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Reference Number: FRV: CAM 2014-08August 2014

Cambodia: Country Partnership Strategy 20112013Final Review Validation

Validation Report

Independent Evaluation Department

This document is being disclosed to the public in accordance with ADB's Public Communications Policy 2011.


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CURRENCY EQUIVALENTS(as of 5 May 2014)

Currency Unit Riel/s (KR)KR1.00 = $0.00025

$1.00 = KR 4,060

ABBREVIATIONS

ADB Asian Development BankADF Asian Development FundASEAN Association of Southeast Asian NationsASR assessments, strategies, and roadmapsCPS country partnership strategyCPSFR country partnership strategyfinal reviewDMF design and monitoring frameworkEIRR economic internal rate of return

ESDP

Education Sector Development ProgramFSP Financial Sector ProgramGDP gross domestic productGMS Greater Mekong SubregionIED Independent Evaluation DepartmentIEM independent evaluation missionMFI multilateral financial institutionNAA National AuditAuthorityNBC National Bank of CambodiaNGO nongovernment organizationNSDP National Strategic Development PlanO&M operation and maintenance

PCR

project completion reportPFM public financial managementPSM public sector managementSRC School Resource CenterTA technical assistanceTVET technical and vocational education and training


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NOTES

(i) In this report, $ refers to US dollars.

(ii) For an explanation of rating descriptions used in ADBevaluation reports, see: ADB. 2006. Guidelines for PreparingPerformance Evaluation Reports for Public Sector Operations.Manila.

Key Words

asian development bank, country partnership strategy, development impacts, evaluation, finalreview, independent evaluation department, lessons, cambodia, recommendations, validation

Director General V. Thomas, Director General, Independent Evaluation Department (IED)Director B. Finlayson, Director, Independent Evaluation Division 2, IED

Team leader E. Kwon, Principal Evaluation Specialist, IEDTeam members F. De Guzman, Evaluation Officer, IEDM. Fortu, Senior Evaluation Assistant, IED

Independent Evaluation Department, VR-15

In preparing any evaluation report, or by making any designation of or reference to a particular

territory or geographic area in this document, the Independent Evaluation Department does notintend to make any judgments as to the legal or other status of any territory or area.


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CONTENTS

Page

EXECUTIVE SUMMARY i

I.

BACKGROUND INFORMATION 1

A.

Validation Purposes and Procedures 1

B.

Country Context and Government Development Plans 4

C. Country Partnership Strategy Priorities and Development Partner Roles 7

II. VALIDATION OF THE COUNTRY PARTNERSHIP STRATEGY FINAL REVIEW 7

A. Strategic Positioning 8B. Program Relevance 11C.

Effectiveness 14

D. Efficiency 23E. Sustainability 26

F.

Development Impacts 30

G. ADB and Borrower Performance 37H.

Overall Assessment 38

I. Lessons, Issues, and Recommendations 39

III. ASSESSMENT OF THE QUALITY OF THE FINAL REVIEW 42

APPENDIX (List of linked documents) 43

1. Country Partnership Strategy Final Review: Cambodia, 201120132. Country Economic Indicators

3. ADB Approved Loans, Grants, and Nonsovereign Investment Facilities to Cambodia4. ADB Approved Technical Assistance to Cambodia

The guidelines formally adopted by the Independent Evaluation Department on avoiding conflictof interest in its independent evaluations were observed in the preparation of this report. G.Ferrazzi and S. S. Dy provided consultant inputs and the peer reviewers were Marco Gatti andToshiyuki Yokota. To the knowledge of the Independent Evaluation Department, there were noconflicts of interest of the persons preparing, reviewing, or approving this report.


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EXECUTIVE SUMMARY

The Independent Evaluation Department (IED) of the Asian Development Bank (ADB)has validated the country partnership strategy final review (CPSFR) prepared by the Southeast

Asia Department for the country partnership strategy (CPS) 20112013 for Cambodia. The CPShad been prepared when Cambodia had just rebounded from the global financial crisis and as

the country was seeking to consolidate the recovery and set a course for sustainable andinclusive growth.

Country Context

Prior to the CPS 20112013, Cambodia acutely felt the impacts of the global financialcrisis of 20082009. At the same time, it experienced a steep rise in international food prices.In the first year of the CPS 20112013 period, Cambodia was hit by severe floods whichaffected a large part of the country. Nonetheless, Cambodia was able to shake off the impactof the floods and continue to achieve rapid economic growth while reducing poverty. Grossdomestic product (GDP) grew at 7.1% in 2011, 7.3% in 2012, an estimated 7.2% in 2013, andis expected to grow at 7.0% in 2014 (Asian Development Outlook 2014). GDP growth has

primarily been driven by household consumption, which accounted for around 85% of realGDP in 2012. On the supply side, growth was underpinned by exports of garments andfootwear, construction, and tourism revenues. Economic diversification is an emerging trend,although there continues to be a strong concentration in a small number of sectors. Even asgrowth has reduced poverty and inequality over the past decade, many people who haverecently risen above the poverty line remain vulnerable. About 50% of the population is at riskof falling back into poverty.

Despite some economic turbulence, Cambodia was able to strengthen its financialposition. The International Monetary Fund assigned the country a grading of low risk statusand high debt sustainability in 2011. Its macroeconomic achievements were due in part tosecond-generation reforms, and particularly those relating to public financial management. As

a result of these developments, Cambodia continues to have access to Asian DevelopmentFund (ADF) loansbut not to ADF grants. If the countrys growth trajectory continues,Cambodia is on a path to achieving lower middle income country status by 2015. It couldreceive a boost at that time from realization of the Association of Southeast Asian Nations(ASEAN) Economic Community, within which goods, investment capital, and skilled labor aretargeted to move more freely among the 10 ASEAN member nations.

Over the CPS period, Cambodia was guided by its Rectangular Strategy on Growth,Employment, Equity, and Efficiency, Phase II (20082013). The governments strategic focuswas on improving governance; stimulating rice exports; diversifying agriculture; facilitatingtrade; and developing physical infrastructure, human resources, and the private sector.Cambodias poverty reduction goal, updated in mid-2010 with the National Strategic

Development Plan Update, set the objective of reducing poverty to 19.5% by 2015. Thisupdate emphasized (i) commercializing agriculture; (ii) developing value chains for ruraldevelopment; (iii) developing logistics and transport systems, especially in the context ofregional integration; (iv) increasing education quality and developing skills to support industry;(v) enhancing public financial management; (vi) strengthening the finance sector; and (vii)intensifying commitments to meet the Cambodia Millennium Development Goals.


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ADB Program

ADB accompanied the first two phases of the governments Rectangular Strategy withthe country strategy and program 20052009 (extended to 2010) and the CPS 20112013.

ADBs overarching goal in Cambodia during the first two phases of the Rectangular Strategyhas been sustainable poverty reduction through broad-based and inclusive economic growth,

social development, and good governance.

The CPS 20112013 was guided by strategic objectives that shaped sector selectionand thematic approaches. CPS 20112013 objectives focused on inclusive economic growth,environmentally sustainable growth, and regional integration. The five priority sectors selectedwere: (i) transport; (ii) water supply, sanitation, and urban development; (iii) agriculture andnatural resources; (iv) education and training; and (v) finance. The strategy applied the driversof change set out in ADBs Strategy 2020 (private sector development, good governance,gender equity, and regional integration). These drivers of change were consistent with fourcross-cutting themes or challenges identified specifically for Cambodia: (i) environment andclimate change, (ii) decentralization, (iii) urbanrural links, and (iv) regional cooperation.

The ADB portfolio in the CPS 20112013 period saw $555 million approved in 43operations (loans, grants, and technical assistance). The number of operations approved in the20092013 period was 70. In value terms, the largest approved allocations in the CPS 20112013 went to agriculture and natural resources ($169 million), transport ($131 million), andpublic sector management ($67 million).

The scope of the validation covers: (i) the ADB program provided between 2011 and2013, (ii) the program approved prior to the CPS but implemented during the CPS, and (iii) theprojects that were implemented and completed in 20092010. The last group of projects wasincluded in the scope of the validation in response to a request from Cambodia ResidentMission to prepare a more complete review of the country program in preparation of the newCPS 20142018. The validation reviews the 11 rated projects and 18 unrated projects in the

period 20092013. The evaluation is based on various sources of information, includingdocuments related to preparation of CPS 2011-2013, project completion reports, review missionreports, and site visits conducted during the independent evaluation mission.

Assessment

The validation has confirmed some of the self-assessments found in the CPSFR, and inplaces it has found that the ratings given were not supported, thus leading to revised ratings asindicated in the summaries that follow.

The validation rates strategic positioning as satisfactory.The IED rating recognizes thatthe CPS closely reflected country needs, government strategies and plans, and the spirit of

ADBs Strategy 2020. The CPS was underpinned by good analysis, in some cases undertakenin close cooperation with the government and in consultation with stakeholders. In implementingthe CPS, the program was enlarged or adapted in places to reflect urgent needs and requestsas well as changing circumstances. Coordination with other development partners andnongovernment organizations was evident, and in many cases appreciated. Offsetting thisresult, there were several factors that detracted from an optimal positioning. The link betweenthe objectives, the sector analyses, and the resource envelope was not clear. Someinconsistencies are noted in ADBs positioning of the energy sector, with the sector assessmentindicating disengagement and the CPS calling for limited engagement. In practice, actual


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extensions and in some cases to costs exceeding budgeted amounts. Outputs for some projectswere reduced or cancelled. Determining the efficiency of the program was hindered by thelackor inconsistent applicationof economic and financial analyses at project level. Data onthe use of the facilities built was absent in many cases. Either rigidities in ADB procedures orpoorly executed communication of these requirements hampered engagement with thegovernment and nongovernment organizations, thus reducing opportunities to efficiently use

available inputs.

Benefits flowing from ADB support are rated by the validation as less likely to besustained. Of the 11 completed and rated projects, eight projects one evaluated and sevenself-assessedhave been assessed as likely sustainable, and three projects two evaluatedand one self-assessed as less likely sustainable. These assessments reflected achievedoutcomes or the anticipation that achieved outputs would, in time, lead to project or sector-wideoutcomes. ADB has given attention to the enabling environment, providing considerable supportfor legislative and regulatory reforms. These frameworks are critical to anchor the necessaryimprovements in downstream institutional capacity development. Despite these efforts,concerns about sustainability have arisen for both rated and nonrated projects. Most often,these concerns relate to availability of funding for operations and maintenance and occur in

project reports, the CPSFR, and comments provided to the independent evaluation mission.Lack of government financing commitments and capacity, and institutional capacity contributedto uncertainty as to benefit flows from projects and the governments ability to achieve sectorobjectives. The concerns regarding sustainability were most evident in the roads and watersectors and are arising due to difficulties in achieving institutional outcomes, such asestablishing road asset management capacity or community-based maintenance structures.

The validation assesses development impacts to be less than satisfactory. The CPSFRhighlights Cambodias development achievements, particularly in economic development andpoverty reduction. However, progress has been variable across sectors. In particular, the qualityof public sector governance remains a serious challenge. It is difficult to obtain a clear view of

ADBs contribution to development impacts due to the short implementation period (many

projects were approved only in 2012); a limited set of self-assessed and/or evaluated projects;as well as weaknesses in the CPS results framework and the CPSFR results framework update,particularly with respect to defining outcome achievements. For these reasons, and becausedevelopment impacts are normally best seen some time after project completion, the validationfindings and conclusions on development impacts are tentative. In some sectors andsubsectors, a plausible case can be made for eventual and meaningful development impactsagainst CPS sector outcomes (agriculture and natural resources, finance, public sectormanagement [decentralization]). However, in other sectors, altogether amounting to more thanhalf of ADB loans, it is not possible to make a case for attribution and a less optimistic view issupported (transport; water supply, sanitation, and urban development; energy; education andtraining; and public sector management [public financial management]).

Overall, the validation rates ADBs CPS design and implementation as less thansuccessful.

The validation finds the performance of both government and ADB was satisfactory.Capacity is increasing in government agencies. Delegation to the resident mission is allowingcloser support to be provided to government agencies in some projects. Although coordinationefforts of the government and ADB are adequate on the whole, there remains room forimprovement on both their parts. For instance, more could be done by both parties to reduceintegrity violations in ADB projects. Communication between ADB and the government relating


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to sector strategies could be better articulated in some cases, especially with respect todiscussions directed to reaching agreement on ADB resource levels and the choice of executingand implementing agencies.

Lessons and Issues

The validation concurs with the key lessons and recommendations in the CPSFR andproposes additional lessons, issues, and recommendations for consideration. The additionallessons are described below:

(i) The case for effectiveness and impact could have been given more attention inADB operations. Business process guidelines and internal incentives stress rapidprocessing and disbursement. Missed opportunities to design and track importantindicators of outcomes, particularly institutional outcomes, have hindered effortsto determine success and draw lessons. This has reduced ADBs ability toinfluence ongoing projects and guide overall program decisions. Theestablishment of clear baselines is an essential requirement for improving projectdesigns.

(ii) ADB is not developing convincing measures on how it will address projectsustainability, particularly in the road sector. This shortcoming is related toweaknesses in designing institutional outcomes and the lack of attention given toinstitutional aspects in monitoring and project completion reports.

(iii) Implementation challenges and threats to sustainability arise in part from the lackof attention paid to capacity development for institutions involved in thepreparation and management of projects. While this preparation activity canrequire additional effort in project design and preparation measures, and therebypossibly extend preparation and implementation schedules, the payoff in capacitygained can make this investment worthwhile.

The validation identifies several issues where greater attention by ADB is needed. ADBs

performance shows it is very responsive to the Government of Cambodia regardinginfrastructure and emergency needs. Nevertheless, it has not yet demonstrated that it caneffectively support the government in some of the more difficult reform and institutionalstrengthening efforts.

Efforts to strengthen institutions dealing with ADB projects have had insufficient impactin reducing integrity violations. It is likely that some improvement is possible by renewing effortsto address fiduciary safeguards at project level. Broader and more sustainable impact onfiduciary issues in Cambodia will require a longer-term strategy that sees ADB engage moreintensively with institutions involved in anticorruption initiatives.

There is room for ADB programs to seek synergy across the portfolio. For example,

opportunities have been missed in decentralization policies of the government. Here, ADB hasprimarily limited its focus to public sector management operations, and it did not meaningfullysupport decentralization in the other sectors where it had a significant presence (e.g.,infrastructure and education). The CPS lists four cross-cutting challenges that are likely tobecome increasingly important: (i) environment and climate change, (ii) decentralization, (iii)urbanrural links, and (iv) regional cooperation. Attaining stronger linkages and coherenceacross the portfolio on these cross-sector issues is a challenge that merits more attention.


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The resident missions proposal to frame the ADB portfolio in terms of value chains canpotentially give the portfolio greater coherence. Under this framework, the Cambodia portfoliowould be linked to vulnerabilities or opportunities along the value-added chains of agricultural orother products. The entry points for ADB support would necessarily cut across several sectors.The challenge for ADB is to articulate this approach and show the thread across projects, givingthe portfolio coherence and greater impact irrespective of the individual projects sector

designations.

Responsiveness is a characteristic of ADBs program for Cambodia that is valued by thegovernment, but it is necessary to impose some discipline on this process that reflects therationale for the overall portfolio. Striking that balance will require better articulation of theportfolio rationale. A more robust approach to developing the portfolio logic would also guardagainst an overly dispersed portfolio that is joined together by ad hoc and retrospectiverationales. The linkages between projects (e.g., projects that fall along an agricultural valuechain) would drive the portfolios spread over sectors. This approach to the portfolio shouldallow ADB to determine how to respond to the many government requests that arise due tochanging circumstances and perceptions of need throughout the CPS period. Where projects donot fit the portfolio logic, linkages need to be demonstrated with initiatives by other development

partners.

Another portfolio-wide issue is the difficulty encountered in ascertaining the progress andsuccess of ADB operations and strategies. A more determined effort is needed within ADB tofashion robust results frameworks. Ideally, this effort will be tied to support given to thegovernment, enabling it to take a larger role in crafting project design and monitoringframeworks or sector and CPS results frameworks in a way that strengthens country system-based data and reporting.

Recommendations

In line with the issues identified in the validation, the following recommendations are

offered for consideration:

(i) The CPS needs to demonstrate how institutional capacity will be developed atboth the strategic level within the country for critical institutions such as anti-corruption units and an ombudsman, and at the project level, by strengtheningexecuting and implementing agencies to meet program objectives and mitigategovernance and safeguard risks. Good practices needs to be in greaterevidence, particularly regarding possible entry points (individual, institutional,enabling environment), sound diagnostic preparation, and sufficiently long timeframes to attain significant changes.

(ii) The CPS results framework needs to reflect the sector results frameworks andthe planned program and provide a clear set of indicators and baselines to

measure effectiveness, efficiency, and in particular, sustainability. Theseframeworks need to provide details on how these measures will be addressed.

(iii) An effort needs to be made to clearly articulate the value chain approach tojustify engaging in programs that cut across sectors.

(iv) In view of the longer time period of CPS 20142018, a CPS midterm reviewneeds to be undertaken that is focused on sector and CPS results frameworkreviews. It needs to allow for the evaluation of cross-sector impacts and bebased on the participatory approach used to develop the CPS 20112013. This


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review needs to lead to adjustments in indicators and strategies to reflectchanging circumstances.


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I. BACKGROUND INFORMATION

A. Validation Purposes and Procedures

1. The Asian Development Bank (ADB) formulated and implemented the Cambodia countrypartnership strategy (CPS), 20112013.1The Southeast Asia Department prepared a CPS finalreview (CPSFR)2in 2013 to identify lessons and draw recommendations to inform the new CPSunder preparation.3

2. The Independent Evaluation Department (IED) has prepared this report to (i) validate theCPSFR findings, (ii) assess the quality of the self-evaluation, and (iii) identify lessons andrecommendations to improve the design and implementation of the new CPS while providing abasis to ensure accountability for future self-evaluations.

3. This validation report is based on (i) findings of the CPSFR report, (ii) a desk review, (iii)findings of an independent evaluation mission (IEM) through consultations in Cambodia andfield visits to selected project sites,4 and (iv) consultations with relevant ADB staff based atheadquarters. In Cambodia, the IEM met with staff of ADB sCambodia Resident Mission, as

well as representatives of the relevant government agencies, development partners, andnongovernment organizations (NGOs).

4. The scope of the validation conforms to the CPSFR validation guidelines.5It covers theCPS, the country operations business plans prepared from 2011 to 2013, and the ADBassistance program provided between 2011 and 2013. The validation encompasses theprogram that was approved prior to the CPS but was implemented during the CPS. Additionally,in response to a request from the resident mission to prepare a more complete review to assistin preparing the new CPS (20142018), the IEM agreed during the mission to enlarge the scopeto include the projects that were under implementation during 20092010.

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5. Tables 1 and 2 delineate those projects that are the focus of the validation. They contain

the 11 rated projectscomprising eight self-assessed and three evaluatedthat fall under theagreed period (Table 1) and the 18 projects in the same period that were not rated and werereviewed on the basis of the review mission reports (back-to-office reports, aide memoires, ormemoranda of understanding) and site visits (Table 2). The projects in Table 1 are part of thelist of rated projects that were reviewed in the CPSFR. In addition, the CPSFR included threeprojects that were not included in the validation: (i) Loan 1753: Stung Chinit Irrigation and RuralInfrastructure (closed on 4 December 2008), (ii) Loan 2129: Small and Medium-Sized Enterprise

1 ADB. 2011.Country Partnership Strategy: Cambodia, 20112013.Manila.

2 ADB. 2013.Country Partnership Strategy Final Review: Cambodia, 20112013.Manila (accessible from the list of

linked documents in the Appendix).3 The next CPS is to cover the 20142018 period (to match the government planning cycle).

4 The IEM visited Cambodia from 18 to 24 March 2014 to validate the CPSFR. It also visited the field locationscovered under the following loans: (i) Loan 1953-CAM: Commune Council Development Project, (ii) Loan 2670-CAM: Rural Roads Improvement Project, and (iii) Loan 2852-CAM: Flood Damage Emergency ReconstructionProject.

5 ADB. 2011. Guidelines for the Preparation of Country Partnership Strategy Final Review Validation Report. Manila

(IED, draft).6 The IED validation guidelines (Draft 2011) state Under normal circumstances, a CPSFRshould evaluate the

performance of both country strategy and assistance programsapproved under the current CPS. Ongoing loansand TA projects approved under the preceding CPS, but being implemented under the current CPS period shouldalso be included in the CPSFR. This guidance would therefore normally exclude projects completed prior to theCPS period.


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Development (closed on 31 August 2008), and (iii) Loans 1864 and 1865: Education SectorDevelopment Program (closed on 18 September 2008).

Table 1: Project Ratings for Projects Closed between 2009 and 2013

SECProject Name

(loan or grant number)Amt$mn APPRV COMP

Rating(source) RELV EFEC EFIC SSTB

ANR Northwestern RuralDevelopment Project(1862)

27.2 Nov2001

Nov2009

PS(PVR)

R EFV LeEFN LeSTN

HSP Health Sector SupportProject (and JapanFund for PovertyReduction grant) (1940)

20.0 Nov2002

Jun2010

S(PCR)

HR EFV EFN MoSTN

TR GMS: Cambodia RoadImprovement Project(1945)

50.0 Nov2002

Sep2011

S(PVR)

R EFV EFN LeSTN

ANR Tonle SapEnvironmentalManagement Project(1939)

10.9 Nov2002

Sep2009

S(PVR)

R EFV EFN LiSTN

EN Greater MekongSubregion TransmissionProject (2052)

44.3 Dec2003 May2011 S(PCR) HR EFV EFN LiSTN

ANR Agriculture SectorDevelopment Program(2022/2023)

29.7 Nov2003

Jun2010

S(PCR)

HR EFV EFN LiSTN

ED Second EducationSector DevelopmentProgram (2121/2122)

45.0 Dec2004

Jun2010

S(PCR)

HR EFV EFN LiSTN

ANR Tonle Sap SustainableLivelihoods Project(G0034/G0035)

19.7 Dec2005

Jul2011

LeSCS(PCR)

R LeEFV LeEFN LiSTN

WM Tonle Sap Rural WaterSupply and SanitationSector Project (G0018)

18.0 Oct2005

Jul2010

LeSCS(PCR)

HR LeEFV LeEFN LeSTN

PSM Commune CouncilDevelopment Project 2(G0066)

7.8 Dec2006

Sep2010

S(PCR)

HR EFV EFN LiSTN

FN Second FinancialSector Program Cluster(Subprograms 24)(2479/2585/2706)

30.3 Dec 08,Nov 09,Dec 10

Jun2011

HS(PCR)

HR HEFV EFN LiSTN

Amt = amount, ANR = agriculture and natural resources, APPRV = approval month and year, COMP = completion monthand year, ED = education, EFEC = effectiveness, EFIC = efficiency, EFN = efficient, EFV = effective, EN = energy, FN =finance, HEFV = highly effective, HR = highly relevant, HS = highly successful, HSP = health and social protection, LeEFN =less efficient, LeEFV = less effective, LeSCS = less than successful, LeSTN = less likely sustainable, LiSTN = likelysustainable, mn = million, MoSTN = most likely sustainable, PCR = project completion report, PS = partially successful, PSM= public sector management, PVR = project validation report, R = relevant, RELV = relevance, S = successful, SEC =sector, SSTB = sustainability, TR = transport and information communication technology, WM = water supply and othermunicipal infrastructure and services.Source: Independent Evaluation Department.


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Table 2: Active Projects during 20092013

SEC Project Name (loan or grant number)Amt

($mn) APPRV Information SourcePSM Public Financial Management for Rural

Development Program (Subprogram 2)(G0222)

5.0 Sep 2010 BTOR, midterm mission report, MOU(October 2013)

ANR Northwest Irrigation Sector Project(2035/G3003.01)

18.0 Dec 2011 PCR of Government of Cambodia

Ministryof Water Resources and Meteorology(December 2011)

EN Second Power Transmission andDistribution Project (2261)

20.0 Oct 2006 BTOR of joint loan review mission (March2014)

TR GMS: Rehabilitation of the Railway inCambodia Project (2288/2602/G0187)

42.042.021.5

Jan 07Dec 09

BTOR and aide memoire of special projectadministration mission (February 2013)

ANR Tonle Sap Lowlands Rural DevelopmentProject (2376/G0092)

10.19.9

Dec 2007 BTOR of review mission (October 2013)

TR Road Asset Management Project (2406) 6.0 Jan 2008 BTOR of final review mission (March 2014)

ANR Emergency Food Assistance Project(2455)

17.5 Oct 2008 BTOR of review mission (December 2011)

TR GMS: Cambodia Northwest RoadImprovement Project (2539) 16.3 Aug 2009 BTOR of final review mission (December2013)ANR Tonle Sap Poverty Reduction and

Smallholder Development Project (2599)3.4 Dec 2009 BTOR of review mission (March 2014)

aide memoire of project review mission(February 2014)

TR Rural Roads Improvement Project (2670) 35.0 Sep 2010 BTOR of review mission, site visit (February2014)

ANR Water Resources Management SectorDevelopment Program (Project Loan)(2672)

10.0 Sep 2010 MOU review mission (September 2013)

TR Provincial Roads Improvement Project(2839/8254/G0278)

52.010.0

7.0

Dec 2011 BTOR of review mission (April 2014)

MU Flood Damage EmergencyReconstruction Project (2852)

55.0 Mar 2012 MOU of midterm review (28 January 2014),site visit (25 November to 13 December

2013)ED Third Education Sector Development

Program (2888/2889)30.0 Sep 2012 BTOR (January 2014)

EN Medium Voltage Sub-TransmissionExpansion Sector Project (2979/8264)

45.0 Dec 2012 BTOR of inception mission (February 2014)

FN Third Financial Sector Program(Subprogram 2) (3002)

15.0 May 2013 BTOR and MOU of consultation mission(November 2013)

PSM Promoting Economic DiversificationProgram (Subprogram 2) (2675)

10.0 Sep 2010 BTOR (February 2010)

PSM Promoting Economic DiversificationProgram (Subprogram 3) (2904)

25.0 Sep 2012 BTOR of reconnaissance mission for projectpreparatory technical assistance, follow-upmission (June 2012)

Amt = amount, ANR = agriculture and natural resources, APPRV = approval month and year, BTOR = back-to-office report,ED = education, EN = energy, FN = finance, GMS = Greater Mekong Subregion, mn = million, MOU = memorandum of

understanding, MU = multisector, PCR = project completion report, PSM = public sector management, SEC = sector, TR =transport and information communication technology.Source: Independent Evaluation Department.


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B. Country Context and Government Development Plans

1. Country Context

6. Economic growth:Cambodiaseconomy grew strongly in the period prior to the CPS20112013, enabling it to reduce the incidence of poverty from 53.2% in 2004 to 20.5% in2011.7 This strong performance has continued through the CPS period, and gross domesticproduct (GDP) grew at 7.1% in 2011, 7.3% in 2012, an estimated 7.2% in 2013, and is expectedto grow at 7.0% in 2014 (Asian Development Outlook 2014). GDP growth has been driven byrobust domestic demand, as household consumption alone accounted for around 85% of realGDP in 2012. From the supply side, growth has been led by services and industry andsupported by strong agricultural performance. Reflecting this favorable economic environment,in 2011 Cambodia was categorized by the International Monetary Fund as having low risk statusand high debt sustainability (low debt distress). 8 As a result, in accordance with AsianDevelopment Fund (ADF) parameters, Cambodias access to ADF grants has ended, although itcan continue to access ADF loans. While growth has been strong for more than a decade, it hasbeen volatile, particularly in the CPS period. The global financial crisis of 20082009 incombination with a steep rise in international food prices prompted ADB to provide emergency

food assistance. Severe floods affected the country in 2011, the first year of the CPS period,which prompted ADB to implement a flood damage emergency reconstruction project. In 2013,there was a period of political turbulence following national elections, together with strikes forhigher wages by garment workers that disrupted some production of garments and footwearand reduced investor confidence.

7. Future economic performance.Assuming the high growth rates (7.0%7.5%) from2013 and 2014 continue,9Cambodia will reach lower middle income country status by 2015. In2015, Cambodia will be affected by creation of the Association of Southeast Asian Nations(ASEAN) Economic Community, where goods, investment capital, and skilled labor will bepermitted to move more freely among the 10 ASEAN member nations. This will bring to thecountry both challenges and opportunities.

8. Income Distribution: The Gini index for Cambodia stood at 36 in 2009, after being ashigh as 44 in 2007.10 This result places Cambodia among the more equitable developingeconomies, although recent data is lacking. Nevertheless, there are a number of factors thatsuggest inequality will continue to be a concern. It is still difficult for small firms in Cambodia to

join the formal economy. In the World Banks 2011 Doing Business report, Cambodia droppedfrom 145th place to 147th (out of 183 countries). The low ranking is mainly due tonontransparent and costly business registration procedures. Cambodia has no credibleantimonopoly or antitrust statutes to curb anticompetitive practices.11As a majority (78.6%) ofCambodians lives in rural areas, land ownership is a key determinant of life outcomes. Landownership has become more concentrated. The number of people owning any type of land fellsubstantially from 90% to 70% over the period 20102013. 12 These developments favor

increasing concentration of wealth rather than inclusive growth.

7 World Bank, 2013. Where Have All the Poor Gone?Poverty Monitoring and Analysis, Policy Note. Washington DC.

8 International Monetary Fund. 2012. Cambodia: Staff Report for the 2012 Article IV ConsultationDebt

Sustainability Analysis. Washington, DC.9 The economic growth rates are predicted by the World Bank andADBs Asian Development Outlook.

10World Bank. Gini Index. http://data.worldbank.org/indicator/SI.POV.GINI (accessed 21 July 2014).

11Bertelmanns Stiftung. 2012. Bertelmanns Transformation Index 2012: Cambodia Country Report.Gtersloh (p. 16).

12S. Kumar, and Ny Boret. 2013. Inequality and Regional Disparity in Cambodia: Status, Trends and Policy Options.Background Paper for Cambodia Human Development Report 2014.


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9. Poverty. Although the reduction in the poverty rate over the past decade has beenimpressive, many of the poor have only recently managed to rise above the poverty threshold. Alarge segment of the populationthought to be as high as 50%is vulnerable to economicshocks and could easily fall back into poverty. 13Most vulnerable are infants and children,women of reproductive age, households with insecure sources of food, and special vulnerablegroups (e.g., orphans or people living with HIV). The risk of these groups falling back into

poverty ensues from the following factors: (i) crisis and emergency (including macroeconomiccrises and natural disasters), (ii) low human development (including poor nutrition and pooraccess to education), (iii) seasonal unemployment and food insecurity, and (iv) health shocks.14

2. Government Development Plans

10. During the term of the fourth legislature (20092013) Cambodia continued to implementthe Rectangular Strategy on Growth, Employment, Equity, and Efficiency, Phase II. This planfocused on improving governance; stimulating rice exports; diversifying agriculture; facilitatingtrade; and developing physical infrastructure; human resources; and the private sector. TheNational Strategic Development Plan (NSDP) Update in mid-2010 emphasized the objective ofreducing poverty to 19.5% by 2015. The policy objectives of the NSDP that influenced the CPS

20112013 included the following (among others): (i) commercializing agriculture anddeveloping value chains for rural development; (ii) developing logistics and transport systems,especially in the context of regional integration; (iii) increasing education quality and developingskills to support industry; (iv) enhancing public financial management (PFM); (v) strengtheningthe finance sector, including capital markets development; and (vi) intensifying commitments tomeet CambodiasMillennium Development Goals.

3. ADBsSupport to the Governments Development Plans

11. As of 31 December 2010, the CPS 201113 indicated the ADB portfolio was $1.167billion.15The CPS results framework for 20112013 stated that ADB would provide assistanceto seven sectors, consisting of (i) agriculture, (ii) education, (iii) finance, (iv) water, (v) transport,

(vi) public sector management (PSM), and (vii) energy. The CPS stated it would provide totallending assistance of $425 million16 plus nonlending assistance of $37 million, bringing totalassistance to $462 million. ADB assistance would be provided for up to 99% of expected costs,and the CPS indicated that for 20112012 the loans would be sourced from concessionary ADFfinancing. It was expected that about five loans would be processed per year in the five prioritysectors over the CPS period. The results framework indicated a total program of $440 millionwould be provided by ADB over the CPS period. It gave no breakdown by type and source offunding (i.e., technical assistance [TA], ADB loan, and cofinancing). The CPSFR based itsanalysis on the figures presented in the results framework, which were in turn derived fromsector plans, and covered the period 2011 to June 2013. A summary of the planned versusactual results is presented in Table 3.

13World Bank. 2013. Cambodia Economy Remains Robust Amidst a Challenge. Press release. 7 October. http://www.worldbank.org/en/news/press-release/2013/10/07/cambodia-economy-remains-robust-amidst-a-challenge

14ADB. 2011. Poverty Analysis (Summary). Supplementary document to ADB. 2011. Country Partnership Strategy:Cambodia,20112013. Manila (p. 2).

15Footnote 1, p. i.

16Regional lending of $33.5 million set aside for the GMS program is excluded from the total lending of $425 million(ADF total lending of $272.7 million for 20112012 plus $152 million for 2013). Source: CPS 20112013, para. 36.


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through more policy dialogue and delegation of project administration. The CPS 201113 didnot systematically address the recommendations raised in the CAPE, but it did mention thatsome findings shaped its Decentralization and Deconcentration program, PFM, andanticorruption measures. On portfolio management it drew on other findings to: (i) applyinnovations in portfolio selectivity; (ii) increase the average size of projects through variousfinancing modalities; (iii) select the appropriate financing modality and mobilize cofinancing; (iv)

assess capacity of executing agencies; (v) selectively delegate projects to CARM; (vi) improveadherence to project readiness filters; and (vii) improve monitoring and evaluation (M&E) of

ADB activities through stronger results frameworks.

C. Country Partnership Strategy Priorities and Development Partner Roles

15. ADBscountry strategy and program, 20052009 (extended to 2010) and CPS 20112013 accompanied the first two phases of the governments Rectangular Strategy. ADBsoverarching goal in Cambodia during this period was sustainable poverty reduction throughbroad-based inclusive economic growth, social development, and good governance. Mainoutcomes were (i) enhanced agricultural productivity and diversification; (ii) strengthenedhuman capital through improved rural water supply and sanitation, and better access to quality

general education and industry-related TVET; (iii) improved transport infrastructure andservices and access to markets, and (iv) a growing resilient and efficient financial system.

16. The CPS 20112013 was guided by strategic objectives that shaped sector selectionand thematic approaches. CPS 20112013 objectives focused on inclusive economic growth,environmentally sustainable growth, and regional integration. The five priority sectors selectedwere: (i) transport; (ii) water supply, sanitation, and urban development; (iii) agriculture andnatural resources; (iv) education and training; and (v) finance. The strategy applied the driversof change set out in ADBs Strategy 2020 (private sector development, good governance,gender equity, and regional integration). These drivers of change were consistent with fourcross-cutting themes or challenges identified specifically for Cambodia: (i) environment andclimate change, (ii) decentralization, (iii) urbanrural links, and (iv) regional cooperation.

17. The NSDP Update called for partnerships in development. Strategy 2020 seespartnerships as a core element of ADBs business model. Multilateral and bilateral developmentpartners were committed to support Cambodias development, and coordination was consideredas a priority objective. The government has strengthened the 19 government-led technicalworking groups comprising public sector agencies and development partners. In 2013, ADB hasserved as the Lead Development Partner Facilitator and in 2012, ADB co-chaired the D&D andthe PSD-related TWGs. ADB consults key development partners when formulating the CPS andthe country operations business plan (COBP), and participates in joint portfolio performancereviews with key development partners, including the World Bank and the Japan InternationalCooperation Agency. There was no formal demarcation of areas of responsibility between thedevelopment partners and the purpose of the reviews was to share information.

II. VALIDATION OF THE COUNTRY PARTNERSHIP STRATEGY FINAL REVIEW

18. This section reviews the findings in the CPSFR and where possible validates its overallassessment of the CPS performance against eight criteria: (i) strategic positioning, (ii) programrelevance, (iii) effectiveness, (iv) efficiency, (v) sustainability, (vi) development impacts, (vii)

ADB performance, and (viii) borrower performance. The validation reviews these findings andprovides an overall assessment of CPS performance that is based on the first six of thesecriteria.


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A. Strategic Positioning

19. Following the IED CPSFR validation guidelines (2011), several major sub-criteria wereconsidered in validating this rating: (i) country context and alignment with the governmentsstrategy and plans, (ii) consistency with ADB Strategy 2020,(ii) adherence to the principles ofthe Paris Declaration on Aid Effectiveness, (iv) country diagnostics and development

challenges, (v) appropriateness of the resource envelope, and (vi) adequacy of the resultsframework for monitoring the progress of CPS implementation and evaluating ensuingdevelopment outcomes. This section of the validation reviews the CPS strategic positioningusing criteria similar to those used in the CPSFR.

20. The validation reviews the CPSFR rating of highly satisfactory, indicating where itconcurs and where additional considerations are necessary. The validation concludes that anadjusted rating for strategic positioning is needed, assessing it as satisfactory. The primaryweaknesses with the CPS relate to lack of clarity on how the CPS program and itsimplementation were supportive of the overarching CPS objectives of inclusive economic growthand social development and equity, and the lack of implementation of a significant proportion ofthe original program presented in the CPS. The lack of clarity arises from (i) an unnecessary

attempt (in the CPSFR) to force projects in priority areas to demonstrate that CPS allocationswere in line with Strategy 2020, and (ii), and inadequate results frameworks in the CPS andCPSFR.

21. Relevance to the governments strategy. The CPS 20112013 states its alignmentwith the Rectangular Strategy 20092013 and the NSDP Update of 2010. ADBs intention toalign the subsequent CPS with the government strategy is also evidenced by the relatively shortduration of the CPS. The country operations business plan for 20082010 was based on thepremise that it would be followed by a 5-year CPS. In practice, this strategy was notimplemented as ADB decided to realign the CPS period with the government strategic planningcycle. As a result, ADB decided to limit the CPS period to 20112013 and to synchronize theCPS 20142018 with the anticipated NSDP 20142018. This approach is in line with the

movement toward recognizing and making the best use of government systems. Theoverarching objectives of the CPS program were to promote inclusive growth and socialdevelopment and equity. These objectives reflect the governments overarching goal of reducingpoverty by 1% per annum.

22. Relevance to ADBscorporate strategy and the Principles of the Paris Declaration.The CPSFR shows how the CPS adhered to ADBs Strategy 2020 and the sector allocation wasrelevant to ADBs corporate strategy. The validation confirms that the CPS objectives reflect thethree pillars in ADBs Strategy 2020 of inclusive growth, environmental sustainability andregional integration. Similarly, the objectives reflected the principles of the Paris Declaration.These objectives were developed in close cooperation with the government and in consultationwith stakeholders. In implementing the CPS, the program was enlarged or adapted in places to

reflect urgent needs and requests as well as changing circumstances.

23. The validation acknowledges that most, if not all, projects identified in the CPS have thepotential to make a contribution to the overarching objective of inclusive economic growth, but itconsiders the CPSFR claim that all projects were oriented toward achieving inclusiveeconomic growth to be overstating the situation. Although it may be correct that projects areclassified under this heading in ADBs Cambodian portfolio, Strategy 2020, prepared in 2008,should nevertheless have guided ADB to be more explicit in defining how all of three pillars of


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inclusive economic growth would be addressed in the CPS and its implementation. 17 Ameaningful claim would acknowledge that support for this objective requires adequate supportfor social protectionthe third and integral pillar of inclusive economic growth. The CPS andCPSFR do not adequately document how the planned and actual social protection supportwould be or was provided by ADB.

24. Country Diagnostics and the Quality of the Resource Envelope. Overall, the CPSand information provided in the CPSFR confirm the relevance and coherence of ADB sectorstrategies.18The sector assessments clearly lay out the governments strategies and plans forthe sectors and how ADB will support these programs. For instance, the governmentseducation sector objective of greater secondary level enrollment, particularly for girls, shapedthe Second Educational Support Development Program. 19 However, the link between theobjectives, the sector analyses, and the resource envelope are not clear. The CPSFR notes thatCPS sector allocations in priority areas (77% in its calculations) come close to meeting thebenchmark set in Strategy 2020 (CPSFR, p. 15) of allocating 80% of loans to infrastructure by2012. In fact, when the agricultural projects are taken out of the environment category, the CPSis substantially below that benchmark (at 56%). It is important to note that the CPS makes nocommitment to attain the Strategy 2020 80% benchmark. The sector allocation is largely

justified on the basis of country needs and specific government strategies and plans. As aresult, the CPSFR reclassification makes it difficult to discern the logic of the underlying portfoliostructure. Further confusion is created by the focus in the CPSFR on value chains, as thelinkages between the objectives, the sector studies, and resource allocation to support the valuechains concept along supply chains is not clearly articulated, particularly in regard to how crosssector linkages will be developed.

25. In some cases, the alignment between ADB and government sector strategies is notoptimal across all sectors. For instance, the CPS notes that the ADB sector interventions will beanchored as much as possible in emerging Decentralization and Deconcentration structures,including through the Sub-National Investment Facility, a new funding mechanism for ruralinfrastructure investments. In practice, the governmentsdecentralization strategies and plans

are not very visible in the CPS sector programs and projects. The PSM sector is an exception,as a decentralization sector development project is being implemented there. The reports andrecommendations of the President for projects in other sectors (agriculture, education, ruralinfrastructure, and water infrastructure) indicate a commitment to align the projects withemerging government policies for decentralization, but their project designs reflect little policydialogue and support to explore or pilot new institutional arrangements.

26. There are inconsistencies between stated objectives and the resource allocation forreasons that appear to be independent of government and ADB stated priorities. For example,

ADB has not adhered to its intention stated in the CPS to have limited engagement in theenergy sector. In a supplementary document of the CPS 20112013, it is noted that Energy is

17Strategy 2020 describes inclusive growth based on three pillars: (i) high, sustainable growth to create and expandeconomic opportunities; (ii) broader access to these opportunities to ensure that members of society canparticipate and benefit from growth; and (iii) social safety nets to prevent extreme deprivation. Seehttp://www.adb.org/themes/poverty/topics/inclusive-growth

18This criterion is partially addressed in the CPSFR, which explains the overall estimated resource envelope and itsdivision by source - ADF or ordinary capital resources. However, the CPSFR does address aspects of coherenceunder section B. Program Relevance.

19This loan was effective in August 2005 and closed in June 2010.


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being considered for disengagement.20Nevertheless, energys allocation in the CPS of $45million is the same amount as that for finance and for PSM (each at 9.6%). Both of the latter arecore programs. The CPSFR notes that in the actual approvals for the CPS period the plannedallocation for the energy sector was exceeded. In the end, there were three such projectsvalued at $61.1 million and representing 11% of the portfolio.21The CPSFR indicates the sectorwas low in priority (standby status), but it does not explain why the amount of assistance was

relatively so large and whether it would persist in the future. The relevance of the CPS program,relative to what was implemented is further reduced by the significant proportion of theprograms in sectors such as education and water that were not implemented.

27. Design quality of the country results framework. The CSPFR notes that linkagesbetween project design and monitoring frameworks (DMFs) and sector results frameworks andbetween the sector results frameworks and the CPS results framework, respectively, are logicalin most cases and systematic. The CPSFR notes that some sector outcomes are tooambitious. Offsetting this result, the validation found that some outcome indicators are notmatched with programs that would provide a plausible case for demonstrating an ADBcontribution. For instance, a forestry cover indicator is connected to a biodiversity project thatonly covers a small area of forest and which is unlikely to add to the forest cover, although it

may add to the quality of the forest. The CPS results framework provides no substantiveinstitutional outcomes indicators, despite having considerable institutional support and targetsembedded in the individual operations which are reflected in the sector assessments, strategies,and road maps (ASR).22These deficiencies in the DMFs and/or results frameworks make theCPS difficult to assess, and they reduce the likelihood that useful lessons can be drawn fromproject implementation and carried into the next CPS.

28. Coordination with development partners and NGOs.ADB engages with developmentpartners in several ways that are reflected with reasonable accuracy in the CPSFR. ADB hasbeen a strong participant in technical working groups that bring the government together withdevelopment partners. It has acted as cochair in the Decentralization and DeconcentrationTechnical Working Group. ADB has attracted a high level of cofinancing from development

partners, accounting for 22.5% of the total for the CPS 20112013 period. Joint portfolio reviewshave also been undertaken annually during the CPS period with the government, the JapanInternational Cooperation Agency, and the World Bank. The ADB has also acted as the LeadDevelopment Partner Facilitator, enabling it to be more effective in mobilizing otherdevelopment partners resources. The validation notes that during discussions with the validationteam, some developing partners raised concerns about the lack of coordination with ADB at theoperational level, although it is difficult to substantiate these assertions. There is also evidenceof a lack of coordination with new developing partners and this type of risk needs to be carefullymanaged.

20Stated in the supplementary document Country Partnership Strategy Formulation which is linked to ADB. 2011.Country Partnership Strategy. 2011-2013. Manila.

21Footnote 2, p.61.

22See the following supplementary documents (ASR summaries) linked to the Country Partnership Strategy:Cambodia, 20112013: Sector Assessment: Public Sector Management; Sector Assessment (Summary): Energy;Sector Assessment (Summary): Agriculture and Natural Resources; Sector Assessment (Summary): Educationand Training; Sector Assessment (Summary): Water Supply, Sanitation, and Other Municipal Infrastructure andServices; Sector Assessment (Summary): Finance; Sector Assessment (Summary): Transport. These documentscan be retrieved at http://www.adb.org/Documents/CPS/?id=CAM-2011


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B. Program Relevance

29. The validation acknowledges the responsiveness of the CPS to country needs.However, it revises the CPSFR rating of highly relevant to relevantdue to the lack of a rationaleto support the overall allocation of resources in the portfolio, and the insufficiency of resourcesand effort applied to address institutional factors related to governance risk (particularly

corruption) and resettlement issues.

30. Program relevance in relation to sector strategies and issues. The CPSFRassesses the programs as being responsive to country needs and reflective of the key issuesfound in the sector ASR. It notes that some additional projects were introduced duringimplementation, explaining that these projects were initiated in response to urgent needs suchas flood damage reconstruction. Due to ADBs responsiveness, the sector coverage of theportfolio has increased in total to 10. The CPSFR justifies this arrangement on the basis thatthis sector spread is comparable to those for other developing member countries in the region.

31. The validation agrees that the portfolio presented in the CPS reflected many of thesalient strategies and technical issues and challenges in the sector ASR. The challenge of

increasing rural incomes, exports, and skill levels for a diversifying economy are well reflected inthe ADB programming choices of subsectors and entry points. In terms of sector spread,however, the validation does not accept the view presented in the CPSFR that comparison ofCambodias broad coverage to those of other developing member countries is the most usefulway to determine the relevance of the Cambodian program to ADB and country priorities. Inparticular, a stronger rationale is required for the additions to the original CPS, as some of theseprojects were not emergency in nature.23For example, the inclusion of the project preparationtechnical assistancefor the urban water and sanitation sector suggests an increasing emphasison the urban environment. This change in emphasis may be justified, but the rationale is notpresented in the CPSFR. The CPSFR could have flagged this shift in strategy during the CPSperiod and this would have helped to set the stage for presenting a revised urban developmentprogram in the next CPS.

32. Program quality and resources. The relevance of the CPS program can be affected byproject design quality and the levels of attention and resources applied relative to the strategicdirections or emphasis found in the CPS. As most approvals for the CPS program wereobtained in 2012, the validation concurs with the view presented in the CPSFR that quality likelyhas been eroded as a result of bunching up of project approvals. Processing many approvals inone year was bound to place the government and ADB under great pressure. Also, it wasknown that the national elections were scheduled for 2013 and that this would add to the risk ofdelays in loan signing and in projectsstart dates.

33. The CPSFR notes the approval of a large number of loans and grants in the single year2012 could have overburdened ADB project teams and government counterparts and

compromised the quality of projects and programs. The validation supports this view, confirms

23A comparison of the CPSFR list of approved operations in the 20112013 period shows that severalnonemergency additions were made to the CPS, as operationalized in the country operations business plan 20112013: Medium-Voltage Sub-Transmission Expansion Sector Project, Second GMS Regional CommunicableDiseases Control Project, Small-Scale Technical Assistance for Strengthening Development Partner Coordinationin Cambodia, Country Systems in Procurement and Financial Management, Capacity Development TechnicalAssistance Supporting Strengthening and Institutional ReformDepartment of Land Transfer of Ministry of PublicWorks and Transportation, Project Preparation Technical Assistance for Mekong River Island Connectivity Output,and Project Preparation Technical Assistance for Urban Water Supply and Sanitation Project.


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that project DMFs are of varied quality, and notes this weakness was evident even prior to thebunching of projects in 2012. Some project completion reports (PCRs) indicate little effort wasmade in preparing DMFs. A case in point is that of the Tonle Sap Sustainable LivelihoodsProject, where the DMF provided no quantifiable targets against which to measureperformance. 24 In the project validation report prepared for the Tonle Sap EnvironmentalManagement Project, meanwhile, it is said to not have a rigorous monitoring plan and needs

an improved set of quantifiable indicators to measure results.25In some projects the baseline isclearly set, but there is no measurement at project completion to show the progress made. Thepoverty and income targets in the Northwestern Rural Development Project are a case inpoint.26

34. In terms of matching the levels of attention and resources for projects to the CPSobjectives, there are three areas in relation to institutional factors that deviate from thedirections or emphasis in the CPS: (i) decentralization, (ii) anticorruption, and (iii) resettlement.The mismatch is found largely in the so-called facilitating sector of PSM (governance). Thesupport provided from ADB for decentralization could have benefitted from more visibleprogramming in the relevant sectors where it was active with substantial projects, in particularwater and irrigation, agriculture, education and training, and roads. Additionally, issues of

anticorruption and resettlementboth important in safeguarding ADB projects andaddressing related government systemswere not given adequate or timely attention.

35. In the case of anticorruption, the Cambodia Resident Mission (CARM) was the firstresident mission to undertake preparation of a governance risk assessment and riskmanagement plan. This was done in partnership with the government as part of the governanceand anticorruption action plan II framework. ADB joined other development partners insupporting implementation of the Anticorruption Law passed in April 201027by strengthening thecapacity of the newly established Anticorruption Unit (ACU) to carry out its mandate. However,since that time, ADBs relationship with the ACU did not develop sufficiently to allow forsignificant engagement.28While ADB has attempted to prepare good governance framework foreach project, the halting approach to the provision of more direct forms of anticorruption support

(compared to PFM and decentralization initiatives) has not brought a substantial improvement inoutcomes to Cambodia, which Transparency International has ranked 160 out of 177 surveyedcountries on the Corruption Perception Index.29

36. In another ADB effort to address corruption, it sought to increase the effectiveness ofthe National Audit Authority (NAA), in part because it figures as a major risk in the CPS riskassessment and management plan. 30 The risk mitigation actions presented in the planincluded providing modest support to capacity building in NAA and to consider additionalsupport for NAAs active involvement in auditing of externally-financed projects. The CPS

24ADB. 2012. Completion Report: Tonle Sap Sustainable Livelihoods Project in Cambodia. Manila (p. 11).

25ADB. 2011. Validation Report:Tonle Sap Environmental Management Project in Cambodia. Manila (p. 10).

26

ADB. 2012. Validation Report:Northwestern Rural Development Project in Cambodia. Manila (p. 5).27Footnote 20, p. 2.

28Capacity development TA (Support to Implementation of Anti-Corruption Law II) at indicated cost of $0.5 millionwas indicatively planned for 2013 in the Cambodia 20112013 country operations business plan. This does notappear to have been implemented. A possible reason was that the forms of support offered by ADB did not matchthe ACUs preferred areas for assistance (e.g., equipment support). ADB held the view that the requestedequipment would not appreciably address the ACUs key challenges.

29Transparency International. 2014. Corruption Perception Index 2013. http://www.transparency.org/cpi2013/results(accessed 21 July 2014).

30ADB. 2011. Risk Assessment and Risk Management Plan (Summary). Supplementary document to ADB. 2011.Cambodia Partnership Strategy: Cambodia, 20112013. Manila.


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reinforced these initiatives and indicated ADBs intent to provide funding for the audit of ADB-financed projects. There is no account in the CPSFR of how these intentions translated intoprograms and how they helped make the Cambodian PFM system more robust. No evidencewas found by the IEM of significant ADB activity in this area. Some effort is seen in the PFMsupport provided to NAA under the PFM for Rural Development ProgramSubprogram 2, but theeffort was minimal and implementation was delayed to 2014. Internal audit processes are being

strengthened in the three rural development ministries, but this effort is making slow progress.31Strengthening governance arrangements for institutions like the NAA is important, and it meritsmore incisive comment in the CPSFR in view of ADBscommitment and the obvious fiduciaryrisks.ADBs Office of Anticorruption and Integrity has reported a rising number of investigationsin Cambodia in recent years, which reinforces concerns that insufficient efforts have beendirected to addressing this issue.32While it is not possible to prevent all integrity violations, ADBmust make more efforts to strengthen the county's capacity to prevent and prosecute corruptionmore effectively. At the strategic level, capacity needs to be developed in critical institutionssuch as ACU and the NAA. When there is inadequate ownership in these institutions, then ADBis limited in what can be done, apart from ensuring it has capacity to act when opportunitiesarise to implement reforms. Nevertheless, ADB does have control over the projects it financesand can pay greater attention to designing institutional capacity to support project

implementation and management during the operating period. In part, this will mean raising thecapacity of the implementing agencies and/or executing agencies which manage ADB projects,helping them to detect and report potential integrity violations. This dovetails with the need tobetter understand where vulnerabilities exist, and designing projects that mitigate these risks.These more short term Governance and Anti-Corruption Action Plan II concerns will need tobe complemented with longer term efforts to strengthen the country institutions that areconcerned with reducing corruption, i.e., audit bodies, ombudsman mechanisms, anti-corruptionunits.

37. On the issue of resettlement, the CPSFR notes the GMS railway rehabilitation project(2006, 2008) has had problems.33It does not, however, assess the resident missions potentialcontribution to effectively addressing resettlement issues. The CPSFR provides little guidance,

but expresses the hope the new CPS will allocate additional resources to develop expertise inthe resident mission. It also recommends support be provided to develop standard operatingprocedures for involuntary resettlement. The IEM considers that a more fundamentalassessment of the resident missions role in addressing resettlement challenges may bebeneficial to mitigate these types of risks. Resettlement issues in the affected project were notcommon, but ADB appeared to not appreciate that such issues can draw disproportionateattention, leading to significant project disruptions as beneficiaries and advocates (wellintentioned or otherwise) seek redress. The project was managed from ADB headquarters, andit is likely this arrangement contributed to the government sdeficiency in effectively managingthe resettlement component. As a result, ADB could not provide the government with more

31Ministry of Economy and Finance and ADB and its Cambodia Resident Mission. 2013. Memorandum of

Understanding: Public Financial Management for Rural Development Program (Subprogram 2) , Manila (midtermreview mission, 16 September11 October 2013. p. 5).

32This statistics was based on the list of investigations in Cambodia from 2009 and 2013, obtained from OAI in April2014 as part of validation.

33The projects resettlement problems arose when resettled populations experienced long delays between the settingof compensation rates and their ultimate relocation and payout, thus diminishing the value of the payments andexacerbating the debt loads on the affected families. The projects problems were compounded by poormanagement of the payment issue, particularly in relation to project and government communication strategies andthe response to advocacy efforts of third parties, primarily NGOs and the media. For a recent review of the project,see ADB. 2014. Final Report on Compliance Review Panel Request No. 2012/2 on the Greater Mekong Subregion:Rehabilitation of the Railway in Cambodia Project. Manila.


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intensive hands-on support when its resettlement management faltered and becamenoncompliant with ADB guidelines and procedures.

38. The validation acknowledges that ADB has monitored and closely followed up on thegovernments obligations. However, this assistance may still be insufficient as the shortcomingsthat were overlooked related to the governmentsimplementation of the resettlement plan. The

inadequate treatment of resettlement issues in ADB programs has reduced the potential impactof the GMS railway rehabilitation. Therefore, it is important for the CPSFR to comment on therole of the resident mission (and delegation from headquarters) in managing resettlementissues. A positive step was the resident missions strengthened capacity in resettlement byrecruiting in 2012 an international resettlement and safeguards specialist. The IEM notes atendency in the CPSFR toward risk avoidance for Category A projects. This risk avoidancestance is not in keeping with the anticipated country needs, inasmuch as ADB support is likelyto be pulled toward the faster growing urban areas where Category A resettlementcomponents are more likely to arise.34

C. Effectiveness

39. The effectiveness assessment is based on an examination of the planned outputs andoutcomes in project DMFs and sector-level results frameworks for projects where substantialprogress had been made in project implementation. The validation uses the same approachused in the CPSFR and adds an overall assessment of effectiveness against the CPS outputsand outcomes.

40. The CPSFR is based on a detailed sector-by-sector analysis of projects and includes 14PCR ratings, 10 of which rate the projects effective. Project delays are acknowledged, but theyare largely seen as delaying the timing of the expected achievement rather than diminishing theexpected outcomes. There is little commentary in the CPSFR on the extent completed facilitiesdeveloped with ADB financing are utilized. Only fragmentary information is available in thePCRs or other project review and evaluation documents.35In its visits to field projects, the IEM

observed that the facilities were being used as expected (rural roads and dikes and communecouncil offices). There is little effort in the CPSFR to determine if outcomes were actually beingachieved, and this may be the reason why the CPSFR used the qualifier likely. 36 Thevalidation provides a rating of effective. There is a lack of evidence in many cases that theoutputs of approved projects are being fully delivered, or that they are achieving the statedoutcomes. In particular, institutional outputs and outcomes are proving difficult to achieve.Offsetting this result, the short time covered by the CPS has meant that any of the projectscovered by the CPS have not yet become operational.

41. Achievement of physical outputs and outcomes. The list of completed and ratedprojects that were assessed by the IEM (Table 1) shows that most projects falling into the scope

34 In 2012 ADB prepared a sector assessment and road map and initiated TA relating to urban management. SeeADB. 2012. Cambodia: Urban Sector Assessment, Strategy, and Road Map . Manila; ADB. 2012. TechnicalAssistance to the Kingdom of Cambodia for Capacity Development for Urban Management. Manila.

35For instance the PCR for ESDP II notes that, The computer rooms in the 18 upper secondary SRCs are very wellutilized for classroom teaching of computer subjects. The science laboratories and equipment in these centers arenot universally well managed or fully utilized and, therefore, the results in science education are belowexpectations. It does not comment on all infrastructure provided, however, and in the cases of other projects theextent to which facilities are used is even less clear.

36The normal rating used in the IED methodology is simply Effective, but when project implementation is limited, theIED guidance allows for the term Likely Effective.


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of the validation are rated as effective or highly effective. This finding does not reflect the factthat some projects have not met their targets due to delays and related escalating costs, poorquality of outputs, or canceled outputs. Cases mentioned in the CPSFR, or additional cases thathave come to the attention of the validation, include the following deviations (actual versustargets):

(i) 28% achievement: 10,000 hectare (ha) versus 35,000 ha of irrigated areas(Northwest Irrigation Sector Project);37

(ii) 39%, 50%, and 70% achievement: 50 versus 128 health centers, 7 versus 14renovations of referral hospitals, and 7 versus 10 emergency facilities in referralhospitals (Health Sector Support Project);38

(iii) 68% achievement: 10,550 ha versus 15,000 ha of irrigated areas (WaterResources Management Sector Development Project);39

(iv) 64% and 75% achievement: 16 upper schools versus 25 existing uppersecondary schools refurbished and 18 versus 24 upper secondary schoolresource centers (SRCs) built (Second Education Sector DevelopmentProgram);40

(v) 76% achievement: 178 versus 235 commune offices; also just 18% versus 75%

of civil registry documents digitized (Commune Council Development Project);41(vi) 90% achievement: 205.91 kilometer (km) versus 230 km (Tonle Sap Lowlands

Rural Development Project);42(vii) undetermined: commune-level irrigation projects (number not reported in back-to-

office report) recorded as complete but which are only partially constructed(Tonle Sap Poverty Reduction and Smallholder Development Project);43

(viii) undetermined: safeguarding of core areas in fisheries cancelled (output 2 ofTonle Sap Sustainable Livelihoods Project);44and

(ix) undetermined: public latrines cancelled (subcomponent of Tonle Sap RuralWater Supply and Sanitation Sector Project).45

42. In reviewing project achievements, the CPSFR generally acknowledges the original

outcome targets presented in the CPS. However, its discussion centers on listing projectoutputs and does not adequately explain how they compare to benchmarks and targets in theDMFs. In many cases, conclusions on effectiveness in the CPSFR are not supported withadequate analysis on availability of facilities, level of usage, or achievement of outcomes. Thefollowing paragraphs summarize the available evidence for effectiveness in each of the keysectors.

37Government of CambodiaMinistry of Water Resources and Meteorology. 2011. Completion Report: NorthwestIrrigation Sector Project in Cambodia. Consultant Report.Phnom Penh (4 December, p. 39).

38ADB. 2010. Completion Report: Health Sector Support Project in Cambodia. Manila.

39Ministry of Water Resources and Meteorology and Asian Development Bank. 2013. Memorandum of

Understanding: Water Resources Management. Sector Development Project in Cambodia. Manila (review mission,27 August6 September, p. 3). SERD/CARM update this figure to 10,890, or 73%.

40ADB. 2012. Completion Report: Second Education Sector Development Program in Cambodia. Manila (p. 3).

41ADB. 2011. Completion Report: Commune Council Development Project (Phase 2) in Cambodia. Manila (p. 3).

42ADB. 2013. Back-to-office report: Tonle Sap Lowlands Rural Development Project. Manila (review mission, 7October).

43ADB. 2014. Back-to-office report: Tonle Sap Poverty Reduction and Smallholder Development Project. Manila(review mission, 519 March, p. 2).

44Footnote 24, p. 11.

45ADB. 2011. Completion Report: Tonle Sap Rural Water Supply and Sanitation Sector Project in Cambodia. Manila(p. 4).


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43. Transport. This sector was the most important priority identified in the CPS and theexpenditure targets were exceeded by a substantial margin (23%). In part, this was because ofemergency flood damage support. The sector outcomes envisaged in the CPS resultsframework were increased movement of heavy goods by road and rail, and improvedinterprovincial and regional road and rail connectivity. The CPSFR concludes that quantitativetargets (principally for the connection by paved roads of 100% of provinces and 1 million tons of

railways freight) were unlikely to be achieved (para. 64). This conclusion appears to becontradicted by the data provided in the updated results framework in the CPSFR, whichindicates that by 2012 100% of provinces were connected and rail freight exceeded 4 milliontons. Problems securing funding for roads maintenance and difficulties in implementing theGMS railway project suggest there may be further problems with effectiveness in this sectorover the medium term.

44. Energy.This sector was not a priority identified in the CPS, although it was projected toaccount for 10% of the lending identified in the results framework. The CPS energy strategyaimed to contribute to Increased grid-electricity consumption by more people, particularlyoutside of Phnom Penh, for economic and social development.This strategy was directed toachieving (i) grid expansion to reach 35% of households by 2013 (2009 baseline: 25%), and (ii)

expansion of households supplied from the national grid-electricity network to 1,131,190 by2013 (2008 baseline: 633,123). Two projects were approved in the current CPS period: theRural Energy Project and the Medium-Voltage Sub-transmission Expansion Sector Project. Oneongoing project had been approved in the previous CSP period: the Second PowerTransmission and Distribution Project (2006). The GMS Transmission Project (approvedDecember 2003) closed early in the current CPS period (May 2011). The transmission lines andsubstations from these older projects are largely completed, and capacity building activities toimprove Electricit du Cambodges performance have largely been concluded.

45. The CPSFR notes the GMS Transmission Project was rated effective by its PCR (2012)for substantially achieving envisaged outcomes despite significant delays. It foresees that, oncethey are completed as planned, the subsequent projects will likely achieve the intended outputs

and outcomes as the projects are well designed and the executing and implementing agenciesare experienced and committed to achieving results.

46. In terms of the CPS indicators, as of June 2012, the electrification rate through gridexpansion had increased to 35%, thus meeting the first target. The number of householdssupplied with electricity from the national grid electricity network had increased to 810,984 in2011. Although this figure falls far short of the target, as the updated figure referred to 2011, it isnot possible to determine if the target was achieved by 2013.46The two CPS indicators takenfrom the energy sector results framework do not adequately reflect ADBs intention to ensurethat affordable electricity is provided to poor and isolated areas, and in particular to benefitwomen.

47. Water supply, sanitation, and urban development. Water was the third mostimportant sector defined in the CPS and accounted for 17% of projected lending. At 49%relative to the original target, there was substantial underspending in this sector. The CPSstrategy for this sector aimed to increase the use of priority infrastructure, and it set targetsexclusively for the Southern Economic Corridor. Urban targets were reduced householdswithout toilets (to 0% by 2015) and increased household sewerage connections (to 50% by2015). Rural targets were 50% with access to safe water and 30% access to improved

46Feedback from SERD/CARM in June 2014 indicates that the number of household reached in 2012 is 992,597.


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sanitation. The CPSFR acknowledges that the first Rural Water Supply and Sanitation Projectwas less effective in achieving expected outcomes. The impact in terms of health benefits is notevident, unfortunately, as PCR data shows an insignificant change in the incidence of diarrheaamong project households and a higher incidence of diarrhea among project than non-projecthouseholds. The CPSFR notes that the Second Rural Water Supply and Sanitation Project(2009) is progressing reasonably well and is expected to achieve its outputs and outcomes. The

validation received no documentation for the latter project and cannot confirm this forecast.Focusing on sector outcomes in the CPS, the data on progress achieved that is presented in theCPSFR is outdated. It incorrectly refers to Cambodia as a whole, making it irrelevant to the setof CPS outcome indicators. The validation notes that the allocation of ADB funding to this sectorwas halved over the CPS period, and it does not appreciably encompass urban areas.Therefore, the urban targets are unlikely to be achieved, or, if they are in fact achieved, thatoutcome will not have been significantly influenced by ADB.

48. Agriculture and natural resources. This was the second most important sectoridentified in the CPS results framework, accounting for 19% of the projected lending. The CPSsector outcomes were: (i) sustainable natural resource development, management, andconservation, where forest cover for inland forest was to be maintained (2008 baseline: 59%;

2015 target: 60%); and (ii) improved agricultural productivity, diversification, andcommercialization, with targets for (a) increased paddy yields (2008 baseline: 2.74 tons/ha,2013 target: 3.00 tons/ha), (b) increased irrigated area (2008 baseline: 1,120,000 ha, 2013target: 1,245,000 ha), and (c) improved quality and sustainability of rice exports (2009 baseline:13,000 tons milled rice, 2015 target: 1 million tons milled rice). The two main projects in thissector defined in the CPS were: (i) flood and drought risk management and mitigation (March2012); and (ii) climate-resilient rice commercialization (June 2013), which had not yet started atthe time of the review. The Cambodia Flooding 2011: Humanitarian Assistance Project and theEmergency Food Assistance Project are contributing to the intended sector outcomes bysupplying inputs, including seeds and repairs to irrigation canals, as well as nutritious food forpoor households. Two ongoing projectsthe Tonle Sap Poverty Reduction and SmallholderDevelopment Project and the Tonle Sap Lowlands Rural Development Projectare reported bythe CPSFR to be progressing well. In the project areas, they will contribute to infrastructuredevelopment (irrigation and rural roads) and provide access to inputs to improve agricultureproductivity and rural livelihoods.

49. The CPSFR notes that three of five agriculture and natural resources projectscompleted during the CPS were rated effective.The Northwestern Rural Development Projectstrengthened local participatory planning in the northwest and rehabilitated 525 km of poorrural roads, linking poorly served rural areas to market towns. The Agriculture SectorDevelopment Program helped farmers to raise productivity and diversify production by providingthem better access to productive land, irrigation water, and higher-quality seeds andagrochemicals. The project also strengthened government capacity to establish an enabling

environment. The Tonle Sap Environmental Management Project established 178 communityfisheries organizations with clear responsibility for managing their local habitats in a sustainablemanner while securing a better future through improved livelihoods.

50. The CPS and its implementation exhibit a strong commitment to the sector, and theADB programs are on the whole relevant to the sector outcomes and targets. Project outputsare largely being achieved. It is more difficult to ascertain if project and sector outcomes arebeing achieved due to use of a weak indicator (the inland forest cover target is not relevant),time periods that do not match (the target for rice export is for 2015 and not 2013), and


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confusing presentation (a 2013 value for irrigated land is said to be missing, but it is quoted inthe CPSFR results framework update). The paddy yield is listed as 2.85 tons/ha in theCPSFR, somewhat below the target of 3.0 tons/ha set in the CPS. 47 Despite the unclearreporting of progress, it appears there has been partial achievement of outcomes related toboosting paddy yields, expanding access to irrigation water, and exporting rice.

51. Education and training.This sector accounted for 14% of projected disbursements, ofwhich only 50% was achieved. The CPS education sector outcomes are secondary educationand TVET graduates with more relevant knowledge and skills, manifested by (i) net lowersecondary enrolment from 32.6% in 2009/10 to 47% in 2012/13, (ii) lower secondarycompletion from 48.7% in 2009/10 to 52% by 2012/13, (iii) formal training enrollment from3,700 in 2009/10 to 18,000 by 2015, and (iv) nonformal skills training enrollment from 53,000 in2007/08 to 210,000 by 2014. ADB has supported the governments education and traininginitiatives in a programmatic approach, with the ADB contribution centered on the ThirdEducation Sector Development Program (ESDP III; approved 2012), which seeks to increaselower secondary enrolment. The project focuses on (i) education system management anddevelopment, (ii) professional development of teachers, and (iii) strengthening secondaryeducation. Three other ongoing projects, Strengthening Technical and Vocational Educationand Training (2009), Piloting the Post-Harvest Technology and Skills Bridging Program forRural Poor (2009), and Enhancing Education Quality (2007), also contribute to sectoroutcomes.

52. The CPSFR concludes that education programs and projects are likely to achieve theirintended objectives. The CPSFR points to the PCR for the ESDP II to show ADBs successfulcontribution to policy reforms; the expansion of lower secondary education opportunities (by10.2% in the case of national lower secondary enrollment and 10.1% in that of total femaleenrollment); and construction of upper secondary schools and school resource centers (SRCs)that expanded enrollment by 3,898 students, of whom 42% were girls. Most TVET-focusedcapacity development activities have been completed, encompassing the construction of food

safety testing laboratories, training of laboratory managers, and training at TVET certificate-level.

53. The lower secondary net enrollment target was partially achieved (38% versus 47%), butthe lower secondary completion rate decreased from the baseline of 49% to 41% (versus atarget of 52%). Enrollment in informal skills training increased to 145,272, which was nearly65,000 (30%) short of the 2014 target. The rather poor performance of the projects againstsector outcomes was not explained in the CPSFR. The modest financial contribution by ADB tothe sector may be one reason, but this alone does not explain the drop in the lower