 4.08 duties, is second, capturing about 16 Malaysia 2.98 4.73 percent of the total. Direct taxes, largely Myanmar 8.0 13.0 Philippines 0.943 5.485 profit taxes (personal income tax has not Thailand 3.35 7.13 been introduced yet) remain relatively Vietnam 9.0 12.47 small, due to tax holidays allowed under *Note: deposit rate is simple average of rates on domestic-currency saving deposit reported by 10 banks with largest deposits holding. the existing investment law. Lending rate is simple average on foreign currency loans to private enterprises reported by 10 banks with largest deposit holding. Source: International Financial Statistics, IMF General Government Domestic Revenues (In percent of GDP) Direct taxes Indirect taxes Trade taxes Others Fiscal Sector 3.6 2.6 3.2 3.0 Revenue and Its Main Components 2.9 2.2 3.1 2.4 3.8 2.3 2.6 2.5 2.3 2.5 Main tax components 2.6 2.2 6.7 6.4 48. During the first five months of 2013, 4.3 5.1 5.9 5.4 5.7 6.0 domestic revenue continues to improve 2.2 2.5 but at a slower pace, rising only at 9.6 1.1 1.4 1.6 1.7 1.7 1.8 percent year on year, compared to 24.7 2006 2007 2008 2009 2010 2011 2012P 2013B percent in 2012. 28 By May 2013, Note: P = Preliminary; B = Budget Source: Ministry of Economy and Finance preliminary fiscal data showed that the central government collected CR 3,389 49. The contribution by direct taxes (and billion (equivalent to US$ 847 million). In non-taxes which include revenue 2012, provisional fiscal data recorded sharing, charges, and fees) needs to be general government domestic revenue of further strengthened, to at least CR 8,402 billion (equivalent to US$ 2.1 29 Provisional 2012 Government Financial Statistics (TOFE). General government domestic revenue includes both central and provincial 28 Preliminary fiscal data for 2013 subject to revision. government revenue. 24 21 compensate for the drop in trade taxes. However, there is room for further Trade taxes, in particular import taxes improvements mainly through enhancing (including non-tariff barriers), are revenue administration. anticipated to be gradually shrunk, because import tariffs are required to be Central Government: Revenue by main components harmonized and reduced as a result of (YTD, % of total) Cambodia’s membership of the ASEAN Excise (domestic) Capital & non-tax VAT (domestic) VAT (import) Import Tax Excise (import) Economic Community, and the World Profit Trade Organization. 30 To partly compensate for a drop in import duties, 22 22 22 26 25 25 efforts have been made to improve VAT 11 12 12 13 12 12 collection, in particular VAT on imports 17 17 17 18 15 18 that contributed about 18 percent of the 22 20 19 15 total domestic revenue in 2012, up from 15 18 16 percent in 2010. Profit tax collection is also 16 17 15 15 14 14 12 rising, amounting to 12 percent of the total 10 10 12 10 11 Dec-07 Dec-08 Dec-09 Dec-10 Dec-11 Dec-12 in 2012, compared to only 10 percent in Source: Ministy of Economy and Finance 2010. There has been also some improvement in non-tax collection, after Main revenue collecting agencies the introduction of standardized non-tax receipting and collecting systems. 50. There are two main revenue agencies, namely the General Department of Customs and Excises (GDCE) and the Box 3. Debt Sustainability General Department of Taxation The 2012 debt sustainability analysis (DSA) shows (GDT). Combined GDCE and GDT that Cambodia’s debt distress rating remains low collection captures about 75 percent of the under the baseline scenario. This is similar to the total domestic revenue. The rest, mainly previous year’s risk rating, as debt burden indicators under the baseline scenario did not breach their non-tax and capital revenue, is collected by relevant thresholds.c Under a scenario of limited various government agencies, line reform progress, however, the indicator would ministries and provincial authorities. “breach” the threshold, showing a lower scope for GDCE is responsible for collecting absorbing risks.d This underscores the need to continue reforms for sustainable strong growth, like international trade taxes, consisting mainly pursuing fiscal consolidation and mobilizing revenue, of duties on imports and exports, and VAT and improving debt and contingent liability and excises on imports. GDCE continues management. to be the largest revenue agency, collecting c. The baseline assumes an average of US$ 500 million debt disbursement a year over the medium term with a macroeconomic assumption as follows: average real GDP growth of more than 40 percent of the total domestic 7.2 percent, inflation of 3.5 percent, domestic revenue of 14.7 percent of GDP, expenditures of 19.0 percent of GDP, and BOPs overall balance of 2.4 percent of GDP revenue. GDT is in charge of collecting during the medium term 2013 – 2017. Staff report for the 2012 Article IV consultation, Joint Bank-Fund DSA. domestic taxes including profit taxes, d. This scenario assumes limited reform progress, lower investment, slower real GDP domestic VAT and excises, and other taxes growth of 6.2 percent, slower imports and exports with Balance of Payments overall balance of 1.9 percent of GDP, flat fiscal revenue of 13.7 percent of GDP, and larger disbursement such as property and annual motor vehicle of external loans. taxes. 30 The ASEAN Economic Community (AEC) has the goal of regional economic integration by 2015. The AEC will transform ASEAN into a region with free movement of goods, services, investment, skilled labor, and freer flow of capital. 25 22 Central Government: Revenue by revenue agency total public investment outlay is (YTD, percent of GDP) financed by external funds (donors). GDCE GDT Non-tax & others Central Government: Current expenditure composition 2.8 (YTD, percent of GDP) 3.0 3.0 2.5 Non-wage Wage 4.3 3.9 3.8 3.6 6.3 6.8 6.2 6.2 6.2 5.6 5.6 5.7 6.0 4.8 4.4 4.3 4.1 3.4 Mar-09 Jun-09 Sep-09 Mar-10 Jun-10 Sep-10 Mar-11 Jun-11 Dec-09 Sep-11 Mar-12 Jun-12 Dec-10 Sep-12 Dec-11 Dec-12 Mar-12 Jun-12 Sep-12 Dec-08 Dec-09 Dec-10 Dec-11 Dec-12 GDCE: General Department of Customs and Excices; GDT: General Department of Taxation Source: Ministr y of Economy and Finance Expenditure and Main Components Source: Ministry of Economy and Finance Current Expenditures 51. Public expenditure performance appears slow during the first five 52. Wage bill continues to cover a large months of 2013, compared to the portion of the total recurrent spending. same period last year. 31 In 2012, the In 2012, of the total recurrent outlay of CR total public outlay amounted to CR 6,059 billion (US$ 1.5 billion equivalent), 11,448 billion (equivalent to US$ 2.7 or 10.4 percent of GDP, the wage bill billion), and Cambodia continues to consumed 40 percent (or 4.2 percent of heavily depend on donor funds to GDP). As a result, sufficient allocation for finance its public investments. The total non-wage funding, in particular funds for outlay represents 19.7 percent of GDP, operations and maintenance of the physical which is relatively large compared to infrastructure (built by donor funds), the regional average. 32 Due to large continues to be a challenge. Total defense donor-funded public investments and security outlay represented 22 percent (financed by concessional loans and of the total recurrent outlays (or 2.3 grants), Cambodia has been able to percent of GDP), while security and maintain an almost 50-50 split between defense wages captured 40 percent of the recurrent and capital outlays of the total wage bill. Interest payments covered general government. 33 The recurrent only 0.3 percent of GDP, thanks to the outlay is fully financed by domestic current budget law, which only allows for revenue, while almost 80 percent of the concessional borrowing. 31 Comparison is based on domestically financed spending only as 2013 spending data remains incomplete with missing externally financed capital. 32 The amount excludes “off-budget” public expenditures (the largest component is technical assistance financing by donors) estimated to average around 3 percent of GDP a year. 33 General government revenue (or expenditure) consists of revenues (or expenditure) collected by both the central and provincial governments. Provincial revenue covered between 4 – 9 percent of the total domestic revenues in recent years. 26 23 Central Goverment: Current expenditure composition Central Government: Expenditure Composition (YTD, percent of GDP) (YTD, percent of GDP) Capital (domestically financed) Capital (externally-financed) Interest payment Civil Adm Defense & Security Non-wage Wage 12.0 2.6 2.4 2.4 1.9 10.0 8.2 1.7 6.4 7.3 8.0 6.7 4.6 6.0 6.3 6.2 6.8 6.2 5.6 4.0 4.8 4.4 4.3 4.1 2.0 3.4 Mar-12 Jun-12 Sep-12 Dec-08 Dec-09 Dec-10 Dec-11 Dec-12 0.0 Mar-12 Jun-12 Sep-12 Dec-08 Dec-09 Dec-10 Dec-11 Dec-12 Source: Ministry of Economy and Finance Source: Ministry of Economy and Finance Capital Expenditures Fiscal Balance 53. To finance its public investment 54. Continued revenue growth and slower requirements, the Government spending should allow budget deficit mobilizes substantial overseas (excluding grants) to remain as development assistance (ODA). Low budgeted at around 5.4 percent of GDP domestic revenue (Cambodia’s revenue to in 2013. While overall fiscal management GDP ratio remains low compared to remains generally appropriate, and regional standards) limits the supportive of macroeconomic stability Government’s ability to use its own funds underpinned by an overriding principle of to finance operations and maintenance balanced budget, domestic revenue activities of its capital investments that are performance needs further improvements. mostly funded by ODA. Donor-financed Outstanding revenue collection and capital expenditures account for almost 80 contained spending achieved in 2012 have percent of the total public investments or resulted in a narrower fiscal deficit in 2012. 34 percent of the total public outlays. 34 Excluding grants, the fiscal deficit is 5.2 percent of GDP in 2012, compared to 9.5 percent of GDP in 2011. The fiscal deficit including grants was reduced to only 0.1 percent of GDP in 2012, compared to 4.6 percent of GDP in 2011. 55. Continued large external funds to finance public investments allow Cambodia to accumulate savings. The accumulation of government deposits provides a cushion that the Government can use at times of shock. During the 2008 and 2009 Global Financial Crisis, 34 The above donor-funded expenditures exclude technical assistance Cambodia introduced a fiscal stimulus, financing. 27 24 supporting laid off workers’ retraining General Government: Overal deficits financing (In percent of GDP) programs, self-employment programs, Foreign financing Domestic financing scholarships, and sub-loans for agricultural 10.0 developments. In 2012, the Government 8.0 was able to rebuild its deposits, 6.0 accumulated to approximately US$ 650 4.0 million by year-end (close to the pre-crisis 2.0 level). 0.0 Fiscal stimulus -2.0 -4.0 General Goverment Operations 2006 2007 2008 2009 2010 2011 2012P 2013B Note: P = Prelimnary; B = Budget (In percent of GDP) Source: Ministry of Economy and Finance 26.0 Revenue Expenditure Deficits (incl grants) 22.0 Sectorial Spending 18.0 14.0 10.0 57. The shares of the health and education sectors in the total domestically 6.0 financed spending decreased to 8.7 2.0 percent and 10.3 percent in 2011 from -2.0 9.1 percent and 15.6 percent in 2004, -6.0 respectively. It appears that the education 2006 2007 2008 2009 2010 2011 2012P 2013B and health sectors have been losing out Note: P = Preliminary; B = Budget Source: Ministry of Economy and Finance their priority in budget allocation and appropriation to other competing sectors. 56. As mentioned earlier in the monetary section, Cambodia has to depend Domestically Financed Sectoral Spending (In % of total budget) almost entirely on its fiscal policy for Health Education macroeconomic management, due to 15.6 15.5 high dollarization. Therefore, it is crucial 14.2 12.9 that the sound fiscal policy is well 12.2 12.0 11.2 10.3 maintained, and the continued large and 9.1 9.0 9.8 9.0 8.9 9.2 8.7 generous support (even during the Global 7.9 Financial Crisis) by donors has helped make this possible. 2004 2005 2006 2007 2008 2009 2010 2011 Source: Ministry of Economy and Finance 58. Combined shares of the general administration, and defense and security sectors rose quickly to 60 percent of the total spending in 2011 from 44.3 percent in 2007. This reflects increasing demand for general 28 25 administration, security and defense related expenditures, crowding out resources that would have been made available to other Domestically Financed Sectoral Spending sectors, in particular the social sector. (In percentof GDP) Health Education Sectoral Spending 1.7 1.6 1.5 1.5 1.6 (in percent of total) 1.4 1.5 1.4 1.3 1.3 1.3 General administration Defense and security Social Economic 1.0 1.0 0.9 0.9 0.9 100.0 10.6 11.0 11.7 12.2 16.1 18.8 19.2 20.0 20.1 21.3 21.8 80.0 32.0 34.9 38.3 29.7 40.3 26.9 36.9 38.0 37.0 33.4 37.2 60.0 21.1 17.9 24.9 40.0 25.6 2004 2005 2006 2007 2008 2009 2010 2011 32.4 20.0 28.1 21.2 21.3 22.7 22.9 Source: Ministry of Economy and Finance 20.0 34.8 34.0 29.4 25.5 24.8 23.1 21.4 20.9 20.6 20.3 19.9 - D. Conclusion 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 Source: Ministry of Economy and Finance 60. The economic growth remains narrow- 59. In percentage of GDP, domestically based, and sustaining robust economic financed spending on the health growth by promoting diversification sector is trending upward, rising to and enhancing competitiveness is 1.3 percent in 2011 from 1.0 percent necessary. Further investment in the in 2007, while spending on the agriculture sector underpins higher and education sector has failed to pick sustainable agricultural growth, making up, and remained at around 1.6 inroads to the reduction of poverty. A percent of GDP since 2007. The stronger agriculture sector also helps serve shares of the health and education as a cushion against external shocks. sectors in total domestically financed Liberal and export-oriented trade and spending decreased to 8.7 percent and investment regimes, currently undertaken 10.3 percent in 2011, from 9.8 percent to cope with the country’s small and and 14.2 percent in 2007, respectively. shallow domestic market, appear The latest Integrated Fiduciary appropriate. However, diversification to Assessment and Public Expenditure widen comparative advantage and Review (IFAPER) report, published in competitiveness is needed to succeed 2011, found that Cambodia’s globally. Cambodia has been quite (domestically and externally financed) successful in diversifying markets for the public spending on education is only garment and tourism sectors. However, it half that of its peers. The IFAPER also has been slow in improving its highlighted potential savings of up to competitiveness, and its sole comparative one third of the total health budget; advantage, cheap labor, is eroding and the savings can be realized by gradually, due to labor shortages and rising improving the procurement processes labor costs. To capture further gains, as for pharmaceuticals. Sectoral spending well as to move up the value chain, the priorities and efficiency, therefore, may public sector may have to step in and play need to be re-examined. a greater role. Ensuring the availability of 29 26 appropriate, skilled labor, and competitive E. Special Focus: Poverty prices of production inputs (for instance energy) for the market are ways in which the public sector may be able to help Economic growth has become more nurture the private sector. inclusive than in the past 61. Financial stability must be maintained. 63. Over seven years from 2004 to 2011, While the entry of more commercial banks Cambodia achieved high rates of into the Cambodian market helps improve economic growth. On average, competition and efficiency, this also entails Cambodia’s annual growth rate was 8 significant financial risks, due to percent over this period, and growth even supervision capacity challenges. Any reached double-digits for four straight instability in the banking and financial years, achieving an average of 11.1 percent sector, in particular when the Central Bank from 2004 to 2007. The only year in which is unable to serve as lender of last resort growth was disrupted was in 2009, when due to dollarization, can easily reverse Cambodia’s main growth drivers were hard-earned public confidence. High affected by the global financial crisis. dollarization undermines the conduct of the monetary and exchange rate policies, 64. In addition to sustaining high growth, and leads to losses of seigniorage. Concrete Cambodia has broadened its economic steps may need to be taken to gradually de- base, spreading the benefits of growth dollarize the economy. 35 more evenly across the population. From 2004 to 2007, Cambodia’s growth 62. Improving fiscal management by was mainly driven by garments, tourism increasing fiscal space and more and construction. Agriculture, which efficient spending is necessary. accounts for about one third of the Tightening revenue collection and economy and where a bulk of the rural revisiting spending efficiency should help population is employed, was not create room for additional allocations to considered a major driver due to its low priority sectors, such as agriculture and growth rate. But, since 2008, agriculture education, which are crucial for sustaining growth has become a significant driver of robust and inclusive growth. Reviewing growth (Figure a). Agriculture growth not spending efficiency for the health sector only contributes towards sustaining high can help realize potential savings, as GDP, but also helps to spread the benefits recommended by the 2011 Integrated of growth to the poorest segments of the Fiduciary Assessment and Public population (Figure b). This means that Expenditure Review report. Cambodia’s growth today is increasingly broad-based and more inclusive than in the past. 35There has been a lot of de-dollarization literature advising Cambodia to gradually de-dollarize and how. 30 27 a/ Sectoral growth rate 2004-11 65. As a result of the rapid pace of growth (Constant 2000 prices) and a pattern of growth that has shared the benefits amongst a larger number 20% of people, Cambodian poverty has 15% fallen dramatically. The poverty rate has 10% halved in seven years from 53.0 percent in 2004 to 20.5 percent in 2011, surpassing all % Growth 5% expectations and far exceeding the 0% country’s MDG poverty target. The latest 2004 2005 2006 2007 2008 2009 2010 2011 -5% figures suggest that the total number of -10% poor people declined from 7 million Agriculture Industry people in 2004 to 3 million people in 2011. -15% In other words, only 2 out of 10 people Source: National accounts, NIS, MOP were poor in 2011, compared with 5 out of b/Per capita daily consumption by quintile 10 in 2004. Among 69 countries that have (Constant 2009 Phnom Penh prices) comparable data, from 2004 to 2008 Cambodia ranked fourth in terms of the Riel 2004 2009 2011 fastest poverty reduction in the world, after 7,000 +2% the West Bank and Gaza, Bhutan, and Fiji. 6,000 This meant that Cambodia was the best 5,000 +47% +7% +48% performer in East Asia. 4,000 3,000 66. This dramatic decline in poverty is also 2,000 reflected in non-consumption 1,000 indicators of well-being, such as 0 improvements in housing and the Poorest 20% Next poorest 20% ownership of assets. For example, from 2004 to 2011, access of households to Source: World Bank staff estimates based on CSES electricity (triple), to sewerage systems or septic tanks (double), and piped water during the dry season (25 percent), Riel 2004 2009 2011 together with the following improvements 20,000 -11% in access to durables such as televisions (37 18,000 +43% percent), motorbikes (double), and mobile 16,000 14,000 telephones (quadruple)—all of which 12,000 +48% -6% reaffirms consumption growth. 10,000 8,000 6,000 4,000 2,000 0 Next richest 20% Richest 20% Source: World Bank staff estimates based on CSES 31 28 c/ Poverty rate workers; and (v) growth in salaried jobs in urban areas (Figure e). However, these 60 53.2 50.1 drivers did not all occur at the same time. High rice prices, higher rice production, Poverty rate (%) 50 38.8 40 higher revenue from non-farm businesses 30 23.9 and higher wage rates of rural workers 22.1 20.5 played a key role in poverty reduction in 20 2008 and 2009, when global food price 10 shocks occurred, whereas growth in 0 salaried jobs in urban areas played a key 2004 2007 2008 2009 2010 2011 role in period prior to 2008. Source: World Bank Cambodia Poverty Assessment 2013 68. But where have all the previously poor d/ Population shares by consumption gone? Unfortunately, they have not gone very far. Most families remain 2009 Phnom Penh Poverty Line = CR 5,326 disturbingly close to the poverty line. 10% 9% Identified as ‘near-poor’, they are still at high risk of falling back into poverty at the Population ( %) 8% 2004 7% 6% 2011 slightest income shock. For example, the 5% impact of losing just CR 1,200/day (only 4% 3% US$0.30) in income would throw an 2% estimated 3 million Cambodians back into 1% 0% poverty. This would double the poverty 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 rate to 40 percent. Consumption in 2009 Riels/day (000) Source: World Bank Cambodia poverty assessment 2013 69. Not only do most families remain at risk of slipping back into poverty, but a e/ Drivers of poverty reduction, Cambodia 2004-11 significant gap exists between the poor and better off families in terms of Urban health outcomes. This reflects not only Farm Non-Farm Salaries gaps in coverage of lifesaving interventions 4% Wage Business 16% 19% but also gaps in the quality of care. Rice Unexplained Another noticeable challenge in health 14% Production Rice Price outcomes is the lack of progress in 23% 24% addressing child malnutrition. From 2005 to 2010, the percentage of stunted children under the age of five decreased from 42 to Source: World Bank Cambodia poverty assessment 2013 40 percent only, while underweight children stalled at 38 percent, and children 67. The latest World Bank Cambodia with wasting actually increased from 8 to Poverty Assessment has found that the 11 percent. rapid decline in poverty was largely 70. In education, late entry into the first driven by five contributing factors: (i) grade of primary education and very high rice prices; (ii) higher rice production; low enrollment of children from poor (iii) higher revenue from non-farm and vulnerable families remain a major businesses; (iv) higher wage rates of rural 32 29 challenge. This causes problems in infrastructure; continuing to invest in secondary education outcomes, such as low human development; and strengthening enrollment, high repetition and high agriculture growth. Policies to prevent the dropout rates. Despite a rapid near-poor from falling back into poverty improvement of 1.7 percentage points per would include: improving diversification of year from 2004 to 2011, the net enrollment agriculture; and implementing the social rate of upper secondary education protection strategy. remained low at only 20 percent in 2011. Despite making the improvement of the quality of education a priority, existing policies do not respond efficiently to labor market needs. A lack of teachers, textbooks, laboratories for science, and teaching and learning materials remains. Cambodia may wish to improve learning and skills on critical thinking, and core subjects such as science, technology, engineering, art and mathematics. 71. Given that major challenges in reducing poverty and improving human development remain, the mission to reduce poverty in Cambodia is not over. Not only do many people risk slipping back into poverty, but maintaining such a rapid reduction in poverty has become harder as the key drivers of that reduction from rice price effects are unlikely to continue, at least not at a similar pace. It is unlikely that international rice prices, local rice prices, or wages will experience further sharp rises similar to those seen in 2004-09, which were 134 percent, 119 percent and 200 percent, respectively. 72. Going forward, it would be desirable if Cambodia could design policies to address both categories: helping the remaining 20 percent of the poor to move out of poverty while also preventing the 20 percent of the near- poor from falling back into poverty. Key policies to lift the remaining poor out of poverty would include: improving access to and the upgrading of basic rural 33 30 Annex 1 World Economic Indicators The grobal outlook in summary (percentage change from previous year, except interest rates and oil price) 2011 2012 2013e 2014f 2015f Global Conditions World Trade Volume (GNFS) 6.2 2.7 4.0 5.0 5.4 Consumer Prices G-7 Countries 1,2 5.3 -0.6 -0.1 0.9 1.0 United States 2.4 2.1 2.4 2.5 2.5 Commodity Prices (USD terms) Non-oil commodities 20.7 -9.5 -4.7 -1.1 -1.5 Oil Price (USD per barrel) 3 104.0 105.0 102.4 101.0 101.0 Oil price (percent change) 31.6 1.0 -2.5 -1.3 -0.1 Manufacturers unit export value 4 8.5 -2.1 2.4 2.2 1.9 Interest rate $, 6-month (percent) 0.8 0.5 0.7 1.1 1.4 €, 6-month (percent) 1.6 0.2 0.5 1.2 1.5 International capital flows to developing countries (% of GDP) Developing countries Net private and official inflows 5.2 5.0 4.7 4.4 4.3 Ne private inflows (equity + debt) 5.0 4.9 4.7 4.4 4.3 East Asia and Pacific 5.7 4.6 4.2 3.9 3.8 Europe and Central Asia 5.5 5.7 6.5 6.1 6.0 Latin America and Caribbean 5.4 6.4 5.9 5.5 5.3 Middle East and N. Africa 1.3 1.4 1.1 1.4 1.7 South Asia 3.3 4.0 3.6 3.4 3.3 Sub-Saharan Africa 4.2 3.5 3.8 3.9 4.2 Real GDP growth 5 World 2.8 2.3 2.2 3.0 3.3 Memo item: World (PPP weights) 3.8 2.9 3.1 3.8 4.1 High income 1.7 1.3 1.2 2.0 2.3 OECD Countries 1.5 1.2 1.1 1.9 2.2 Euro Area 1.5 -0.5 -0.6 0.9 1.5 Japan -0.5 2.0 1.4 1.4 1.3 United States 1.8 2.2 2.0 2.8 3.0 Non-OECD countries 4.9 2.8 3.1 3.7 3.9 Developing countries 6.0 5.0 5.1 5.6 5.7 East Asia and Pacific 8.3 7.5 7.3 7.5 7.5 China 9.3 7.8 7.7 8.0 7.9 Indonesia 6.5 6.2 6.2 6.5 6.2 Thailand 0.1 6.5 5.0 5.0 5.5 Europ and Central Asia 5.7 2.7 2.8 3.8 4.2 Russia 4.3 3.4 2.3 3.5 3.9 Turkey 8.8 2.2 3.6 4.5 4.7 Romania 2.5 0.7 1.7 2.2 2.7 Latin America and Caribbean 4.4 3.0 3.3 3.9 3.8 Brazil 2.7 0.9 2.9 4.0 3.8 Mexico 3.9 3.9 3.3 3.9 3.8 Argentina 8.9 1.9 3.1 3.0 3.0 Middle East and N. Africa -2.2 3.5 2.5 3.5 4.2 Egypt 6 1.8 2.2 1.6 3.0 4.8 Iran 1.7 -1.9 -1.1 0.7 1.9 Algeria 2.4 2.5 2.8 3.2 3.5 South Asia 7.3 4.8 5.2 6.0 6.4 India 6,7 6.2 5.0 5.7 6.5 6.7 Pakistan 6,7 3.0 3.7 3.4 3.5 3.7 Bangladesh 6 6.7 6.2 5.8 6.1 6.3 Sub-Saharan Africa 4.7 4.4 4.9 5.2 5.4 South Africa 3.1 2.5 2.5 3.2 3.3 Nigeria 7.4 6.5 6.7 6.7 7.0 Angola 3.4 8.1 7.2 7.5 7.8 Memorandum items Developing countries excluding transition countries 6.5 5.0 5.3 5.8 5.9 excluding China and India 4.5 3.3 3.5 4.2 4.4 Source: June 2013 Global Economic Outlook, The World Bank. Notes: PPP = purchasing power parity; e = estimate; f = forecast. 1. Canada, France, Germany, Italy, Japan, the United Kingdom, and the United States. 2. In local currency, aggregated using 2005 GDP weights. 3. Simple average of Dubai, Brent, and West Texas Intermediate. 4. Unit value index of manufactured exports from major economies, expressed in USD. 5. Aggregate growth rates calculated using constant 2005 dollars GDP weights. 6. In keeping with national practice, data for Bangladesh, Egypt, India, and Pakistan are reported on a fiscal year basis in table 1.1. Aggregates that depend on these countries are calculated using data compiled on a calendar year basis. 7. Real GDP at factor cost, consistent with reporting practice in Pakistan and India. See Table SAR.2, South Asia Regional Annex for details. 34 31 32 Annex 3 Cambodia: Domestically Financed Sectoral Spending Domestically Financed Current Spending by Ministry (2005-2013) 2005 2006 2007 2008 2009 2010 2011 2012 BUDGET 2013 BUDGET % of 2005 2006 % of %2007 of 2008 % of 2009 % of 2010% of 2011 % of 2012 BUDGET of % 2013 BUDGET % of (In billion of riels) total % of% of % of % of total total % of % of total % of % of total % of % of % of total % of % of total % of % of total % of % of total % of (In billion of riels) Total Total % of Total Total Total Total total Total Total Total budget totalGDP% of Total total GDP Totalbudget total Total budget % of GDP Total total budget % of GDP Total total budget % of GDP Total budget % of GDP Total total budget % of GDP Total total% of budget GDP Total total % of budget GDP budget GDP budget GDP budget GDP budget GDP budget GDP budget GDP budget GDP budgetGDP budget GDP exp. exp. exp.exp. exp. exp. exp. exp. exp. exp. exp. exp. exp. exp. exp. exp. exp. exp. Total Spending Total Spending by Ministries/Agencies by Ministries/Agencies 1,254.6 42.8 42.8 4.9 4.9 1,254.6 1,572.8 1,572.8 53.7 53.7 5.35.3 1,900.0 1,900.0 53.3 53.3 5.4 2,565.3 5.4 2,565.3 53.2 53.2 6.1 3,308.7 6.1 3,308.7 54.3 54.3 7.7 7.7 3,518.5 54.6 54.6 7.5 3,518.5 7.5 4,348.0 4,348.0 56.1 56.18.4 8.4 3,906.3 3,906.3 48.3 48.3 6.8 6.8 4,440.5 4,440.5 47.9 47.9 7.0 7.0 I. General Administration I. General Administration 437.1 14.9 346.8 346.8 11.8 11.8 1.3 1.3 437.1 14.9 568.9 1.51.5 568.9 15.9 15.9 1.6 1.6 801.7 801.7 16.6 16.6 1.9 1.9 1,323.7 1,323.7 21.7 21.7 3.1 3.1 1,410.8 1,410.8 21.9 21.9 3.0 1,917.01,917.0 3.0 24.7 24.73.7 932.2 3.7 11.5 932.2 1.6 11.5 1,100.1 1.6 11.9 1,100.1 1.7 11.9 1.7 01. Royal Palace 36.2 1.2 0.1 39.4 1.3 0.1 41.1 1.2 0.1 43.8 0.9 0.1 48.0 0.8 0.1 47.4 0.7 0.1 49.2 0.6 0.1 53.5 0.7 0.1 58.3 0.6 0.1 II. Defense and Security 451.2 15.4 1.8 520.2 17.8 1.7 615.9 17.3 1.8 813.8 16.9 1.9 1,427.4 23.4 3.3 1,153.1 17.9 2.5 1,303.3 16.8 2.5 1,398.4 17.3 2.4 1,600.6 17.3 2.5 02. National Assembly 40.0 1.4 0.2 49.9 1.7 0.2 68.2 1.9 0.2 86.0 1.8 0.2 100.0 1.6 0.2 113.3 1.8 0.2 109.1 1.4 0.2 108.3 1.3 0.2 114.7 1.2 0.2 III. Social 03. Senate 729.8 24.9 2.8 895.5 30.6 3.0 1,064.0 29.8 3.0 1,322.9 27.4 3.2 1,636.5 26.9 3.8 1,725.4 26.8 3.7 1,967.8 25.4 3.8 2,434.4 30.1 4.2 2,746.5 29.6 4.3 18.6 0.6 0.1 20.7 0.7 0.1 25.6 0.7 0.1 30.1 0.6 0.1 30.8 0.5 0.1 32.7 0.5 0.1 34.9 0.5 0.1 38.3 0.5 0.1 46.9 0.5 0.1 12. Public Health 04. Counstitutional Council 224.6 3.3 7.7 0.1 0.9 0.0 260.8 3.4 8.9 0.1 0.90.0 343.3 3.5 9.6 0.1 1.0 0.0 426.8 5.1 8.9 0.1 1.0 0.0 524.5 6.3 0.18.6 0.0 1.2 593.2 6.8 0.1 9.2 0.0 1.3 6.6 667.3 0.1 8.60.0 1.3 7.3 794.2 0.1 9.8 0.0 1.4 7.9 901.5 0.1 9.7 0.0 1.4 16. Education,Youth 05.1 Council of Ministers and Sport 110.1 15.2 3.8 350.8 94.0 12.0 3.2 1.4 0.4 445.6 162.2 1.50.4 493.7 4.5 13.8 0.5 1.4 314.5 606.5 6.5 12.6 0.7 1.4 341.9 708.2 5.6 11.6 0.8 1.6 286.4 712.5 4.4 11.1 0.6 505.8 799.6 6.5 1.5 10.31.0 235.4 1,007.6 1.5 2.9 0.4 12.5 249.3 1.8 2.7 1,119.6 0.4 12.1 1.8 05. 2 Civil Service Secretariate IV. Economic 2.1 0.1 0.0 2.2 0.1 0.0 2.0 0.1 0.0 2.5 0.1 0.0 2.9 0.0 0.0 2.4 0.0 0.0 2.7 0.0 0.0 3.5 0.0 0.0 3.9 0.0 0.0 178.1 6.1 0.7 240.3 8.2 0.8 267.1 7.5 0.8 440.7 9.1 1.1 348.5 5.7 0.8 382.3 5.9 0.8 463.1 6.0 0.9 539.7 6.7 0.9 593.9 6.4 0.9 05.4 CDC 13. Industry, Mines and Energy 3.3 0.1 0.0 3.9 0.1 0.0 3.6 0.1 0.0 4.3 0.1 0.0 5.0 0.1 0.0 4.2 0.1 0.0 5.2 0.1 0.0 5.8 0.1 0.0 6.4 0.1 0.0 07.2 Interior - Administration 7.4 0.3 0.0 31.0 1.1 0.1 38.3 1.1 0.1 163.2 3.4 0.4 15.0 0.2 0.0 16.1 0.2 0.0 27.2 0.4 0.1 20.5 0.3 0.0 22.1 0.2 0.0 20.4 0.7 0.1 38.0 1.3 0.1 42.5 1.2 0.1 47.5 1.0 0.1 47.0 0.8 0.1 50.7 0.8 0.1 56.1 0.7 0.1 65.3 0.8 0.1 72.1 0.8 0.1 17. Agriculture, 08. Relations Forestry Assembly and and Fishery Inspections 47.1 3.7 1.6 0.1 0.2 0.0 55.9 5.5 1.9 0.2 0.20.0 57.7 7.3 1.6 0.2 0.2 0.0 65.8 9.6 1.4 0.2 0.2 0.0 79.9 10.7 0.21.3 0.0 0.2 14.5 81.3 0.2 1.3 0.0 0.214.9 91.0 0.2 1.20.0 0.2 17.4 109.7 0.2 1.4 0.0 0.2 19.6 121.2 0.2 1.3 0.0 0.2 Rural Development 20. Affairs 09. Foreign and Int'l Cooperation 22.1 57.1 0.8 1.9 0.1 0.2 30.059.7 1.0 2.0 0.10.2 34.8 65.6 1.0 1.8 0.1 0.2 45.2 77.9 0.9 1.6 0.1 0.2 60.7 72.7 1.21.0 0.2 0.1 64.6 73.7 1.0 1.1 0.1 0.275.9 85.2 1.0 1.10.1 0.2 99.2 95.9 1.2 1.2 0.2 0.2 81.4 109.3 0.9 1.2 0.1 0.2 10. Economy and Finance 25. Public Works and Transport 13.0 40.4 0.4 1.4 0.1 0.2 17.371.9 0.6 2.5 0.10.2 76.9 19.8 2.2 0.6 0.2 0.1 107.5 25.3 2.2 0.5 0.3 0.1 600.6 29.9 9.9 0.5 1.4 976.2 0.1 722.0 29.5 11.2 0.5 1.5 0.1 12.6 40.0 0.51.9 124.7 0.1 1.5 42.5 0.2 0.5 236.2 0.1 2.5 47.9 0.4 0.5 0.1 14. Planning 28. Land Management, Urbanization and 6.3 0.2 0.0 7.8 0.3 0.0 9.5 0.3 0.0 12.4 0.3 0.0 15.2 0.3 0.0 21.8 0.3 0.0 22.8 0.3 0.0 31.3 0.4 0.1 37.5 0.4 0.1 26. Justice 7.9 11.7 0.3 0.4 0.0 0.0 12.713.2 0.00.0 0.0 0.0 Construction 0.4 0.5 15.3 15.6 0.4 0.4 0.0 19.0 19.1 0.4 0.4 0.0 22.5 23.3 0.40.4 0.1 0.1 30.4 25.2 0.5 0.4 0.1 0.132.8 55.1 0.4 0.70.1 0.1 45.4 76.1 0.6 0.9 0.1 0.1 51.0 79.9 0.5 0.9 0.1 0.1 30. National Election 29. Water Committee Resources and Meteorology 13.7 6.0 0.5 0.2 0.1 0.0 18.8 6.2 0.6 0.2 0.10.0 40.0 20.4 1.1 0.6 0.1 0.1 35.9 25.8 0.7 0.5 0.1 0.1 13.9 29.5 0.20.5 0.0 0.1 7.6 30.5 0.1 0.5 0.0 0.118.9 42.4 0.2 0.50.0 67.8 0.1 0.8 51.4 0.1 0.6 79.2 0.1 0.9 57.9 0.1 0.6 0.1 33 31. National Audit Authority 3.7 0.1 0.0 5.0 0.2 0.0 5.4 0.2 0.0 5.5 0.1 0.0 5.5 0.1 0.0 5.9 0.1 0.0 5.9 0.1 0.0 6.9 0.1 0.0 8.3 0.1 0.0 33.1 Anti-Corruption Unit Source: Ministry of Economy and Finance 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 22.1 0.3 0.0 27.5 0.3 0.0 II. Defense and Security 451.2 15.4 1.8 520.2 17.8 1.7 615.9 17.3 1.8 813.8 16.9 1.9 1,427.4 23.4 3.3 1,153.1 17.9 2.5 1,303.3 16.8 2.5 1,398.4 17.3 2.4 1,600.6 17.3 2.5 1/ For current 06. National spending covers chapters 60 (purchase), 61 (external services), 62 (other services), 65 (social assistance), and 66 (interest payments) that are not classified to sector ministries/agencies. Defense 289.4 9.9 1.1 328.1 11.2 1.1 372.6 10.4 1.1 501.1 10.4 1.2 972.4 16.0 2.3 735.8 11.4 1.6 826.1 10.7 1.6 876.4 10.8 1.5 980.5 10.6 1.6 07.1 Interior - Security 161.8 5.5 0.6 192.0 6.6 0.6 243.3 6.8 0.7 312.7 6.5 0.7 455.0 7.5 1.1 417.3 6.5 0.9 477.2 6.2 0.9 522.0 6.5 0.9 620.1 6.7 1.0 III. Social 729.8 24.9 2.8 895.5 30.6 3.0 1,064.0 29.8 3.0 1,322.9 27.4 3.2 1,636.5 26.9 3.8 1,725.4 26.8 3.7 1,967.8 25.4 3.8 2,434.4 30.1 4.2 2,746.5 29.6 4.3 11. Information 13.2 0.4 0.1 17.2 0.6 0.1 18.5 0.5 0.1 23.0 0.5 0.1 40.4 0.7 0.1 39.9 0.6 0.1 50.2 0.6 0.1 58.6 0.7 0.1 74.5 0.8 0.1 12. Public Health 224.6 7.7 0.9 260.8 8.9 0.9 343.3 9.6 1.0 426.8 8.9 1.0 524.5 8.6 1.2 593.2 9.2 1.3 667.3 8.6 1.3 794.2 9.8 1.4 901.5 9.7 1.4 16. Education,Youth and Sport 350.8 12.0 1.4 445.6 15.2 1.5 493.7 13.8 1.4 606.5 12.6 1.4 708.2 11.6 1.6 712.5 11.1 1.5 799.6 10.3 1.5 1,007.6 12.5 1.8 1,119.6 12.1 1.8 18. Culture and Fine-Arts 14.3 0.5 0.1 15.5 0.5 0.1 17.8 0.5 0.1 22.2 0.5 0.1 25.3 0.4 0.1 25.8 0.4 0.1 28.8 0.4 0.1 39.6 0.5 0.1 43.2 0.5 0.1 19. Environment 8.2 0.3 0.0 9.5 0.3 0.0 11.2 0.3 0.0 16.1 0.3 0.0 18.1 0.3 0.0 18.9 0.3 0.0 24.1 0.3 0.0 25.7 0.3 0.0 28.0 0.3 0.0 21. Social Affairs, Veteran & Youth Rehabilitation 95.4 3.3 0.4 108.0 3.7 0.4 129.1 3.6 0.4 159.0 3.3 0.4 196.5 3.2 0.5 236.9 3.7 0.5 281.7 3.6 0.5 353.2 4.4 0.6 411.0 4.4 0.6 23. Public Worship and Religion 4.1 0.1 0.0 5.5 0.2 0.0 7.6 0.2 0.0 9.6 0.2 0.0 12.1 0.2 0.0 20.2 0.3 0.0 21.9 0.3 0.0 26.5 0.3 0.0 30.5 0.3 0.0 24. Woman Affairs 10.3 0.4 0.0 13.1 0.4 0.0 14.9 0.4 0.0 19.9 0.4 0.0 23.7 0.4 0.1 24.7 0.4 0.1 24.6 0.3 0.0 29.6 0.4 0.1 30.9 0.3 0.0 32. Labor and Vocational Training 8.9 0.3 0.0 20.2 0.7 0.1 28.0 0.8 0.1 39.8 0.8 0.1 87.5 1.4 0.2 53.2 0.8 0.1 69.6 0.9 0.1 99.4 1.2 0.2 107.4 1.2 0.2 IV. Economic 178.1 6.1 0.7 240.3 8.2 0.8 267.1 7.5 0.8 440.7 9.1 1.1 348.5 5.7 0.8 382.3 5.9 0.8 463.1 6.0 0.9 539.7 6.7 0.9 593.9 6.4 0.9 05.3 Civil Aviation Secretariate 7.2 0.2 0.0 8.2 0.3 0.0 9.8 0.3 0.0 10.5 0.2 0.0 11.3 0.2 0.0 12.2 0.2 0.0 13.1 0.2 0.0 15.0 0.2 0.0 18.3 0.2 0.0 13. Industry, Mines and Energy 7.4 0.3 0.0 31.0 1.1 0.1 38.3 1.1 0.1 163.2 3.4 0.4 15.0 0.2 0.0 16.1 0.2 0.0 27.2 0.4 0.1 20.5 0.3 0.0 22.1 0.2 0.0 15. Commerce 14.6 0.5 0.1 17.3 0.6 0.1 20.4 0.6 0.1 29.9 0.6 0.1 35.3 0.6 0.1 49.4 0.8 0.1 44.1 0.6 0.1 66.7 0.8 0.1 76.3 0.8 0.1 17. Agriculture, Forestry and Fishery 47.1 1.6 0.2 55.9 1.9 0.2 57.7 1.6 0.2 65.8 1.4 0.2 79.9 1.3 0.2 81.3 1.3 0.2 91.0 1.2 0.2 109.7 1.4 0.2 121.2 1.3 0.2 20. Rural Development 22.1 0.8 0.1 30.0 1.0 0.1 34.8 1.0 0.1 45.2 0.9 0.1 60.7 1.0 0.1 73.7 1.1 0.2 85.2 1.1 0.2 95.9 1.2 0.2 109.3 1.2 0.2 22. Posts and Telecommunications 30.9 1.1 0.1 31.7 1.1 0.1 30.5 0.9 0.1 34.5 0.7 0.1 37.0 0.6 0.1 36.7 0.6 0.1 24.7 0.3 0.0 27.6 0.3 0.0 22.2 0.2 0.0 25. Public Works and Transport 13.0 0.4 0.1 17.3 0.6 0.1 19.8 0.6 0.1 25.3 0.5 0.1 29.9 0.5 0.1 29.5 0.5 0.1 40.0 0.5 0.1 42.5 0.5 0.1 47.9 0.5 0.1 27. Tourism 14.3 0.5 0.1 17.2 0.6 0.1 20.3 0.6 0.1 21.4 0.4 36 27.4 0.1 0.5 0.1 27.9 0.4 0.1 40.3 0.5 0.1 34.3 0.4 0.1 38.8 0.4 0.1 28. Land Management, Urbanization and Construction 7.9 0.3 0.0 12.7 0.4 0.0 15.3 0.4 0.0 19.0 0.4 0.0 22.5 0.4 0.1 25.2 0.4 0.1 55.1 0.7 0.1 76.1 0.9 0.1 79.9 0.9 0.1 29. Water Resources and Meteorology 13.7 0.5 0.1 18.8 0.6 0.1 20.4 0.6 0.1 25.8 0.5 0.1 29.5 0.5 0.1 30.5 0.5 0.1 42.4 0.5 0.1 51.4 0.6 0.1 57.9 0.6 0.1 Source: Ministry of Economy and Finance The World Bank Cambodia Country Office 113 Norodom Blvd., Phnom Penh, Cambodia Tel : (855-23) 861 300 Fax : (855-23) 861 301/302 Website: www.worldbank.org