Cambodia: Poverty Assessment

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Cambodia Poverty Assessment

• Preliminary Findings
• October 13, 2005

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Outline of the presentation

• Facts
• Trends between 1993/94 and 2004
• State of poverty, 2004
• Analysis
• Pattern and composition of growth between 1993/94
  and 2004
• Reasons behind observed features of poverty, 2004
• Recommendations

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The Good News

• Headcount poverty fell between 1993-94 and 2004
• from 39 percent to 28 percent, in geographically
  comparable areas
• Or, a 1 percentage point reduction in headcount
  poverty per year
• Average real per capita consumption rose
• from 2,228 riel / day to 2,392 riel / day
  (93-PNH prices) a 32 increase
• Socio-economic indicators improved
• for all and especially among the poor
• In terms of ownership of consumer durables
  housing quality schooling enrollment rates

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The Not-so-Good News

• Per capita household consumption grew slowest in
  rural areas and among the poorest
• by a cumulative 24 in rural areas versus 36 in
  other urban regions and 26 in Phnom Penh
• by a cumulative 8 for the poorest quintile
  versus the national average of 32
• Poverty severity, or the depth or shortfall below
  the poverty line, remained largely unchanged
• from 3.1 percent to 3.3 percent
• Inequality of consumption rose quite
  significantly
• Gini coefficient rose from 0.35 to 0.40

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Results not unexpected,given where growth took
place

• The engines of growth were primarily urban
  manufacturing, construction, and tourism
• Concentrated in Siem Reap and Phnom Penh
• While the poor are concentrated in rural Cambodia
• Urban-rural linkages were limited, primarily
  remittances
• 13 of all households received domestic
  remittances
• Average receipt constituted 8-10 of total
  household consumption

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and where it did not

• Low growth in agriculture
• 3.4 p.a. during 1993-94 and 2004
• neighboring countries averaged gt 5 p.a. for a
  decade in their early stages of development,
  e.g., Thailand and Malaysia during 70s China
  during 80s and beyond Laos during 90s.
• Low level of agricultural productivity
• crop yields labor productivity and land
  productivity have been and still are among the
  lowest in Asia
• Consequently, slow poverty (headcount) reduction
  rate in rural areas
• at 22 in rural areas c.f. 60 in Phnom Penh and
  44 in other urban regions (cumulative over 10
  years)
• Low rural income and high rural poverty headcount

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Cambodia needs an additional engine

• An engine that is more pro-poor
• The agriculture sector
• Extensive literature of many countries concludes
  that growth in agriculture has the greatest
  poverty reduction impacts, compared to growth in
  secondary and tertiary sectors
• Almost the entire countrys poor are in rural
  areas
• And an engine that is more resilient
• garment industry offshore-outlet nature ?
  susceptible to high exit-and-entry rates
• tourism peace, security and health in the
  country and the region are requisites

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The state of poverty in 2004

• National poverty incidence, covering all areas in
  the country, in 2004 was 35
• Best informed projection of the national poverty
  incidence, covering all areas in the country, in
  1993 was 47
• Rural poor made up 91 percent of all poor
• Rural Tonle Sap and Rural Mountain regions had
  the highest poverty incidence and worst poverty
  severity.

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Main characteristics of poor in 2004

• high dependency ratio
• lack of education
• remoteness
• greater dependence on common property resources
  (forestry fishery)
• less secure ownership of land
• less access to irrigation

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Preview of analyses (key results)

• Secure land title increases productivity
• Irrigation enhances productivity
• Smaller farm sizes are more productive
• The poor rely heavily on common property
  resources
• Human capital (education) enhances productivity
• ODA (resource) allocation is not pro-poor (and
  not particularly rural-focused

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Why is land titling important?

• Having a secure land title
• Increases rental value by 57 and sale value by
  38
• Increases productivity by 70
• Increases consumption by 24
• Reason creates incentives to invest in land
• more willing to undertake higher-risks
  higher-payoff investments (e.g., diversify crops
  invest in perennial trees)

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Why irrigation is important

• Having access to irrigation during the dry season
• Increases land rental value by 26
• Increases land value by 26
• Having access to irrigation during the wet season
• Increases land rental value by 13
• Increases land value by 16
• Irrigated land
• Increases productivity (yields) by 10

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Smaller farm is more productive, in various
measures
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The poor rely heavily on common property
resources
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Diversity of sources of income
US1 4,016 Riel
2,203
2,784
3,684
7,703
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Why is human capital of this generation of adults
important?

• Education of household heads
• increases profitability of crop production
• increases crop yields
• increases household consumption

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ODA allocation is not prioritized by poverty
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ODA is not particularly rural-focused
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Summary (potential) recommendations

• Provide secure land titles
• Provide irrigation (need further costs-benefit
  analyses)
• Ensure access to common property resources
• Replenish human capital of adults, in particular,
  adult literacy programs
• Provide more rural infrastructure (need further
  costs-benefit analyses)
• Improve targeting of resources (ODA)

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End of presentation
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Salient characteristics of the poor
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Trends in poverty incidence
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Is our best-informed estimate of 1993 poverty
incidence reasonable?
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Non-monetary dimension of poverty selected
socio-economic indicators of the poorest quintile