36873 Volume 4, Number 7 July 2006 World Bank SeniorVice President and Chief Economist Visits Cambodia S chool is a place which provides great opportunities for a country's develop- ment, World Bank Vice President Francois Bourguignon told students at Thmor Sor School inTakeo on June 25. "Cambodia has an ambitious scholarship program, and the World Bank is very proud to support the Government to meet its goals," he said. MrBourguignon,WBSeniorVicePresi- dent for Development Economics and Chief Economist, visited Cambodia on June 25 and 26, 2006, and met with government of- ficials, NGO and private sector representa- tives, and young people to learn about the country's progress and to talk about eq- uity and development in Cambodia. Early in his program he visited Thmor H.E Kol Peng, Minister of Education Youth and Sport (front left) and Mr. See WORLD BANK: on page 6 Francois Bourgunion (front right) visit Thmor Sor School in Takeo province Equity Promotes Growth and Poverty Reduction R epresentatives from Government, civil growth and poverty reduction at a work- (www.worldbank.org/wdr2006). society, private sector, research insti- shop to launch the World Bank's World In Cambodia, the concern with equity tutes and development partners met on June DevelopmentReport2006:EquityandDe- reflects survey findings that inequality 13 to debate connections between equity, velopment has risen rapidly over the last ten years. NishaAgrawal, Country Manager for the World Bank in Cambodia, noted that "While the standards of living of the poorest 20 percent of Cambodians have risen on average by 8 percent over the last decade, the standard of living of the richest 20 percent have risen almost six times as fast, by 45 percent...The over- all picture is of a Cambodia that is mov- ing forward to the benefit of the great majority, but in which some are moving ahead much faster than others, creat- ing a widening gulf between the oppor- tunities and standards of living for dif- ferent groups in society." Summarizing the lessons of interna- tional experience and their relevance for Cambodia, HE Keat Chhon, Senior Min- ister for Economy and Finance, empha- From left: NishaAgrawal, World Bank Country Manager, H.E Keat Chhon, Senior sized that "Equity is complementary to Minister for Economy and Finance, and Michael Woolcock, one of the authors of the pursuit of long-term development. the World Bank's World Development Report 2006 at the workshop on June 13 See EQUITY: on page 2 2 The World Bank Newsletter June 2006 Equity Promotes Growth ... continued from page 1 efits was due to both market failures and government failures." Meas Nee of the NGO KromAkphiwat Phum identified top-down development models and power differences between social groups as important sources of in- equality: "to prevent themselves from be- ing further exploited by any unjust and inequitable development paradigm, ...community people must identify their own strategies to enhance the roles of traditional leadership in rebuilding their social capital." For its part, he said, "the government [must] adopt a consul- tative approach with the people rather than to impose approaches upon them." Addressing the relationship between law and equity in Cambodia, DanielAdler from the World Bank Cambodia Country From Left: Prof. James Robinson; Tim Conway, World Bank Poverty Specialist; Office referred to the WDR, and said le- Prof. David Chandler, historian; and Prof. Keang Un, Political Scientist. gal institutions can be a two-edged sword, possibly equalizing opportunities continued from page 1 those living in urban areas, were the by protecting citizen's rights, but poten- Institutions and policies that promote first to capture rents and became rich. tially also perpetuating inequality if they a level playing field contribute to sus- People living in remote areas contin- are captured by elite interests. "It seems tainable growth and development." ued to suffer from many disadvantages. that an equitable legal system will Two of the WDR's authors, Michael The highly unequal share of the ben- see EQUITY... page 5 Woolcock and James Robinson, sum- marized the key messages from the glo- bal report, particularly with regard to the importance of political institutions that foster equity in policy-making and the management of national resources in everyone's interests. Other speakers then presented papers on specific aspects of inequality in Cam- bodia. Historian David Chandler put con- temporary debates in context: he said that throughout Cambodia's history "avenues for social mobility were traditionally narrow or non-existent, hierarchical ar- rangements have always dominated so- cial relations, and episodes of extreme deprivation...have occurred frequently" ­ but went on to argue that "striving for equity is crucial to Cambodia in 2006 and for the future." Analyzing the relationships between political equity and development, Prof. Kheang Un of Northern Illinois Univer- sity argued that "the political and eco- nomic gains achieved thus far could be consolidated by further promoting good governance and democratic deepening." Sok Hach, Director of the Economic Institute of Cambodia, examined the un- derlying economic processes that have generated widening inequalities, saying that as Cambodia opened up since the early 1990s,"A small number of people with more opportunities, especially Aparticipant asks the panelists questions at the Equity and Development Workshop July 2006 The World Bank Newsletter 3 WorldBankReaffirmsCommitmenttoSupportReforminCambo- dia,ApprovesProjecttoStrengthenManagementofPublicFunds P HNOMPENH,June28,2006--the Cambodia ­ as outlined in the Country incorporates all of the elements of the World Bank's Board of Executive Di- Assistance Strategy. Where reformers are Bank's strategy ­ it supports a long-term rectors reaffirmed its support for moving forward with critical measures, program of critical reforms for improv- Cambodia's reform program, one-year into the World Bank will work actively with ing public financial management and, implementation of the new Country As- other donors to support them. But when in doing so, helps to strengthen fiduciary sistanceStrategy.Tofurtherthiswork,the corruption is found, the Bank needs to systems and the World Bank's portfolio. Board also approved a new project to sup- work vigorously with the Government to It is based on strong donor partnerships port improvements in the management of take appropriate actions, so that devel- in support of Government priorities, and and accounting for public finances. opment assistance ultimately benefits the will help Cambodia carry out its 10-year The new US$14 million project, the poor who are its intended beneficiaries." program of public financial management Public Financial Management and Ac- The Board discussed the recent prob- reform." countabilityProject,isseenasakeycom- lems of corruption in the Bank's portfolio, The Public Financial Management ponent of the Bank's approach to helping which have come to light as a result of the andAccountability Projectwillworkin improve governance and fight corruption. fiduciary work of the CAS and efforts to six specific areas, supporting the The two-pronged approach the World improve the effectiveness of the Bank's Government's Public Financial Manage- Bank has taken in the Cambodia Country portfolio. This Fiduciary Review, plus fol- mentReformProgramwith:revenueman- Assistance Strategy (CAS) aims to sup- low-up investigation by the World Bank's agement; budget formulation; budget port anti-corruption and governance re- Department of Institutional Integrity, led execution; capacity development; a Merit forms, particularly reducing the costs of to the finding of corrupt practices in 7 Based Pay Initiative (MBPI) ­ which will doing business, improving management projects, the cancellation of US$11.9 mil- help reform the civil service; and build- of natural resources, strengthening pub- lion in contracts, and the suspension of 3 ing the oversight capacity of Cambodia's lic financial management, and supporting projects until problems can be fixed National Audit Authority. The Govern- decentralization and the demand side as- through the implementation of agreed ac- ment-led Public Financial Management pects of governance; and reduce the fi- tion plans. Reform program ­ which this project will duciary risk for Bank financed opera- The Government is now working with support ­ has been underway since 2004 tions in Cambodia the Bank to fix the problems of the past and has already achieved results. Rev- During Tuesday's discussion, Bank and also to adopt new implementation enues have increased by 20 percent from management updated the Board on measurestominimizefuturefiduciaryrisks. 2004 to 2005; the amount of customs rev- progress made in the first year of the as- "The projects that we have suspended enue collected through the banking sys- sistance strategy. Cambodia's Country finance critical interventions to help im- tem has increased from zero in 2004 to 36 Policy and Institutional Assessment prove the lives of the people of Cambo- percent in 2005, and 86 percent of allTax (CPIA) indicators, the World Bank's an- dia, including land titles, rural roads, and Department revenue is now collected nual rating of a country's performance, water supply and sanitation," Ian Porter, through the banking system; the stock have improved, especially in private sec- Country Director for Cambodia added. of old expenditure arrears has been re- tor development and public financial man- "As we have said repeatedly, it is impor- duced by over 40 percent; the procure- agement. Enhanced anti-corruption mea- tant that we work with the Government to ment process has been streamlined and sures guided by a Fiduciary Action Plan fix the weaknesses affecting these projects tightened; five line ministries have es- are being carried out, after being jointly so that we can get back to the business of tablished internal audit departments; and, identified and agreed with the Government helping to ensure that people have secure for the first time in Cambodia, a pilot pro- aspartofaFiduciaryReviewin2005.Also, property rights, that roads are built and gram has been launched to pay civil ser- a $10 million grant for Trade Facilitation more people have access to clean water. vants through commercial banks instead and Competitiveness to improve the busi- We are also applying the lessons learned of by cash. ness environment and level the playing from the fiduciary and investigatory work The reform program is supported by field for the private sector is under imple- to strengthen our overall portfolio and 11 donors -- the Asian Development mentation. Finally, in March, the Consul- make it more effective at reaching the poor Bank,Australia, European Commission, tative Group Meeting for Cambodia, while and achieving results." France, Germany, International Monetary acknowledging the challenges and long- The Board agreed with the approach Fund, Japan, Sweden, United Kingdom, term nature of reducing corruption and the Bank has adopted to take tough ac- United Nations Development Program, improving governance, was encouraged tions to combat corruption within World and the World Bank ­ four of whom are by the progress made on the reform pro- Bank projects while continuing work to contributing about $17 million to the gram and the joint Government-Donor build institutions to improve governance World Bank-managed multi-donor trust Monitoring Indicators. and fight corruption more broadly ­ fund, set up to co-finance the implemen- However, there have also been some through lending, technical and capacity tation of this program. setbacks and difficulties. "While there has building assistance, and analytical work, clearly been progress in Cambodia, the where appropriate. In this context, the For more information please contact governance environment remains ex- Board approved the Public Financial Man- Mr. Robert Taliercio tremely challenging," WorldBankPresi- agement and Accountability Project. Senior Country Economist dent Paul Wolfowitz said. "We need to NishaAgrawal,CountryManagerfor Email: rtaliercio@worldbank.org continue to take a balanced approach in Cambodia,commented,"Thisnewproject 4 The World Bank Newsletter July 2006 ImprovingManagementofForestsIsCritical toBetterLivelihoods,EconomicGrowthinCambodia W ASHINGTON, June 29, 2006 -- The Chairperson of the Inspection In response to the Inspection Panel World Bank President Paul Panel,EdithBrownWeiss,said,"Forests report, theWorld Bank's Management rec- Wolfowitz said, "Improving the manage- in Cambodia are extensive, and they have ognized that the project was not in full ment of forests, land, and other natural high economic, ecological and cultural compliance with a number of safeguard resources is essential for the well-being value for large numbers of rural commu- policies, that project preparation could of the Cambodian people and its nities, including Indigenous Peoples. The have more effectively documented and economy, and the Bank should try to stay Panel found that the Bank did not com- drawn on available environmental and engaged to promote further dialogue and ply with key provisions of its policies social information, and that the project information disclosure to help build con- designed to protect people and the envi- would have benefited from broader con- sensus for the future." ronment, including on Environmental sultation with local communities and other The President welcomed a Report of Assessment, Indigenous Peoples, Forests stakeholders, including Indigenous the Inspection Panel involving a Bank- and others. The Panel is pleased that Peoples. Management agreed with the funded project in Cambodia, and Management is taking on board the find- Panel on the deficiencies of the manage- Management's Response to this Report, ings of the Report. The Panel recognizes ment plans prepared by the forest as important contributions to promoting the importance of taking risks in the for- concessionaries, and acknowledged that sustainable development, and noted that est sector in countries such as Cambo- the project overestimated the willingness it is important to learn the lessons from dia, and is glad that the Bank will incor- and the capacity of the concessionaires this experience and work hard to apply porate the insights from the Panel's Re- and the Government to carry out their re- them in the future. It is particularly impor- port into its future forest work in Cambo- sponsibilities in an effective manner. But tant, he said, that information on all as- dia and elsewhere." it acknowledged the Panel's finding that pects of forestry management be dissemi- The Inspection Panel issued its Re- the project did not finance logging or di- nated widely at both local and national port in response to a Request for Investi- rectly cause the damages from unsustain- levels so that parliamentarians, civil soci- gation submitted by the NGO Forum on able logging in the country. According to ety groups, the media and the affected Cambodia, acting on its own behalf and Management, since the late 1990s, illegal populations can exert a greater and much- on behalf of affected forest-dependent logging has dropped dramatically and the needed scrutiny of these activities. communities, which included some indig- total area under forest concessions de- Mr. Wolfowitz was speaking today at enous communities. These communities creased during the life of the project. a meeting of the World Bank's Board of depend on the forests for their livelihoods, Given that the project has closed, the Executive Directors and the institution's tapping resin and collecting forest prod- Board discussion centered on the way independent Inspection Panel. The Board ucts to sell. The Request said that the Bank forward for the Bank in the forestry sector gathered to discuss the thorough Report promoted the interests of forest conces- in Cambodia as outlined in a proposed of the Inspection Panel and its findings sionaires and contributed to a set of out- Action Plan, which forms part of the regarding problems that arose in the plan- comes that the communities said could Bank's Management response to the In- ning and implementation of the World harm them in the future. spection Panel's report. In developing its Bank-supported Cambodia Forest Con- In its Report, the Panel noted the chal- Action Plan, Management pointed to a cession Management and Control Pilot lenging context for work in the forestry number of key lessons, including the im- Project. The meeting also heard how the sector in Cambodia, and commended the portance of a shared vision with govern- Bank's Management plans to use the les- Bank's willingness to become involved in ment and other partners; improved gov- sons learned from the Panel Report and this work. It recognized the dedication of ernance to ensure transparency, account- the project in its future work in forestry staff and the difficulties they encountered. ability and equitable access to forest re- and natural resources management in The Panel found that by focusing so sources; continuous assessment of Gov- Cambodia. strongly on reforming forestry conces- ernment commitment; and finally, early When the Bank project was approved sions and taking a view that this could be and sustained involvement of local com- in 2000, over-exploitation of timber re- done effectively on a technical basis, the munities in project design and implemen- sources and illegal logging were threaten- Bank missed opportunities to engage more tation. ing to exhaust Cambodia's forest resources broadly. The Panel also questioned the As part of theAction Plan, the Bank's in as little as five years. The Forest Con- choice of a Learning and Innovation Loan, Management agreed to provide additional cession Management and Control Pilot which was not well suited for this type of support to staff in addressing environmen- Project,aUS$5millionLearningandInno- operation. The Panel noted, at the same tal and social issues in technical assis- vation Loan, focused on addressing the time, that no project could have produced tance projects related to natural resources critical but difficult issue of concession perfect outcomes in the extremely difficult management; to promote the use of Stra- management and control, and forest crime operating environment in Cambodia. tegic Environmental Assessments and monitoring and prevention. The project The Panel noted the alternative ap- other methods to provide information on complemented efforts by the Bank and proaches suggested by the Bank in a No- environmental and social trends and con- other donors, including a Bank-financed vember 2005 letter to the Government as ditions in natural resources management Structural Adjustment Credit, and a being consistent with their findings. These projects; and to promote the use of inno- Biodiversity and Protected Areas Project include support to community forestry, vative practices in future projects of this which was jointly financed by the World enhanced information disclosure, and im- type. Bank and the Global Environment Facility. proved law enforcement and monitoring. See IMPROVING: on page 6 July 2006 The World Bank Newsletter 5 Equity Promotes Growth ... continued from page 1 emerge only in response to effective de- mand-side pressures for change." This implied, he said, that "Work in the jus- tice sector should include a focus on pro- grams and institutions which amplify the demand for better governance cur- rently emerging both among citizens and in the private sector." Closing the workshop, Tim Conway from the World Bank Cambodia Coun- try Office summarized the conclusions of both the global and Cambodia re- search, drawing out the lesson that "In- equitable arrangements can sustain high growth rates for a decade, maybe even two -- but cannot sustain the kind of long-term growth and structural transformation that has lifted the Asian tigers to where they are now." Interna- tional experience, he said, suggests that "Institutions that foster equality of op- portunity create the possibilities for sustained broad-based growth: institu- Prof. David Chandler (right) said equity is about fairness. "Equity has to do with tions that protect the property rights of equality of opportunity. That's not the same as financial equality or political equal- some rather than others, or shape policy ity. Equality of opportunity is how people can have access to the various privileges and legal decisions to their own imme- such as higher education, or to financial security, health, and so forth." In the Back diate interests, tend to be bad at pro- ground is Dr. Neth Buron, vice rector of the Royal University of Phnom Penh. moting long-term growth and eco- nomic modernization." For example, it lacked secure property rights for the mass of the population; Responding to a request from the Gov- rights, and a state willing to create a le- to provide equality before the law and ernment, the World Bank will work with gal system to enforce contracts in an un- a legal system open to everyone, not partners over the coming year to produce biased way, or invest in public goods and just the privileged few; and to provide a report on the importance of tackling in- education. He said the lack of these in- socially (not privately) efficient levels equity to promote sustainable, poverty- stitutions is the result of the political or- of public goods such as security, edu- reducing growth in Cambodia. This re- ganization of society. cation and infrastructure," he said. port will form the Bank's background pa- "For Cambodia to become rich it For more information contact: per to the next Consultative Group meet- has to develop a political system which Mr. Tim Conway ing between Government, donors and creates the right incentives for politi- Poverty Specialist NGOs in June 2007. cians, such as to create stable property tconway@worldbank.org While they were in Cambodia, Pro- fessor Chandler and Professor Robinson shared their views on equity and development at the Royal Univer- sity of Phnom Penh with more than 400 students who came from 10 universities in the city. Prof. Chandler said equity is about fair- ness. "Equity has to do with equality of opportunity. That's not the same as finan- cial equality or political equality. Equal- ity of opportunity is how people can have access to the various privileges such as higher education, or to financial secu- rity, health, and so forth." Prof. Robinson said evidence sug- gests that Cambodia is poor not because it is geographically or culturally disad- vantaged, but because it has not had in- Students from ten different universities and colleges in Phnom Penh listen to trans- stitutions which stimulate investment. lations as prof. David Chandler and James Robinson discuss equity on June 15. July 2006 The World Bank Newsletter 6 World Bank SeniorVice PresidentVisits Cambodia continued from page 1 Sor Lower Secondary School in Lom Pong commune, Takeo province, to learn about the impact of a scholarship program sup- ported by theWorld Bank through its Edu- cation Sector Support project. Speaking to around 200 students, Mr Bourguinon said the program aims to help poor fami- lies send their children to school. In Thmor Sor School, 50 students, 33 of them girls, have received support from theWorld Bank-funded education project, which helps the government move towards the education sector support program goals of expanding access to educational services by addressing supply, demand, quality and efficiency constraints, with special focus on poor and under-served communes. The scholarship program, one of the project components, encourages dis- advantaged children to attend school. Most of the scholarship students at Crossingthegenerationgap,oldandyounglistentoWorldBankVicePresidentFrancois Thmor Sor received between $45 and Bourgignon at Thmor Sor School in Takeo. $60 per annum, which they used to buy nomic activities; what we mean by equity bicycles, school clothes, and school tion/Mekong Program Development Fa- is the equality of opportunity that people supplies. cility (IFC/MPDF), to learn about their re- face in their lives, opportunity to achieve Sam Srey Neang, one of the scholar- spective work programs and the main is- the life that they want on the economic ship students, said she used the money sues they face. front," he said. to buy clothes and school supplies. At a lunch time talk at Le Royal, hosted Mr Bourgignon also attended an in- "I am happy with this support be- by HE Dr Aun Porn Moniroth, Secretary formal consultation with the Supreme Na- cause I can continue my schooling," Srey of State at the Ministry of Economy and tional Economic Council (SNEC) on the Neang said. Finance, and attended by more than 100 initial concept paper for the next World During his half-day field trip, Mr representatives from government, donors, Bank report to the Consultative Group Bourgignon was briefed by commune private sector, and civil society, Mr meeting, with the theme Equity and De- council members on changes to the imple- Bourgignon spoke about Equity and De- velopment in Cambodia. mentation of the government's decentrali- velopment, the topic of the World Devel- zation program. opment Report 2006. (Please read World For more information contact: In Phnom Penh, Mr Bourgignon met Development Report workshop story.) Mr. Beng Simeth, with the entire staffs of the World Bank "By equity we mean not equity of the Human Development officer and the International Financial Coopera- income or outcomes of individual eco- Email: sbeng @worldbank.org ImprovingManagementofForestsIsCritical... continued from page 4 programmatic approaches and inte- livelihoods. This is too critical an issue The Action Plan for Cambodia high- grating forest management decisions for the World Bank to simply walk away. lights the need for continued dialogue into broader natural resources plan- At the same time, we recognize that we with the Government and other stakehold- ning and implementation efforts. have to work harder to build consensus ers in the context of a general governance The Bank's Board endorsed the Ac- with donors, civil society and Govern- framework consistent with the Country tion Plan and agreed that continued en- ment on a range of reforms to ensure com- Assistance Strategy aimed at: gagement in the forestry sector is impor- munity access to forests, land, and other · increasingtransparency,improvingac- tantforlong-termsustainabledevelopment natural resources, more transparent al- cess to information and greater pub- inCambodia.Managementwillreportback location of these assets, and a larger licparticipationindecisionmaking; to the Board in six months on progress on share for local communities of the com- · directing the bulk of Bank support to implementation of theAction Plan. mercial benefits of natural resources." sub-national levels to expand com- "Natural resources management is at munity and commune level planning the heart of governance in Cambodia," For More information contact: and management of natural re- said Ian Porter, Country Director for Ms. Chamroeun Mudita sources; and Cambodia. "Many poor communities de- Rural Deveolpment Officer · developing partnerships to support pend on access to forest products for their Email: cmudita@worldbank.org TheWorldBankOffice Cambodia 113, Norodom Blvd. Phnom Penh,Tel: (855 23) 217 301 Fax (855 23) 210 504 Khmer website: www.worldbank.org.kh and English website: www.worldbank.org/kh