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 $27 billion GDP accounts for 0.8% of the regional GDP of Southeast Asia. With a population of more than 16.5 million, Cambodia’s GDP per capita is $4,784, the second-lowest in the region.

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. Its Human Development Index score placed it 146th in the world out of 191 countries, and 17.8% of the population live below the national poverty line. Corruption and governance remain significant barriers to growth and development, with Cambodia ranking 150th out of 180 in Transparency International’s Corruption Perceptions Index.

During 2015–21, more than 13,000 projects were implemented by 65 development partners in Cambodia, to a total of more than $13 billion or $1.8 billion per year.

Overview of development finance trends

In volume terms, official development finance (ODF) disbursements — including grants, loans, and other forms of assistance — to Cambodia have almost doubled between 2015–21, with the country moving from sixth to fourth largest recipient of ODF in the region. This increase can be explained by China and Japan both more than doubling their loans to the country over this period. ODF disbursed to Cambodia averaged US $1.8 billion per year, accounting for 6.6% of regional ODF in the period.

Yearly grant financing provided by international development partners grew consistently over the period, albeit at a much slower rate than loans, reaching over US $750 million in 2021.

In volume terms, 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 the sixth- to the fourth-largest recipient of ODF in the region. This increase can be explained by both China and Japan more than doubling their loans to the country during this period. ODF disbursed to Cambodia averaged $1.8 billion per year, accounting for 6.6% of regional ODF.

Yearly grant financing provided by international development partners grew consistently during these seven years, albeit at a much slower rate than loans, reaching more than $750 million in 2021.

Over the period analysed, ODF increased relative to the country’s economy, rising from 7.6% of GDP in 2015 to 10.7% in 2021. This growth can be explained by a large boost during 2020–21 in response to the Covid-19 pandemic, with China as the largest contributor to this increase.

In Cambodia, commitments exceeded disbursements in 2015–20. However, in 2021 disbursements surpassed commitments by $832 million. 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 Airport Cam055 and $880 million New Siem Reap International Airport Cam015. Four out of Cambodia’s top five bilateral partners — China, Japan, France, and the United States — spent more than they committed in 2021. Overall, the ratio of spending to commitments was 70% during 2015–21, 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 around $600 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 development partners in Cambodia. A second group of development partners consisted of France, the United States, South Korea, and the EU institutions, with average annual spending around $110 million. These seven partners collectively contributed 77% of the total development financing received by the country in the period.

Chinese development spending in Cambodia was mainly focused in the transport and storage sector, as well as in the health sector, which were funded through a mix of grants and non-concessional loans. China was the largest development partner in Cambodia in 2015 and retained that position in 2021. China’s development financing almost doubled during the period, from $579 million to more than $1.23 billion. Projects were mostly financed by the China Development Bank (CDB) and Export–Import Bank of China, and implemented by a mix of Chinese companies, with the China Road and Bridge Corporation (CRBC) being the largest implementing partner, accounting for almost 16% of total Chinese ODF over 2015–21. The Shanghai Baoye Group, a subsidiary of the CDB, has invested $440 million on a new Phnom Penh Airport Cam055. The project was supposed to be finished by the end of 2022, but the collaboration agreement was terminated, resulting in a financing gap of $1.1 billion. Meanwhile, the Cambodian government and Angkor International Airport Investment commenced construction of the New Siem Reap International Airport Project Cam015 in March 2020. The airport is scheduled to be operational by October 2023 and is designed to accommodate up to 7 million passengers annually.

Cambodia received development finance from Japan in the form of grants and concessional loans (ODA), primarily financed by the Japan International Cooperation Agency (JICA) and the Japanese Ministry of Foreign Affairs. Japan’s development support stayed relatively constant in the pre-pandemic period with a spike during 2020 and a peak of more than $470 million in 2021, almost four times higher than in 2015. Before the pandemic, the transport and storage sector received the most significant amount of support, particularly for road and bridge projects, including the National Road No. 5 Improvement Projects, which consisted of multiple road sections (JICACP-P17, JICACP-P19, and JICACP-P13). 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 2020003074 - JICACP-C2.

The Asian Development Bank’s (ADB’s) total development spending fluctuated significantly through 2015–21, with development flows driven by concessional loans rather than grants. Concessional loans accounted for 97% 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 government and civil society sector received the largest total amount of development flows to 2021. However, this was skewed by a single large concessional loan during the pandemic, the Covid-19 Active Response and Expenditure Support Program XM-DAC-46004-54195-001-LN3951. Setting this particular loan aside, transport and storage received the most financing, primarily focused on road improvement. The Flood Damage Emergency Reconstruction Project XM-DAC-46004-46009-003-LN3125 was the largest single project disbursement excluding the Covid-19 support loan. With this project, the ADB helped Cambodia restore key provincial infrastructure that was damaged by the 2011 flood. The project aimed to rehabilitate national, provincial, and rural roads, including bridges and culverts.

Overall, around 80% 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.

In terms of implementing partners, the central government of Cambodia was the major recipient of ODF from the international community, followed by the China Road and Bridge Corporation, Electricite du Cambodge, the Shanghai Baoye Group, and the Cambodian government 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, and forestry and fishing 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, the road transport sub-sector accounted for 74% of disbursements, while air transport accounted for 21%. The two largest projects in the transport and storage sector were China’s $1.1 billion Phnom Penh Airport Cam055 and $880 million New Siem Reap International Airport Cam015.

In the health sector, the two largest projects were related to public health campaigns to combat HIV and tuberculosis (47045-KHM-C-MEF, 47045-KHM-H-NCHADS), both run by the Global Fund to Fight AIDS, Tuberculosis and Malaria, which combined 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 resources development projects accounted for more than 55% of ODF in the sector, with the largest project, the Prek Stung Keo Water Resources Development Project Cam065-1, funded by China, worth over $200 million.

Cambodia saw ODF inflows between 2015 and 2021 shift towards a greater emphasis on infrastructure, rather than human development. Unlike the rest of the region, the onset of Covid-19 actually saw an increase in infrastructure funding, mainly due to the construction of the two airport projects. ODF for human development only increased modestly, despite the pandemic.

Climate

The Southeast Asia Aid Map uses an adapted version of the Organisation for Economic Co-operation and Development’s (OECD’s) climate marking system to sort projects into three distinct categories: principal, where climate change mitigation or adaptation is explicitly stated as fundamental to the project; significant, where climate change mitigation or adaptation is explicitly stated but not fundamental; and not climate-related, where climate change is not targeted in any significant way.

The level of climate finance, while growing throughout 2015–21, remained a small part of overall ODF. Principal climate development finance rose but from a low base. The largest project was the construction and expansion of the Bakheng Water Treatment Plant, undertaken between 2019 and 2021 by the French Development Agency (2019219700 - CKH124401, 2018211300 - CKH117601). This project cost $200 million and accounted for over 80% of total “principal” climate finance provided to Cambodia between 2015 and 2021.

The remaining climate development finance in the country was invested in other water resource-related projects, energy, and transport and storage, with a particular focus on electricity grid and road improvement projects. Seventy per cent of projects were funded through concessional loans rather than grants or semi-concessional loans. The largest principal climate project partner by far was France, accounting for 40% of such projects in the country. France is the only major bilateral development partner to Cambodia that allocated almost 50% of its development funding to climate-related projects.

Cambodia as an ODF provider

Phnom Penh has contributed to the ASEAN Coordinating Centre for Humanitarian Assistance on Disaster Management, with small annual amounts provided between 2015 and 2021. The country has also made timely donations in response to specific events, such as more than $100,000 to Laos following floods in 2018 Inter-SEA019. It also provided $3 million and 500,000 doses of Covid-19 vaccine to Laos in 2021 Inter-SEA026.