Cambodia Sustainable Development Resource Mobilization: Assessing Financing Gaps and Needs KIM VEARA, LECTURER, DEPARTMENT OF ECONOMIC DEVELOPMENT, FACULTY OF DEVELOPMENT STUDIES, ROYAL UNIVERSITY OF PHNOM PENH CAMBODIANA HOTEL, PHNOM PENH NOVEMBER 5, 2018
Cambodia LDC Graduation Status 2012 Reviews 2015 Reviews Thresholds 2015 Reviews GNI Per Capita, $ 880 1,070 Average 1,242 Human Asset Index 57.9 67.2 Above 66.6 Economic Vulnerability Index 50.05 38.3 Below 32 It is expected that the country will graduate from LDC around 2030 The country is moving into a Lower Middle Income Country (LMIC)
Economic Outlook GDP Growth and Per capital GDP Growth 8.0 7.6 7.3 7.0 7.1 7.1 6.7 6.0 6.0 1127 1034 5.0 965 899 822 4.0 753 762 3.0 2.0 1.0 1433 6.9 1315 7.0 6.9 1206 1600 1400 1200 1000 800 600 400 200 0.0 0.1 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Per capita GDP GDP 0
Economic Outlook 12,000.0 External Debt as Percentage of GNI 2007 2017 60.0 Debt Sustainability Analysis 10,000.0 8,000.0 6,000.0 4,000.0 2,000.0 24.8 24.8 31.4 34.3 34.6 47.2 48.9 50.1 55.0 54.4 50.0 40.0 30.0 20.0 10.0 PV of public external debt to GDP, 21% (Threshold 40%) PV of public external debt to exports is 30% (threshold 80%) Debt service export 1.6% (threshold 15%) Debt service to revenue is 5.6% (threshold 18%) 0.0 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Total debt outstanding and disbursed External debt (% of GNI) 0.0
80.0 60.0 Economic Outlook Balance of Payment in % of GDP at Current Prices 73.5 69.9 71.5 65.6 63.5 58.6 70.5 70.1 40.0 33.8 50.1 30.2 46.9 34.7 39.3 40.5 46.1 48.6 51.6 51.3 50.7 20.0 0.0 5.0 1.3 2.4 2.7 2.3 4.5 4.3 4.4 7.4 2008 5.1 2009 6.0 0.0 2010 8.7 2011 7.9 2012 8.7 2013 8.4 2014 8.4 2015 8.7 2016 8.5 2017 8.1 20.0 16.2 16.7 23.9 24.2 25.1 23.8 22.9 21.8 19.2 19.3 40.0 Exports Imports Balance on goods Current account balance Overall balance
Economic Outlook 4,200 4,148 4,174 4,150 4,118 4,111 4,100 19.7% 4,060 4,065 4,076 4,034 4,039 4,062 4,056 4,050 4,019 4,025 4,037 4,037 4,037 4,037 4,000 3,984 3,950 3,924 3,918 3,900 5.5% 3,859 5.8% 5.9% 3.9% 3.9% 4.7% 4.0% 2.9% 3.0% 3.8% 3.3% 3,850 3,800 1.2% 0.8% 0.9% 0.1% 3.0% 1.2% 3.5% 3.4% 0.6% 3,750 3,700 Exchange Rate and Inflation 25.0% 20.0% 15.0% 10.0% 5.0% 0.0% 5.0% Riel/US$ parity (year average) Inflation in Riel (% change, year average)
Financing Needs Need Assessment of Financing for Development 2015 2020 2025 Aggregate Individual flow $ million % GDP $ million % GDP $ million % GDP Domestic public Domestic private International public Non grant 3,142.4 17.2% 5,047.0 19.7% 7,176.9 20.0% governmentrevenue Government borrowing (domestic) 0.0 0.0 89.7 0.3% Private borrowing 2,147.5 11.8% 3,070.2 12.0% 4,306.1 12.0% (domestic) Philanthropy (domestic) 41.5 0.2% 44.6 0.2% 44.6 0.1% ODA 1,464.8 8.0% 1,328.2 5.2% 1,328.2 3.7% Other official flows 111.1 0.6% 112.6 0.4% 112.6 0.3% Government borrowing (international) 918.2 5.0% 1,279.2 5.0% 1,794.2 5.0% International private FDI 1,732.0 9.5% 2,558.5 10.0% 3,588.4 10.0% Private borrowing 1,629.0 8.9% 1,637.4 6.4% 2,296.6 6.4% (international) Remittances 394.2 2.2% 911.1 3.6% 1,780.3 5.0% Philanthropy (international) 216.4 1.2% 209.6 0.8% 209.6 0.6% Total development finance 11,797.2 64.7% 16,198.5 63.3% 22,727.2 63.1%
Overviews of Estimated Total Expenditure Requirement based on NSDP 2014 18
Financing Needs RGC s agenda for Infrastructure Development (RS IV) Approving and implementing the Master Plan for Mutimodal of Transport and Logistics to accelerate integration by linking key economic poles and major economic corridors to be more competitive in the region and the world. Increasing investment budget and mobilizing financing to rehabilitate, build and develop physical infrastructure, including roads and expressways, bridges, railways, waterways, and airways to respond to the demand of national development in terms of quantity, quality, safety and sustainability aspects along with the improvement in inter institutional coordination mechanism.
Financing Needs Financing Infrastructure Up to late 2017, Cambodia has built a total of 16,292 km of the national and provincial roads, of which 8,526 km are made of bituminous asphalt and concrete pavements, or an equivalent to 52.33 % of the total length. In addition, the RGC has upgraded other physical infrastructure to support national economic activities through the improvement and development of infrastructures such as rural roads, ports, railways, airways and other urban infrastructure.
Financing Needs For logistics, Cambodia s ranking has been remarkably improved from 129 in 2010 to 98 the World Bank's Logistics Performance Index (LPI). For the electricity sector, the RGC has reduced the proportion of electricity imported from neighboring countries from 63.1% in 2011 to 18.6% in 2017 of the total electricity consumption. It has also expanded transmission and distribution networks with the aim of improving the livelihood of the people in general as well as to support industrial and commercial development in industrial zones.
Financing Needs In the digital sector, the RGC has promoted the connectivity of backbone fiber optic cables, which have increased to 37,441 km in 2017 along with two undersea optic cable networks in 2017.
Financing Needs While access to grid electricity has expanded in Cambodia to 71.5 percent, reliability of electricity supply can be improved, as nearly two thirds of households with access face frequent power shortages Nationwide, nearly 90 percent of Cambodian households have access to at least four hours of electricity a day. Some 30 percent of rural households rely on off grid power for electricity, including solar home systems, solar lanterns, and rechargeable batteries.
Financing Needs More than 66 percent of households still use biomass stoves, hence helping families particularly low income and female headed households gain access to clean fuels and stoves would reduce health risks. Total number of people having access to improved sanitation has risen from 3% to 42% between 1990 to 2015
Financing Needs Reducing further the electricity rates, expanding supply coverage and enhancing electricity reliability through the construction of additional sub stations closer to economic development poles and areas with high economic potentials. Enhancing digital connectivity by ways of expanding fiber optic cable distribution network infrastructure, backbone fiber optic infrastructure, and undersea fiber optic cables, along with the improvement and modernization of mobile telephone network to ensure quality, cost competitive and nationwide service for all.
Financing Needs Paved roads (percent of total road) Beginning period End Period 75.9 82.8 80.4 47.6 56.9 57 28.2 6.3 10.5 9.9 Cambodia (2004-15) Phillippines (2003-14) Vietnam (2007-13) Indonesia (2009-11) Malaysia (2006-10)
Financing Needs Cost to export (US$ per container) Guatemala Bangladesh Nicaragua Cambodia Philippines Myanmar Vietnam Thailand 0 200 400 600 800 1000 1200 1400 1600 1800 2000 2014 2005
Sources of Financing and Financing Tools 3500 3000 2500 2000 1500 1000 500 0 Disbursement Trends 1445 1351 1335 1214 1074 583 555 421 526 567 631 558 543 598 384 231 238 250 211 123 2014 2015 2016 2017 est 2018 proj Total Loans ODA Grants NGO Grants
Sources of Financing and Financing Tools Fiscal Balance 25.0 20.0 15.0 10.0 5.0 0.0-5.0-10.0-15.0 20.5 21.2 22.5 21.8 21.4 21.8 21.1 22.0 22.3 16.8 17.6 18.5 19.7 15.1 11.7 12.8 12.8 14.4-8.7-8.3-9.7-6.7-7.0-5.0-3.5-3.6-2.7 2009 2010 2011 2012 2013 2014 2015 2016 2017e Revenue Expenditures Fiscal balance
Sources of Financing and Financing Tools 100,000.0 90,000.0 80,000.0 70,000.0 60,000.0 50,000.0 40,000.0 30,000.0 20,000.0 10,000.0 0.0 FDI as Percentage Of GDP 12.1 11.8 10.5 10.8 10.8 10 9.1 2011 2012 2013 2014 2015 2016 2017 14 12 10 8 6 4 2 0 GDP in Billion Riels FDI (% of GDP)
Sources of Financing 18,000.0 16,000.0 14,000.0 12,000.0 10,000.0 8,000.0 6,000.0 4,000.0 2,000.0 FDI Stock (2009 2016) 2009 2010 2011 2012 2013 2014 2015 2016 FDI Stock (million US) 4,820.1 6,162.2 7,534.7 9,361.1 11,222.7 13,025.0 14,739 17,017.8 % Growth 23.9% 27.8% 22.3% 24.2% 19.9% 16.1% 13.2% 15.5% 30.0% 25.0% 20.0% 15.0% 10.0% 5.0% 0.0%
Sources of Financing China s ODA, FDI and Export, Import Indicator (In Million USD) (As percentage of total) 2012 2013 2014 2015 2016 2012 2013 2014 2015 2016 ODA 281.2 371.6 290.3 266.8 35.0% 52.9% 37.3% 33.4% FDI 600.0 768.3 953.2 856.5 1,077.1 35.7% 47.2% 67.9% 60.6% 41.5% Export 1,865.4 1,867.3 524.0 587.5 718.9 23.8% 20.2% 7.6% 6.8% 7.2% Import 3,191.1 4,212.1 5,101.4 5,186.7 5,195.0 45.2% 45.7% 49.7% 46.2% 45.3%
Sources of Financing and Financing Tools 80,000.0 70,000.0 Bank Deposits and Lending 60,000.0 50,000.0 40,000.0 30,000.0 Time and savings deposits, and demand deposit Loans and advances Domestic credits outstanding 20,000.0 10,000.0 0.0 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Sources of Financing and Financing Tools The government bond funded project is planned before 2025 Public Private Sector Partnership for infrastructure development Private sector Capital Market Securities and Exchange Commission of Cambodia was established under the Law of the Issuance and Trading of Non Government Securities, promulgated in 2007 CSX Co, Ltd. is the operator Currently there are five companies in the list Donation from Local people/companies (the case of Kuntha Bopha Children Hospital)
Challenges and Opportunities in Cambodia Opportunities The regional association has agree on the number of issues for the regional growth and development. Partnership for prosperity and peace Active collaboration and mutual assistance on matters of common interest in the economic, social, cultural, technical, scientific and administrative fields Providing assistance to each other in the form of training and research facilities in the educational, professional, technical and administrative spheres, and the collaboration with more effectiveness for the greater utilization of their agriculture and industries, the expansion of their trade, including the study of the problems of international commodity trade, the improvement of their transportation and communications facilities.
Challenges and Opportunities Roles of Development Partners and Bilateral Donors The role of United Nations and ADB could be still supportive for Cambodia, for example, in the areas of infrastructure, policies and human resource development. Road reconstruction financed by Japan for Road No. 1 and 5 would build a stronger economic corridor connecting Thailand and Vietnam The reconstruction of National Road 3 by China s financing through BRI
Opportunities and Challenges Belt and road projects could help Cambodia build more infrastructure, especially rails and roads Quality of infrastructure could be one of the concerns SMEs are the back bone of the economy, and the development is this sector would strengthen the private sector
Opportunities and Challenges The reduction of ODA, amid the time of payment of the previous debts Tax collection has almost reached the ceiling. The broad base approach should be encouraged. Increase in salaries of government officials would increase the recurrent expenditure and reduce the capital expenditure Loss of preferential treatment such EBAs Tariffs is fragile, upon heavily on taxes on the import of vehicles Dedolarization is continued in far future
Conclusion and Recommendations Strong GDI growth, averaging 7 percent would provide Cambodia with opportunity to finance the development needs; There is a falling trends of ODAs and increasing trend of public debts; increase in FDIs and Fiscal Revenues While there is a falling trend in ODA, there is an opportunity to attract bilateral donors, such as Japan and China for infrastructure development as well as the role of development partners, such as World Bank, ADB
Conclusion and Recommendations The development of SMEs would promote the private sector growth Building skills and necessary infrastructures to attract FDIs Building a financial system that is sound, efficient, inclusive and marketbased; Promote savings from the public