Policy Note 83082 October 2013 Poverty Monitoring and analysis Where Have All the Poor Gone? Significance Over the past decade, Cambodia has experienced a phenomenal decline in poverty: the total number of poor fell from 7 million in 2004, to just 3 million in 2011, a decline of more than 50 percent. This performance makes Cambodia one of the best performers in poverty reduction worldwide in recent years. But despite this success, most families have only been lifted out of poverty by a small margin, and instead of being poor are now near-poor. As such, they risk falling back into poverty at the slightest income shock. An average loss of just US$0.30 in income per day would push 3 million near-poor Cambodians back into poverty, doubling the country’s current poverty rate from 20.5 percent to about 40 percent. Going forward, it would be desirable if Cambodia could consider three key priorities: (i) improved access to and quality of basic rural infrastructure and strengthened agricultural diversification; (ii) continued investment in human development; and (iii) implementing an enhanced social protection system. POVERTY RATE, CAMBODIA 2004-2011 Background By more than halving poverty from 53.0 percent in 2004 to 20.5 percent in 2011, Cambodia has surpassed all expectations and easily exceeded the MDG poverty target. This achievement was made possible by robust economic growth that has enabled benefits to be shared by a lager number of people. The rapid reduction of poverty was driven by five main factors: (i) high rice prices; (ii) higher rice production; (iii) higher revenue from non-farm businesses; (iv) higher wage POPULATION SHARES BY CONSUMPTION, CAMBODIA rates of rural workers; and (v) growth in salaried jobs in urban areas. 2004 However, the majority of those lifted out of poverty remain 2011 near-poor, and highly vulnerable to slipping back into poverty at the slightest shock. Indeed, an average loss of CR 1,200/day (US$0.30) would return 3 million near-poor into poverty and double Cambodia’s poverty rate to 40 percent. DRIVERS OF POVERTY REDUCTION, CAMBODIA 2004-2011 Important challenges remain to further cuts in poverty In addition to the risk of the near-poor slipping back into poverty, continued progress in human development outcomes is needed if poverty levels are to fall further. This is especially important given that the key drivers of the rapid poverty reduction over the past decade are unlikely to continue—at least not at their previous pace. In health, for example, although maternal, infant and child mortality rates have all improved dramatically there is still a large gap between rates for the poor Policy Note Poverty Monitoring and Analysis and those for better off families, indicating problems activities will be the most important factor for sustained in the coverage and quality of health care. There has economic growth and poverty reduction in Cambodia. also been a distinct lack of progress in reducing child The country should be ready to step up efforts to promote malnutrition: from 2005 to 2010, the percentage of industry and the services sector. stunted children under five years of age only fell from 42 to 40 percent, while underweight children stalled at 38 percent and children with wasting increased from Continue Investing in Human Development 8 to 11 percent. Meanwhile, in education low levels of It is important to make special provisions to bring rural enrollment in primary education, especially from poor children into education earlier, and reach out to children from and vulnerable families, is a problem and is also producing low enrollment, high repetition and high poor and minority families who have never been in school, drop-pout rates in secondary education. using a combination of scholarships and school feeding programs. For secondary education, policies are needed to address low enrollment, low retention and high drop-out Priorities for policies going forward rates. In rural areas, proximity to schools remains a problem in raising completion rates. In order to raise retention, cash Proactive policies aimed at helping the remaining poor transfer and other targeted programs could be considered. out of poverty and preventing the near-poor from slipping back into poverty could have a major impact in maintaining In the health sector, Health Equity Fund coverage and the momentum of declining poverty in Cambodia. Such utilization need to be increased for the poor, while maintaining proactive policies are all the more crucial as the aspirations low user fees. Furthermore, oversight mechanisms need and expectations of Cambodians rise in line with economic to be strengthened to ensure all eligible poor are covered growth, and demands for better public services and higher and also aware of their benefits. For health care quality, wages grow. Going forward, it would be desirable if Cambodia there is a need for better control to ensure the quality of could consider three key priorities. medicines and providers outside the public health system. Oversight and regulation of private and informal providers is Basic Rural Infrastructure and Agriculture crucial, while accreditation of pharmacists is vital to combat Diversification counterfeit drugs. Standards of pre-service training (phar- There is a need to continue investing in rural infrastructure. macist and nurse degrees) need to be evaluated, starting The poor will benefit from further improvement in access to with an independent needs assessment. Child malnutrition and upgrading of rural roads, expanding irrigation facilities, is another challenge in the health sector. A multi-sector electricity, and clean water and sanitation. In terms of approach needs to be adopted to reduce child malnutrition agriculture diversification, this could be achieved by rice with a focus on poor and rural families. Community-based intensification, and improvements in crop diversification programs need to reduce open defecation, and improve and value-added creation. Rice production needs to be feeding habits, food fortification and micronutrients. The intensified from one crop to two crops annually in areas that monitoring of child growth by health facilities needs to be currently only rely on rain-fed water and this would require strengthened, together with the linking of malnutrition to access to improved rice seeds and extension services. Likewise, Cambodia should promote crop diversification— appropriate response mechanisms. especially in agro-ecological zones that are better suited for crops besides rice. Value-added creation in agricultural Implementing an Enhanced Social Protection System products includes all activities from production to packaging A stronger mandate and increased resources are needed for in shops or markets. This would include, but not be limited the central implementing agency in its role as coordinator of to, marketing, processing (such as rice milling), and several government ministries in implementing the National commercialization. To achieve this, it is necessary to promote Social Protection Strategy (NSPS). In particular, some NSPS cooperatives, information flows and credit instruments to small- and medium-sized farms. programs require seed money to attract further resources from government and other stakeholders. In addition, labor Although agriculture has lifted many people out of poverty, compliance standards used in the garment industry could poverty reduction cannot be sustained by agriculture alone. be applied to other industries to better protect workers and In the medium term and over the long run, non-agricultural encourage them to enrol in the national social security system. The World Bank Office For further information, Funding from the UK’s DFID for the Trust please contact: Fund for Poverty Reduction and Governance No. 113 Norodom Blvd. Phnom Penh - Cambodia Analysis and Coordination Support program Tel: (855 23) 861 300 Samsen Neak (PRAGACS) is gratefully acknowledged. Fax: (855 23) 861 301/302 Poverty Economist (sneak@worldbank.org) Visit our website: http://www.worldbank.org/cambodia Lyden Kong This note reflects the views of the authors and not Team Assistant necessarily those of the World Bank and the donors. (lkong@worldbank.org )