Annex C. Field visit to Cambodia

As part of the peer review of Cambodia, a team of examiners from New Zealand and the United States visited Cambodia in June 2017. The team met with Korea’s Ambassador in Cambodia, Korean development co-operation professionals, Cambodian government representatives and civil servants, other bilateral providers, representatives of civil society and senior officials from Korea’s trade and investment agency.

Towards a comprehensive Korean development effort

Although Cambodia has one of the world’s highest growth rates, rural poverty remains entrenched

Cambodia is a fast-growing economy with a complex history that continues to shape its politics and partnerships. Following an imperial heyday in the 12th century, marked by the construction of Angkor temple complexes, Cambodia entered a long period of decline in economic and political power, culminating in French colonisation, Japanese occupation, political instability and civil war. Between 1975 and 1979 Cambodia was devastated by the regime of the Khmer Rouge – under which an estimated 2 million Cambodians died – before political stability was re-established with the 1991 Paris Peace Agreements. The 1993 Constitution of Cambodia provided for a market-based economy anchored in a constitutional monarchy, whereby the Prime Minister is the head of government and the Monarch is the head of state. Since 1998, Cambodia has been ruled by the Cambodian People’s Party, led by Prime Minister Hun Sen.

Today, buoyed by garment exports, construction and tourism, Cambodia sustains an average annual growth rate of around 7% and is the sixth fastest growing economy in the world. Poverty levels have declined dramatically, down from 53% in 2004 to 13.5% in 2014. Cambodia attained lower-middle-income status in 2016 with gross domestic product (GDP) reaching USD 20 billion for a population of around 15.5 million (USD 1 300 per capita). Although economic growth eased slightly in 2016, Cambodia’s strong growth trajectory is expected to continue into the medium term (World Bank, 2017a), aided by Foreign Direct Investment (FDI) from regional investors, its shared borders with two regional growth engines (Thailand and Viet Nam) and the identification of off-shore oil and gas reserves. This rapid growth trajectory led official development assistance (ODA) to fall to one-third of the total budget in 2015, down from 60% in 2010 (Figure C.1). Over this period, the number of donors present in Cambodia also declined, with Cambodia’s ODA data listing 27 traditional and non-traditional development partners in 2015, down from 45 in 2012 (GoC, 2017).

Despite this impressive growth and diminishing aid dependency, endemic corruption remains a significant challenge and impedes inclusive development. The watchdog group Transparency International rates Cambodia 156 out of 176 countries for perceptions of clean governance (TI, 2016). Cambodia also ranks low (131 out of 190) for its ease of doing business (World Bank, 2017b). While poverty continues to fall, the pace has declined significantly and many Cambodian households remain highly vulnerable to slipping back into poverty (EIU, 2017).1 More than 80% of Cambodia’s poor live in rural areas, where most of the workforce is still employed in subsistence farming or has found employment as migrant labourers, and where growth is hampered by low productivity, low levels of land title registration, limited services and lack of infrastructure (ADB, 2014).2

Korea and Cambodia are forging closer economic ties, particularly through trade, migration, aid and tourism

Korea has been strongly engaged in Cambodia since it restored full diplomatic relations in 1997.3 The bilateral relationship between the two countries is stable and friendly and around 400 000 Korean tourists visit Cambodia each year. Cambodia is one of Korea’s 24 priority partner countries for development co-operation, and levels of development assistance are increasing. Overall, Korea’s assistance of USD 70 million in 2015 represented more than 5.6% of total external co-operation to Cambodia (USD 677 million). In 2014-15, Korea became the third largest bilateral donor (fourth largest overall) in Cambodia, up from seventh place in 2010 (Figure C.1). Meanwhile, total ODA commitments to Cambodia declined by 4.6% on the previous year based on OECD data, or by 9.4% when based on Cambodian data for total external development co-operation.4 As Cambodia’s dependency on aid diminishes, finance for development from other sources has increased. For example, as Figure C.2 shows, non-ODA resource flows [including foreign direct investment, other official flows, remittances and assistance from non-DAC donors] are now far greater than ODA flows.

Within this context, Korea’s significant investment in manufacturing, tourism and agriculture, together with a large temporary labour migration programme and high remittance flows, are helping to catalyse and broaden economic growth and increase resource flows to Cambodia. Over the past decade, Korea has become one of Cambodia’s largest trading partners and the second largest foreign direct investor after China, concentrated in the manufacturing, finance, agriculture/forestry/fisheries and construction sectors.5 From 2006 to 2014, South Korea’s exports to Cambodia tripled, while Cambodia’s exports to South Korea rose 40-fold. Despite this trajectory, growth in bilateral trade between the two countries remains constrained due to lack of investment and business opportunities. In recognition of these challenges, in 2016 both countries signed a memorandum of understanding for a plan to support export of Cambodian mangoes to Korea, and a Korean company has also been investing in the export system for agricultural products including quarantine, packaging and cold storage. Such efforts are aimed at supporting a significant increase in trade (KOTRA, 2017). This is an example of Korea’s pragmatic approach to policy coherence for development, in which it prefers to focus on resolving trade challenges on a case-by-case basis (see Chapter 1).

High remittance flows, but Korea can do more to ensure key rights for its Cambodian migrant workers

Between 1998 and 2015, almost a quarter (22%) of Cambodian workers participating in state-sponsored migration programmes went to Korea (OECD/CDRI, 2017). In 2016 permit numbers doubled due to rising labour demand in the Korean manufacturing and agriculture sectors.6 As a consequence, remittance flows from Korea to Cambodia are rising, with Korean government sources estimating that remittances from Cambodians working in Korea now outstrip Korea’s ODA to Cambodia (Hang, 2017). However, the situation of Cambodian migrant workers in Korea is highlighted in reports to the International Organization for Migration, with female agricultural workers complaining of long work hours, low wages, and isolated accommodation leading to increased risk of exposure to sexual harassment (NHRCK, 2013; IOM, 2016). In addition, a loophole in Korea’s Labour Standards Act means that employers hiring fewer than five workers are not required to provide employment insurance or other benefits to their employees.7 In response to these and other concerns, the United Nations’ Human Rights Council has urged Korea to ensure key rights for migrant workers (UNHRC, 2015). Meanwhile, in order to avoid Cambodian workers overstaying their visas, Korea’s Ministry for Employment has started a “Happy Returns” initiative, with initial prize-winners showcasing successful return and re-integration programmes for Cambodians.8

At the political level, co-operation between Korea and Cambodia is strong, centering on co-ordinating trade agreements through regional organisations, particularly the Association of Southeast Asian Nations (ASEAN) and the Asia-Pacific Economic Cooperation (APEC). These efforts are helping Korea to maintain its ties with Cambodia at a particularly challenging time for regional foreign policy and traditional donor partnerships.

Korea's policies, strategies and aid allocation

Korea’s Country Partnership Strategy is aligned with Cambodia’s national plan

Korea’s development assistance is highly valued by the Government of Cambodia as it is demand-driven and in line with Cambodia’s priorities. In particular, Korea’s Country Partnership Strategy (CPS) for Cambodia for 2016-20 (GoK, 2017) is closely aligned with the Cambodian government’s current Rectangular Strategy (GoC, 2013a).9 Within its CPS, Korea identifies the following objectives: (1) transport infrastructure; (2) capacity building (for water resources, health and disaster response); (3) human resource development; and (4) rural development. These focus areas integrate cross-cutting issues such as gender and environment. The CPS also defines a clear division of labour among the main Korean actors at country level involved in managing Korea’s ODA. In general, the embassy supports policy setting, the Korean International Cooperation Agency (KOICA) implements grants and the Economic Development Cooperation Fund (EDCF) manages Korea’s loan portfolio. The Korean Embassy represents Korea with the Cambodian Government and in aid co-ordination groups, and agrees Korea’s strategy with the Government of Cambodia. Increasingly, Korea’s Embassy in Cambodia is also taking on a field-level co-ordination role among actors involved in Cambodia’s development.

Though well-aligned, the country strategy does not encompass all Korea’s development co-operation efforts

An estimated 72% of Korea’s ODA allocations in Cambodia in 2015 were covered by its Country Partnership Strategy, and are largely comprised of activities managed by KOICA and by Korea’s Export-Import Bank (KEXIM) through its EDCF loans programmes. Development co-operation outside this framework is carried out though a growing number of other Korean ministries,. Such activities include Korea’s co-operation with Cambodia on the OECD’s Programme for International Student Assessment for Development (PISA-D) Project and other technical co-operation programmes (Box 5.1 and Box C.1). While the CPS is well aligned with Cambodia’s priorities overall, it does not yet capture the full scale and scope of Korea’s aid activities. The CPS also provides very limited information on Korea’s civil society funding and the placement of Korea’s 500 ODA-funded volunteers. It does not articulate Korea’s approach to promoting inclusive growth and addressing the drivers of poverty and inequality. Nor does it provide an indicative budget for Korea’s development co-operation or offer clarity on how implementation partners are selected. In summary, while the CPS is well aligned with Cambodia’s priorities overall, it does not yet capture the full scale and scope of Korea’s aid activities.

As the embassy takes on a greater co-ordination role and works to reduce the risks associated with aid fragmentation (see Chapter 4), the CPS could provide a useful platform for strengthening Korea’s whole-of-government efforts in Cambodia, as well as giving an overview of all Korea’s development efforts in Cambodia, both financial and non-financial. Korea will also need to clarify its decision-making hierarchy, including whether its embassies – which are currently responsible for the initial draft of country partnership strategies in consultation with partner governments – have the authority to respond flexibly to the changing development landscape and to take up new opportunities under the umbrella of the CPS without reverting to headquarters.

Korea focuses its loans on economic infrastructure

Korea uses a mix of grants, technical co-operation and highly concessional lending in Cambodia and largely delivers project-type assistance. In 2016, Korea disbursed some USD 19.6 million (46%) of its aid as concessional loans and another USD 16.9 (39%) million as project aid, while the rest was allocated to overseas volunteers (USD 2.9 million, 7%), training (USD 1.5 million, 4%) and NGO programmes (USD 2.0 million, 5%). Broken down by sector, by far the largest share of Korea’s aid goes to economic infrastructure. Korea is now the third largest supporter of Cambodia’s infrastructure development after China and Japan. Its country programme involves a small number of large infrastructure projects, typically funded through EDCF loans, alongside a greater number of smaller grant and technical co-operation projects in a range of sectors implemented by KOICA and other agencies.

Following its development finance commitments in 2015, Korea is making efforts to increase synergies between grants and loans, particularly in infrastructure. Korea now has access to grant funding for feasibility studies and post- completion sustainability efforts. In Cambodia, the DAC’s peer review team found that use of blended finance for infrastructure projects is increasing. At the same time, it will be important to ensure the pro-poor focus of the grant element is protected, in line with Korea’s allocations criteria for grant aid (Chapters 2 and 5), including in testing the availability of commercial finance channels.

In addition to its loan financing of infrastructure, Korea has large grant investments in health and education. Technical co-operation activities are valued by Cambodia but their effectiveness continues to be difficult to assess. Some activities would appear to be highly effective. These include an eight-year Ministry of Health programme to strengthen health systems, implemented by the Korea Foundation for International Healthcare (KOFIH); and the student assessment support through PISA-D (see Box C.1). However, another 5% of Korea’s ODA in Cambodia is disbursed through a range of fellowships, training programmes and exchange visits, the effectiveness of which is much more difficult to assess.

Box C.1. Peer-to-peer learning partnership in education in Cambodia

The OECD’s Programme for International Student Assessment (PISA) is a triennial survey that aims to evaluate education systems worldwide by testing the skills and knowledge of 15-year-old students. Korea, one of the strongest education reformers and performers among PISA participating countries, is now putting its experience and valuable lessons at the disposal of Cambodia, a participant in the OECD’s PISA for Development (PISA-D) project. With funding from Korea’s development co-operation programme, the Korea Institute for Curriculum and Evaluation (KICE) in Seoul is working with the OECD’s Directorate for Education and Skills to help prepare Cambodia for participating in the PISA survey, including providing training in assessment, analysis and using the resulting data. The PISA-D partnership between Korea, the OECD and Cambodia spans the five-year PISA-D cycle (2014-19). This peer-to-peer learning partnership between Korea and Cambodia is designed to strengthen the institutional capacity of the Cambodia Ministry of Education, Youth and Sport (MoEYS) to manage PISA and other large-scale learning assessments. KICE recently expanded the scope of the partnership to include curriculum support to the MoEYS Department of Curriculum Development. This is an excellent example of how Korea is adding value through direct bilateral partnerships in a priority sector.

Source: Information provided by the Directorate for Education and Skills, OECD, the Korea Institute for Curriculum and Evaluation and the Ministry of Education, Seoul, Korea.

Organisation and management

Korea could lift its profile in joint donor co-ordination efforts

Korea participates in external aid co-ordination mechanisms in Cambodia (Box C.2), and since the DAC’s 2010 review has been increasing its engagement in Cambodia’s technical working groups, particularly for agriculture, health, infrastructure and private sector development. However, this engagement is not outlined in Korea’s CPS and a number of Korea’s development partners noted that Korea’s participation has recently diminished in these fora, particularly since the departure of the technical experts from KOICA’s Cambodia office who had supported Korean inputs to these meetings (Chapters 4 and 5). As a result, Korea may not be taking full advantage of the potential offered by these forums for sharing relevant expertise and experience. A key example is the infrastructure technical working group, which is attended by both DAC and non-DAC donors.

Box C.2. Donor co-ordination and mutual accountability in Cambodia

The Cambodian Government’s policy on aid management is outlined in its Development Co-operation and Partnerships Strategy 2014-18 (GoC, 2014), which supports its national development plan and is grounded in the principles of development effectiveness: results, capacities and partnerships. Within the government, the Cambodian Rehabilitation and Development Board of the Council for Development of Cambodia is responsible for the co-ordination and management of aid, while the Ministry of Economy and Finance manages loans. The Cambodia Development Co-operation Forum is the principal forum for high-level government-donor co-operation, chaired by the Deputy Prime Minister and attended by ministers and high-level government and donor officials. It is expected to be held every 18 months to discuss a range of development issues and challenges and to assess financing needs for future development programmes related to the implementation of the national development plan. The Cambodia Development Co-operation Forum is complemented by an in-country donor co-ordination mechanism called the Government-Development Partner Co-ordination committee. This forum for co-ordination, dialogue and information sharing meets two to three times a year to discuss matters of key concern for Cambodia’s socio-economic development. Korea is represented on the committee both by the Embassy and the KOICA Cambodia office. The committee works towards aid harmonisation and effectiveness and is supported by 19 technical working groups for aid co-ordination at the sector level. The committee’s secretariat is responsible for co-ordinating these working groups, providing policy guidance and reporting to the Global Partnership on sectoral monitoring indicators. Nevertheless, a 2015 survey noted that just over half of all projects in Cambodia (323 out of 630), representing 30% of total funding, are not associated with any technical working group. This suggests poor use of existing co-ordination mechanisms by development partners and a need for the government to re- think co-ordination mechanisms for aid and loans to ensure a more comprehensive picture of Cambodia’s development finance.

Sources: Interviews held in Cambodia; GoC (2014), “Development Co-operation and Partnerships Strategy 2014-18”, Cambodia Board for Reconstruction and Development, Government of Cambodia, Phnom Penh; GoC (2013b), “Partnership and Dialogue Arrangements for Promoting Development Effectiveness in Cambodia”, Cambodia Board for Reconstruction and Development, Government of Cambodia, Phnom Penh; OECD/UNDP (2016), “Cambodia: monitoring profile October 2016” in Making Development Co-operation More Effective: 2016 Progress Report, OECD Publishing, Paris.

Korea’s increasingly fragmented efforts and complex procedures hamper flexibility in the field

In terms of Korea’s internal (whole-of-government) co-ordination efforts, fragmentation within the grant component of Korea’s support remains an ongoing challenge for Cambodia, and is reducing the effectiveness of its development. While the Committee for International Development Cooperation (CIDC) has taken on a stronger co-ordination role in Seoul, a number of implementing agencies – for example the Korea Development Institute, the Korean Directorate General for Education and Ministry of Agriculture – deliver projects directly to their Cambodian partners with limited and often no involvement of the embassy or KOICA. In discussions during the review team’s mission to Cambodia, a wide range of Korea’s development partners noted that creating a single window for grant aid and aligning systems and processes could increase effectiveness and improve communication for all stakeholders (Chapters 4 and 5).

On the positive side, the review team found that the Cambodian KEXIM and KOICA offices were following systems, processes and guidance developed in Seoul and this is increasing the focus on quality. Useful systems include an on-line project management tool open to all partners (Chapter 4). The review team also saw evidence that Korea has made progress on mainstreaming gender equality into project appraisals; this is now being extended to disability and environmental sustainability, although governance issues are not yet incorporated into the programme cycle. In addition, while a number of recent initiatives are linked to climate adaptation and mitigation, the country strategy is not yet underpinned by an assessment of future climate change scenarios for Cambodia in the sectors supported by Korea.

Low investment in human resources is undermining risk management

The review team’s mission to Cambodia took place at a time when technical expertise resources in KOICA and KEXIM were stretched, compounded by the loss of KOICA’s key technical expertise. This expertise is missed by many stakeholders (see Chapter 4). In addition, the expanding EDCF loans portfolio and stronger engagement at country level are not reflected in current staffing levels. The embassy currently has only one full-time staff member, a career diplomat, covering various aspects of development co-operation, including loans. The Embassy team is complemented by two EDCF field officers (one Korean and one local project staff member) and KOICA’s in-country team (4 from KOICA HQ, 19 local staff and 6 interns), who manage the country programme and are also responsible for co-ordinating the formulation of Korea’s country strategy. While links between headquarters and the field are good and supported by comprehensive project management systems, resources for project design, implementation and reporting are stretched, potentially leading to increased risks.

As such, it would be useful for Korea to conduct a cost-benefit analysis of the current approach to staffing, and to look at how it might bridge current gaps in technical capacity, and draw more on local expertise to improve the quality of development programming and reporting. While Korea is making increased use of its highly competent locally-engaged staff, further incentives for career and training opportunities would increase their ability to contribute to the quality of the programming, including in overcoming cultural divides and helping to navigate a challenging operating environment. In addition, while translation has increased, many documents and training opportunities are only available in Korean, presenting challenges for Cambodian staff. In the context of an expanding aid programme for Cambodia, Korea’s field team will need to become more effective in how it operates and delivers aid in order to absorb large allocation increases and/or expand human resources. For example, a large part of KOICA’s field team resources appear to be consumed by managing its volunteer programme (34% of its budget in 2017, up from 16% in 2011).

Since 2009, KOICA has proactively made use of feedback from evaluation results. This is in line with its guidelines (Chapter 6), which stipulate that implementing agencies must create a plan to incorporate evaluation results into future activities. Korea could also manage its ODA more efficiently by supporting fewer but much larger programmes, and by engaging more in partnerships with other bilateral and multilateral donors as well as with NGOs. Korea’s move towards a programme-based approach in the Cambodian health sector is an example of an opportunity to improve the scale and effectiveness of Korean ODA within Cambodia, particularly in terms of Korea’s ability to address longer-term sustainability challenges in its development co-operation (Chapter 5).

Partnerships, results and accountability

Korea applies the Busan Principles when partnering with government

Korea’s development co-operation is highly valued by the Government of Cambodia. Using a range of mechanisms, Korea takes Cambodian government requests for development finance as the starting point for grant and loan project selection. Korea’s co-operation is therefore demand-driven and in line with the Busan principles. Furthermore, Korea has increased aid predictability and is preparing for increased volumes of ODA by sharing KOICA and EDCF’s three-year growth plans with the Government of Cambodia.

However, once projects have been selected, involvement of the Cambodian Government in managing or evaluating results is limited. Greater involvement in joint-donor approaches, for example by replicating good examples of Korean involvement in programmatic approaches (such as the sector-wide health programme), would help Korea to better implement the Busan principles throughout its development co-operation efforts. Participation in technical working groups, the setting of joint monitoring indicators and the joint portfolio reviews of major donors overseen by Cambodia’s Ministry of Economy and Finance and/or Council for Development of Cambodia are all government-led processes to promote greater engagement in evaluating the results and impacts of development-co-operation. In allocating loans, Korea allows for local sub-contracting and joint ventures in its bidding procedures. Nonetheless, all loans to Cambodia are tied, potentially limiting value for money and disadvantaging Cambodian companies in sectors where they can bid, win tenders, and build their capacity. In addition, Korea has not harnessed the full potential of civil society to support its development co-operation objectives in Cambodia and lacks a strategy and systems that would enable it to strengthen partnerships with local or Korean NGOs.

Overall, without ensuring government plans have been subject to broader multi-stakeholder consultation, Korea risks supporting projects within the framework of the CPS that give inadequate attention to context, sustainable development results and recurrent costs. Development partners in Cambodia and other countries consistently noted that more contact and dialogue with Korea, both within and outside of formal co-ordination structures, would be welcome. Finally, considering entrenched governance challenges – including corruption – in Cambodia, Korea needs to strengthen guidance on managing these issues. In this respect, Korea could learn from other development partners present in the country, as well as from GOVNET (the OECD-DAC network on governance), on effective ways in which donors can tackle corruption.

Results focus on Korea’s contributions in a well-defined framework

Since the 2012 peer review, Korea has taken a range of positive steps to improve its management for results in Cambodia. These include: (1) introducing a comprehensive project management information system that can also be used by implementing partners; and (2) introducing mandatory baseline surveys and ex-post evaluations. Guidance on results management sets out the results framework and the results chain that links each key activity to outputs, outcomes and impacts. Mid-term reviews and end-of-project evaluations take place regularly. However, capacity for regular monitoring throughout the programme cycle is currently limited, even though such monitoring is critical for adjusting any parameters and programming. In general, results-based management is focused at the level of each project and there is no aggregation by country or theme (see Chapter 6).

The impressive scale of Korea’s bilateral and economic partnership with Cambodia offers potential for greater attention on monitoring results and measuring impact. In order to communicate the full scale of the partnership with Cambodia and provide a clear framework for decision making on development co-operation, Korea’s strategy for Cambodia could benefit from defining and articulating Korea’s commitment to a results framework that is anchored in the Sustainable Development Goals and that reflects Korea’s efforts to improve the lives of the poorest and most vulnerable. In doing so, Korea could also consider how to increase the involvement of Cambodian government officials and other stakeholders in the project or programme evaluations it commissions.

Bibliography

Government sources

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GoC (2013a), “Rectangular Strategy” for Growth, Employment, Equity and Efficiency, Phase III”, Government of Cambodia. Phnom Penh, September 2013.

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Notes

← 1. Recent shocks include the 2015 drought, serious health events and sudden unemployment. These are exacerbated by limited social protection, high levels of informal employment and low levels of education and skills.

← 2. The World Economic Forum ranks Cambodia 100 out of 130 countries in terms of human capital development in its 2017 Global Human Capital Report –see www.weforum.org/reports/the-global-human-capital-report-2017. It is ranked 143 out of 188 on the United Nations (UN) Human Development Index 2016 – see http://hdr.undp.org/en/2016-report.

← 3. Cambodia’s former Prince Norodom Sihanouk had a close relationship with the Democratic People’s Republic of Korea from 1961 through to his abdication in 2004.

← 4. ODA disbursements fell from USD 970 million in 2014 to USD 830 million in 2015, marking the first decrease since 2004, while new commitments made by donors dropped from USD 1.47 billion to USD 1.171 billion (OECD International Development Statistics, Volume 2016 Issue 2, https://doi.org/10.1787/dev-v2016-2-en). However, these figures exclude China, one of Cambodia’s most significant donors. According to Cambodia’s own ODA data China is now the largest provider of foreign assistance (ODA-like assistance), disbursing almost USD 5 billion between 2010 and 2015.

← 5. For further analysis of South Korea’s investment activities in Cambodia, see Heng (2012).

← 6. The total number of official Cambodian workers in South Korea, as of May 2017, is 44 714 (30 264 men/14 450 women). Key sectors in Korea that employ Cambodian workers are manufacturing (19 299 workers), agriculture/livestock (9 896), construction (2 678), fishing/aquaculture and services (OIM data).

← 7. For further information, see NHRCK (2013) and IOM (2016).

← 8. For further information see the Global Forum on Migration and Development: https://gfmd.org/pfp/ppd/1689.

← 9. The four strategic objectives of the Cambodia’s Rectangular Strategy Phase III are: (1) economic growth of at least 7% a year that is sustainable, inclusive, equitable and resilient to shocks; (2) promoting employment, especially for the youth, through increased competitiveness and investment; (3) promoting equality by a 1% reduction in poverty incidence annually, prioritising human resources development and sustainably managing natural resources; (4) promoting efficiency by strengthening institutional capacity and governance and improving public services.