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Aid Coordination in Cambodia CAMBODIA CONSULTATIVE GROUP MEETING PARIS, JULY 1-2, 1997 Public Disclosure Authorized Tableof Content PAGE SUMMARY REPORTOF THE PROCEEDINGS.................................................... 1 I LIST OF ANNEXES Annex 1: List of Participants................................................... 14 OpeningSession Annex 2: Agenda.23 Annex 3: Opening Remarksby Mr. Javad Khalilzadeh-Shirazi,World Bank .. 24 by H.E. Keat Chhon, Sr. Minister in charge Public Disclosure Authorized Annex 4: Opening Remarks of Rehabilitationand Development,Minister of Economy and Finance, Cambodia.27 Macro-EconomicIssues Annex 5: Statement by H.E. Keat Chhon, Cambodia.30 Annex 6: Statement by Mr. Hubert Neiss, IMF.33 Annex 7: Statementby Mr. Kyle Peters, WorldBank .38 Annex 8: Statement by the Delegatefor Japan.41 Annex 9: Statementby the Delegatefor Australia.47 Annex 10: Statementby the Delegate for the United States........................................... 54 Annex 11: Statementby the Delegate for ADB.................................................... 57 Annex 12: Statementby the Delegatefor the EuropeanCommission ............................ 59 Annex 13: Statement by the Delegate for the United NationsAgencies ........................ 61 Public Disclosure Authorized Annex 14: Statement by the Delegatefor Norway.................................................... 64 Annex 14A: Statement by the Delegatefor Denmark . ...................................66 Annex 15: Statement by the Delegatefor Sweden.................................................... 68 Annex 16: Statement by the Delegatefor Germany.................................................... 71 Annex 17: Statement by the Delegatefor the United Kingdom..................................... 73 Annex 18: Statementby Delegatefor the NGO Community......................................... 76 Public InvestmentProgram Annex 19: Statement by H.E. Keat Chhon,Cambodia ................................................... 77 Annex 20: Statementby Mr. RajatNag, ADB. ....................................................80 Annex 21: Statement by Mr. Guy Darlan, World Bank.................................................. 84 Annex 22: Statementby Mr. Kip Thompson,IFC .................................................... 3 5 Annex 23: Statement by the Delegatefor Australia.................................................... 39 Annex 24: Statementby the Delegate for Japan.................................................... 95 Annex 25: Statement by the Delegatefor Germany.................................................... 98 Public Disclosure Authorized mi I V'' Aid Coordination Annex 26: Statement by H.E. Keat Chhon,Cambodia ................................................... 99 Annex 27: Statementby Mr. Paul Matthews,UNDP ..................................................... 102 Annex 28: Statementby Mr. Natarajan,World Bank..................................................... 110 Annex 29: Statementby the Delegatefor Japan......................................................... 112 Financing Requirements and Indications of Assistance Annex 30: Statementby H.E. Keat Chhon,Cambodia ................................................... 116 Annex 31: Statement by Mr. Kyle Peters, World Bank.................................................. 118 Annex 32: Statementby the Delegatefor Japan......................................................... 120 Annex 33: Statementby the Delegatefor Australia....................................................... 125 Annex 34: Statement by the Delegatefor the United States........................................... 130 Annex 35: Statementby the Delegatefor ADB.......................................................... 131 Annex 36: Statementby the Delegate for Germany....................................................... 1 32 Annex 37: Statement by the Delegatefor Denmark....................................................... 134 Annex 38: Statementby the Delegatefor Belgium......................................................... 136 Annex 39: Statementby the Delegatefor Sweden......................................................... 138 Annex 40: Statementby the Delegatefor IFC......................................................... 140 Closing Session Annex 41: Closing Statementby Mr. Javad Khalilzadeh-Shirazi,World Bank............. 142 Annex 42: Press Release......................................................... 146 Annex 43: Letter from the Chairmanto the PrimeMinisters ....................................... 148 .I__f . _. .I CAMBODIA CONSULTATIVE GROUP MEETING Paris, July 1-2, 1997 Summary Report of the Proceedings 1. The Second ConsultativeGroup meetingfor Cambodiawas held on July 1-2, 1997 in Paris under the chairmanshipof the World Bank. The Cambodiandelegation was led by His ExcellencyKeat Chhon, SeniorMinister in charge of Rehabilitationand Development,and Minister of Economyand Finance. The meetingwas chairedby Mr. Javad Khalilzadeh-Shirazi,Regional Manager, East Asia and Pacific Region. 2. The meeting was attendedby delegationsfrom Australia,Belgium, Cambodia, Canada, China, Denmark,France, Germany,Japan, the Netherlands,Norway, the Republic of Korea, the Russian Federation,Sweden, the United Kingdom,and the United States. The internationalorganizations participating in the meeting includedthe Asian DevelopmentBank, the EuropeanUnion, the InternationalFinance Corporation,the InternationalMonetary Fund, the United NationsDevelopment Prograrn, and the World Bank. Representativesfrom the ASEAN (representedby Malaysia),NGOs, and the Organizationfor Economic Cooperationand Developmentparticipated as observers. The list of participants is shown in Annex 1. 3. This report summarizesthe proceedingsof the meetingbased on the Agendathat is shown in Annex 2. The main statementsdelivered at the meeting are in Annexes 3 to 41 and the Press Releasein Annex 42. The documentationprepared by the Government of Cambodia for the meeting included the Socio-economic Development Requirements and Proposals, the 1996/97 Development Cooperation Report, and briefs on "special programs." The World Bank prepared an economicreport (Cambodia:Progress in Recovery and Reform) for discussion at the meeting. Opening Statements 4. In his opening statement(Annex 3), Mr. Khalilzadeh-Shiraziwelcomed all the delegates to the meeting, extendinga specialgreeting to H.E. Keat Chhon and H.E. Ung Huot, Cambodia's Minister of ForeignAffairs. He also expressedhis appreciationto the Governmentsof France and Japan for the roles they played in the organizationof this meeting. UT, _ I* -I -2 - 5. 'Mr. Khalilzadeh-Shirazithen briefly reviewedthe developmentsin the Cambodianeconomy since the last CG Meetingheld in Tokyo on July 11-12,1996. Cambodia,he said, has passed through anotheryear of intense challenge. Events on the political front had seized the world's attentionand compoundedthe difficultiesthat Cambodiafaces in meeting its developmentobjectives. Whilethe primary focus of the CG Meeting will be on issues related to economicdevelopment, Mr. Khalilzadeh-Shirazi suggestedthat participantsbear in mind the complexpolitical issues facing the CambodianGovernment. 6. Under difficult conditions,there has been progress,he said. However, along with the accomplishments,there have been disappointments.On the positive side, the Governmenthad maintainedmacroeconomic stability and fostered economicgrowth. The economy grew by almost 7 percentin 1996, the inflationrate was containedwithin single digits, and the current account deficit of 16 percentof GDP was financedwithout jeopardizing Cambodia's future creditworthiness.On the fiscal side, an ambitious 1997 Budget and the Law on Taxationwere enacted into law. In the forestrysector, the Governmentformed the NationalCommittee on Forest Policy Reform,improved controls on illegal logging,and signedthree of the four contractswith internationalfirms that will help carry out activities recommendedin the ForestryPolicy Assessment. 7. On the negative side, Mr. Khalilzadeh-Shirazimentioned several issues for which progress had fallen short of the expectationsgenerated at the Tokyo meeting:(i) the long- awaited implementingregulations of the InvestmentLaw were not put in place; (ii) there has been slow implementationof steps to improve fiscal management,as revenueshave again been below target; (iii) managementof Cambodia's forestresources has not yet exerted the necessaryimpact on the ground;and (iv) there has been a lack of concrete progress on both civil service reform and militarydemobilization. He added that a fundamentalissue that underlinesthese disappointmentsis that much more needs to be done to improvetransparency and accountabilityin fiscal and economicmanagement. 8. With this background,the Chairmanset the followingobjectives for the meeting: (a) to hear the Government's views on Cambodia'scurrent situation,its development prospects and financingrequirements; (b) to share donor experienceson assistance programs for Cambodia;and (c) to hear the internationalcommunity's plans for financial support to Cambodiafor the coming year. He then turned over the floor to MinisterKeat Chhon. 9. In his opening remarks (Annex 4), Minister Keat Chhon highlightedthe fact that this was the first "regular" CG Meeting,and thankedthe Bank for organizingthis event and agreeingto do so in the future. He then mentionedthe difficult politicalsituation that the Governmentwas facing and the violentincidents that had occurred in recent months. The Minister asked the internationalcommunity
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