Monday, 3 October 2011

Cambodia's Economic Development and International Assistances


Prime Minister Hun Sen (left) shakes hand with his Chinese Counterpart. China, the main economic development partner for Cambodia?


(Prime Minister Hun Sen delivered his speech at the 4th Cambodia Economic Forum in Feb 2011). Cambodia has to heavily invest in human resource development and to diversify its narrow industrial base (clothing, tourism, construction, and agriculture) if it wants to secure its high-growth potential in the long-run economic development.




For the last ten year from 2000-2009, Cambodia’s economic development is quite remarkable with a high GDP growth rate and macroeconomic stability. This remarkable achievement has been contributed by peace and stability, good governance, economic reform, and international development assistance. After the signing of Paris Peace Agreement in 1991 and UNTAC-supervised election in 1993, large amount of international development assistance has been provided to Cambodia for national reconstruction and rehabilitation, especially on socio-economic development. Among major donor countries to Cambodia, Japan is the largest donor, constituting a substantial amount of ODA for Cambodia. As of 2006, Japan’s ODA, including loans, grant aids, and technical assistance has amounted to nearly 1.8 billion USD for Cambodia alone (Ministry of Foreign Affairs of Japan, 2010). So, a robust economic development in Cambodia has been strongly supported by this large amount of money pouring into development of all sectors of Cambodia’s economy, especially in economic infrastructure development, such as renovation of roads, ports, construction of bridges, dams and irrigation systems etc. Although the current poverty rate is still high, Cambodia’s development by Japanese ODA can be a good example for other war-torn countries, especially the Sub-Saharan Africa.
 
However, human resource development in Cambodia is very limited due to low per capita GDP, prolonged period of civil wars and instability, poor education facility, and limited number of teachers and professors. Although Japan has provided a huge grant aids to Cambodia, most of grant aids has been concentrated on economic infrastructure, rather than human resource development. However, it is very logical that economic infrastructure should be the top priority for economic development in Cambodia since after the fall of Khmer Rouge regime (1979) all of its infrastructure and human resource were almost totally destroyed by Khmer Rouge’s regime. Until today, most part of the country is still underdevelopment due to poor transportation infrastructure. Fortunately, Cambodia-Japan Friendship Bridge across Tonle Sap River was reconstructed in 1994 and the first Mekong Bridge in Kampong Cham province has been built to connect the Eastern part and Western Part of Cambodia. The second construction project of Mekong Bridge in Neak Leung is under way this year. To realize this project after several phase of feasibility study, Japanese government, last year, has provided a financial assistance of $131 million to Cambodia for building this bridge across the Mekong River. The bridge will be built at Neak Loeung in Kandal province, about 40 miles southeast of Phnom Penh and will be the longest bridge in Cambodia once completed in 2015. However, all kinds of economic infrastructure’s projects take several years to be completed. So, the pace of economic and social development is very slow in Cambodia. That is why Cambodia and other Less Developed Countries in ASEAN have not caught up with the level of economic development of the ASEAN-6 (especially Thailand and Malaysia) countries.
 
Human resource development in Cambodia has met a lot of challenges ranging from low annual education budget, poor quality of higher education, limited number of qualified teachers and professors, and low research and development. According Cambodia Demographic and Health Survey 2005, adult illiteracy rate was very high, around 26.4% (National Institute of Statistics of Cambodia, 2010). In the higher education sector, Cambodia has experienced low enrollment rate for higher education (46,845 students in 2004-05) and a very low number of college graduate annually. The total number of Cambodian students studying abroad through scholarships and self-support is very low in comparison to neighboring countries such Thailand and Vietnam. Furthermore, according to Ministry of Planning of Cambodia (2010), National Human Development Report 2007 indicated that Cambodia’s Human Development Index (HDI) ranking was 129 among 177 countries. All of these figures indicate that human resource development in Cambodia is very poor comparing to other countries in the Association of South East Asian Nation (ASEAN). This problem could have serious negative impact on long-term economic development and requires careful attention of the Royal Government of Cambodia (RGC).
 
Therefore, human resource development should be the top priority in the government’s long-term development strategy so that more grant aids and technical assistance can be effectively directed to this crucial area. According to the National Strategic Development Plan 2006-2010, capacity building and human resource development is the most important growth angle and is accorded high priority in the RGC’s development agenda (Ministry of Planning of Cambodia, 2010). With this strategic plan, Priority Action Program has been developed in which RGC's budget allocation to the education sector has increased from 10% of total budget in 1997 to 19.5% in 2004 with 20% to be reached in 2005. For scholarships, RGC still seek grant aids to promote human resource development by seeking supports from various donor countries, especially Japan, and other developed countries.
 
Now let’s have a look to Cambodia’s economic development through Official Development Assistances (ODA). International assistances to Cambodia dates back to the early day of the Paris Peace Agreements in October 1991. Then, international development assistance started in full swing after the general election supervised by United Nation Transnational Authority in Cambodia (UNTAC) in 1993. After the same year, the International Committee on the Reconstruction of Cambodia (ICORC) has been convened annually. In 1996, ICORC was replaced by The Consultative Group Meeting for Cambodia (CG). So far, Japan is the largest donor among other donor countries such as China, France, Australia, and Germany, and USA. However, grant aids and concession loans from China has been significantly increasing in recent years. Most of major construction projects such as construction of national roads and hydro-power dams are being undertaken by Chinese companies.
 
However, Japanese grant aids for human resource development in Cambodia is still at a very low figure in comparison to large amount of grant aid for physical infrastructure development. According to ODA Disbursement Table by fiscal year for Cambodia (Ministry of Foreign Affairs of Japan), Japanese grant aids for human resource development scholarship has constituted a small portion of approximately one percentage of Japanese ODA to Cambodia, if I am not mistaken with the figures and calculations. Among this human resource development scholarship project, there are two remarkable scholarships for Cambodia, one is Japanese Grant Aid for Human Resource Development Scholarship (JDS) Program and Young Leader Programs (YLP). Particularly, JDS Program, which has been implemented since 2000 is aimed at providing scholarship for young government officers, researchers, and students to study in Japan. So far, 175 Cambodian students have been granted with this scholarship (JICA Cambodia Office, 2008).
 
While economic infrastructure development is still vital for economic progress in Cambodia, its process of development study and construction projects can take several years to be completed. For example, the development study of the Second Mekong Bridge in the Eastern part of Cambodia took five years (2004-2009). Therefore, human resource development should be promoted as the top development agenda of the Government and it should deserve more attention and support from Japan’s ODA policies. In this new century, Japan should allocate more grant aids for human resource development projects. If Cambodia has enough human resource, its self-help effort for socio-economic development will be easily achieve in the same way as other countries in ASEAN such as Singapore and Vietnam. Furthermore, human resource development can contribute to higher productivity and higher per capita Gross National Income (GNI). The accumulation of human capital and capital stock of a country would enable it expand and diversify its industrial base into a technological and capital-based industry, contributing to rapid economic growth and poverty reduction.
 
Since Cambodia achieves full peace and stability and a robust economic growth, it is time that human resource development is the top priority in the new strategy for Japan’s ODA to Cambodia. The number of Scholarships to study in Japan should be increased for Cambodians, especially those who live in the rural areas which has suffered high rate of poverty and poor socio-economic infrastructure. The field of study in Japanese scholarship is also a critical factor contributing to the development of Cambodia. Especially, the field of public policy, economic development, finance and banking, and ICT, would be useful for Cambodia’s administrative and economic reform and capacity building and the development of a reliable database and computerized network for public service. For example, the establishment of National Information Communication Technology Development Authority (NIDA) with the technical assistance from South Korea has enabled a quick access to useful statistics and public data and also improve computerized civil service in Cambodia.
 
Furthermore, peacebuilding efforts in Cambodia will be promoted through human resource development by providing better opportunity for young generation in education and labor market. The more people get educated, the more they contribute to economic development and consolidation of democracy in Cambodia which is still facing with many challenges such as corruption, weak rule of law, clientelism and partisanism. Especially, poverty in the rural and remote areas in Cambodia is very high and this major social problem could be exploited by opportunistic politicians and illegal armed groups by motivating unemployed youth to join their movement and provoke social instability. So, human resource development and vocational training play an important role to replace “lack of opportunity” with full of opportunity for Cambodians in education and labor market.
 
Therefore, in this new decade of the 21st century, donor countries should strongly focus on human resource development in Cambodia by providing more human resource development scholarship for Cambodian students to study in all area of development in their countries since human capital is the vital element in promoting socio-economic development and democracy for Cambodia in the 21st century. Cambodia’s Millennium Development Goals (MDGs) on Education by 2015 will be further promoted if donor countries provide more assistance in the field of education, youths, and sports.


(King Sihamony's visit to Japan in May 2010)
Japan is still the largest contributor of ODA to Cambodia

Other articles on Cambodia: 

    (5 March 2014)


    (17 October 2011)

    (03 October 2011)

    (12 September 2011)

6. Review of Cambodia's Economy and Finance (up to 2011)
    (31 August 2011)

     (22 August 2011)

    (17 August 2011)

    (17 August 2011)

    (16 August 2011)

      (15 August 2011)


      (15 August 2011)

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