Cambodia, like many other developing countries, has struggled to improve aid coordination and for a decade has issued decrees for better aid alignment and harmonization.

Cambodia is one of the poorest countries in Asia and escaped from civil unrest in 1991. Despite that, it had high economic growth in 2014 and 2015. The GDP growth rates for 2014 and 2015 were 7.1% and 7% respectively (“Cambodia- Economy”). Even though there was high GDP growth, a worrisome point of Cambodia’s economy is its high dependence on international aid. 8% of the country’s Gross National Income in 2014 was just aid money (“Cambodia Faces Turning Point on Foreign Aid”). Aid receipts accounted for approximately half of the national budget.

In an internationally acclaimed book, ‘Delivering Aid Differently: Lessons from the Field’ (Fengler and Kharas 2010), the authors talk about the new mechanisms which govern the aid industry and how aid must now adapt to the “new reality”. One of the case studies in the book is of Cambodia written by Ek Chanboreth and Sok Hach. The authors have highlighted the challenges faced by Cambodia in aid delivery and how the Cambodian government along with the donors is trying to solve these problems.

In 2008, when this case study was written, Cambodia faced a common issue across the developing countries – a high level of fragmentation in the aid delivery. In 2008, Cambodia had 39 donors, including both bilateral and multilateral donors, which provided ODA worth $743 million. Out of these, 5 small bilateral donors provided less than $1 million combined ODA. In addition, Cambodia also saw an insurgence of new bilateral donors, namely China, South Korea and Thailand.

Cambodia also faced a high level of aid volatility. Aid flows for all developing countries are volatile, but Cambodia’s volatility was higher than the average of the rest of the developing countries. Between 1997 and 2006, Cambodia’s aid volatility was 13% compared to the average 6% aid volatility of other developing countries.

Another significant challenge was the absence of any link between the foreign aid and Cambodia’s national development plan (especially the National Strategic Development Plan). Furthermore, development cooperation was largely donor driven and lack of ownership resulted in suboptimal results from donor programs and activities. Also, aid was poorly coordinated among the donors, resulting in duplication of similar projects. Instead of focusing on capacity building, the donors had given priority to capacity substitution.

Consequently, Cambodia and its development partners ended up diverting aid money and resources to other purposes like administrative costs.

To treat the ailing aid structure, the Royal Cambodian Government (RGC) used various instruments under two primary declarations: Declaration on Harmonization and Alignment (2004, signed with 12 partners) and Declaration of Aid effectiveness (2006, signed with 14 partners).

The main goals of these declarations were to tackle the challenges faced in the aid structure in areas of ownership, alignment, harmonization and managing results and creating mutual accountability.

RGC committed to having full ownership of development policies and goals. Developing partners committed to respecting RGC ownership and provide support. The aid programs were supposed to be aligned with national strategies and plans (NSDP). RGC also dedicated itself to improving their administrative and public finance management. To tackle the problem of lack of harmonization, the developments partners committed to reducing duplicative missions and to increase assistance through program-based approach. To manage results and to create mutual accountability RGC started operating an ODA disbursement website which enabled partners to report their ODA data directly- so all donors can see the projects the rest are working on and public and civil society has access to reliable and timely information. The website also helps in monitoring the alignment of ODA and NSDP priorities.

Cambodia’s case is not unique. Many developing countries have faced similar issues and the challenge since the Paris declaration of 2005 has been to harmonize aid and improve its impact on the receiving country. A key lesson for the donors has been that they should not choke local capacity but help the country build it.

 

References

  1. “Cambodia: Economy,” Text, Asian Development Bank, (August 14, 2014), https://www.adb.org/countries/cambodia/economy.
  2. “Cambodia Faces Turning Point on Foreign Aid,” The Cambodia Daily, November 13, 2015, https://www.cambodiadaily.com/news/cambodia-faces-turning-point-on-foreign-aid-100205/.
  3. Wolfgang Fengler and Homi J. Kharas, Delivering Aid Differently: Lessons from the Field (Brookings Institution Press, 2010).
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