Since the 1990s, UNCDF has been working with the Royal Government of Cambodia and partners to rebuild and develop the country after years of conflict. This continued and systematic support has contributed to the phenomenal growth and development of an inclusive Cambodia that finds itself on the cusp of being recognized as an emerging young Asian tiger economy.
UNCDF has primarily supported this achievement through a mix of high-level policy advisory, testing of development concepts in the areas of local governance, financial inclusion and public financial management (PFM), investing in sustainable solutions that promote inclusivity and taking to scale the success stories of our partnerships. These efforts have contributed to the establishment a well-managed public finance system, a rapidly maturing financial sector and the emergence of an inclusive digital economy that is being powered through innovative public and private sector financing solutions.
Cambodia was one of the most economically impacted countries in ASEAN due to the pandemic, witnessing an economic contraction of 3.1 percent in 2020. With a narrow economy, and reliance on global value chains in a limited number of sectors, the country suffered from a dual shock of supply and demand side contractions. However, the Royal Government is implementing a rapid recovery policy that is ushering in new sovereign financial tools inclusive of bonds and guarantees that provide the foundations for a quick recovery and the diversification of the economy.
Under these post-pandemic conditions, UNCDF, through its new corporate strategic framework, is providing advisory and technical assistance to undertake a more strategic role in Cambodia’s transformation and recovery efforts to support the creation of a modern inclusive financial and digital sector and a responsive public sector finance management system.
Integrated National Financing Framework for SDGs
In partnership with United Nations Development Programme (UNDP) and the Joint SDG Fund, UNCDF is providing policy, regulatory and strategic advisory support to enable the catalysing potential of blended finance to achieve Cambodia’s Sustainable Development Goals (SDGs). UNCDF has partnered with UNDP to deliver the Integrated National Financing Framework (INFF) in Cambodia. The joint initiative with the Ministry of Economy and Finance provides a forward-thinking policy framework that responds to the need to grow fiscal space and diversify the economy through the combination of public and non-public finance, official development assistance (ODA), and capital markets whilst leaving no one behind. UNCDF, with its partners, is bringing its capacity as a thought leader to formulate with the government the INFF financing strategy that provides new pathways to finance SDG commitments.
The strategy assimilates UNCDF diagnostics and evidence-informed advisory to enhance the development finance architecture. This includes capital market participation, the internal government managed and maintained sovereign credit rating systems, the development of a national policy framework for debt finance instruments and their issuance and the development of the regulatory framework and testing of transboundary financial instruments for the deepening of the investment and financial ecosystems. UNCDF is also working with the Stock Exchange of Cambodia and the Securities and Exchange Regulator of Cambodia to assure safeguards are in place as the government embarks on a sustainable course of debt financing.
Women’s economic empowerment
UNCDF mobilizes and de-risks capital for private sector innovations that focus on solutions to alleviate the constraints faced by women-led micro, small and medium sized enterprises (MSMEs) in Cambodia. UNCDF has supported the establishment and operationalization of a US$200 million capitalized national credit guarantee facility that combines our traditional support to Cambodian financial service providers. In the latter context, UNCDF uses grants, complemented by technical assistance, to help unlock public and private sector finance for solutions that foster digitalization and access to finance for women-led MSMEs. These solutions include e-commerce platforms, record-keeping applications, digital and financial literacy tools, digital business support solutions, digital loan platforms and digital agribusiness models in response to the COVID-19 pandemic.
UNCDF also provided technical support to the government to develop the National Financial Inclusion Strategy, as well as ensured capacity-building of the National Bank of Cambodia on data analysis for financial inclusion, especially for women.
Credit Guarantee Corporation of Cambodia
UNCDF advisory and deployed financial instruments have been integral to the inauguration, development, and operationalization of the Credit Guarantee Corporation of Cambodia (CGCC).
Working in partnership with the Ministry of Economy and Finance and Asian Development Bank (ADB), UNCDF fostered South-South dialogue with Bangladesh, Hong Kong and Thailand to complete the policy framework and legislation for the inauguration of the CGCC and further financed its operationalization.
The CGCC provides a policy instrument for pandemic response and sustainable recovery by unlocking domestic finance to maintain productive capacity in the garment, tourism and construction sectors. As a recovery tool to diversify the economy, it supports business start-ups for youth, women and MSMEs expanding into new sectors, such as higher-value agriculture, light manufacturing, electronics and robotics.
Cambodia Investment Facility
The Cambodia Investment Facility provides institutional capacity-building to the Ministry of Economy and Finance on:
- the development of the public-private partnerships (PPP) law,
- the origination of national and sub-national PPP investments opportunities for the formulation of PPP project bank,
- capitalization of a fund to finance the development and advisory for these projects.
UNCDF is also devising a waste to energy PPP in partnership with the subnational administrations of Poi Pet and Siem Reap to address plastic waste from tourism and industrial cross-border waste.
Local Climate Adaptive Living Facility
Through the Local Climate Adaptive Living Facility (LoCAL), UNCDF supported the accreditation of the National Committee for Sub-National Democratic Development Secretariat to become the world’s first Green Climate Fund (GCF) national implementing entity dealing with local governments.
LoCAL has delivered 538 adaptation measures financed using performance-based climate resilience grants (PBCRG), of which 450 are small-scale infrastructure projects, mainly entailing:
- the construction of elevated roads and bridges,
- renovation and construction of rural roads,
- restoration and protection of irrigation canals,
- rehabilitation and construction of water gates, sewage systems and community ponds.
With a $1.5 million grant from the Republic of Korea’s Ministry of the Environment, LoCAL initiated a pilot project called Water Solutions to Provide Safety and Resilience for Residential Water Systems (LGCC-WRP) to address the issue of water scarcity in rural areas. The project aims to support the functional re-assignment of rural water supply services to local governments. The pilot project is expected to prove the concept for the potential scale-up of similar initiatives countrywide. It will also inform local officials on how PBCRGs can be used to leverage non-public sector finance for local adaptation projects with the potential to generate revenues.
In a demonstration of national support for LoCAL, H.E. Say Samal, Minister of Environment of Cambodia is one of ten ministers from LoCAL participating countries that has agreed to serve as a LoCAL Ministerial Ambassador, advocating for increased climate finance on the global stage using the LoCAL mechanism.