Guest contribution - issue 25 - April 2005

By: Farid Siddiqui and Niloy Banerjee


Background and current state of play
Cambodia has reached a crossroads in its development as it moves away from a post-conflict situation towards a more stable development paradigm. Several decades of isolation and conflict have devastated much of Cambodia’s physical, social and human capital. Much has been achieved since the Paris Peace Accords were signed in 1991, and Cambodia has made great progress in ensuring peace and security, rebuilding institutions, and establishing a stable macroeconomic environment and a liberal investment climate. With peace and macroeconomic stability more firmly entrenched, the country has an opportunity to make far-reaching reforms so as to achieve sustained social and economic development.

Cambodia’s gross domestic product (GDP) has grown by an average of 6% per annum over the past decade. The industrial sector has been the main engine of growth, with garment manufactures forming 85% of Cambodia’s exports. Tourism has begun to contribute to growth, while agriculture has grown only modestly, lagging behind population growth. Official Development Assistance (ODA) has averaged 12% of GDP in the past decade and represents the largest share of total public spending in the social sectors. ¹

In this context, effective aid coordination and management is crucial if Cambodia is to achieve the Millennium Development Goals. Significant changes have been registered in this regard during the past few years. At the 4th Consultative Group (CG) meeting in Paris in 2000, the Royal Government of Cambodia presented a new paradigm for development cooperation management to its development partners. ² In this framework, the Cambodian government appointed the Cambodian Rehabilitation and Development Board (CRDB) at the Council for the Development of Cambodia (CDC) as the nodal agency within the government for aid coordination and resource mobilisation for public investments. At the 5th CG Meeting in Tokyo in 2001, the Cambodian government provided further details on the strategic implementation considerations that need to be taken into account in developing effective cooperation partnerships with development partners. However, it has only been since the 6th CG meeting in Phnom Penh in 2002 that both the government and donors have been more keen to improve aid coordination modalities.

At this 6th CG Meeting - the first to be held in Cambodia, a clear sign that the government wanted to take charge - the Cambodian government proposed the establishment of a ‘government-donor partnership working group’. This working group started to collect and analyse background information and to outline feasible solutions to the problem of aid coordination and harmonisation. It did so by performing three studies focusing on:

1. the capacity-building practices of Cambodia's development partners;
2. the practices and lessons learned in the management of development cooperation;
3. the preparation of national operational guidelines for development cooperation.

Based on the findings of these studies, new partnerships with donors, private sector actors, and civil society organisations are being currently structured around the principles of a common vision and shared objectives, agreed governance and accountability standards, harmonised strategic management and operational capacities, and a spirit of building and maintaining trust. ³ The 2003 Rome Declaration on Harmonisation, as well as the work that is being done to monitor its implementation, have accelerated the momentum. The government is engaging with the donor community both locally and at OECD/DAC level. The government has also made a strong commitment to seek the improved harmonisation and alignment of donor resources at other ongoing regional and global forums in Bangkok and, most recently, at the second High-Level Forum in Paris.

Other recent initiatives have included:

• promoting harmonisation by means of sector-specific and/or thematic programmes;
• strengthening partnership with the private sector;
• restructuring the working groups operating under the CG;
• enhancing government-donor coordination to achieve greater harmonisation and alignment of ODA-supported activities with national priorities; and
• strengthening the monitoring of the government's reform programmes.

An Action Plan on Harmonisation and Alignment was also drafted and included in a Declaration on Harmonisation and Alignment signed by the government and 12 development partners. In 2004, the Royal Government of Cambodia and its development partners agreed to establish 18 Joint Technical Working Groups (TWGs) for particular sectors and themes. A ‘Government-Donor Coordination Committee’ (GDCC) was formed to coordinate these TWGs. The GDCC’s job is to provide policy guidance, to set priorities, and to propose action to solve problems raised by the TWGs. The GDCC is chaired by one individual who holds the three portfolios of Senior Minister, Minister of Economy and Finance and vice-chairman of DCD, and its membership includes ministers or heads of government agencies, ambassadors or heads of diplomatic missions, and heads of multilateral institutions. The GDCC is assisted by a secretariat based at the Cambodian Rehabilitation and Development Board (CRDB) at the CDC.

Aid coordination in action
The strong lead taken by the government in recent times, as well as donors’ efforts to better coordinate their cooperation programmes and harmonise their own practices, have moved things along in the right direction. Solid examples of effective aid coordination can be found in the Seila decentralisation programme, the education and health sectors, and in public financial management.

Seila is the government’s multi-donor funded programme for fostering local development and enhancing the capacity of provincial and local authorities for managing sustainable development. It is Cambodia’s most celebrated programme, since it has produced unique decentralised systems for planning, programming, financing and implementation, as well as monitoring and reporting systems. Seila shows that government-donor relationships can be established on an even keel, based on clarity and trust and negotiated through dialogue. ⁴


In education, a sector-wide approach (SWAp) has been developed to support a common framework and expenditure policy (including planning, monitoring and evaluation) introduced by the Ministry of Education, Youth and Sports. Under the aegis of this programme, all donor-funded projects are intended to support a single-sector policy. The SWAp in the education sector has made two important contributions. First, it has given the Ministry of Education a mechanism for aligning donor assistance with the needs of the education sector. Second, it has reduced the transaction costs imposed on the Ministry in coordinating with each donor agency bilaterally. On the financing side in 2003, donor funding was mostly in the form of loans from multilateral financial institutions, and 18% of total donor assistance accounted for direct budget support.

In the health sector, a sector-wide management (SWiM) programme was introduced. Under this programme, the government and donors developed a strategic plan for the health sector covering the period from 2003 to 2007, including a rolling Medium Term Expenditure Framework and a five-year implementation plan - all through broadly consultative processes. However, the bulk of donor assistance to the health sector under the SWiM arrangement is being provided in the form of project-type support, thus constraining the potential reduction in transaction costs.

A SWAp has also been established for the Public Financial Management Reform programme. This is aimed at improving the provision of Technical Assistance and ensuring a concerted effort in support of this reform initiative.

Challenges remain
As outlined above, significant steps have been taken in improving aid effectiveness and enhancing donor coordination. However, while alignment with government strategies and national priorities has dramatically improved, alignment with government administrative and financial systems is still lagging behind, partly because Cambodia’s systems and procedures are not yet in place or are not up to international standards. As a consequence, much aid – nearly 90% of it – translates into procurement, disbursement and monitoring systems.

Cambodia still remains overwhelmingly in the traditional Technical Assistance (TA) mode. Individual and institutional capacity development is the avowed main thrust of most of the development programmes, accounting for 43.2% of total ODA expenditure in 2002. The delivery remains overwhelmingly conventional TA-type: 12.7% is used in employing international staff, 11.8% in providing training and overseas trips, 8.2% is spent on operational support and equipment, 8.1% on employing national staff and 2.5% on topping up civil service salaries ⁵, which remain by and large below the poverty line. This is where the Cambodian government will be challenged to lead the way, and achieve some significant results in the next few years.

The road ahead
The Cambodian experience clearly holds many lessons for policy-makers and advocates of aid coordination worldwide. With no experience of handling donors prior to the UN-brokered peace in the 1990s, Cambodia is still on a steep learning curve. With national institutions and systems gradually gaining ground and enhanced capacities being developed in the government, donors and senior officials can now engage in a dialogue based on mutual trust and accountability. The SWAps have helped to raise government commitment to reforms in the health and education sectors, as has clearly been demonstrated by government’s decision to raise the budgets for these two sectors. In Seila, the managerial authority over donor funds has been transferred to the government, a key milestone in aligning and trust-building.

The Royal Government of Cambodia is moving steadily ahead to develop much-needed aid management information systems. Key documents emanating from the Government-Donor Partnership Working Group indicate that lessons are being learnt and applied. The new joint technical working groups were challenged to come up with sector priorities and action plans before the CG meeting scheduled for December 2004.

The government has clearly outlined the challenges that donors working with the Cambodian government need to address:

• developing capacities at ministries;
• strengthening national systems and procedures, and discouraging donors from using parallel implementation systems and structures;
• enhancing delegated cooperation arrangements;
• aligning ODA-supported activities with national priorities;
• diminishing reliance on international experts;
• addressing incentive issues in the civil service.

The government is committed to preparing a single National Strategic Development Plan for 2006-2010, implementing the action plan on harmonisation and alignment as a follow-up to the Rome Declaration, preparing a National ODA Management and Utilisation Policy, promoting sector and/or thematic programme-based approaches to ODA programming, and strengthening partnerships among sectors.

Cambodia’s progress in assuming overall charge of ODA management also holds lessons for post-conflict countries. The global debate on aid coordination, harmonisation and alignment has doubtless added to the interest and the ability of Cambodian government officials to engage with donors on these issues. The leadership of the Cambodian Rehabilitation and Development Board at the Council for the Development of Cambodia has also been instrumental in driving this agenda forward at a rapid pace in the last few years. However, significant obstacles remain and the Cambodian government’s leadership will be crucial in overcoming the complex problems surrounding, for example, the question of national capacity retention in the face of very low civil service salaries.

By: Farid Siddiqui, Senior Advisor, Aid Coordination and Partnerships, UNDP Cambodia (farid.siddiqui@undp.org) and Niloy Banerjee, Capacity Development Advisor/ Regional Coordinator Capacity 2015, UNDP Regional Centre in Bangkok serving Asia and the Pacific (niloy.banerjee@undp.org). Inputs were provided by Stephen Browne, Head of Policy and Programmes, UNDP Regional Centre in Bangkok, (stephen.browne@undp.org) and Douglas Gardner, UN Resident Coordinator and UNDP Resident Representative, Cambodia (douglas.gardner@undp.org).

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1) World Bank 2004, Cambodia at the Crossroads, p. 111.

2) Royal Government of Cambodia, ‘A New Development Cooperation Partnership Paradigm’, Draft Discussion Paper, presented at the 4th Consultative Group Meeting, May 2000, by the Cambodian Rehabilitation and Development Board of the Council for the Development of Cambodia. A copy of this paper is posted on the CDC/CRDB website (see www.cdc-crdb.gov.kh).

3) Royal Government of Cambodia, ‘Building Partnerships for Development: An Update’, presented at the 7th Consultative Group Meeting for Cambodia, Cambodian Rehabilitation and Development Board of the Council for the Development of Cambodia, December 2004.

4) More on each of these cases can be found in ‘Practices and Lessons Learned in the Management of Development Cooperation: Case studies in Cambodia’s Government-Donor Partnership Working Group, Sub-Working Group No. 3’, Phnom Penh, February 2004. Also, for Siela see ‘Ownership Leadership and Transformation, Can We Do Better for Capacity Development?’, Lopes and Theisohn, UNDP, Earthscan, 2003.

5) Siddiqui, F et al. ‘Capacity Building Practices of Cambodia’s Development Partners: Results of a Survey’, discussion paper prepared for the Government-Donor Partnership Working Group, Cambodian Rehabilitation and Development Board of the Council for the Development of Cambodia, June 2004.