38002 Volume 4, Number 11 November 2006 BusinessEnvironmentScorecardRanksProvincesandCities T he results of a study comparing the tober 26, 2006 in a seminar for 200 repre- ness Environment Scorecard (PBES), is a business environments of Cambodia's sentatives from government, private en- joint initiative of the International Finance ten most economically active provinces terprise, donor agencies and the media. Corporation's Mekong Private Sector De- and municipalities were announced on Oc- Thissurvey,the2006ProvincialBusi- See BUSINESS: on page 2 World Bank Country Manager Nisha Agrawal, second from left, and IFC-MPDF General Manager Adam Sack, third from left, at the seminar on the Business Environment Scorecard in Phnom Penh. Right: H.E. Suy Sem opens the launch. Poverty Both Cause and Consequence of Child Labor C hild labor is a key obstacle to achieving universal primary education and other Millennium Devel- opment Goals in Cambodia. It harms the welfare of individual children, and it slows broader na- tional poverty reduction and development efforts. A recent report on child labor in Cambodia was devel- oped under the aegis of the Understanding Children's Work project, a research co-operation initiative of the International Labor Organization, UNICEF and the World Bank. The World Bank Newsletter had the opportunity to interview Mr Cristobal Ridao-Cano, Economist, on the report's findings. Q: You have been researching child la- bor in Cambodia. Would you mind tell- ing us about your findings? Young people at the A: The report shows the magnitude of launching of childlaborinCambodia.Childworkisvery the widespread even though it has declined Understanding recently. The report shows that the work- Children's ing children spend a significant amount of Work project their time working and their contribution in Phnom to household income is very important. It Penh. also shows that work has a large impact on schooling and health of children. For ex- ample, in terms of schooling, it increases the school entry age and leads to dropout See POVERTY page 4 2 The World Bank Newsletter November 2006 Business Environment ... continued from page 1 "This, says Dorothy Berry, "is velopment Facility (IFC-MPDF) and The wherecomplex,costlyandtimecon- Asia Foundation, with funding from the suming regulations take their toll on Australian Agency for International De- the businesses that must comply velopment--AusAID. with them." According to the 2006 PBES, which is As examples of successful re- based on interviews with 500 business form, Dorothy Berry cited the cities leaders in 10 provinces, the eastern bor- of La Paz in Bolivia, and Quezon in der provinces of Kampong Cham and the Philippines. "In La Paz, after just Svay Rieng have the best business envi- one year of simplifying business ronment. These are followed in descend- registration with IFC assistance, the ing order by Kampong Chhnang, time to get an operating license be- Kampot, Kandal, Banteay Meanchey and came 13 times faster. As a result of Battambang. Those lowest ranked were this and other improvements, the the capital, Phnom Penh, Siem Reap, and number of registered businesses Sihanoukville. rose by an astonishing 20%. In The seminar stressed that no province Quezon City, much faster times for excels in all areas. Even top-ranked obtaining business licenses and Kampong Cham scored poorly on indices permits means that the number of related to unofficial charges, pro-activity permits issued rose by almost 70%. of authorities, and resolution of disputes. Quezon City businesses also re- H.E. Lisa Filipetto, Australian Ambassador, Priority areas for improvement in all ten ported more satisfaction with mu- closing the seminar on the Provincial Business provinces were costs of starting a busi- nicipal services and less corruption. Environment Scorecard result. ness, property rights, transparency (spe- The municipality gained too, with rev- proving the ability of provincial authori- cifically access to information on regula- enues rising by almost 40%.' ties to supply the conditions to satisfy that tions),participationinpolicymaking,infor- Roderick Brazier, Country Represen- demand." mal charges, and crime prevention. tative of The Asia Foundation, stressed Several development agencies have H.E. Suy Sem, Minister of Industry, the important role the private sector, and already indicated interest in assisting pro- Mines and Energy, thanked IFC-MPDF especially small and medium enterprises, vincial authorities to improve economic and The Asia Foundation for conducting play in reducing poverty. "Across Asia governance in order to meet private sector thePBESthisyearandcommittingtocon- sometimes as many as 99% of non-farm demand for a better business environment duct this for at least two more years. "This workers are employed by SMEs," he said. and through this improve economic is very valuable assistance," he said. "An "Helping the small business sector to growth and increase incomes for annual survey that ranks provinces on grow more effectively, reduces poverty Cambodia's poorest people. the business-friendliness of their policies, by creating jobs for poor Cambodians. For more information contact: regulations and services will encourage Conversely, obsolete or unclear regula- Ann Bishop local officials to be more responsive to tions, cumbersome administrative proce- Communication Advisor the needs of entrepreneurs. This will lead dures, or bureaucratic red tape and cor- Email: bishop1@ifc.org to a better business environment, greater ruption, stifle the growth of small busi- investment and ultimately to job creation nesses and prolong poverty. and a reduction in poverty." "IFC-MPDF andTheAsia Foundation MekongPrivateSectorDevel- Dorothy Berry, IFC's Vice President hope that the PBES results will encourage opment Facility (IFC-MPDF) for Human Resources and Administra- the public sector to improve policies by tion, congratulated the Ministry of Indus- adopting good practices from high-scor- IFC-MPDF is a multi-donor funded try, Mines and Energy, and the Ministry ing provinces. We also hope that busi- initiative set up by the International Fi- of Commerce for their endorsement of the nessownersandbusinessassociationswill nanceCorporationinVietnam,Cambodia, survey. "Research worldwide shows that use the data contained in these findings and Lao PDR, to reduce poverty through for business environment reform to suc- toencourageofficialstoimprovetheirper- sustainable private sector development. ceed, it must be implemented effectively formance. In our work on similar surveys TheFacilityworksthroughsixinterrelated at the sub-national level," she said. "If in Indonesia, the Philippines andVietnam, programs that seek to improve the busi- communication between national and lo- we found that publicity about the surveys ness environment; develop the financial cal authorities is weak and local authori- encouraged a large and influential audi- sector; improve managerial capacity; and ties lack the resources to implement re- ence to pay attention to business envi- increase sustainable business practices forms, these reforms will not succeed." ronment issues for the first time." in three sectors that are central to eco- Recognizing this, IFC and other de- Her Excellency Lisa Filipetto,Austra- nomic growth and poverty reduction ­ velopment agencies, including The Asia lian Ambassador to Cambodia stated, "It tourism, agribusiness, and garments. IFC- Foundation, have been surveying busi- is our hope that the PBES scores will en- MPDF's donors are the Asian Develop- ness environments in developing coun- hance the dynamic for change at the local ment Bank, Australia, Canada, Finland, tries and helping authorities to simplify level, for both the public and private sec- IFC, Ireland, Japan, New Zealand, the regulations at the provincial or municipal tors, by strengthening the demand for an Netherlands, Norway, Sweden, Switzer- level. improved business environment and im- land and the United Kingdom. November 2006 The World Bank Newsletter 3 AStitch in Time: Better Management, Better Business A report released in a Phnom Penh seminar on October 26 shows that train- ing in management skills can significantly improve garment supervisors' practices and factory performance in Cambodia's leading industry. The report, A Stitch in Time, presents evaluation results from a pilot supervisory skills training program conducted jointly by the International Finance Corporation's Mekong Private Sector Development Fa- cility (IFC-MPDF) and clothing retail gi- antGAPInc.Thisfour-dayprogram,which was conducted 36 times between January 2005andMarch2006,trained650supervi- sors who manage nearly 20,000 workers in seven factories producing for Gap. DorothyBerry,IFC'sVicePresidentfor Dorothy Berry, IFC's Vice President for Human Resources and Administration, at Human Resources and Administration, the seminar releasing the report AStitch in Time. The report says management who was visiting from Washington DC, training can improve supervisors' practices and factory performance, below. stated that managerial skills are an often overlooked necessity. "When companies The supervisory skills training program are small, with less than 20 employees, was adapted from a successful training managerial skills are important. But when scheme conducted in GAP factories in In- companies want to grow and achieve their donesia and India. "We chose IFC-MPDF full potential, both locally and internation- as our partner because of its extensive ex- ally, management skills are crucial. They perience in developing affordable and lo- can make the difference between success cally tailored resources for management and failure." training in Cambodia, Lao PDR and Viet Summing up results of the evaluation Nam," said Vannchhai Leng, Gap Inc. which surveyed 1,800 people (supervisors, Project Manager, Global Partnerships for human resources managers, factory man- Social Responsibility. agers and workers), Ms Berry stated Based on the success of the pilot pro- "When you think about training, don't gram,IFC-MPDF,GapandtheInternational think of it as an expense ­ think of it as a Labor Organization's labor monitoring and necessary investment. The Supervisory remediation program, Better Factories The Asia Foundation Training Program results show a number Cambodia, now plan to extend the pilot in- of improvements that contribute to greater dustry-wide. According to Conor Boyle, The Asia Foundation is a non-profit, productivity. For example, labor relations TrainingManagerforBetterFactoriesCam- non-governmental organization commit- improved with a 12 percent reduction in bodia, they also plan to customize the tedtothedevelopmentofapeaceful,pros- employee warnings and an 8.2 percent fall course. "It's important to develop a version perous,just,andopenAsia-Pacificregion. in absenteeism. Production quality im- of the course for senior managers. We are The Foundation supports programs in proved as well, with a 38.9 percent reduc- keenlyawarethatwithoutbuy-infromthem, Asia that help improve governance and tion in in-line rejections and a 44.4 percent no training program can achieve its in- law, economic reform and development, reduction in shipment rejections." tendedimpact.Allofthiswillrequireanex- women'sempowerment,andinternational H.E. Prak Chantha, Secretary of State pansion of the existing locally-based train- relations. Drawing on 50 years of experi- for the Ministry of Labor and Vocational ers' network and the cooperation of other ence inAsia, the Foundation collaborates Training, emphasized the important role socially responsible buyers." with private and public partners to sup- that garment factories play in Cambodia's An industry-wide training strategy is port leadership and institutional devel- economy. "In the first half of 2006, the in- also being developed by IFC-MPDF and opment, exchanges, and policy research. dustry earned Cambodia two billion dol- ILO in collaboration with employers, With a network of 18 offices through- lars, represented more than 80 percent of unions, buyers, the government, and non- outAsia, an office in Washington, D.C., manufactured exports and employed over governmental organizations. This is ex- and its headquarters in San Francisco, 300,000people. pected to result in a range of training pro- the Foundation addresses these issues "The Cambodian garment industry is grams and other initiatives that will raise on both a country and regional level. In the driving force behind this country's re- the level of skills across the industry. 2004, the Foundation provided more cent impressive economic growth," H.E. For more information contact: than $72 million in program support and Prak Chantha also stressed the importance Ann Bishop distributed almost 800,000 books and of good labor practices which have helped Communication Advisor educational materials valued at $28 mil- the industry grow in the face of strong Email: bishop1@ifc.org lion throughout Asia. regional competition. (www. asiafoundation.org) November 2006 The World Bank Newsletter 4 Poverty Both Cause and Consequence... continued from page 1 important factor behind at the end of primary school. Finally, the children's engagement in reporttriestocomeupwithapolicyframe- work, and that eventually worktoreducechildwork,andsomepriori- leads to their dropping out ties for the government to pursue. of school. Q: How important are these findings? Q: As you say, in Cambodia, as in many poor countries, A: I think these findings set up a baseline most parents need their chil- for what the problem is and draw atten- dren to work to get income tion to the fact that child work has a sig- for the family. What solu- nificant negative impact on education and tions do you suggest? health, limiting prospects in terms of eco- nomic growth and poverty reduction. The A: Since the main cause of next step is to think about ways in which child labor is poverty, it is not World Bank Economist Cristobal Ridao-Cano. different sectors can get together to de- that the parents are bad with their children, isalreadysupportingsomeefforts.Govern- signapolicyframeworkwithspecificpoli- but that they are responding to their envi- mentisprovidingschoolsubsidiesforpoor cies to try to address the problem of chil- ronment, in this case the lack of resources. people in secondary education. But then dren working in Cambodia. Youneedtothinkaboutwaysinwhichyou there are the children who are working and can compensate parents for their children already out of school, for whom the schol- Q: So what is the most critical factor that not to work. The report shows types of arship would not be appropriate. Interna- causes children to be involved in child program that have produced promising re- tional evidence shows that it is difficult to labor? sults,particularlyinLatinAmericaandmore bring them back. So we have to think of recently in Cambodia. These are the so- ways that you could allow them to re-enter A: The report shows clearly that poverty called conditional cash-transfer programs: the school system or at least to acquire ba- is the cause of child labor. Many people a school subsidy targeted to poor children sicskillsthatallowthemtobecomeemploy- think of child labor in terms of prostitu- that compensates their parents and family able.Andwhatthereportemphasizesisthe tion, trafficking, and the like. But most for their children not working and attend- need for the so-called second-chance edu- children who work are engaged in agricul- ing school. cationprograms--literacy,vocationaltrain- ture and work with their families. That ing, and life-skills--tailored to the diverse doesn't sound very harmful, but we have Q: How can the World Bank and other needs of out-of-school children. So there is shown in the report the effects it has on donors bring the findings of the report a need to move the dialogue forward schooling and health down the road. The into policy debates for intervention in throughdifferenttechnicalworkinggroups fact is that children are needed for the Cambodia? to translate the report's findings into po- survival of their family: the family needs licesandimplementthosepolicies. to resort to the work of children to sustain A: The Ministry of Education, Youth and the family. So poverty is the single most Sports, in partnership with several donors, Q: What do you see as the next steps to help children and reduce child labor in Cambodia? A: In the past, all the focus has been on addressing the worst forms of child labor such as street children, prostitution, and the like.Although this is still a priority, the worst forms of labor only account for a small proportion of the child-labor force. As I have said, most working kids are en- gagedinagriculturewiththeirfamilies.The emphasis needs to be on conditional cash- transfer programs to enable these kids to stay in school. And for those who have already left school, we need to be thinking of second-chance education programs. For more information contact: Mr. Beng Simeth Human Development Officer Most child laborers are children working on their family's farm. Email: sbeng@worldbank.org TheWorldBank Office Cambodia 113, Norodom Blvd. Phnom Penh,Tel: (855 23) 217 301 Fax (855 23) 210 504 Khmerwebsite:www.worldbank.org.khandEnglishwebsite:www.worldbank.org/kh