Government and World Bank Sign Grant Agreements for Three Development Projects Totaling US$70 million

Phnom Penh, August 14, 2007 —

The Royal Government of Cambodia and the World Bank today signed grant agreements for three projects totaling US$70 million that have been approved recently by the World Bank Board of Executive Directors. The three projects are: the Greater Mekong Sub-region (GMS) Power Trade Project, the Poverty Reduction and Growth Operation (PRGO), and Additional Financing for the Rural Investment and Local Governance Project (RILGP-AF). These projects will support Cambodia’s reform efforts and aim to provide goods and services that will help to accelerate growth and reduce poverty in Cambodia.

The GMS Power Trade Project, a grant of US$18.5 million to the Kingdom of Cambodia, will help enhance regional power trade within the Greater Mekong Sub-Region and bring more affordable grid-based electricity to Cambodia by financing the construction of cross-border transmission lines to neighboring Lao PDR and Vietnam. Along with transmission links under construction with Vietnam through the IDA-funded Rural Electrification Project, the new funding will further expand power trade, enabling Cambodia to import electricity and bring down the cost to between 10-15 cents per kWh for consumers. The project is expected to be completed by August 2011.

The Poverty Reduction and Growth Operation, a grant of US$15 million to the Kingdom of Cambodia, is the first of three operations that focus on support to the “good governance” reform program laid out in the Government’s National Strategic Development Plan (NSDP), 2006-2010. The PRGO will provide budgetary support for the implementation of the NSDP. The NSDP outlines the development strategy and priorities that will help Cambodia achieve its Millennium Development Goals. In supporting this, the PRGO focuses on three core areas: private sector development, public financial management, and natural resources management. Discussions with other development partners on co-financing the PRGO are at an advanced stage—the European Commission and the Japanese Bank for International Cooperation (JBIC) are also considering financial support of the operation, as are the UK’s Department for International Development and the Canadian International Development Agency.

The Additional Financing for RILGP, a grant of US$36.25 million to the Kingdom of Cambodia, aims to expand the project support from the current 15 to 23 provinces and cities, provide continuing financing for an additional three years from 2007 – 2009 to the intergovernmental fiscal transfer, the Commune/Sangkat Fund, and facilitate an accelerated increase in the amount of the overall intergovernmental fiscal transfer and related commune allocations. This provides additional financing for the Rural Investment and Local Governance Project (RILGP), as a supplement to the original RILGP which provided US$22 million during 2003 - 2007.

Ian Porter, World Bank Country Director, said “these projects support both the pillars of the World Bank’s Country Assistance Strategy for Cambodia for FY05-08: helping build stronger institutions of governance that will lead to higher growth and faster poverty reduction and also providing financial and technical support for delivering goods and services that will help Cambodia attain its Millennium Development Goals. We are pleased that with the delivery of these projects, the implementation of our CAS is firmly back on track.”

H.E. Senior Minister, Keat Chhon, Ministry of Economy and Finance said: "The good economic performance and poverty reduction of the past decade show that Cambodia is on the right development path. The progress would not have happened without the reforms initiated by the Royal Government of Cambodia and supported by all our development partners. However, the road ahead is still long. The Poverty Reduction and Growth Operation will play a crucial role in supporting and driving further structural reform in key sectors, while the RILGP-AF and the GMS Power Trade Program will support crucial investments at the national and sub-national levels."

Nisha Agrawal, World Bank Country Manager for Cambodia added “we are pleased that this signing ceremony follows so soon after the visit of our new President Mr Zoellick, who visited Cambodia last week. Mr Zoellick in his visit emphasized the need for Cambodia to gain momentum on reforms and establish a track record for reforms. He also stressed the need for providing low cost energy to reduce the costs of doing business for the private sector as well as to provide benefits to the citizens of Cambodia, especially in rural areas. And he stressed the need to undertake governance reforms and to have a more transparent and participatory pattern of development that would ensure that the benefits of development could be shared more widely. The three projects that we are signing today show the World Bank’s support in these three areas and signal our overall support for growth and poverty reduction in Cambodia.”
For more information about the World Bank program in Cambodia, visit: http://www.worldbank.org/kh