Cambodia - Country Assistance Strategy

DOCUMENT OF The World Bank FOR OFFICIAL USE ONLY Report No. 16255-KH MEMORANDUM OF THE PRESIDENT OF THE INTERNATIONAL DEVELOPMENT ASSOCIATION TO THE EXECUTIVE DIRECTORS ON A COUNTRY ASSISTANCE STRATEGY OF THE WORLD BANK GROUP FOR THE KINGDOM OF CAMBODIA January 28, 1997 Country Department I East Asia and Pacific Region This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization.  The last Country Assistance Strategy for Cambodia was reviewed by the Executive Directors on June 8, 1995 CURRENCY EQUIVALENTS Currency Unit = Cambodian Riel AVERAGE VALUE OF US$1.00 IN 1993 1994 1995 end-December 1996 2470 2543 2462 2720 WEIGHTS AND MEASURES Metric System GOVERNMENT'S FISCAL YEAR January I - December 31 ABBREVIATIONS AND ACRONYMS ACLEDA - Association of Cambodian Local Economic Development Agencies ADB - Asian Development Bank ASEAN - Association of South-East Asian Nations AusAID - Australian Agency for International Development CC - Cooperation Committee for Cambodia CDC - Council for the Development of Cambodia CEM - Country Economic Memorandum CIB - Cambodia Investment Board CVAP - Cambodia Veterans Assistance Program EDI - Economic Development Institute ERC - Economic Recovery Credit ESAF - Enhanced Structural Adjustment Facility FAO - Food and Agriculture Organization of the United Nations GDP - Gross Domestic Product ICORC - International Committee on the Reconstruction of Cambodia ICSID - International Centre for Settlement of Investment Disputes IDA - International Development Association ILO - International Labor Organization IMF - International Monetary Fund MAFF - Ministry of Agriculture, Forestry and Fisheries MIGA - Multilateral Investment Guarantee Agency NGO - Non-Governmental Organization NPRD - National Program to Rehabilitate and Develop Cambodia O & M - Operations and Maintenance PFP - Policy Framework Paper PHRD - Population and Human Resource Development SIDA - Swedish International Development Authority UNDP - United Nations Development Programme UNICEF - United Nations Children's Fund USAID - United States Agency for International Development WHO - World Health Organization WTO - World Trade Organization Acting Vice President Mr. Javad Khalilzadeh-Shirazi Director Mr. Javad Khalilzadeh-Shirazi Acting Division Chief Mr. Sanjay Dhar Task Manager Mr. Kyle Peters  FOR OFFICIAL USE ONLY MEMORANDUM OF THE PRESIDENT OF THE INTERNATIONAL DEVELOPMENT ASSOCIATION TO THE EXECUTIVE DIRECTORS ON A COUNTRY ASSISTANCE STRATEGY OF THE WORLD BANK GROUP FOR THE KINGDOM OF CAMBODIA TABLE OF CONTENTS I. ECONOMIC AND SOCIAL PERFORMANCE.............................. A. Legacies from the Past ............................................1 B. Recent Economic Developments ............................................2 II. EXTERNAL ENVIRONMENT ............................................3 II. CAMBODIA'S DEVELOPMENT OBJECTIVES AND POLICIES ............................................4 A. Policy Issues and Challenges ............................................4 B. Economic Scenarios and Risks ............................................7 IV. DEVELOPMENTS SINCE THE LAST CAS ........................................... 10 A. Policies and Performance ............................................ 0 B. Portfolio Performance ............................................11 V. BANK GROUP COUNTRY ASSISTANCE STRATEGY ........................................... 12 A. Strategic Overview ........................................... 12 B. Partnerships and Aid Coordination ........................................... 13 C. Country Assistance Objectives ........................................... 15 D. Policy Dialogue and Lending ........................................... 19 E. Role for a Field Presence ........................................... 21 F. CAS Success Criteria ........................................... 22 VI. AGENDA FOR BOARD CONSIDERATION ........................................... 22 This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization.   MEMORANDUM OF THE PRESIDENT OF THE INTERNATIONAL DEVELOPMENT ASSOCIATION TO THE EXECUTIVE DIRECTORS ON A COUNTRY ASSISTANCE STRATEGY OF THE WORLD BANK GROUP FOR THE KINGDOM OF CAMBODIA I. ECONOMIC AND SOCIAL PERFORMANCE A. Legacies from the Past 1. Cambodia has made important strides in re-establishing political and economic stability and re-integrating itself into the international community. These achievements are impressive given the suffering that the country and its people experienced during the past quarter century. Most people lack access to health and educational facilities, potable water, electricity, and serviceable roads. The country's natural and productive capital have suffered great losses. Land mines render large portions of valuable agricultural land unusable and pose a serious threat to people. But perhaps Cambodia's greatest loss was the depletion of its human capital by mass genocide and large-scale exodus of the most educated citizens during 1975-79, the years of Khmer Rouge rule when, in addition to the depletion of human capital, institutions were dismantled, the legal system destroyed and money abolished. Although the Royal Government was established as a result of the elections in May 1993, the Khmer Rouge insurgency continued in the northwestern border regions. The security situation, however, has improved recently. The breakaway of a major faction of the Khmer Rouge and its integration into the Royal Armed Forces in November 1996 brings most of the northwestern part of the country under Government control for the first time in many years. 2. Comparing Cambodia's economy today with its own past and other economies indicate the devastation that the country suffered from the events of the past twenty-five years. The country's economic, social and institutional situation is more akin to those of the least-developed countries than an East Asian economy. Cambodia is now one of the poorest countries in the world with a per capita income of US$260.I And its social indicators compare unfavorably with other low income countries: infant mortality at 110 per thousand is twice as high while life expectancy of 52 is ten years lower. Moreover, while the data are unreliable, Cambodia's per capita income and its socio-economic indicators suggest that it is not clearly better off today than it was in the late 1960s. This estimate of per capita GNP is based on the World Bank Atlas method. This method uses the average of several years' exchange rates and adjusts for inflation in converting local currency to US dollars. In contrast, the estimate of GDP per capita in Table I uses the 1995 exchange rate in making the conversion.  -2 - 3. Given the legacy of its past, Cambodia has made remarkable progress towards economic reform. In the late-1980s, Cambodia embarked on a transition to a market economy but until 1992, these reforms were partial and ad-hoc. Beginning in 1993, the Royal Government began formulating a comprehensive economic reform program supported by the international community. The Government has since achieved some significant successes both in stabilizing the economy and in implementing reforms. The economy has expanded at an annual rate of 6 percent during the 1990s. Inflation has been dramatically reduced, and the balance of payments is being financed without jeopardizing future creditworthiness. Progress was also made in the transition towards a market-oriented economy: a two-tier banking system is being put in place and new large denomination banknotes were introduced to promote "de-dollarization"; most non- tariff barriers were eliminated; the tariff structure was streamlined; a liberal foreign investment law was adopted; and the spread between the official and parallel market exchange rates has been almost eliminated. These reforms have placed the economy in a good position to grow rapidly and sustainably, if economic management, particularly of Cambodia's natural resources, is improved. 4 These recent accomplishments, however, could be jeopardized by problems of insufficient accountability and transparency in economic management and weak governance. Unless these issues are addressed decisively, the initial successes that have been achieved in establishing a democratic government and a market-oriented economy, and substantial international financial and technical assistance could be lost. B. Recent Economic Developments 5. A combination of liberalization, stabilization and initial market reforms, combined with generous external assistance, has led to an economic recovery. GDP expanded at an annual rate of about 6 percent during 1991-95. Manufacturing has grown at an average annual rate of 7 percent. Services and construction also grew rapidly, largely in response to donor-sponsored rehabilitation activities. Growth, however, has not been broadly based, with agricultural growth averaging slightly less than 3 percent. This is also evident from the employment situation, as perhaps a quarter million persons are unemployed, which is a significant proportion of the formal labor force. Underemployment is also an important problem, with excessive, low productivity workers in state enterprises, the civil service and the military. The proportion of people living below the poverty line has not been estimated systematically, but it would be surprising if it were less than half the population. 6. The Royal Government's policies have stabilized the economy and this has been one of the major achievements of the past several years. Inflation decelerated from an average of 140 percent in 1990-92 to 3.5 percent in 1995. Fiscal management has been the cornerstone of Cambodia's success in reducing inflation. This success is the result of the elimination of monetary financing of the budget deficit. This has been achieved through substantial inflows of foreign assistance and efforts to raise public revenues (although they still remain low). At the same time, the Government contained the growth of current expenditures, allowing for an increase in capital expenditures to begin rebuilding the country's social and physical infrastructure. However, while the growth in current expenditures was limited to roughly half  - 3 - the growth in revenues, defense expenditures expanded disproportionately. Defense expenditures and civil service wages and salaries constitute nearly three-quarters of current expenditures. As a result, the brunt of the fiscal adjustment has fallen on operations and maintenance expenditures, which are nearly non-existent (less than 3 percent of GDP). This is a particular problem in health and education where already low expenditure shares are almost totally consumed by wages and salaries. 7. A favorable external environment, improved export performance, inflows of foreign direct investment and large aid flows have all contributed to an improved balance of payments position and an increase in official reserves. While Cambodia's domestic export base is small, it has expanded rapidly, increasing about four-fold since 1991. Retained imports (net of re- exports), however, have increased six-fold. The consequent widening of the current account deficit from 1.5 percent of GDP in 1991 to 16 percent in 1995 was financed by an increase in external capital inflows. Part of the external financing is being provided by foreign direct investment inflows, mostly from neighboring countries, which almost doubled from US$80 million in 1994 to US$150 million in 1995. But the bulk of external financing is provided by official grants and concessional loans. XI. EXTERNAL ENVIRONMENT 8. The greatest risks to Cambodia's development prospects are internal. They could arise from either a pause or cessation of the reform effort that is necessary to sustain high rates of economic growth or the abandonment of austere fiscal and monetary policies that are necessary to sustain the stabilization effort. Also, the Cambodian economy is still vulnerable to external shocks. Its export base is very narrow and the balance of payments is heavily dependent on external aid flows--a rapid deterioration in aid flows or a sharp downturn in exports and/or foreign investment could quickly undermine Cambodia's external position. 9. Cambodia is also heavily indebted and the economy's long-term viability hinges crucially on a successful resolution of its external debt situation. It is currently considered a "Severely Indebted Low Income Country." Some progress towards resolving Cambodia's external debt situation has been made. In 1995, Cambodia received highly concessional terms ("Naples terms") on its official convertible currency debt to Paris Club creditors. The terms of the Paris Club rescheduling allowed a write-off of up to two-thirds of Cambodia's eligible debt. Since then, bilateral agreements with France, Germany and Japan have been completed, and negotiations with the United States are underway. However, resolving Cambodia's external debt situation will require finding a solution to its significant outstanding obligations in non- convertible currencies, and the Government is seeking debt relief from other official bilateral creditors that did not participate in the Paris Club, particularly the Russian Federation. Debt owed to Russia--about 815 million Rubles--would amount to US$1.4 billion if valued at the historical exchange rate at the time the debt was incurred, which is the rate used by the Russian Federation (i.e., US$1 = 0.64 Rubles). Attachment I discusses Cambodia's external debt situation and its sustainability in detail. An important conclusion of this analysis, which is shared by the IMF, is that the sustainability of Cambodia's debt will depend critically on the terms of rescheduling of the Ruble debt.  III. CAMBODIA'S DEVELOPMENT OBJECTIVES AND POLICIES A. Policy Issues and Challenges 10. While the human and institutional obstacles to Cambodia's development loom large, its prospects are now brighter than at any time in the past 25 years. Cambodia is well endowed with natural resources: it has three times the arable land per capita as Vietnam; it has abundant remaining forestry resources and untapped mineral wealth, including potentially large offshore oil and gas deposits; and its tourism potential is good. And it is situated in one of the most dynamic regions in the world. Realizing this development potential, however, requires successfully addressing a number of areas of risks and uncertainties. Politically, there are increasing tensions within the governing coalition. Growth remains concentrated in Phnom Penh and driven by services and construction, and the disequilibria that remain in the balance of payments and the budget are concealed by a high level of international financial assistance. Finally, problems of insufficient transparency and accountability in economic management and governance--especially with regard to natural resource management and foreign investment-- pose significant concerns. 11. To accelerate and deepen growth so that it fully incorporates rural areas, the Government recognizes that it will need to address challenges in a number of areas with appropriate policy and institutional reforms: (i) maintaining macroeconomic stability and undertaking further economic reforms; (ii) supporting rural and agricultural development; (iii) rehabilitating and rebuilding social and economic support services; and (iv) managing natural resources sustainably. Improved transparency and accountability in economic management are essential prerequisites to addressing these challenges successfully. 12. The Royal Government has prepared, in close collaboration with the World Bank and the IMF, a medium-term economic reform program, which is summarized in the Policy Framework Paper (PFP) for 1995-97. To achieve the PFP targets, macroeconomic stability is essential and would involve maintaining a tight fiscal stance, complementary monetary and exchange rate policies and continuing restrictions on non-concessional borrowing. Over the medium tern, further reforms are required to enhance domestic resource mobilization and improve the structure of both the balance of payments and the budget. Tax reform efforts need to be strengthened through a broadening of the tax base, a modernization of the tax system and an improvement in tax administration, including the elimination of ad hoc tax exemptions. It is of particular importance that revenues from the exploitation of natural resources, most notably forestry, should flow transparently and fully into the national budget. Public expenditure policies must be reoriented to improve the provision of basic services and efficiency of public investment so as to support growth. A key issue in this context is the timely implementation of the Government's programs to reform the civil service and demobilize the military consistent with legitimate security considerations. The 1997 Budget and the Fiscal Reform Law (enacted in January 1997) are positive steps in strengthening the revenue base and reorienting expenditures toward the social sectors. Implementation of these reforms, however, remains crucial.  -5- 13. The private sector needs to play a central role in Cambodia's development. Given the country's weak human capital base, institutions, and the past dismantling of the legal system, there is an urgent need to establish a more open, transparent and consistent legal framework within which private enterprises can operate. Significant progress has occurred already in liberalizing the foreign exchange and trade regimes. The legal and institutional framework for privatization is now in place, and several enterprises, most notably the petroleum distribution company, have already been privatized; the next step is to complete the process for the remaining large enterprises, particularly those involved in trade and agriculture. A number of financial laws--e.g. Companies and Contract--still need to be enacted. And all laws would need to be enforced fairly and transparently. In the financial sector, actions are required to complete the establishment of the two-tier banking system, strengthen supervision, especially of the numerous, new private banks and enact a Banking Law. This reform agenda will take a number of years to complete, but the current uneven pace of reform discourages investment. 14. With almost 85 percent of the population in rural areas, a renewed focus on rural development is essential to provide a solid foundation for broad-based economic growth and poverty reduction. Agricultural development is key. With the abolition of collectivized agriculture and privatization of land holdings in the 1980's, the liberalization of agricultural prices and trade, and recent improvements in support services, the performance of the agriculture sector has improved recently. However, its growth has barely outstripped that of the population, and productivity is low. The potential for significant improvements in agricultural productivity from small farmers is good, as has occurred in other Southeast Asian economies, but it is currently constrained by many factors that reflect the destruction and neglect of the countryside after three decades of civil conflict. The most salient of these are: a low proportion of cropped area under irrigation; difficulties in achieving satisfactory water control on poorly engineered irrigation schemes; and poor transport and communication facilities. The latter make it difficult to get modem inputs to small farmers and to move surplus products from one area to another, with the result that even in times of food sufficiency, there can be pockets of starvation. The prolonged past civil conflict has also severely disrupted the agricultural labor force, leaving many women as heads of households and many rural households displaced from their land holdings. Finally, the ongoing effects of war in a few areas and the widespread presence of land mines continue to constrain rural development with at least 15 percent of rural areas currently unusable for agriculture. The Government is placing considerable emphasis in its development plan on strengthening the rural economy and the agricultural sector, as indicated by the large share of public investment allocated to rural development. 15. Rebuilding the economy's physical and social infrastructure is also essential to maintaining sustainable economic growth. Cambodia's human resource base has been severely depleted by civil conflict. In particular, there is a large imbalance in the population between men and women; there is only a very small fraction of highly educated people; a significant proportion of the population is physically handicapped due to the effects of war, particularly land mines; and an unusually large share of the population is under 15. This legacy of a depleted and distorted human resource base has been exacerbated by inadequate public funding for basic services during the past decade. As a result, lack of adequate public health facilities means that diseases such as tuberculosis and malaria kill thousands each year. Low education budgets for  -6 - many years have meant that primary school enrollment rates and the quality of schools are low, while secondary and higher education reach few within the eligible age groups. To ensure the sustainability of economic and social development programs, implementation also needs attention. The Government is addressing the shortfall of skilled personnel through technical assistance, with donors, including NGOs, playing a strong supporting role in rebuilding the delivery systems of health and education. But relying on technical assistance, while essential, will not be enough. It will need to be supplemented by a shift in budget allocations, especially towards basic education and preventive health care, and sustained efforts to strengthen institutional capacity. 16. Cambodia's physical infrastructure also needs significant improvement, especially in rural areas. The Government's general strategy is to shift gradually from emergency rehabilitation to nationwide reconstruction and eventually to expand capacity. The key areas requiring attention are power, transport and water resource management. In power, upgrading of the system has begun around Phnom Penh with plans to rehabilitate the system next in provincial cities and in rural areas. Establishing the power companies as autonomous commercial entities as well as developing a legal framework for private sector involvement are important institutional reforms that need to accompany the rehabilitation of physical facilities. This is important as the private sector is already involved in distribution in the Phnom Penh area, and private investments in generation are being negotiated. In transport, the badly degraded road network, including national highways, is a severe constraint. This is especially a problem in rural areas where inadequate, deteriorated trunk and rural roads limit access to important areas and limit the flow of food between different parts of the country. Most rural communities and many urban ones also lack access to clean water and adequate sanitation facilities. Thus, improving water and sanitation facilities throughout the country would bring significant health and environmental benefits. In general, urban infrastructure investments should be largely self- financing so as to free public resources for less well-off rural areas. 17. Cambodia's extensive renewable natural resources, particularly its forests and fisheries, are potentially major contributors to economic development. Therefore, it is important that the Government improves its capacity to ensure sustainable use and management of natural resources. In the preparation of the National Environmental Action Plan (NEAP), the Government has identified six critical areas for immediate attention: management of the Tonle Sap ecosystem; commercial logging; urban and industrial pollution; energy development; protected areas management; and coastal fisheries management. Forestry management, however, has become the primary environmental issue in light of recent developments. Cambodia's forests are threatened by illegal logging and inappropriate policies. Illegal logging has been most prevalent in areas controlled by the Khmer Rouge, although it occurs in other areas as well. Policies such as the awards of large concessions to a small number of concessionaires, and royalties that account for only about a fifth of their economic value, also contribute to excessive deforestation, besides depriving the budget of much-needed revenues. The Government, at the highest levels, has publicly committed to implement the policies recommended by a recent World Bank/UNDP/FAO report and to institute a program to control illegal log exports. After initial delays, implementation of these forestry policy reforms and enforcement of the log export  -7- ban are now underway. Substantial progress in these areas (see para. 53) would constitute a key test of the Government's commitment to sustainable natural resource management B. Economic Scenarios and Risks 18. The improvement in economic performance over the last few years reflects an encouraging response to the Government's initial program of liberalization, stabilization and market reforms. It also reflects the inevitable rebound from past conflict and devastation, induced by a more stable political, economic and security situation, and substantial infusions of donor technical and financial support. However, recent events, particularly the uneven progress on reforms, show that a continuation of the past economic performance cannot be taken for granted. With national elections scheduled for 1998, it is difficult to designate any single macroeconomic scenario as most likely; there is considerable uncertainty about policies leading up to the elections and after the elections. One scenario--an intermediate case--is that the Government continues to maintain macroeconomic stability but does not implement all the fiscal and structural reforms necessary to maintain a high rate of economic growth and a reduction in poverty. 19. Under this scenario, growth could average, at best, about 5 percent p.a. over the medium term (see Table 1). The primary impetus to growth would come from a rebound in agriculture (primarily rice and other annual crops), as a result of a gradual improvement in agricultural support services and rural infrastructure, and the expansion of service sectors, primarily tourism. Inflation would remain at single-digit levels, as tight fiscal management would limit monetary financing of the budget deficit. However, stabilization policies, without decisive implementation of structural and fiscal reforms, would imply that the Government could not sustain the current pace of economic growth in the long term. Without fiscal reforms, non-development expenditures (especially military and wage and salary expenditures) would increasingly crowd out development expenditures, such as O&M and public investment. Domestic resource mobilization, in the absence of tax and financial sector reform, could be expected to improve only slightly. Private investment would likely stagnate and would, therefore, be insufficient to attain a higher growth path. Per capita income would grow but too slowly to achieve a dramatic decline in poverty levels. Another adverse consequence of this scenario is that inadequate resource mobilization and expenditure reform would be expected to limit the improvement in Cambodia's human resource base necessary to strengthen institutional capacity over the long term. (i) High Growth Scenario 20. If the Government were able to implement a strong reform program, a continuation of the economy's current high growth performance could be achieved. Under this scenario, a stable political/security situation and continued progress in consolidating macroeconomic stability-- both as assumed under the intermediate case--would be combined with an acceleration of economic reforms and a strengthening of institutional capacity. In turn, these policies are expected to lead to a high level of external grants, concessional loans, and foreign investment. Under these assumptions, GDP would grow at 7 percent p.a. (see Table 2). In addition to high  -8 - agricultural and service sector growth, reforms to the enabling environment, as implied under this scenario, would translate into higher industrial growth, albeit from a small base, led by labor-intensive manufacturing and stimulated by foreign investment. Domestic resource mobilization would increase significantly faster than under the intermediate case. As a consequence, savings could more than double from their current low level by the year 1999. Even with tax reform and control of current expenditures, however, positive government saving would not be realized until the year 2001, because of outlays required for civil service and military reform. Thereafter, improved domestic resource mobilization and lower current expenditures would allow positive government saving. Private saving would increase as macroeconomic stability is maintained, as disposable incomes increase, and as financial institutions are developed. Investment would increase as a result of both higher domestic saving and expanded foreign direct investment. TABLE 1: MAIN MACROECONOMIC INDICATORS - INTERMEDIATE CASE (IN PERCENT) 1Estimated Average Average 1994 1995 1996 1997-2000 2001-2005 GDP Growth 4.0 7.6 6.0 5.2 4.8 GDP per Capita (US$) a/ 242 265 279 310 351 Inflation 17.9 3.5 10.0 5.0 5.0 Revenue/GDP b/ 9.6 8.9 9.0 10.5 11.9 Current Expenditure/GDP 11.0 9.6 9.3 11.0 12.3 Government Savings/GDP -1.4 -0.8 -0.8 -0.5 -0.4 Government Investment/GDP 5.5 7.1 6.7 5.5 4.3 Private Investment/GDP 13.0 12.1 10.2 10.3 12.3 Private Savings/GDP 6.2 4.0 3.8 4.2 5.5 Current Account Balance/GDP c/ -13.7 -16.0 -13.9 -12.0 -11.5 Debt/GDP c/ 82.1 71.3 70.7 65.0 67.4 a/ GDP per capita for 1996, 2000 and 2005 (in 1994 constant prices). b/ Current and capital revenue. c/ Excludes non-convertible currency debt payments. Source: World Bank staff estimates and projections. (ii) Risks and Down-Side Scenarios 21. As noted, Cambodia faces a number of strategic risks and uncertainties. The primary ones are: a sharp deterioration in the political or security situation; a failure, over the medium term, to tackle the difficult economic reforms necessary to place the economy on a sustainable  -9 - growth path; and/or the failure to implement a strategy that brings rural areas, and the bulk of Cambodia's people, into the growth process. In the near term, these risks would likely manifest themselves in expansionary macroeconomic policies or inadequate structural reforms. This is a particular risk in the run-up to the national elections that are scheduled for 1998, which could lead to attempts to expand the economy too rapidly. There are also risks regarding the pace and depth of economic reforms following these elections. A loss of macroeconomic stability combined with little or no structural reform--as implied under this scenario--could lead to a further deterioration in the transparency of economic management. As a result, entrepreneurial energies would be channeled into rent-seeking activities with a reduced level of aid sustaining a bare minimum of government functions. Economic growth would be lower than the population growth, and it would be narrowly based (see Table 2). Per capita income would stagnate and hence, poverty levels would worsen. Inflation would be high and variable. Another danger under such a scenario is that Cambodia's natural resources would be exploited in an unsustainable manner with inadequate resources accruing to the state. If this persisted for a significant period of time, a major source of growth for the Cambodian economy would be squandered and the economy's future prospects would be adversely affected. TABLE 2: ILLUSTRATIVE MACROECONOMIC SCENARIOS - HIGH AND Low (IN PERCENT) Estimated High Case Projection Low Case Projection 1996 Average Average Average [ Average 1997-2000 2001-2005 1997-2000 2001-2005 GDP Growth 6.0 7.0 6.5 2.5 2.0 GDP per Capita (US$) a/ 279 332 407 279 276 Inflation 10.0 5.0 5.0 15.1 20.2 Revenue/GDP b/ 9.0 11.2 14.5 8.9 9.0 Current Expenditure/GDP 9.3 12.2 12.7 11.5 11.8 Government Savings/GDP -0.8 -1.0 1.8 -2.6 -2.8 Governrent Investrnent/GDP 6.7 6.8 7.1 3.3 2.6 Private Investrnent/GDP 10.2 13.3 14.6 4.5 4.9 Private Savings/GDP 3.8 7.6 10.9 3.9 5.3 Current Account Balance/GDP c/ -13.9 -13.5 -9.0 -6.6 -5.0 Debt/GDP c/ 70.7 63.8 53.3 62.4 52.5 _/ GDP per capita for 1996, 2000 and 2005 (in 1994 constant prices). b/ Current and capital revenue. c/ Excludes non-convertible currency debt payrnents. Source: World Bank staff estimnates and projections.  - 10- IV. DEVELOPMENTS SINCE THE LAST CAS A. Policies and Performance 22. The first CAS for Cambodia was presented to the Board in June 1995. Its scope was limited, as the Bank lacked basic information on the economy, and Cambodia's political and security situation was unsettled. The CAS, therefore, concentrated largely on the Bank's activities for the following year. The Bank's strategy focused on five objectives: (i) supporting macroeconomic stability and economic reforms; (ii) enhancing rural development and natural resource management; (iii) supporting critical infrastructure rehabilitation; (iv) improving the economy's human resource base and reducing poverty; and (v) strengthening institutional capacity, including implementation performance and aid coordination. These objectives were to be pursued through three types of activities--capacity building, analytical work, and financing critical rehabilitation activities. This first CAS also identified three success criteria to gauge the level and intensity of Bank support to Cambodia. These were: demonstrated improvements in resource mobilization; expenditure management; and the implementation of development programs. 23. These objectives and the success criteria are long-term development priorities. Some progress has been made in all areas, but considerable efforts are still needed in the medium term to achieve the objectives set out in the last CAS. The Bank, in tandem with other donors, assisted the Government in all these areas through lending and non-lending services. As noted earlier, progress has been achieved in macroeconomic stability and economic reform. Cambodia's overall macroeconomic perfornance has been commendable under difficult circumstances. On revenue mobilization, the Government has made progress in developing a comprehensive tax reform program. Regarding expenditure management, a series of options has been developed for civil service reform and military demobilization (using the Bank's Technical Assistance Credit). Although steps to re-orient expenditures towards health and education have been slower than expected, a first Public Investment Program was prepared in 1996. In these areas, the Bank, in collaboration with the IMF, worked closely with the Royal Government in the preparation of a PFP in the context of an IMF-supported ESAF program, and prepared a balance-of-payments and budget support operation--the Economic Recovery Credit. However, the record in implementing other commitments in these areas--such as raising the tax ratio, eliminating discretionary tax exemptions, implementing civil service reform and military demobilization, and reorienting public expenditures towards social services and rural areas--has been slower than anticipated. 24. In agriculture and natural resource management, the Bank has played a key role in helping formulate a reform program: a report on sustainable forestry management, which addresses a key development issue for Cambodia and a key concern of the international community, was prepared jointly with the UNDP and FAO; and a report on agricultural development is nearing completion. The Government has endorsed the findings of the forestry report and committed itself to implementing its recommendations. Delays in initiating these actions, and revelations that agreements had been concluded for the export of logs felled, before a log export ban was instituted, led to concerns about the transparency of forestry management.  - 11 - However, actions to improve forestry management have since been initiated, with the cancellation of most of the past agreements to export logs; the reimposition of the log export ban from January 1, 1997; the initiation of actions to monitor and control illegal log exports; and the use of technical assistance to review and improve forest management policies. A power rehabilitation project was approved in FY96 and is supporting restoration of the power supply system in the Phnom Penh area. Poverty reduction and human resource development are being supported by the Social Fund Project, that was approved in FY95, and the initiation of work on a comprehensive poverty assessment. B. Portfolio Performance 25. Six projects have been approved for Cambodia. Commitments total US$210 million, including US$30.4 million for the Disease Control and Health Development Project, which was approved in December 1996. The undisbursed balance is US$96 million (as of end-December 1996). This is a solid disbursement performance, given that the first credit was only approved in FY94. 26. The Bank's assistance program to Cambodia is still young and, therefore, it is not possible to draw conclusions regarding implementation performance. However, the dominant feature of Cambodia's public administration is the lack of experience of its staff and the need for technical support to help with the implementation of the country's development programs. As a consequence, the Bank is taking a proactive stance vis-a-vis portfolio implementation, in order to anticipate and overcome weaknesses in portfolio performance. For both the Social Fund and Power Rehabilitation Projects, project preparation was undertaken on an accelerated timetable and the Government's institutional capacity was supplemented by technical personnel who have undertaken line functions as well as advisory roles. Given Cambodia's weak human capital base, such assistance is inevitable and will be required for many years. Constant monitoring of the role of technical advisors is required, however, to ensure that they are contributing to Cambodia's long-term development rather than hindering it. The Government and donors, including IDA, are consciously designing their programs to ensure that greater responsibility for project preparation and implementation are gradually assumed by implementing agencies. Another example of the Bank's approach, to ensure satisfactory project implementation, is that the Social Fund project, which is providing emergency rehabilitation mostly for school construction, is being implemented largely by NGOs, outside of Government channels. 27. Another key issue in portfolio management, in the current situation, is to ensure that there is sufficient transparency and accountability in the implementation of foreign-funded projects, including IDA projects. A significant initiative, in this regard, is the establishment of a public procurement unit in the MEF (the unit is located in the CDC, the Government body responsible for donor-assisted projects), with the support of the ADB. In tandem with the establishment of this unit, a Public Procurement Law is being drafted. Bank staff have commented on this Law and have been consulted on the formation of the procurement unit. In addition, Bank staff are closely monitoring compliance with project audit requirements (timely audits are one of the performance indicators for the Bank's program). Bank staff are also providing procurement training annually in Phnom Penh for staff involved in the implementation  - 12 - of Bank projects. Finally, steps are being taken within IDA projects to ensure that they are implemented appropriately. One example is the Social Fund Project, which has commissioned a NGO technical field audit to examine procurement, disbursement and participatory procedures for a random sample of 25 schools constructed by the project. V. BANK GROUP COUNTRY ASSISTANCE STRATEGY A. Strategic Overview 28. The Bank Group's ultimate objective in Cambodia is to promote sustainable development and to help achieve a rapid reduction in poverty. However, it is important to note that without more decisive implementation of economic reforms and improved transparency and governance, the Bank Group will have difficulty providing the level and intensity of support necessary to reach these objectives. In designing our country assistance strategy, we have drawn on the lessons learned since the first CAS and have made a special effort to solicit the views of the Government, other donors and civil society. This full CAS is designed to articulate a three- year program (FY97-99) of lending and non-lending services. The Bank intends to review progress annually. 29. At the inception of the current CAS process, a discussion paper was extensively discussed in Cambodia with the Government, and at the Government's encouragement, with donors and non-governmental stakeholders. These meetings provided valuable feedback that is reflected in the current CAS. The Government also provided feedback on the Bank's strategy at several stages. These discussions, while confirming that the five objectives articulated in the previous CAS remain appropriate, have helped to sharpen the focus of the Bank's program, as well as engage the Government, other donors and the NGO community more actively in the pursuit of these objectives. A detailed program for FY97-99 for each of these objectives is elaborated in Section C below. 30. The assistance program that would be used by the Bank Group in meeting these strategic goals takes into account three key considerations: the Government's weak implementation capacity; the sparse information base on the economy; and the availability of substantial official development assistance from other donors along with the presence of strong and active local and international NGOs. One major implication of these factors is that our assistance strategy will have a strong component of non-lending services. Our analytical work will assist the Government in prioritizing its policy agenda and investment requirements, while helping to underpin the activities of other donors. Enhancing the capacity of the Government to manage the development process will also be a priority for the Bank and we intend to involve EDI actively in this endeavor. And, given the extensive involvement of other donors in Cambodia's development, aid coordination will be a key component of the non-lending services we provide. 31. A second implication is that the Bank's lending activities will shift gradually over the next three years. In the past, their focus has been on meeting immediate balance-of-payments and rehabilitation needs in a post-conflict society. Our emphasis will shift in two ways: from emergency balance-of-payments/budget support towards policy-based lending; and from  - 13 - rehabilitation-type projects that fund critical imports towards more traditional investment projects. The fast-disbursing assistance that is envisaged would be provided based upon mutually-agreed economic reforms, such as tax reform, expenditure rationalization and restructuring, and natural resource management. On investment projects, the Bank will continue to support some rehabilitation-type activities, such as the Disease Control project, which attempts to rebuild quickly the health system's capacity in addressing readily preventable diseases. However, our lending activities would also begin to develop and support longer-term investment priorities, such as in the agriculture sector. 32. A final implication is that the Bank's proposed assistance program would complement the efforts of other official donors and NGOs by focusing on sectors and activities in which they are not active, rather than displacing their resources. As in the past, donor financial support will likely continue to be large and should enable the Bank to be more selective in its investments and focus on complementing existing donor programs. We will also continue to rely on technical support and NGO involvement to ensure the proper and timely implementation of IDA projects and would seek co-financing for these, where available. B. Partnerships and Aid Coordination 33. Official donors have and will continue to play a central role in the Cambodian economy's post-conflict rehabilitation through technical assistance, budget and balance-of- payments support and investment financing, as well as in helping to develop macroeconomic and sectoral policies. The Bank has worked closely with donors across a range of sectors and activities. Examples of such collaboration in providing technical and analytical inputs include: preparation under the TA Project, and jointly with Australia and other donors, of the Cambodian Veterans Assistance Program (CVAP) to support military demobilization; compilation of a civil service data base and census by the UNDP to feed into Bank support for designing a voluntary departure program for civil servants; participation by the UNDP and FAO in preparing the Forestry Policy Assessment; completion of the first phase of the Poverty Assessment with the support of UNDP and ADB; and involvement of several donors, including USAID, in conjunction with the Bank in assisting the Government to develop its National Environmental Action Plan. In terms of lending activities, the preparation of most Bank projects in Cambodia has been supported by Japanese PHRD grants and/or Swedish grants. In addition, preparation of the Social Fund Project benefited directly from programs supported by the ILO, UNICEF, the ADB, and the UJNDP; technical assistance for the preparation of the Power Project was financed by the UNDP, with the ADB financing a parallel and complementary power project; and work on the Disease Control and Health Development Project has relied heavily on the support of WHO and UNICEF. 34. The strong presence of NGOs in Cambodia adds substantially to the pool of development expertise and capacity available in the country and increases the efficiency of project implementation in several sectors. The Bank is working with and consulting Cambodia's NGO community very closely; it is a very important development partner in a country with a weak civil service. NGO representatives attended ICORC meetings and the 1996 Consultative Group meeting as observers. The NGO community is also represented at local donor coordination  - 14 - meetings. In the course of the Bank's operational work in Cambodia, the skills and experience of local and international NGOs have been and will continue to be tapped on implementation questions and policy issues, and for research. NGOs made important contributions to the preparation and implementation of several Bank projects: in agriculture, NGOs have advised on the design of the component for female-headed households; in health, an intemational NGO advised the Bank on provincial health budget and disbursement issues, health center rationalization and construction, and tuberculosis treatment protocols; and, in power, several NGOs assisted in preparing the land acquisition and compensation plan. Moreover, under the Social Fund Project, NGOs can sponsor applications for infrastructure and equipment grants. The preparation of the National Environmental Action Plan will rely on workshops attended by NGOs, and a USAID-funded consortium of NGOs will provide inputs and support throughout the preparation process. 35. The first Consultative Group meeting was held in Tokyo in July 1996 and was co- chaired by the World Bank and the Government of Japan. This co-chaired CG meeting was a transition from ICORC meetings that were held in the early phases of Cambodia's recovery to full-fledged CG meetings. The Royal Government indicated at the first CG meeting that it would like the CG process to continue. The Bank, therefore, plans to hold CG meetings annually. The final ICORC meeting is planned for 1997. The Royal Government also plans to hold several local donor coordination meetings on specific sectors. A first meeting was held in January 1997. The Bank will cooperate closely with the UNDP in Phnom Penh, which will continue to take the lead in local donor coordination. 36. The Bank has collaborated closely with the IMF on issues of macroeconomic policy, especially those pertaining to public finance, and of structural reform. Cambodia is currently in the midst of an ESAF arrangement with the IMF. To support the ESAF process, as well as the Bank's adjustment lending, the Government, working closely with the IMF and the Bank, has prepared two PFPs. Macroeconomic performance under the adjustment program has been broadly favorable. Progress has also been made on structural reform in a number of key areas. However, the lack of timely progress in implementing agreed measures in the management of forestry resources has precluded conclusion of the mid-term review under the second annual arrangement. The sustained implementation of agreed actions on forestry could provide the basis for a resumption of IMF financial support in the context of the third annual ESAF arrangement, provided agreement can be reached on an economic and financial program for 1997 and on a revised PFP. The IMF continues to provide technical assistance, primarily to the National Bank of Cambodia.  - 15 - C. Country Assistance Objectives (i) Supporting Macroeconomic Stability and Economic Reforms 37. The Bank will assist the Government's implementation of its reform program, through a combination of technical assistance, balance-of-payments support and analytical work, through the selective use of EDI, and through collaboration with the IMF and the ADB. In the fiscal area, reforms will be supported by supervision and implementation of the Technical Assistance Credit (TAC). The TAC will continue to help the Government develop a program in the areas of civil service reform, military demobilization, tax reform, and budget management. It will also finance the establishment of a debt reporting and management system to enable a closer monitoring of external creditworthiness. This technical support under the TAC for key public sector reforms is being coordinated and complemented by support from the IMF, UNDP and the ADB. A Country Economic Memorandum (FY97) will update developments in the real sectors and evaluate the progress of policy reform, including fiscal reforms. Fast-disbursing assistance in the form of an Adjustment Credit (FY98), which could be advanced if Government commitment to a defined policy package is in place, is envisaged to support the balance-of- payments and budget, and would focus on fiscal reform, improved forestry management, and private-sector development. Finally, a key aspect of the Bank's strategy for assisting in the process of economic reform in Cambodia will be institution building through the involvement of EDI. A dual role is foreseen for EDI: facilitating the policy debate in Government and civil society; and providing skills training in economics and economic management for civil servants and NGOs. Special topics under consideration for policy seminars are economic management, governance, natural resource management, the lessons from East Asian development and project preparation and implementation. 38. Improving the climate for private sector development is critical to Cambodia's long-term prospects. The TAC is providing support for private sector development, notably through assistance to the Cambodian Investment Board to develop its capacity as a one-stop shop for private investment and to other agencies responsible for developing an enabling legal environment for PSD. Entrepreneur training and business services for small and medium enterprises will be available under the IFC's Mekong Project Development Facility (see Box 1). The Bank Group is also encouraging Cambodia to complete the requirements for joining the IFC and MIGA. IFC membership is almost completed; the National Assembly has adopted legislation authorizing Cambodia to sign the IFC's Articles and preparation are currently underway for this. Once this is done, the IFC will be in a position to provide more assistance, as Cambodia is one of the three countries in Asia where the IFC plans to make a special effort to boost its activities under the "Extending IFC's Reach" initiative. The IFC has already provided technical assistance in reviewing the Foreign Trade Bank and in the formation of the Securities Commission. Currently, the IFC is also considering a hotel investment at Siem Reap as well as investments in the manufacturing, energy and financial sectors. Joining MIGA would allow potential investors to secure its assistance for key projects and would permit Cambodia to benefit from MIGA's investment marketing activities designed to assist countries in attracting foreign investment.  - 16- Box I: Cambo Vetnam and Laos: IFCsAMekong PM Deveient Facility E In many emerging market economies, smail- and medium-sized enterprises (SMEs) form the basis for tomorrow's pivate sector. jl The: success of SMEs often determines whether or not a country wilt have. a vibranthprivate sector. From IFC's pe*pectiv - SMEs will play a key role in thet development of the private sector in C"abodia,KVietnam and Laos. With] this in: min6d, the Corporation :launched a new initiative,thei:Mekongr Project Development Facility (OPDF), which is designed to suppr ASMEs inithe regio. PEI:F will helpentrepreneurs prepare business plans, identify potenial partnhrs a nd obtain tftnanving.i It will also workl t improve, local instittions that support SME sby providing trainingIto localI onsultants,loant ofIices and other groups who -work twith.gsmiall businesses.00 MPlDF M Fwill tleverage its resources by coordinating closey with existinge businessbassociations Eand: otbher . ABak (3roUp and NGO that support SMEs in the region. The Faclit will have offices Hin anoi and Ho Chi Mih City wia Stff of about 25 individuls It is scheduled to bin loerat ons in earl FY97 IFC wiill managee MMPDF and 0contfrbute: $4 million to the Facility's five-year, S$25:miliontbudget aThe balance of the Faciity's fnacing islbeing provide-d by several bilateral donors, many of whom iare nw in the xprocess iofwobaining na funding approvals.: To omplement MPDF's activities, IFC will makegavailalelto; SMEs $5 million of seed capitalthou the Mekong: Financin Line (MFL). These funds, which may be in the forn of debt or equity, should help mobilizel capital from other sources. It is hoped that the:0 combination of technical assistance (from MPDP) and capital. (from MEL) will help to strengn the local private sector in these threecountries. (ii) Enhancing Rural Development and Natural Resource Management 39. A key focus of the Bank's efforts will be to broaden the base of economic development and to ensure that economic growth and development are sustainably based. A considerable proportion of the Bank's lending and non-lending activities will be used to help improve economic conditions in rural areas, where the bulk of the population lives. To identify the constraints and priority needs in the agriculture sector, an Agricultural Sector Memorandum (FY97) has been prepared and is being discussed with the Government and other stakeholders. In tandem with the Bank's analytical work, the ADB has recently approved a program loan, which will support a strengthening of the policy framework for agricultural development. To complement these activities, the Bank is taking a gradual and phased approach to rural and agricultural development through its lending activities. First, the Social Fund Project (FY96) is being used to develop small-scale social and physical infrastructure in rural areas focusing on poor regions, with an intensive use of technical assistance, and with implementation outside of local government channels. The Bank's next operation, the Agricultural Productivity Improvement Project (FY97), is designed to reach the small farmer directly through improving agricultural support services. This project will support efforts to raise agricultural productivity in soil fertility management, seed production, plant protection, animal health, small scale irrigation2 2 This component of the project includes a provision for mine survey and removal activities, if required. In general, the Government intends to use grant funding for demining. About US$16 million, which was equivalent to the Government's annual request, was pledged for demining at the 1996 CG meeting. IDA funding will be used for demining only when it is essential for project success.  - 17- and fisheries management. An important feature of this project is that it is designed to help strengthen the institutional capacity of the Ministry of Agriculture. The final component of the Bank's strategy will involve participatory rural development activities and related institutional strengthening of local governments in rural areas. To achieve this, a Rural Development Project (FY98/99) is being prepared that would focus on four rural provinces of northeastern Cambodia. These areas are the ones whose development potential has been constrained by the lack of basic infrastructure, where the improved security situation will permit more intensive development activity and where other donors are not yet active. The project would include investment in rural infrastructure (mainly roads and water), support for small-scale enterprise development, and institutional development to support decentralization. It would provide opportunities for expanding the activities of NGOs in the project area. In future years, this project could serve as a model for other donors and for additional Bank rural development activities. 40. Effective management and protection of Cambodia's forest resources and other natural resources is a priority on which the Bank places considerable emphasis in its assistance strategy. The sustained implementation by the Government of the actions it has initiated in this area will be a bellwether of the level and intensity of Bank support. The Bank is working actively to facilitate the implementation of the findings of the World Bank/UNDP/FAO report on forestry management. Funding under the TAC is being made available, in coordination with other donor resources, for the implementation of an action plan, including development of a program for monitoring illegal exports of logs, the review of existing concession contracts, development of improved criteria and procedures for evaluating concession master plans, preparation of a long- term forest policy, and training and support for the Forestry Department. Finally, the Ministry of Environment has begun preparation, with the assistance of the Bank, of a National Environmental Action Plan-NEAP-(FY97) to address the six key environmental issues identified by the Government and other stakeholders (see para. 17), and provide the basis for future projects that could be implemented with official assistance. One area under active consideration is the use of the GEF, for a biodiversity protection project, in association with the proposed Rural Development Project. (iii) Supporting Critical Infrastructure Rehabilitation 41. The Bank will also selectively support the development and rehabilitation of physical infrastructure to address key deficiencies in urban areas. In power--a critical area to support future growth--supervision of the Phnom Penh Power Rehabilitation Project, which is now effective, will provide critical technical support to the Government in expanding and rehabilitating electricity lines and establishing consumer connections and new substations. In addition, a Power Sector Study (FY97), co-financed by AusAID, will be carried out to help identify further investment needs and sources of financing, emphasizing the role that the private sector can and should play in the power sector. For water, a Water Supply Project (FY98) is under preparation to improve the efficiency of existing water institutions and augment water supply facilities in Phnom Penh and Sihanoukville. This project is linked to a water distribution project in Phnom Penh prepared by the ADB. These two projects together will improve access to safe, reliable water in two urban areas, and the institutional framnework will lay the foundations for future water development throughout the country. EDI has a related program to build  - 18- stakeholder commitment to institutional reform and policy change through seminars and study tours. Also, to improve the national highway system, a Roads Project (FY99) is under preparation. This will help to link domestic markets and rural roads nationally and will complement the infrastructure completed in the Rural Development Project The Bank will actively seek co-financing for this project, in order to maximize the impact of IDA resources. (iv) Improving Human Resources and Reducing Poverty 42. As noted earlier, Cambodia faces a unique situation regarding its human resource base brought about by nearly a quarter century of conflict. Initially, in the social sectors, the Bank concentrated its activities in health and education on analytical work and on ensuring that adequate health supplies were available through our rehabilitation credits. In the education sector, the Bank has assisted the Government in establishing the National Higher Education Task Force that will produce a higher education master plan aimed at rationalizing future investments and addressing policy issues in areas such as curriculum development, standards and scale of higher education institutions. The Task Force is expected to release its final report by mid-1997. In the meantime, implementation of the Social Fund Project is becoming a major source of finance and technical support for the construction of primary and lower secondary schools, as well as rural health facilities. This project represented the first step in rebuilding social sector infrastructure in a situation with weak implementation capabilities. The next generation of Bank projects would be implemented through, and help strengthen the capacity of, line ministries. In the health sector, the recently-approved Disease Control and Health Development Project would support the rehabilitation and expansion of the public health system, with a focus on control of communicable diseases, tuberculosis and malaria, particularly in rural areas. Work on a basic education project would be initiated during FY98-99. 43. Finally, in a country with Cambodia's low level of income and pervasive poverty, fostering broad-based economic growth will constitute the primary thrust of IDA's poverty reduction efforts. However, to assist in the design and implementation of IDA support, the Bank, in collaboration with the ILO, UNDP and the ADB, is preparing a comprehensive Poverty Assessment and Strategy Report (FY98) in several stages. First, an initial poverty profile has been prepared based on existing data collected in the 1993 Socio-Economic Survey, which only covered about 55 percent of the rural areas because of security difficulties. The Bank is also assisting the Government in preparing a living standards and measurement survey--similar to the one completed for Vietnam. Donor support is being actively sought to design, implement and institutionalize this survey, without which a comprehensive poverty assessment and strategy will be extremely difficult to formulate. From this more comprehensive strategy, the Bank will be able to identify more precisely poor households and target infrastructure and social sector lending better. The Bank's poverty analysis will focus particularly on gender issues due to Cambodia's unique population structure and the needs of the handicapped due to the extremely large proportion of the population that has suffered the consequences of Cambodia's past and ongoing conflicts. The Bank's program (both lending and non-lending) may need to be modified in view of the findings of the poverty report.  - 19 - (v) Strengthening Institutional Capacity 44. A longer-term issue, upon which the Bank places high priority and which impinges on all donor activities, is the need to strengthen the Government's capacity to implement its economic reforms and development programs. In addition to strengthening the human resource base, legal and administrative reforms are key to building the institutional capacity necessary for achieving long-term development. During Cambodia's years of civil conflict, judicial institutions were destroyed. Most notably, many critical business, economic and financial laws, which are key elements of the enabling environment for private sector development, are still absent and those that have been recently enacted have yet to be adequately enforced. The absence of these laws and their inadequate enforcement are one source of the security and governance problems that plague Cambodian society today. Legal reform is necessary but not sufficient to strengthen governance and development institutions. Administrative reform is also required, particularly a thorough reform of the civil service, including, but not limited to, a downsizing of the civil service. The development of reform programs in these two areas--improving the enabling environment and administrative reforms--are being supported by the TAC and the implementation of further reforms in these two areas would be elements of the proposed policy- based lending operation. 45. While legal and administrative reforms and human resource development will take years to help overcome existing obstacles to economic development, the Bank is also helping to build capacity through technical assistance for the formulation of economic policy and for the implementation of development projects. The experience of East Asia's successful economies would be emphasized. Following discussions with the Government and other donors, a phased approach to the provision of technical assistance is being used. Extensive use of substitution technical support is being used by IDA and all other donors to supplement preparation and implementation capacity. With Cambodia's devastated human resource base, this is inevitable and will likely persist for many years to come. Over time, however, all donors are making efforts to phase out such assistance through approaches such as twinning arrangements, thereby avoiding a "dependency trap" that would force the country to rely exclusively on technical assistance. In addition, the activities of EDI will help build capacity by upgrading economic management skills among civil servants and building analytical capabilities among Cambodian researchers. For instance, EDI will provide advice on curriculum development and pedagogical methods to the training institute for Ministry of Finance officials, which is being established under the TAC. D. Policy Dialogue and Lending (i) Non-Lending Services 46. As noted throughout this CAS, non-lending services will be a critical element of the Bank's assistance strategy in Cambodia. In FY97 more than one-third of the Bank's administrative resources for Cambodia will be allocated to non-lending services. Even under the intermediate and low case lending scenarios (see below), the Bank would still devote  - 20 - considerable resources and efforts in non-lending services to foster economic reforms and aid coordination. Our non-lending services will focus on three types of activities: * analytical work, both formal reports and informal notes, to build up an information base on the Cambodian economy so as to underpin the Bank's and other donors' activities; * an intensive use of EDI to increase the institutional capacity for economic decision making and project preparation and implementation; * aid coordination activities to help maintain an adequate level of donor support for Cambodia's reconstruction and development and to ensure that duplication of efforts among donors is avoided as far as possible. (ii) Lending Program 47. The size and composition of the Bank's lending program would depend on the Government's macroeconomic management, implementation of the reform program, the findings of the poverty report, and the performance of the Bank's portfolio. We envisage three lending scenarios linked to the macroeconomic scenarios discussed in paras 18-21. 48. The Intermediate Lending Scenario. This lending scenario would be consistent with the intermediate economic scenario, in which the Government's macroeconomic management is reasonably strong (i.e. single digit inflation, moderate economic growth and a sustainable external debt situation), but economic and structural reforms are not sufficient to place the economy onto a broad-based, sustainable high growth path. Under this scenario, IDA lending would be US$150 million (about SDR 100 million) for the FY97-99 period. It would involve about five projects during the three-year period covered by this CAS. There would be no policy- based lending to provide balance-of-payments and budgetary support, since the Government would not be able to implement the economic reforms necessary to place the economy onto a higher growth path. IDA investment lending under this lending scenario would support investment and rehabilitation activities in the social sectors, agriculture and rural development, and physical infrastructure in rural and selected urban areas. 49. The High Lending Scenario. The Bank will devote considerable resources to work with the Government on designing and implementing a robust reform program that would help engender rapid, sustainable economic growth. This would involve a large IDA program in support of the implementation of an ambitious reform program. It would involve IDA lending of US$225 million (or roughly SDR 150 million) for FY97-99, or US$75 million per year on average. Normally, two projects would be prepared annually within the IDA resource envelope. The lending program under the high case would provide support to the Government's structural reform program, as well as the social sectors, infrastructure and agriculture and rural development with a heavy focus on poverty alleviation. This high case lending program would depend critically on the Government's progress in maintaining macroeconomic stability and in undertaking further economic and structural reforms. In the context of discussions on the current  - 21 - CAS, the Government has indicated its intention to implement the policies needed to enable IDA to extend the support envisaged under the high lending scenario. 50. The primary triggers for this level of lending would be those associated with the Adjustment Credit proposed for FY98. The focus would be on a set of simple, yet binding, conditions that would help to move the economy onto a more broadly-based growth path, to restructure the balance of payments and budget, and to enhance transparency and governance while eliminating incentives for rent-seeking behavior, particularly in the forestry sector. The main economic and structural reforms that would trigger policy-based lending are: (i) fiscal reform, including the elimination of ad hoc tax exemptions, tax reforms to broaden the tax base and reduce its dependence on trade taxes, improved tax administration, and restructuring of expenditures towards priority basic and social services in rural areas; (ii) continued implementation of measures to ensure sustainable forestry management, as outlined in the recent World Bankl/UNDP/FAO report; and (iii) improving the enabling environment for private sector development, such as state enterprise restructuring (including privatization), strengthening the financial sector (including implementing a program of on-site supervision, improving the bank regulatory environment, and completing the establishment of a two-tier banking system) and enacting key remaining economic and business laws (such as the Companies Law, the Banking Law and a Bankruptcy Law). 51. The Low Lending Case. If macroeconomic stability cannot be maintained, severe governance or transparency problems persist and/or implementation performance deteriorates significantly, we would propose limiting IDA lending to about US$20 million (one operation) per year focussing on the social sectors and/or rural development projects whose benefits primarily accrue to rural areas and the poor. Given the Government's weak implementation capacity, the Bank would involve NGOs heavily in the preparation and implementation of these projects. This will help ensure that the projects reach their intended beneficiaries. E. Role for a Field Presence 52. As discussed in last year's CAS, the Bank has established a field presence in Phnom Penh. A liaison office was opened in January 1997, under the supervision of the Resident Mission in Thailand. As the Bank's portfolio grows, this office would be upgraded to a resident mission. This phased approach is appropriate as currently the Bank has formed a strategic alliance on aid coordination with the UJNDP. While the Bank will chair the annual CG meeting and provide the principal background materials, the UNDP will take the lead on local donor coordination--a role that it is currently performing very well. This is appropriate given the UINDP's long involvement in Cambodia and the fact that it is currently represented by a highly experienced individual. To facilitate the Bank's coordination and interaction with the UNDP, the Bank liaison office is located on the UJNDP's premises. The Bank's Resident Representative in Thailand is also visiting Cambodia on a regular basis. The primary duty of the liaison officer would be to assist in the implementation of the Bank's program and facilitate communication among the Government, the Bank and other donors. IFC is planning to establish a presence in Phnom Penh under its "Extending IFC's Reach" initiative. An office for IFC's Mekong Enterprise Facility is also being considered, once demand for the facility begins to rise.  - 22 - F. CAS Success Criteria 53. Attachment II summarizes the Bank's assistance program, our objectives and performance indicators for our major activities. Within this framework, we would propose the following summary indicators (building on those in the last CAS) for measuring success: * Continued progress on macroeconomic stabilization. Key indicators would be a steady improvement in public resource mobilization and a continuation of the strict limit on domestic bank financing of the budget to reduce inflationary pressures. * Re-orientation of expenditures to the social sectors and basic infrastructure, with a major poverty reduction focus. * Significant progress in structural reform through: (i) an improved enabling environment for private sector development (state enterprise reform, financial sector strengthening, and improved economic and business legal system); and (ii) initiation of civil service reform and military demobilization. ? Discernible progress towards ensuring sustainable forestry management practices, as evidenced by implementation of the key recommendations of the World Bank/UNDP/FAO report on forestry management. - Satisfactory progress on the implementation of development programs, including maintaining a satisfactory IDA disbursement ratio. VI. AGENDA FOR BOARD CONSIDERATION 54. A successful country assistance strategy in Cambodia would require an intensive effort by the Bank Group, but it is unclear whether the Government will take the actions required to justify the level and intensity of support necessary to reach our objectives. There are a number of risks: the political balance of power is still fragile; the Khmer Rouge's insurgency, while weakened considerably, will likely continue in some remote areas; macroeconomic stability is still tenuous at best; and there remain concerns about transparency and governance. Managing these risks, while providing the Government with support to move the economy onto a long-term sustainable growth path, calls for an assistance strategy closely conditioned and calibrated to Government actions. 55. The Board may wish to comment on the following topics: * the linkage of IDA lending to policy reforms in support of mutually-agreed measures, with improvements in natural resource management as a bellwether of the overall reform effort; and,  - 23 - * the extensive and intensive use of technical assistance and NGOs in the near term, while local institutional capacity is improved. James D. Wolfensohn President by Gautam S. Kaji Attachments  - 24 - Attachment I Page 1 of 4 Cambodia: Debt Sustainability Analysis for Country Assistance Strategy Structure of External Debt and Debt Management Strategy At the end of 1995, Cambodia's external public debt stood at US$2,094' million, (including short-term debt and IMF credits) which was equivalent to 71 percent of 1995 GNP 2 and 378 percent of 1995 total exports . Of the total debt disbursed and outstanding, 65 percent was owed in rubles (almost all of which was owed to the Russian Federation), 18 percent to creditors of the Paris Club and 9 percent to multilateral lenders (including US$65 million to IDA, and US$72 million to IMF). Over 90 percent of Cambodia's external indebtedness is on concessional terms. Figure 1: Composition of External Debts (in percent, as end of 1995) 3.6 31 3.4 86 5 Bfilateral n IMF E Short-temi 0 IDA . OtherZl Debt Management The Government of Cambodia has adopted a debt management strategy aimed at reducing the debt burden in the medium term. In 1991, Cambodia signed a bilateral agreement with the Russian Federation, consolidating previous commodity loans of 796 million rubles, to be repaid over 20 years at zero interest rate. This agreement was not implemented and all principal repayments since 1991 are in arrears. On January 26, 1995, the creditors of the Paris IThis includes US$1,385 million of debt denominated in ruble, if valued at the historical exchange rate at the time the debt was incurred, which is the rate used by the Russian Federation. 2Throughout this analysis, three-year average of GNP and exports (excluding re-exports) are used.  - 25 - Attachment I Page 2 of 4 Club agreed to reschedule Cambodia's external debt in accordance with the highly concessional Naples terms. Since then, bilateral agreements have been reached with Germany, France and Japan. Negotiations with the United States, the only remaining country named in the Paris Club terms of reference, are underway. Rescheduling efforts outside of the Paris Club with Poland and the Czech and Slovak Republics are also underway. At this time, no progress has been made in addressing Cambodia's ruble debt to the Russian Federation. Intermediate Case: macro-economic and borrowing assumptions: * Under the intermediate case outlined in this CAS, Cambodia would continue to make progress in consolidating macroeconomic stability through tight fiscal and monetary policies. The scenario assumes GDP growth averaging 5 percent per annum. * Over the longer term, exports (excluding re-exports) are projected to grow by 5 percent per year in real terms. During the same time period, the share of re-exports to total exports would decline from the 1995 level of 59 percent to 21 percent in the year 2000 and to 12 percent in the year 2004. Cambodia's current account deficit (before official grants) as a ratio of GDP is projected to experience a modest decline over the projection period, falling from 16 percent of GDP in 1995 to 12 percent by the year 2004. * Foreign direct investment is assumed to remain at $100 million p.a. throughout the period until the year 2004. * It is also assumed that Cambodia would continue to benefit from official capital grants of about $250 million per annum through the year 2000, and afterwards declining steadily to $120 million in the year 2004. * Long-term disbursements from multilateral creditors, including IDA and the ADB, are expected to average $105 million p.a. Debt Sustainability On the basis of end-1995 debt outstanding and disbursed, Cambodia's net present value of debt to export ratio was 378 percent (if ruble debt is valued at the historical exchange rate at the time the debt was incurred, which is used by the Russian Federation) against the threshold of 220 percent that defines severely indebted low-income countries (SILICs). Servicing the Russian ruble debt in accordance with the 1991 agreement reached between Cambodia and the Russian Federation would imply debt service to exports ratio of as high as 35 percent in 1996,  - 26 - Attachment I Page 3 of 4 declining to below 20 percent by the year 2001. Even with continued availability of official grants and highly concessional loans assumed under the intermediate macroeconomic scenario presented above and with the full implementation of 1995 agreement with the creditors of the Paris Club, without proper resolution of ruble debt, Cambodia 's debt would remain unsustainable throughout the projection period 3 Cambodia is expected to seek comparable debt relief on its non-Paris Club external debt as the one granted by the Paris Club creditors in 1995 under the Naples terms. In order to explore possible approaches to attain debt sustainability, two illustrative rescheduling scenarios were examined. As 65 percent of Cambodia's current external debt is denominated in rubles, rescheduling scenarios focus on the possible outcome of a ruble debt resolution. In these scenarios, it was assumed that the historical exchange rate at the time the debt was incurred would be applied and that bilateral agreements were reached with all creditors of the Paris Club in 1996. In the first illustrative scenario, it was assumed that Cambodia could seek a debt relief package comparable to Naples flow rescheduling and stock of debt operation in which all ruble debt, including arrears and maturities during the consolidation period (1996-98), would be eligible for rescheduling over 40 years, including 16 years grace. It was also assumed that maturities beyond the consolidation period and not covered by rescheduling would be eligible for stock reduction. A second scenario of a deeply discounted debt buyback operation, comparable to the debt relief recently accorded Nicaragua (debt buyback at 10 percent of face value, financing the cost of buyback at commercial rates with 15 years maturity including 5 years of grace), was also examined. In the first illustrative scenario, the decline in the present value of debt resulting from rescheduling of the stock of arrears and flows of future maturities, coupled with reduction of debt stock not covered by rescheduling, would allow attainment of debt sustainability in 1997 and beyond, following the implementation of the debt relief, but also implying slightly higher debt service payments in the first few years after rescheduling, as the balance of outstanding amounts would be rescheduled on less concessional terms. Under the deeply discounted debt buyback scenario, Cambodia's external debt would also become sustainable in 1997 and beyond, following the implementation of debt relief. While both these scenarios would move Cambodia's debt to sustainable levels, the buyback operation would provide greater relief as both the present value of debt to exports and debt service to export ratios would be lower in the majority of years during the projection period. 3A sustainable external debt situation is defined here as a combination of the debt to exports ratio being less than 200 percent and the ratio of debt service to exports being less than 20 percent.  - 27 - Attachment I Page 4 of 4 Summary of Results of Debt Sustainabiity Analysis (Intermediate Case) CAMBODIA Ratio of Present Value gf Debt to Exoorts (%1 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 No rescheduling/no clearance of arrears 378.4 424.9 340.4 282.3 245.7 220.7 211.0 208.6 211.6 217.7 Restructuringon Naples terms 378.4 174.9 157.4 145.7 134.4 129.0 128.6 133.7 143.1 154.9 Buybackat 10%offacevalue+rescheduGng 378.4 152.4 135.4 123.9 114.8 110.8 111.8 117.8 127.8 140.3 Ratio efTotal Debt Service to ExWorts (%l 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 NoreschedulingInoclearanceofarrears 8.4 34.8 32.1 27.5 25.5 24.7 13.0 12.2 11.5 10.7 Restructuring on Naples terms 8.4 5.1 6.6 7.9 11,9 12.1 11.9 11.3 10.5 9.8 Buyback at 1O% of face value + reschedulng 8.4 7.8 8.2 8.8 10.6 10.7 10.8 10.3 9.6 9.0 Ratio of Present Value of Debt to 3-year Average Exports 450 400 350 300 -250 ~200 150 00 1995 199 1997 1998 1999 2000 2001 2002 2003 2004 Ratio of Total Debt Service to 3-year Average Exports 35 -________ 25 / \ _ 0 ~~~~~~~~~~~~~~~~~~Romo.ruchg o.N;ks tonn 25 20 / \ E1u~~~~~~~~~~~~~~~~~~~~~yb..k Dt 10'l/ of f-c -Wbe +n:shedurng 20 1 5 10 5 1995 1in6 1997 1998 1999 2000 2001 2002 2003 2004  - 28 - Attachment 11 Page 1 of 3 CAMBODIA - PERFORMANCE INDICATORS, FY97-99 COUNTRY OBJECTIVES MONITORABLE ACTIONS PERFORMANCE INDICATORS SERVICES/TASKS 1. SUPPORTING ECONOMIC REFORMS Sustain Improve Debt Management - Establish debt management unit and Non-Lending macroeconomic Capacity install computerized debt management - CEMs, PFPs, economic tability and reporting system by end- 1997 monitoring, financial sector study Initiate fiscal reform - Extend the coverage of the tax on wages Lendine and salaries and the excise tax -SAC . Revenue reform - Eliminate ad-hoc tax exemptions - Implement VAT for 400-500 largest tax Supervision payers and gradually extend. VAT rate - TA (support for: expenditure should be, at least, revenue neutral control, tax reform, debt - Broaden corporate tax base, by management, civil service reform, incorporating new tax payers into the public investment, private sector system development) b. Rationalize and restructure - Reduce size of civil service and prepare - ERC expenditures new wage policy - Prepare and begin implementation of EDI Cambodian Veterans Assistance Program - Civil service training (CVAP), resulting in reduction of militarv - Economic seminars by 40,000 people (in tandem with an improvement in the security situation.) IFC - Re-orient public expenditures towards - Small enterprise development, social services and basic services hotels, mid-sized manufacturing joint ventures, and banking Implement austere fiscal and - Achieve positive government savings by monetary policies 1999 MIGA - Limit domestic banking financing of - Investment guarantees budget deficit to present levels Develop private Improve enabling environment for - Adopt implementing regulations of Invest- sector private sector development ment Law ensuring that fiscal incentives provided to investors are minimized and approvals are automatic in 1997 - Implement legal framework for private sector development - Maintain open trade regime and take steps to integrate trade regime with ASEAN - Implement legal framework for commercial banking, complete establish- ment of two-tier banking system (privatize FTB and MB; NBC sell shares in joint venture banks, and stop its commercial banking activities in branches) - Develop program of on-site supervision. - Complete membership requirements for IFC and MIGA (by end-FY97)  - 29 - Attachment 11 Page 2 of 3 COUNTRY OBJECTIVES MONITORABLE ACTIONS PERFORMANCE INDICATORS SERVICES/TASKS 11. ENHANCING RURAL DEVELOPMENT AND NATURAL RESOURCE MANAGEMENT Increase agricultural - Reorganize and strengthen - Prepare MAFF reorganization plan by Non Lendinig production MAFF technical capacity, at end-FY97 - Agriculture Sector Memorandum headquarters and in the provinces - Begin implementation of MAFF human (and dissemination) resource development plan by end-FY98 Lendingl - Prepare a five-year strategic plan - Agricultural Productivity Project for the sector - Start implementation of pilot field (and supervision) - Formulate and begin implementa- programs for seeds production, animal - Rural Development Project tion of development strategies for health improvement and small-scale he key subsectors for agricultural irrigation development Improve environmentl Formulate coherent environment - Prepare NEAP by end of FY97 Non Lending natural resource and natural resource management - Begin implementation of NEAP action - NEAP management policies and strategies - Develop and implement an action plan - Forestry Sector Study Improve the policy and institu- to control the illegal export of logs, (dissemination) tional framework for sustainable including a monitoring program - Follow up to NEAP forest management - Establish a mechanism to award, Lendin monitor and enforce concessions in a -SAC transparent and competitive manner Supervision - Initiate gradual removal of the logging - TA (forestry management) and log export bans commensurate with improvements in monitoring capacity - Ensure that revenues from natural resources flow into the budget (ongoing 1996-98). 111. SUPPORTING CRITICAL INFRASTRUCTURE REHABILITATION Develop and - Rehabilitate transport. energy, - Create enabling environment for an Non Lending reestablish normal and water supply infrastructure efficient expansion and operation of the - Power Sector Strategy utility services in power sector, open to private l ESMAP TA Project (energy cities and upgrade participation efficiency and sector restructuring national infrastruc- - Initiate commercialization of - Establish power utility as separate Lending ture power utility and attract private judicial entity and enact Electricity Act - Water Supply investment in electricity - Increase bulk water provision by 50% in - Road Project generation Phnom Penh & by 100% in Sihanoukville Supervision - Accelerate institutional - Improve cost recovery in Phnom Penh - Phnom Penh Power development for water utilities in Water Supply Authority Rehabilitation Phnom Penh and Sihanoukville - Develop strategy for water and sanitation sector development IV. IMPROVING THE HUMAN RESOURCE BASE AND REDUCING POVERTY Prepare targeted - Target public expenditure and - Sustain disbursement schedule of Social Non-Lending programs to reach foreign assistance to rural areas Fund and maintain its management - Poverty Assessment the poor structure as negotiated with IDA Lending - Adopt more differentiated health - Incorporate LSMS as part of regular - Rural Development Project delivery and infrastructure activities of Institute of Statistics by end- Supeision l strategies to target the poor 1998 - Social Fund Project  - 30 - Attachment 11 Page 3 of 3 COUNTRY MONITORABLE ACTIONS PERFORMANCE INDICATORS SERVICES/TASKS OBJECTIVES Improve health and - Increase coverage and access of - Commission and bring up to full ducation services basic health services capacity over 200 health facilities by end- - Higher Education Sector 1998 Strategy (dissemination) - Increase coverage of TB, malaria, - Attain target disease control coverage Lending IV/AIDS programs and impact rates by end- 1998. - Basic Education Project (FY2000) Supervision - Disease Control and Health Development V. STRATEGY AND OVERHEAD - Portfolio management - Timely audits of projects - CAS - Country strategy, aid - Organize a series of in-country sectoral - CGs, aid Coordination coordination, policy dialogue aid coordination meetings (at least two - Other Country Work meetings should be held annually - Liaison Office/Resident Mission following the CG meetings).  - 31 - Annex 1 Cambodia -- Selected Indicators of Bank Portfolio Performance and Management Current Indicator FY94 FY95 FY96 FY97 Portfolio Performance Number of projects in under implementation 1 3 5 6 Average implementation period (years) 0.7 0.8 1.4 2.1 Percent of problem projects rated U or HU (for past years, rated 3 or 4) Development objectives 0.0 0.0 0.0 0.0 Implementation progress (or overall 0.0 0.0 0.0 0.0 status for past years) Cancelled during FY 0.0 0.0 0.0 0.0 Disbursement ratio (%) 0.0 2.8 13.5 5.5 Disbursement lag (%) 8.5 29.7 -7.0 2.5 Memorandum item: % completed projects rated unsatisfactory n.a. Portfolio Management a/ Supervision resources (total US$) 83.9 273.0 364.6 325.1 Average supervision (US$/project) 83.9 91.0 72.9 54.2 Supervision resources by location (in %) Percent headquarters 100.0 100.0 100.0 100.0 Percent resident mission 0.0 0.0 0.0 0.0 Supervision resources by rating category (US $/project) Projects rated HS or S 83.9 91.0 72.9 54.2 Projects rated U or HU 0.0 0.0 0.0 0.0 Memorandum item: date of last/next CPPR: n.a. a/ Does not include TF.  - 32 - Annex 2 Page 1 of 2 Cambodia -- Bank Group Fact Sheet, FY94-97 IDA Lending Program, FY94-99 Past Current Planned Category FY94 FY95 FY96 FY97 FY98 FY99 Commitments (US$m) 62.7 37.0 80.0 58.0 86.0 80.0 Sector (%) Agriculture 48.0 31.0 Mining and other extractive Industry Finance Energy Power 50.0 Telecommunicatons Transportation 69.0 Urban development Water supply and sanitation 30.0 Public sector management Human resources Education Population, health, and nutrition 52.0 Social sector 54.0 Public sector management 46.0 Environment Trade policy reform Preinvestment/portfolio development Other non-sector-specific 100.0 50.0 70.0 TOTAL 100.0 100.0 100.0 100.0 100.0 100.0 Lending instrument (%) Adjustment loans -- -- 50.0 70.0 -- Specific investment loans and other 100.0 100.0 50.0 100.0 30.0 100.0 TOTAL 100.0 100.0 100.0 100.0 100.0 100.0 Disbursements (US$m) 28.7 23.0 42.2 38.6 53.3 37.2 Adjustment loans aJ 28.7 22.0 37.0 20.0 20.0 20.0 Specific investment loans and others 0.0 1.0 5.2 18.6 33.3 17.2 Repayments (US$m) 0 0 0 0 0 0 Interest (US$m) 0 0.3 0.4 0.5 0.5 0.6 .a/ Structural adjustment loans, sector adjustment loans and debt service reduction loans.  - 33 - Annex 2 Page 2 of 2 Cambodia - IFC and MIGA Program, FY94-97 Past Current Planned Category FY94 FY95 FY96 FY97 FY98 FY99 Commitments (US$m) Category IFC approvals (US$m) 0 0 0 5.25 4.00 0 Sector (%) Tourism 1 00 Manufacturing 100 TOTAL 0 0 0 100 100 0 Investment instrument (%) Loans 0 0 0 100 100 0 Equity 0 0 0 0 0 0 Quasi-Equity a/ 0 0 0 0 0 0 Other 0 0 0 0 0 0 TOTAL 0 0 0 100 100 0 MIGA guarantees (US$m) 0 0 0 0 0 0 MIGA commitments (US$m) 0 0 0 0 0 0 a/ Includes quasi-equity types of both loan and equity instruments.  - 34 - Annex 3 Summary of Economic and Sector Work A/ (US$ thousands) Current Category FY96 FY97 FY98 FY99 Agriculture 122.2 17.5 Mining and other extractive Industry Finance 22.8 90.0 75.0 Energy Power 21.9 52.1 68.0 Telecommunications Transportation Urban development Water supply and sanitation Education 23.7 30.6 Population, health, and nutrition Public sector management Environment/Forestry 177.2 133.5 50.0 50.0 Trade policy reform Preinvestment/portfolio development Other non-sector-specific Other economic work Poverty assessment 71.0 83.0 140.0 Private sector assessment Country economic memoranda 244.0 80.0 230.0 245.0 Other (specify) 12.6 25.1 30.0 30.0 Total economic and sector work 672.6 444.6 608.0 400.0 a/ Does not include TF.  Annex 4 Page 1 of 2 Cambodia Most Same regionrincome goaw New Laest singk year recent highe Unit of estimant East Low- income Indicator measzre 1970975 1980-85 1989-94 Asia income grop Priorty Poverty Indicators POVERTY Upper poverty line local curr. Headcount index % of pop. Lower poverty line local curr. .. .. Headcount index % of pop. .. .. GNP per capita USS 240 890 390 1,670 SHORT TERM INCOME INDICATORS Unskilled urban wages local curr. .. Unskilled rural wages Rural terms of trade Consumer price index 1987-100 .. .. .. Lower income Food& Urban Rural SOCIAL INDICATORS Public expenditure on basic social services % of GDP .. 1.8 Gross enrollment ratios Primary % school age pop. 42 .. 47 116 105 104 Male 48 .. 48 119 112 105 Female 35 .. 46 115 98 101 Morality Infantmortality perthou.livebirths 181 160 110 35 58 36 Under 5 mortality .. .. 177 49 101 47 Immunization Measles % age group .. .. 38.0 93.0 86.2 77.4 DFT .. .. 38.0 95.0 89.1 32.0 Child malnutrition (under-5) .. 20.0 .. 16.9 38.2 Life expectancy Total years 40 46 52 68 63 67 Female advantage 2.7 2.8 3.3 3.6 2.4 6.4 Total fertility rate births per woman 5.5 5.1 5.1 2.2 3.3 2.7 Materal mortality rate per 100,000 live births .. 500 900 Supplementary Poverty Indicators Expenditures on social security % of total gov't exp. .. .. .. Social secunty coverage % ecocL active pop. .. .. .. Access to safe watet total % of pop. 45.0 .. .. 67.2 Urban ' 97.0 .. 20.0 83.5 Rural * 38.0 .. 12.0 61.4 Access to health care Population growth rate GNP per capita growth rate Development diamond b 61l c0+ (average annual, percent) Life expectuncy 45 GNP Gross 2 0 I I per ~~~~~~~~~~~~~~~~~~~~~primasy capita cnrollment -2 -10 1970-75 1980-85 1989-94 1970-75 1980-85 1989-94 Access to safe water 7 Cambodia - Cambodia - Low-income - Low-income a. See the technical notes, p.387. b. The developmfent diamond, based on four key indicators. shows the average level of development in the country compared with its income group. See the introduction.  - 36 - Annex 4 Page 2 of 2 Cambodia Mon Sau nrgionMacome group Ne Latt zingey nrceUrS hu h,r Unit of es.naU Eas Low- income Indicator measure 1970-75 198045 1989-94 Asia income roup Resources and Expenditures HUMAN RESOURCES Populadon (mre.1994) thousands 7,098 7,562 9,951 1,734,703 3,182,221 1,096,881 Age dependency ratio ntio 0.80 0.77 0.89 0.53 0.66 0.63 Urban % of pop. 10.3 14.8 20.1 31.9 28.3 55.9 Population growth rate annual % 0.5 3.4 3.0 1.3 1.7 1.3 Urban -2.2 6.7 6.1 2.8 3.2 2.7 Labor force thousands 3,420 3,832 4,949 977,170 1,590,533 488,647 Agriculture % of labor force 77 75 74 67 67 36 Industry 5 7 8 16 14 26 Female 53 55 53 44 39 40 Labor participation rates Total % of pop. 48 51 50 56 50 45 Female 25 28 26 51 41 36 NATURAL RESOURCES Area thou. sq. kn 181.04 181.04 181.04 16367.16 40391.42 40,594.43 Density pop. per sq. km 39.21 41.77 53.36 104.65 77.44 26.66 Agncultural land % of land ara 15.18 13.60 24.93 44.90 52.42 41.05 Change in agricultural land annual % 0.00 13.74 0.00 1.28 0.16 -1.38 Agricultural land under irrigation % 3.32 3.75 2.09 13.14 17.84 11.40 Forests and woodland thou. sq. km .. 134.77 121.63 4,057.84 7.632.00 5,969.25 Deforestation (net) % change, 1980-90 .. .. 1.02 INCOME Household income Share of top 20% of households % of income .. .. .. Share of bottom 40% of households .. .. .. Share of bottom 20% of households - .. .. .. EXPENDITURE Food % of GDP .. .. 19.8 Staples .. .. 3.6 Meat, fish, milk, cheese, eggs .. .. 8.9 Cereal imports thou. mettic tonnes 112 55 106 29,997 36,922 68,936 Food aid in cereals 226 27 82 447 8.516 5,771 Food production percapita 19S7 100 80 103 109 118 115 102 Fertilizer consumption kgha 0.0 0.8 3.3 74.5 58.5 46.3 Share of agriculture in GDP % of GDP .. .. 51.2 18.1 27.6 14.0 Housing % of GDP .. .. 4.7 Average household size persons per household .. .. 5.6 4.2 Urban .. .. 5.9 3.3 Fixed investment housing %of GDP .. .. 4.9 Fuel and power % of GDP .. .. 1.0 Energy cosumption per capita kg of oil equiv. 54 56 51 659 373 1,602 Households with electicity Urban % of households .. .. .. Rural Transport and communlcation % of GDP .. .. 6.2 6.0. Fixed investnent tronsport equipment .. .. 10.3 Total road length thou. km .. .. 34 INVESTMENT IN HUMAN CAPITAL Health Population per physician persons 16,248 16.489 9,727 1,063 .. 3,064 Population per nurse 1376 .. 670 1,490 Population per hospital bed 925 .. 491 612 1,034 592 Oral rehydyraiontherapy (under-5) % of cases .. .. 6 32 38 Education Gross enrollment ratios Secondary % of school age pop. 10 .. 29 56 48 63 Female 6 .. .. 52 42 62 Pupil-teacher ratio: primry pupils per teacher 24 .. ,. 23 39 Pupil-teacher ratio: secondary 39 .. .. 16 20 Pupils reaching grade 4 % of cohort .. .. .. 92 Repeater ratc: primary % of total enroil .. .. .. 6 Dliteracy % of pop. (ag 15+) *- 71 35 16 35 Female % of fem (age 15+) - 83 47 24 46 Newspaper circulation per thou. pop. 10 .. .. .. .. 236 World Bank International Economfics Department. April 1996  - 37 - Annex 5 Page 1 of3 Cambodia - Key Economic Indicators Intermediate Case Actual Estimated Projection Indicator 1992 1993 1994 1995 1996 1997 1998 1999 National accounts (as % GDP at current market prices) Gross domestic product 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 Agriculturea 47.8 50.6 51.2 51.0 47.3 45.7 44.4 43.2 Industrya 13.2 13.7 13.9 14.5 15.4 15.7 16.0 16.2 Servicesa 39.1 35.6 34.9 34.5 37.3 38.5 39.6 40.6 Total Consumption 92.9 95.5 96.1 97.0 97.1 97.3 96.1 94.9 Gross domestic fixed 9.8 14.1 18.5 19.2 16.9 15.1 15.2 15.8 investment Government investment 0.3 4.3 5.5 7.1 6.7 5.6 5.5 5.4 Private investment 9.5 9.8 13.0 12.1 10.2 9.4 9.7 10.4 (includes increase in stocks) Exports (GNFS)b 15.7 14.1 21.5 31.4 24.7 24.2 23.7 23.1 Imports (GNFS) 18.6 23.7 36.1 47.6 38.7 36.5 35.1 33.9 Gross domestic savings 7.1 4.5 3.9 3.0 2.9 2.7 3.9 5.1 Gross national savings' 7.6 4.7 4.8 3.2 3.0 2.4 3.1 4.0 Memorandum items Gross domestic product 2002 2013 2409 2936 3112 3349 3594 3872 (US$ million at current prices) Gross national product per 210.0 230.0 240.0 260.0 .. capita (US$, Atlas method) Real annual growth rates (%, calculated from 1989 prices) Gross domestic product at 7.0% 4.1% 4.0% 7.6% 6.0% 5.8% 5.0% 5.0% market prices Gross Domestic Income .. .. .. .. .. .. Real annual per capita growth rates (%, calculated from 1989 prices) Gross domestic product at 3.9% 1.1% 0.9% 4.5% 3.0% 2.9% 2.4% 2.5% market prices Total consumption .. .. .. .. .. .. .. Private consumption .. .. .. .. .. .. (continued)  - 38 - Annex f Page 2 of 2 Cambodia - Key Economic Indicators Intermediate Case (Continued) Actual Estimated Projection Indicator 1992 1993 1994 1995 1996 1997 1998 1999 Balance of Payments (US$m) Exports(GNFS)b 314.5 283.2 518.0 921.9 767.3 811.0 851.8 893.9 Merchandise FOB 264.5 218.9 462.0 809.0 615.1 621.3 627.2 630.1 Imports (GNFS)b 373.0 476.9 862.1 1396.8 1203.1 1223.7 1260.5 1311.6 Merchandise FOB 351.0 422.1 737.1 1190.0 1010.3 1016.4 1038.9 1074.5 Resource balance -58.5 -193.7 -344.1 -474.9 -435.9 -412.7 -408.7 -417.7 Net current transfers 9.0 3.5 20.0 20.0 23.0 20.0 20.0 20.0 (including official current transfers) Current account balance -44.6 -40.6 -94.0 -177.0 -170.0 -154.5 -186.7 -208.2 (after official capital grants) Net private foreign direct .. .. 80.0 151.0 171.0 100.0 100.0 100.0 investment Long-term loans (net) -2.0 44.0 54.3 78.0 71.0 50.4 106.2 110.0 Official 0.0 43.9 62.5 75.9 59.2 44.6 56.4 74.8 Private -2.0 0.1 -8.2 2.1 11.8 5.8 49.8 35.2 Other capital (net, including .. .. -11.3 -10.6 -36.9 -20.0 0.0 0.0 errors and omissions) Change in reservesd -29.7 -41.0 -29.0 -41.4 -35.1 24.1 -19.5 -1.8 Memorandum items Resource balance (% of -2.9% -9.6% -14.3% -16.2% -14.0% -12.3% -11.4% -10.8% GDP at current market prices) Real annual growth rates (1989 prices) Merchandise exports .. .. .. .. .. .. (FOB) Primary Manufactures .. .. .. .. .. .. Merchandise imports .. .. .. .. .. .. (CIF) Public finance (as % of GDP at current market prices)' Current revenues 6.2 5.4 9.6 8.8 8.5 9.8 10.4 10.9 Current expenditures 9.5 6.9 11.0 9.6 9.3 10.2 10.9 11.3 (Continued)  - 39 - Annex 5 Page 3 of 3 Cambodia - Key Economic Indicators Intermediate Case (Continued) Actual Estimated Projection Indicator 1992 1993 1994 1995 1996 1997 1998 1999 Current account surplus(+) -3.3 -1.5 -1.4 -0.8 -0.8 -0.5 -0.5 -0.4 or deficit (-) Capital expenditure 0.3 4.3 5.5 7.1 6.7 5.6 5.5 5.4 Foreign financing .. 4.4 7.0 7.8 7.1 6.5 7.5 8.5 Monetary indicators M2/GDP (at current market 9.9 6.4 7.3 9.0 10.5 prices) Growth of M2 (%) 213.8 40.0 29.5 44.3 33.0 Private sector credit growth / .. .. .. .. .. total credit growth (%) Price indices( 1989 =100) Merchandise export price .. .. .. .. index Merchandise import price .. .. .. .. .. index Merchandise terms of trade index Real exchange rate .. .. .. .. .. (US$/LCU)1 Real interest rates Consumer price index 112.5% 41.0% 17.9% 3.5% 10.0% 5.0% 5.0% 5.0% (% growth rate) GDP deflator 75.4% 107.4% 8.9% 9.2% 7.5% 5.0% 5.0% 5.0% (% growth rate) a. If GDP components are estimated at factor cost, a footnote indicating this fact should be added. b. "GNFS" denotes "goods and nonfactor services." c. Includes net unrequited transfers excluding official capital grants. d. Includes use of IMF resources. e. Should indicate the level of the government to which the data refer. f. "LCU" denotes "local cune-ncy units." An increase in US$/LCU denotes appreciation.  - 40 - Annex 6 Cambodia - Key Exposure Indicators Intermediate Case Actual Estimated Projection Indicator 1992 1993 1994 1995 1996 1997 1998 1999 Total debt outstanding and 1872.4 1862.3 1977.5 2094.1 2200.9 2272.3 2372.3 2465.7 disbursed (TDO) (US$m)a Net disbursements (US$m)a -11.2 37.1 82.5 117.9 59.2 79.1 86.9 82.7 Total debt service (TDS) 13.0 34.3 2.3 25.2 33.7 38.4 46.6 54.2 (US$m)a Debt and debt service indicators (04/) TDO/XGSb .. .. 378.8 225.2 281.8 274.9 273.2 270.6 TDO/GDP 93.5 92.5 82.1 71.3 70.7 67.9 66.0 63.7 TDS/XGS .. .. 0.4 2.7 4.3 4.6 5.4 5.9 ConcessionaUTDO 91.4 92.3 89.7 87.6 86.7 86.7 86.3 86.6 IBRD exposure indicators (%) IBRD DS/public DS .. .. 0.0 0.0 0.0 0.0 0.0 0.0 Preferred creditor DS/public DS .. .. 75.7 47.5 50.9 54.3 61.9 68.8 IBRD DS/XGS .. .. 0.0 0.0 0.0 0.0 0.0 0.0 Share of IBRD portfolio .. .. 0.0 0.0 0.0 0.0 0.0 0.0 IFC (US$m) Loans 3.0 7.3 9.3 Equity and quasi-equity' MIGA MIGA guarantees (US$m) a. Includes public and publicly guaranteed debt, private nonguaranteed debt and use of IMF credits and net short-term capital. b. "XGS" denotes exports of goods and services, including workers' remittances. c. Includes equity and quasi-equity types of both loan and equity instruments.  - 41 - Annex 7 STATUS OF BANK GROUP OPERATIONS IN CAMBODIA A. STATEMENT OF BANK LOANS AND IDA CREDITS (as of December 31, 1996) Difference between Last ARPP actual and supervision rating Amount in US$ million expected Develop- ject Fiscal (less cancellations) disburse- ment Overall D Year Borrower Purpose IDA Cancellations Undisbursed ments a/ Objectives status :redit Closed 62.70 0.55 34 1995 Cambodia Technical Assistance 17.00 12.38 (0.92) S S 39 1995 Cambodia Social Fund 20.00 15.44 (0.83) S S 31 1996 Cambodia Economic Rehab. Credit 40.00 2.73 0.73 S S 32 1996 Cambodia Phnom Pehn Power Rehab. 40.00 35.44 5.38 S S D5* 1997 Cambodia Disease Control and Health 30.40 30.40 0.00 al 210.10 96.94 4.36 al disbursed 108.47 Of which has been repaid 0.00 al now held by IDA 210.10 Amount sold 0.00 Of which repaid 0.00 al undisbursed 96.94 Not yet signed Actual disbursements to date minus intended disbursements to date as projected at appraisal B. STATEMENT OF IFC INVESTMENTS (as of December 31, 1996) Cambodia is not yet a member of IFC  Annex 8 Cambodia - National Accounts Page I of 4 Part A: Current Price Data (in billions of local currency units) Intem,ediate Case Projeclion Atlas GNP per capita: S 260 (1995) Midyear population: 10.25 millions (1995) Actual Estimated Projection 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2004 Grossdomesticproductatmarketprices 598.6 1335.9 2508.0 5414.0 6131.0 7197.3 8201.3 9110.8 10044.7 11074.3 17935.9 Net indirect taxes .. . .. 343.6 424.6 496.0 601.3 697.1 786.3 1381.1 GDP at factor cost .. .. .. .. 5787.4 6772.7 7705.3 8509.5 9347.6 10288.0 16554.8 Agriculture 333.1 666.4 1198.3 2742.0 3139.6 3672.9 3877.1 4165.1 4461.7 4779.4 6737.7 Industry, of which 66.7 161.7 329.9 743.3 853.2 1041.7 1265.1 1434.9 1604.6 1794.4 3102.9 Manufacturing 31.4 71.0 126.9 285.5 324.9 409.9 491.3 559.8 630.2 709.4 1268.0 Services 198.8 507.8 979.8 1928.7 2138.2 2482.7 3059.1 3510.8 3978.4 4500.5 8095.3 Resource balance 43.4 -21.4 -73.3 -520.9 -892.8 -1163.9 -1148.6 -1122.7 -1142.3 -1194.8 -1718.7 Exports(GNFS)' 40.3 159.9 394.1 761.5 1317.5 2259.6 2021.7 2206.3 2380.8 2556.9 3770.2 Imports (GNFS) 83.8 181.4 467.4 1282.4 2210.3 3423.5 3170.3 3329.0 3523.1 3751.7 5488.9 Total expenditure 634.3 1356.8 2574.4 5933.5 7023.8 8361.2 9349.9 10233.6 11187.0 12269.1 19654.6 Consumption expenditures 585.1 1231.5 2329.0 5170.1 5889.6 6981.8 7967.4 8860.7 9655.9 10514.0 16687.8 Government 43.3 99.0 238.5 373.2 673.8 682.8 726.8 871.0 1011.6 1148.8 2039.8 Private 541.8 1132.5 2090.5 4796.9 5215.8 6299.0 7240.7 7989.7 8644.3 9365.2 14647.9 Gross domestic investment 49.2 125.3 245.4 763.4 1134.2 1379.3 1382.4 1372.9 1531.1 1755.1 2966.9 Total government investmentb 6.9 5.2 7.1 235.2 335.3 511.1 546.1 513.1 556.7 603.3 714.6 Total private investment' 42.3 120.1 238.3 528.2 798.9 868.2 836.3 859.7 974.3 1151.8 2252.2 Total fixed investment 49.2 125.3 245.4 763.4 1134.2 1379.3 1382.4 1372.9 1531.1 1755.1 2966.9 Total investment in stocks .. .. .. .. .. .. .. .. Domestic savings 13.5 104.4 179.0 243.9 241.4 215.4 233.9 250.2 388.8 560.3 1248.1 + Net factor income 0.0 0.0 0.1 1.0 4.3 -34.6 -48.2 -86.6 -134.1 -172.9 433.4 + Net current transfers 1.0 2.7 10.8 9.6 48.7 49.0 60.6 54.4 55.9 57.2 80.7 = National savings 14.5 107.1 189.9 254.5 294.4 229.8 246.3 218.0 310.6 444.6 895.5 Grossnationalproduct 598.6 1335.9 2508.1 5415.0 6135.3 7162.6 8153.1 9024.2 9910.6 10901.4 17502.6 Grossnationaldisposableincome 599.6 1338.6 2518.9 5424.6 6183.9 7211.7 8213.7 9078.6 9966.5 10958.6 17583.3  Annex 8 Cambodia - National Accounts (continued) Page 2 of 4 Part B: Shares of Gross Domestic Product (percentages calculated using current price data) Interm ediate Case Projection Aci/al Estimated Projection 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2004 Gross domestic product 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 Net indirect taxes .. .. .. .. 5.6 5.9 6.0 6.6 6.9 7.1 7.7 Agriculturevalue added 55.6 49.9 47.8 50.6 51.2 51.0 47.3 45.7 44.4 43.2 37.6 Industryvalueadded,ofwhich 11.1 12.1 13.2 13.7 13.9 14.5 15.4 15.7 16.0 16.2 17.3 Manufacturing 5.2 5.3 5.1 5.3 5.3 5.7 6.0 6.1 6.3 6.4 7.1 Servicesvalueadded 33.2 38.0 39.1 35.6 34.9 34.5 37.3 38.5 39.6 40.6 45.1 Resource balance (X-M) -7.3 -1.6 -2.9 -9.6 -14.6 -16.2 -14.0 -12.3 -11.4 -10.8 -9.6 Expors (GNFS) 6.7 12.0 15.7 14.1 21.5 31.4 24.7 24.2 23.7 23.1 21.0 Imports (GNFS) 14.0 13.6 18.6 23.7 36.1 47.6 38.7 36.5 35.1 339 30.6 Total expenditure 106.0 101.6 102.6 109.6 114.6 116.2 114.0 112.3 111.4 110.8 109.6 Government consumption 7.2 7.4 9.5 6.9 11.0 9.5 8.9 9.6 10.1 10.4 11.4 Private consumption 90.5 84.8 83.4 88.6 85.1 87.5 88.3 87.7 86.1 84.6 81.7 Govemnment investment 1.2 0.4 0.3 4.3 5.5 7.1 6.7 5.6 5.5 5.4 4.0 Private investment 7.1 9.0 9.5 9.8 13.0 12.1 10.2 9.4 9.7 10.4 12.6 Gross domestic savings 2.3 7.8 7.1 4.5 3.9 3.0 2.9 2.7 3.9 5.1 7.0 Grossnationalsavings 2.4 8.0 7.6 4.7 4.8 3.2 3.0 2.4 3.1 4.0 5.0 Memorandum items GDP deflator 245.6 509.5 893.8 1853.5 2018.8 2202.3 2367.5 2485.9 2610.2 2740.7 3497.9 Consumerpriceindex 252.3 474.0 1007.2 1418.1 1670.5 1816.9 1907.7 2003.1 2103.3 2208.4 2818.6 TotalGDP(millioncun-entUS$) 1304.9 1900.3 2001.6 2013.4 2409.0 2936.5 3112.4 3349.0 3593.8 3871.6 5553.2 Conversion factor used (LCU/USS) 458.8 703.0 1253.0 2689.0 2545.0 2451.0 2635.0 2720.5 2795.0 2860.4 3229.9 Per capita gross national product .. .. 210.0 230.0 240.0 260.0 .. .. .. (Atlas method: in 1987 USS)  Annex 8 Cambodia - National Accounts (continued) Page 3 of 4 Part C: Constant Price Data (in local currency, constant 1989 prices) Internediate Case Projection Actual Estimated Projection 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2004 GDPatmarketprices 243.7 262.2 280.6 292.1 303.7 326.8 346.4 366.5 384.8 404.1 512.8 GDP at factor cost .. .. .. .. .. . .. .. Agriculture 127.4 135.9 138.5 137.1 137.1 145.9 148.1 154.5 160.6 167.1 203.2 Industry,ofwhich 36.3 39.5 45.7 51.7 55.7 61.1 69.3 74.2 78.3 82.6 106.7 Manufactunng 17.2 18.4 19.0 20.5 22.1 24.3 27.2 29.3 31.1 33.0 44.1 Services 80.0 86.8 96.4 103.3 110.9 119.8 129.0 137.8 145.9 154.4 202.9 Resource balance Exports (GNFS). Imports (GNFS) .. .. .. .. .. .. .. .. Total expenditure Consumption Government Private Gross domestic investment .. .. .. .. .. .. .. .. Total government investment .. .. .. .. .. .. Total private investment .. .. .. .. .. .. .. .. .. Total fixed investment - - I Total changes in stocks .. .. .. .. .. TermTs-of-trade (TT) effect .. .. .. .. .. Gross domestic income Domestic saving (TT adjusted) Net factor income .. .. .. .. .. .. .. GNP at market prices .. .. .. .. .. .. ..  Annex 8 Cambodia - National Accounts (continued) Page 4 of 4 Part D: Annual Growth Rate (calculated from data in constant 1989 prices) Intermediate Case Projection Actual Estimated Projeccdon 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2004 GDP at market prices 1.2% 7.6% 7.0% 4.1% 4.0% 7.6% 6.0% 5.8% 5.0% 5.0% 4.7% Agriculture 1.2% 6.7% 1.9% -1.0% 0.0% 6.5% 1.5% 4.3% 4.0% 4.0% 4.0% Industry, of which -2.2% 8.8% 15.7% 13.1% 7.7% 9.8% 13.5% 7.0% 5.5% 5.5% 4.8% Manufacturing -4.4% 7.0% 3.3% 7.9% 7.8% 10.0% 12.0% 7.5% 6.2% 6.2% 5.5% Services 2.7% 8.5% 11.1% 7.2% 7.4% 8.0% 7.7% 6.9% 5.9% 5.8% 5.4% Exports (GNFS) Imports (GNFS) Total expenditure Consumption .. .. .. .. .. .. .. .. Investment Gross domestic income .. .. .. .. .. .. .. .. Gross domestic saving .. .. .. .. .. .. .. .. Per capita growth rates PercapitaGDP(mp)b -2.0% 4.5% 3.9% 1.1% 0.9% 4.5% 3.0% 2.9% 2.4% 2.5% 2.5% Per capita GNP (mp) .. .. .. .. .. .. .. .. .. .. .. Per capita total consumption .. .. .. .. .. .. .. .. .. .. .. Per capita private consumption .. .. .. .. .. .. .. .. Part E: Period Average Indicators Actual Estimate Projecdon 1984-89 1989-94 1994-99 Marginal national saving rate Incremental capital-output ratio Import elasticity a. "GNFS" denotes "goods and nonfactor services." b. Gross domestic fixed capial formation only. c. Derived as a residual; includes increase in stocks. d. Total net unrequited transfers excluding official capital grants  Annex 9 Cambodia - Exports and Imports Page 1 of 2 Intermediate Case Projection Actual Estimnated Projection 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2004 A. Value in current prices (US$ millions) Total merchandise exports (FOB) 85.9 213.5 264.5 218.9 462.0 809.0 615.1 621.3 627.2 630.1 735.1 Principalprimaryproducts 28.3 62.1 44.8 104.5 227.4 228.0 211.6 228.1 244.6 257.6 328.1 Logs 7.7 24.6 25.1 56.4 124.0 112.0 73.0 75.9 84.1 87.2 104.0 Sawn timber& semi-processed 0.0 3.7 0.7 34.0 74.0 73.0 102.0 104.1 108.2 112.3 132.8 Rubber 16.5 18.7 12.6 13.9 27.0 41.0 34.3 37.3 40.4 45.1 68.9 Rice, fish&otheragri. products 4.1 15.1 6.4 0.2 2.4 2.0 2.3 10.8 11.9 13.1 22.4 Manufactured goods 4.6 5.9 7.2 3.6 7.6 41.0 92.9 114.9 136.1 154.2 287.9 Other goods' 53.0 145.5 212.5 110.8 227.0 540.0 310.6 279.1 247.2 219.0 119.4 Total merchandise imports (CIF) 163.6 245.0 351.0 422.1 737.1 1190.0 1010.3 1016.4 1038.9 1074.5 1357.4 Re-exports .. .. .. 110.8 227.0 540.0 310.6 279.1 247.2 219.0 119.4 B. Value in constant 1989 prices (USS millions) Total merchandise exports (FOB) .. .. .. .. .. .. .. .. Principal primary products Logs............... Sawn timber & semi-processed .. .. .. .. .. .. .. Rubber .. .. .. .. .. .. .. .. Rice, fish & other agri. products .. .. .. .. .. .. .. .. Manufactured goods .. .. .. .. .. .. .. .. Other goods' .. .. .. .. .. .. .. .. .. .. .. Total merchandise imports (CIF) .. .. .. .. .. .. .. .. .. .. .. Re-exports .. .. .. .. .. .. .. (continued)  Annex 9 Cambodia - Exports and Imports (continued) Page 2 of 2 Inrertnediate Case Projectioni Actual Estimated Projeetion 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2004 Memorandum items Export volume growth rate .. .. .. hnport volume growth rate .. .. .. .. C. Price Indices (1989 = 100) Merchandise export Merchandise irnport Merchandise terms of trade .. .. . .. .. .. .. .. D. Non-Factor Services (1989=100) Exports of NFSW - volume index .. .. .. .. .. .. .. Exports of NFS - price index .. .. .. .. .. .. Imports of NFS - volume index .. .. .. .. .. .. .. .. .. Imports of NFS - price index .. . a. Includes re-export & primary products not specifically identified. b. "NFS' denotes 'nonfactor services." -J  Annex 10 Cambodia - Balance of Payments Page I of 2 (USS millions at current prices) Intermediate Case Projection Actual Esfimated Projection 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2004 TotalexportsofGNFS' 87.9 227.5 314.5 283.2 518.0 921.9 767.3 811.0 851.8 893.9 1167.3 Merchamdise(FOB) 85.9 213.5 264.5 218.9 462.0 809.0 615.1 621.3 627.2 630.1 735.1 Nonfactorsevices 2.0 14.0 50.0 64.3 56.0 112.9 152.2 189.6 224.6 263.7 432.2 Total Impous of GNFS 182.6 258.0 373.0 476.9 862.1 1396.8 1203.1 1223.7 1260.5 1311.6 1699.4 Merchandise(FOB) 163.6 245.0 351.0 422.1 737.1 1190.0 1010.3 1016.4 1038.9 1074.5 1357.4 Nonfactorservices 19.0 13.0 22.0 54.8 125.0 206.8 192.9 207.2 221.6 237.1 342.1 Resource balance -94.7 -30.5 -58.5 -193.7 -344.1 474.9 435.9 412.7 408.7 417.7 -532.1 Net factorincome -12.3 -8.7 -5.5 0.5 -6.0 -8.5 -8.1 -31.8 48.0 -60.4 -134.2 Factorreceipts 0.0 0.0 0.0 1.5 4.0 8.1 13.8 15.6 16.6 17.3 19.7 Factotpayments 12.3 8.7 5.5 1.0 10.0 16.6 21.9 47.5 64.5 77.8 153.9 Interest (scheduled) 12.3 8.7 5.5 1.0 10.0 15.8 11.4 13.7 14.3 17.1 61.7 Total intseres paid 1.0 1.0 1.8 1.0 10.0 15.8 11.4 13.7 14.3 17.1 61.7 Net adjustments to scheduled interest 11.3 7.7 3.7 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Other factor payments 0.0 0.0 0.0 0.0 0.0 0.8 10.5 33.7 50.3 60.7 92.2 Net private cusrent transfers 3.0 4.0 9.0 3.5 20.0 20.0 23.0 20.0 20.0 20.0 25.0 Curnent receipts, of which 3.0 4.0 9.0 3.5 20.0 20.0 23.0 20.0 20.0 20.0 25.0 Workers remittances .. .. .. .. 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Current payments 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Net official current transfers 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 J., Current account balance -91.0 -28.0 -49.6 -189.7 -329.0 -469.0 430.0 424.5 436.7 458.2 -641.3 Official capital grants 42.0 3.0 5.0 149.1 235.0 292.0 260.0 270.0 250.0 250.0 120.0 Ptivate investment (net) .. .. .. .. 80.0 151.0 171.0 100.0 100.0 100.0 100.0 Directforeigninvestmnent .. .. .. .. 80.0 151.0 171.0 100.0 100.0 100.0 100.0 Portfolio investments .. .. .. .. 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Net LT' borrowing 12.0 5.0 -2.0 44.0 54.3 78.0 71.0 50.4 106.2 110.0 451.9 Disbursementsb 0.0 0.0 0.0 43.9 62.5 93.1 81.0 62.7 119.2 120.7 476.0 Repayments (scheduled) 15.0 0.0 2.0 0.0 6.6 4.0 19.0 12.3 13.1 10.7 24.1 Total principal repaidb 3.2 -7.6 -4.6 0.0 6.6 4.0 19.0 12.3 13.1 10.7 24.1 Net adjustments to scheduled repayments 11.8 7.6 6.6 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Net otherLTinflows 27.0 5.0 0.0 0.1 -1.6 -11.1 9.0 0.0 0.0 0.0 0.0 (continued)  Annex 10 Cambodia - Balance of Payments (continued) Page 2 of 2 (US$ millions at current prices) Inmermediate Case Projection Actual Estimated Projection 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2004 Adjustments to scheduled debt service 23 1 15.3 10.3 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Debt service not paid 23.1 153 10.3 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Reduction in arrears/prepayments (-) 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0 0 0.0 0.0 0.0 Other capital flows .. .. .. -11.3 -106 -36.9 -20.0 0.0 0.0 0.0 Net short-term capital Net capital flows n.e.i.d Errors and omissions Change in net intemnational reserves .. -297 -41.0 -29.0 -41.4 -35 1 24.1 -19.5 - 8 -30.5 (- indicates increase in assets) Memorandum items Total gross reserves, ofsshich 03 300 71.0 1000 182.10 217.0 233.0 246.3 231 6 308.9 Total reserves minus gold 03 30.0 71 0 100.0 182.0 217.0 233.0 2463 231.6 308.9 Gold (at year-end London price) 0.0 0.0 0 0 0.0 0.0 0.0 0.0 0 0 0.0 0.0 Total grossreserves(in months' imports G&S) . 0.0 10 1.8 1.4 1.5 2.1 2.2 2.2 2() 2.0 Exchange rates Annual average (LCU/US$)1 458.1 703.0 1253.0 2689.0 2545.0 2451.0 2635.0 2720.5 2795 0 2860.4 3229.9 At end year (LCU/USS) 600 0 520.0 2000.0 2305.0 2575 0 2543.0 2677.8 2757.8 2827.7 2891.0 3270.9 Index real average exchange rate (1989 -100) .. .. .. .. . Current Account Balance as % GDP -7.0 -1.5 -2.5 -9.4 -13.7 -16.0 -13.9 -12.7 -12.2 -11.8 -11.5 4" a. Goods and nonfactor services. b. Histoncal data from Debt Reporting System (DRS) othet data projected by country operations division staff. c. "LI" denotes "long-term." d. "n.e i." denotes "not elsewhere included." e. "G & S" denotes "goods and services." f. "LCU" denotes "local currency units."  Annex I I Cambodia - External Debt Stocks and Flows Page I of 3 (USS millions at current prices) Intermiediale Case Projeclion Actual' Estimated' Projection' 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2004 A. Gross disbursements Public & publicly guaranteed 0.0 0.0 0.0 43.9 62.5 93.1 81.0 62.7 119.2 120.7 476.0 Official multilateral creditors, of which 0.0 0.0 0.0 43.9 46.3 59.9 79.0 67.3 81.5 95.3 132.6 IDA 0.0 0.0 0.0 0.0 34.2 25.6 48.7 23.7 24.9 32.5 50.0 IBRD 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Official bilateral creditors 0.0 0.0 0.0 0.0 16.2 33.2 2.0 2.0 1.0 1.0 0.0 Private creditors, of which b 0.0 0.0 0.0 0.0 0.0 0.0 0.0 -6.5 36.7 24.4 343.4 Bonds 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Private creditors nonguaranteed 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Total LTloandisbursements 0.0 0.0 0.0 43.9 62.5 93.1 81.0 62.7 119.2 120.7 476.0 Net SI'credit 15.0 -1.0 0.0 -0.4 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Drawings from IM 0.0 0.0 0.0 8.7 20.0 42.0 0.0 41.0 0.0 0.0 0.0 Toal disbsrsements(LT*ST+Mff) 15.0 -1.0 0.0 52.2 82.5 135.1 81.0 103.7 119.2 120.7 476.0 B. Amortizations Public & publicly guaranteed 0.0 0.0 0.0 0.0 0.0 17.2 21.8 24.7 26.1 21.5 32.5 Official multilateral creditors, of which 0.0 0.0 0.0 0.0 0.0 8.6 10.9 12.3 13.1 10.7 24.1 ]DA 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 15.7 IBRD 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Official bilateral creditors 0.0 0.0 0.0 0.0 0.0 8.6 10.9 12.3 13.1 10.7 S.4 Private creditors, of which 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Bonds 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 o Private creditors nonguaranteed 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Total LTloanmnortization 0.0 0.0 0.0 0.0 0.0 17.2 21.8 24.7 26.1 21.5 32.5 Repayments to MF 0.0 0.0 11.2 15.1 0.0 0.0 0.0 0.0 6.2 16.6 10.4 Totalamortization(LT+IMF) 0.0 0.0 11.2 15.1 0.0 17.2 21.8 24.7 32.3 38.1 42.9 C. Net disbursements Public & publicly guaranteed 0.0 0.0 0.0 43.9 62.5 75.9 59.2 38.1 93.1 99.3 443.4 Official multilateral creditors, of which 0.0 0.0 0.0 43.9 46.3 51.3 68.1 54.9 68.4 84.6 108.5 IDA 0.0 0.0 0.0 0.0 34.2 25.6 48.7 23.7 24.9 32.5 34.3 IBRD 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Official bilateral creditors 0.0 0.0 0.0 0.0 16.2 24.6 -8.9 -10.3 -12.1 -9.7 -8.4 Private creditors, of which 0.0 0.0 0.0 0.0 0.0 0.0 0.0 -6.5 36.7 24.4 343.4 Bonds 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 (contnuect)  Annex II Cambodia - External Debt Stocks and Flows (continued) Page 2 of 3 (US$ millions at current prices) Inlernnediate Case Projection Actual' Estimated' Projecdon' 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2004 Private creditors nonguaranteed 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Total LT" loan net disbursements 0.0 0.0 0.0 43.9 62.5 75.9 59.2 38.1 93.1 99.3 443.4 Net ST' credit 15.0 -1.0 0.0 -0.4 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Net credit from lMIF 0.0 0.0 -11.2 -6.4 20.0 42.0 0.0 41.0 -6.2 -16.6 -10.4 Total net disbursements (LT+ST+IMF) 15.0 -1.0 -11.2 37.1 82.5 117.9 59.2 79.1 86.9 82.7 433.0 D. Interest and charges Public & publicly guaranteed 0.0 0.0 0.7 0.0 0.3 5.8 7.1 7.1 7.0 9.0 60.1 Official multilateral creditors, of which 0.0 0.0 0.7 0.0 0.0 1.1 1.5 1.8 2.3 2.9 7.1 IDA 0.0 0.0 0.0 0.0 0.0 0.0 1.1 1.3 1.5 1.7 3.3 IBRD 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Official bilateral creditors 0.0 0.0 0.0 0.0 0.3 4.6 4.6 4.6 4.5 3.4 2.1 Private creditors, of which 0.0 0.0 0.0 0.0 0.0 0.0 1.0 0.6 0.2 2.7 50.8 Bonds 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Private creditors nonguarmnteed 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Total intereston LTloans 0.0 0.0 0.7 0.0 0.3 5.8 7.1 7.1 7.0 9.0 60.1 Interest on ST credit 1.0 1.0 1.0 1.0 1.0 0.0 0.0 0.0 0.0 0.0 0.0 Interest on IMF drawings 0.0 0.0 0.1 18.2 1.0 2.3 4.8 6.7 7.3 7.0 0.6 Total interest (LT+ST+IMF) 1.0 1.0 1.8 19.2 2.3 8.0 11.9 13.7 14.3 16.1 60.7 1 E. External debt (DOD)' V Public & publicly guaranteed 1720.9 1721.9 1712.4 1718.4 1807.5 1882.1 1946.9 1997.3 2103.5 2213.5 3747.0 1 Official multilateral creditors, of which 1.3 1.4 0.0 5.0 58.0 125.0 204.0 271.2 352.7 448.0 1018.4 IDA 0.0 0.0 0.0 0.0 39.0 64.6 113.3 137.0 161.9 194.4 426.5 IBRD 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Official bilateral creditors 1719.0 1720.0 1712.0 1713.0 1749.5 1742.9 1734.0 1723.6 1711.6 1701.9 1659.8 Private creditors, of which d 0.6 0.5 0.4 0.4 0.0 14.1 9.0 2.5 39.2 63.6 1068.9 Bonds 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Private creditors nonguarantecd 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 TotalLTDOD 1720.9 1721.9 1712.4 1718.4 1807.5 1882.1 1946.9 1997.3 2103.5 2213.5 3747.0 ST debt 139.7 146.4 145.1 135.3 140.0 140.0 140.0 140.0 140.0 140.0 140.0 Use oflMF credit 26.7 26.8 14.9 8.6 30.0 72.0 114.0 135.0 128.8 112.2 2.1 Total DOD (LT+ST+MF), of which: 1887.3 1895.1 1872.4 1862.3 1977.5 2094.1 2200.9 2272.3 2372.3 2465.7 3889.1 Principal arrears 97.4 105.0 88.8 86.1 1574.0 1574.0 1574.0 1574.0 1574.0 1574.0 1574.0 Interest arrears 106.7 114.4 113.1 103.6 110.0 110.0 110.0 110.0 110.0 110.0 110.0 (continued)  Annex I I Cambodia - External Debt Stocks and Flows (continued) Page 3 of 3 (US$ millions at current prices) Intermrediate Case Projection Actual' Estimated' Projection' 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2004 F. Debt and debt burden indicators (based on data in parts A-E) Total debt service (US$ millions) 1.0 1.0 13.0 34.3 2.3 25.2 33.7 38.4 46.6 54.2 103.6 Intcrest(LT+ST+IMF)b 1.0 1.0 1.8 19.2 2.3 8.0 11.9 13.7 14.3 16.1 60.7 Principal (LT+ IMF) 0.0 0.0 11.2 15.1 0.0 17.2 21.8 24.7 32.3 38.1 42.9 Total DOD' and TDSd DOD/ exports (XGS') ratio .. .. .. .. 378.8 225.2 281.8 274.9 273.2 270.6 327.6 DOD / GDP ratio 144.6 99.7 93.5 92.5 82.1 71.3 70.7 67.9 66.0 63.7 70.0 TDS / exports (XGS) ratio .. .. .. .. 0.4 2.7 4.3 4.6 5.4 5.9 8.7 EBRD exposure indicators: IBRD DSr/ public loan DS .. .. .. .. 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Prefered creditor DS / public DS .. .. .. .. 75.7 47.5 50.9 54.3 61.9 68.8 40.8 IBRD DS / exports (XGS) .. .. .. .. 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Country share in IBRD portfolio .. .. .. .. 0.0 0.0 0.0 0.0 0.0 0.0 0.0 G. Debt and debt burden indicators (based on post-DDSR data for countries with projected debt workouts; based on adjusted data from Annex C7) TDSafterDDSR(USSmillions) .. .. .. .. 2.3 24.4 30.8 26.1 33.5 44.4 96.2 Interest(LT+ST+IMf)b .. .. .. .. 2.3 15.8 11.9 13.7 14.3 17.1 61.7 t Principal (LT+ MF) .. .. .. .. 0.0 8.6 18.9 12.3 19.3 27.3 34.5 Memorandum items Factor payments / exports (XGS) ratios Interest payments / exports .. .. .. .. 1.9 1.7 1.5 1.7 1.6 1.9 5.2 Total factorpayments/exports .. .. .. .. 1.9 1.8 2.8 5.7 7.4 8.5 13.0 a. Historical data from Debt Reporting System (DRS); other data projected by country operations division staff. b. "LT" denotes "long-term," "ST" denotes "short-term." c. "DOD" denotes "debt outstanding and disbursed" d. "TDS" denotes "total debt service." e. "XGS" denotes "exports of goods and services," which comprises exports of goods, nonfactor services, factor receipts, and workers' remittances f "DS" denotes "debt service."  Annex 12 Cambodia - Public Finance Page I of 2 (at current prices and exchange rates) Intennediate Case Projection Actual Esimnated Projection 199 1991 1992 199 1994 1995 1996 199 1998 1999 2004 Govemrnment budget (billions LCUs) Total current revenues 23.3 58.8 156.1 290.1 589 2 635.3 693.7 889.3 1042.4 1208.7 2182.6 Direct taxes 4.4 9.0 30.4 23.0 8.6 20.9 22.8 51.1 84.1 123.5 281.4 Indirect taxes 8.8 22.0 79.3 211.1 356.0 424.6 496 0 619.5 717.2 808.4 1416.9 On domnestic goods and services 0.0 0.0 0.0 51.6 75.1 103.8 160.4 236.9 315.4 387.6 878.9 On international trade 8.8 22.0 79.3 159.5 280.9 320.8 335.6 382.7 401.8 420.8 538.1 Noyntax receipts 10.1 27.8 46.4 56.0 224.6 189.8 174.9 218.7 241.1 276.9 484.3 Total Current Expenditures 43.3 98.9 238.6 373.2 673.8 693.3 763.0 933.3 1093.6 1251.9 2252.1 Interest on external debt 0.8 10.3 11 5 12.5 13.5 15.1 27.3 Interest on domestic debt 0.0 0.1 24.8 31.6 48.4 65.8 149.2 Transfers to private sector . ..-0.8 0.0 0.0 0.0 0.0 0.0 0.0 Transfers to other NFPS' -.. .. 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Subsidies 5.3 16.1 9 3 17.5 13.6 0.0 0.0 18.2 20.1 22 1 35.9 Consumption ... . 355.7 660.2 682.8 726.8 871.0 1011.6 1148.8 2039.8 Wages and salaries .. 20.6 53.9 67.4 293.4 325.8 378.8 365.8 404.7 459.5 815.9 Other consumnption -.... 288.3 366.8 357.1 348.0 505.2 607.0 689.3 1223.9 Budgetary Savings -20.0 -40.1 -82.5 -83.1 -84.6 -58.0 -69.4 -44.0 -51.2 -43.1 -69.5 Capital Revenues 1.2 7.7 42.2 0.0 0.0 0.0 0.0 Total Capital Expenditures 6.9 5.2 7.1 235.2 335.4 511.1 546.1 513.1 556.7 603.3 714.6 Capital trasfers Budgetary fixed investmnent ...... 335.3 511.1 546.1 513.1 556.7 603.3 714.6 Overall balance (-=deficit) -418.8 -561.4 -573.3 -557.2 -608.0 -646.4 -784.2 Sources of financing ()418.8 561.4 573.3 557.2 608.0 646.4 784.2 Official capital grants Net external borowing Net disbursements (cash) Adjustmnents to scheduled principal repayinents(- Adjustmnents to scheduled debt service(+ Net monetary system Net other domestic borrowing (continued)  Annex 12 Cambodia - Public Finance (continued) Page 2 of 2 (at current prices and exchange rates) Intermediate Case Projection Actual Estinu,ted Projection 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2004 Shares of GDP (%) Current revenues 39 4.4 6.2 5.4 9.6 8.8 85 9.8 104 10.9 12.2 Current expenditures 7.2 7.4 9.5 6 9 1120 9.6 93 10.2 10.9 11.3 12.6 Budgetary savings -3.3 -3.0 -3.3 -1.5 -1.4 -0 8 -0 8 -0 5 -0.5 -0.4 -0.4 Capital revenues - -0.0 0.1 0.5 Capital expenditures 1.2 0.4 03 4.3 5.5 7.1 6.7 5.6 5.5 5.4 4.0 Overall Balance (- = deficit) -6.8 -78 -7,0 -6.1 -6.1 -5.8 -4.4 Official capital grants Net extemnal borrowing Monetary system credit Other domestic financing Government Debt (DOD 'at the end of the year, in (billions LCUs, unless noted)) External debt .4. .. . 4859.8 4865.5 5282.0 5566.2 5874.4 6218.6 8806.3 External debt (in US$ millions) .. . 1887.3 1913.3 1972.5 2018.4 2077.4 2151.0 2692.4 Debt to monetary system Other domestic debt Total government debt Total government debt as percent of GDP .. Tax burden indicators (%) Direct taxes/ GDP 0.7 0.7 1.2 0.4 0.1 0.3 0.3 0.6 0.8 1.1 1.6 4 IndirecttaxesondomesticG&Sd /GDP 0.0 0.0 0.0 1.0 1.2 1.4 2.0 2.6 3.1 3.5 4.9 1 Indirect taxes on domestic G&S / private consumption 0.0 0.0 0.0 1.1 1.4 1.6 2.2 3.0 3.6 4.1 6.0 Taxeson intenationaltrade/merchandiseimports 11.7 12.8 18.0 14.1 15.0 11.0 12.6 13.8 13.8 13.7 12.3 a. "LCU" denotes "local currency unit." b. "NFPS" denotes "nonfinancial public sector." c. "DOD" denotes "debt outstanding and disbursed." d. "G&S" denotes "goods and services."  Annex 13 Cambodia - Monetary Survey Page I of 2 (in billions of local currency units) Iilernediaie Case Projection Actual Estimnted Projection 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 A. Annual Flows: Net foreign assets .. .. 25.9 77.7 288.9 159.2 281.3 Net international reserves .. .. . Other net foreign assets .. .. .. Domestic credit .. .. 179.7 88.1 30.9 60.1 110.0 To government .. .. 90.8 25.3 -44.6 3.8 -17.7 Government budget .. .. 101.2 30.8 44.4 4.7 -18.0 Other NFPS' -10.4 -5.5 -0.2 -0.9 0.3 To rest of the economy 88.9 62.8 75.5 56.3 127.7 Private sector Other financial institutions Total assets = liabilities Money and quasimoney 169.1 99.3 102.4 199.2 214.2 Net other liabilities B. End of Year Stocks: Net foreign assets .. -1.7 24.2 101.9 390.8 550.0 831.3 Net international reserves .. .. .. .. .. .. .. Other net foreign assets -- .. .. .. .. .. .. Domestic credit .. 87.6 267.3 355.4 386.3 446.4 556.4 To govemment (NFPS) 77.7 168.5 193.8 149.2 153.0 135.3 Government budget .. 55.6 156.8 187.6 143.2 147.9 129.9 Other NFPS .. 22.1 11.7 6.2 6.0 5.1 5.4 To rest ofthe economy 9.9 98.8 161.6 237.1 293.4 421.1 Private sector Other financial institutions .. .. .. .. .. .. Total assets = liabilities Money and quasimoney .. 79.1 248.2 347.5 449.9 649.1 863.3 Net other liabilities (continued)  Annex 13 Cambodia - Monetary Survey (continued) Page 2 of 2 (in billions of local currency units) Intemuediate Case Projection Actnal Estmated Projection 1990 1991 1992 1993 1994 1995 199 1997 1998 1999 C. Factors accounting for monetary expansion (as % MQMb) Net foreign assets Credit to govenmment (NFPS) Credit to rest of the economy Net other liabilities (-) Total increase in MQM D. Money, credit and prices M21GDP . .. 9.9 6.4 7.3 9.0 10.5 Annual growth rate MQM .. .. 213.8 40.0 29.5 44.3 33.0 Annual growth rate private credit .. .. .. .. .. .. .. Increase in private credit as % of increase in domestic credit .. .. .. .. .. .. .. Interest rates (historical only) Nominal end-period discount rate Real end-period discount rate a. "NFPS" denotes "nonfinaneial public sector." b. "MQM" denotes "money and quasi money."  Projected Arrears, Rescheduling, and Reductions in Debt and Debt Service Annex 14 (Supplementary annex to be used for countries requiring debt workouts) Page I of 2 (USS millions at current prices) Irtertediate Case Projectioni Estimate Projection 1994 1995 1996 1997 1998 1999 2004 A. Interest payments 1. Interest due per DRS- pipeline 0.0 5.0 5.0 5.0 5.0 5.0 4.0 2. Adjustments to DRS pipeline (if any) 0.0 7.8 0.0 0.0 0.0 0.0 0.0 3. Less interest saved through debt reduction 0.0 0.0 0.0 0.0 0.0 0.0 0.0 4. Plus interest on arrears/restructuring/DDSRb 0.0 0.0 0.0 0.0 0.0 0.0 0.0 5. Plus interestdueonnewLT' debt 0.3 0.8 2.1 2.1 2.0 5.0 57.1 6. Plus interest on ST' debt 1.0 0.0 0.0 0.0 0.0 0.0 0.0 7. Plus IMF service charges 1.0 2.3 4.8 6.7 7.3 7.0 0.6 8. Subtotalinterestdue(scheduledbasis) 2.3 15.8 11.9 13.7 14.3 17.1 61.7 9. Adjustments to scheduled interest 0.0 0.0 0.0 0.0 0.0 0.0 0.0 10. a. Interest not paid 0.0 0.0 0.0 0.0 0.0 0.0 0.0 11. Arrears accumulation 0.0 0.0 0.0 0.0 0.0 0.0 0.0 12. Interest rescheduled 0.0 0.0 0.0 0.0 0.0 0.0 0.0 13. Interest forgiven 0.0 0.0 0.0 0.0 0.0 0.0 0.0 14. b. Artears reduction (-) 0.0 0.0 0.0 0.0 0.0 0.0 0.0 15.Totalinterestpaid(A8-A9)(cashbasis) 2.3 15.8 11.9 13.7 14.3 17.1 61.7 l B. Disbursements U 1. Disbursements per DRS pipeline 20.0 33.0 29.0 21.0 12.0 5.0 0.0 - 2. Adjustments to DRS pipeline (if any) 0.0 0.0 0.0 0.0 0.0 0.0 0.0 1 3. Plus disbursements on newLTdebt, ofwhich 34.5 49.1 46.8 41.7 107.2 115.7 476.0 4. Disbursements for debt reduction 0.0 0.0 0.0 0.0 0.0 0.0 0.0 5. Subtotal LTdisbursements 54.5 82.1 75.8 62.7 119.2 120.7 476.0 6. Plus net ST capital 0.0 0.0 0.0 0.0 0.0 0.0 0.0 7. Plus IBF purchases 20.0 42.0 0.0 41.0 0.0 0.0 0.0 8. Total disbursements 74.5 124.1 75.8 103.7 119.2 120.7 476.0 C. Principal repayments 1. Principal due per DRS pipeline 0.0 7.0 7.0 7.0 7.0 7.0 10.0 2. Adjustments to DRS pipeline (if any) 0.0 0.0 8.0 0.0 0.0 0.0 0.0 3. Less principal saved through debt reduction 0.0 0.0 0.0 0.0 0.0 0.0 0.0 4. Plus principal on arrears/restructuring/DDSR 0.0 0.0 0.0 0.0 0.0 0.0 0.0 5. Plus principal on new LT debt 0.0 1.6 3.9 5.3 6.1 3.7 14.1 6.SubtotalLlrepaymentsdue(scheduledbasis) 0.0 8.6 18.9 12.3 13.1 10.7 24.1 (continued)  Projected Arrears, Rescheduling, and Reductions in Debt and Debt Service (continued) Annex 14 (Supplementary annex to be used for countries requiring debt workouts) Page 2 of 2 (USS millions at current prices) Intermedia,e Case Projection Estimate Projection 1994 1995 1996 1997 1998 1999 2004 7. Plus IMF repurchases 0.0 0.0 0.0 0.0 6.2 16.6 10.4 8. Subtotal repayments due (scheduled basis) 0.0 8.6 18.9 12.3 19.3 27.3 34.5 9. Adjustments to scheduled principal repayments 0.0 0.0 0.0 0.0 0.0 0.0 0.0 10. a. Principal not paid 0.0 0.0 0.0 0.0 0.0 0.0 0.0 11. Arrears accumulation 0.0 0.0 0.0 0.0 0.0 0.0 0.0 12. Principal rescheduled 0.0 0.0 0.0 0.0 0.0 0.0 0.0 13. Principal forgiven 0.0 0.0 0.0 0.0 0.0 0.0 0.0 14. b. Arrearsreduction/prepayments 0.0 0.0 0.0 0.0 0.0 0.0 0.0 15.Total principal repayments made (C8-C9) (cash basis) 0.0 8.6 18.9 12.3 19.3 27.3 34.5 D. Debt outstanding (end of period) I. Long-teem DOD dperDRSpipeline ,of which 1774.0 1800.0 1822.0 1836.0 1842.0 1839.0 1801.0 2. Existinggprincipalarrears 1574.0 1574.0 1574.0 1574.0 1574.0 1574.0 1574.0 3. Adjustments to DRS pipeline (if any) 0.0 0.0 0.0 0.0 0.0 0.0 0.0 4. Less reduction from forgivenesslDDSR 0.0 0.0 0.0 0.0 0.0 0.0 0.0 5. Plus consolidation from restructuring/DDSR 0.0 0.0 0.0 0.0 0.0 0.0 0.0 6. Plus new principal arrears (+increase/-reduction) 0.0 0.0 0.0 0.0 0.0 0.0 0.0 1 7. Plus newLT debt 34.5 82.1 124.9 161.3 262.5 374.5 1947.0 U, 8. Plus ST debt, of which 140.0 140.0 140.0 140.0 140.0 140.0 140.0 Oo 9. Interest arrears not yet capitalized 110.0 110.0 110.0 110.0 110.0 110.0 110.0 I 10. Plus use of lMF credit 30.0 72.0 114.0 135.0 128.8 112.2 2.1 11. Exchange rate impacts on DOD 0.0 0.0 0.0 0.0 0.0 0.0 0.0 12. Total DOD, of which 1978.5 2094.1 2200.9 2272.3 2373.3 2465.7 3890.1 13. Total arrears (interest + principal) 1684.0 1684.0 1684.0 1684.0 1684.0 1684.0 1684.0 Memorandum item: Adjustment due to debt write-offs 0.0 0.0 0.0 0.0 0.0 0.0 0.0 a. "DRS" denotes "Debt Reporting System." b. "DRS" denotes "Debt Reporting System." c. "DDSR" denotes "debt and debt service reduction." d. "LT" denotes "long-term," "ST" denotes "short-term."       -,_, V ,, > j 1 VD :dAJ~, T CF t 4 1 C t C, 1-11 N S, S' 7" "-:), N Ct t-rt L