Cambodia

Key development challenges

Cambodia became a lower middle-income country in 2015, with ambitions to reach upper middle-income status by 2030. Its roughly $29.5 billion GDP (2022) accounts for 0.8% of the regional GDP of Southeast Asia. With a population of more than 16.7 million, Cambodia’s GDP per capita is $1760, the second-lowest in the region, after Myanmar.

Cambodia has seen impressive poverty reduction and some of the fastest economic growth in the world since the formal end of civil conflict in 1991. Nonetheless, the country still faces significant development challenges. Governance remains a primary barrier to growth and development.

During 2015–22, almost 15,000 projects were implemented by 63 development partners in Cambodia, totalling more than $17.7 billion in funding.

Overview of development finance trends

Official development finance (ODF) disbursements — including grants, loans, and other forms of assistance — to Cambodia almost doubled between 2015 and 2021, with the country moving from sixth- to fifth-largest recipient of ODF in the region. This was followed by a decline in flows between 2021 and 2022, driven by a fall in total development flows from China of more than $1 billion. ODF disbursed to Cambodia averaged $2.2 billion per year, accounting for 7.1% of regional ODF, despite the recent fall.

ODF has fluctuated relative to the country’s economy, rising from 7.9% of GDP in 2015 to 11.3% in 2021 in response to the Covid-19 pandemic, and then falling back to 7.7% in 2022. China has been the largest contributor to this recent fluctuation.

Commitments exceeded disbursements in every year except 2021 when disbursements surpassed commitments by $1.1 billion. This was primarily due to the significant increase in commitments in 2020, which were implemented in 2021, including major infrastructure projects from China such as the $1.1 billion Phnom Penh International Airport and $880 million new Siem Reap International Airport. Four out of Cambodia’s top five bilateral partners — China, Japan, France, and the United States — spent more than they committed in 2021. Overall, 74% of projects committed during the 2015–22 period resulted in disbursements, above the regional average of 64%.

Main development partners

China, Japan, and the Asian Development Bank (ADB) were Cambodia’s primary development partners. China disbursed an average of $776 million per year, which was more than 2.5 times the amount disbursed by Japan and more than triple the amount by the ADB, the next two largest partners. A second group of development partners consisted of France, the United States, South Korea, and the European Union, with average annual spending of around $120 million. These seven partners collectively contributed 79% of the total development financing to Cambodia in the period.

Chinese development spending in Cambodia was mainly focused in the transport and storage sector, as well as health, funded through a mix of grants and non-concessional loans. China was the largest development partner in Cambodia from 2015 to 2021, however lost that position to the ADB in 2022. China’s development financing to Cambodia almost doubled from 2015 to 2021, from $711 million to more than $1.48 billion, but fell to $386 million in 2022. Projects were mostly financed by the China Development Bank and Export–Import Bank of China, and implemented by a mix of Chinese companies, with the China Road and Bridge Corporation being the largest implementing partner, accounting for almost 13% of total Chinese ODF over 2015–22.

Japan’s development support stayed relatively constant in the pre-pandemic period but ramped up over 2020–22, with spending now almost four times higher than in 2015. Before the pandemic, the transport and storage sector received the most Japanese support, particularly for road and bridge projects. In January 2021, Japan provided Cambodia with its most substantial single disbursement through a $231 million concessional loan, the Covid-19 Crisis Response Emergency Support Loan.

The ADB’s total development spending fluctuated significantly through 2015–22, with development flows driven by concessional loans rather than grants. Concessional loans accounted for 92% of the ADB’s financing to Cambodia in this period. The ADB focused on the sectors of government and civil society, transport and storage, agriculture, and forestry and fishing. The transport and storage sector received the most funding to 2022, primarily focused on road improvement. The Flood Damage Emergency Reconstruction Project was the largest single project disbursement, excluding the Covid-19 support loan. The government and civil society sector received the second-highest amount, skewed by a single large concessional loan during the pandemic, the Covid-19 Active Response and Expenditure Support Program.

Overall, around 82% of development support provided to Cambodia was concessional, higher than the regional average due to Cambodia’s lower middle-income status, making it eligible for concessional financing.

The central government of Cambodia was the major implementing partner of ODF in the country, followed by the China Road and Bridge Corporation, Shanghai Construction Group, the Shanghai Baoye Group, Electricite du Cambodge, and Angkor International Airport Investment.

Sectors

Cambodia diverges from regional trends in terms of sector distribution of ODF. The transport and storage, health and agriculture, forestry and fishing, water and sanitation, and education sectors received a higher share of Cambodia’s ODF compared to the regional average, while the energy, government and civil society, and industry, mining and construction sectors received a smaller share.

Within the transport and storage sector, roads accounted for 78% of disbursements, while air transport accounted for 17%. The two largest projects in the transport and storage sector were China’s $1.1 billion Phnom Penh International Airport and $880 million new Siem Reap International Airport.

In the health sector, the two largest projects were related to public health campaigns to combat HIV and tuberculosis, both run by the Global Fund to Fight AIDS, Tuberculosis and Malaria, which together accounted for more than 18% of total health ODF flows.

Disbursements made in the agriculture, forestry and fishing sector were driven by water resource development, irrigation, and dam development projects, with China being a major source of funding. Water resource development projects accounted for more than 55% of ODF in the sector, with the largest project, the Water Resource Development of Stung Raksa, funded by China, worth more than $100 million.

Climate

While climate financing grew throughout 2015–22, it remained a small part of overall ODF. Development finance with a “principal” focus on climate has been falling since 2019. The largest project was the construction and expansion of the Bakheng Water Treatment Plant, undertaken between 2019 and 2021 by the French Development Agency. This project cost more than $200 million and accounted for more than 18% of total “principal” climate finance provided to Cambodia between 2015 and 2022.

The remaining climate development finance was invested in other energy, water resource-related, and transport and storage projects, with a particular focus on electricity grid and road improvement projects. Seventy per cent of projects were funded through concessional loans.

Gender

Gender equality finance to Cambodia has grown steadily over time, largely driven by an increase in disbursements with a “significant” focus on gender equality rather than projects with a “principal” focus on gender equality. The biggest provider of gender equality finance was the ADB, spending $1.4 billion or 29% of its ODF on Cambodia. “Principal” projects constituted a very small proportion of spending, indicating a preference on the part of development partners for integrating gender objectives into more general projects rather than implementing standalone gender-related projects. The largest gender equality disbursement was for the ADB’s Covid-19 Active Response and Expenditure Support Program in 2020.

Cambodia as an ODF provider

Phnom Penh has contributed to the ASEAN Co­ordinating Centre for Humanitarian Assistance on Disaster Management via small annual amounts provided between 2015 and 2022. It has also made timely donations in response to specific events, such as more than $100,000 to Laos following floods in 2018. It also provided $3 million and 500,000 doses of Covid-19 vaccine to Laos in 2021.