Page 1 PROGRAM INFORMATION DOCUMENT (PID) CONCEPT STAGE Report No.: AB3805 Operation Name Cambodia PRGO II Region EAST ASIA AND PACIFIC Sector Other domestic and international trade (33%); General public administration sector (33%); General agriculture, fishing and forestry sector (12%); Health (11%); General education sector (11%) Project ID P075267 Borrower(s) KINGDOM OF CAMBODIA Implementing Agency INISTRY OF FINANCE Date PID Prepared April 7, 2008 Estimated Date of Appraisal Authorization June 9, 2008 Estimated Date of Board Approval August 26, 2008 1. Key development issues and rationale for Bank involvement Key development issues: Cambodia has established a remarkable track record of economic growth over the last ten years (9.7 percent per annum since 1998). In 2007, real GDP grew by around 10 percent. This performance relies on four sources of growth: rapid garment exports, strong tourism receipts, continuing construction boom, and robust crop growth in agriculture. Growth is underpinned by an open trade regime (exports have increased by 23 percent per annum since 1998) and a favorable investment regime for Foreign Direct Investment (FDI, above 6 percent of GDP in recent years). Economic growth has raised living standards and reduced poverty headcounts to 35 percent in 2004. It is difficult to measure the fall in poverty in the country as a whole with precision given the lack of an all- Cambodia baseline in 1993/4 (when the survey was only able to cover around two-thirds of the rural population). Within the geographical sampling frame of the first survey, the headcount fell from 39 to 28 percent. Backward projection on the basis of this observed trend suggests that the national poverty rate fell by 10-15 percentage points over the last decade (from a projected 45-50 percent in 1993/4 to a measured 35 percent in 2004). Growth is expected to ease somewhat around 7 percent per annum over the next several years. The four growth pillars would continue to drive growth. Domestic conditions, with a rapid increase in consumption and a deepening of the financial sector, also appear conducive to rapid growth. Oil production – possibly commencing around 2011 – could further contribute to growth. Besides potential oil, Cambodia has a number of assets to sustain growth, including its culture heritage, land, forestry, and fisheries, a coast, and potential mineral deposits. International conditions also bode well for favorable economic prospects, with encouraging recent trends of FDI, and external assistance projected to remain stable over the short to medium term. The RGC places good governance at the center of its development strategy, the National Strategic Development Plan (NSDP). Poor governance is indeed the primary constraint on development in general, as well as the delivery of project-based aid and the World Bank Group’s program. Rationale for Bank Involvement: Page 2 The PRGO program is designed to support the implementation of the Country Assistance Strategy (CAS) objectives. The CAS, which covers the period FY05-08, complements the NSDP’s focus on strengthening governance and reducing poverty. It focuses on support to Private Sector Development (PSD), Public Financial Management (PFM), Land and Natural Resource Management (LNRM), and decentralization and deconcentration (D&D). As the first multi-donor budget-support operation, the PRGO program also promotes effective aid delivery, another CAS objective. 2. Proposed objective(s) The development objective of the series of PRGO is to support growth and poverty reduction through an improvement in the investment climate, higher agricultural productivity, and more effective service delivery. These objectives will be met through a number of channels, including the diversification of the export basket, increase in investment, better revenue collection and management, stronger PFM systems, and more effective land management. Progress in these areas will result from policy actions supported by the PRGO program and from expenditure policies enabled by the program. A related objective is to support the design and implementation of development policy operations, as an aid modality that puts the RGC in the driver seat, supports reforms, promotes a focus on results, and facilitates donor coordination. 3. Preliminary description The series of PRGO selectively focuses on the key reform areas of Private Sector Development (PSD), Public Financial Management (PFM), Civil Service Reform (CSR), and Land and Natural Resource Management (LNRM). These areas were identified jointly with the RGC and are the key pillars of the CAS. These areas have a strong focus on governance, have a cross-cutting impact across sectors, have sufficiently well-developed sectoral strategies, and have established an initial track record of achievements. Once they meet these criteria, other areas could be incorporated. 4. Environment Aspects While the issues are complex, on balance, the PRGO program is expected to have a positive impact on the environment. Using the Strategic Partnership Framework for Natural Resources Management, the program supports an overall improved framework which ensures that measures which support private land tenure security are balanced by measures to improve the management of state lands. On the one hand, the program promotes land titling toward an increase in agricultural productivity, as well as allocation of SLCs: this could have the adverse impact of tapping more on environmental resources. On the other hand, the program strongly supports a sustainable framework of environment management (e.g. the PA Law; disclosure of ELCs; demarcation of forests; etc.). It is complemented by a series of projects to build the capacity to implement this framework, in particular to support the implementation of the PA Law and build the capacity for Environment Impact Assessments. Better land tenure can also contribute positively to the environment by enabling more responsible investments. Continued monitoring will be made to mitigate risks (including through the annual Environment Monitors). 5. Tentative financing Source: ($m.) BORROWER/RECIPIENT 0 Loan/Credit 15 Total 15 The PRGO is cofinanced by 4 DPs, working in partnership with a broader group of DPs. 6. Contact point Contact: St éphane Guimbert Page 3 Title: Senior Economist Tel: 855-23-217-324 Fax: 855-23-210-504 Email: sguimbert@worldbank.org Location: Phnom Penh, Cambodia (IBRD)