Balance between macro-economic and social & environmental policies

The Royal Government's strategic motto is "Poverty reduction through high economic growth over the long term by ensuring environmental sustainability and social equity"[1] In practice, rapid growth has often come at the cost of environmental degradation, social disruption and rising inequality. In the particular case of Cambodia, an overemphasis on high economic growth may be problematic as long as there are not adequate social regulations (e.g. minimum wage legislation, social security) and environmental regulations (e.g., pollution thresholds) in the country’s legal and institutional framework.

Social and environmental regulations are not adequately covered, and indicators are lacking.  Focus is on high economic growth plus improved service provision.

Economic growth is emphasized as a prerequisite to poverty reduction.  However, the position of human development and poverty reduction within the overall economic policy framework determines the type of growth and the equity priorities pursued.  For instance, processes such as the Poverty Reduction Strategy Paper (PRSP) or the Integrated Framework for Trade-Related Technical Assistance to Less-Developed Countries (IF) put a premium on aggregate growth targets and emphasize specific “profitable” economic sectors.  NGOs reiterate that development strategies require comprehensive participatory poverty impact analysis in order to identify the policy instruments that will most effectively target the poor and ensure development with equity. 

Section 4.2.2 mentions “ex-ante poverty and social impact analyses” of trade policies, but this is not included in the Action Plan Matrix.  Chapter 6 also mentions poverty and social impact analysis as a monitoring tool.

A focus on growth with equity would also include maximizing the poverty reduction impact of fiscal, monetary and trade policies, the incentives for Foreign Direct Investment (FDI) and the regulatory environment.  For instance, a Public Expenditure Policy should allocate the budget to target basic social services and focus on closing regional and/or gender gaps in education, health, and other key human development indicators.  The macroeconomic policy framework should place poverty reduction at the center of the development targets.  At the same time, at the center of poverty reduction strategies are the people and stakeholders for which they are intended, and who must participate in all phases of this process. 

MTEF shows increasing expenditures on health, education and agriculture.  Poverty considerations in FDI strategy are not clear. Process of participation requires further development.