KINGDOM OF CAMBODIA

Nation Religion King 

ROYAL GOVERNMENT OF CAMBODIA 

NATIONAL STRATEGIC DEVELOPMENT PLAN UPDATE 2009-2013 

FORGROWTH,EMPLOYMENT,EQUITYANDEFFICIENCY

TOREACHCAMBODIAMILLENNIUMDEVELOPMENTGOALS

NOVEMBER2009 

Samdech Akka Moha Sena Padei Techo HUN SEN

Prime Minister of the Kingdom of Cambodia 

FOREWORD 

Phnom Penh, 14 November 2008 Prime Minister of the Kingdom of Cambodia

Samdach Akka Moha Sena Padei Techo HUN SEN

  GENERAL(2008) 

Foreword.................................................................................................................................. i

National Emblem and Flag of the Kingdom of Cambodia......................................................... ii

Rectangular Strategy Phase II -- Diagram................................................................................. iii

Cambodia at a Glance............................................................................................................. iv

Table of Contents.................................................................................................................... ix

List of Tables, Text Boxes, and Annexes................................................................................. xi

I.         INTRODUCTION............................................................................................................... 1

II.        MAJOR ACHIEVEMENTS AND CHALLENGES IN THE

IMPLEMENTATION OF NSDP 2006-2010.......................................................................... 6

1. Good Governance: The Core of the Rectangular Strategy......................................... 12
   1. Fighting Corruption......................................................................................... 12
   2. Legal and Judicial Reform............................................................................... 14
   3. Public Administration Reform.......................................................................... 16
   4. Reform of the Royal Cambodian Armed Forces................................................ 19
   5. Environment for the Implementation of the Rectangular Strategy............................... 21
      1. Peace, Political Stability, and Social Order....................................................... 21
      2. Cambodia’s Integration into the Region and the World...................................... 22
      3. Favourable Macroeconomic and Financial Environment..................................... 23
      4. Partnership in Development............................................................................. 27
      5. Enhancement of the Agricultural Sector................................................................... 29
         1. Improving Agricultural Productivity and Diversification...................................... 30
         2. Land Reform and De-Mining............................................................................ 31
         3. Fisheries Reform............................................................................................. 35
         4. Forestry Reform.............................................................................................. 36
         5. Further Rehabilitation and construction of Physical Infrastructure.............................. 38
            1. Further Rehabilitation and Construction of Transport Network............................ 38
               1. Water Resources and Irrigation System Management........................................ 42
            2. Development of the Energy Sector and Electricity Network............................... 44
            3. Development of Information and Communication Technology........................... 45
            4. Private Sector Development and Employment......................................................... 46
               1. Strengthening of the Private Sector and Attracting Investment........................... 47
               2. Promotion of Small and Medium Enterprises.................................................... 51
               3. Job Creation and Ensuring Better Working Conditions for Workers and Employees 52
               4. Establishment of Social Safety Nets for Civil Servants, Employees

and Workers................................................................................................... 54

1. Capacity Building and Human Resources Development............................................ 55
   1. Strengthening the Quality of Education............................................................ 55
   2. Ensuring Enhanced Health Services................................................................. 60
   3. Implementation of Gender Policy..................................................................... 71
   4. Implementation of Population Policy................................................................ 74
   5. MACRO-ECONOMIC FRAMEWORK FOR NSDP UPDATE 2009-2013................................. 76
   6. The Economy at the Start of NSDP Update 2009-2013............................................. 76
   7. Macro-Economic Management: 2009-2013............................................................... 80
   8. Economic Outlook: 2009-2013................................................................................. 86
   9. Capital Investment Required to Achieve Projected GDP Growth................................ 89
   10. Budget Revenues and Expenditures: 2009-2013....................................................... 91
       1. KEY POLICY PRIORITIES AND ACTIONS: 2009 – 2013................................................... 94
       2. Good Governance: The Core of the Rectangular Strategy Good Governance.............. 98
       3. Fighting Corruption......................................................................................... 98
       4. Legal and Judicial Reform............................................................................. 101
       5. Public Administration Reform......................................................................... 103
          1. Reform of the Royal Cambodian Armed Forces.............................................. 108
          2. Overarching Environment for the Implementation of the Rectangular Strategy................... 109
          3. Peace, Political Stability, Security, and Social Order....................................... 109
             1. Cambodia’s Integration into the Region and the World..................................... 110
             2. Favourable Macroeconomic and Financial Environment................................... 111
                1. Partnership in Development........................................................................... 113
                2. Enhancement of the Agriculture Sector.................................................................. 118
                3. Improving Agricultural Productivity and Diversification.................................... 118
                4. Land Reform and Clearing of Mines............................................................... 120
                5. Fisheries Reform........................................................................................... 124
                   1. Forestry Reform............................................................................................ 126
                   2. Further Rehabilitation and construction of Physical Infrastructure............................. 129
                   3. Further Rehabilitation and Construction of Transport Infrastructure................... 129
                   4. Water Resources and Irrigation System Management...................................... 132
                   5. Development of the Energy Sector................................................................ 138
                      1. Development of Information and Communication Technology.......................... 140
                      2. Private Sector Development and Employment........................................................ 143
                      3. Strengthening Private Sector and Attracting Investment................................... 143
                      4. Creation of Jobs and Ensuring Improved Working Conditions......................... 147
                         1. Promotion of Small and Medium Enterprises.................................................. 149
                         2. Creation of Social Safety Nets....................................................................... 151
                         3. Capacity Building and Human Resource Development............................................ 156
                            1. Strengthening the Quality of Education........................................................... 156
                            2. Enhancing Health Services............................................................................. 161
                               1. Implementation of Gender Policy................................................................... 166
                               2. Implementation of National Population Policy................................................. 172
                               3. COSTS, RESOURCES AND PROGRAMMING................................................................ 174
                                  1. Total Public Investment Requirements.................................................................... 174
                                  2. Potential Sources of Funding the Public Sector Investment Expenditures................ 177
                                  3. Programming: Public Investment Expenditures and Development

Cooperation Financing.......................................................................................... 178

1. MONITORING, EVALUATION AND KEY INDICATORS/TARGETS................................... 181
2. CONCLUSIONS............................................................................................................ 184

TABLES

TABLE 1:     MACROECONOMIC INDICATORS, 2003-2008.................................................................. 24

TABLE 2:

TABLE 3:     DEVELOPMENTS IN THE EDUCATION SECTOR: 2005/06–2008/09..................................... 56

TABLE 4:     CORE INDICATORS OF RMNCH PERFORMANCE............................................................ 61

TABLE 5:     CORE INDICATORS OF PERFORMANCE IN THE AREA OF COMMUNICABLE DISEASES............ 66

TABLE 6:     DEVELOPMENT OF HEALTH SECTOR INFRASTRUCTURE................................................... 67

TABLE 7:     KEY INDICATORS FOR SECTOR FINANCING (AS OF DECEMBER 2008)................................ 68

TABLE 8:     MACROECONOMIC INDICATORS, 1994, 1999, 2001-2008............................................... 78

TABLE 9:     PROJECTIONS OF KEY MACROECONOMIC INDICATORS: 2009 – 2013............................... 88

TABLE 10:  REAL GDP (CONSTANT 2000 PRICES) GROWTH RATES   ...................................................

BY ECONOMIC ACTIVITY: 2008-2013............................................................................ 89

TABLE 11:  CAPITAL INVESTMENT REQUIRED TO ACHIEVE GDP GROWTH TARGETS AND

POTENTIAL SOURCES OF FINANCING THE NEEDED INVESTMENT: 2009 – 2013................... 90

TABLE 12:  CAPITAL INVESTMENT REQUIRED TO ACHIEVE GDP GROWTH TARGET

BY ECONOMIC SECTOR............................................................................................. 91

TABLE 13:  CAPITAL AND RECURRENT EXPENDITURES: 2008 – 2013................................................. 92

TABLE 14:  INDICATIVE RECURRENT BUDGET EXPENDITURE BY MINISTRY/AGENCY: 2008 – 2013 ...93 TABLE 15:  KEY INDICATORS FOR AGRICULTURE, FISHERIES, AND FORESTRY......................................................... 120

TABLE 16:

TABLE 17:  MINISTRY OF INDUSTRY, MINES AND ENERGY INDICATORS............................................. 140

TABLE 18:  TARGETS FOR THE EXPANSION OF TELECOMMUNICATION SERVICES............................... 142

TABLE 19:  MINISTRY OF INFORMATION INDICATORS..................................................................... 143

TABLE 20:  MAIN INDICATORS OF THE TRADE SECTOR................................................................... 145

TABLE 21:  MOEYS SELECTED CORE INDICATORS AND TARGETS................................................... 161

TABLE 22:  SELECTED CORE INDICATORS (OUTPUT AND OUTCOME) AND TARGETS OF MOH............... 166

TABLE 23:  GENDER TARGETS/INDICATORS.................................................................................. 172

TABLE 24:  RESOURCE MOBILIZATION TARGETS FOR PULIC SECTOR INVESTMENT 2009-2013............. 176

TABLE 25:  NSDP UPDATE 2009-2013 ALLOCATIONS BY SECTOR.................................................. 180

TABLE 26:  NSDP 2006-2010’S CORE INDICATORS (TARGETS)....................................................... 183

BOXES

BOX 1:       MAJOR ACHIEVEMENTS AND CHALLENGES IN REDUCING POVERTY.................................... 8

BOX 2:       ALIGNMENT, USE AND ACCOUNTABILITY OF EDP RESOURCES........................................ 29

BOX 3:       RGC’S HIGHEST PRIORITY IS TO CONTINUE TO REDUCE POVERTY & PRIORITIES TO MITIGATE THE ADVERSE EFFECTS OF THE GLOBAL FINANCIAL CRISIS AND ECONOMIC DOWNTURN.......................... 95

ANNEXES

Annex I:     ABBREVIATIONS & ACRONYMS.................................................................................. 191

Annex II:   WEBSITES OF MINISTRIES AND AGENCIES.................................................................... 192

1. The Royal Government of Cambodia through its concerted efforts has been successfully rebuilding Cambodia from the state of near total destruction of all its assets -- human capital; economic, educational and social institutions; government structures and physical assets in infrastructure. On the basis of the national reconciliation among different factions reached at the Paris Peace Conference in October 1991, the first General Elections were held in 1993 leading to the adoption of the new constitution and formation of a national Royal Government of Cambodia (RGC). From that time the highest priority of the Royal Government has been to vigorously foster the achievement of rapid socio-economic progress to lift the poor out of poverty and to place the nation firmly on a path of sustained economic growth.

1. The formation of the Royal Government of Cambodia (RGC) in 1993 led to the end of the economic embargo imposed on Cambodia in 1979 and resulted in inflows of Foreign Direct Investment (FDI) and Official Development Assistance (ODA) for economic rehabilitation. To begin the process of rebuilding and rehabilitating the social, physical, and institutional infrastructure, the Royal Government outlined its long-term vision for the future in the National Programme to Rehabilitate and Develop Cambodia (NPRD) that was adopted in 1994. Based on this vision, the 1st fiveyearSocio-EconomicDevelopmentPlan(SEDPI, 1996-2000) was formulated setting clear goals and milestones to be reached by 2000. This Plan’s focus was on macro-economic growth, social development, and poverty alleviation. At the same time, a three year rolling Public Investment Programme (PIP) was developed for the period 1996-1998 so that domestic and external development cooperation resources could be channelled to priority areas to achieve goals set out in SEDP I. Since then PIP has been updated annually. During 1993-1998, Cambodia was both at peace and at war.

1. Following the 2nd General Elections in 1998, the 2nd Legislature of the Royal Government of Cambodia (RGC) was elected into office in November 1998. As a result of the implementation of SamdechPrimeMinisterHUNSEN’s“Win-WinPolicy”the political and military organizations of the Khmer Rouge were dismantled and were integrated into the mainstream of the society in 1999. The Royal Government has achieved tangible results by implementing the "TriangleStrategy" put forward by Samdech Prime Minister HUN SEN. This Strategy focused on (1) building peace, restoring stability and maintaining security forthe nation and the people; (2) integration of Cambodia into the region and normalization ofrelationshipswith the international community; and (3) promoting economic and socialdevelopment. The successful implementation of the Triangle Strategy set the stage for a profound transformation of Cambodia from a region of uncertainty, war, internal strife, instability and backwardness into an epicenter of sustained peace, security and social order, respect for democracy, human rights and dignity, cooperation and shared development. It is only since 1999 that the people of Cambodia have enjoyed an environment of peace, political stability, law and order, democracy, respect for human rights and economic stability. The current political stability has been achieved and consolidated through persevering efforts of the Royal Government after many decades of conflict. This new environment has enabled the Royal Government to move forward on implementing its reform programs in all sectors to re-built institutional capacities, strengthen socio-economic infrastructure, and create an enabling environment to attract investment from both domestic and foreign sources to achieve Royal Government’s economic growth and poverty reduction targets. 

1. As SEDP I 1996-2000 was nearing its end, the 2nd Socio-EconomicDevelopmentPlan (SEDP II 2001-2005) was prepared focusing on economic growth and poverty reduction. For the Royal Government, the most formidable development challenge has beenand continues to be the development of the private sector that is the engine of economicgrowthto achieve reduction of poverty and improving the livelihoods and quality of life of therapidlygrowing Cambodian population. The Royal Government considers poverty to be a waste of valuable economic resources which is not only morally unacceptable but can also result in social polarization and instability. Following the preparation of the SEDP II, two important and forward looking developments took place. First, following the historic United Nations Millennium Summit in 2000 which declared broad Millennium Development Goals (MDGs) to be achieved by all countries by year 2015, Cambodia developed its own set of MDGs called Cambodia Millennium Development Goals (CMDGs), focusing on poverty alleviation and human development. Second, a National Poverty Reduction Strategy (NPRS) was also prepared  and  adopted in December 2002 through an inclusive consultation process.

1. Following the 3rd General elections on 27 July 2003, the newly elected Government made public its “Rectangular Strategy” as the successor of the TriangularStrategyof the Royal Government in the Second Legislature of the National Assembly. It outlined the economic policy agenda to support the policy platform of the Royal Government in the Third Legislature of the National Assembly (2003-2008). The RectangularStrategy synthesised the key elements from the CambodiaMillenniumDevelopment Goals, the Socio-EconomicDevelopment Plan 2001-2005 (SEDP II), the CambodiaNational Poverty Reduction Strategy2003-2005 (NPRS), and various important policies, strategies, plans and other reform programs, all of which had been formulated through broad consultations with all national and international stakeholders. The main aim of the Rectangular Strategy for Growth, Employment, Equity, and Efficiency was to promote economic growth, generate employment for Cambodian workers, ensure equity and social justice, and enhance efficiency of the public sector through the implementation of the Governance Action Plan and in-depth reforms that are coordinated and consistent across all levels and sectors.

1. The 3rd five year development Plan for 2006-2010 was formulated to be the single, overarching, guiding,and reference national policy document for pursuing prioritized goals, targets and actions for the next five years. The new Plan was renamed to be the National Strategic Development Plan (NSDP) 2006-2010. NSDP 2006-2010 was organized using the Rectangular Strategy framework. In preparing the NSDP 2006-2010, the Royal Government had taken full ownership and actively led the process of the preparation of the Plan while ensuring participation of and consultations with all stakeholders.

1. With unwavering implementation of the “Rectangular Strategy” and the NSDP 2006- 2010, the Royal Government of the Third Legislature has created a favorable environment and necessary conditions enabling Cambodia to step forward with increased hopes and strong confidence on the road of further reforms and development. The Royal Government has adhered to the principle of national solidarity to rally all Cambodians, inside and outside the country, from all walks of lives and political tendencies, under the motto “Nation- Religion-King” with the objective to build and protect the nation and its social achievements while ensuring national independence, integrity, sovereignty, peace, democracy and progress.

1. Following the General Elections held on 27 July 2008, the Royal Government announced its “Rectangular Strategy Phase II”  that is the “Socio-economic Policy Agenda” of the “Political Platform” of the Royal Government of the Fourth Legislature of the National Assembly (2008-2013). This political platform was provided by the Cambodian People’s Party to all Cambodians for their consideration before the last elections. An overwhelming majority of Cambodians from all walks of life reaffirmed their support, for the fourth time, for the Cambodian People’s Party to continue to lead the country on the path of development and reforms in all sectors. Samdech Akka Moha Sena Padei Techo HUN SEN, Prime Minister of the Kingdom of Cambodia, presented this strategy at the first meeting of the new Government and stated that the "Political Platform" of the Royal Government of the Fourth Legislature has been formulated and endorsed through a comprehensive review of the performance during the Third Legislature, people's will and desire, the national and international context and the prioritization of strategies for all key sectors. At this meeting, the Rectangular Strategy Phase II was revealed as an updated and fine-tuned version of the earlier Rectangular Strategy to develop systematic, coherent, interrelated, complimentary, and simplified priority packages within key sectors, which outlines in detail the policy priorities for the implementation of the RGC’s reform programs to re-build institutional capacity, strengthen socio-economic infrastructure, and to create an enabling environment to attract investments from both domestic and foreign sources in order to create employment opportunities for Cambodians, to reduce poverty, and to develop key sectors of the economy. Samdech Prime Minister also underlined that “The Royal Governmentrecognizesthe need to ensure consistency in terms of hierarchy, role, substance, coherenceand synchronization between the “Rectangular Strategy”, the “National StrategicDevelopment Plan”, and the Sectoral Development Strategies, as well as other policydocuments, investment programs and the national budget; and this calls for a review of thetimeframe of the "National Strategic Development Plan" and "Political Platform of the RoyalGovernment"which includes the "Rectangular Strategy" as its socio-economic agenda” 1. To ensure this hierarchy of RGC key policy documents, Samdech Prime Minister emphasized that “This strategy will be implemented mainly through the National Strategic DevelopmentPlan”2.He concluded that the successful implementation of these prioritized policies will require dedicated and concerted efforts by all Line Ministries and Agencies of the RGC during its mandate in the Fourth Legislature of the General Assembly (2008-2013).

1. The on-going international financial crisis and the economic recession in advanced economies have resulted in declining demand for Cambodia’s export and have increased macro-economic and financial risks. These external developments have presented unexpected new challenges for Cambodia. The Royal Government is taking systematic and sequenced measures to mitigate the negative impact of the international financial cataclysm and global economic recession on our financial and economic system, and to protect our hard earned achievements. These external developments have made it necessary for all Ministries and Agencies to re-examine their plans to implement the prioritized policies of the Rectangular Strategy, Phase II for the Fourth Legislature. The NSDP Update, 2009-2013is being prepared to accomplish two primary goals. First, to synchronize the time period covered by the NSDPUpdatewith the term of the Fourth Legislature of the Royal Government in order to ensure that the actions, programs, and projects of all Ministries and Agencies are aligned to implement the prioritized policies of the RGC that are outlined in Rectangular Strategy Phase II. The second goal is to ensure that the roadmap to implement these prioritized policies by Ministries and Agencies has taken into account the potential impact of the global economic downturn on our economy.

1. To prepare NSDP Update 2009-2013, the planning methodology has been further refined. As noted earlier, NSDP Update is the implementation tool or roadmap for the implementation of RGC’s priority policies for the Fourth Legislature that are outlined in Rectangular Strategy – Phase II. The methodological refinements are focused on:

• Identifying who is responsible for implementing the priority policy or policies in each area of RS II; what specific actions the responsible institution(s) has/have planned to implement the priority policy(ies); and the responsible institution(s) best estimate on how much it will cost to implement the planned actions during 2009-2013. The information collected through this bottom-up planning process is a major component of the information that is required to link the planning, public investment requirements, and development cooperation financing issues within the overall context of the macroeconomic outlook for the Plan period. It is, however, important to highlight that the information provided by responsible institution(s) needs to be based on a comprehensive technical analysis of the sector that must also include prioritization and sequencing of the planned actions.
  • Outlining the macroeconomic framework for NSDP Update to present a top-down planning perspective developed based on econometric analysis of a likely scenario on economic growth, “capital” investment requirements to achieve the projected economic growth rate, and outlook for budget revenues and expenditures over the Plan period.
  • Programming or allocation of total development expenditures based on: (i) information complied through the bottom-up planning process that covers all aspects of social and economic development needs; (ii) information from the top-down planning process that establishes the parameters of overall resource availability from the national budget and information on “capital” investments that will be required to achieve the projected economic growth targets; and (iii) estimates of the total amount of resources, from all sources, that are likely to be available or would need to be mobilized to achieve the Plan targets.

1. Also, to ensure effective consultations with concerned development partners and civil society stakeholders in the preparation of inputs by the Ministries and Agencies, the Ministry of Planning took two important steps. First, at a workshop held in June 2009 to launch the circular of the RGC on the preparation of the NSDP Update 200-2013, the Ministry of Planning provided detailed policy and technical guidelines to Ministries and Agencies on how to prepare their inputs for NSDP Update. Development partners and other civil society stakeholders also attended this workshop. One important policy guideline issued at this workshop required that “line Ministries and Agencies chairing a Joint Technical Working Group should prepare their inputs in consultation with their TWG’s”. The Royal Government strongly believes that investment of time and energy on consultations, by both Government officials and development partners, would be most productive if these efforts are focused at the Ministry/Agency level that are responsible for preparing the inputs for NSDP. Second, immediately following the workshop, at a meeting of the  TWG–Planning and  Poverty Reduction, that the Ministry of Planning Chairs, it tasked the Lead Donor Facilitators of the TWG to work with all development partners to ensure that they are ready and able to provide technical and logistic support, if needed, through the TWG mechanism to their concerned Ministry/Agency in the preparation of inputs for NSDP Update. While the Ministries and Agencies are expected to take full ownership of their submissions to the Ministry of Planning, it strongly encouraged Ministries/Agencies, development partners, and other stakeholders to engage in productive consultations that contribute to improving the Ministry/Agency inputs for the preparation of NSDP Update within the TWG framework. 

1. The NSDP 2009-2013 is organized in seven chapters. Following the introduction presented in chapter I, it presents a summary of major achievements and challenges faced in the implementation of NSDP 2006-2010. Chapter III outlines the macro-economic framework for NSDP Update 2009-2013 and critical indicators/targets for the Plan period. Chapter IV presents RGC’s key policies and actions that will be taken by ministries and agencies to implement these policies during the time frame of the Fourth legislature of the Royal Government. Chapter V deals with issues of costs, resources and programming. Information on monitoring and evaluation aspects of the NSDP 2009-2013 is presented in Chapter VI. The final Chapter VII presents broad conclusions.

1. With unwavering implementation of the "Rectangular Strategy", the Royal Government of the Third Legislature has created a favorable environment and necessary conditions enabling Cambodia to step forward with increased hopes and strong confidence on the road of further reforms and development.

1. Cambodia has been enjoying the fruits of peace and full territorial unity and integrity as the result of the "Win-Win Policy" of Samdech Prime Minister Hun Sen as evidenced by high economic growth and poverty reduction over the past decade. Cambodia has integrated into the region and the world and plays a dynamic role on equal footing and with equal rights in various sub-regional, regional, inter-regional and international organizations. With unwavering implementation of the "Rectangular Strategy", the Royal Government has created a favourable environment and necessary conditions enabling Cambodia to step forward with increased hopes and strong confidence on the road of further reforms and development. Overall, in spite of the new unexpected challenges that have emerged as a consequence of the global economic recession and the turmoil in the global financial markets, the Royal Government has further consolidated its achievements by continuing its determined implementation of the Rectangular Strategy through NSDP 2006-2010. Notable major achievements have included:
   1. Peace, political stability, security and social order have been strengthened based on a firm foundation of the liberal multi-party democracy. The second free and fair commune elections were held in 2007. The 4th national General Elections were held on 27 July 2008.
   2. Respect for human rights and dignity, including political, economic and social rights, has been enhanced; and decentralization and de-concentration reforms, aimed at strengthening democracy and efficiency of local public services, have been initiated.
   3. Good governance through state reform, especially civil service reform, legal and judicial reforms and armed forces reforms, has been strengthened to ensure that all government activities are increasingly more transparent, accountable, predictable, effective and efficient.
   4. Macro-economic stability and unprecedented high, double digit economic growth has been ensured while maintaining low inflation and a stable exchange rate. Competitiveness of the national economy has been strengthened by improving agricultural productivity, building a rural economic base, and expanding the industrial sector, especially to further the dynamism of the garment sector. The services sector has also expanded rapidly. All these have created jobs and skills training for hundreds of thousands of youth.
   5. Through the “Public Financial Management Reform Program”, budget credibility has been fundamentally achieved as reflected by substantial growth in government revenues and the rationalization of expenditure, especially to increase the current budget surplus, which contribute to expanding investments in the economic and social infrastructure aimed at enhancing public service and poverty reduction.
   6. The Private sector has emerged as the “trueengine of economic growth”, and made a very impressive contribution to socio-economic development in both the economic and the financial sectors. 

1. The rehabilitation and construction of the major national road networks has almost been completed and attention is now being paid to accelerate improvement of provincial and rural roads. The irrigation, energy and telecommunication infrastructure has improved significantly.
2. Institutional and human resource capacity has been strengthened by concentrating on development of the education and health sectors. The social sectors have made remarkable progress: in the education sector enrollment rates have increased and drop-out and repetition rates have declined; in the health sector infant and child mortality rates and HIV/AIDS infection rate have also declined.
3. Partnership with all stakeholders especially official development partners, private sector and civil society has been strengthened by putting in place a range of effective mechanisms, allowing for mobilizing and coordinating cooperative financing and investments.

POVERTYREDUCTION

1. One of the highest priorities of the RGC has been to reduce poverty, especially in rural areas. Through the successful implementation of the action plan spelt out in the “Vision and Financial Sector Development Plan 2001-2010” which has been updated into the “Financial Sector Strategy 2006-2015” and the “Public Financial Management Reform Program”, the RGC has achieved not only macroeconomic stability but also impressive growth over the last decade, averaging around 10 percent per year. These achievements have enabled RGC to reduce the poverty levels significantly. The first survey of poverty headcount in Cambodia was carried out in 1993/94. It covered only part of the country because of lack of access due to security conditions in some parts of the country. The results of the most recently completed Cambodia Socio-Economic Survey carried out in 2007, show that poverty headcount index within parts of the country that were covered by the 1993/94 survey has declined from 39 percent in 1993/94 to 28.0 percent in 2004, and to

24.7 percent in 2007. In the rural areas in these parts of the country, the poverty headcount has declined from 43.1 percent in 1993/94 to 33.7 percent in 2004 and to 30.6 percent in 2007.

1. At present, data covering the whole country are available for the years 2004 and 2007. These data show that poverty headcount index for the whole country relative to the overall poverty line fell from 34.8 percent in 2004 to 30.1 percent in 2007, a significant decline of 4.7 percentage points from 2004 to 2007 representing a reduction of more than 1 percentage point per year. Similarly, the results show that poverty headcount has declined at all sub-national levels: in Phnom Penh from 4.6% in 2004 to 0.8% in 2007, in other urban areas from 25.8% to 21.9%, and in rural areas from 39.1% to 34.7%. The decline in poverty during the period 2004-2007 reflects substantial and statistically significant growth in real per capita household consumption – the measure of living standards commonly used. The rise in consumption is reported to be both apparent and statistically significant in the two poorest quintiles. Among the poorest and next poorest quintiles consumption increased in real terms by 10.7 and 11.5 percent respectively.

1. The analysis of the data from the Cambodia Socio-Economic Surveys of 2004 and 2007 also shows that the picture of welfare improvements amongst the bottom two quintiles is reinforced by improvements in a wide range of variables related to service delivery and human development outcomes. Gains are most notable in education, health and nutrition. Physical access to public services has improved, as measured in terms of average distances to the nearest health centre or school; this, combined with an improved road network and rising real incomes, helps explain improving rates of school enrolment and health-seeking behaviour. As a result, there is continued improvement in outcomes such as average level of educational attainment and self-reported health status. 

1. The NSDP 2006-2010 outlined the actions and broad resource allocations to implement the Rectangular Strategy. To ensure effective monitoring of the implementation of NSDP 2006-2010, regular Annual Progress Reports have been prepared and widely disseminated by the Ministry of Planning. The Mid-Term Review (MTR) on the Implementation of NSDP 2006-2010 was completed and widely disseminated by the Ministry of Planning in November 2008. The MTR highlighted the adverse effects of the meltdown of global financial markets that started in late 2007, on the Cambodian economy, in particular the vulnerable and the poor.

1. This global financial crisis that originated in New York - partly due to the failure of the US regulatory system - has caused a severe recession in the advanced economies and has adversely impacted the economies of developing countries. Since late 2007, along with the global financial crisis there were also wide fluctuations in the price of crude oil, food items, and other commodities. The price of a barrel of crude oil rose from $ 66.47 in April 2007 to record level of US$ 147 per barrel in July 2008. It then plummeted, and traded between 30 and 40 US$ per barrel. However, it rose again to over US$ 70 per barrel. For Cambodia that imports all of its oil requirements the rapid rise and massive fluctuations in price have posed serious challenges for the economy. The rising cost of fuel that resulted in higher transportation costs for businesses has meant higher prices of essential commodities like cooking oil, construction materials (e.g. steel and cement), and other commodities causing an escalation in the cost of construction of infrastructure and buildings. There were also wide fluctuations in the price of food items. The price of rice doubled in international markets between the first quarter of 2007 and the first trimester of 2008 and doubled again in the first four months of 2008 alone. Since then prices have dropped presenting a new set of challenges for farmers and the rural communities. 

1. Many studies have been conducted by various international and national agencies to assess the impact of the global financial crisis and the wild fluctuation in food and fuel costs on the poor across the world, including in Cambodia. In his address at the 2009 Cambodia Outlook Conference on “Cambodia and the Global Economic Crisis: impact, Policy Responses and Actions”, the Prime Minister Samdech Hun Sen pointed out that “this global and regional crisis is not a crisis of Cambodia’s making. It has been caused by external factors beyond Cambodia’s control, and it is a crisis that will have serious impacts on us all. As I have emphasised in other recent forums, we must now work together to manage our way through it, to ensure that the remarkable development and poverty reduction achievements of Cambodia over the past two decades are not lost, and to further strengthen Cambodia’s key sectors for future growth and development so that we can emerge from the crisis with a stronger, more sustainable economy, stronger institutions, and a stable, peaceful and resilient society in Cambodia”.

1. Samdech Prime Minister also emphasized that “we are fortunate that we face these challenges while our economy is still in good shape by having achieved a decade of sustainable strong economic growth and sound macro-economic management. A recent World Bank’s study has placed Cambodia in the top ten developing countries with the highest economic growth rate from 1998-2007, with our average growth over the past decade reaching double digits, but slowing in 2008 to around 7%, which is still relatively high by the international standards. At the same time, we have made an impressive record in poverty reduction, from 45% in 1994 to around 30% in 2008. We have been able to achieve this impressive record through responsible macro-economic management and a steady programme of reforms by government, along with the dynamism of our private sector, and the productivity and effort of the Cambodian people. We have made great progress in the provision of better infrastructure, roads, bridges, irrigation, transport and telecommunications, and the promotion of international labour standards in our garment industry, the promotion of tourism, and the promotion of a positive enabling environment for trade and investment sectors development”.

1. Although the Royal Government has taken various measures to tackle the crisis, it is still progressing and becoming more severe for some countries and its relief is unpredictable. This crisis will impact some key economic sectors and bring down the growth of major sectors such as garment, tourism, and construction which will have negative impacts on our economy and people. Therefore, the Royal Government has placed a high priority on tackling the following key sectoral challenges:
   1. To diversify the markets for our garments and other manufactured goods market to East Asia, the Middle East and Africa etc.
   2. To further improve tourism infrastructure and the development of more tourism destinations and attractive tour packages.
   3. To prioritize the use of resources and expertise of the government, and donors to broaden and diversify our agricultural sector, in order to attract more quality investments in agri-business and improve agricultural trade linkages, land reform, agricultural diversification and agro-processing.
   4. To further invest in infrastructure development, particularly energy generation to reduce energy costs to the private sector and to the community.
   5. Continue to promote and support wealth creation and improving the people’s livelihood according to the correct principles and procedures as stipulated in the Cambodia’s  Constitution. 

1. Meeting these challenges will require not only a more effective and dynamic cooperation between the government, its development partners and the private sector but also more effective coordination and collaboration within and across government ministries, and the development community. In key areas such as agriculture and rural development, and associated infrastructure development, irrigation and water resource management, and trade facilitation, there is an urgent need to strengthen communication, coordination and cooperation between relevant ministries/institutions to ensure that development programmes are more speedily and effectively designed and implemented, and that the supporting resources provided by our development partners can be more speedily and effectively disbursed for implementation.

1. For the Royal Government, the current global financial crisis presents opportunity for us to strengthen and expand cooperation and regional integration in order to maximize benefits from our great economic potentials through expanding the scale of regional markets as well as trade and investment promotion in the region. This is important to minimize our over dependence on international markets and enhance our competitiveness in attracting investments from outside into the region.

1. Although RGC was taken by surprise by these rapid external developments, it responded quickly by putting in place a response mechanism, and has viewed these unexpected external developments as a challenge to test the economic fundamentals of the Cambodian economy. The RGC response mechanism has adopted a two pronged approach, focusing on short-term and long-term actions. The short-term actions have focussed on implementing fiscal measures to incentivise producers and consumers alike to resuscitate the sluggish real economy, and following a monetary policy that has responded rapidly to changing conditions. This approach has been instrumental in maintaining macroeconomic stability, in particular in ensuring the soundness of the banking system. As long-term measures, the RGC priority is to continue to address long term issues through improved competitiveness. In order to build resiliency against the current global economic down turn and to sustain economic growth, Cambodia will be looking at ways to improve its competitiveness in the regional and international arena, as well as actively look for opportunities to diversify and expand the economic base. Cambodia will continue to diligently explore new economic frontiers while nurturing existing and emerging sectors such as telecommunications and Information Communication Technology (ICT), light manufacturing, financial and securities market; and potential sectors such as alternative energy sources, oil exploration, mining; and processing technology to sustain productivity and competitiveness.

1. Protecting the hard earned gains made so far and staying on the path to ensure future gains in reducing poverty has now added risks due to the global financial crisis, indeed, if the current situation persists for an extended period then people who are just over the poverty line at present could fall below the poverty line. The RGC is therefore taking urgent measures to expand social safety nets for the most vulnerable through subsidies and targeted labour intensive work -- like food for work programs.

1. Although through a vigorous implementation of its Triangular and Rectangular Strategies over the last decade, the RGC has been able to transform the nation over a very short period relative to the long histories of many developed countries, Cambodia still faces a number of challenges, such as: 

1. Despite remarkable progress in key reforms aimed at strengthening good governance, the quality, efficiency and delivery of the public service still remain as challenges and could not yet respond fully to the real needs of the people. The judiciary could not yet gain full confidence from the public. The development of legal framework has not yet been comprehensive, while law enforcement is still to improve.
2. The economy is narrowly based and driven by four main sectors: garment, tourism, construction and agriculture. The garment and tourism sectors are vulnerable to external risks. Agriculture, which shares 30% of the GDP and accounts for more than 60 percent of the total employment, has not reached its full potential.
3. Climate change, global economic imbalance and continuing and deepening financial crisis resulting in global economic slowdown as well as the increase in oil price, soaring food price and depreciation of US dollar have brought severe inflationary pressure on the Cambodian economy in the short and medium term. The increase in domestic demand as a result of recent high economic growth has also aggravated the pressure. These pose a threat to the growth prospects for Cambodia.
4. Although we have managed to reduce poverty rate significantly through high economic growth and pro-poor policies, the rural poverty rate remains high. Furthermore, the gap between the rich and the poor, especially urban-rural inequality remains a challenge.
   1. Land concentration and landless people are on a rising trend, adversely impacting on the equity and efficiency of land use. On the other hand, large areas under economic land concessions have not been utilized efficiently as targeted, needing strict government measures to tackle them.
   2. The anarchy in illegal land possession, illegal claim of state land and protected areas as privately owned and unlawful logging are still taking place. At the same time, poverty and internal migration have added pressure on natural resources and places them at risk of destruction.
   3. Having achieved great progress in the rehabilitation and reconstruction of the national road network across the country, our next challenges are to ensure traffic safety and proper maintenance of the entire road network across the country.
   4. The aviation sector plays a crucial role in tourism development. Further development of aviation infrastructure, including continuous improvement of flight safety, still continues to be a key priority to ensure the tourism development and absorption of increasing number of tourists to Cambodia.
   5. Electricity tariff remains high compared to neighboring countries, and is a big obstacle in strengthening the Cambodian competitiveness as well as attracting investments and improving livelihoods. Access to electricity in rural areas is still limited.
   6. Irrigation system has not been fully developed and utilized to its potential, requiring more efficient management and investment.
   7. Financing, management, and technology are the major challenges for SMEs in Cambodia.
   8. The social safety net for workers and the poor has not yet become an efficient system.
      1. The quality of education  at  primary, secondary  and  tertiary levels  is  low. The production and trafficking of illegal drugs has become a social problem which harms welfare of the Cambodian youth at present and in the future.
      2. The shortages of technicians and skilled workers are a major obstacle to accelerating economic development in both urban and rural areas.
      3. The provision of quality public health services is still limited. In spite of numerous achievements in the health sector, the maternal mortality rate is still high. The progress in promoting health care services, sanitation and clean water in rural areas needs to be speeded up to meet the targets set in the Millennium Development Goals. 

1. Lack of education, domestic violence and human trafficking are the major factors that handicap women from realizing their full potential in contributing to socio-economic development.
2. In general, institutional capacity of the Government is still limited due to low salary and incentive schemes. The cooperation between government agencies is still inadequate, while some legal and regulatory frameworks contain loopholes, and there is a shortage of resources to carry out our policies.

1. The discussion on major achievement and challenges faced in the implementation of NSDP 2006-2010 by line ministries and agencies of RGC, presented below, follows the structure of the Rectangular Strategy as well as the NSDP 2006-2010.

1.       GOODGOVERNANCE:THE CORE OF RECTANGULARSTRATEGY

1. Good governance, the core of the Rectangular Strategy, needs above all equitable and fair public participation in all matters through democratic and peaceful means to ensure that the free will and informed choices of the majority are adopted and implemented while at the same time protecting the rights and welfare of the minority. Political stability, internal security, adherence to rule of law, transparency, predictability and accountability of public institutions are vital for orderly economic and social progress and to ensure that public gains are not eroded by disruptive elements. Four major reform areas to promote good governance continue to be RGC's priority in its pursuit for achieving sustainable and steady socio-economic development with equity, equal opportunity, equality before law, and social justice. These are: (i) fighting corruption; (ii) legal and judicial reforms; (iii) public administration reforms in all aspects (including decentralisation and de-concentration); and

(iv)reform of the armed forces. Major developments that have taken place in these areas are summarized below.

1. FIGHTINGCORRUPTION

1. As compared to crimes where there is a victim and an offender, corruption is a crime where all parties directly involved in corrupt practices benefit from their actions. The victim is the society at large that suffers because of loss  of public revenues, lost investment opportunities that could provide new jobs and additional revenues, and inefficient delivery of public services. The RGC had adopted a holistic approach to fighting corruption that recognizes the limitation of the existing legislative framework as well as the existing capacities of its institutions, in particular the legal and judicial system. This approach recognizes that fighting corruption requires capacity to effectively manage and enforce the implementation of any anticorruption laws that are put in place. At this stage of the socio- economic development of Cambodia, the challenges of fighting corruption are compounded by the fact that those who are called to enforce laws transparently and without fear or favour are paid salaries that are not sufficient to support a minimum subsistence level. At the same time, the severe shortage of national legal experts has meant that much of the drafting of the laws is influenced by international experts from many countries, which has created a range of inconsistencies that have significantly slowed down the law drafting process and made enforcement more difficult. Law enforcement remains a challenge for a variety of reasons, in particular the low salaries of law enforcement officers.

1. RGC recognizes that corruption is a phenomenon that exists in all communities, the developed countries, the developing countries, and the international institutions. A quick check of press clippings from around the globe is an easy way to verify this fact. For RGC, the elimination of corruption is a high priority because it is an obstacle to achieving its goal of sustained high growth by fostering private sector development in order to reduce poverty. 

1. There are a number of RGC institutions that are involved in preventing and combating corruption. The Anti-Corruption Unit in the Council of Ministers is responsible for receiving complaints from the public about incidences of corruption and taking disciplinary actions against the perpetrators of corruption. It is also responsible for widely disseminating information on RGC’s policies on preventing and combating corruption. It also coordinates the preparation of any laws, rules and regulations required to implement RGC’s policies on preventing and combating corruption. The Ministry of National Assembly-Senate Relations and Inspection (MONASRI) through its Inspection Program monitors the management practices of public sector institutions and investigates any irregularities. It also monitors law enforcement in line ministries and public institutions and investigates complaints received from the public. The Ministry of Justice is responsible for drafting of all laws, including the anti-corruption law.

1. In August 2006, the Anti-Corruption Unit was restructured and a “Corruption Complaint Office” was created with the aim of enhancing public participation in the supply and receipt of corruption-related information. Disciplinary actions have been taken against civil servants, and customs, police and judicial officers who have been reported to have indulged in corrupt practices. In public management more transparency is being ensured in competitive bidding processes. Campaigns have been launched to provide information to and educate the public and disseminate knowledge on all aspects of corruption, including causes, effects and consequences. The Unit, however, faces many challenges to carryout its functions. It has limited knowledge, skills and experience in fighting corruption. It also lacks the tools, materials, and techniques to be effective in fighting corruption. So far, this Unit has received limited support from the development partners’ community.

1. MONASRI, through its Inspection Program, has conducted many investigations of public establishments, including four cases of irregularities in four World Bank Funded projects. It received 298 complaints from the public of which 92 were investigated by MOSARI and the remaining cases referred to other concerned public institutions. MOSARI also suffers from lack of capacity and resources to carry out its functions efficiently.

1. The Ministry of Justice that is responsible for the drafting of all laws has been updating the drafts of the Anti-Corruption Law as work on related laws has progressed. A comprehensive Anti-Corruption Law is now going through the final reviews to ensure that it conforms to the overarching Penal Code that is currently in the process to be passed by the National Assembly. The draft Anti-Corruption Law was endorsed by the Council of Ministers on 11 December 2009. After the Penal Code has been passed by the National Assembly, the Anti-Corruption Law will be submitted to the National Assembly for its approval. In the meantime, the already existing legal framework and institutional mechanisms will continue to be employed to prevent and combat corruption.

1. Cambodia now participates as a member country in the ADB/OECD Anti-Corruption Initiative for Asia and the Pacific. It is one of the countries that has adopted the United Nations Convention Against Corruption, and a signatory in the MOU on Preventing and Combating  Corruption.

1. LEGAL ANDJUDICIALREFORM

1. The Royal Government is committed to accelerating the Legal and Judicial Reform process. The Council for Legal and Judicial Reform that was established in June 2002 has the mission to “initiate and encourage the process and to follow up the implementation of legal and judicial reform policy and programs in accordance with the objectives of theSupreme Council of State reforms”. Since mid 2005, the Council for Legal and Judicial Reform has been implementing its comprehensive action plan to implement RGC’s Legal and Judicial Reform Strategy. The action plan outlined the priorities and specific actions that were planned to be implemented in the short to medium-term (2004-2008), and long-term (after 2008). The Legal and Judicial Reform Strategy has seven strategic objectives which are as follows:

1. Improvement of the protection of fundamental rights and freedoms by developing and supporting measures to safeguard rights and raise awareness among the people and all institutions involved aiming to promote equitable and sustainable development as a simultaneous and integrated part of the fulfilment of rights.
2. Modernization of the legislative framework by developing a comprehensive framework of laws through an efficient, coherent and participatory law-making process, ensuring balanced legislation and a full implementation of the rule of law.
3. Provision of  better access to legal and judicial information by promoting dissemination of basic legal knowledge through official publications, electronic media and information folders and ensuring easy accessibility to all legal and judicial information for legal practitioners and any other interested party.
4. Enhancement of the quality of legal processes and related services by strengthening the legal profession, enhancing access to legal assistance and streamlining judicial procedures in order to ensure fair justice and due process for the people.
5. Strengtheningof judicial services, i.e. the judicial power and the prosecutorialservicesby introducing the necessary educational, legislative, procedural ad structural measures to ensure access to justice within fair, credible and independent judicial institutions enjoying broad respect.
6. Introductionof alternative dispute resolution mechanisms to enable quick, informal and easy dispute resolution to the benefit of involved parties and to ease the burden on the established judicial system.
7. Strengtheningof Legal and Judicial sector institutions to fulfil their mandates by strengthening management, planning and monitoring mechanisms and capacity in general in order to enable the full provision of public services and to ensure decision- making in accordance with principles of good governance and their efficient enforcement.

1. During 2006-2008, the Ministry of Justice’s work on drafting and reviews of drafts within the executive branch of RGC was completed, and the following draft Laws and Codes were reviewed and approved by the National Assembly:
   1. Code of Civil Procedure promulgated on 06 July 2006.
   2. Code of Criminal Procedure promulgated on 10 August 2007.
   3. Civil Code promulgated on 08 December 2007.
   4. Counter-Terrorism law promulgated on 20 July 2007.
      1. Law on Suppression of Human Trafficking and sexual Exploitation promulgated on 15 February 2008.
      2. Code of Ethic of Judges, Prosecutors adopted by the Supreme Council of Magistracy on 20 February 2007.

1. Work on drafting the following Laws and Codes has been completed by the Ministry of Justice and have been submitted to the Council of Minister’s for its review and approval:
   1. Draft Law on Court Organization and Prosecution.
      1. Draft Law on the Statute of Judges and Prosecutors. 

1. Draft Law on Civil Litigation related to Personal Status.
2. Draft law on non-Suit Civil Case Procedure.

1. The draft of Criminal Code was approved by the Council of Ministers on 19 June 2009. It is now being reviewed by the Senate.

1. A Pilot Court Model for provincial courts has been established by the Council of Legal and Judicial Reform in cooperation with the Ministry of Justice. This pilot model is being implemented in the following four provinces:
   1. Kandal Provincial Court
      1. Phnom Penh Municipal Court
      2. Kompong Cham Provincial Court
      3. Banteay Meancey Provincial Court

1. Mechanisms for dispute resolution outside the court system to reduce the backlog of cases at the provincial court and to expedite dispute resolution for the citizen and the poor have been put in place by the Ministry of Justice in cooperation with the Ministry of Interior. Since 2007, the Ministry of Justice has established 20 Centers for Legal Services that proceeded. If these mechanisms work successfully then they will be expanded across the country.

1. Laws have been disseminated to the communities and the poor. Since 2007, the Ministry of Justice has disseminated information on laws on TV and Radio through 520 broadcasts. Twenty four Workshops on laws have been held Capital and in provinces and 4200 law books have been published.

1. Twenty four legal trainings programs have been conducted to build capacity of judges, prosecutors, Legal official and Court clerks.

1. Although significant progress has been made through the implementation of the Council of Legal and Judicial Reform’s Action Plan, the work has also faced many challenges. The drafting of a numbers of laws, such as the Organization and Functioning of the Supreme Council of Magistracy, Law on Statute of Judge and prosecutor and law on Court Organization and Prosecution could not be completed as planned because these laws are related and need to be revised and discussed further. Work on drafting of the Law on Statute of Court Clerks, Law on Notary and Law on Bailiffs, can proceed further only after the principal law has been adopted. Other challenges faced have included:

• Budget constraints to expand programs aimed at improving legal knowledge of communities and the vulnerable people and as well as the training programs to build capacity of the Judges and prosecutors.
• The Ministry of Justice does not have sufficient resources to provide needed supplies of materials, buildings and the court rooms to the court and prosecution at the provincial level.
• The establishment of Special Courts has been delayed while the Law on Court Organization and Prosecution is the process of being adopted.
• Insufficient resources available for the establishment of the model of the pilot courts.
• Insufficient resources for publishing of laws and court decisions.

1. PUBLICADMINISTRATIONREFORM

1. Good governance, the core of the Rectangular Strategy, is critical to achieving the priorities of the Royal Government. The Public Administration is one strategic instrument of implementation. Since 2000, the Council for Administrative Reform (CAR) has implemented a series of National Program for Administrative Reform to systematically and gradually transform the Administration and the Civil Service into effective providers of public services and trusted development partners.

1. This was achieved in the context of successive Governance Action Plans to facilitate coordination among national and sectoral reforms. The GAPs covered a broad area of reforms including the legal and judicial reform, the reform of armed forces, the reform of public finances, decentralization and deconcentration, reforms concerning investment and trade, the management of social services and the management of natural resources. Over the years, major achievements have been made towards principles of good governance in every area of GAPs support of sustainable development, social justice and poverty reduction. The CAR together with ministries and institutions is preparing a third Governance Action Plan that will focus on how to improve services delivery and better coordinate reform efforts.

1. The present Public Administration is less than ten years old. It is the result of peace and reconciliation imperatives. Early in the second mandate (1998-2003), the Royal Government successfully realized the unification of the administrations of the State of Cambodia and of the three political factions into one integrated Public Administration. This allowed the national government, for the first time in over 500 years, to exercise sovereignty over the whole country and to begin the task of implementing its first Governance Action Plan.

1. During the third mandate (2003-2008), the Royal Government accelerated the implementation of its reform program. Through a rigorous implementation of its “National Programme for Administrative Reform (NPAR)”, the Royal Government has been working hard to transform the Public Administration. The Government believes that a performing and accountable Civil Service is essential to secure ongoing peace and political stability, to sustain development and social justice, and to reduce poverty. To-date significant progress has been made to transform the Public Administration to meet the challenges of a globalized world. With the on-going global financial and economic crisis and its impact on the Country, it has become even more urgent to further strengthen the Civil Service.

1. Working in close cooperation with ministries, institutions and development partners, the Council for Administrative Reform (CAR) has achieved significant milestones:

• The integration of all civil servants into unifying systems more conducive to motivation and career progression has been completed.
• Average compensation within the Civil Service has more than quadruple since the beginning of the second mandate.
• Innovative instruments (Special Operating Agencies, Priority Mission Groups, Merit- Based Performance Incentives) are being deployed government-wide to enhance performance and accountability.
• A Performance Management and Accountability System has been developed to support the implementation of P&A instruments.
• The reform is at the leading edge of harmonization and alignment to implement the Paris and Accra agreements.
• There is now a clear direction and a broad consensus on how best to proceed.

1. The following illustrate the breadth of achievements that have contributed to developing human and institutional capacity within the Administration and the Civil Service: 

• The legal and regulatory framework to anchor the Civil Service is in place, including the Common Statute and 21 Particular Statutes.
• Management  and  control  systems  are  operational  and  effective  (recruitment, promotion,  retirement).
• Civil servants have been integrated into a new classification system more conducive to career progression. The payroll system has been automated through ICT.
• The compensation regime has been made more conducive to performance - average salaries have reached US$ 81.4 per month in May 2009.
• Mechanisms to implement the 20% annual increase in basic salary are in place.
• Innovative schemes to enhance performance and accountability are being deployed (SOAs, PMGs, MBPIs).
• The Performance Management and Accountability System is being implemented to better mobilize human resources and identify priority capacity development needs.
• The Policy on Improving Public Services delivery has been approved and is being implemented.
• A Compendium on Public Services is being completed and disseminated to improve access to public services and enhance transparency.
• A Human Resources Management Information System is operational and personnel management processes have been streamlined.
• A system  of functional  allowances  for management  and specialized  skills  was implemented.
• Communications tools have been deployed to inform about the reform (bulletin, website, periodic workshops and seminars).

1. The Royal Government intends to continue to vigorously pursue the implementation of the National Program for Administrative Reform (NPAR) to transform the Administration and the Civil Service into effective providers of public services and trusted development partners. Current challenges and priorities include:

• Complete the policy framework (Capacity Development, HRD, HRM, compensation and redeployment) to guide reform activities.
• Improve the quality and delivery of public services.
• Change the attitude and behaviour of civil servants from administrators to service providers.
• Deploy a network of ministerial focal points to facilitate the implementation of NPAR and the policy framework.
• Further develop human and institutional capacity to implement RGC policies and to sustain results.
• Improve performance and accountability using innovative instruments in a controlled manner and carefully manage associated risks.
• Manage human resources based on principles of performance, merit and fairness.
• Motivate   civil   servants   with   adequate   compensation   and   promising   career perspectives.
• Develop the capacity of the CAR Secretariat, ministries and institutions to plan, manage and monitor the reform.

DECENTRALIZATIONANDDE-CONCENTRATIONREFORMPROGRAM

1. The long-term development objective of the Royal Government’s decentralization and  de-concentration  reform  program  is  to  achieve  broad-based  and  sustainable development and strengthen vibrant local economic foundations so that every citizen has equal opportunity to participate in local development, effective environment and natural resource management and delivery of quality public services to meet the needs of citizen and poverty reduction by focusing on vulnerable groups, indigenous minorities, women and children. The Royal Government believes that establishing and promoting democratic development at provincial/municipal, district/Khan and commune/Sangkat levels can best achieve the expansion of democratic governance. Reforms of management systems of provincial/municipal, district/khan and commune/sangkat administrations have the following two strategic goals: (i) to strengthen and expand local democracy; and (ii) to promote local development and to reduce poverty.3

1. The RGC has made significant progress in implementing the Decentralization and De-concentration (D&D) reforms in order to achieve sustainable development through the expansion of local economic development. To implement the D&D reforms an inter-agency committee that is Chaired by the Ministry of Interior (MOI), the National Committee for Sub- National Democratic Development (NCDD), has been established to provide overall direction and to coordinate the implementation of the D&D reforms. In May 2008, the Organic Law on Administrative Management of the Capital, Provinces, Municipalities, Districts and Khans and the Law on Elections of Capital City Council, Provincial Councils, Municipal Council, District Councils and Khan Council were promulgated. The NCDD is now working on the formulation of a regulatory framework to implement these Laws, in particular on the regulations for the demarcation of administrative boundaries at sub-national levels and regulations on the composition of membership of Capital City Council, Provincial Councils, Municipal Councils, District and Khan Councils.

1. The elections of Capital City Council, Provincial Councils, Municipal Councils, District Councils and Khan Councils for their first term were held on May 17, 2009. The inauguration of the office of the Councils and the Boards of Governors at all sub-national levels for their first term was officially organized in early June, 2009 in order to ensure the sustainability, effectiveness and authority of public administration. The objectives of establishing the Councils at sub-national administrative levels through elections - either direct or indirect - are: (i) to create opportunities and mechanism for the Councils to decide on the destiny of their own community through participatory consultations with the people in their localities, and (ii) enable the citizens in these localities to have a voice in securing better and responsive public service delivery, materials, means and infrastructure in order to rapidly and equitably meet the requirements of local development and to contribute to alleviation of poverty. The Royal Government has completed the establishment of institutional structures at all administrative level both at the national level and sub-national levels through democratic principle and process.

1. The NCDD is also coordinating technical support and assistance to improve the capacity of commune/sangkat council members to manage their respective commune/sangkat affairs effectively in accordance with the provisions of the law on the administration of Commune/Sangkat. It is now working on formulating a National Program on the sub-national democratic development that will outlines the work plan for the enforcement of the Law on Administrative Management of the Capital, Provinces, Municipalities, Districts and Khans and the short-, medium-, and long-term D&D reform policies to be implemented from 2010 to 2019. The drafting process of this national program is to be completed by the end of 2009. The national program will set the timeframe for the implementation of D&D reform policies and the enforcement of the Law on Administrative Management of Capital, Provinces, Municipalities, Districts and Khans.

1. Despite major achievements and progress that has been made in implementing RGC’s Strategic Framework for D&D reforms, developing capacity of the newly created sub- national institutions to deliver programs and services under their mandate, is still a major challenge that will need to be dealt with within the framework of a new comprehensive human resources management system. Human and physical resources for the administration and management of their mandates are still limited and the adoption of required legal documents and procedures is yet to be completed.

1. Under decentralized democratic governance, the long-term vision of the new human resource development (HRD) system for local administration is to have each sub-national council take full responsibility to train its civil servants under its own well-established HRD system. In reality, however, it will take time - at least a decade or so - until each sub-national council can take up such responsibility and will require the continued support from NCDD to build human resources capacities of sub-national councils. 

1. REFORM OF THE ROYAL CAMBODIAN ARMED FORCES

1. The reform of the Royal Cambodian Armed Forces (RCAF) as one angle of the Royal Government’s Rectangle Strategy demands an effective response from the RCAF in its reform to absolutely ensure peace, stability, security, sovereignty, territorial integrity and the nation’s development. Based on the “Defence White Paper” as a compass for the RCAF to successfully implement the RGC defence policy, the reform and further capacity enhancement of the armed forces are proceeding according to plan through demobilisation and establishment of more effective armed forces. The share of Defence and Security in GDP has stabilised at around 2% (1.8% in 2005, 2006 and 2007) and is expected to be 1.7% by 2010. This share in the national budget has been steadily declining (from 22.93% in 2005 to 18.87% in 2007). RGC will ensure that the armed forces are always in readiness to protect the country's territorial integrity by allotting needed funds without reducing increasing share for development and social sectors.

1. In the recent years, the security outlook of the Kingdom of Cambodia has changed due to the evolving regional and global security situation. In the current external environment, the RCAF has played an increasingly important role as the leading force in defending the sovereignty, independence and territorial integrity of the Kingdom of Cambodia and in contributing to ensuring the stability, safety and security. It has contributed to enhancing Cambodia’s prestige in the international arena through its participation in peace and humanitarian missions within the framework of United Nations’ requests and a strong commitment to combating terrorism. Since achieving conditions of full peace in late 1998, the RCAF has substantially contributed to strengthening stability and internal security to support the development of the nation.

1. The reforms of the RCAF over the last decade have faced many challenges that have been somewhat unfavorable for achieving government’s efforts in this reform area. The reform process has encountered perpetual constraints such as a lack of resources, unsuitable structure, complicated bureaucracy, inadequate military bases and accommodation and living conditions for soldiers.

1. Nevertheless, the RCAF has made significant progress in moving forward its reform process. In  addition to ensuring security for  the  nation, the RCAF has been actively contributing to rehabilitation of physical infrastructure, rescuing people during disasters and, since April 2006, participating in international peace missions. Hundreds of Cambodian troops have been serving the UN peacekeeping forces in Sudan. Although the capability and resources of the RCAF are limited, Cambodia will continue its efforts to participate with the UN in other humanitarian peacekeeping missions in the future. While border disputes, threats from transnational criminals and international terrorism have recently become a major concern, the RCAF has strengthened its capability to defend the border of the Kingdom of Cambodia and to ensure security for the entire nation. The capability of border protection forces has been further strengthened by the presence of armed forces at all strategically important points, strengthening the expertise in preventing infiltration by international terrorism and transnational crime, mobility, communications, information collection, and cooperation with other competent authorities. Strengthening the presence of armed forces for border protection forces has been intended not only for the protection of the nation in case of any intrusion into Cambodia’s territory but also to maintain peace and stability with neighboring countries that has remained the top foreign policy priority of the RGC.

1. Although significant progress has been made in the reform process, the RCAF still has many major tasks to perform to implement the strategic initiatives outlined in the Defense White Paper 2006.

2.       ENVIRONMENTFOR THEIMPLEMENTATIONOFTHERECTANGULARSTRATEGY

1. There are four main aspects addressing this issue, viz., (i)peace,politicalstabilityandsocialorder;(ii)partnershipindevelopment;(iii);favourablemacro-economicandfinancialenvironment;and(iv)Cambodia’sintegrationintotheregionandtheworld.

1. PEACE,POLITICALSTABILITY AND SOCIALORDER

1. Leaving behind an era of conflict and destruction, in just over a decade the RGC has been able to create an environment of peace, political stability and social order which are pre-requisites for achieving sustained economic growth and to reduce poverty. The Royal Government’s full commitment to liberal, multi-party democracy, dialogue, and mutual adjustment among people holding different views and perceptions, is bearing fruit. These processes are taking deep roots in Cambodian society. Enhancement in political stability have paved the way for better governance, particularly because of the constitutional amendment in 2006 allowing for all legislations to be passed with a majority of votes, thus removing a major obstacle to moving ahead with the legislative agenda to put in place rules and regulations that are urgently needed for good governance and to create an environment conducive for private sector development. All RGC institutions have contributed to creating the current environment of political stability and social order. The Ministry of Interior (MOI) has made a significant contribution to the achievement of the current environment. To reinforce the central role of the family and religion in building the social fabric of the society, the Ministry of Religion and Cult has continued to make important contributions to promote family and religious values.

1. The tradition of holding free and fair elections is now well established. So far, four General Elections have been held to elect members of the National Assembly. The latest one held on 27 July 2008. Two elections have been held to elect members of the Commune Councils across the country – first one in February 2002 and the second one in April 2007. The Senate was created as an upper house through a constitutional amendment in March 1999. The first election of senators by Commune Councilors and Parliamentarians was held in January 2006. An era of dynamic stability is now in place, with an emphasis on freedom of expression and free speech in an environment of accountability and responsibility for each individual’s actions, both within RGC and the general public. RGC will make every endeavor to ensure that these hard earned gains continue to enhance and get fully integrated into the Cambodian society and psyche.

1. The Ministry of Interior (MOI) has been playing three major roles: (i) managing the sub-national public administration institutions; (ii) ensuring internal security of the nation, and public order through the National Police Forces (NFP); and (iii) leading and coordinating the implementation of RGC’s Decentralization and De-concentration Reform Program (D&D), as the Chair of the National Committee for Sub-National Democratic Development (NCDD). The MOI has made significant progress in broadeneing and further strengthening the sub- national public administration institutions, ensuring internal security, and putting in place institutional arrangements to guide the D&D reform process to achieve democratic development at the sub-national level.

1. The MOI through its NPF has actively participated in spoiling all terrorist activities, safeguarding safety and wellbeing of the people, preventing all plots aiming at rupturing national solidarity and causing political instability and social chaos, and preventing attempts to use Cambodia as a springboard to destroy the neighboring countries. The remarkable achievements are reflected in the overall safety and security, the organization of elections of Commune-Sangkat Councils in the second mandate on April 1, 2007, the general elections of the Fourth Legislature of the National Assembly on July 27, 2008, the elections of the Capital Council, Provincial Council, Municipal Council and District/Khan Council on July 26, 2009, and the attainment of safety for the hearings of the Extraordinary Chamber in the Court of Cambodia.

1. Through the National Police General Commissariat (NPGC), the MOI has cooperated with the Ministry of Justice in drafting the RGC-MOI circulars, and preparing an action plan to prevent and suppress the activities of “juvenile delinquency”. The MOI, through this subsidiary body, has also prepared a strategic plan on combating drug trafficking, the exploitation of labor and sex exploitation of women and children and on strengthening management mechanisms for the implementation of this plan at the central as well as in provincial, municipal and district/Khan levels. In cooperation with relevant ministries, the MOI has promoted the enforcement of Law on Land Traffic to reduce road accidents. It is implementing the MOI-MEF Inter-ministerial Prakas on the Collection, Distribution and the Transfer of the fines paid by traffic offenders to national budget. The MOI has collaborated with the Ministry of Public Works and Transport in the drafting of the Sub-decree on the Management of Garages that repair, assemble and transform vehicles been formulated. The MOI has strengthened the capacity of the National Police Force including the National Border Police to be more professionally capable of defending the sovereignty and ensuring security and order within the nation.

1. Despite strong commitment and remarkable success,there are still some challenges caused by limited capacity, including human resources and equipment; as well as limited legal framework to guide the work. The prevention of international terrorist attacks against foreign embassies, legations, international delegations, tourists and investment entities is a priority of RGC. However, the organized overseas criminals, taking advantages of our weakness use all means to infiltrate and hide in our country, evade our legal network and carry out crimes. The control of foreigners is not as yet as comprehensive as it needs to be to safeguard national security. Despite a significant reduction in crimes, the incidences of armed robberies, murders, illegal drug circulation and trafficking, rapes, women and children trafficking as well as other offenses such as technical violation of law and money laundering are still high. There are too many traffic accidents. The administrative management is complicated in cities and towns by juvenile delinquency in public places; night clubs and dancing halls are negatively affecting the youth, causing inactiveness in study, drop outs from schools and leading to the conduct of other wrong doings.

1. CAMBODIA’S INTEGRATION INTO THE REGION AND THE WORLD

1. Cambodia is now fully integrated into the region and with all nations of the world on equal footing. As a member of the Association of South East Asian Nations (ASEAN) it actively participates and contributes to its work. As a member country of the World Trade Organization (WTO) Cambodian businesses now have opportunities to export their products around the world. Cambodia is participating in sub-regional, regional and inter-regional and global cooperation initiatives such as the Greater Mekong Sub-region (GMS), Ayeyawady- Chao Phraya Mekong Economic Cooperation Strategy (ACMECS), Asia-Europe Meeting (ASEM), Asia Pacific Economic Cooperation (APEC), the Non-Aligned Movement, and in the work of the World Investment Promotion Agency (WIPA). RGC has established normal relations with all international organizations and the international community.

72. Further strengthening of the integration of Cambodia’s economy into the region has been a high priority of the Royal Government. RGC institutions, in particular the Ministry of Foreign Affairs, have worked hard to strengthen relations with countries in the region by actively participating in  the work  of the  GMS and  ACMECS; and through multilateral development cooperation agreements. These multilateral agreements include: agreements between Cambodia, Lao PDR, and Viet Nam (CLV); Cambodia, Lao PDR, and Thailand (CLT); and Cambodia, Lao PDR, Myanmar, and Viet Nam (CLMV).

1. Cambodia’s integration into the regional and global economy has contributed to achieving sustained high rates of economic growth over the last decade. The on-going global financial crisis that originated in the advanced economies, because of the failure of their regulatory systems, however, now poses new challenges not only for Cambodia but for all developing and middle-income nations across the globe.

1. FAVOURABLEMACRO-ECONOMICANDFINANCIALENVIRONMENT 

1. MACRO-ECONOMICMANAGEMENT:2006-2008

1. The Royal Government of Cambodia’s concerted efforts to secure political and social stability, internal peace and security, along with sound and progressive management of the economy have enabled it to achieve sustained high rates of economic growth and poverty reduction over the last decade. Economic growth during the mandate of the Third Legislature, 2003-2008, averaged around 10% per year, with a record high annual rate of growth of  13.3% in 2005. Economic performance in 2008 was somewhat diminished compared with 2003-2007, as a result of the global financial crisis that started in late 2007 and caused a recession in the advanced economies. The economy grew at an annual rate of 6.7% in 2008 (Table 1 on next page).

1. Two key features of economic performance in recent years have been the increasing diversity of the sectors contributing to economic growth and the robust contribution of the agriculture sector to economic growth. This performance is underpinned by the strong support extended to agriculture, the garment sector, and active promotion of the Tourism sector by the RGC. The expansion of the economy resulted in a rapid growth of the construction sector, facilitated by the availability of increased domestic credit to the private sector. During 2003-2005, domestic credit to private sector grew at an average annual growth rate of 30%. It grew by 53% in 2006, 78% in 2007. 

1. Over the period of implementation of NSDP 2006-2010, the highlights of the changes in the sectoral composition of the economy were as follows:

• The share of agriculture sector in total GDP increased from 30.8% in 2005 to 32.4% in 2008.
• The share of industrial sector declined from 25.1% in 2005 to 22.4% in 2008. Within industrial sector the share of:
  • Ø Textiles and Garments sub-sector has declined from 12.3% in 2005 to 10.3% in 2008.
  • Ø Mining Sub-sector has not changed from 0.4% in 2005 (also 0.4% in 2008).
  • Ø Construction sub-sector slightly declined from 6.3% in 2005 to 6.1% in 2008.
  • The share of services sector has slightly declined from 38.9% in 2005 to 38.8% in 2008. Within the services sector the share of:
    • Ø Tourism and Hotel sub-sector has increased from 4.3% in 2005 to 4.5% in 2008.
    • Ø Transportation and Communications sub-sector has not changed from 7.4% in 2005 (also 7.4% in 2008).
    • Ø Financial sub-sector has increased from 1.1% in 2005 to 1.3% in 2008.
    • Ø Real estate sub-sector has declined from 6.6% in 2005 to 6.4% in 2008.

TABLE1: MACROECONOMICINDICATORS,2003-2008

(as a percentage of the GNP)

Source:Ministryof the Economy and Finance, National Bank of Cambodia, IMF.

1. As noted earlier in this Chapter, one of the highest priority of the RGC has been to reduce poverty, especially in rural areas. The impressive economic growth over the last decade, averaging around 10 percent per year has raised living standards and reduced poverty headcounts across the country. Physical access to public services has improved, as measured in terms of average distances to the nearest health centre or school; this, combined with an improved road network and rising real incomes, helps explain improving rates of school enrolment and health-seeking behaviour. As a result, there is continued improvement in outcomes such as average level of educational attainment and self-reported health status.

1. BUDGETREVENUESANDEXPENDITURES

1. Along with the rapid growth, tax revenue collection performance also improved significantly over the years 2006-2008. Total revenues collected as a percent of GDP increased from 11.4% in 2006, to 12.1% in 2007, and 13.3 percent in 2008. At the same time, budget expenditures increased at a relatively slower rate than revenues resulting in a decline of the overall deficit from 3.3% of GDP in 2006, to 2.8% of GDP in 2007, and 2.7% in 2008.

1. Since 2004, the Royal Government has been implementing the PFM Reform Program (PFMRP). The long term vision of this reform program is to build a public financial management system by 2015 that meets international standards. In developing the implementation strategy of the Public Financial Management Reform Program (PFMRP) careful attention was paid to the sequencing of reforms. It was recognised that not everything can be done at once, but also that some basic and core activities need to be done before others can work effectively. To guide this sequencing, potential activities were grouped into a series of Platforms with each Platform representing a real and measurable improvement in the performance of the public financial management system, but also being a step to the next Platform. The series of Platforms decided upon at that time are shown in the diagram I.

1. It was also considered important that the plans to implement each Platform should encompass not just technical and process developments, but also complementary organisational, capacity and motivational developments. It was recognised that without attention to all these different dimensions each Platform would not be a robust step to the next. Reforms would be shallow and subject to degradation during the reform process unless these aspects of reform support each other.

1. Significant progress has been made in achieving the goals of Platform I, although there is a continuing need to reinforce Platform 1 activities. Revenues have improved significantly and flow of these resources to line ministries and other policy and service delivery implementing agencies has been improved. Greater fiscal stability has been achieved with improvements in forecasting, the management of cash balances and the virtual elimination of the substantial accumulation of arrears of payment of the past.

1. The outcome of the implementation of the first platform of the reform program focused on building budget credibility has been:

• Improved and strengthened revenue policy, forecasting, management and taxcollection.As a result, revenues increased on average by around 26% per annum, the legal framework has been broadened, improved, and enhanced.
• Improved and strengthened budget preparation. Budget is now more comprehensive, accurate and responsive to RGC policies. The budget preparation process has been refined and made more comprehensive through introduction budget strategic plan, a new budget classification, piloting program budgeting, and carrying out systematic mid-year budget reviews and preparing quarterly revenue and expenditure plans. The “Public Financial System Law” was prepared and adopted. The next step is to ensure that that there consistency, coherence, and coordination between the Public Financial System Law and the Law on Administration of Capital City, Province, Township and District/Khan, in order to achieve the goals of PFMRP and D&D reform programs.
• Improved budget implementation and efficiency. As the results, budgetary control is more simplified and effective, disbursements and payments are smoother and timely, and recording is more transparent and accurate. These has been done through strengthening of cash management, establishment of Treasury Single Account, introduction of new Chart of Accounts, introduction of banking system payment, reduce budget execution processes and procedures, including decentralizing financial inspection and procurement. In addition, internal control system has been strengthened through establishment of internal audit body in all line ministries and agencies.
• Institutional capacity of the Ministry of Economy and Finance has been enhanced. Roles, functions, and responsibilities of departments and individuals are now clearly defined, transfer of knowledge and know-how through on-the-job training by consultants/advisers is now taking place. Other activities to strengthen capacity have included: study tours; short term and long term training; as well as incentive to skilled staff through the Priority Mission Group (PMG) and Merit Based Pay Initiative (MBPI) mechanisms.

DIAGRAMI

SEQUENCE OF P LA T FO RMS    

Rewarding performanc e as we ll as disc ipline Basis for stronger deconcentration

Greater external transparency 

Opportunities for efficiency

Re-alignment of resources with priorities Scope for in-depth review

ENABLES                                          Around here that:

Focus on what is                              *Regional s tandards start to be beaten

done with money                             *Donors cons ider more budget support

PLATFORM  2                                                                   Credi ble common data

Initialimprovementsininternal                              Effective dis cipline

controlandholdingmanagers                        Basis for reward and s anction

accountable.                                                                        Greater internal transparency

PLATFORM  1                                                      Matching of resourc es used to period in which consummed.

Budgetiscrediblebecause                 Control ov er arrears

deliversre lia b le and predictable                 Better basis for proc urement efficiency.

resourcetobudgetm anagers

1. The implementation of Platform I reflects the Royal Government’s firm determination, ownership and acceptance of accountability. The Royal Government will continue to strengthen Platform I achievements. In 2007, work on detailed planning for implementation of Platform 2 began that is focussed on “BuildingonImprovedBudgetCredibilitytowardsAchievingFinancialAccountability”. The detailed action plan to implement the Platform II was officially announced on 3rd December 2008. It is now being implemented. The main theme of Platform 2 is increased accountability of those who are responsible for the safe, efficient and effective management of public resources. Platform 1 had sought to address the overall resource management framework and to tackle fundamental problems in the system as a whole. Platform 2 seeks the engagement of all budget entities and their managers in improving their own internal financial management within the overall framework. Activity plans developed aim to bring this about through a combination of regulatory, process and capacity development initiatives with an appropriate balance of incentives for good PFM performance and sanctions for poor performance.

1. INFLATIONANDMONETARYDEVELOPMENTS

1. As a small and open economy that is highly dollarized, Cambodia is affected by changes in price of crude oil, food items, and other commodities in the international markets. The dramatic increase in the price of a barrel of crude oil that rose from $ 66.47 in April 2007 to record level of US$ 147 per barrel in July 2008 as well as the price of rice that doubled in international markets between the first quarter of 2007 and the first trimester of 2008 and doubled again in the first four months of 2008, resulted in inflation rising to 25.7 percent in May 2008. However, the proactive measures taken by the National Bank of Cambodia were able to reduce the inflationary pressures and inflation had declined to 13.5 percent at the end of 2008. Over the 2006-2008 period, the exchange rate of the Riel against the US Dollar was stable, varying between 4,000 Riel to 4,125 Riel for 1 US Dollar. Gross international reserves accumulated to 2,200 million US Dollars, sufficient to support 3.8 months of imports.

1. The Cambodian banking system has not suffered any direct loses because of the sub-prime loans that have adversely effected the financial institutions in other countries. However, to increase confidence in the banking system and to mitigate any potential effects the National Bank of Cambodia took proactive measures to strengthen prudential regulation of the banking system, increased the reserve requirement rate from 8% to 16% in the banking system, placed a 15% credit ceiling on the real estate sector, improved credit rating system of the banking sector, and strengthened the credit information sharing system. The National Bank of Cambodia has also required banks to develop a modern enterprise system based transaction mechanism by improving the code of conduct, encouraging good corporate governance, and provided guidance to banks on risk management.

1. During 2006-2008, significant progress has been made to transform the financial institutions into a market-based, private sector-dominated sector. Reform measures and infrastructure improvements have contributed to the development of a healthy financial sector. The prudential indicators for banks have posted positive gains. The average capital adequacy ratio for commercial banks in December 2008 was 28%, compared to the base level of 15%; there has been a remarkable increase in aggregate assets in the banking system. In terms of asset quality, non performing loans reached a level of 14.8% at the end of 2002, 9.9% at end of 2006, but decreased significantly to 3.7% in December 2008. Money supply (M2) compared to GDP increased to 28.6% at the end of 2008. Loans to the private sector increased by 23% of GDP, while total deposits increased to 22.2% of GDP.

1. The National Bank of Cambodia (NBC) has actively supported microfinance institutions, both domestic and overseas partners, to link banking services to rural areas. Because of the fast growth and increasing complexity of the banking system, the NBC is working on amending the scope of the Law on Banking and Financial Institutions to keep the legal framework up-to-date with market changes. The NBC has established a Financial Intelligence Unit to implement the Law on Anti-Money Laundering and Combat the Financing of Terrorism, passed in 2007.

1. The RGC has continued to vigorously implement the Financial Sector Development Strategy 2006-2015. Concerted efforts have been made to carry out planned actions in both non-banking and banking sectors under the lead of the MEF and NBC respectively.

1. PARTNERSHIP IN DEVELOPMENT

1. The three aspects of partnership between RGC and other stakeholders comprise relations with (i) civil society; (ii) private sector; and (iii) external development partners. In regard to the first two:

• Active efforts continue to involve and associate all sections of the civil society in all appropriate aspects of RGC’s planning and decision-making processes for taking Cambodia forward. Civil society is an important partner and many NGOs, both national and international, play an active and vigilant role in social and economic development efforts as well as in promotion of democracy and human rights. These organisations are represented and contribute at high cooperation and consultation forums like CDCF, GDCC and TWGs. A law on NGOs will be passed after wide consultation with all stakeholders.
• In RGC’s development strategy, the private sector has the prime role as the locomotive and driving force for investments and economic growth. To facilitate and assist private sector development and orderly progress, several mechanisms have been set up. Already, the cooperation efforts such as through the Government Private Sector Forum are much appreciated by the private sector and are bearing fruit as manifest in the robust growth of private sector investments. Full efforts will continue to strengthen and deepen the harmonious and symbiotic relationships with the private sector, based on strict adherence to the laws and regulations and focused on development priorities.

1. Relations with external development partners (EDPs): Generous financial and technical assistance from EDPs has greatly helped Cambodia to achieve impressive progress so far. RGC fully appreciates this help. The cooperative relationship between EDPs and RGC has enhanced progressively, has deepened over the years and is becoming healthy based on appreciation of mutual needs and roles. Various developments in the consultative process in the last few years include:

• To guide EDPs and better ensure proper coordination of all assistance from EDPs, a Strategic Framework for Development Cooperation was issued in 2006.
• The annual overarching consultative discussions forum has graduated into full Cambodian ownership by being transformed into the Cambodia Development Cooperation Forum (CDCF) which held its first meeting in 2007.
• A high level GDCC (Government-Development Partner Coordination Committee) meets thrice yearly to discuss common issues and pursues Joint Monitoring Indicators (JMIs) on the progress of various aspects of NSDP.
• Technical Working Groups (TWGs) function to better coordinate and monitor progress at the sectoral level. After review of their initial functioning, and in consultation with all EDPs, clear guidelines were issued in 2006.
• The procedures and processes of collection of data of EDP assistance have been streamlined and the ODA data base maintained at CRDB/CDC gets continuously updated.
• EDPs are increasingly cooperating among themselves and bring to RGC matters of common concern.
• RGC is committed to implement the “Accra Agenda for Action” to increase efficacy of development  assistance4.

1. The total external development assistance to Cambodia has registered an increase due largely to inclusion of assistance from hitherto “non-traditional” partners. However, internationally, development assistance from the developed world does not show any signs of moving upwards to the level advocated by the Monterrey Consensus, 2001, viz., 0.7% of GDP per annum, but instead is estimated to have dropped 8.4% in 2007 after a 4.7% drop in 20065, and averages only at 0.45% of GDP of developed countries. At the country level in Cambodia there are some significant shortcomings still to be addressed and overcome, as exhaustively brought out in the Aid Effectiveness Report, 2007 (CRDB/CDC). In addition and in particular:

• Except in a few instances (MEF, MOH, MOEYS) where SWAP approach is followed, alignment of Development Partner resources to NSDP has not proceeded well despite clear undertakings in Paris and Rome Declarations and country level agreements by major donor agencies.
• Many TWGs are still to commence review of all ongoing programmes to align and reorient them to NSDP priorities as well as to PIPs in spite of clear calls from the highest levels in RGC6; as such, much needed EDP resources continue to be spent in traditional and pre-conceived ways, resulting in studies and duplicating technical assistance,  and  not  adding  to  much  needed  'net  transfer  of  resources'  for Cambodia’s priorities.
• 4       Arrived at the third high level forum in September 2008 (the first two were in Paris and Rome)

5       Report released by UN SG on 4 September 2008

6       Prime Minister Samdech Hun Sen’s foreword to NSDP and APR and several speeches at international and domestic forums  

3.       ENHANCEMENTOF AGRICULTURALSECTOR

1. The four sides of this rectangle are: (i) improving agricultural  productivity anddiversification (including animal husbandry, food security and nutrition, and ruraldevelopment); (ii) land reform and de-mining; (iii) fisheries reform; and (iv) forestry reform(includingenvironmentprotectionand conservation). Notable features during the last two and half years were: continued RGC efforts in arresting depletion of natural resources and environment; rehabilitating and enhancing irrigation potential; favourable weather conditions; some diversification into cash crops; issuance of more land titles to the farmers; and, further improvement of rural infrastructure. The National Strategy for Agriculture and Water, 2006-2010, was developed through a consultative process and adopted in 2007.

1. IMPROVINGAGRICULTURALPRODUCTIVITYANDDIVERSIFICATION

1. The Royal Government’s overall goal is “poverty reduction and economic growth through enhancement of agriculture sector development”. The sectoral goal is to “ensure food security, increase incomes, create employment and improve nutrition status for all people by improving productivity and diversification, and commercialization of agriculture with environmentally sound protection and food security”.

1. An “Agriculture Sector Strategic Development Plan: 2006-2010” was prepared by the Ministry of Agriculture, Fisheries and Forestry (MAFF) in October 2005. A strategy to implement this Plan was also prepared by the TWG for Agriculture and Water in March 7 CRDB is in the process of preparing “A Guideline for the Management of Technical Cooperation in Cambodia”, and notes, in the Position Paper for Consultation (June, 2008), inter alia that: TCremains a “problem”; it comprises up to half of ODA; it might be stuck in an inappropriate and out-dated 'post-conflict recovery mode”; and, significant amounts of TC are just “tolerated”. 2007. However, a sector-wide program to implement the Plan is not yet in place. Also a strategy for the agriculture and water sectors has been formulated jointly by MAFF and the Ministry of water Resources and Meteorology.

1. The “Agriculture Sector Strategic Development Plan: 2006-2010” has identified the following seven strategic objectives for the agriculture, fisheries and forestry sectors:
   1. Food security, productivity, diversification.
   2. Improve and strengthen agricultural research and extension systems
   3. Market access for agricultural products.
   4. Institutional and legislative development framework.
   5. Land reform – land market development and pro-poor land access.
   6. Fisheries reform - sustainable access.
   7. Forestry reform - promote sustainable conservation and management of forests, ensure better management of natural protected areas.

1. To achieve the seven strategic objectives, the MAFF has organized its activites in the following five program areas:

Program # I:        Improving productivity & diversifying agriculture sectors. Program # II:                         Promote market access of agriculture products.

Program # III:           Strengthen  institution,  legal  framework  and  human  resources development.

Program # IV:      Management of sustainable fishery resources. Program # V:                          Management of sustainable forestry resources.

1. Significant progress has been made by MAFF in increasing the land area for crops, paddy cultivated area, yield per hectare, fishing lots, and area released to fishing communities, fish catch (from all sources), forestry cover, and percent of land area reforested.

1. Over the years 2006-2008, the overall agricultural production has increased remarkably in spite of unpredictable weather conditions. The growth rate for agriculture sector was 5.5 percent in 2006, 5.1 percent in 2007, for 2008 is estimated to be 5.4 percent. In 2008, the total cultivated land area was 2.61 million hectares, producing about 7.15 million metric tons resulting in an average yield of 2.74 tons per hectare and a surplus of

2.02 million metric tons of milled rice.

1. The livestock production has increased slightly. The number of cattle raised has increased by about 13 percent over the 2004-2008 period. However, the number of pigs raised has declined from 2.42 million heads in 2004 to 2.21 million heads in 2008 due to an increase in import of pigs from neighbouring countries. Animal husbandry sectors’ contribution to the economy has remained stagnant at about 4 percent. This sub-sector needs to grow in order to meet local needs to improve nutrition and to serve the tourism industry. Introduction and propagation of high yielding species and expanded veterinary services is priority of MAFF. To promote agricultural production, the MAFF has prepared laws and regulations that include: the Law on Sanitary and Phyto-sanitary, the Law on Production and Animal health, Law on Agricultural Pesticide Management, and Law on Agricultural Land.

1. Notwithstanding the significant progress that has been made, a number of challenges remain to: 

• Increase productivity in rice and other  crops;  increase and improve  access  to extension services, credit and inputs; increase irrigation; ensuring better benefits for farmers through marketing; lack of farmer’s knowledge in using agricultural inputs, techniques and soil improvement management.
• Develop appropriate legal and regulatory tools and competency in law enforcement to monitor and regulate agricultural inputs and soil resources and soil fertility management.
• Improve post-harvest management; promote export and domestic markets for agricultural products (including rice – not merely paddy, fruits and vegetables); promote agro-industry including post-harvest processing; improve quality of standard of agricultural products; organise farmers’ organisations for better bargaining power; aim for optimum use of land and other resources; and, encourage and increase private sector investments and participation.
• Establish mechanisms at local level that can provide techniques and services to the farmers; promote program of agricultural extension at local level; and promote the formation of farmer to be effective and partner with private sector.

1. The livestock production has been adversely effected due to:

• Outbreak of diseases and lack of resources and capacity to effectively prevent the spread of diseases and protect the livestock.
• The reluctance of some investors to invest in poultry projects after the incidence of bird flue.
• Lack of market competition for meat and animal feed.

1. LAND REFORM AND DE-MINING

1. Land constitutes the most precious resource of Cambodia. RGC’s overarching policy is to ensure that all land is put to the best use possible for the benefit of all Cambodians, now and in the future. The draft Declaration on Land Policy addresses issues relating to Land Administration (clarify and record ownership and other rights), Land Management (to ensure that land and natural resources are effectively managed) and Land Distribution (to allocate state land for public and private purposes in a transparent, decentralized and fair manner).

1. Out of a total land area of 18.1 million hectares, the state owns 14.5 m and 3.6 m (20%) are with private entities. The Land Law details land by its use, ownership and control. There are three categories, viz,

• State Public Property, is non-transferable and is held for public purposes (government buildings and establishments, infrastructure use, etc) or environmental interests (like natural forest reserves, rivers, lakes, seashores and others).
• State Private Property, is often idle that could be put to various uses or transferred, including grant of land concessions (for large plantation, commercial farming, mining and social concessions).
• Private Property held by private individuals or entities.

1. The Royal Government recognizes that land reform is vital to enhance social stability, the development of an efficient land market, environmental sustainability, and for increasing agricultural productivity through the issuance of land titles to the citizens; in particular, to farmers who are cultivating land that they occupy. Issuing land titles to citizens is vital for improving the management of land use, especially the management of state- owned lands, to ensure security of land tenure in a transparent and equitable manner, and to further reduce poverty by enabling citizens to have access to financial markets by using their land titles as collateral. It was estimated in 2001 that there are 6-7 million parcels of land (plot) for which land titles have to be issued.

1. RGC attaches high importance to land reforms for poverty reduction and sustainable socio-economic development. The priority is on strengthening security of land tenure (both state land and private land) through land registration for systematic and sporadic land titling procedures in order to provide land titles to people as well as institutions entitled to tenure rights. To strengthen land management, the required policy and legal framework for effective implementation of the Land Law has been developed and approved. The work so far has included: a Sub Decree on State Land Management; Guiding Circular on Illegal Land Occupancy of State Land; Prakas on Identification, Mapping, Classification of State Land; the Inter-Ministerial Prakas on Strengthening of Cadastral Commission; Joint Prakas on the The Mechanism for Agricultural Dissemination Service Delivery for Social-Land-Concession Using Farmers; Joint Guidelines on Strengthening of Performance of all levels of Cadastral Commissions. The draft Policy and Sub-Decree on Registration of Indigenous-People- Community lands and the draft Policy on Land Evaluation System have been developed and discussed. In addition, a Committee for Land Dispute Resolution has been established in order to promote the efforts in resolving land conflicts.

1. Significant progress has been made in issuingland titles. So far, 1,664,297 land titles have been issued, of which 3/4 are rural lands and 1/4 are urban lands. Of these, 1,070,665 titles were issued through systematic land titling process whilst 593,645 titles were issued through sporadic titling. To-date the land titling process has, therefore, covered between 23 and 24 percent of total land plots (6-7 million) throughout the Kingdom. The targets set for the issuance of land titles in the Cambodian Millennium Development Goals (CMDGs) for the year 2010 is the registration of 32 percent of total land parcels (plots) – of which 24 percent are set for lands owned by farmers. The CMDGs targets for 2015 are registration of 65 percent of total land parcels (plots) – of which 48.75 percent are the land parcels (plots) owned by farmers. Of the total land titles issues so far, 70 percent are for common property of couples, 20 percent are for property owned by women, 5 percent are for personal property owned by men, and another 5 percent are for property owned by monasteries.

1. With respect to the registration for the communal property of indigenous lands in the pilot areas of three communities, the task force has completed the phase of land identification and boundary demarcation by consulting with relevant people on the boundary issues. This next step is the setting up of the pole and full registration at the beginning of 2010, as well as continuing the implementation of Sub- decree 83 ANK.BK concerning the procedures of indigenous land titling; especially, those in Mondulkiri and Rattanakiri provinces.

1. In area of settlement of land disputes, the Cadastral Commission has dealt with 5193 cases, of which

• 1810 cases were completely solved, that involved 8560 households and 3057.2 hectares of land;
• 272 cases were withdrawn;
• 1369 cases were rejected due to non compliance with the Cadastral Commission's jurisdiction; and
• 1742 cases are pending.  

1. The number of dispute cases brought to the Cadastral Commission has increased from year to year by over 20 percent.

1. To further strengthen land management, the process of establishing policy framework and relevant regulatory frameworks such as land management policy, national housing policy, guidelines on legal procedures for resettlement, and law on land management, urbanization and construction are now being prepared through an inter- ministerial working group. To prepare Land Use Maps for urban areas, the Ministry of Land Management, Urban Planning and Construction is providing technical support to District/Khan, provincial and municipal authorities in order to collect and verify data on Urban and Provincial Land Use Planning from ten provinces/Municipality. The task of data collection in Stung Hao and Bovet Towns has been completed and work is nearing completion in three more areas - the towns of Kratie, Neak Loeung and Anlong Veng. In addition, a Strategic Development Plan for Phnom Penh city has been finalized and work is now underway in three other provinces (Sihanouk, Kep and Kompong Cham province).

1. RGC has been implementing a policy to distribute land to landless citizens through its social land concessions program. The National Strategic Development Plan (NSDP) 2006-2010 had set a target of providing land to 10,000 landless-families under this program. To reach this target, each Province/Municipality has been asked to make available land for at least 416 families. The Royal Government has identified 36,917 hectares of state-owned land in twelve provinces for distribution to 14,791 landless poor households under its social land concessions program. So far:

• 4,700 hectares of land have been distributed to 783 households under LASED Kampong Cham.
• 9,514 hectares of land have been distributed to 190 households in Kratie.
• 129 hectares of de-mined land to 95 households in Uddor Meanchey.
• 1,019 hectares of land to 317 families of disabled veterans in Taken Koh Sla commune of Chhouk district in Kampot province.
• 2,074 hectares of land to 903 families of soldiers who served along the Thai- Cambodian border in Choam Khsan district in Preah Vihear province.
• At the same time, under a plan initiated by the head of Government, 4,500 hectares of land has been reserved for 793 families to develop a new village named "Thomcheat" in the area of Preah Vihear temple to be developed with financial support from the Royal Government.

1. Notwithstanding the progress made so far, many challenges remain that will require concerted action to enhance citizens’ confidence in land management practices:

• There is a need to promote the culture of land registration and to further strengthen the services delivery by the Cadastral System through a Single Window process that is transparent and accountable and delivers its services in a timely manner to build citizens confidence in the system. Accelerate the countrywide land systematic land registration system, in particular in the economically potential areas through establishment of a special operation agency.
• Land management, land use and land distribution processes need to be made more transparent, equitable and effective. The management of state land needs to be strengthened using various tools, including land management planning for all levels to direct land development and monitoring, preventing Concentration of unused land in few hands, preventing clearance of state-owned lands, forestlands, and lands in protected areas. Properly identifying lands to allocate for poor landless families, veterans, and for relocation of families displaced due to economic development projects of private companies, or through actions to recover state lands that were occupied illegally -- through RGC’s social land concessions program; as well as taking more stringent enforcement measures against the concessionaires who do not properly comply with the terms and conditions of the agreements of economic land concessions.

• Undertake a review of already granted large economic concessions by strengthening the control mechanism for contract implementation; verify the size of authorized lands in order to take back land that are not being used in accordance with contracts or exceed the limits under the 2001 land law and to remove from the concessions lands of 'protected areas' and lands already earlier held by people, which had been inadvertently included in concessions, and restore such areas back to 'protected areas' or to the people who were using them, as the case may be.
• Strengthen the social and environmental impact assessment in a participatory and transparent manner in the areas considered to be land concessions.
• Pursue and ensure registration of state land according to procedures stipulated in the Sub-decree on the Management of State Land and the Registration of Indigenous-People Community lands where these people are living in community.
• Strictly implement the Guiding Circular on Illegal Occupancy of State Land in order to identify speculators and to take back illegally-occupied lands for social development and environment protection purposes.
• Pursue the taxation of idle lands; consider terminating concessions that are not complying with existing laws and regulations; set up a clear and well-functioning system of land information and land price valuation; and the preparation of strategic development plan for provinces and municipalities in particular for the economically potential areas in order to manage their development and to prevent concentration of lands for speculation.
• Pursue implementation of RGC's Guiding Circular on the Plan on Distribution of Social Land Concessions to 416 families in each province to reach the target of 10,000 families by 2010.
• Speed up the process to grant collective land rights and titles to indigenous minorities (estimated to be 17 groups) and to restore to them land wrongfully bought from them by some unscrupulous individuals; 2 pilot projects in Rattanakiri and 1 in Mondolkiri are being started to register lands held by such minorities.
• Provide land to the landless poor where-ever possible.
• Through education and wide publicity, warn poor people from parting with their land, their main source of livelihood, to speculative land grabbers who pay a price seemingly high to the poor who may quickly use up this newly acquired "wealth" for consumption and are often left without any source of livelihood.
• Speed up land dispute resolution process, in particular, the disputes of multi-parties by establishing Land Conflicts Mobile Team with a status of a special operational agency to clear the backlog in the districts.

1. De-mining: Past conflicts contaminated large land areas with landmines and unexploded ordnance (UXO), which routinely claim lives and limbs. The clearance of land from mines and Explosive Remnants of War (ERW) is required to reduce casualties and to remove a major constraint to the development of effected areas. The Cambodian Mine Action and Victim Assistance Authority (CMAA) has been implementing a landmine and ERW  clearance  programme  since  1992  and  its  performance  has  improved  steadily. 

Reported annual casualties from landmines/ERW have decreased from 4,320 in 1996 to 271 in 2008. De-mining and ERW de-fusing have increased mine-free land areas from 33,036 hectares in 2005 to 43,650 hectares by May 2008.

1. FISHERIESREFORM

1. Fish continues to be a vital source of food, nutrition and income of millions of Cambodians. Total production of fish grew to over 650,000 tonnes in 2008, the main increases coming from rice field capture and a steady growth in aquaculture. The new Fisheries Law was promulgated in May 2006; the fisheries sector has since undergone major reforms and now has a more poverty-focused approach. Since the release of the fishing lots for community use, 468 Community Fisheries have been established (433 inland, 35 coastal), of which 173 were formally legally registered in October 2008. In addition, 235 Community Fish Refuges (CFR) have also been established mostly in the remote areas far away from important water bodies. In aquaculture, 13 State and 152 private hatcheries are now operating and 15,000 families are engaged in small-scale aquaculture. Fisheries management was strengthened, including the increase in community’s fisheries registration around Tonle Sap Great Lake, expansion of aquaculture activities and increased suppression on illegal fishing. The Fisheries Administration also tightened and will continue its efforts in preventing and suppressing flooded forest land grabbing.

1. In spite of the significant progress made the fisheries sector still face many challenges:

• Fisheries are being seriously threatened through the destruction of flooded forests, land clearing  for land ownership by  both  ordinary  and powerful  people, which requires a timely and effective intervention from the government.
• Shortage of resources to carry out its functions: transportation, equipment, budgets and gasoline for management process, research and studies to develop and conserve fisheries resources.
• Lack of resources to effectively protect the conservation site in Tonle Sap Lake, dolphin conservation in Upper Mekong River in Kratie and Stung Treng marine conservation posting and boundary of flooded forest and eradication of fishery violation
• Competency of the fisheries communities still limited, most of the communities are not provided support by development partners, including NGOs.
• Fishing by using electrocution fishing gears, long tubular mosquito nets, and destroying fish hatching sites in flooded forest is still taking place.

1. FORESTRYREFORM

1. The implementation of the Law on Forestry and regulations along with good collaboration between all concerned institutions, forest resources are now more strictly managed, resulting in increased prevention and suppression on illegal forest land grabbing. In 2008, the Forestry Administration allocated 9 logging coups outside forest concession areas to meet local wood consumption amounting to about 261,270 m3. Reforestation/tree plantings, community’s forestry establishment, forest boundary demarcation, and wildlife research and conservation were actively carried out as planned. However, illegal forest land clearing and land grabbing still exist. The Ministry of Interior plays an important role in issuing instructions to all level of local authorities to strengthen statistics, movement and resettlement of new incomers, and not to allocate forest areas for other purposes. The implementation of sub-decree on rules on the use of state forest lands for forest plantation will contribute towards achieving Cambodian Millennium Development Goals that set a target of 60 percent forest cover in 2015.

1. The Forestry Administration faces many challenges in carrying its tasks. These include:

• Lack of human resources and incentive for staff working in remote areas.
• Lack of budget for forest management and conservation.
• Lack of offices and facilities for working.
• Threats from powerful man.
  • Illegal people usually change mean of transportation of illegal timber and destroying forest.
  • Forest demarcation facing difficulties with encroachers and destruction of marking poles.

ENVIRONMENTALPROTECTION,CONSERVATION,ANDCLIMATECHANGE

1. Protection and conservation of the unique eco-system that Cambodia is blessed with and the sustainable use of this natural resource for the benefit of all Cambodians is a high priority of the Royal Government. Significant progress has been made in developing the regulatory framework to manage these resources and to strengthen the capacity of the Ministry of Environment and other RGC institutions to manage the implementation of the laws and regulations. In April 2006, through a sub-decree a National Climate Change Management Committee was established. In 2008, two Laws – the Law on Bio-safety and the Law on Natural Protected Areas – were adopted.

1. The Ministry of Environment (MOE) has been implementing the following programs to address environment management issues:
   1. Environment assessment impact.
   2. Environmental pollution control, covering solid waste management, air quality control, and public water quality management.
      1. Natural protected area management.
      2. Education and dissemination of information on environment issues.

1. The MOE in collaboration with other ministries and concerned parties has provided recommendations on environmental-social impact assessment for 15 projects in the agricultural, industrial, energy, tourism and infrastructure sectors. The Ministry of Environment also signed agreements with 61 project’s owners on environmental protection.

1. Significant progress has been made in expanding the collection of solid waste across the country. The number of solid waste collection sites has increased from 43 locations in 2005 to 65 locations in 2008. The amount of solid waste and garbage collected has increased from 352.5 tons in 2005 to 518.1 tons in 2008. In the Kompot, Pursath, Battam Bang , Siem Reap provinces and Sihanouk Ville 45 to 85% of the solid waste and garbage is now collected. In Phnom Penh, solid waste and garbage collection services by CINTRY Company cover 90-100% of total solid waste garbage in four districts and between 45 to 70% in three other districts.

1. There are three air quality control stations in Phnom Penh located at Kbal Thnol round, Olympic water tank round and Tuol Kok traffic light. They monitor the CO, NO2 and SO2 levels.

1. To monitor water quality for biodiversity conservation, every month the Ministry takes water samples along Tonle Sap river (Prek Kdam), up Mekong river (Chroi Changva), down Mekong river (Kien Svay) and Tonle Bassac (Ta Khmav Svay Rolom) as well as water samples from sewage at Boeng Trobek, Stung Chrav. The analysis is used to monitor water quality in rivers.
2. The MOE has prepared a master plan of natural protected areas covering 18 areas. The Ministry is also carrying out research and collecting data on plant species, medicine plants and animals.

1. The MOE has also supported the communities living in natural protected areas. The number of these communities has increased from 59 in 2005 to 82 in 2008.

1. The MOE is also working on addressing the climate change issues. The Ministry prepared a Second National Report under the United Nations Convention on Climate Change.

1. The MOE is engaged  in providing educational  information and discussions on environment issues as well as disseminating this information to the public.

1. A challenge of very significant proportion lurking on the horizon is the country's ability, and need, to adapt to the reduction in the fluctuations of water levels in the major rivers between wet and dry seasons, as well as possible increase in water pollution, that are likely to result from upstream countries controlling the flow by erecting successive barriers for tapping electricity and irrigation waters, and by releasing industrial wastes into the river systems. Such changes will alter and adversely affect the entire eco-system in Cambodia and will have serious implications for its crops and fisheries. Constant watch and dialogue will be maintained through the Mekong River Commission. The regulatory framework to effectively manage Cambodia’s eco-system is still at an early stage of development. Lack of coordination and cooperation between city and provincial governments as well as among ministries and agencies continue to hamper efforts to control illegal activities.

RURALDEVELOPMENT

1. Rural Development, as a vital parameter for the enhancement of agriculture and poverty reduction, is a major crosscutting issue, covering rural infrastructure, health, education, agriculture, water supply and sanitation, and other areas of socio-economic development in rural areas. It is central to poverty reduction since 85% of Cambodian population, which have high poverty incidence, live in rural areas. RGC has adopted a multi- pronged approach to foster rural development and empower local communities to plan and manage development of their communities. The decentralisation and deconcentration of public services delivery, support for participatory decentralised-based programmes, and the provision of credit to households and small businesses are some of the examples of Royal Government’s efforts in this sector.

1. Since 2006, it is a priority sector among other 6 priority sectors of the RGC under the PFMRP for budget allocations and timely disbursements. 

1. Institutional and human resource capacity development in this sector has been progressing though the development of policy and regulatory framework necessary for the implementation of rural development activities including the following draft national policies, national strategies and other regulations:

• National Policy on Rural Road;
  • National Strategy on Rural Road;
  • National Policy on Rural Clean water Supply and Sanitation;
  • National Strategy on Rural Clean water Supply and Sanitation that will be completed in March 2010;
    • Policy on Indigenous People;
    • National Policy on Rural Development; and
    • Royal Decree on Village Development Committee (VDC) and Sub-Decree on Procedures for the Establishment and Functioning of the VDC, which has been submitted to Council of Ministers for endorsement.

TABLE2: PROGRESSIN RURALDEVELOMENT

4.       FURTHERREHABILITATIONANDCONSTRUCTIONOF PHYSICALINFRASTRUCTURE

1. A functioning physical infrastructure is a pre-requisite for sustained economic development, growth, and poverty reduction. The depth and diversity of the physical infrastructure influences not only the pattern of growth, but lack of it prevents access to health and education, trade liberalisation and access to local, regional, and international markets. RGC’s key physical infrastructure priorities include repair, maintenance and upgrading of the road network from national to rural levels, improved water supply and sanitation, creation of an efficient power sector, rural electrification, better telecommunications, etc. This rectangle of the Rectangular Strategy addresses issues dealing with: (i) further rehabilitation and construction of transport network; (ii) water resources and irrigation system management; (iii) development of the energy sector (including oil and gas) and electricity network; and (iv) development of information and communications  technology.

1. FURTHERREHABILITATIONANDCONSTRUCTIONOF TRANSPORTNETWORK

1. Significant progress has been made in rehabilitating and construction of physical infrastructure of national roads network, ports and main airports to put in place a transportation network connecting all parts of the country, as well as with neighbouring countries. RGC has also given a high priority to ensuring that the transportation network is properly maintained and has encouraged and promoted the participation of the private sector in the operations and maintenance of the transportation network. The rehabilitation, construction and development of the railway network that connects Phnom Penh to provinces and to the railway networks of the neighbouring countries, as part of the Asian Railway Network, is also a high priority of the RGC. To speed up the development of the railway network, RGC has decided to give the concession to the private sector for the development, operations and maintenance of the railway network. The Ministry of Public Works and Transport is responsible for the rehabilitation, construction, and regular maintenance of the transport network.

1. Road Network: The rehabilitation and construction of single-digit National Roads Network is now nearing completion. The main National Roads (asphalted) now connect Phnom Penh with almost all provincial capitals, and link to major cross-border check points with the neighbouring countries. Significant progress has been made to put in place regional and sub-regional roads (such as the Asia-Pacific Region, ASEAN, and the Greater Mekong Sub-Region), that will serve as the economic corridor routes, and international transit routes facilitating transportation, provision of logistics, trading, international trans-boundary tourism, and national defence.

1. At the end of 2008, the total roads network was 30,652 Kms of roads that include:

• 2,117 km of single-digit National Roads.
• 3,146 km of double-digit National Roads.
• 6,441 km of Provincial Roads, of which 113 kms are now asphalted.
• 18,948 km of Rural Roads.

1. During the period of implementation of NSDP 2006-2010 (2006-2008), a total of 2,375 kms of road network was rehabilitated and/or constructed. That included:

• 1,731 km of single-digit National Roads.
• 531 km of double-digit National Roads.
• 113 km of Provincial Roads.

1. To safeguard against the misuse of the roads network and to enhance road safety a Traffic Law has been adopted. The development of an efficient legal system for the transport sector and the enforcement of laws are a priority of RGC. A General Secretariat of the National Road Safety Committee has been established that is responsible for:

• Preparing and disseminating information on National Safety Plan.
• Organizing seminars/workshops to promote road safety.
• Producing educational material on road safety, and disseminating this material widely on Radios and TVs.
• Conducting trainings on auditing and publishing information on road safety.
• Organizing National Week of Road Safety, to be held from 7th to 14th April, every year.
• Conducting trainings on road safety for the public as a part of the tests to get Motorcycle Driving License through the Provincial/Municipal Departments of Public Works and Transports.  

• Preparing and implementing on-site training programs on road safety in low-income communities in the remote districts/areas as part of the testing to get the Motorcycle Driving License.
• Conducting training programs as part of the Motorcycle Driving Test for adult youth in schools in Provinces and Cities countrywide.
• Organizing a series of Seminars to formulate the Traffic Safety Action Plan, and promote the “Helmet Campaign”.

1. Through the efforts of the Overloaded Vehicle Inspections Committee in cooperation with transport companies and the owners of trucks the overloaded trucks traffic along National Roads has been significantly reduced. To prevent these illegal practices the Ministry of Public Works and Transport has installed weighbridge stations and mobile scales on selected road sections; including the installation of 8 weight bridge stations and 18 mobile scales. Work on 7 permanent weighbridge stations and 20 mobile scales is underway that is scheduled to be completed in 2009.

1. A sub-decree on the Management of Garages that repair, assemble and transform vehicles has been adopted in order to prevent the out-of-standard transformation that makes vehicles able to carry more than limited weight.

1. Railways: At present, transportation of passengers and goods on the railways is quite limited. Plans are now being prepared to rehabilitate and expand this important mode of transportation and its integration with the regional railways. The Committee for Railways Restructuring and Rehabilitation and the Committee for the Management of Railways Concessions are now in place. A 30-year concession agreement between the Royal Government and Toll Holdings Ltd of Australia was signed in June 2009. Work is now underway to implement the concession agreement. To rehabilitate the railwaysinfrastructure, a rehabilitation project funded by a loan agreement with the Asian Development Bank (ADB) is now being implemented. So far, the rehabilitation contractor has been working on developing a detailed plan and to start work on the project. Through this project the following sections of the railways network will be rehabilitated: the missing link from Sisophon – Poipet 48 km (to connect to Thai railways); the line between Phnom Penh and Sihanouk Ville Port of 264 Km; and from Phnom Penh to Sisophon of 337 Km. The Royal Government is also considering a supplementary financing agreement with ADB and a grant from AusAID (total about US$ 72 million) which will provide funding for a new station construction in Samrong (9 km from Phnom Penh) and additional upgrading of the railway, including branch line to Green Trade Warehouse (6 m from Phnom Penh) and Northern Line. To construct the missing link from Batdeoung to Trapeang Sre (the railways connecting point on Cambodia-Viet Nam border) a engineering feasibility study is being carried out. Following the exchange of notes between the Royal Government and the Government of People’s Republic of China in late 2008, a railways expert team from China is now carrying out this work. A draft of the railways cross border agreement between Cambodia and Thailand was prepared by working groups in the two countries in 2007 (Royal Railways of Cambodia and State Railways of Thailand). The last meeting between the two working groups was held in March 2008. The Royal Government has now assigned the Ministry of Public Works and Transport to carry forward these negotiations.

1. Ports: RGC has been implementing its “Open Sea” Strategy. As a part of this strategy, at the Sihanouk Ville Port, a container terminal of 400 m that can accommodate 1,000 vessels/month, with a 9m depth has been constructed. This terminal has a maximum container storage capacity of 7,900 TEUs (Twenty Equivalent Units) at a time or 340,000 TEUs/year; an average lifting capacity of 25 Containers per hour per derrick. In 2008, the total quantity of cargo in transit was 2,057,967 Tons, and 258,000 TEUs of containers; compared to a cargo of 1,818,877 Tons and 253,271 TEUs of containers in 2007.

1. The improvements at the Phnom Penh Autonomous Port have included the addition of 1 crane with a lifting capacity of 45 Tons; 1 crane for lifting empty 40’ containers; the installation of navigation aids from Vietnamese border up to Phnom Penh; setting up of CCTV Camera and ID Pass Safety Systems; 1 X-ray scanner; the establishment of a Navigation School for staff from both international ports; and the operation of an administrative building to deliver one stop services. A total of 1,543 vessels called at Phnom Penh Port in 2008, compared to 1,398 vessels in 2007. Total quantity of cargo in transit through the port in 2008 was 1,240,339 Tons, increasing 12% compared to 1,106,701 Tons in 2007. The number of containers transiting the port in 2008 was 47,507 TEUs, with a very small increase compared to 47,504 TEUs in 2007. Number of passenger vessels in 2008 was 1,878, showing a decrease of 3% comparing from 1,931 in 2007.

1. Airports: RGC has been implementing its “Open Sky” strategy. As part of this strategy, the infrastructure of the 3 international airports has been significantly improved fostering the development of tourism. All of the 8 local airports are being repaired and preserved, rehabilitating runways and establishing airports boundaries. As of now, the infrastructure of 2 airports has been fully rehabilitated. Development of human resources in civil aviation sector is a RGC priority to ensure further improvement of this sector in the future.

1. GMSCross Border Transport Agreement ( CBTA ): The Agreement including its 20 Annexes and Protocols is now effect. RGC has ratified and adopted 3 Protocols and 17 Annexes. To implement this agreement, RGC has  entered into bi-lateral MOU’s with Thailand, Viet Nam, and Lao-PDR. The progress to-date has included:

• AgreementbetweenCambodiaand Thailand:
  • Two MOU’s have been signed for implementing CBTA at Poi Pet- Ararnyaprathet check point.
  • A quota of 40 units from each country in trans-border traffic has been agreed. Work is now underway to identify and construct the CCA, and the identification of additional Check-points.
  • Both side have agreed to de-link the 2 MOUs in order to allow the implementation of the MOU on the exchange of traffic rights (quota 40) at Poipet–Arangpathed border check point.
  • AgreementbetweenCambodiaand Viet Nam:
    • 1 MOU has been signed. Work is now underway to identify and construct the CCA, and to establish Customs Procedures for inspection of goods and vehicles crossing the border, etc.
    • Custom authorities from both sides have agreed and signed a MOU on custom procedures to implement of The Initiative in Implementation of GMS Cross Border Transport Agreement ( IICBTA ) at Bavet-Mockbai border check point.
    • Initially, under bi-lateral CBTA, a quota of goods and 40 buses crossing the border at Bavet was agreed. However, in March 2009, an agreement has been reached to increase the quota of vehicles crossing the border from 40 units to 150 units and 6 check-points will be opened for trans-bordering transport.

• BilateralAgreement Cambodia-Lao PDR:
  • Agreement, Protocol and an MOU have been signed with Lao PDR.
  • There is a quota of 40 trucks.
  • A separate Partnership Agreement on passenger traffic is under preparation that will require the approval of the Ministries of Public Works and Transport from both sides.
  • To start the implementation, Lao PDR has suggested 4 units and 5 routes destination only.
  • Trilateral Agreement Cambodia, Lao PDR and Viet Nam
    • The three countries have agreed to set up a Task force for preparing a Trilateral Agreement between Cambodia, Lao PDR and Viet Nam on cross- border transport that will start in 2010.

1. Sewage/drainage and waster water filtration systems: The Ministry of Public Works and Transport is also responsible for the rehabilitation, construction and maintenance of the sewage/drainage and waste water filtration systems. At present, sewage water is a major problem in Phnom Penh, Sihanouk Ville, and Siem Reap provincial town. The lack of available resources has been a major constraint to further rehabilitate and construct sewage/drainage systems and waste water filtration stations across the country. In recent years, the sewage/drainage system in Phnom Penh has been upgraded, in Sihanouk Ville a waste water filtration station has been completed. A water treatment station in Siem Reap is under construction with a plan to expand the work to include dredging of Steung Siem Reap. Plans for construction of a waste water filtration station in Kampot are currently being studied.

1. The Ministry of Public Works and Transport faces many challenges that include:

• The process of reviewing plans for the rehabilitation and construction of the transport sub-sectors takes a long time.
• Lack of adequate legislative instruments and regulations to effectively deal with identified problems.
• Roads, bridges are deteriorating faster than the current capacity to rehabilitate, improve and to carryout regular maintenance of these facilities in a timely manner.
• The private sector has not as yet shown an interest in road maintenance.
• National roads are still being damaged by overloaded vehicles traffic.

1. WATERRESOURCE ANDIRRIGATIONSYSTEMMANAGEMENT

1. The Ministry of Water Resources and Meteorology (MWRAM) has made significant progress during 2006-2008 in rehabilitating and constructing irrigation infrastructure to expand capacity of the irrigation system and to provide protection from natural disasters (floods and drought) that are becoming more unpredictable because of climate change. The Law on Water Resources Management was approved and adopted in June 2007.

1. The MWRAM has carried out many projects across the country. Its activities have included:

• Rehabilitation, maintenance and construction of 141 irrigation projects which provide irrigated water to 267,224 hectares of agricultural land (rainy season rice 191,202 hectares and dry season rice 76,022 hectares). By the end of 2008, the capacity of the irrigation system has increased to provide water for 827,373 hectares of agriculture land. This represents 31.6% of the total cultivated land (2,615,741 hectares), and now can provide water for rice crops totaling 582,085 hectares of land in the rainy season, and 245,288 hectares of land in dry season.

• Dug 30 wells to use under ground water for irrigation.
• To reduce the vulnerability by flood and drought:
  • Rehabilitated 7 flood control projects which are able to protect 130,799 hectares of cultivated land. In 2008, the total area protected from flooding was 244,299 ha.
  • Rehabilitated 6 polder projects which are able to protect 14,328 ha of cultivated land. Up to 2008, the total area provided protection from sea water was 31,008 ha.
  • Installed 12 and repaired one pumping stations which can rescue rice paddy totaling 305,225 ha from drought, 137,122 ha in dry season rice and 168,103 ha in rainy season rice.
  • Established 350 Farmer Water Users Communities (FWUC) involving 305,550 households. Women are actively involved in FWUC committee leadership.
  • In the area of Hydrological improvements:
    • Repaired and set up 20 hydrology stations along Mekong, Tonle Sap and Basac river.
    • Set up 39 water level staff gates along the river at check points.
    • Set up 13 water level automatic recorders at the check points along the rivers.
    • Set up 4 discharge measurements at Siem Reap River in Siem Reap province, Sangke River, Battambang province, at Porsat River, Porsat province, and at Boribo river, Kampong Chhnang Province.
    • To strengthen the capacity to provide up-to-date weather information, the Meteorology Department of the MRWAW has:
      • Repaired and upgraded 8 climate observation stations in Phnom Penh Municipality and in provinces.
      • Repaired and installed 5 new climate observation stations in provinces.
      • Installed 05 wind direction and speed wave 10-100 m measurements to examine heat, sun light, in municipality and in provinces.
      • Installed 01 station of information receiver satellite to examine the latitude of cloud MTSAT.
      • Installed telecommunication network to send and receive meteorology data in national and international framework GST 01 place.
      • MOWRAM has studied river basins round Tonle Sap River and other main rivers to effectively and sustainably manage, conserve, and develop water resources sector: Boribo River basin, Dountry River Basin, Monkolborei River Basin, Sangke River Basin, Svaychek River Basin, Prekthnot River Basin, and Krangponlei Rive Basin. It also prepared a master plan on water resources management in The Kingdom of Cambodia.

1. Notwithstanding the progress made so far, many challenges remain:

• Although the Water Resources Management Law has been adopted, sub-decrees to implement the Law have not yet been prepared. It is important to carry out this task to define mechanisms that will be used to implement the Law effectively especially, river basin management, water license, FWUC, and water quality protection.

• The inter-ministerial coordination is weak and need to be strengthened and enforced.
  • There is a need to develop basic data and information on infrastructure which relate to water management and improvement to reduce the impact of floods and droughts.There is a need to strengthen irrigation, drainage, and infrastructure management to:
    • Select priority locations for rehabilitation and construction within the irrigation infrastructure that have high potential for generating incomes in rural communities.
    • Engage Commune Councils in managing commune irrigation infrastructure.
    • Take action to encourage water resources management to maximize its impact on increasing agricultural production in different ways.
    • Increase participation of farmers and farming communities in matters dealing with irrigation utilities and maintenance.
    • Limited budget for irrigation system maintenance.

URBANDRINKINGWATERSUPPLY

1. The Ministry of Industry, Mines and Energy (MIME) is responsible for the supply of clean drinking water. Drinking water supply capacity has increased significantly over the last decade. There are now 111 urban centres that have access to clean drinking water from safe drinking water supply systems. In Phnom Penh, the production of safe drinking water supply increased from 79,400,031cubic metres in 2007 to 85,531,649 cubic metres in 2008. In 2009, around 90 per cent of Phnom Penh’s population has access to safe drinking water around the clock. 17,590 poor households, many of which are female-headed households, have been receiving support through a policy of subsidised charges for water use based their income.

1. It has been estimated that around 51 per cent of the population living in all urban centres of the country have access to safe drinking as the Water Supply Authorities of these urban centres increased their supply capacity based on people’s actual needs. Safe drinking water production by the Water Supply Authorities in all urban centres has increased from 11,965,649 cubic metres in 2007 to 13,754,769 cubic metres in 2008.

1. Although progress has been made in providing clean drinking water, many challenges remain:

• The percentage of the total population having access to safe dinking water is still quite low.
• The poor still have limited access to safe drinking water.
• Available financial recourses for further development in this area are still limited.

1. DEVELOPMENTOFTHEENERGYSECTORANDELECTRICITYNETWORK

1. Significant progress has been made in increasing the available supply of electricity and the expansion of the electricity network. To guide the development of the energy sector, an Energy Sector Development Plan, 2005-2024 has been prepared. A Rural Electrification Master Plan focusing on the use of renewable energy has also been prepared and is being implemented. Some the major improvements have included: 

• A 115KV-transmission line, from Thai border to supply electricity to Banteay Mean Chey, Siem Reap, and Battambang Provinces has been completed.
• Two 370KW-microhydro power stations (O Romis and O Mleng) and a reserve 300KW-desiel-powered generator are now fully operational to provide electricity to the provincial town of Mondulkiri.
• In August 2009, Electricité du Cambodge completed work on the 230KV- transmission line from Vietnamese border to supply electricity to Phnom Penh and the southern region of the country.
• To implement the Rural Electrification Policy, the Royal Government has established a Rural Electrification Funds to promote equity in access to electricity supply services and encourage private sector to participate in investing in rural power supply services in a sustainable manner, in particular to encourage the use of new technologies and renewable energy.
• To enhance regional cooperation, within the framework of the GMS, Cambodia has been participating in the implementation of GMS Power Trade Plan; and within the framework of ASEAN, Cambodia is participating in the implementation of ASEAN Power Grid.

1. Although significant progress has been made, the energy sector also faces many daunting challenges:

• How to ensure efficiency and sustainability of production, supply, and proper maintenance of the power infrastructure across the whole country.
• How to lower the current high cost of electricity generation not only to support private sector development but also to make it available to the poor at affordable cost.
• How to attract private sector investment and participation to expand the power infrastructure to meet the growing demand for electricity, in particular to the rural communities. In 2008, only around 10 per cent of rural households had access to electricity, while in urban centres about 75 per cent of urban homes has access to electricity.

1. Offshore oil and gas fields are a common asset of all Cambodians, now and in the future. With the first discovery of off-shore oil in 2004, 27 exploratory wells have now been drilled in petroleum prospective areas to make further realistic estimates of the extent and scope of oil deposits. The Cambodian National Petroleum Authority (CNPA) has signed contracts with a number of companies from various countries to explore for oil and gas in six other blocks in Cambodian gulf waters. Exploration work is accordingly proceeding ahead. Once the deposits levels are estimated, further work and investments are needed for setting in place the development infrastructure before pumping could commence, currently expected in 2011. Coordinated advance planning should start now to carefully conserve and use this energy resource and potential revenues from it in an optimal manner to benefit Cambodia and its citizens in the immediate and long term. The priorities are to:

• Get maximum revenues to the state through multi-layered returns such as by way of royalties, profit sharing, taxes, etc. MEF has done considerable advance thinking to examine all available options. Besides, RGC is examining the Extractive Industry Transparency Initiative (EITI) as a platform for good governance in the treatment of these resources.
• Set up mechanisms and bodies to guide this sector and monitor operations by ensuring strong regulatory oversight, transparency, and clear separation of policy, regulatory and operational aspects.  

• Consider and prepare plans for use of substantial associated gas which would otherwise go to waste by flaring.
• Set up downstream units for processing and use of the resource for value-addition and for industrial use including fertiliser production.
• Prepare and get ready a list of priority projects and feasibility studies for using the additional financial resources – such as for installing more hydro-electric generation capacity, transmission lines for a national grid, rural electrification, agriculture and rural development including water and sanitation, civil service reform and improvements in salary levels, etc.

1. DEVELOPMENTOFINFORMATIONANDCOMMUNICATIONTECHNOLOGY

1. Information and communication technology includes telephones and telecommunications, and mass media. With increasing competition and largely led by private operators, Cambodia has leaped ahead in the use of mobile phones. Significant achievements and major challenges include:

• Following the opening up of the telecommunications sector in January 2006, more private investors have joined this sector and have substantially contributed to its development. The Ministry of Post and Telecommunications is managing the implementation of several large projects worth around 536 million US$ to extend the fibre optics cable network infrastructure across the country to expand telecommunications services nationwide.
• On 31 December 2008, the total number of telephones in use increased to 4,143,417 (of which 4,100,000 were mobile phones and 43,417 were fixed lines). In 2005, total number of telephone lines was 882,020. This exponential expansion has occurred especially in rural areas along with more access to e-mail and internet in all 24 provinces and municipalities.
• The number of internet subscribers was 20,100 in 2008 whereas it was just over 8,630 in 2005.
• The number of fixed public phones has increased from 439 in 2005 to 456 in 2008.
  • Use of computer technology and internet are also spreading fast along with increasing expertise among young people.
  • From 2006 up to now, postal services have been improved significantly in following areas: (i) reduction in the distribution of postal items, (ii) putting in place express postal services in all 24 Capital-Provinces, (iii) expansion of postal services to major urban centres, (iv) establishing a postal item control-monitoring system by using IPS system for postal express service, postal package, and registered mail.
  • RGC will continue to implement the Government Administrative Information System and E-Government.
  • The Ministry of Information has made significant progress to improve and expand the coverage, efficiency and quality of mass media (radio, TV and the press agency). About 70% of Cambodian population is now able to receive news, education, and entertainment through the existing mass media, both government and private, thus helping to enhance national identity and solidarity.
  • Major challenges in this sector include: (i) efficiency in the management of telecommunication sector is still limited, (ii) illegal international gateway continues to adversely affect government revenues and legal international gateway although the Ministry of Post and Telecommunication has been striving to crack down this illegal activity,  (iii)  coordination  between  Ministry  of  Post  and  Telecommunication  and operators/development agencies is still to be improved, (iv) cost of internet use is still high, (v) private postal services are more competitive than public postal services and the capacity of human resource in postal sector is still limited.

5.       PRIVATESECTORDEVELOPMENT AND EMPLOYMENT

1. RGC has recognised and accorded a critical place for the private sector as the main engine for investments and growth in the country. RGC’s role is that of the fosterer, promoter, enabler, facilitator and regulator. Massive levels of investments are needed in the next few years to maintain and accelerate momentum of diversified economic growth. A robustly growing private sector would complement public investment in the social sectors, absorb increasing entrants in the labour force and create a wide variety of skills. The four aspects of this rectangle are: (i) strengthening private sector and attracting investments(includinggarment and tourism sectors); (ii) promotion of small and medium enterprises; (iii)Job creation and ensuring better working conditions for workers and employees; improvedwork conditions; and (iv) establishment of social safety nets for civil servants, employeesand workers. RGC has brought down the costs of doing business and expanded market access, reduced in-country transportation costs and improved safety through improved basic infrastructure that also promotes integration of urban and rural economies. The progress so far made towards achieving these priorities has significantly contributed to the recent developments in other sectors and to the enhancement of socio-economic conditions of rural population especially the poor.

1. STRENGTHENINGTHEPRIVATESECTORANDATTRACTINGINVESTMENT

1. Private sector investments have grown at a rapid pace as evident from the macro- economic and monetary indicators thereby affirming the increasing confidence and comfort among domestic and international investors in the Cambodian economy. This is a testimony to the increasing success of RGC’s proactive and progressive policies – ensuring peace, political stability, law and order, legal cover, macro-economic growth and monetary policies, and creating an enabling environment for the development of the private sector. The Royal Government has pursued a export-led, pro-poor growth strategy focused on diversifying and broadening the economic base and has encouraged, facilitated, and supported private sector investment in priority sectors.

1. The Government-Private Sector Forum, chaired by the Prime Minister, that meets every six months as well as the work of the Steering Committee and various sub-committees have provided an important venue for meaningful cooperation and understanding between the RGC and the private sector. An additional working group for improving employer- employee relations has been set up. Also, the management of mineral ore resources exploitation and strengthening and enhancing of trade activities have been added as priority areas for consideration.

1. To reduce the burden of seeking approvals from a number of line ministries and agencies, the Royal Government has created a “Single Window” mechanism through which investors can complete all paper requirements to seek approval of their proposed investment projects. This “Single Widow” mechanism is administered and managed by the Cambodian Investment Board of the Council for the Development of Cambodia (CIB/CDC). To reduce further the administrative burden of seeking approvals of investment projects of less than 2 million US$, the RGC has decentralized the authority to review and approve these projects to provincial authorities. 

1. The CIB/CDC has also established an “Investor Aftercare” mechanism and an “Investor Tracing System” to provide support to investors in getting their approved projects underway and to monitor progress on the implementation of the approved investment projects. The Royal Government is determined to ensure transparency, accountability and effectiveness in the delivery of services to investors. A high priority of the Royal Government is to continue to streamline and improve the delivery of investor services by strengthening the technical capabilities of officials, in particular at the mid levels, at the national and sub- national levels.

1. To promote private sector investments, the Royal Government has signed bi-lateral agreements on the promotion and protection of investments with 7 neighbouring countries, and 17 agreements with other countries in the Middle East, East Asia, and Europe. These efforts will be expanded to enter into bi-lateral agreements with other countries in the ASEAN, APEC, US, Europe, and Middle East.

1. The Ministry of Commerce (MOC) has been working on streamlining the procedures for new business registration, provding market information, organizing product associations, implementing “better factories” program, trade facilitation and promotion, and enforcement of intellectual property laws. To facilitate registration of new businesses, in September 2007, the Ministry established a commercial registration office at its provincial branche in BattamBang Branch to serve businesses in BattamBang, Pursat, Bantay Meachay, and PaiLin Province. Plans to open commercial registration offices in other provinces include:

• In 2010, a commercial registration office in Preah Sihanouk province to serve businesses in Preah Sihanouk, Takeo, Kampot, and KohKong Provinces.
• Also,  in  2010,  a  commercial  registration  office  in  the  Kratie  Branch  to  serve businesses in Kratie, Stoeng Treng, Mondol Kiri, and Rotanakiri province.
• In 2012, a commercial registration office in the Siem Reap Branch office to serve businesses in Siem Reap and Oddar Meanchay Province.
• In 2013, the Ministry of Commerce will develop an electronic system for business registration.

1. Until recently, MOC has provided market information only through the Ministry's News Letter and Television. To improve market information, in 2008, the Ministry developed an Electronic Market Communication System (EMCS) which is expected to provide better and faster information. EMCS can now be accessed by mobile phones to check price information of agricultural products, food products, exchange rate, and other market demands.

1. The MOC has also provided assistance in organizing product associations to improve production capacity and to integrate products into local markets, nich markets, and world markets. Between 2007 and 2009, several product associations have been organized including Pepper Development Association, SkorTnot Development Association, North-West Agricultural Development Association, and Prahoc Kampong Kleng Association. Currently, the Ministry is assisting to organize cashew nut association in Kampong Cham and Kampong Thom province. Organizing product associations could help to upgrade businesses from family businesses to businesses with sustainable market strategies and the ability to compete in world markets.

1. To facilitate and promote trade, the Ministry has actively implemented the Sub- Decree on Trade Facilitation through Risk Management which was adopted in March, 2006. 

It has organized “Trade fairs” to promote local products and organized several business meetings with foreign trade partners for individual products to solve the problem of product congestion and to facilitate the flow of products to the world market.

1. To strengthen private sector for trade and economic development and promoting local business, the MOC has set up 11 Provincial Chambers of Commerce in 2006 and 2007 in the Banttam Bang, Siem Reap, Pursate, Bantay Meanchey, Kanda, Takeo, Kampot, Sihanoukville, Koh Kong, Kampong Speu, and Kampong Cham provinces. In 2008, Cambodia’s Chamber of Commerce was organized to represent Cambodia’s private sector in business negotiations and to attract foreign direct investment into Cambodia. Phnom Penh Chamber of Commerce that was established in 1995, has been providing training for trainers, as well as support to the Provincial Chambers of Commerce.

1. The MOC has been enforcing the Laws on Intellectual Property Rights to prevent production and distribution of fake products. Camcontrol officers regularly do market surveillance and carryout inspections at border check points to prevent the importation and selling of unsafe products which could have negative affect to the health and well being of the consumers.

1. To maintain competitiveness of the Garment sector in the world market, the MOC has been implementing the "Better Factories" program to ensure that better working conditions in the sector meet international standards, as well as providing training to workers and unions on Labor Law and fashion design.

1. To promote integration in the region, in 2008, a Cambodia-Vietnam Cross Border Market Committee has been organized to develop the blue print for cross border market construction along Cambodia-Vietnam border in Memot and to prepare agreement on tariff free exports of Cambodia agricultural products to Vietnam.

1. The MOC has noted that exports of agriculture products face many challenges, these include:

• Many products do not meet technical standards of the buyers because of out of date processing facilities, such as old rice mills and poor production methods. At present, there are only 2 rice processing mills which can produce between 12,000 to 15,000 tons of rice each year.
• High production costs due to high formal and informal expenses including high transportation cost due to high oil price and high energy cost, and too many types of informal expenses.
• Many products do not meet the sanitary and phytosanitary standards that are a pre- requisite for import of Cambodian products into some countries.

1. The following Laws and regulations have been developed and are being implemented by the MOC to gain trust of the business community and investors:

• Law on Commercial Rules and Registration Right (1995)
• Law on the Management of Quality and Safety of Products and Services (2000)
• The Law on Marks, Trade Names and Acts of Unfair Competition (2002)
• The Law on Commercial Enterprises (2005)
• The Law on Commercial Arbitration (2006)
• The Law on Secure Transaction (2007) 

• The Law on Insolvency (2007)

1. The private sector investment from both domestic and foreign sources has been the main drivers of the sustained high rates of economic growth achieved over the last decade. The economic sectors that have received most of these private investments have included: the tourism sector, the garment sector, the construction sector, and more recent years the exploration for oil, gas, and mineral resources. However, the global financial crisis and the recession in the developed economies that started in late 2007 have had a serious adverse impact not only on the inflow of foreign direct investment but also on domestic private sector investment. The Royal Government is implementing a fiscal stimulus package to support the growth of the real economy as well as measure to mitigate the adverse impact of these external developments on the vulnerable and the poor. The Royal Government remains committed to creating an environment that encourage and promotes investments by both domestic and foreign investors in all priority sectors to broaden and diversify the economic base. Highlights of the actions taken and challenges faced by priority sectors that have attracted domestic and foreign investments in recent years are summarized below.

1. TOURISM SECTOR: The driving force behind the development of the tourism industry in Cambodia has been its cultural heritage and natural environment. Some of the major achievements of the Ministry of Tourism (MOT) to support the development of the tourism industry have included:

• RGC’s “Open Sky Policy” to promote easy access to tourist destinations by air travel has been vigorously implemented. Major airports have been upgraded, and the Sihanouk Airport is now operational. In 2009, a new national airline “Cambodia Angkor Air” was launched to operate flights between Phnom Penh, Siem Reap, and Sihanouk Ville as well as flights from Phnom Penh and Siem Reap to Ho Chi Minh City.
• Tourist Visa requirements have been simplified for tourists from within the region. With the ASEAN framework, the Royal Government has signed agreements with Singapore, Malaysia, Philippines, Laos, and Vietnam that exempt citizens of Cambodia and these five countries from visa requirements Within the ACMECS framework, a Single Visa issued by either  Cambodia or Thailand for travel to Cambodia and Thailand. For travellers from around the world, entry visa is issued at the point of entry. The MOT has also signed and/or is in the process of bilateral negotiations with Kuwait and Russia to promote tourism.
• Anti Child sex tourism activities are being actively monitored and actions taken against the perpetrators by the Child Safe Tourism Commission of the MOT in cooperation with line-ministries, relevant agencies, national and international organizations. Tourism promotions materials are now produced, such as video clips, radio spots, stickers, leaflets, billboards, and through newspapers and magazines to raise awareness of and to ensure Child Safe Tourism.
• The tourism sector in Cambodia has experienced a growth rate of over 20 percent per year between 2003 and 2007, and 5.5 percent in 2008. However, further development of the tourism sector faces many challenges that include:
  • The high cost of tour packages to Cambodian destinations.
  • Lac of competition in the market for tourism services (e.g. accommodation, transportation and communications services).
  • The rating/classification of hotel, resort, guest house etc. does not follow international  standards.  

• Development of tourism is concentrated in urban areas. There is a need to broaden investments in areas surrounding the historical-cultural site (such as Chong Khneas, Kampong Phluk), around beaches and islands, as well as aggressively promoting eco-tourism around Tonlesap River.
• The infrastructure of relevant services in tourism sector is limited. There is a need  for  further  improvement  of  physical  infrastructure  connecting  to historical-cultural and eco-tourism destinations.
• A significant proportion of income generated by tourism sector is spent outside the country to procure goods and services with little participation of local companies and providers of goods and services. It is important to establish strong backward linkages with local supplier and between tourism and agriculture sectors.
• There is need to monitor and take prompt action to mitigate the risks and adverse effects from tourism on environment especially in Siem Reap (e.g.,

`      excessive use of underground water resources which may lead to soil degradation and damage to ancient monuments) and Sihanoukville.

1. The preservation and promotion of the rich Khmer cultural heritage and traditions are a high priority of the Royal Government. The ancient temples, museums, and various artistic endeavours, including presentations of traditional Khmer dances, songs, and paintings have contributed to and supported the growth of the tourism sector. The Ministry of Culture and Fine Arts has been actively involved in ensuring that the cultural heritage sites are protected and in promoting activities covering various aspects of fine arts.

1. GARMENTSECTOR:A major contributor to economic growth and employment so far, is showing signs of losing its competitive edge because of higher wages (exacerbated by inflation in the recent past) relative to wages in other countries producing similar products, higher freight costs, and increased competition for similar products while the overall demand for these products in the world markets is declining. There are also other factors that have implications for continued growth of the sector, for example, the sector’s limited participation in garment value chain functions; and proliferation of worker’s associations in factories because of ambiguities in the Labour Law. To cushion the sector, RGC has provided exemption from taxes and starting in late April 2008 commenced providing subsidies to top up the salaries of workers by US$ 6 per month.

1. CONSTRUCTION SECTOR: Another important contributor to growth so far, has been adversely affected by the global financial crisis, as well as by dramatic changes in the cost of imported building materials such as cement and steel.

1. OIL, GASAND MINERAL EXPLORATION: In recent years, exploration for oil and natural gas, the minerals has attracted foreign investor interest. Exploration work for oil and gas reserves is now well underway and it is expected that in near future the exploration phase will move to a production stage generation new revenues for the state. Exploration for bauxite has commenced in north-eastern provinces which also have become a potential new source for semi-precious stones. Careful regulations and procedures need to be in place to ensure environmental sustainability, in-country value-added processing, and maximising revenues to the state.

1. RGC will continue to actively promote private sector investments for expansion and diversification of manufacturing and industrial production to take advantage of the country's natural endowments. At present, 3 cement plants are in operation, apart from enterprises for  bottling beverages and making cigarettes; and a small-size oil refinery is being planned by a private party.

1. PROMOTIONOF SMALL ANDMEDIUMENTERPRISES

1. Further development of this sector has contributed to benefiting rural communities in processing, and adding value to, products, as well as creating employment. It has also created an important link with the trade sector, as well as with larger enterprises. The planned work ahead will  focus on three main aspects, viz., (1) legal framework and adjustment – limitation of procedures of inspection and product justification for import and export without sacrificing essential quality aspects, preparation and adoption of a sub- decree on business facilitation through risk management, and widening registration through internet; (2) financing, creation of a financial leasing company, company classification by credit points, and strengthening governance and financial reporting; and, (3) supportive actions for SMEs – creation of a new business development service, prevention of all kinds of smuggling, subsidies for SMEs for export, and adding SMEs into a global value chain. Adoption and acceleration of the “one village, one product” movement is among many other measures to be pursued.

1. The Ministry of Commerce (MOC) has taken actions to reform the commercial registration procedures for SMEs. The timeline required for commercial registration has been reduced from 2 - 3 weeks to only 1 week. The documentation required to register a SME has have been reduced. The requirements to report criminal convictions and reconfirming address of the company are no longer needed. The capital requirements in the form of a Bank Deposit for commercial registration have been reduced from 20 million Riels to 4 million Riels. The administrative fee for Commercial Registration has been reduced to 177.00 US$. After the reform in 2005, the number of companies registered has increased every year and in 2008 was double the level of 2005.

1. JOB CREATIONANDENSURINGBETTERWORKINGCONDITIONSFOR WORKERSAND

EMPLOYEES

1. Creating jobs and ensuring improved working conditions are RGC’s continuing long- term goals  aiming at  enhancing the  living standards of  the  population and ultimately alleviating poverty and accelerating economic growth. Unemployment in Cambodia is overwhelmingly a youth problem8. Of every 100 job seekers in Phnom Penh, 72 are 15-24 years old. An additional 275,000 job seekers enter the labour market each year. The creation of new job opportunities, however, is dependent on the level of investments by the private sector in the formal and informal sectors in both urban and rural areas. Ensuring that the skills of the new entrants match with the requirements of the new jobs is a challenge that will require more focussed efforts to expand technical education and vocational in both urban and rural areas as well as developing labour market information systems. To some extent the achievement of the goal to to generate more employment and to improve agriculture sector productivity and diversification will depend on the availability of skills some of which can be developed through technical education and vocational training.

1. The Ministry of Labour and Vocational Training (MLVT) has been providing employment placement services to assist job-seekers in finding employment in private sector businesses and to work in foreign countries. Each year several thousand workers have been assisted by the Ministry to secure jobs outside the country. 

8        ILO, Policy Brief on Youth and Employment in Cambodia, 2007. 

1. The Ministry is also provided technical and vocational training programs through its

36 training centres. There are an additional 12 private technical and vocational training institutions, and 9 NGO managed institutions. To mitigate the adverse impact of the global financial crisis and the economic downturn, the Royal Government has created a Special Training Fund for short-term training for workers who have lost jobs and those who are unemployed. In the academic year 2007-2008, through this Fund the Ministry’s technical and vocation training centres have provided training to 21,140 trainees, of whom 8,396 had jobs and 12,744 were unemployed. In addition, under the National Training Fund initiative 64 institutions were selected to provide training that included 35 municipal-provincial institutions, 15 associations and 14 NGOs. They have provided training to 19,000 trainees, of which 6,846 had jobs and 12, 154 were unemployed. These trainees were paid an allowance of 4000 Riels for food per day and 40,000 Riels for accommodation per month. The Ministry has also trained 7,497 apprentices in 100 enterprises in 2008 to early 2009. The Ministry has established a National Employment Agency (NEA) to assist the trainees after they have finished their technical and vocational training in finding jobs.

1. To ensure improved working conditions, the Ministry has continued its focus on strengthening the enforcement of the Labour Laws and regulations, disseminating information about these laws, conducting inspections of working conditions, hygiene and occupational safety, child labour and foreign employees at business establishments across the country. It has facilitated resolution of labour disputes and promoted the formation of labour associations in accordance with the provisions of the Labour Law. In 2008, there has been a dramatic decrease in the number of labour disputes and violations concerning working conditions. The Ministry is now working on drafting the Law on Trade Union and the Law on Labour Court. A tripartite working group - composed of representatives of workers, employers and relevant development partners - has been established to guide this work.

1. The Ministry conducted 3,133 inspections and identified 927 enterprises that were in violation of the provisions of the Labour Law and were given a warning and 12 were fined. The collective bargaining dispute conciliation services of the Ministry handled 174 cases of collective bargaining disputes in 171 enterprises of which 90 cases were resolved. Eighty two illegal strikes have been settled by labour inspectors. The unresolved cases have been referred to Arbitration Council. In 2008, the Ministry conducted 1,338 inspections of hygiene and occupational health conditions 586 enterprises. The Ministry removed 8,221 children who were engaged in hazardous types of work, and has prevented 10,095 children from working on these types of jobs.

1. There are many challenges that will require concerted efforts to ensure continue job growth and a labour relation environment that is conducive to attracting new private sector investment. These challenges include:

• Challenges facing the Garment sector that has been a major source of growth over the last decade, because of its lack of competitiveness and the limited participation in Garment value chain functions.
• The proliferation of Workers’ professional organizations mainly because the Labour Law (1997) did clearly specify the rules for the formation of Labour Unions. As a result, in some garment and footwear factories there are now 3, 5 or even 8 local unions in a factory.
• Developing a labour market information system, expanding the coverage of the Employment Placement services. 

• Expanding the technical education and vocational training programs to meet the skilled labour needs, especially in rural areas to create skilled jobs and to support the development of agro-industries, improve agriculture sector productivity and diversification.
• Support systems and  management of workers  seeing  employment outside  the country need significant strengthening.
• The rules and regulations governing the National Social Security Fund need to be enforced by the Ministry to ensure that contributions on behalf of workers are paid by employers on time. The Ministry’s capacity to enforce the rules and regulations also needs to be strengthened.

1. ESTABLISHMENTOFSOCIALSAFETYNETSFORCIVILSERVANTS,EMPLOYEESAND

WORKERS 

1. The Ministry of Social Affairs, Veterans and Youth Rehabilitation (MoSAVY) is responsible for developing and managing the Social Security Fund and the National Social Security Fund for civil servants. The Social Security Fund and the National Social Security Fund for Civil Servants have been established. When fully implemented, the Social Security Fund will provide benefits to retirees, for work disabilities, motherhood, work-related injuries, and death. The pension of retirees and payments for work disabilities have been adjusted constantly in response to national economic growth. Associations of elderly persons have been created to enable them to help each other to help reduce hardship of elderly.

1. The MoSAVY is also responsible for ensuring the well being of the veterans. A total of 87,875 families (families of dead veterans, disabled veterans; retired veterans and veterans losing their ability to work) have received regular payments from the government. The payments to veterans have been regularly adjusted in proportion with the salary increase of civil servants and armed forces. The Cambodian Veterans’ Association has been established to promote the interests of veterans and their families, protect their rights, raise their living standard and create a sense of solidarity and mutual help. Reforms of the veteran sector have improved the living conditions of veterans.

1. The MoSAVY, also provides services to homeless and destitute people, emergency relief to people effected by natural and other disasters, victims of sex trafficking and inter- country human trafficking, protecting the four basic rights of children, promoting family values, and caring for orphan infants, orphan children, disable children, and children with HIV/AIDS.

1. A national committee to address homeless people’s problems at the national level and a sub-committee to tackle homeless people’s problems at municipal sun-national levels has been established. The six-point strategy of providing temporary shelters in social affairs’ centers, psychology education services, health care services, and short-term vocational training services; and reintegrating vulnerable people into communities through the provision of support capital at the first stage and follow-up by local officials of the Ministry of Social Affairs, Veterans and Youth Rehabilitation is being implemented.

1. The social relief operations have provided assistance to more than 10,000 families each year to overcome difficult situations through small-and-medium scale emergency programs. More than 1,000 victims of sex trafficking and inter-country human trafficking are saved each year through victim reintegration and operations against human trafficking. 

1. The four basic rights of the children have been mainstreamed in the programs delivered by the government and various NGOs. The five-year National Action Plan for combating human trafficking and sexual exploitation against children has been implemented fruitfully. The policy of alternative care for children and minimum standards has been adopted. The Cambodia National Council of Children (CNCC) has strengthened its activities as a coordinating institution to promote improved cooperation among relevant institutions for children’s interests. A total of 10,913 orphan infants and children have been cared for in 223 centers, thereby, a 2,154 of orphan infants, orphan children, disable children, and children with HIV/AIDS has been raised and cared for at 20 government centers. The community- based child protection network program has also increased and reinforced its activities.

1. The Youth Rehabilitation Department of the MoSAVY has been providing education programs on delinquency and impact of substance abuse to children and young teenagers across the country. Children and young teenagers committing offences and abusing addictive substances have been admitted to centers that provide health services, moral education, general knowledge and vocational training to enable them to be reintegrated into their communities. Attention has also been given to protection for children in prisons. Policies for the disabled have been successfully implemented. Rehabilitation services for the disabled are being continuously strengthened and expanded. Discrimination against the disabled has been gradually reduced. Cambodia has taken part in the United Nations Convention on the rights of the disabled. The Law on the Protection and Promotion of the Rights of the Disabled was adopted in July 2009 to protect the rights and interests of the disabled. Many disabled people have received vocational training in centers and are being employed to earn a living. Progress is being made to promote sports, art and cultural movements of the disabled.

1. Although significant progress has been made in meeting the needs of the various vulnerable groups, the magnitude of the problems is daunting in light of the available resources. Around 30% of the total population is still living below the poverty line. Most of poor people live in rural areas, do agriculture for their living and face natural disasters and other sorts of disasters every year. Some of the poor who migrate to large cities and populated areas are enable to find employment. Orphan child and infant abandonment continues to exist in society. Violence and debauchery among children and young teenagers committing offences and abusing addictive substance has notably and worryingly increased from year to year. In the last few years, there has been a notable decline in international aid in this area, making it difficult to provide the necessary rehabilitation services needed.

6.       CAPACITYBUILDINGANDHUMAN RESOURCESDEVELOPMENT

1. The last, but not the least, of the "growth" rectangles of RS covers predominantly social sectors, viz., (1) strengthening the quality of education; (2) ensuring enhanced healthservices;(3) implementation of gender policy; and (4) implementation of population policy. Progress has been very impressive in both education and health sectors, where cooperation and coordination mechanisms among various stakeholders had started even before introduction of the TWG mechanism in late 2003. Sectoral strategies in both of these critical sectors are now well developed and are being implemented, and progress is being monitored on a regular basis in a timely manner.

1. STRENGTHENINGTHEQUALITYOF EDUCATION 

1. Strengthening the quality of education has been and remains a high priority of the RGC. It is recognized as a necessary and critical element for human development and poverty reduction. To effectively tackle the enormous challenges in the education sector, RGC encouraged the use of a sector wide approach (SWAp) by building partnerships to carryout joint planning and programming for the education sector. The first Education Strategic Plan (ESP) 2001-2005 and a detailed Education Sector Support Program (ESSP) 2001-2005 were completed in 2001. The first joint review and appraisal of the ESP/ESSP were carried out in June 2001. In September 2004, a revised ESP and ESSP for 2004-08 was prepared and endorsed by development partners. The most recent ESP 2006-2010 was developed to ensure consistency with NSDP 2006-2010, CMDGs, and to achieve the targets set in the National Plan for Education for All: 2003-2015. The ESP 2006-2010 implementation has contributed to enhancing equitable access to education for all Cambodian children, assisting them to become good students, good children, and good citizens, who will be able to productively contribute to socio-economic development of Cambodia in the future.

1. The SWAp in the education sector has made two important contributions. First, it has made available to the Ministry of Education a mechanism for aligning development cooperation assistance with the education sector needs. Second, it has reduced the transaction costs to the MOEYS of coordinating with each development partner’s agency bilaterally. A significant number of development cooperation partners are now participating in the planning, reviews and financing under the SWAp in the education sector. On the financing side, however, development cooperation funding through direct budget support is still quite low. In 2008, funding through direct budget support accounted for only 3.5 percent of total development cooperation assistance to the education sector. The education sector is one of the priorities in PublicFinancialManagement Reform (PFMR) program of the RGC.The RGC remains committed to further strengthening of the quality of education and have continued to increase the recurrent expenditure allocations for the education sector in the National Budget and has ensured timely disbursements to the MOEYS of the allocated resources, which have increased from 183.2 billion CR in 2000 to 742.5 billion CR in 2009.

TABLE3: DEVELOPMENTSIN THE EDUCATIONSECTOR: 2005/06–2008/09

Source:EMIS, MoEYS, CSES 2007, and Census 2008

1. The priority policies in the ESP 2006-2010 are focused on three areas: (i) ensuring equitable access to education; (ii) improving quality and efficiency of the education services; and (iii) strengthening institutional development and capacity building for decentralization. Significant progress has been made to achieve the major priorities of ESP 2006-2010, especially in ensuring entry of 6 years old to primary schools and reducing parental cost barriers at all schools and all levels nationwide. The implementation of Child Friendly School (CFS), curriculum and standard assessment has contributed to improving education quality and efficiency. Good progress has been made especially on increasing the number of primary schools and lower secondary schools, increasing the number of students enrolled in secondary schools, and increasing adult literacy rate (15-24). However, it is recognized that there are still gaps that require more intensive efforts to implement the strategies successfully, especially those related to Early Childhood Education, reducing repetition and drop out rates, facility development and higher education in particular for students from poor families and remote areas. Table 2 shows the latest data for the education sector.

1. Major actions taken by the MOEYS to achieve the desired outcomes in the three strategic policies of ESP 2006-2010 have included:

• In the first strategic policy of ESP 2006-2010, that is, “ensuring equitable access to education”, the actions taken and major results achieved have included:
  • Issued a Prakas on gradually increasing school operational budget in 2006.
  • Issued guidelines and action plans to eliminate unofficial payments in schools which is a barrier to students from the poor families, especially girls.
  • Built dormitories in all the Teacher Training Colleges (TTCs) to accommodate approximately 3,700 teacher trainees.
  • Built dormitories for girls in secondary schools (general education) in Siem Reap, Kampong Thom, Kratie, Rattanakiri and Mondulkiri that can now accommodate 356 girls.
  • Built dormitories in the Higher Education that can now accommodate 560 female students.
  • Provided scholarships to poor students, in particular 17,667 girls per year in grades 7 to 9.
  • The total number of primary, lower secondary and upper secondary schools has increased significantly from 8,628 in school year 2005/06 to 9,834 in 2008/09. The increases at different levels are as follows: primary schools from 6,277 in 2005/06 to 6,565 in 2008/09; lower secondary schools from 911 in 2005/06 to 1,451 in 2008/09; and upper secondary schools from 252 in 2005/06 to 349 in 2008/09.
  • To reduce gaps in accessibility to education services for children from the very poor households and households in remote areas, more primary schools were built in remote areas. In school year 2008/09, there were 547 primary schools in remote locations.
  • Total enrolment in primary schools has decreased from 2,558,467 in school year 2005/06 to 2,262,834 in school year 2008/09 due to decrease of school age populations. In lower secondary schools it has increased from 588,333 in 2005/06 to 605,707 in 2008/09. In upper secondary schools enrolment has increased from 204,925 in 2005/06 to 292,423 in 2008/09.

• The female/male enrolment ratios at the primary, lower secondary, and upper secondary school levels have improved significantly. At the primary school level the net enrolment ratio has increased from 91.3 percent in 2005/06 to

94.4 in 2008/09, at the lower secondary school level from 31.3 percent in 2005/06 to 34.0 in 2008/09, and at the upper secondary school level from 11.3 percent in 2005/06 to 16.4 in 2008/09.

• The expansion of education services has included more accessible facilities for disabled children by way of ramps, toilets, etc.
• Equitable access to and the quality of public education services in urban and rural areas had been promoted for boys and girls.
• The percentage of female teachers at primary level has reached 44.8% of the total in 2008/09.
• The number of teachers recruited increased to 5,000 annually.
• To pursue a long-term strategy in this sector, continued investments and efforts have taken place for progress in tertiary education. Equity for admission to higher education has been improved through scholarship award scheme for outstanding students, poor students, students from remote areas, and female students.
• Currently, there are 77 institutions offering higher education of which 33 are in the public sector and 44 are privately owned and run.
• In the second strategic policy area, that is, “improving quality and efficiency of the education services”, although significant progress has been made especially on such strategies as related to CFS, curriculum and standard assessment, however, more intensive efforts are needed especially on Early Childhood Development, reducing repetition and drop out rates, facility development and higher education. The actions taken and major achieved results have included:
  • Issued a Prakas on Internal Regulation for pubic primary schools to increase promotion rate.
  • Endorsed the Child Friendly School (CFS) Policy and the Master Plan to improve quality of education.
  • Endorsed  Policies  on  Education  for  Disabled  Children,  implementing accelerated classes and piloting the CFS programs in the lower secondary schools.
  • Issued guidelines on the implementation of the new curriculum for basic education including the learning standards and action plans for guiding teachers on the new curriculum policy and guidelines on preparing school subjects and guideline for students to select elective subjects to study in upper secondary schools. The MoEYS is developing a framework for supplying core textbooks.
  • Some public and private higher education institutions have been assessed and accredited.
  • Developed re-entry program, policy on NFE equivalency program and equivalency program for primary education of NFE.
  • 59% of newly trained teachers were deployed to remote and disadvantaged areas comparing to target 30%.
  • Standard tests have been conducted for grade 3, 6 and 9 to see students’ understanding on math and Khmer.  

• In the third policy priority area, that is, “institutional development and capacity building for decentralization”, MoEYS’s efforts were focused on the finalization of and implementation of the Education Law and BMCs. The Education Law was promulgated by the RGC on 08 December 2007. The MoEYS is now preparing action plans to improve other legislative instruments, so far, the actions it has taken have included:
  • The MoEYS has developed a Gender Mainstreaming Strategic Plan: 2006- 2010.
  • Conducted training programs on gender and integrating the gender concept to education personnel for all levels.
  • The MoEYS has issued Guideline dated 05 February 2008 on the functions and duties, the preparation of documents, and legislative instruments for those institutions that are involved in managing and using the Program Based Budgeting (PB) at the central and provincial/municipal levels.
  • The Sub-Decree No. 126 GnRk/bk registered on 09 September 2008 on Teachers’ code.
  • The  Sub-Decree  No.  84  GnRk/bk  registered  on  09  June  2009  on Organization and Operation of MoEYS.
  • The MoEYS has drafted a Strategic Plan to decentralize the education function and it is waiting for the endorsement of the Organic Law.
  • The MoEYS is now focusing its effort, in particular, on strengthening the monitoring system.

1. Although significant progress has been made, many challenges remain that will require targeted action plans. These challenges concern issues that are currently impeding progress to achieve the policy priority goal of enhancing access to education services. At a broader level, access to education services at the primary and lower secondary school level, at present, is not equally accessible to all segments of the population. Those still not fully benefiting from the significant advance that have been made over a relatively short period of time, include: those who are economically disadvantaged, minorities, and populations living in remote areas. Other factors that also have an adverse effect include:

• Direct and indirect cost: transportation, learning material, costume, food, etc.
• Child labour and migration: most related to student in lower secondary education.
• Issues related to Society, disability and poverty.
• Child health and nutrition.

1. Other challenges that need to be addressed include:

• The education system needs to be decentralised and deconcentrated according to the organic law and its national program to promote democratic development.
• Reducing the number of incomplete primary schools -- approximately 18% of all primary schools.
• Even after the planned expansion of lower secondary schools not all communes would have been covered. After the ADB and World Bank projects are completed there will still be a need to construct an additional 400 lower secondary schools to secure full coverage.
• Teacher shortage and housing for teachers in remote areas remains a problem, especially for teachers with a bachelor degree.
• Ensuring adequate supply of textbooks for all students.  

• Efforts to reduce repetition and drop out rate that are still too high.
  • Loss  to  teaching  and  learning  time  due  to  lack  of  classrooms  and  teacher absenteeism.
  • At present, the traditional management at school level is not responding to the development of ICT.
  • Limited capacity of school principals to implement decentralization such as School base Management, classroom management, teaching and learning activities, student performance evaluation and effective use of budget resources.
  • The number of classes for students with disability is still too few.

1. ENSURINGENHANCEDHEALTHSERVICES

1. Progress in enhancing the delivery of health services has been impressive. From early on RGC had adopted a health sector-wide management (SWiM) approach to guide the development of this sector. A process to carryout discussion with development cooperation partners begun in 1999 and a Joint Health Sector Review was held in December 2000. A Health Strategic Plan (HSP) was subsequently prepared. It provided the framework for three development cooperation partners, ADB, DFID and the World Bank, to coordinate their financial inputs to the health sector through a Health Sector Support Project (HSSP) for 2003-2007. A comprehensive review of the HSP 2003-2007 was carried and a HSP 2008- 2015 (HSP2) was developed taking into account the findings of the review. The implementation of HSP2 began in 2008. Joint Annual Performance Reviews have been organized on yearly basis since 2002 to monitor the progress of strategic plan implementation.

1. The building blocks of the HSP 2003-2007’s strategic framework were the following three main health programs of the MoH:

• Reproductive, Maternal, New Born and Child Health.
• Communicable  Diseases.
• Non communicable Diseases and other health problems.

1. Major achievements and challenges faced in the implementation of NSDP 2006- 2010 policy priorities in each of the three program areas are summarized below.

PROGRAM AREA#1: REPRODUCTIVE,MATERNAL,NEWBORN AND CHILDHEALTH(RMNCH)

1. Significant progress has been made to expand services delivery under the RMNCH program that are reflected in improvements in core indicators of RMNCH performance during the 2006-2008 period (Table 3). Notable achievements have included:

• Proportion of deliveries assisted by skilled birth attendants increased from 39% in 2006 to 58% in 2008.
• Proportion of women who gave birth in the public health facilities increased from 19.3% in 2006 to 39% in 2008
• A significant increase in the number of deliveries in health centers.
• In 2008, 81% of women received 2 or more antenatal care from trained health personnel during their pregnancy compared to only 60% in 2006.
• Increase in the proportion of mothers who gave birth by Caesarean section (CS). The rate of CS is a proxy indicator for access to Emergency Obstetric and Newborn Care (EmONC) and the increase indicates that more women are referred to hospitals where these life-saving services are available. However, there are concerns about the uneven distribution of CS and EmONC services across the country and it will be important in the future to monitor CS rates disaggregated by ODs.

• Children’s health improved dramatically over the period from 2000 to 2005 and infant and child mortality rates declined by almost 30%. A progressive increase in immunization coverage has raised the measles immunization coverage to over 80%. A decision to introduce Hib vaccine in 2010 and to add Japanese Encephalitis vaccine in the near future has been made. Certification of neonatal tetanus elimination is expected next year.
• Increased coverage of Health Centers implementing Integrated Management of Childhood Illness (IMCI). The cumulative number of health workers who have been trained in IMCI is increasing steadily and the coverage target of 65% was reached in 2008. Although the number of health centers with two or more staff trained in IMCI increased from 58% in 2007 to 69% in 2008, it is recognized that there is a need to maintain quality IMCI services.

TABLE4: COREINDICATORS OF RMNCHPERFORMANCE

Source: Annual Health Statistics Report 2008, MoH

1. The main challenges faced in the implementation of the RMNCH program have included:

• Health outcomes and health service utilization rates in different socio-economic groups point to equity issues that need stronger attention.
• Critical concerns about the uneven distribution Emergency Obstetric Neonatal Care services across the country and need for increasing quality of continuum of care for RMNCH.
• Maternal mortality remains unacceptably high and substantial investments in delivery services and fast track interventions are required. However, it is recognized that maternal mortality is a cross-sectoral problem; influenced by women’s education and literacy levels, infrastructure development, and levels of women’s participation and gender equity.
• Demand side interventions are important to increase utilization of improved services through provision of clearly defined Continuum of Care of services.
• Large disparities in maternal and child health outcomes and inequities in health service utilization and access to care between richest and poorest quintiles. 

PROGRAMAREA#2:  COMMUNICABLE DISEASES

1. Cambodia has demonstrated through the implementation of its communicable disease programs that enormous achievements are possible when sufficient resources are available. The progress to date is on track to achieve the communicable disease CMDGs. While the relative importance of communicable diseases within the broad range of diseases has diminished somewhat, it still requires sustained and focused attention. A high level of preparedness still needs to be maintained to minimize the risks of emergence of new diseases – and re-emergence of the old ones.

1. Cambodia has the highest TB incidence in the Western Pacific Region, at 495 cases/100,000 population/year. The coverage of the basic Directly Observed Treatments (DOTS) for tuberculosis (TB) has reached 100% of health center, while Community DOTS has been expanded to 506 health centers. Public-private DOTS have also been expanded to

11 provinces and TB/HIV collaborative activities to  57 ODs. The third national seroprevalence survey showed a further decline in HIV prevalence among TB patients from 11.8% in 2003 to 7.8% in 2007. TB cure rate of over 85% has been maintained for the 12 consecutive years. TB case detection rate has increased from 65.4% in 2007 to 69% in 2008. Multi-Drug Resistant TB project is being piloted.

1. ITN coverage strategy currently covers 75.6% people living up to 2 km from the forest areas. The number of village health volunteers has increased from 1,734 in 2004 to 2,000 in 2008 and the village malaria workers from 380 in 2004 to 800 in 2008. Malaria incidence has decline from 7.5 per 1,000 populations in 2004 to 4.1 per 1,000 populations 2008. Malaria prevalence has declined from 4.2% in 2004 to 2.9% in 2007. Malaria mortality has also declined from 2.8 per 100,000 populations in 2004 to 1.46 per 100,000 in 2008.

1. The coverage of the school-based dengue control in collaboration with Ministry of Education, Youth and Sport has increased from 107 primary schools in 2004 to 159 Primary schools in 2008. Dengue incidence rate has decreased from 9,983 cases (78.2/100,000 population) in 2004 to 9,542 cases (65/100,000 population) in 2008. Dengue Case fatality rate has decreased from 90 cases (0.90%) in 2004 to 65 cases (0.68%) in 2008.

1. Rapid Response Teams (RRT) have been established from National level down to Health Center Level. Their functions include: Early detection of outbreaks via an event based surveillance system and response to the outbreaks by local teams within 24 hours, Provision of laboratory supplies for sampling and Personal Protection Equipment to protect the teams as part of their preparedness, Training of the staff on outbreak response including management of suspected Human Avian Influenza cases, In addition to outbreak investigation, RRTs are in charge of collecting routine communicable disease data and reporting them to next level. Early Warning and Response System indicator based zero reporting system covers 12 diseases and syndromes. Data is submitted via preformatted SMS system into provincial and national level where automatic computer based analysis is done and reported.

1. HIV/AIDS: As a result of the large scale up of prevention, care and treatment services, the HIV incidence has decreased significantly since 2000, which now stands at only 0.9%9 i.e. less than half of 1.9% assumed earlier for 2005. The 100% Condom Use Program for HIV prevention covers 24 provinces with outreach and peer education program reaching more than 90% of entertainment workers in 2008. STD case management is being provided at 32 specialized STI clinics in 24 provinces for high-risk population and syndrome approach of STD integrated into 222 health centers for the general population. Voluntary and Confidential Counselling and Testing services have been scaled up to 212 sites nationwide and 392,315 people have been tested for HIV in 2008. 

9   CDHS put this figure at 0.6% but subsequent agreement among all concerned revised it to 0.9%. 

1. Home and community based care for people living with HIV have been scaled up to 657 Health Centers in 20 provinces. Opportunistic Infection Treatment/Anti-Retroviral Treatment (OIT/ART) services  have been expanded to  51 sites  in  39 Referral Hospitals/Operational Districts in 20 provinces. A total of 31,999 patients with advanced HIV infection (>90% of those in need) are currently receiving ART including 3,067 children. In addition 12,805 patients are currently on OIT and prophylaxis. The survival rate of patients with HIV/AIDS after 12 months on ART is higher than 85% in 2008.

1. The National HIV/AIDS Authority (NAA) is responsible for coordinating and monitoring the national, multi-sectoral response to HIV/AIDS. It has been implementing a five-year comprehensive and multi-sectoral national strategic plan (2006-2010) that was developed in collaboration with all government agencies, national and international NGOs, other civil society organizations, the private sector and development partners10. The main results achieved under the plan are as follows:

• HIV prevalence in the general adult population (15 to 49 years old) declined from an estimated peak of 2% in 1998 to 1.2% in 2003 and 0.9% in 200611. If efforts are maintained at current levels, it is expected that HIV prevalence will further decrease to 0.7% in 2010 before stabilising thereafter12.
• HIV prevalence among brothel based female sex workers (FSW) dropped to 13.7% in 2006 from 21.4% in 200313.
• The number of people living with HIV (PLHIV) was estimated at 64,750 in 2007. This included 3,350 children under the age of 15. In 2008 there were an estimated 58,700 PLHIV.
• By the end of the year 2007, 82.6% of the estimated number of adults with advanced HIV infection received ART, up from 60.9% in December 2006.
• At the end of 2008 31,999 people were receiving antiretroviral treatment (ART- 28,932 adults and 3,067 children) meaning 95% of all adults living with HIV/AIDS in need were receiving treatment under the continuum of care system. 51 health facilities offered ART services at this time14.
• In 2007 99% of brothel based female sex workers (FSW) reported the use of a condom with their most recent client up from 96% in 2003. Condom use among non- brothel based FSW increased from 80% to 94% in the same time period. The rate of condom use among men who have sex with men (MSM) at last sex with a male client was 90% for short hair and 79% for long hair in 200715.
• The rate of condom use by MSM at last sex with non paid and non paying male partners was 94% for long hair and 83% for short hair MSM.
• Knowledge about HIV transmission and prevention among the general population was more than 95% in 200516.
• In the school year 2006-2007, 26% of all schools in the country were involved in efforts aimed at providing life skills-based HIV education.

 10 NAA (2008) National Strategic Plan For a Comprehensive & Multi-Sectoral Response to HIV/AIDS (2006- 2010)(revised).

11 MoH/NCHADS (2007) Report on Consensus Workshop on HIV Estimates and Projections for Cambodia 2006-2012.

12 NAA (2008) UNGASS Cambodia Country Progress Report.

13 MoH/NCHADS (2007/2004) HIV Sentinel Surveillance Survey 2006 and 2003.

14 MoH/NCHADS (2009) Universal Access Health Sector Reporting Sheet.

15 MOH/NCHADS (2008) Behavioural Sentinel Surveillance Survey 2007.

16 NIPH/NIS (2006) Cambodia Demographic and Health Survey 2005. 

• In 2007 94% of brothel-based FSW and 91% on the non-brothel based FSW reported in the BSS to have received HIV education in the 6 preceding months as well as 96% of MSM surveyed17.

1. Other major achievements include:

• The review of the HIV/AIDS Situation and Response Analysis (SRA)18, the National Strategic Plan (NSP II) and its detailed costing19 in 2007 to reflect new HIV prevalence estimates and forecasts and changes in the epidemic.
• The development or review of costed strategic plans for several line ministries including MoH (NCHADS and NCMCH), MoWA, MoND, MoEYS and MoLVT and for specific high risk populations such as drug users and injecting drug users (DU/IDU), MSM and entertainment workers (brothel based and non-brothel based).
• Importantly, the integration of HIV, reproductive health, TB and ANC through the "Linked Response" initiative was accelerated.
• The national response increasingly focused on key priorities guided by the participatory Universal Access (UA) target setting process which involved all relevant sectors and stakeholders.
• Most UA targets set for 2008 were either met or surpassed, although efforts need to be scaled up with special regard to prevention with high risk populations (particularly MSM and injecting drug users) and prevention of mother-to-child transmission of HIV (PMTCT) and to impact mitigation for orphans and vulnerable children (OVC).
• The cooperation between government agencies; non-governmental, community- based and faith-based organizations; PLHIV networks and development partners was strengthened and proved essential in building effective and sustainable HIV prevention, treatment and care services20.
• Leadership and coordination by the NAA21 based on the Three-Ones Principle22 grew and resulted in a better enabling environment that facilitated policy development and planning of the multi-sectoral response to HIV and AIDS.
• The civil society continued making a central contribution to the national response in the areas of prevention, impact mitigation, care and support especially among the high-risk and vulnerable groups at the grass-root level.
• The national HIV/AIDS Monitoring and Evaluation (M&E) system was strengthened through endorsement of the multi-sectoral National M&E Guidelines and M&E capacity was developed at different levels including among staff in the NAA, ministries and civil society entities.
• In addition, two National AIDS Spending Assessments (NASA), covering the fiscal years 2006, 2007 and 2008 were completed23.

1. The main challenges faced by the MOH in the implementation of the Communicable Diseases program area have included:

• Continuing threat of re-emerging diseases, including those successfully eradicated in Cambodia, as well as the ongoing threat of viral mutations.

17 MOH/NCHADS (2004/2008) Behavioural Sentinel Surveillance Survey 2003 and 2007.

18 NAA (2008) A Situation and Response Analysis of HIV and AIDS in Cambodia 2007 Update.

19 NAA (2008) Cost Estimates for Cambodia’s National Strategic Plan II 2008-2010,

20 FY2008 Country Profile: Cambodia. The U.S. President’s Emergency Plan for AIDS Relief.

21 NAA’s mandate is to lead, coordinate and monitor the national, multi-sectoral response to HIV.

22 The “Three Ones” principle calls for: One single agreed HIV/AIDS Action Framework that provides the basis for coordinating the work of all partners; One national AIDS coordinating authority, with a broad based multi-sectoral mandate; and One single comprehensive multi-sectoral HIV/AIDS M&E System.

23 NAA (2009) The National AIDS Spending Assessment (NASA) Fiscal Year 2006 and NAA (2008) The National  AIDS Spending Assessment (NASA) Fiscal Years 2007 and 2008.

• Cross-border transmission, regional and global CD threats, including possibility of Pandemic Influenza.
• Maintaining vigilance against reversals in declining incidence, particularly in view of the international evidence of HIV incidence rising again.
• High cost of treatment for chronic effects of communicable diseases.

1. The National HIV/AIDS Authority (NAA) has identified the following challenges in the implementation of its strategic plan:

• The main risk of a second-wave of HIV infections stems from changing sexual behaviours among FSW, their clients and sweethearts, MSM, DU and IDU. HIV prevalence among these high risk populations continues to be high. Also, transactional sex is increasingly sought outside of brothels, and particularly from ‘sweethearts’. In these relationships consistent condom use remains alarmingly low24.
• Changes in the structure of the commercial sex  industry, and the difficulty of sustaining the 100% Condom Use Program in the light of brothel closures, have pushed the national response to find ways to promote consistent condom use among staff of entertainment establishments like karaoke bars, massage parlours and beer gardens where there is a high turnover of sex workers25. To address this issue a new Standard Operating Procedure (SOP) was developed targeting HIV prevention specifically at this high risk group.
• The risk of rising HIV epidemics remains high among MSM and especially IDU. The new 2008 drug user survey revealed 24% HIV prevalence among IDU26, whereas 9% and 17% HIV prevalence were recorded respectively in 2005 among MSM and transgender groups in Phnom Penh27.
• People at particular risk of HIV infection also include female partners of high-risk males, migrants and youth who dropped out of school. More strategic and cost- effective interventions need to be devised to reach these groups.
• PMTCT has been strengthened especially through the Linked Response, but related UA targets could not be attained. This must remain an area of priority.
• In 2007 the PMTCT programme tested 19% of Cambodia’s pregnant women for HIV and provided prophylaxis for 11% of the total number of HIV-exposed neonates. This is significantly lower than the 2008 UA targets of 25% (testing) and 30% (ART prophylaxis).
• NAA’s operations are not yet sufficiently decentralized to ensure an effective multi- sectoral coordination of HIV interventions at the sub-national levels, especially at the commune council and provincial level.
• The national M&E system needs further strengthening to better capture progress and results achieved by the national response28. Special attention needs to be focused on harmonizing output indicator definitions and tools and on improving the collection, analysis, interpretation and use of the data.
• Around 90% of all funds spent on AIDS related interventions in 2006, 2007 and 2008 came from external sources making the national response highly dependent on external aid. While AIDS spending increased from 2006 to 2007, it dropped again in 2008. Greater efforts are needed to mobilize resources for the HIV response, especially from the national budget, while working to improve their allocation across strategic priorities and key interventions.
  • Efforts to mitigate the impact of HIV/AIDS have been insufficient. More will need to be done to support OVC and HIV affected families and communities. 

24 PSI (2005/2006)HIV Tracking Results Continuously (TraC) Study 2005 and 2006.

25 NAA (2009) Constraints and bottlenecks to Reaching Cambodia’s Universal Access Targets and Mitigation Measures Framework.

26 MoH/NCHADS (2008) Drug User Survey.

27 MoH/NCHADS (2006)STI Sentinel Surveillance Survey 2005.

28 NAA (2009) The Annual Report on The National Comprehensive and Multi-sectoral Response to HIV/AIDS in Cambodia. 

TABLE5: CORE INDICATORSOF PERFORMANCEIN THE AREA OF COMMUNICABLEDISEASES

Source: Annual Health Statistics Report 2008, MoH

* 0.6/CDHS2005, 0.9/Expert Consensus Meeting, 2007, NCHAD

PROGRAMAREA#3:  NON COMMUNICABLEDISEASESAND OTHERHEALTH PROBLEMS

1. Mental health services have been expanded gradually. Specialized consultations are available in 10 referral hospitals, while mental in-patient services are provided at two national hospitals. In addition, primary mental health services are currently provided at 40 referral hospitals and 18 HCs.

1. Cancer prevention program has been initiated through trainings on self-detection of breast cancer for midwives at HCs and physicians at referral hospitals, and training of trainers on detection of cervix cancer for physicians working at the national hospitals in Phnom Penh. 11 Diabetes clinics have been established.

1. Rapid development and changing demographics may be expected to bring about an evolution away from communicable diseases and towards increasing prevalence of non- communicable diseases. There are in particular serious concerns for health burdens related to hypertension, diabetes mellitus, road traffic accidents, environmental pollution, poor sanitation and lack of access to safe drinking water. Substance abuse epidemic is becoming a major challenge due to its effect on mental health, HIV transmission and other social problems, while mental health in general will require increased attention in its own right. Consequently, emerging health issues in the areas of prevention, emergency care and rehabilitation will require more resource allocations for effective interventions.

1. The main challenges faced in the implementation of the Non-Communicable Diseases and Other Health Problems program area have included:

• Changing life style factors – smoking, changed nutritional habits, alcohol consumption, illicit drugs – will steadily increase the incidence and prevalence of cardio-vascular disease including hypertension, cancer, diabetes and stroke.
• Road traffic accidents will increase with urbanization and the expansion of road infrastructures, as will diseases caused by pollution. Rapid economic growth and industrialization pose increasing environmental health threats.
• As the population ages, higher levels of neuro-pathological disease are expected. Disability caused by eye disease and arthritis of joints will also increase and become a major burden on individuals and health services.  

• Dealing with non-communicable disease needs to be prevention, and to energize and monitor preventive measures across all sectors.
• The increase burden of non-communicable disease will have significant impact on investment in medical technology, clinical guidance and re-training.

FURTHERSTRENGTHENINGOF THE HEALTHSYSTEM

IMPROVING HEALTH SERVICES DELIVERY

1. The expansion of public facilities, services offered, and support structures were closely targeted to meet population needs based on the Health Coverage Plan’s (HCP) Operational District System Approach. The HCP is a basic planning tool to guide the development of health infrastructures according to population size and geographical accessibility criteria.

1. The Health Centers and health posts are the front line facilities providing Minimum Package of Activity, whereas referral hospitals are second line facilities providing Complementary Package of Activity. The number of HCs and health posts located in remote areas has been increased to 967 and 108, respectively in 2008. The total number of Referral Hospitals is 84. These include 8 National Hospitals in Phnom Penh, 18 Referral Hospitals CPA3, 28 CPA2 and 30 CPA1.

1. There has been a significant expansion of health facilities infrastructure across the country, with appropriate investment in hi-tech medical equipment i.e. Scanner Multibarette 64, MRI Angiographie, Radiocobalt, Mamography, MRI 3 Tesla for specialized hospitals, and basic equipment for other health facilities in order to improve clinic capacity and quality of care. The data presented in Table 5 shows a significant of the health sector infrastructure since 1995 in terms of construction/renovation of hospitals, health centers and health posts since 1995.

TABLE6: DEVELOPMENTOF HEALTHSECTORINFRASTRUCTURE

1. Contracting for health services delivery has been scaled up and institutionalized within the Cambodian public sector institutional context through a stronger focus on internal contracting and managerial autonomy through Special Operating Agencies in accordance with the RGC Policy on Service Delivery. 30 Operational Districts including provincial hospital have been established as Special Operating Agencies in 2009.

1. Health service delivery consists of both public health measures against disease as well as a general strengthening of health service delivery through general and disease specific policies and plans. Much emphasis is given the subject of quality improvement. An increase in health demand and empowerment of patients are underlined as important ways forward for improved quality and accountability in health service delivery.

IMPROVING HEALTH FINANCING

1. RGC’s allocation for the recurrent budget of the Ministry of Health has increased more than what was planned in the NSDP 2006-2010. Over the past 20 years, the health sector has had a substantial increase not only in RGC’s budget allocations but also in funding provided by external development partners. In 2008, the contributions of both RGC and the external development partners to the health sector were about the same, at around 8 US$ per capita. Overall disbursement levels and disbursement to peripheral level have also improved, contributing to more effective public expenditure management.

TABLE 7: KEY INDICATORS FOR SECTOR FINANCING (ASOF DECEMBER 2008)

1. A good health financing system is one of the single most important ways to ensure quality health services for all Cambodians. RGC is aware that out-of-pocket expenses to have access to health services, is a serious problem for households with low income and the poor. RGC has and will continue to expand social-protection measures and other social safety nets to address this problem. Currently, this protection is being provided through various systems, mainly fee-exemptions, health equity funds (HEF) and subsidy schemes. Currently, HEF and subsidy schemes are being implemented in 50 ODs (covering 51 referral hospitals and 120 Health center). 6 National Hospitals in Phnom Penh and 9 ODs are subsidized by the RGC under the provisions of Prakas 809 issued in 2008, whereas the rest are funded by health partners. 68% of the poor population is protected by HEF/ Subsidy, providing coverage to 2,832,844 peoples, who are living under the poverty line. A Preliminary analysis of Cambodian Socio-Economic Survey carried out in 2007 shows interesting results in terms of reduction of debt for health care in households benefiting from HEFs. In 2004, 5.17% of households in surveyed had reported incurring debt for health care, in 2007 it is reported to have declined significantly to 3.43%.

1. A number of community-based health insurance (CBHI) schemes have also been introduced in various parts of the country by a range of international and local NGOs. The CBHI schemes are based on the principle of risk pooling and pre-payment for health care. The CBHI schemes is a not-for-profit voluntary insurance mechanism that provide the purchaser and their families with coverage for health services for a stated list of medical benefits delivered at contracted public health facilities (generally health centers and referral hospitals). Currently, 12 CBHI schemes are being implemented in 11 ODs in 7 provinces and Phnom Penh Municipality, covering 81 HCS and 11 Referral Hospitals, and 73,828 beneficiaries.

HUMAN RESOURCES FOR HEALTH

1. As of December 2008, the public health sector employed 18,096 health workforces, including 2,173 Doctors, 1,220 Medical Assistants, 172 Dentists, 427 Pharmacists, 5,084 Secondary Nurse, 3,407 primary nurses, 1,806 Secondary Midwives, 1,439 Primary Midwives, and 428 Secondary Laboratory Technicians. Recruitment and distribution of staff has been improved. As of January 2009 73.78% of total health workforce was employed at provincial level (including HC.HP), and the remaining 26.22% at the Central Level including Phnom Penh Municipality. Remarkable progress has been made in the deployment of midwives at health centers. The number of health centers without a midwife has decreased from 229 HCs in 2004 to 79 HCs in 2008. As of July 2009, the Ministry of Health has staffed all HCs (967 in 2008) with at least one midwife. 

1. The implementation of the PMG29 program of the RGC in the MOH started in 2006. Currently, it is being implemented in 7 provinces covering 65 HCs with the total staff of 380. The implementation of MBPI program of the RGC has begun in 2009 in 6 provinces and 2 Central institutions30 covering 190 posts. The provision of Midwifery Incentives to promote safe delivery at health facilities nation-wide has substantially increased deliveries at HCs and RHs attended by a skilled birth attendant from 39% in 2006 to 58% in 2008.

1. Although a number of actions have been taken to address issues surrounding the recruitment and retention of midwives, the distribution of staff between urban and rural areas remain a problem. A priority of the MOH is to increase recruitment and training capacity over the next five years, as well as to improve quality of the training.

1. The relationship between public and private services delivery needs to be addressed, especially differences in remuneration between public and private sectors. MOH is looking at options to implement performance based pay system to improve management and delivery of health care services, as well as providing special incentives for those working in ‘hard to reach’ areas, together with improved national human resource planning and a more effective in-service training system. As a first step, the “Fast Track Interventions to Improve Access and Quality of RMNCH” is now being implemented.

HEALTH INFORMATION SYSTEM (HIS)

1. A Health Information System (HIS) was developed in 1993 to serve the needs of the country, and then gradually implemented. Complete nationwide coverage was achieved by February 1995. The HIS collects data on routine health service activities and health problems reported from all levels of public health facilities in the health system. Data are disaggregated by age group, geographical location and sex. The development objective of HIS is to provide the Ministry of Health and different levels of the health system with reliable and timely information on health problems and health service activities for better planning and management of health services and decision-making.

1. Since its inception, the HIS has undergone several revisions (1996, 1999, late 2003) and a comprehensive assessment of the health information system was conducted in 2006 to identify strength and weakness. The main strengths of the HIS is an integration of nearly 20 recording and reporting systems into one system to prevent duplication and reduce staff workload, standardization of recording and reporting forms, and computerization (health information system database), currently covering at all provinces and districts.

1. While the MOH has a functioning routine health information system that extends from the lowest public health facility level up through operational district and provincial levels to the central level, the private sector is largely excluded. Lack of information on private sectorand NGO supported health services is a serious issue that needs to be addressed in orderto ensure that future expansion of the health services delivery system across the countrycan be carried out without duplication of services between public, private and NGO’s. HIS data therefore cannot be used to monitor health status in the country as a whole. Although the use of data in planning and monitoring has increased, it is still limited at all levels of the system. While a reasonably effective disease surveillance system exists, case reporting and monitoring of key non communicable diseases is weak. There is an urgent need for further improvement in coordination and collaboration among HIS stakeholders within and outside the health system. 

29 Kompot, Takeo, Odormeanchey, Siemreap, Banteaymeanchey, Pailin and Battambang

30 Koh Kong, Takeo, Prey Veng, Kompong Cham, Prah Vihear, Mondulkiri, Ratanakiri, National Maternal & Child Health Center, MoH HeadQuarter

1. A focus area for strengthening HIS is the provision of relevant and timely high quality health information for evidence-based policy formulation, decision making, program implementation, performance monitoring and evaluation by using appropriate communications and technology. This will make available quality socio-demographic, economic, morbidity, mortality, and risk factor information, and surveillance data will be more complete and timely for efficient outbreak response and diseases control. Comprehensive coverage will be achieved with improved database management of infrastructure, human resources, and logistics.

HEALTH SYSTEM GOVERNANCE AND DECENTRALIZATION & DE-CONCENTRATION

1. To improve governance of the health care delivery system, a number of sub-decrees covering various aspects of the health sector are being implemented by the MOH. These include:

• Sub-decree on the management of the Regional Training Center, on the 30th, 2002, on the promulgation for the preparation and functioning of the RTC issued on 27th May, 2003.
• Sub-decree on Medical Code of Conduct issued on 28th August 2003.
  • Royal degree on technical and grade logo and uniform of the government technical high ranking officials and the secondary technical official issued on 29 May 2005.
  • Declaration on the implementation of primary-midwife nurse curriculum issued on 09 September, 2005.
  • Inter-ministerial declaration allowing health service delivery (consultation and treatment) to charge user fees issued on 11 October, 2005.
  • Declaration on the identification of areas facing difficulties of the Ministry of Health issued on 07th December, 2005.
  • Joint-Declaration of the Ministry of Health and Ministry of Information on the conditions for commercial advertisement on modern and traditional medicines, cosmetics, baby artificial feeding product, tobacco and private sector in the areas of medicine, para clinics, and supportive medicines issued on 21 February, 2006.
  • Sub-decree on the establishment of the Department of International Collaboration of the Ministry of Health, issued on 06 April, 2006.
  • Sub-decree on the establishment of the Department of Internal Audit of the Ministry of Health, issued on 21st February, 2006.
  • Sub-decree on the National Midwife Day on 05th May, 2008.
    • Sub-decree on the transformation of the National Institute of Public Health into Public Administrative Institution issued on 04 September, 2006.
    • Sub-decree on the transformation of the Kossamak Hospital into Public Administrative Institution issued on 25th July, 2009.
    • Sub-decree on the transformation of the Khmer-Soviet Friendship Hospital into Public Administrative Institution issued on 25th July, 2009.
    • Sub-decree on the transformation of the National Drug Quality Laboratory Control Center into Public Administrative Institution issued on 24th January, 2008.

1. The MoH recognizes the importance of strengthening its cooperation with external partners which is reflected in the success of the TWG-H as a consultative body for the sector, as well as through strengthening and expansion of the Sector-Wide Management through Health Sector Support Program phase 2 and its Joint Partnership Agreement aligning partner investments behind MoH strategic and operational planning.

1. The implementation of RGC’s broad reform programs has major opportunities for improving health system governance and health services delivery. Operational Districts and provincial referral hospitals have been established as Special Operating Agencies, thereby re-integrating formerly contracted districts into the public health system and strengthening the responsiveness of the system as a whole. The on-going D&D reforms program will further strengthen this responsiveness. It is, however, important to ensure that changes be consistent with the public health evidence based Health Coverage Plan.

1. MoH recognizes that to deliver high quality health services within budget constraints, managerial and clinical competencies; significant improvements are needed in systems to manage budgets and staff. There is also a general agreement that without the right incentive arrangements, the organizational changes required by D&D reforms will be difficult to implement.

1. IMPLEMENTATIONOF GENDERPOLICY

1. Remarkable progress has been made toward achieving gender equality and women’s empowerment in Cambodia through implementation of RGC’s Neary Rattanak II (2004-2008) by the Ministry of Women’s Affairs. RGC appreciates the support provided by development cooperation partners and national and international NGOs in the implementation of Neary Rattanak II. The Neary Rattanak II focused on the following priority areas:

• Economic empowerment of women.
• Enhancing women’s and girls’ education.
• Legal protection of women and girls;
• Promotion of health of women and girls.
• Promotion of women in decision-making.
• Gender mainstreaming in national policies and programs.

ECONOMICEMPOWERMENTOF WOMEN

1. With the growth of the industrial sector and new opportunities in the tourism sector, the participation of women in wage employment in the formal sector increased significantly over the last decade. However, the low level of education among adult women limits their livelihood options and remains a serious constraint to participation in higher paying jobs. Women continue to dominate informal sector businesses. Eleven Women’s Development Centres are now in place in provinces. These centres are providing vocational training and consultations for entrepreneurship development for women.

1. The current global financial crisis and the economic recession in advanced economies have adversely impacted the textiles and garment sector and the tourism sector in Cambodia. These two sectors are a major source of wage employment for women. Displacement of large numbers of women from paid employment and its potential impact on rural communities is now  a serious concern.  RGC has taken a variety of measures, discussed earlier, to mitigate the adverse effects of these external developments on vulnerable  populations.

ENHANCING WOMEN’S AND GIRLS’ EDUCATION 

1. Remarkable progress  has been made in closing the gender gap in access to education, especially at primary level and an improvement of gender parity at the higher levels of education. Near gender equity in literacy rates and mean level of education among young people under 20 years of age has been achieved -- a reflection of the significant improvements in the primary education system. Institutions responsible for education continue to consider gender concerns in education sector policy development. There are however, still fewer girls than boys in upper secondary and university levels. In addition, a larger number of women in the age-group 25-44 and a significant number in the age group 15-24 have less than a primary school level education. Addressing the low levels of literacy and education among women of work and child-bearing age remains a concern.

LEGAL PROTECTION OF WOMEN AND GIRLS

1. Significant progress has been made in strengthening the legal framework to protect women by addressing issues of gender equality and women’s rights in the preparation and implementation of laws as well as by enhancing the awareness of the provisions of the laws through training programs for relevant institutions and the public. In August 2005, the Law on Prevention of Domestic Violence and Protection of Victims was adopted by the National Assembly and, recently, the National Action Plan to Combat Violence Against Women was adopted by the Council of Ministers. The Law on Suppression of Human Trafficking and Sexual Exploitation was adopted by the National Assembly in early 2008. A high level inter- ministerial working group has been established under the MOI on human trafficking. Addressing the attitudes and behaviour which underlie gender-based violence and sexual exploitation, and the stigmatization of the victims of violence remains a challenge.

PROMOTIONOF HEALTHOF WOMEN AND GIRLS

1. Excellent progress has been made in promoting women’s and girls’ health, with increased awareness and access to primary health care and protection and prevention services on HIV/AIDS, STDs and Malaria. Moreover, the prevalence rate of HIV/AIDS has been reduced among pregnant women as well as among direct and indirect sex workers. However, spousal/partner transmission and mother-to-child transmission of HIV are now emerging as the main modes of transmission of new infection and maternal mortality still remains very high, which is a serious concern.

PROMOTIONOF WOMENINDECISION-MAKING

1. The participation of women at all levels of decision-making has increased significantly. The proportion of women appointed to Senate seats has increased from 13 percent in 2003 to 14.8 percent in 2007; and the proportion of women elected to the National Assembly increased significantly from 5 percent in the 1993 national election to 11 percent in 1998; 19 percent in the 2003 election; and 22 percent in the 2008 election. The proportion of women as Secretary of State and Under Secretary of State has also increased from 7 percent and 9.6 percent in 2003 to 7.7 percent and 14.6 percent in 2008, and the proportion of women elected to Commune Councils has increased from 8 percent in 2002 to 14.6 percent in the 2007 elections. Women now occupy 30 percent of village chief positions. Women make up 10.1% of municipal and provincial councillors, and 12.6% of district, town and khan councillors.

1. The number of women officials and leaders in local administration has also increased. The Ministry of Interior has appointed women as Provincial vice Governor in 24 provinces/cities and 197 women as District/Khan vice Governor throughout the country. The Secretariat of State of Civil Service has issued guidelines on affirmative action with a quota ranging from 20% to 50% for women among the new recruits to the civil service. As a result, the proportion of women civil servants has increased from 32 percent in 2007 to 34 percent in mid 2009. However, the number of women at senior level/decision-making levels of the civil service remains low, as do the number of women in the judiciary, both as judges and prosecutors.

GENDER MAINSTREAMING IN NATIONAL POLICIES AND PROGRAMS

1. The Royal Government has made significant progress in mainstreaming gender equality and incorporating gender equality and women’s empowerment considerations into key national policies, including the Cambodian Millennium Development Goal (CMDG), the National Strategic Development Plan 2006-2010 (NSDP), and the second National Governance Action Plan. Gender issues and strategies have also been incorporated into key reform programmes of the government, e.g., Public Financial Management Reform stage 2, Public Administration Reform and the Organic Law on the Management and Administration of the Municipality, Province-City and District-Khan, as well as the draft 10 year national programme for Sub-national Democratic Development.

1. Another notable achievement is the establishment and strengthening of the national mechanisms for gender mainstreaming. These include: establishment of the Technical Working Group on Gender (TWG-G) as part of the Government-Development partner Coordination Committee (GDCC); establishment of Gender Mainstreaming Action Groups (GMAGs) in most line ministries. Sixteen ministries and institutions have already established their Gender Mainstreaming Action Plan for their sector (Ministry of Education, Youth and Sport; Ministry of Health; Ministry of Rural Development; Ministry of Information; Ministry of Water Resources and Meteorology; Ministry of Commerce; Ministry of Industry, Mines and Energy; Ministry of Agriculture, Forestry and Fisheries; Administration of Fisheries of MAFF, State Secretariat of Civil Service; Ministry of Land Management, Urban Planning and Construction; Ministry of Tourism; Department of Local Administration of Ministry of Interior; Ministry of Labour and Vocational Training; Ministry of Planning and Ministry of Economy and Finance). Five other line ministries are in the process of finalising their GMAPs (Ministry of Justice; Ministry of Environment; Ministry of Public Works and Transport; and Ministry of Social Affairs, Veterans and Youth Rehabilitation, and Ministry of Post and Telecommunications). Ten line ministries have been provided resources from the National Budget or are receiving assistance from development partners to implement their GMAPs. These include MLMUC, MRD, MoT, MLVT, MAFF, MoEYS MoH, DOLA/MOI, MOP, and MOC.

1. However, attitude and behavioural change in regard to gender equality and women’s rights is a long term effort requiring strong commitment from all relevant stakeholders. The national capacity for gender analysis, research and advocacy needs strengthening. The harmonization of gender mainstreaming plans, sectoral strategic plans and monitoring machinery together with appropriate resource mobilization to implement sectoral GMAPs effectively is still a challenge.

1. IMPLEMENTATION OF POPULATION POLICY

1. RGC’s pro-active and well-orchestrated Population Policy involves actions in many sectors such as health, education, environment, macro-economy, gender, emigrations, youth, aging people, and others. The National Committee for Population and Development (NCPD) has been working to strengthen its human resources to integrate population-related issues in the development planning processes at all levels for planners and policy makers. It has developed population reference tools on National Population Policy (NPP), Population datasheet, Urbanization, Migration, Youth, Ageing, and NPP indicators. These reference tools have been used to disseminate NPP and population and development linkage to the parliament, national government, sub-national government, and local government in all 24 provinces and Phnom Penh Municipality. The dissemination of NPP also included students from the Royal School of Administration.

1. Notwithstanding the many achievements, the NCPD also faced many challenges in carrying out its tasks. These include:

• Limited capacity and knowledge of participants in population issues.
• Lack of timely data for updating population indicators and reference tools.
  • Lack of in-depth analysis of population related issues that are needed for understanding the root causes and solutions. Such evidence based understanding is crucial for effective plan of action.
  • Lack of M&E and follow-up activities.

1. The decennial Population Census was conducted in March 2008 after a great deal of careful and meticulous preparations. The work was done entirely by Cambodians indicating the capacity building attained for such extensive enumeration and analysis work. Involving about 35,000 enumeration staff and covering all the households (2.8 million) and also transient populations, this was a colossal exercise which was conducted very efficiently and successfully. The final results of the 2008 Census show that:

• In 2008, the total population was 13.4 million, less than 13.8 million estimated earlier, forming 2.3% of the total population in Southeast Asia as in 1998.
• The annual growth rate of the population of Cambodia was found to decrease over time from 2.5 percent per annum in 1998 (GPC 1998) to 1.5 percent per annum for 1998-2008. The population growth rate of 1.5% is less than 1.8% estimated earlier, but is still slightly above the average for the region at 1.3%.
• The annual population growth rate in urban areas in 2008 is higher than that in rural areas (2.6 percent versus 1.3 percent, respectively).
• The sex ratio was 94.2% males to 100 females, up from 93 in 1998.
  • The average household size declines by about 0.5 in all areas from 1998 to 2008 (5.2 versus 4.7 for Cambodia total, 5.5 versus 5.0 for urban, and 5.1 versus 4.6 for rural, respectively). However, the change in the average household size is a result of increased new households - the number of regular households has increased from

2.2 million households in 1998 to 2.8 million households in 2008.

• Although, the age structure of the population indicates that Cambodian population is young, the proportion of population under 15 years of age declined from 42.8% in 1998 to 39.0% in 2004 and to 33.7% in 2008.
• At the same time, the proportion of the elderly increased, as life expectancy at birth increased from 54 years in 2000 to 60.5 years in 2008 for men and from 58 years in 2000 to 64.3 years in 2008 for women. In 1998, the percent of people aged 65 and over was 3.5% (3% among men and 3.9% among women). By 2008, the figure increased to 4.3% (3.5% among men and 5% among women).
• The decline in the number of children under age 15 is greater than the increase in the number of elderly, resulting in a sharp decline in age dependency ratio from 86.1% (69.1% in urban and 89.7% in rural) in 1998 to 74.0% (59.7% in urban and 76.8% in rural) in 2004 and to 61.2% (40.8% in urban and 67.1% in rural) in 2008.  

• The urban population was 19.5%, up from 17.4% in 1998; conversely, the rural population was 80.5%, down from 82.4%.
• The 2008 census data points to the success in implementation of the population policy of the government.

1. THE ECONOMY AT THE STARTOF NSDP UPDATE 2009-2013. 

1. The Royal Government of Cambodia’s concerted efforts to secure political and social stability, internal peace and security, along with sound and progressive management of the economy have enabled it to achieve sustained high rates of economic growth and poverty reduction over the last decade. However, the implementation of NSDP Update 2009-2013 will begin in an uncertain global environment where both developed and developing nations are working hard to minimize the adverse effects of the global financial crisis that started in late 2007 and subsequently caused a severe recession in the advanced economies. The negative effects of these external developments were felt in Cambodia’s economy in 2008, when GDP growth rate decelerated to 6.7 percent from 10.2 percent in 2007. The on-going economic recession (as of mid 2009) in advanced countries is now expected to severely impact the Cambodian economy in the very short-term, 2009 and 2010.

1. To respond to these external developments and to maintain the momentum of economic growth and poverty reduction that has been achieved over the last decade, the challenges that RGC faces are indeed formidable. Notwithstanding, the deceleration of economic growth in 2009 and 2010, the RGC is determined to protect the gains in poverty reduction that it has achieved over the last decade. RGC will take whatever measures are necessary to mitigate the adverse effects of the global developments on the vulnerable and poor, in particular those living in rural areas. Since the first election of the Royal Government of Cambodia in 1993, RGC has faced and overcome many formidable challenges before and it is confident that it will overcome the current difficulties with the cooperation of the people of Cambodia and its traditional and non-traditional development cooperation partners. Looking back, economic development in Cambodia since the formation of the first national government can be divided into three distinct phases:

• The rehabilitation phase, 1993-1998;
• The reconstruction phase, 1999-2003;
• The economic take-off phase, 2004-2008.

1. The rehabilitation phase, 1993-1998: In the mid 1980’s Cambodia had embarked on a series of reforms to transform the central planning system into a market-based system. The rudiments of a market economy were established, with the introduction of private property, privatization of state-owned companies, and de-collectivization of agriculture that paved the way for national reconciliation and the General Elections in 1993. However, the efforts of the RGC of the First Legislature to implement market reforms were undermined by macroeconomic imbalances, caused by following factors:

• Economic liberalization that had begun in late 1980s, acted to hinder revenue mobilization. Privatization of State-Owned Enterprises (SOEs) and enterprise reform combined with price and trade liberalization slashed economic rents formerly captured by the public sector enterprises. This loss of revenue was not made up by revenues from the emerging private sector.
• On the expenditure side, removal of price controls considerably increased the unit cost of goods and services procured for operations and investments. The government’s policy to protect wages and defence expenditures crowded out public investment and expenditures on operations and maintenance. 

• The elimination of Cambodia’s credit facility under the 1986-1990 trade and payments agreement with the Soviet Union. Commodity aid received under this agreement financed 15% of budgetary expenditures in 1989. Humanitarian assistance amounted to only US$20-30 million a year in 1991-92.
• Under prevailing circumstances, the government had to resort to monetary financing of the budget deficit. Monetary financing covered more than half of the budgetary gap in 1991 and the budget went in arrears for the remaining 20% of expenditures. Wage payments became sporadic. Monetary financing resulted in high inflation. This, in turn, contributed to lack of public confidence in national currency and a high level of dollarization.

1. The formation of the Royal Government of Cambodia (RGC) in 1993 led to the end of the economic embargo imposed on Cambodia in 1979 and resulted in inflows of Foreign Direct Investment (FDI) and Official Development Assistance (ODA) for economic rehabilitation. During 1993-1998, Cambodia was both at peace and at war. The RGC of the First Legislature could not give full priority to economic development and poverty reduction, as it was required to combat the Khmer Rouge forces scattered across the country. Defence and security spending amounted to 6.3% of GDP in 1994, while social spending represented only 2.1% of GDP. However, RGC began to implement the first generation of reforms. Inflation was reigned in from 121% in 1991 to -0.7% in 1993. A new French-based budget system was introduced and a legal framework was established for public enterprises. With the implementation of RGC’s “win-win” strategy, the military and political organization of the Khmer Rouge was dismantled in 1998 and the foundation for peace, security and economic growth was put in place. Despite many setbacks, economic growth during 1993-1997 averaged 6.6%. Growth during this period was financed mainly by the overuse of naturalresources,Official Development Assistance (ODA) and the FDI inflows into the financialsector.From 1994 to1998, much of the ODA was used to rehabilitate power generation capacity and water supply. Electricity, gas and water sub-sector of manufacturing grew at an annual average rate of 14.9%. Public administration grew at the rate of 20.8%. Finance increased at an average annual rate of 38.5%.

1. The reconstruction phase, 1999-2003: In the second term, 1998-2003, the RGC vigorously implemented its Triangular Strategy that focused on: (i) restoration of peace and security; (ii) integration of Cambodia into the region and the world; and (iii) promotion of socio-economic development. The successful implementation of this strategy enabled RGC to restore peace and security, political stability, and to begin rebuilding democratic institutions. Cambodia regained international recognition after the end of factional fighting in 1997. It was given a seat at the UN in December 1998 and formally admitted to ASEAN in April 1999. These conditions enabled RGC to further deepen and broaden the implementation of its reforms agenda. The focus of the reform agenda was on sustaining economic growth, reducing poverty, accelerating economic reconstruction, maintaining macroeconomic stability, strengthening the banking and financial institutions, implementing additional fiscal reform measures, ensuring a sound management of public property, and increasing public investment in physical and social infrastructure and human resources development.

1. During 1999-2003, the economy grew at an averaged annual rate of 8.8%. Although ODA continued to finance growth, FDI especially investments in garment and tourism, were key to promoting growth. During this period Textile sub-sector grew by 35.1% a year. Construction sector became a pillar of growth, growing at an average annual rate of 20.1%. Recently restored peace contributed to rapid development of tourism, the sector grew at the average annual rate of 13.6%. Continued rehabilitation of the power and water sector resulted in the electricity, gas and water sub-sector growing at an annual average rate of 10.2%. Although, the share of the agriculture sector in total GDP declined slightly, as other sectors grew, it still accounted for 32.0% of GDP in 2003.

TABLE8: MACROECONOMICINDICATORS,1994, 1999, 2001-2008

(as a percentage of the GNP)

Source:Ministryof the Economy and Finance, National Bank of Cambodia, IMF.

1. The economic take-off phase, 2004-2008: During this phase RGC accelerated the pace of implementation of the second generation reforms, in particular the implementation of the Public Financial Management Reform Program (PFMRP). It also increased investments in social sectors and infrastructure development to reduce poverty, in particular in rural areas of the country. The efforts were focused on rehabilitating and building rural irrigations systems, and the provincial and rural roads network. Economic growth during this period, 2004-2008, averaged 10.3% per year, with a record high annual rate of growth of 13.3% in 2005. Economic performance in 2008 though somewhat diminished compared with 2004- 2007, as a result of the global financial crisis that caused a global economic down turn in late 2007, was still impressive, the economy grew at an annual rate of 6.7% in 2008.

FIGURE1: ANNUALECONOMIC GROWTHRATE:1994 -2008

1. Since 1993, the sectoral composition of the economy has changed significantly. Over the 1993 to 2008 period, the contribution to GDP or share in total GDP of the:

• Agriculture sector has declined from 45.3% in 1993 to 32.4% in 2008.
• Industrial sector has increased from 12.6% in 1993 to 22.4% in 2008. Within industrial sector the share of:  

• Textiles and Garments sub-sector has increased from 1.0% in 1993 to 10.3% in 2008.
• Mining Sub-sector has increased from 0.2% in 1993 to 0.4% in 2008.
• Construction sub-sector has increased from 3.5% in 1993 to 6.1% in 2008.
• Services sector has slightly declined from 39.4% in 1993 to 38.8% in 2008 – mainly because of relative high growth in the industrial sector. Within the services sector the share of:
  • Tourism and Hotel sub-sector has increased from 2.3% in 1993 to 4.5% in 2008.
  • Transportation and Communications sub-sector has increased from 5.5% in 1993 to 7.4% in 2008.
  • Financial sub-sector has increased from 0.3% in 1993 to 1.3% in 2008.
  • Real estate sub-sector has declined from 9.1% in 1993 to 6.4% in 2008.

1. Since the first General Elections held in 1993, Gross Domestic Product (GDP) has increased from 6,813 billion CR (US$ 2.48 billion) in 1993 to 41,977.3 billion CR (US$10.34 billion) in 2008, and per capita GDP has increased from 629,000 CR (US$229) in 1993 to around 3 million CR (US$739) in 2008. During the last five years, 2003-2008, the accelerated economic growth has resulted in the doubling of per capita GDP. Nevertheless, the size of Cambodia’s Gross Domestic Product is still relatively modest at 41,977 billion CR (US$10.3 billion). Per capita GDP is expected to reach over 4 million CR (US$1,000) by 2015, possibly even earlier when oil and gas production comes on stream.

1. According to a study by the World Bank, Cambodia was among the 15 fastest growing economies in the world during 1998-2007, positioned slightly ahead of China and exceeding the Asia-Pacific average of 8.4%.

FIGURE2: FASTEST GROWING ECONOMIES:1998-2007   

Source:TheWorldBank

1. As noted earlier, one of the highest priorities of the RGC has been and will continue to be its highest priority is the reduction of poverty, especially in rural areas. The impressive economic growth over the last decade, averaging around 10 percent per year has raised living standards and reduced poverty headcounts across the country. The results of the most recently completed Cambodia Socio-Economic Survey carried out in 2007, show that poverty headcount index for the whole country relative to the overall poverty line fell from 34.8 percent in 2004 to 30.1 percent in 2007, a significant decline of 4.7 percentage points from 2004 to 2007 representing a reduction of more than 1 percentage point per year. These data also show that, “the picture of welfare improvements amongst the bottom two quintiles is reinforced by improvements in a wide range of variables related to service delivery and human development outcomes. Gains are most notable in education, health and nutrition. Physical access to public services has improved, as measured in terms of average distances to the nearest health centre or school; this, combined with an improved road network and rising real incomes, helps explain improving rates of school enrolment and health-seeking behaviour. As a result, there is continued improvement in outcomes such as average level of educational attainment and self-reported health status”31.

1. Protecting the hard earned gains made so far and staying on the path to ensure future gains in reducing poverty has now added risks due to the global financial crisis, indeed, if the current situation persists for an extended period then people who are just over the poverty line at present could fall below the poverty line. The RGC is therefore taking urgent measures to put in place safety nets through subsidies and targeted labour intensive work programs, like food for work program, to protect the most vulnerable and the poor from the negative impact of external developments on the Cambodian economy.

2.        MACRO-ECONOMIC MANAGEMENT:2009-2013

1. Notwithstanding, the uncertainties because of the global financial and economic crisis, the Royal Government of Cambodia remains determined to maintain a stable macroeconomic environment, while taking all possible actions to mitigate the adverse effects of this crisis on the vulnerable and poor, in particular those living in rural areas, to safe guard gains made in reducing poverty in recent years. The medium-term goals of the RGC’s macroeconomic framework is to continue to work towards achieving an annual economic growth rate of 6% to 7% over the medium term, maintaining a rate of inflation below 5%, limiting foreign debt to a level compatible with flows of concessional financing and direct foreign investment, and maintaining gross foreign exchange reserves required to finance approximately 3 months of imports. The Royal Government will continue to pursue prudent fiscal and monetary policies, with a focus on broadening the fiscal base to generate additional revenues, in order to consolidate macroeconomic and financial stability.

1. To mitigate the impact of current global economic and financial crisis, the Royal Government has taken immediate steps that have included: a sizeable fiscal stimulus and a sharper focus on support for social safe net programs delivered by ministries and agencies to mitigate the adverse effects of the crisis on the vulnerable and poor segments of the population. On the monetary policy side, the National Bank of Cambodia’s rapid response has included a dramatic easing of and accommodative monetary policy and implementing wide-ranging measures to support and strengthen the financial and banking system. The Royal Government is confident that through a vigorous implementation of its socio-economic policy agenda for the Fourth Legislature articulated in Rectangular Strategy Phase II, in particular the implementation of policies to diversify and broaden the economic base and to improve competitiveness in the regional and international markets economic growth will rebound towards its historical growth trend in the medium-term.

1. In the short to medium-term, RGC will continue to take actions required:

• to further strengthen the financial sector in order to rebuild market confidence and to attract new private capital. To lay a foundation for revival of bank credit growth, the near-term focus of policies will continue to be on restructuring weakened financial institutions by cleansing banks' balance sheets of impaired/damaged assets, assessing bank viability, and ensuring bank recapitalization where needed;  to continue to follow macroeconomic policies to support demand;

• to maintain a balance between efforts aimed at supporting demand against the risk of exacerbating capital outflows or deteriorating credit quality through monetary policy;
• on the fiscal side, the deficits in the medium-term will be consolidated in order to bring public finances back to a sustainable path. However, in the short-term, fiscal policy will remain expansionary, at least through 2010. The fiscal deficits is expected to be high in 2009 (at around 6.75% of GDP) and 2010 to provide fiscal support needed to sustain and stimulate economic activities. The exit strategy or unwinding of the fiscal stimulus activities will be closely linked with the timing of economic recovery. As economic growth begins to recover to its trend level, the phasing out of the fiscal stimulus activities will begin. It is expected that during 2011-2013 the level of fiscal deficit will return to its pre-crisis level of around 2% - 2.8% of GDP.

31   “Poverty Profile and Trend in Cambodia: Findings from the 2007 Cambodia Socio-Economic Survey (CSES)”, World Bank Report No. 48618-KH, page viii, June 2009.  

FISCALPOLICY 

1. During the Fourth Legislature, the Royal Government will continue to focus on:

• Mobilizingdomesticrevenues,ensuringeffective allocation of budget resourcesamong competing priorities and promoting healthy public financial practices ingeneral.The financing of growing public expenditures will require continued efforts to raise more revenues, currently at around 12% of GDP. The revenue mobilization policy will be implemented within the framework of the Public Financial Management (PFM) reform program.
• Minimizing exchange rate fluctuations. In a small and open economy like Cambodia, exchange rate fluctuations can be reduced by ensuring orderly budget disbursements that would not drastically increase the volume of riel-denominated money supply in the economy at any given time. This fiscal policy instrument will continue to be used along with appropriate monetary policy interventions to maintain a stabile exchange rate.
• Counteracting inflationary pressures. In addition to maintaining a stable exchange rate, the Royal Government will closely monitor factors that may cause inflationary pressures in domestic markets, in particular agriculture products. Fiscal measures combined with other policy instruments, such as increased investment in processing facilities and ensuring fair competition among traders and middlemen by improving road conditions and enhancing trade facilitation will be used to stabilize agricultural prices.
• Pursuing sound debt management. The impact of the global financial crisis and the economic downturn on the real economy and the vulnerable and the poor in Cambodia has been discussed earlier. The financing of the measures to mitigate the adverse effects of these external developments will require the Royal Government to finance these activities through a significant increase in deficits in the short-term. The Royal Government will pursue prudent policies to ensure a sound macroeconomic and fiscal management of the economy.
• Supportingthe RGC Strategic Framework for Decentralization and De-concentration.Within the framework of the Public Financial Management Reform program, concrete steps will be taken to support the implementation of decentralization initiative to devolve some revenue and as well as expenditure responsibilities to the provinces, districts and communes. 

1. The Royal Government will follow a prudent fiscal policy and will ensure that budget deficit decline as economy recuperates, at the same time putting in place measures to consolidate the recovery. The RGC will adopt various fiscal and adjustment measures to maintain fiscal discipline and long-term fiscal stability. These will include:

• Rationalizing less  productive  spending and  protect budget allocation to priority sectors. The government will closely monitor wage bill allowing for the steady (according to the government planned policy reform on salary increase for civil servants) base salary increase and will temporary capping the increase in functional allowance. The RGC will aim at containing the spending growth in the 2010/2011 budget, as the economy start on the path of recovery. The government will monitor the size and composition of the recurrent spending which has dramatically increased in 2009 and will be cautious against allowing significant increase in non-reversible current spending, such as the wage bill, to become entrenched, as this could risk crowding out spending on priority sectors such as health, education, and operations and maintenance, and further increase domestic financing needs if not accompanied by significant revenue gains.
• Increasing revenue collection through broadening the tax base and strengthening administrative compliance. Revenue mobilization measures may include the followings: (i) broaden tax base and increase tax rates; (ii) strengthen the enforcement of property tax and unused land tax, including the implementation of the capital gain tax; (iii) introducing VAT for electricity and water; (iv) replacing current tax incentives with investment allowances, tax credits, and accelerated depreciation.
• The Ministry of Economy and Finance will review the current national budget by rationalizing current spending (compulsory versus non-compulsory expenditures) and reallocating them into funds used for direct support of growth or for specific government’s allocations for social safety net as well as spending needed to mitigate unexpected impacts resulting from the global financial and economic crisis.
• Adopt policies to foster investment in the oil sector and in energy resources more generally and to ensure that investment regimes are stable and predictable, encourage greater cooperation and synergies between national and international concerned agencies through well designed partnerships.
• Proactive policy to mobilize and increase disbursement of ODA for capital/development spending. The Government will make it utmost to mobilize and use official development assistance effectively, efficiently and on target. The Ministry of Economy and Finance will lead and coordinate with all relevant Ministries/agencies in order to speed up the implementation of necessary reform measures, which are the conditionalities for providing budget support in order to mobilize and disburse the resource quickly and efficiently to meet development needs.

1. The Ministry of Economy and Finance is now implementing Platform II of RGC’s Public Financial Management Reform Program that is focussed on “Buildingon ImprovedBudget Credibility towards Achieving Financial Accountability”. The main theme of Platform 2 is increased accountability of those who are responsible for the safe, efficient and effective management of public resources. Platform 1 had sought to address the overall resource management framework and to tackle fundamental problems in the system as a whole. Platform 2 seeks the engagement of all budget entities and their managers in improving their own internal financial management within the overall framework. Activity plans that have been developed aim to bring this about through a combination of regulatory, process and capacity development initiatives with an appropriate balance of incentives for good PFM performance and sanctions for poor performance. 

1. It is envisaged that work that will be done under Platform 2 twill increase the empowerment of budget entities/managers. However, given the fragility of financial control systems from which reforms have started, progress will be closely monitored will be rolled out as lessons are learned, as confidence is build and trust is earned.

1. Both enhanced accountability and empowerment will be supported by measures to further improve information systems and transparency about how financial management obligations are being exercised in practice by budget entities/managers. The focus of implementation of Platform 2 activities in 2009 has been on:

• For MEF, to develop proposals for the detailed implementation of some of the key technical changes envisaged in Platform 2 such as the way that funds will reach service deliverers and be utilized, the implementation of improved financial information systems and methods for holding budget implementation agencies more accountable.
• Seeking the engagement of line ministries and other budget implementation agencies in the implementation of Platform 2.
• Building capacity development programs that are so important to achieving Platform 2 objectives.

1. Significant progress has been made in all these areas during 2009 although work on each will continue into 2010 as well as other more detailed activity  development. In particular, work on procuring the computer systems that will sit at the heart of the financial information system is now well advanced. The development of a more strategic approach to resource management is being developed, a framework for internal audit activity has been designed and all line ministries have participated in briefing seminars and the design of capacity development programs. They have formed their own reform cells and most line ministries have already developed their plans for contributing to the overall reform strategy.

1. The implementation of Platform 2 as planned will help to establish a climate of responsibility for the management of public resources at all levels in the administration. Strong and weak management of those resources will be recognised and differentiated. As a result of this step change, a foundation will be laid for the following developments in later Platforms:

• To build on initial steps towards greater empowerment of budget entities managers to achieve improved results because there will be an improved control framework within which to exercise that empowerment and lessons will have been learned.
• To challenge the efficiency of expenditure deployment and the continuing relevance of on-going expenditures because there will be an improved basis for engaging budget entities/managers in examining such questions based on improved information flows and visibility of what is happening with resources in practice.
• To begin to identify an alignment between the implementation of policies and the delivery of service improvements with the resources required to achieve those improvements because a foundation of information and analysis about how resources are being used in practice will be in place.
• To move on towards accountability for the management of results because the improved accountability for resource management can be built upon.