UN Says Wealth Disparity Grew With Economy

Inequalities play out along urban-rural divide, UN Development Fund report finds

Economic growth in Cambodia over the last decade has been ach­ieved without clear policies and has resulted in marked and rising in­equality between the rich and the poor, the UN said in a report to be re­leased today.

The report from the UN Capital Development Fund, which provides investment capital to Least Developed Countries, underscored the fact that high economic growth of about 9 percent a year for almost a decade has been mainly driven by foreign investment, tourism, op­en markets and urbanization.

“They worked well at an aggregate level, as expected, but were ac­companied by widening disparities in income, a polarized social situation between the rich and poor, and between urban and rural areas,” the report said.

Part of the reason for the growing in­equality in the country, the re­port said, was a lack of coordination be­tween centralized and local au­thorities and a “lack of strategic di­rection” for development in specific areas of the country.

Decentralizing responsibilities to local authorities and promoting public-private partnerships would be ways to ensure that Cambodia’s development is more evenly spread, the report said.

“The government has a key role to play and difficult, strategic decisions to make regarding the future of different parts of Cambodia,” the report said. “In the absence of a clear strategy, these decisions are likely to be taken casually and without transparency.”

The International Monetary Fund said in September that government spending during the economic downturn had been too focused on military and civil service wages and not enough on priority sectors in health and education.

“It’s pretty normal when a country is growing fast you have some degree of inequality,” said Nicola Crosta, chief technical adviser in Cambodia for the UN Capital Development Fund. “Our analysis shows that there is a lot of unexploited potential. So you can do something about it.”

Mr Crosta said that much of the economic potential in Cambodia was locked up in areas of the country that are poor but blessed with abundant resources such as fisheries and fertile soil.

If you push for rural development “you will have a more equal model of growth, and you will have less territorial disparities,” he said.

But actually bringing about more development in rural areas will be possible only if human resources among government officials in the provinces are improved.

“As we all know, a plan doesn’t mean the things will happen. So what will be critical is the level of support,” Mr Crosta said. “It’s a question of making sure that they [local officials] get the technical support, and the skills and the training that they need.”

The government’s National Strategic Development Plan, which was approved by the National Assembly in May, includes plans to decentralize government authorities.

The government’s decentralization policy aims to “strengthen vibrant local economic foundations so that every citizen has equal opportunity to participate in local development,” according to the plan.

It also lays out a strategy on rural development, which aims to broaden access to health care, education and irrigation, among other services.

While admitting that the annual expenditures of urban dwellers currently average about $1,500 per year compared to just $400 for those living in the countryside, CPP lawmaker Cheam Yeap said the government was committed to improving the level of development in rural areas.

“The government keeps improving infrastructure by constructing more roads, hospitals, schools, power plants and toilets,” he said.

Chea Peng Chheang, secretary of state at the Ministry of Finance, said in response to the report, “Our duty is to better the livelihood of those living in the countryside.”

“We are spending hundreds of millions of dollars to improve irrigation systems and roads,” he added.

Ron Jones, technical advisor for the Fisheries Action Coalition Team, which works to strengthen local fisheries, said that while decentralization was key to improving the lot of rural inhabitants, its actual implementation faces an array of hurdles.

“Especially in developing countries like Cambodia where locals are controlled by informal relationships,” Mr Jones said. “Those are going to be altered in a way the government will never understand when implementing a decentralized system.”

“The nuances of local life and people in Cambodia have been left out of the equation,” he added.

The UN report said that while about 80 percent of Cambodia’s 14 million inhabitants live in rural zones, “the role and importance” of the agricultural sector have been lagging behind the overall economic growth trends of the country as a whole.

Whereas in 1990 agriculture accounted for half of total GDP, today it accounts for just 27 percent. Meanwhile industry has gone from accounting for 12 percent of GDP to more than twice that amount, a sign that wealth generation is more highly concentrated in urbanized areas.

The report also said that out of 3.7 million people estimated to be living below the poverty threshold, 92 percent live in the countryside.

Investment in health services is also extremely imbalanced, with the mortality rate for children under five about twice as high nationally as it is in Phnom Penh.

Only 10 percent of the rural population owns a title to their land, according to the report, while economic growth between 1998 and 2008 averaged 12 percent a year in Phnom Penh, 11 percent a year in coastal areas and just 7 percent a year in the inland provinces.

“There is cause for concern that in conjunction with weak governance, increasing inequality in society may lead to the poor being increasingly shut out of opportunities to benefit from overall economic progress,” the report said.

 

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