World Bank approves $275 million for Cambodia’s growth
World Bank approves $275 million for Cambodia’s growth
World Bank has approved $275 million for Cambodia’s growth. This is the second tranche to boost the country’s economy after the Covid-19 pandemic. The first tranche was in 2022, when the World Bank approved $274 million for Cambodia’s Growth and Resilience Development Policy Financing.
The project aims at promoting long-term economic growth and resilience by targeting different aspects. Some of this will include boosting competitiveness in the private sector, strengthening Cambodia’s fiscal position and assisting the underprivileged and most vulnerable in livelihood opportunities.
“While Cambodia’s economy has recovered from the impacts of the Covid-19 pandemic and subsequent shocks, the focus is now shifting toward achieving sustained high-quality growth,” said Maryam Salim, World Bank Country Manager for Cambodia. “This new operation will boost private sector competitiveness, strengthen the government’s fiscal position, provide assistance to the most vulnerable Cambodians.”
While Cambodia’s economy has since recovered, growth is still not at pre-pandemic levels. “Some of the key hurdles we have noticed to development is the lack of diversification in terms of market concentration and sector. For instance the focus on garment, footwear and travel goods; and again this primarily caters to the US and Europe. If there was more diversification it would help,” Sophie Duong T Nguyen, Senior Country Economist, Asian Development Bank said recently at a panel discussion. “The second hurdle is human capital development and the third the high vulnerabilities the country faces in terms of climate change. Look at the periodic flooding of the Mekong or droughts and heat waves,” she added.
The World Bank in its statement voiced views similar to the Asian Development Bank and said, “The situation reflects both the global economic slowdown and structural challenges to the country’s growth model. Cambodia’s structural challenges include weak productivity growth, low human capital formation, and barriers to private business formation and competition.”
World Bank also added, “Cambodia’s highly concentrated economy — in terms of products, export markets and financing sources — exposes it to shocks. The country is also highly vulnerable to the impacts of climate change, especially floods and drought.”
Official development finance to Cambodia fell by 30 percent to $2.3 billion in 2022, as per a Lowy Institute report. So with this fresh funding of $275 million, the World Bank’s efforts could address some of the fall in funding experienced in the region. The World Bank said, “The new operation supports reforms to address these challenges. These will help create an environment in which firms can enter, exit, and compete fairly.”
The World Bank also said that some of its efforts will be to enhance fiscal resilience – with more public-private partnerships and strengthening the government’s capacity to raise financing through sovereign bonds.
Some of the funding will also go towards insulating poor households from natural disasters or economic shocks, and improving environmental regulation and bolster disaster risk management.
More than 113,000 people in Cambodia are expected to benefit from better water supply infrastructure – with $145 million in credit earmarked by the World Bank’s International Development Association.
The Cambodia Water Security Improvement Project is also set to improve water security, increase agricultural productivity, and build resilience to climate risks.
“This project helps Cambodia move toward sustainable water security and greater agricultural productivity. Investing now in climate resilience, planning, and better infrastructure not only addresses the immediate water needs of Cambodian farmers and households, but also lays the groundwork for long-term water service delivery,” said the World Bank country manager.
Although Cambodia has abundant water, seasonal and regional differences in rainfall bring challenges to urban and rural water supply. Climate projections suggest flooding and drought will become more frequent and severe, placing even more strain on the country’s capacity to manage its freshwater resources. This would affect food production and economic growth.
The new World Bank project will be implemented over five years by the Ministry of Water Resources and Meteorology and the Ministry of Agriculture, Forestry, and Fisheries. It will enhance water resource management by expanding hydrometeorological stations, updating policies and regulations, preparing climate-informed river basin management plans, and strengthening the performance of central and provincial water authorities.
