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CAMBODIA GETS $2BILLION IN ADB FUNDING.

Byline: Tim Vutha

The Asian Development Bank (ADB) has financed Cambodia $2.11 billion of which $1.8 billion was the concessional loan and the rest were in grants and technical assistances, according to the banks' annual fact sheet for Cambodia.

The cumulative disbursements to Cambodia for lending and grants financed by ordinary capital resources, the Asian Development Fund (ADF), and other special funds amounted to $1.53 billion.

For non-sovereign operations, as a main propeller for private investments, ADB provided direct financial assistance to non- sovereign public sector and private sector projects in the form of direct loans, equity investments, guarantees, B loans, and trade finance.

Since its inception, ADB has approved two private sector projects in Cambodia's energy and finance sectors amounting to $83 million. To tal outstand ing balances and commitments of ADB's private sector transactions in the country as of last year, were $75.43 million, representing 0.95% of ADB's total non- sovereign portfolio.

ADB's Trade Finance Program (TFP) fills market gaps by providing guarantees and loans through partner banks in support of trade.

The TFP has done over 10,300 transactions supporting over $20.5 billion in trade and over 6,000 small and medium-sized enterprises since 2004. In 2014, the TFP supported $3.8 billion in trade through over 1,900 transactions.

In Cambodia, the TFP works with one bank and has supported over $2.6 million in trade between eight transactions. In addition to filling market gaps, the TFP's objective is to mobilize private sector capital/involvement in developing Asia.

The bank also co-financed Cambodia with other international development partners including the Cambodian government itself which came in the form of official loans and grants, other concessional financing, and commercial financing such as B loans, risk transfer arrangements, parallel loans and equity, guarantee co- financing, and co-financing for transactions under ADB's TFP.

By the end of 2014, cumulative Direct Value-added (DVA) official co-financing for Cambodia amounted to $394.4 million for 36 investment projects, and $47.9 million for 46 technical assistance projects. Cumulative DVA commercial co-financing for Cambodia amounted to $16.46 million for one investment project.

In 2014, Cambodia received $41 million loan in co-financing from the Korean government; and $21.3 million grant co-financing from the Australian and Japanese governments, and the Nordic Development Fund.

ADB supported projects and programs

Holding the title as Cambodia's largest multi-lateral development partner, ADB, in recent years, has focused its efforts on the development of physical infrastructure, education, public sector management, private and finance sectors, and the management of agriculture and natural resources.

In 2014, ADB projects totaling $295.7 million, including $62.3 million under co-financing for investment projects and $3 million for technical assistance co-financing, were approved for Cambodia. Funding will be used to rehabilitate about 1,000km of rural roads in nine provinces, providing safer, cost-effective, year-round access to markets and other social services.

ADB, through partnerships with the private sectors, will also assist Cambodia to achieve a formal technical and vocational education and training system that is market responsive.

market oriented, and to enhance the mobilization of financial resources. Meanwhile, ADB will help to improve and expand urban water supply services in selected provinces, restore infrastructure damaged by the 2013 floods, and improve Cambodia's ability to respond to natural disasters.

The bank in late April this year granted Cambodia another $7.4 million to enhance communities' resilience to climate change impacts in Koh Kong and Mondulkiri provinces which including the construction of 40 rainwater harvesting ponds for home gardens and introducing drought-resilient crops in both provinces.

Focus has also been directed toward generating employment in the tourism industry in underdeveloped areas such as Kampot, Kep, and Koh Kong. ADB's gender work across all sectors continues to build women's capacity for better livelihoods, and on creating opportunities beyond low-productivity agriculture.

ADB's procurement contracts for Cambodia

ADB's procurement contracts for goods, works and related services under loan and grant operations among its members totaled $6.59 billion in 2013 and $8.58 billion in 2014, the cumulative procurement, as of 2014, was $135.21 billion. For Cambodia, the cumulative procurement for goods, works, related services and consulting services worth a total of $828 million as of last year.

Procurement contracts for consulting services under loan, grant, and technical assistance operations totaled $511 million in 2013 and $555 million in 2014. Cumulative procurement, by end of 2014 was $9.98 billion.

Table 1. Cambodia: 2014 Approved Loans, Grants, and Technical Assistance ($ million)

###Loans

###Technical

###Sovereign###Nonsovereign Assistance Grants Total

###226.00###

###7.40###21.25 254.65

###= nil.

Table 2. Cambodia: Cumulative Lending, Grant, and Technical Assistance Approvalsa, b

###Total

###Amount

###Sector###No. ($ million)###%

###Agriculture, Natural Resources,

###and###Rural Development###70###628.85###25.34

###Education###33###253.05###10.20

###Energy###20###177.63###7.16

###Finance###35###230.00###9.27

###Health###15###79.78###3.21

###Industry and Trade###13###71.14###2.87

###Multisector###10###168.18###6.78

###Public Sector Management###65###201.30###8.11

###Transport###47###502.50###20.25

###Water and Other Urban###21###169.21###6.82

###Infrastructure and Services

###Total###329###2,481.61###100.00

Table 3. Cambodia: Cumulative Nonsovereign Financing by Product

Number of Projects###2

###Amount($ million)

Loans###83.00

Equity Investments###-

Guarantees###-

B Loans###-

Total###83.00

- = nil.

From 1 January 1966 to 31 December 2014, consultants were involved in 194,667 contracts for consulting services under ADB loan, and grant projects worth $135.21 billion.

During the same period, 2,766 contracts were awarded to contractors and suppliers from Cambodia worth $782.59 million. Consulting services were involved in 45,584 contracts under ADB loan, grants and technical assistance projects worth $9.98 billion. During the same period, 641 contracts were awarded to consultants from Cambodia worth $45.46 million.

Partnership with civil society organizations (CSOs) and other development partners is an important commitment in ADB's long-term strategic framework, Strategy 2020, and in its Midterm Review.

The ADB country partnership strategy (CPS), 2014-2018 for Cambodia, approved in November 2014, reflects extensive consultations with many stakeholders, including national and local government officials, representatives of CSOs, the private sector, development partners, and research institutions.

On-going challenges for Cambodia

Annual country portfolio performance reviews, carried out with the Japanese International Cooperation Agency (JICA) and the World Bank, have identified various implementation challenges for Cambodia.

ADB in its report said that executing and implementing agencies have limited implementing capacity, particularly in project management, procurement, and financial management. Authority is not being delegated to project management units. Project preparation is generally poor, with delays in project implementation start-ups.

The long-term impact and sustainability of ADB infrastructure projects need to be safeguarded by effective operations after completion. Government asset management needs to improve, and expenditure on operation and maintenance needs to increase.

Through targeted technical assistance, ADB is assisting government line ministries and agencies in institutional and capacity development for projects and programs. ADB is also engaged in dialogue with the government to ensure that sufficient resources are earmarked for operation and maintenance.

Future Direction

In coordination with other development partners, ADB's Cambodia Resident Mission Office via its CPS, 2014-2018, has aligned with the Cambodian government's Rectangular Strategy and National Strategic Development Plan (NSDP), 2014-2018.

The CPS builds on the two strategic pillars of rural urban-regional links, and human and social development, with one facilitating and overarching pillar of public sector management.

Expanding rural-urban-regional connectivity is an integrated approach to developing the areas in which most poor people live.

This pillar supports higher agricultural productivity and commercialization. It aims to build rural and urban infrastructure, improve natural resource management, and support trade and transport facilitation.

The second pillar, targets human and social development, supports access to, and the quality of, secondary education, and targeted skills development through technical vocational education and training linked to the evolving demands of the labour market.

The facilitating pillar of public sector management covers decentralization and de-concentration, as well as reforms to public financial management.

ADB will also take further steps to improve the environment for public-private partnerships and private sector development, and continue to support the deepening of the finance sector.

As Cambodia has been moving closer to lower middle-income status, ADB's finance and assistances to this Least Developed Country (LDC) also change along the course.

The bank stopped offering to Cambodia since 2011, while the bank's experts have alerted that Cambodia will need the bank's assistance in term of loans and technical assistances over the next five to 10 years, before it can jump to commercial loan condition just like other developing countries that are also members of the bank.

Table 6. Cambodia: Projects Cofinanced, January December 2014

Cofinancing###No. of Projects###Amount ($ million)

Projects a###15###225.98

Grants###12###103.17

Official loans###8###106.35

Commercial cofinancing###1###16.46

Technical Assistance Grants###10###22.00
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Publication:Cambodian Business Review
Geographic Code:9CAMB
Date:Jun 30, 2015
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