The World Bank In Cambodia

Over the two decades before COVID-19 struck in 2020, Cambodia blossomed economically. Having reached lower middle-income status in 2015, it set its signs on attaining upper middle-income status by 2030. Thanks to garment exports and tourism, Cambodia’s economy grew at an average annual rate of 7.7 percent between 1998 and 2019, making it one of the fastest-growing economies in the world. 

Post-pandemic, Cambodia’s economic recovery has gained momentum, but remains uneven. Traditional growth drivers, especially manufacturing and agricultural commodities exports, have fully recovered. However, while travel and tourism have improved, the sector remains well below pre-COVID-19 levels. The pick-up in tourism is due to both rising domestic activity and increasing international arrivals. The construction and real estate sector, another important pre-pandemic growth driver, remains sluggish. The economy is projected to grow 4.8 percent in 2022, upwardly revised from a forecast of 4.5 percent in April, underpinned by merchandise exports and domestic economic activity. Foreign direct investment (FDI), while diversified, remains affected by China’s zero COVID-19 policy.

Cambodia’s export-oriented manufacturing sector is expected to face headwinds from a less favorable external environment reshaped by slowdowns in the United States and China. In addition, energy and food price hikes due to the war in Ukraine are expected to weigh on household budgets and slow poverty reduction. To blunt the impact of high inflation on vulnerable households’ welfare, the government is considering additional fiscal interventions.

Over the medium term, the economy is expected to grow around 6 percent annually as the new investment law and free trade agreements help boost investment and trade.

Cambodia has recently redefined the poverty line, using the most recent Cambodia Socio-Economic Survey for 2019/20. The national poverty line is now 10,951 riels per person per day or the equivalent of $2.70 (at October 2022 exchange rates). Under the new poverty line, about 18 percent of the population is identified as poor. Poverty rates vary considerably by area. The poverty rate is the lowest in Phnom Penh (4.2 percent) and other urban areas (12.6 percent), and the highest in rural areas (22.8 percent).

Over the period 2009-2019/20, poverty rates declined by 1.6 percentage points a year, driven substantially by rising labor (especially wage) earnings. However, the COVID-19 pandemic led to increases in unemployment, poverty, and inequality. The scale-up of social assistance to poor and vulnerable households, launched in June 2020, has moderated income losses. The increase in the poverty rate in 2020 is projected to have been limited to an increase of 2.8 percentage points. Poverty nevertheless remains higher than pre-pandemic levels.

By contrast, a survey of households shows that employment has returned to pre-pandemic levels. The negative effect of the pandemic on non-farm family businesses has stabilized; however, low consumer demand remains the main driver of revenue losses. One-third of households continued reporting declines in income between April and May 2022. This suggests that the proportion of households negatively affected by COVID-19 is still higher than those received cash transfers from the government, which could lead to an increase in poverty.

Cambodia has made considerable strides in improving health outcomes, early childhood development, and primary education in rural areas. Life expectancy at birth and maternal, under-five, and infant mortality rates have been improved significantly between 2000 and 2021. Despite this progress, human capital indicators lag other lower middle-income countries. In 2020, a child born in Cambodia would be expected to be only 49 percent as productive when grown as she or he could be if she or he enjoyed full quality education, good health, and proper nutrition during childhood. In the 2021-2022 academic year, net enrollment rates for primary, lower secondary, and upper secondary education (both public and private) reached 93 percent, 46.7 percent, and 28.6 percent, respectively.

Key reforms are needed for Cambodia to sustain pro-poor growth, foster competitiveness, sustainably manage natural resource wealth, and improve access to and quality of public services. Cambodia continues to have a serious infrastructure gap and would benefit from greater connectivity and investments in rural and urban infrastructure. Further diversification of the economy will require fostering entrepreneurship, expanding the use of technology, and building new skills to address emerging labor market needs. Accountable and responsive public institutions will also be critical.  Boosting investments in human capital will be of utmost importance to achieve Cambodia’s ambitious goal of reaching middle-income status by 2030. 

Last Updated: Oct 19, 2022

The World Bank’s engagement in Cambodia focuses on eliminating poverty and boosting shared prosperity by investing in human capital, improving rural living standards, building basic infrastructure, and empowering communities.

The World Bank Group’s Country Partnership Framework (CPF) for Cambodia for FY19-23 was discussed by the Board on May 30, 2019. This five-year strategy is closely aligned with the fourth phase of Cambodia’s Rectangular Strategy for Growth, Employment, Equity and Efficiency and the National Strategic Development Plan 2019-2023. The CPF has three focus areas: (i) promote state efficiency and boost private sector development; (ii) foster human development; and (iii) improve agricultural productivity and the sustainable use of natural resources. Critical cross-cutting themes are governance, institutions, and citizen engagement, which are embedded in all World Bank Group-financed activities.

The Cambodia CPF’s three focus areas are underpinned by specific objectives:

Promoting state efficiency and boosting private sector development by: 

• Enhancing financial sector development and fostering private enterprise;
• Strengthening public sector accountability and public financial management;
• Expanding and improving sustainable infrastructure.

Fostering human development by:

• Enhancing the quality of education and alignment with labor demands;
• Expanding access to quality early childhood services, along with health care and nutrition services.
• Improving agricultural productivity and strengthening the sustainable use of natural resources by: 
• Strengthening management of water and land resources;
• Improving agricultural productivity and diversification.

The World Bank supports these focus areas through investment projects in education, health and nutrition, roads, improved livelihoods, agriculture diversification, land allocation for social and economic development, water supply and sanitation, sustainable landscape and water resource management, disaster risk management, and community-level service delivery.

A recently completed Performance and Learning Review (July 2022) extended the CPF period by one year. The extension will align the next CPF with the strategy that the Government will put in place after the completion of the Economic Recovery Plan (ERP) at the end of 2023.

In support of Cambodia’s efforts to deal with the COVID-19 crisis and to strengthen the country’s economy for recovery and future resilience, the World Bank approved the COVID-19 Emergency Response Project ($20 million) and activated the Contingent Emergency Response component (CERC) of the Health Equity and Quality Improvement Project (H-EQIP) and approved an additional financing ($14 million) to this component for responding to COVID-19 pandemic. The World Bank also approved the Cambodia Relief, Recovery and Resilience Development Policy Financing ($200 million). In March, 2022, the World Bank approved $55 million for the second phase of the Health Equity and Quality Improvement Phase 2 (HEQIP-2) to support for improve access and quality of health care services in Cambodia. This new financing will benefit the population throughout the country, particularly the poor and vulnerable, and will support effective responses to health crises when required.

Further, the Bank adjusted the active portfolio to respond to the crisis. For example, the Higher Education Improvement Project re-allocated $5 million to support activities on EdTech e-learning to help students learn from home (nearly 3 million beneficiaries), and the Cambodia Agricultural Sector Diversification Project financed $10 million in activities to address food security for vulnerable populations. The Livelihood Enhancement and Association of the Poor Project continued to use the skills development platform to scale up the labor component. The Water Supply and Sanitation Improvement Project will install water connections in hospitals treating COVID-19 patients and provided hand washing stations to households in low-income communities.

The knowledge agenda is a significant part of the World Bank’s engagement in Cambodia. Programmatic Advisory Services and Analytics (PASA) on competitiveness and entrepreneurship, economic diversification, digital development,  social accountability, public sector performance, poverty assessment, equitable access to quality health and nutrition services, environmental sustainability and resilience, and social protection and jobs strengthen the understanding of development challenges Cambodia faces and foster dialogue on development policy issues with a broad range of stakeholders.

Last Updated: Oct 18, 2022

The COVID-19 Emergency Response project contributed to increasing the COVID-19 testing capacity in the country from 1,500 to 12,000 tests a day through rolling out testing to 10 provincial hospital and for regional hospital laboratories, and established the Polymerase Chain Reaction System in two regional hospital laboratories in Battambang and Siem Reap provinces. The project also supplied medical equipment to treat severe COVID-19 cases and prevent infection as well as COVID-19 vaccine deployment.

The Health Equity and Quality Improvement Project (H-EQIP)  aims to improve access to quality health services for the targeted population groups with protection against impoverishment due to the cost of health services. H-EQIP supported the nationwide implementation of (1) the National Quality Enhancement Monitoring Program (NQEMP), resulting in increasing the  number of health centers exceeding a 60 percent score on quality assessment; and (2) helped the Health Equity Fund (HEF) purchase health care services at public health facilities for the poor and vulnerable, supporting approximately 15 million visits by the end of 2021. H-EQIP financed the construction of 45 new health centers and 15 maternity and obstetric wards, most of them located in remote or difficult-to-access areas. The project used a multipronged approach to strengthening health systems and to roll out non-communicable disease (NCD) screening and treatment services to approximately 200 health centers and 61 NCD clinics. Under the Contingency Emergency Response Component, H-EQIP support for the establishment of two regional hospital laboratories for testing COVID-19 equipped hospitals for treating severe COVID-19 cases and  purchased 80 ambulances to refer severe Covid-19 cases for treatment at designated sites.

The ongoing Higher Education Improvement Project (HEIP) has invested $5 million in e-learning so that nearly 3 million pre-school, primary, and secondary school pupils could learn from home while schools are closed. The main achievement as of now includes (i) 21 Bachelor’s and Master’s curricula that have been revised or developed to meet national and international standards, (ii) publication of 25 internationally peer-reviewed articles, (iii) nine products and 23 prototypes developed, (iv) 100 renovated and newly built laboratories, (v) a sizeable number of classrooms renovated, and (vi) enrollment of 118 faculty members from five target higher education institutions for advanced degrees. As of now, the project has benefitted 50,770 students, faculty members and educational staff.

Based on the success of the implementation of the Implementation of Social Accountability Framework (ISAF) phase I, which was initiated in 2015, phase II (ISAF II) has been rolled out. The World Bank established a multi-donor, Social Accountability and Service Delivery Trust Fund (SASD-TF) with Switzerland, Germany, Australia to provide financing for World Vision International (WVI) to implement demand side (civil society organization) activities (Engaging Citizens to Improve Service Delivery Through Social Accountability) and for the National Committee for Democratic Development Secretariat (NCDDS) to implement supply side (government) activities (Integration of Social Accountability into National and Subnational systems) as part of ISAF phase II (2019-2023). So far, supply side activities have been rolled out to 24 out of 25 capitals and provinces.

To raise awareness of citizen rights and service provider standards, the project has organized events including village meetings, mobile kiosks, and home visits to vulnerable families. Some 59 percent of the service providers covered by the project (schools, health centers, and commune administrations) are now meeting key national standards. The total number of active Community Accountability Facilitators (CAFs) is 2,039 (1,351 females and 860 youth).

The Livelihood Enhancement and Association of the Poor  (LEAP) is being implemented to improve access of poor and vulnerable households in selected rural and urban communities to financial services, opportunities for income generating activities (IGAs), and small-scale infrastructure, and to provide immediate and effective response in case of an eligible crisis or emergency. LEAP established 975 self-help groups (SHGs), in which 89 percent of the participants were women, and mobilized 11,377 poor households. The SHG have been provided over $1.1 million in seed grants, another $1.1 million in additional grants. Nearly $700,000 of savings has been mobilized among these groups.  Intra-SHG lending from these sources of funds and loan rotation total over $4.4 million to date, with over $2.8 million in loan repayment, 83 percent on-time. 44 producer groups (PGs) and eight agriculture cooperatives (ACs) have been formed. Over 1,000 people have received skills development training, 37 percent of whom were employed directly after completion of their training. 116 community-infrastructures (83 in Siem Reap and 33 in Phnom Penh) out of 216 have been completed.

The Community-based Childcare for Garment Factory Workers Project (CBCC) is a five-year project effective from April 05, 2020 to March 31, 2024. The project is being implemented by Planète Enfants & Dévelopement (PE&D). The target beneficiaries are garment factory workers (approximately 80% of which are women) and their families living in Kampong Spue province,  and other provinces.  The Centers will look after children of garment factories workers and promote overall child development, including cognitive growth, motor and social skills, and early learning. Currently, the first four centers are fully open at Kampong Spue province for children from 3 months to 3 years old.

The ongoing Road Asset Management Project II (RAMPII) has been supporting the Ministry of Public Works and Transport (MPWT) to improve the conditions, safety, and climate resilience of over 420 kilometers of  the core national road network and to introduce a road management system. Performance-based contracting for road construction and maintenance is expanding to promote private sector participation and to optimize service quality.

As of April 2022, the Water Supply and Sanitation Improvement Project has benefitted a total of 2,838 people, including 1,340 women, with the provision of piped household water connections in Mondul Kiri’s provincial center, comprising 515 connections (including eight to indigenous households), the Saen Monoroum High School and 14 public institutions. Some 117 households with children under two years of age also gained access to piped water supply under the project.

Last Updated: Oct 18, 2022