CAMBODIA-DEVELOPMENT: Donors Pledge More Aid, But at What Cost?

By Suvendrini Kakuchi Reprint | | Print |

Suvendrini Kakuchi and Andrew Nette

TOKYO/CAMBODIA, Jul 12 1996 (IPS) - Cambodia Friday received a vote of confidence and 500 million dollars in aid from the international donor community, despite NGO warnings that the Phnom Penh government policies may hurt the nation’s urban and rural poor.

In the weeks leading up to the Consultative Group meeting in Tokyo, environmental groups have been pressing donors to attach conditions on any aid to Phnom Penh to ensure the government takes stronger measures to protect its dwindling forest cover.

At the same time, non-governmental organisations (NGOs) working at the community level in and outside the Cambodian capital warned that the structural adjustment plans of the Phnom Penh government would come at a serious social cost.

But Cambodian officials attending the two-day meeting emerged with smiles on their faces, having convinced donors for the second year running, that the government’s fiscal policies were bearing fruit and deserved support.

“We are satisfied with the assistance received in Tokyo,” stated a beaming Keat Chhon, Cambodian Minister in charge of Rehabilitation and Development and Minister of Finance. “Looking at the figure from a per capita basis the aid we received is very high,” he told reporters in Tokyo.

Last year in Paris, donors agreed on a 900 million dollar aid package for Cambodia now in the process of rebuilding the economy after 20 years of war within and outside its borders.

“For the past two years, this government has shown an extraordinary amount of budgetary discipline and they (donors) want to see it continue,” a World Bank official in Phnom Penh told IPS last week.

The 500 million dollar package, including 230 million dollars in bilateral aid, the rest from multilateral agencies, is for the 1996-97 fiscal year. Cambodia had requested 940 million dollars for its three-year economic reconstruction plan, or 550 million dollars for the one year-period.

The main conditions of the donors were that Cambodia reduce its military budget, and improve its investment in its social infrastructure particularly in the rural sector, and also that Phnom Penh pay closer attention to protection of the environment.

But an NGO Forum, representing 60 Cambodian and international non- governmental groups, says that the very policies endorsed by the donor community and prescribed by the World Bank and the International Monetary Fund (IMF) “will carry a high social cost” and expose a number of Cambodians to poverty.

Chhon told donors that his government will reduce its military budget from the current five per cent of Cambodia’s Gross Domestic Product (GDP) to less than two per cent by the year 2000. He also told donors and reporters that army personnel numbers would drop from 130,000 in 1994 to 90,000 by 1997.

“While the Forum acknowledges the importance of reducing military expenditure and improving the government’s capacity to work, we are concerned that those most in need will bear the brunt of the costs,” the NGO Forum said in a statement.

“In the absence of an effective social safety net, these people may simply add to the already high number of Cambodians living in poverty,” the Forum said.

The NGOs are concerned that while donors did stress the need for more money to set aside for Cambodia’s social infrastructure, that in reality the Phnom Penh government would blindly strive for macro-economic development and that like in the rest of South-east Asia, only the rich would benefit.

A World Bank report on Cambodia released ahead of the Tokyo meeting advocated that the government take greater steps to encourage private foreign investment and to adopt an export- oriented growth strategy.

But according to Nicola Bullard, the NGO Forum’s coordinator, such policies are at the root of the widening rich-poor gap in other South-east Asian nations that have recorded rapid economic growth in recent years.

“It will hit the most vulnerable and their families, those who do not have the skills to take advantage of the private sector,” Bullard warned, adding that if pursued in its current form, the structural adjustment programme would be a “disaster”.

What usually accompanies such policies, she said, is reduced expenditure on social services and a diminished government capacity to pursue its own development policies.

Such criticisms do not go down well with the World Bank or the IMF which have been criticised in the past for structural adjustment programmes on the African continent.

Joshua Charap, the IMF resident representative in Hanoi, counters: “Countries don’t come to us because they want our help, they come because they need our help.”

And in a reference to the civil service restructuring programme which is expected to see at least 30,000 public servants lose their jobs, he said: “Creating a more efficient public sector will in itself lead to a more productive economy.”

But even Cambodian officials have expressed reservations about the restructuring programme.

Addressing a May 10 preparatory meeting for the Consultative Group gathering, Cambodian Minister for Planning Sok An told donors that Phnom Penh was endorsing administrative reform for various reasons “not least of which is to meet conditionalities for continued support by international financial institutions”.

He added: “With technical assistance from the World Bank, we are finalising the reduction programme. But I must admit, with some trepidation.”

Cambodia has little bargaining power to resist such measures, with foreign aid, including support from the IMF and World Bank, accounting for 40 per cent of the government’s annual budget.

The World Bank pledged 75 million dollars and the Asian Development Bank another 107 million dollars grants and loans to Cambodia at the Tokyo meeting.

And while donors have lauded the way the Cambodian authorities have conducted themselves so far as far as economic policies are concerned, they renewed calls for “greater transparency” in development projects.

And there were warnings as well to the Phnom Penh government that the aid programme may be suspended should donors not be satisfied with how the money is being managed.

“Some of the programmes to be financed will take several years to show results and donors are willing to be patient,” Javad K. Shirazi representative of the World Bank, told reporters in Tokyo Friday. But he added: “Aid can be put on hold. Donors expect the Cambodia government will honour their expectations.”