The World Bank In Cambodia

Over the two decades before COVID-19 struck in 2020, Cambodia blossomed economically. Cambodia’s economy grew at an average annual rate of 7.6 percent between 1995 and 2019, driven largely by tourism, manufacturing exports, real estate, and construction, making it one of the fastest-growing economies in the world. After reaching lower middle-income status in 2015, it set its sights on becoming an upper middle-income economy by 2030 and higher-income economy by 2050.

The COVID-19 pandemic triggered the first economic contraction in 25 years. In 2020, the economy contracted 3.1 percent. During the post-COVID-19 period, the economy continues to gradually recover, growing at 3.0 percent and 5.2 percent in 2021 and 2022, respectively. Cambodia’s economic growth is estimated to have reached 5.4 percent in 2023.

This year’s economic growth is projected to marginally improve to 5.8 percent, driven mainly by a revival of services and goods exports. Downside risks include weaker-than-expected global demand, global financial stress amid elevated debt and high borrowing costs, and a slower-than-anticipated recovery in China. Domestically, a faster-than-expected increase in non-performing loans could affect macro-financial stability as the housing market correction continues.

In the decade before COVID-19, 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, and poverty. In addition, the energy and food price hikes due to the Russian-Ukraine conflict imposed an additional burden as they weighed on household budgets.

The World Bank’s Assessment, which did not account for implications of COVID-19 or for the fiscal policy response implemented between 2020 and 2022 to support households, suggests that inflation could increase poverty 4 percentage points from the national poverty rate of about 18 percent, measured in 2019/20.

The scale-up of social assistance to poor and vulnerable households, launched in June 2020, has moderated income losses. Poverty nevertheless remains higher than pre-pandemic levels. Poverty is expected to decline due to the projected economic recovery and moderating inflation.

Cambodia has made considerable strides in improving health outcomes, early childhood development, and primary education in rural areas. Life expectancy at birth and 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.

Cambodia's educational journey, characterized by advancement and resilience, has seen increased enrollment rates, new schools, and improved access to learning. However, this journey is far from complete.  Many Cambodian students are not acquiring the foundational skills in literacy and numeracy crucial for future learning and a dynamic workforce​​. When these children grow up, it is unlikely that they will be able to contribute to Cambodia’s economic growth. This situation highlights the urgent need to harness and develop the vast untapped potential of these young learners.

Key reforms are needed for Cambodia to sustain inclusive 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: April 2024

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 has updated Cambodia's first Systematic Country Diagnostic. This Systematic Country Diagnostic Update (SCD2) Update will help inform the World Bank’s next Country Partnership Framework (CPF) 2025-2029 and contribute to the policy discussion in Cambodia. This SCD2 report summarizes the key findings from new World Bank analysis and extensive consultations to provide an updated set of desired outcomes, development areas and policy priorities to support Cambodia’s sustainable and inclusive development.

SCD2 outlines a refreshed set of outcomes, development areas and policy priorities to help ensure strong, inclusive, and sustainable growth over the next five years. There are three main High-Level Outcomes (HLOs):

·         HLO I: Improved access to high-quality formal jobs. Sustaining strong and high-quality economic, jobs and wages growth will require deeper reforms to increase the Cambodian economy's economic competitiveness, diversification, and productivity.

·         HLO II: Upgraded and better protected human capital. Upgrading, and better protecting the human capital of Cambodia’s people has become more urgent given the low starting point, only modest progress since the SCD1, growing skills shortages, and declining labor productivity growth.

·         HLO III: Enhanced livability and resilience. Enhancing the livability and resilience of Cambodia’s natural and urban environments remains critical for ensuring a sustainable pattern of growth, given the relatively high exposure to risk from natural disasters and poor performance on environmental management and urban development.

·         Strengthening governance and public sector capacity remains a critical cross-cutting priority to support achieving the three high-level outcomes. Despite the progress since the SCD1, Cambodia continues to rank low compared to its structural peers and globally (bottom two quintiles) on most governance and public sector capacity measures.

The World Bank Group is preparing a new Country Partnership Framework (CPF) for FY2025-2029 for Cambodia.  The new CPF is building on its ongoing engagement in the country, and draws on the priorities identified in the new Pentagonal Strategy Phase I, the Systematic Country Diagnostic (SCD) Update along with other core analytics (including the Country Climate Development Report, Country Economic Memorandum, Public Finance Report, and Poverty Assessment) and the Completion and Learning Review. The CPF aims to support better quality of life for all Cambodians through three interlinked high-level outcomes (HLOs) – strengthened human capital, enhanced economic competitiveness for better jobs, and greater resilience for vulnerable people. The CPF consultations with key stakeholders took place during December 2023 to early February 2024.The CPF is expected to be finalized and discussed by the World Bank Board of Executive Directors in calendar year 2024.

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: April 2024

The Health Equity and Quality Improvement Project Phase 2 (H-EQIP II) aims to improve equitable utilization of quality health services, especially for poor and vulnerable populations, and provide immediate and effective response in case of an eligible crisis or emergency in the Kingdom of Cambodia. By the end of the first year of the project lifespan, H-EQIP II:

·         Initiated the first round of the nationwide implementation of the National Quality Enhancement Monitoring Program Phase 2 (NQEMP-2), aimed at improvement of the quality of health service delivery; and

·         Financed the Health Equity Fund (HEF). HEF has:

o   Purchased of 3.2 million episodes of health care services at public health facilities for the poor and vulnerable;

o   Completed training for health facilities staff in all public health facilities at the subnational level and equipped them for delivery of diabetes and hypertension screening and management;

o   Completed training of more than 500 health center staff and over 60 referral hospital staff on providing cervical precancerous lesions and treatment; and

o   Trained village health support groups to assist with screening and treatment of diabetes, hypertension and cervical precancerous lesions.

The Cambodia Nutrition Project aims to enhance and accelerate the formation of the country’s human capital by focusing on maternal and early childhood health and nutrition. Key achievements include:

·         Around 4,450 village health workers — 3,225 of them are women — have been recruited and trained on the Commune Program for Women and Children (CPWC), which focuses on the first 1,000 days of life (from pregnancy to a child’s second birthday);

·         The rollout of quality assessment and performance-based grants at 156 health centers and 281 commune government administrations to enhance availability and quality of service delivery for women and children;

·         Development of modernized communication materials for children under two years old and women of reproductive age (especially pregnant and lactating women) and associated tools to boost demand for service uptake and to improve behavior across different stages of service delivery;

·         Intervention to include the children under two years old of informal workers as a new group of beneficiaries to be covered by Health Equity Fund, to lower financial barriers for access to essential health services; and

·         Improved reporting of gender-disaggregated data on beneficiaries and implementers.

The ongoing Higher Education Improvement Project (HEIP) has invested $5 million in e-learning so that nearly 3 million preschool, primary, and secondary school pupils could learn from home when schools are closed. The main achievement as of now includes:

·         21 Bachelor’s and Master’s curricula that have been revised or developed to meet national and international standards,

·         Publication of 25 internationally peer-reviewed articles,

·         Nine products and 23 prototypes developed,

·         144 renovated and newly built laboratories,

·         A sizeable number of classrooms renovated, and

·         Enrollment of 118 faculty members from five targeted 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 Social Accountability Framework (ISAF) phase I, which was initiated in 2014, 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 and Germany to provide financing for World Vision International (WVI) to implement demand side (civil society) activities (Engaging Citizens to Improve Service Delivery Through Social Accountability) and for the National Committee for Subnational Democratic Development Secretariat (NCDDS) to implement supply side (government) activities (Integration of Social Accountability into National and Subnational systems) in support of ISAF phase II (2019-2025). So far, supply side activities have been rolled out to 24 of 25 capitals and provinces (15 provinces covered by the Bank-supported operations, and the remaining supported by other development partners). Australia is providing additional financing to both operations through the Australia-World Bank Partnership for Promoting Inclusion, Sustainability and Equality in Cambodia Single-Donor Trust Fund.

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 84 percent of the service providers covered by the projects (schools, health centers, and commune administrations) are now meeting key national standards. A total of 3,532 Community Accountability Facilitators (CAFs) were active by the end of 2023, 63 percent of whom were women, and 35 percent of whom were youth.

Last updated: April 2024