Sri Lanka Project Number: 38421 September 2012

Proposed Loan for Subprogram 3 Kingdom of Cambodia: Promoting Economic Diversification Program

Report and Recommendation of the President to the Board of Directors

CURRENCY EQUIVALENTS (as of 5 September 2012)

Currency unit – riel/s (KR) KR1.00 = $0.00025

$1.00 = KR3,979.17

ABBREVIATIONS

ADB – Asian Development Bank ASEAN – Association of Southeast Asian Nations ASYCUDA – automated system for customs data CPS – country partnership strategy DTA – double tax agreement ECOSOCC – Economic, Social and Cultural Council GDCE GDP ILCC

– – –

General Department of Customs and Excise gross domestic product Industrial Laboratory Center of Cambodia

ISC – Institute of Standards of Cambodia

ISO – International Organization for Standardization

MAFF MEF

– –

Ministry of Agriculture, Forestry, and Fisheries Ministry of Economy and Finance

MIME – Ministry of Industry, Mines, and Energy MOC – Ministry of Commerce MOE – Ministry of Environment MOH – Ministry of Health MOT – Ministry of Tourism NSDP OCM

– –

national strategic development plan Office of the Council of Ministers

ORIA – office of regulatory impact assessment PED – promoting economic diversification PEFA PPPF RIA

– – –

public expenditure financial accountability postprogram partnership framework regulatory impact assessment

SDR – special drawing right SMEs – small and medium-sized enterprises SPS – sanitary and phytosanitary standards SWAp TDF TPR

– – –

sector-wide approach Technology Development Fund trade policy review

WTO – World Trade Organization

Vice-President S. Groff, Operations 2 Director General K. Senga, Southeast Asia Department (SERD) Director S. Hattori, Public Management, Financial Sector, and Trade Division, SERD Team leader R. Hattari, Public Management Economist (Fiscal Management and Social

Security), SERD Team members K. Bird, Principal Economist, SERD K. Hattel, Financial Sector Specialist (Rural and Microfinance), SERD

U. Hoque, Social Development Specialist (Gender and Development), SERD

C. Kim, Programs Officer, Cambodia Resident Mission, SERD B. Konysbayev, Senior Counsel, Office of the General Counsel

R. Ramilla-Siquijor, Operations Assistant, SERD Peer reviewer J. Menon, Lead Economist, Office of Regional Economic Integration

In preparing any country program or strategy, financing any project, or by making any designation of or reference to a particular territory or geographic area in this document, the Asian Development Bank does not intend to make any judgments as to the legal or other status of any territory or area.

CONTENTS Page

PROGRAM AT A GLANCE

I. THE PROPOSAL 1

II. THE PROGRAM 1

A. Rationale 1 B. Impact and Outcome 3 C. Outputs 3 D. Development Financing and Program Costs 7 E. Implementation Arrangements 8

III. DUE DILIGENCE 8

A. Governance 8 B. Poverty and Social 9 C. Safeguards 9 D. Risks and Mitigating Measures 10

IV. ASSURANCES 10

V. RECOMMENDATION 10

APPENDIXES

1. Design and Monitoring Framework 11 2. List of Linked Documents 14 3. Development Policy Letter 15 4. Policy Matrix 20

PROGRAM AT A GLANCE

1. Project Name: Promoting Economic Diversification (Subprogram 3) 2. Project Number: 38421-072

3. Country: Cambodia 4. Department/Division: Southeast Asia Department/Public Management, Financial Sector, and Trade Division

5. Sector Classification:

Sectors Primary Subsectors

Agriculture and natural resources Agriculture and rural sector development

Public sector management √ Economic and public affairs management

6. Thematic Classification:

Themes Primary Subthemes

Economic growth Promoting economic efficiency and enabling business environment

Private sector development √ Policy reforms

Regional cooperation and integration

Trade and investments

Capacity development Institutional development

6a. Climate Change Impact No Climate Change Indicator available.

6b. Gender Mainstreaming

Gender equity theme (GEN)

Effective gender mainstreaming (EGM) √

Some gender elements (SGE)

No gender elements (NGE)

7. Targeting Classification:

General Intervention

Targeted Intervention

Geographic dimensions of inclusive

growth

Millennium development

goals

Income poverty at household

level

√

8. Location Impact:

National High

9. Project Risk Categorization: Low

10. Safeguards Categorization:

Environment C

Involuntary resettlement C

Indigenous peoples C

11. ADB Financing:

Sovereign/Nonsovereign Modality Source Amount

($ million)

Sovereign Program loan Asian Development Fund 25.0

Total 25.0

12. Cofinancing: No Cofinancing available.

13. Counterpart Financing:

No Counterpart Financing available.

14. Aid Effectiveness:

Parallel project implementation unit No

Program-based approach Yes

I. THE PROPOSAL

1. I submit for your approval the following report and recommendation on a proposed loan to the Kingdom of Cambodia for subprogram 3 of the Promoting Economic Diversification Program.1

II. THE PROGRAM

A. Rationale

2. Cambodia has grown from a post-conflict country to a small open vibrant economy. The Rectangular Strategy; National Strategic Development Plan (NSDP), 2006–2010;2 and NSDP Plan Update, 2009–2013 are key government documents focusing on maintaining robust growth. The Rectangular Strategy provides a medium-term development strategy that focuses on better governance and institution building, including anticorruption measures and public administration reforms. The NSDP aims to operationalize the Rectangular Strategy. The government adopted several sector strategies to implement the strategy and plan, such as the trade sector-wide approach (SWAp), which underpins a diagnostic trade integration study. The trade SWAp aims to expand the private sector by improving foreign and domestic trade and developing efficient backward links in the economy.3

3. The policy priorities of the NSDP update intersect closely with Strategy 2020 and the country partnership strategy (CPS), 2011–2013 for Cambodia of the Asian Development Bank (ADB).4 The overarching objective of the CPS is poverty reduction in line with government priorities. The CPS aims to help reduce poverty and promote inclusive growth with an integrated approach to rural development, targeting the areas where most poor reside. With nearly 75% of the population engaged in agriculture, the government sees economic diversification and private sector development as two ways to help achieve inclusive growth, i.e., reach its poverty reduction goal of more than 1% per annum and accomplish the NSDP update policy thrusts.

4. The NSDP, the NSDP update, and the trade SWAp have helped Cambodia improve its competitiveness. According to the global competitive index produced by the World Economic Forum, Cambodia’s competitiveness rank improved from 109 in 2008 to 97 in 2012. However, the economic base of the economy remains narrow; in 2007, three subsectors—garments, construction, and tourist-related services—accounted for up to 42% of gross domestic product (GDP). Garments contributed 16% of GDP in 2007 and 15% in 2008. Its share of total exports has been more than 90% since 2003. During 2010–2011, garments accounted for 76% of the manufacturing sector. During the same period, while its percentage share in GDP, the contribution to export revenue decreased to 74% of GDP. The high economic dependence on garment exports makes the economy vulnerable to external shocks. Hence, a more diversified economy supported by vibrant private sector development is needed for Cambodia to sustain high economic growth, reduce economic volatility, and reduce poverty. This requires more difficult reforms to improve competitiveness throughout the supply chain. Value-chain studies identify constraints to export diversification as poor product quality, an inadequate sanitary and phytosanitary standards (SPS) policy framework, limited access to technology and business development services, underdeveloped links between the rural and modern sectors of the economy, and relatively costly logistics.

1 The design and monitoring framework is in Appendix 1.

2 Government of Cambodia. 2006. National Strategic Development Plan 2006–2010. Phnom Penh.

3 Government of Cambodia, Ministry of Commerce. 2007. Cambodia’s 2007 Trade Integration Strategy. Phnom

Penh. 4 ADB. 2008. Strategy 2020: The Long-Term Strategic Framework of the Asian Development Bank, 2008–2020.

Manila; and ADB. 2011. Country Partnership Strategy: Cambodia, 2011–2013. Manila.

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5. The Promoting Economic Diversification Program cluster approved by the ADB Board of Directors in December 2008 is designed to support the government priorities and promote economic diversification by (i) enhancing competition in domestic markets and lowering cost of regulation, (ii) strengthening investor confidence in the regulatory environment and promoting market-based innovation, and (iii) strengthening trade facilitation measures along the entire supply chain. 5 The program comprises three subprograms from 2008 to 2012. 6 Under subprogram 1, financed by ADB in 2008 (SDR13.419 million), the government implemented a series of investment and trade facilitation measures that laid the foundation for a more competitive and diversified economy in the longer term. The subprogram included a $2 million SPS capacity development project (footnote 4). Subprogram 2, which is financed by ADB (SDR6.565 million as a loan and $9 million as a grant), responded to policy challenges arising from the impact of the global financial crisis, such as the need for competition policy, regulatory efficiency, and innovation to promote private sector competitiveness. Similar to subprogram 1, subprogram 2 included a capacity development project for SPS and regulatory impact assessment (RIA).7

6. In implementing the program, ADB has closely coordinated with development partners, such as the European Commission, the International Finance Corporation, the United Nations Development Programme, the United Nations Industrial Development Organization, the United States Agency for International Development, the World Bank, and the World Trade Organization. This provides holistic support for private sector development in Cambodia (Appendix 3).

7. Subprogram 3 is the last subprogram of the program cluster. It is built on progress made under subprograms 1 and 2 on investment climate, trade policy, and trade facilitation. Subprogram 3 draws on best international practice for a comprehensive trade and investment program. Activities include (i) establishment of an office of regulatory impact assessment (ORIA) to be responsible for regulatory review and thus decrease the regulatory burden for the private sector, (ii) capacity development assistance to address constraints of SPS service providers for small and medium-sized enterprises (SMEs), (iii) implementation of a pilot SPS technology matching grants component that aims to address demand-side issues of SMEs, and (iv) assistance for Cambodia’s global and regional integration efforts via support for World Trade Organization’s trade policy review (TPR) on Cambodia and its participation in the Association of Southeast Asian Nations (ASEAN) regional trade agreements and ASEAN commitments to develop competition policy and law.

8. Subprogram 3 incorporates gender considerations in its policy reforms. This is in line with government recognition of the importance of women’s entrepreneurship as a growth engine for the economy. In 2011, Cambodia’s economic survey showed that 60% of 500,000 establishments in the country were owned and operated by women, of these, 180,000 were new establishments. Women owned nearly 40% of the new establishments. The government supports the role of women in catalyzing private sector development. The Ministry of Women’s Affairs has assisted the Ministry of Commerce (MOC) in setting up MOC’s gender mainstreaming action plan, which promotes women entrepreneurs.

5 The Development Policy Letter is in Appendix 3 and the Policy Matrix, listing the triggers and milestones defined for

this program and including the postprogram partnership framework, is in Appendix 4. 6 ADB. 2008. Report and Recommendation of the President to the Board of Directors: Proposed Program Cluster,

Loan for Subprogram 1, and Grant to the Kingdom of Cambodia for the Promoting Economic Diversification Program. Manila.

7 ADB. 2010. Report and Recommendation of the President to the Board of Directors: Proposed Loan and Grants for

Subprogram 2 to the Kingdom of Cambodia for the Promoting Economic Diversification Program. Manila.

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9. Subprogram 3 is one of the ADB programs in Cambodia aiming to improve private sector access to better quality SPS services and quality. ADB provides national assistance to SPS (through the Promoting Economic Diversification Program) and regional assistance through the Greater Mekong Strategy Trade Facilitation Program.8 Subprogram 3 focuses on the regulatory reform of SPS management in Cambodia, while the Greater Mekong Subregion Trade Facilitation Project builds on and strengthens SPS management capacity in Cambodia and the Lao People’s Democratic Republic to contribute to intraregional trade, export competitiveness, and health protection.

B. Impact and Outcome

10. The impact of the Promoting Economic Diversification Program is an expanded and diversified private sector. By the end of 2015, the program is expected to have increased investment and economic diversification through more robust competition in domestic markets, lowered regulatory compliance costs and better investor protection, increased exports and diversification of products through private sector access to better quality SPS services and technology, and reduced customs trade facilitation costs.

11. The outcome of the program will be an improved business environment where the private sector operates efficiently and effectively. This will be reflected in an improved competition policy framework and institutionalized government regulatory review systems that promote better appreciation of the costs and benefits of regulations and greater transparency, strengthen the SPS management system, increase government capacity to assess trade policy,

and address the backlog in World Trade Organization (WTO) compliance and legal notifications.

C. Outputs

12. The report and recommendation of the President for subprogram 2 identified 10 policy triggers for subprogram 3 (Appendix 4). In the process of assessing implementation progress, the government proposed a revision to a policy trigger on submission of trade remedy legislation to the national assembly. All 21 measures (10 triggers and 11 milestones) required for subprogram 3 were completed by the end of August 2012 (Appendix 4).9 The immediate and medium-term challenges are briefly outlined in the postprogram partnership framework (PPPF) in the program’s policy matrix (Appendix 4). The PPPF advocates for continued support for the development of the policy framework and institution building, identifies government priorities for reform, and emphasizes needed improvements for the policy coordination framework.

1. Regulatory Efficiency and Competition Policy

13. Subprogram 3 supports the government’s agenda to improve the regulatory environment for business. The objective is to promote greater competition in domestic markets and lower regulatory compliance costs faced by businesses through measures linked to subprogram 2 accomplishments. Such measures are reforms in institutionalizing good practices in regulation and RIAs, and public consultation for the draft competition law. The following measures toward achieving these objectives are complete.

14. Institutionalize regulatory impact assessments in government. The government established ORIA under the Economic, Social, and Cultural Council (ECOSOCC) of the Office

8 ADB. 2012. Report and Recommendation of the President to the Board of Directors: Proposed Loans, Grant, and

Technical Assistance Grant to the Kingdom of Cambodia and the Lao People’s Democratic Republic for the Trade Facilitation: Improved Sanitary and Phytosanitary Handling in Greater Mekong Subregion Trade Project. Manila.

9 Performance of the Promoting for Economic Diversification, Subprogram 3 Triggers (accessible from the list of

linked documents in Appendix 2).

4

of the Council of Ministers (OCM). This is the culmination of the conceptualization of ORIA in subprogram 2. The establishment of ORIA institutionalizes good policymaking and reduces the regulatory burden in Cambodia. The fully operationalized ORIA produced a manual, guidelines, and checklist on RIA. These products introduce policymakers to the importance of calculating the costs and benefits of a regulation, and the need to weigh alternative solutions to problems identified. Thus, the end result improves Cambodia’s business climate. In promoting RIA, ORIA established RIA pilot projects in four line ministries, i.e., the Ministry of Industry, Mines, and Energy (MIME), MOC, the Ministry of Tourism (MOT), and the Ministry of Environment.

15. Build awareness and capacity to undertake regulatory impact assessments. MIME and MOC have taken ownership of the RIA process. In MIME, the RIA unit is a permanent task force and, starting in 2011, all regulatory proposals in MIME’s General Department of Industry are subject to the RIA process. In MOC, the RIA process is applied to the regulatory processing of two main important laws: Competition Law and Trade Remedies. Both MIME and MOC have completed one preliminary impact assessment. The four pilot RIA units have completed their 2012–2013 work plans. The newly created ECOSOCC website (www.ecosocc.gov.kh) includes ORIA activities and preliminary impact assessments.

16. Increase female participation in regulatory efficiency. ORIA mainstreams gender in its activities and takes into account gender issues in regulatory analysis. As such, the recently developed manual for preliminary impact assessments includes a checklist for gender impact assessment, and analyses of the impact on women and equity, impact on women’s roles, and the participation of women in decision-making. RIA assessors first consult female entrepreneurs when assessing new regulations.

17. Promote competition in the domestic market. The government conducted a public consultation for the draft competition law. MOC, as the lead agency for drafting the law, shared the draft law with other relevant government stakeholders and with the private sector through a series of public consultations. This action supports the government’s commitment to have a competition policy by 2015—one of the main actions the government will accomplish in the Rectangular Strategy, phases 1 and 2. For the government, a competition policy is expected to improve the efficiency of the economy, thus benefitting consumers. It is also part of the government’s commitment to WTO and ASEAN. The ASEAN Economic Community Blueprint requires that all ASEAN countries introduce a competition policy by 2015.10

2. Investment Climate

18. Subprogram 3, as the last subprogram of the Promoting Economic Diversification Program, implements reforms that allow the government to improve the investment climate through the promotion of technology diffusion, increased access to finance, and gender mainstreaming. Measures accomplished by the government include (i) the General Department of Taxation at the Ministry of Economy and Finance (MEF) is giving priority to negotiating a double tax agreement (DTA) and has a DTA module, (ii) the General Department of Industry at MIME is starting to implement the capacity development plan for technology and innovation policy, and (iii) MEF is introducing a partial credit guarantee facility for a sector-specific industry.

19. Investor confidence and protection. The government, with ADB technical assistance, is finalizing a draft policy framework for the DTA, a draft DTA negotiation program that identifies the first country for negotiation, and a draft DTA module. The government sees the importance of DTA because it provides foreign investors with security and stability on the issue of taxation

10

ASEAN. 2003. ASEAN Economic Community Blueprint. Jakarta.

5

and relief from double taxation. Hence, it will have a positive impact on foreign investment in Cambodia.

20. Technology diffusion. The government is implementing the Technology Development Fund (TDF). The TDF is a pilot matching grants fund between ADB and the government that assists SMEs with a proven track record in food processing to upgrade their SPS-related product quality and management processes, thus enhancing their competitiveness in domestic and international markets. The matching grant would be up to 50% of an SME’s upgrading project cost to a maximum of $30,000. During the first round of the TDF, the government selected 10 food processing SMEs using a lottery scheme. The fund-matching disbursement was approximately $256,000, ranging from $15,000 to $30,000 per SME. Women own and manage seven of the 10 selected SMEs. This indicates an increase in female entrepreneurship and is in line with the findings of the 2011 economic survey. The government is currently in the process of selecting the next TDF recipients in the second round, which will draw from 25 food-processing SMEs.

21. Access to finance. MEF and the National Bank of Cambodia introduced a partial credit guarantee scheme to guarantee loans from commercial banks to companies and rice millers. In 2010, the government adopted a new rice policy based on an ambitious 5-year plan aimed at expanding the production and export of rice. However, lack of financing is constraining the government’s goal of expanding its production and export capacity and becoming a major export nation. To be able to export more milled rice, local rice millers need more financing to purchase large amounts of Cambodia’s paddy rice for processing domestically. The new credit guarantee scheme provides short-term loans to the rice millers. In the 2011 budget, the government allocated up to $25 million to the partial credit guarantee scheme. In addition, the World Bank is providing the government with another partial credit guarantee scheme with a broader scope (including working capital and investments for agribusiness in general) and longer loan maturities (medium- to long-term).11

22. Gender dimension. Selected private participants in the food processing industry, in conjunction with the Sanitary and Phytosanitary Standards Management Systems Project (footnote 5), set up an informal private sector consultative group that meets quarterly. The group promotes innovativeness and access to technology in the food processing industry. Women owners of food processing companies account for almost 40% of the group members. The group is an effective forum for exchanging information and provides inputs and comments to the government on SPS issues, particularly relating to food safety, tax, regulatory burden, the TDF, standards, and legal framework support.

3. Trade Policy and Facilitation

23. Subprogram 3 implements the government’s reform agenda on trade policy that started in subprogram 2. These reforms aim to lower the cost of doing business for the private sector and provide implementing measures to improve trade facilitation (customs and SPS) for enhanced competitiveness. The following measures are complete.

24. Trade policy reforms. Trade policy reforms continue with WTO publishing Cambodia’s first TPR. The government finalized the revised trade remedies legislation and accompanying implementing regulations. Subprogram 3 assisted the government in conducting and finalizing the TPR12 in November 2011. Cambodia is the first least-developed country to produce a TPR.

11

World Bank. 2010. Cambodia–Agribusiness Access to Finance Project. Washington, DC. 12

The TPR provides a review of Cambodia’s trade and investment policies and highlights the government’s commitment for continuing trade reform.

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For trade remedies, the government shortened the 2010 draft trade remedies legislation from 100 articles to 46 (footnote 7). The trade remedies working group13 believes that shorter draft legislation, comprising only the substantive part of the law and not the implementing articles, would gain wider support from relevant stakeholders.14 The working group also produced the implementing regulations. The policy trigger initially anticipated the draft law’s submission to the National Assembly. However, the consultation process on the proposed trade remedies legislation has been prolonged to ensure greater stakeholder support. Consistent with domestic law-making practice, the government now plans submission to the OCM by September 2012 for its endorsement and submission to Parliament in 2013.

25. Trade facilitation in customs reforms. The General Department of Customs and Excise (GDCE) rolled out the national automated system for customs data (ASYCUDA) in all major ports in Cambodia. This continues the process of introducing ASYCUDA to three main ports in subprogram 2; ASYCUDA now operates in Sihanoukville Port, Phnom Penh International Airport, Phnom Penh Port, and dry ports and customs border checkpoints (MSE-KPM, Poi Pet, So Nguon, Bavet, Tech Srun, Teng Lay, Trapaing Phlong, and Trapaing Sre), and covers both import and export processing. Progress has also been made in customs valuation transaction. As of 1 January 2011, the government terminated the use of price list methods for valuing certain sensitive items and high-risk goods, including used vehicles, other used items, and petroleum products. Instead, a complaint procedure and appeals process for these valuations is in place. GDCE implemented the WTO valuation agreement in parallel with the decentralization of customs valuation decision-making, and obtained significant early results. For example, 50% of dutiable goods were processed using the transaction value.

26. Capacity, enforcement, and awareness in food safety management systems. In subprogram 3, the government strengthened risk management on cross-border market surveillance activities for food safety. The Ministerial Regulation (Prakas 155) introduced a risk management unit in the Cambodia Import–Export Inspection and Fraud Repression Directorate General of MOC. The government also improved interministerial coordination on food safety between the Ministry of Agriculture, Forestry, and Fisheries (MAFF), the Ministry of Health (MOH), MOC, MEF, MIME, and MOT by issuing an interministerial prakas (IMP) in October 2010 on the implementation of food safety based on the farm-to-table approach (IMP 868). The regulation defines the roles and responsibilities for food safety within the supply chain among the six government ministries and/or agencies. On the implementation of food safety, the government issued food safety guidelines, which were to be a precursor to the food policy. The government also strengthened the delivery of SPS services to the private sector and community by improving the quality of services of the Institute of Standards of Cambodia (ISC) and the Industrial Laboratory Center of Cambodia (ILCC). Lastly, the government, with the assistance of the ADB grant (footnote 5), drafted a food policy.

27. Professionalization of the food safety management system. The government built the capacity of ILCC, ISC, MAFF, MOC, and MOH personnel through a series of programs financed under the program cluster. The government views the development of a pool of qualified and internationally registered auditors as critical to professionalize food safety management. This capacity building is complete. First, with the assistance of the ADB SPS project, 19 government food safety auditors (four are women) were trained as International

13

The trade remedies working group is an interministerial working group led by MOC and comprising the Council of Jurists, ECOSOCC, GDCE, MAFF, MIME, and the National Assembly.

14 The current legislative process to prepare a draft law in Cambodia requires the draft law to be reviewed first by the interministerial meeting before it is approved by the Council of Ministers for approval by the Prime Minister’s Office. A delicate balancing between maintaining the core of the draft law while accommodating the needs of the other stakeholders is crucial to gain support.

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Organization for Standardization (ISO) 22000 lead auditors.15 The result has been impressive: 11 auditors (3 are women) passed the ISO qualification examinations. Second, 33 staff of ILCC, ISC, and MIME (12 are women) are enrolled in intermediate and pre-intermediate technical English classes. The classes are a critical requirement for ISO accreditation. Third, the Cambodia Certification Department of ISC, which is responsible for the certification schemes, was also assessed by international accreditation bodies for compliance with ISO 17021 and ILCC for compliance with ISO 17025. The Cambodia Certification Department addressed the two main conformities found during the audit and is currently waiting for the response from the accreditation body. ILCC has obtained ISO accreditation for test parameters and ISO 17025 accreditation from the National Association of Testing Authorities in Australia for seven microbiology tests. ILCC has also been awarded certification for ISO 17025 for a full range of food and water tests. These accreditation processes increase the professionalization of food safety management in Cambodia. Fourth, ILCC, with the assistance of an ADB grant, provided staff with on-the-job-training and targeted training programs for food safety in other countries, such as Sri Lanka, Thailand, and Viet Nam.16 Eight ILCC staff (three are women) enrolled in external training courses. Fifth, ILCC continues to commercialize to meet increasing demand for its services. The number of commercial tests completed increased by 34% in 2010 and 22% in 2011. In addition, in 2010, ILCC’s income increased by 130% and gross profits by about 170%. To meet increasing demand, ILCC produced business plans for 2011 and 2012, and financial projections.

D. Development Financing and Program Costs

28. To support reform initiatives, the government has requested a loan in various currencies equivalent to SDR16,568,000 ($25 million equivalent) from ADB’s Special Funds resources to finance subprogram 3 of the Promoting Economic Diversification Program cluster. The loan will have a 24-year term including an 8-year grace period, and interest of 1% per annum during the grace period and 1.5% per annum thereafter, and such other terms and conditions set forth in the draft loan agreement. The government will meet the remaining resource requirement. The proceeds of the program loan will be disbursed in accordance with the provisions of ADB’s relevant policy.17 ADB will retain the right to audit the use of the loan proceeds and to verify the accuracy of the withdrawal application certification.

29. The program size reflects the development financing needs in 2012 central government’s budget of $1 billion and factors required to support implementation of the policy matrix (Appendix 4). ADB estimates that the long-run benefits of the reform program are approximately 2.6% of GDP or over $290 million (in 2010 prices).18 These economic benefits include increased output and investment from a reduction in business costs of compliance with licensing, lower trade facilitation costs, increased foreign direct investment due to a better investment climate, increased productivity due to lower incidence of food and water-related diseases and premature mortality in the human population, and higher tax revenue due to a broader tax base. The reforms will also have important distributive effects that will increase employment and wages. Distribution of labor will be more widespread as more labor will be employed in new industry. Female entrepreneurship will also thrive. Policy adjustment costs to the government and private sector are conservatively estimated as a discounted present value lump sum of $30 million (or $18 million without the present value lump sum). These adjustment costs include administrative, enforcement, and fiscal costs to the government in implementing

15

ISO 22000 is an international standard that defines the requirements of a food safety management system. 16

The ILCC team trained at Dynamics Bangkok in Thailand, at the Institute of Technology in Sri Lanka, and at Intertech Lab in Viet Nam.

17 ADB. 1998. Simplification of Disbursement Procedures and Related Requirements for Program Loans. Manila.

18 Program Impact Assessment (accessible from the list of linked documents in Appendix 2).

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and enforcing the reforms (estimated at $30 million or alternatively $15 million without present value lump sum estimates), such as the investment cost to set up ORIA at OCM including new staff and operating costs, investment costs to set up RIA units at line ministries, the national rollout of ASYCUDA during subprogram 3, the investment costs in implementing the action plan to commercialize the ILCC, restructuring costs at the ISC to be accredited as a conformity and assessment body, and costs involved in drafting legislation and the TPR process. The policy adjustment costs include the increased business costs of compliance with the SPS reforms related to mandatory SPS-sensitive standards (conservatively estimated at $5 million).

E. Implementation Arrangements

30. MOC, the executing agency for the subprogram, will be responsible for overall implementation of subprogram 3, including carrying out all policy actions, program administration, and maintenance of program records. The subprogram 3 will be implemented from October 2011 to September 2012. The implementation arrangements under subprograms 1 and 2 will continue under subprogram 3. MOC will use a steering committee chaired by the minister of commerce and comprising senior officials from MEF and MIME. The steering committee is responsible for coordinating implementation and sustaining the program cluster policy actions with MOC and relevant line ministries and agencies involved in supporting the program (MEF, MIME, the Ministry of Environment, MOH, MOT, and ECOSOCC). 19 The committee will meet quarterly to monitor progress and oversee program implementation. ADB may be invited to participate in the meetings as an observer. English translations of the minutes of these meetings will be forwarded to ADB within 2 weeks of each meeting. MOC will be responsible for day-to-day program implementation activities, and report on implementation progress. MEF will be responsible for subprogram 3 disbursements.

III. DUE DILIGENCE

A. Governance

31. The country’s financial management systems were assessed to identify fiduciary risks and determine fiduciary arrangements for subprogram 3. The assessment was based on the sector work of ADB’s report on Cambodia’s country governance risk assessment and risk management plan.20 The first national governance risk assessment and risk management plan for Cambodia was prepared using ADB’s Second Governance and Anticorruption Action Plan and its implementation guidelines.21 The assessment is risk-based and looks at risk in relation to fiduciary matters and broader governance risks to achieving satisfactory development outcomes. The approach is based on three core governance areas: public financial management, procurement, and corruption. The report assesses public financial management to have gradually progressed, given the strong government Public Financial Management Reform Program. The results of the 2010 public expenditure financial accountability (PEFA) indicate mixed but improving performance since the 2002 PEFA. The 2010 PEFA finds Cambodia to be at par with other low-income countries at similar stages of development. Financial accountability improved markedly, i.e., significant progress with budget formulation, internal controls, treasury operations and cash management, accounting system, and internal and external auditing. The procurement assessment, which used several recent procurement diagnostic studies of the World Bank, ADB, and the Organisation for Economic Co-operation and Development, indicates limited recent tangible progress, but significant reform work is well under way and could result in

19

ECOSOCC is one of the councils in the OCM. Its key function is to review all proposed legislation and subdecrees prior to submission to cabinet for consideration. It also provides economic advice to the OCM.

20 ADB. 2012. Cambodia: Country Governance Risk Assessment and Risk Management Plan. Manila.

21 ADB. 2006. Second Governance and Anticorruption Action Plan (GACAP II). Manila.

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important progress. The anticorruption assessment indicates important recent legislative and institutional developments with prospects for improvement have not yet achieved significant results. Important new legislative developments include penalty provisions in the new Law on the Public Finance System (2008), strengthening of the penal code in relation to corruption offenses (2009), and passing of the new Anti-Corruption Law (2010). Institutional work now focuses on strengthening the capacity of the Anti-Corruption Unit to fulfill its mandate as provided for under the new law. ADB’s Anticorruption Policy (1998, as amended to date) was explained to and discussed with the government.

B. Poverty and Social

32. Subprogram 3 will contribute to sustainable poverty reduction through three channels. The first channel is through higher, broad-based, and sustainable economic growth. 22 By reducing the business compliance costs with the business licensing system, lowering trade facilitation costs, and improving taxation and investor guarantees in line with international norms, private and foreign investment will increase across a broad range of sectors thereby supporting higher economic growth. The improvement in SPS management systems will aid government efforts to develop backward linkages with the agriculture sector. The second channel is through the labor market with increased real wages and hiring activity across most sectors from increased investment. The lower risk of food and waterborne diseases in the human population will increase productivity and improve household incomes. The third channel is through lower prices of goods and services. By improving transparency in trade policy, increasing integration within the region and the world through trade policy and regulatory reforms, and implementing competition policy, domestic prices will fall because of greater competition in the economy.

33. Subprogram 3 is classified under effective gender mainstreaming. The categorization reflects a gradual buildup of ADB dialogue with government counterparts on gender issues throughout the Promoting Economic Diversification Program. Subprogram 1 was classified with no gender benefits and subprogram 2 was classified with some gender benefits. Subprogram 3 benefits women entrepreneurs by improving regulatory aspects and increasing access for greater involvement in the economy. From the regulatory aspect, subprogram 3 addresses barriers to integrating gender concerns within the regulation drafting processes by ensuring that the RIA guidelines and checklists are developed to provide actions and indicators for adequate consultation of all key stakeholder groups of both genders, with monitoring of women’s participation in consultations. Subprogram 3 provides access for women entrepreneurs in the food processing sector by giving them access to funds from the SPS Matching Grants Project that is financed under subprogram 2 to avail of relevant SPS technologies and improve the quality of their products. To date, 7 of the 10 entrepreneurs supported by the project are female. Gender concerns were addressed in the food safety management system. Currently, 30% of ISO-certified government auditors are women. Female business owners comprise close to 50% of the private sector consultative group of the food processing industry, which provides feedback to the government on SPS issues, i.e., food safety and tax. ILCC and ISC continue to train their female staff in food safety management. To date, three of the eight ILCC staff sent abroad for training on food safety are female and one of the four ISC auditors accredited as ISO 22000 lead auditors is female.

C. Safeguards

34. The program will have (i) no adverse environmental impacts, (ii) no involuntary resettlement impacts, and (iii) no impact on indigenous peoples. It is classified under category C for involuntary resettlement, indigenous peoples, and the environment. The program is a

22

Summary Poverty Reduction and Social Strategy (accessible from the list of linked documents in Appendix 2).

10

general intervention aimed at supporting sustainable economic growth. In that respect, it is expected to have an indirect positive effect on poverty reduction.

D. Risks and Mitigating Measures

35. The assumptions underlying subprogram 3 include (i) external economic environment continues to improve to support domestic macroeconomic stability and growth, and (ii) the government will continue with key business regulatory reform measures. Subprogram 3 has three potential risks (Table 1).

Table 1: Summary of Risks and Mitigating Measures

Risks Mitigating Measures

Continuing slowdown in the global economy reduces global demand for Cambodia’s garments

The program supports government efforts to diversify its economic base by promoting access to technology and access to finance to the nontraditional economy, such as the food processing industry.

The capacity of agencies to implement reforms may be constrained by resources and other emerging priorities

The program reduces this risk by focusing on policy triggers that constitute high-priority, high-impact policy reforms supported by substantial capacity development assistance in the core areas of the program, such as competition policy, regulatory reform, and SPS.

Resistance to some of the reforms from vested interests, especially in institutionalizing RIA in government

The program focuses on efforts to support the government’s own initiatives and reforms in areas where political will and commitment are strong. The RIA reforms have strong political commitment at the Office of the Council of Ministers and support from key regulatory agencies (MIME, MOC, MOE, and MOT). Similarly, the SPS reforms have strong political commitment supported through the private sector development forum. Both reforms are supported with capacity development projects linked to performance milestones and triggers.

MIME = Ministry of Industry, Mines and Energy; MOC = Ministry of Commerce; MOE = Ministry of Environment; MOT = Ministry of Tourism; RIA = regulatory impact assessment; SPS = sanitary and phytosanitary standards. Source: Asian Development Bank.

IV. ASSURANCES

36. The government has assured ADB that implementation of the program will conform to all applicable ADB policies including those concerning anticorruption measures, safeguards, gender, procurement, consulting services, and disbursement. In addition to the standard assurances, the government will ensure that program steering committee constituted under subprogram 1 will meet semiannually and, if needed, on ad hoc basis to (i) monitor and evaluate progress of the program cluster, in particular the PPPF; and (ii) provide guidance and direction to MOC, the implementing agencies, and the relevant line ministries for PPPF implementation. The program steering committee may invite ADB to participate in its meetings.

V. RECOMMENDATION

37. I am satisfied that the proposed policy-based loan would comply with the Articles of Agreement of the Asian Development Bank (ADB) and recommend that the Board approve the loan in various currencies equivalent to SDR16,568,000 to the Kingdom of Cambodia for subprogram 3 of the Promoting Economic Diversification Program, from ADB’s Special Funds resources, with an interest charge at the rate of 1.0% per annum during the grace period and 1.5% per annum thereafter; for a term of 24 years, including a grace period of 8 years; and such other terms and conditions as are substantially in accordance with those set forth in the draft loan agreement presented to the Board.

Haruhiko Kuroda President

5 September 2012

Appendix 1 11

DESIGN AND MONITORING FRAMEWORK

Design

Summary Performance Targets and Indicators with Baselines

Update on Status of Performance Targets

a

Data Sources and Reporting Mechanisms

Assumptions

and Risks

Impact

Expanded and diversified private sector

By 2015: (i) Share of nontraditional sectors in nonagricultural GDP increased (2007 baseline: 59% of nonagricultural GDP) (ii) Nongarment exports (e.g., processed foods and beverages, handicrafts) increased by 5%–10% per year (2007 baseline: $155 million) (iii) Private Investment to GDP increased (2006 baseline: 14.8%)

GDP share in 2010: 64% (ii) Substantial growth in nongarment exports in 2011 over 2009. Of key commodities, rice exports rose from $11.0 million to $107.0 million, fish products from $52.0 million to $201.0 million, other nongarment exports from $266.2 million to $365.7 million (iii) In 2009 and 2010, private investment to GDP is estimated to be 7.2% and 8.9%, respectively. In 2010, the private investment grew by 30% from 2009.

National income accounts from NIS Trade data from NIS NIS national income accounts

Assumption

External economic environment continues to improve to support domestic macroeconomic stability and growth. Risk

Macroeconomic instability is linked to budget deficits.

Outcome

Improved business and regulatory environment where the private sector operates efficiently and effectively

By the end of 2012: (i) Number of registered enterprises increased by 15% (disaggregated by sex) (2007 baseline: 16,450) (ii) Cambodia’s competitiveness rank and score are improved (2007/08 baseline: rank is 110 and score is 3.5)

(i) Number of registered and active enterprises in 2011: 25,580 (25.1% growth from 2009 baseline of 19,141) (ii) For 2011/12, Cambodia’s competitiveness rank is 97 and score is 3.9

MOC business registry data The World Economic Forum’s Global Competitiveness Index

Assumption

The government stays on course with key business regulatory reforms.

Outputs

1. Competition in the domestic market increased and regulatory efficiency improved

(i) Number of line ministries with RIA action plans increased (2009 baseline: 0)

b

(ii) Line ministries with action plans produce at least 5 RIAs per year and post them on respective websites and the ORIA website (% women participants in consultations) (2009 baseline: 0)

b

(iii) At least one of the four RIA team members at each participating ministry is female (2009 baseline: 0)

b

(iv) 20% reduction in business compliance costs (2010 baseline)

c

(i) Four line ministries have RIA action plans (MIME, MOC, MOE, and MOT). (ii) MIME and MOC have finished with one preliminary impact assessment (iii) MIME has 2 women, MOE has 1 (iv) New indicator

RIA subproject PIU data on line ministries RIA action plans RIA subproject PIU data ADB and MIME survey on bureaucracy

Risks

The capacity of agencies to implement reforms may be constrained by resources and other emerging priorities. Vested interests resist some of the reforms.

12 Appendix 1

Design

Summary Performance Targets and Indicators with Baselines

Update on Status of Performance Targets

a

Data Sources and Reporting Mechanisms

Assumptions

and Risks

2. Investment climate strengthened

(v) Number of investment agreements increased (2007 baseline: 20)

b

(vi) Double taxation agreement completed with a major trading partner (2007 baseline: 0)

b

(vii) Number of days to launch a business reduced (2007 baseline: 86)

(v) No additional investment agreements (chapters in FTAs) in 2011 (vi) No double taxation agreement completed by mid-2012 (vii) 85 days in 2011

ASEAN website MEF World Bank Group Doing Business reports

3. Trade policy and facilitation enhanced

(viii) New technology accessed by at least 50 firms through matching grants scheme, of which 45%–55% of grant recipients are enterprises owned by women (ix) Time to prepare documents for exporting goods reduced by 20% (2007 baseline: 37 days) (x) Time to prepare documents for importing goods reduced by 20% (2007 baseline: 46 days) (xi) At least five firms SPS-related ISO accredited (2008 baseline: one) (xii) 25% of government auditors trained to be ISO 22000 lead auditor are female (2008 baseline: 0) (xiii) ILCCs ISO accredited for at least 10 tests (1998 baseline: 0)

b

(viii) First round of matching grant selection was concluded in April 2012; 7 of the 10 selected SMEs were owned and managed by women (ix) 22 days in 2011 (40% reduction) (x) 30 days in 2011 (35% reduction) (xi) No change (xii) By 2012, 4 of 19 government auditors trained to be ISO 22000 lead auditor are female (xiii) NATA accredited ILCC for six tests by the end of 2011

SPS-2 subproject monthly reports World Bank Group Doing Business reports World Bank Group Doing Business report SPS-2 subproject monthly report SPS-2 subproject monthly re NATA accreditation notice

Activities with Milestones (Subprogram 3) Inputs

1. Competition in the domestic market increased and regulatory efficiency improved

1.1 ECOSOCC issued Cambodia’s RIA strategic plan to institutionalize RIA in the national government (August 2010)

1.2 The Office of the Council of Ministers issued decision to establish ORIA (October 2010)

1.3 MIME, MOC, MOE, and MOT established RIA units (July 2011) 1.4 ORIA approved MIME, MOC, MOE, and MOT RIA action plans (December 2011) 1.5 MOE prepared and endorsed a RIA action plan; MOE initiated an RIA reviewing

the cost of business compliance with a subdecree (July 2010) 1.6 ECOSOCC formally launched ORIA (September 2012) 1.7 The government, in collaboration with ADB, undertook several RIA awareness-

raising activities including workshops (November 2010–September 2012) 1.8 MOC started public consultation on the draft competition law (June 2012)

2. Investment climate strengthened

2.1 GDT International Office drafted a policy framework for DTA, a DTA negotiation model, and a DTA module as the basis for future DTA negotiations (September 2012)

2.2 The Technology Development Fund was successfully launched and recipient firms

ADB subprogram 3 loan of $25 million equivalent

Appendix 1 13

Activities with Milestones (Subprogram 3) Inputs

selected (April 2012) 2.3 The government endorsed a private–public partial guarantee scheme for the rice

subsector (December 2011)

3. Trade policy and facilitation enhanced

3.1 MOC drafted subdecrees on trade remedies consistent with best international practice and an economywide perspective; interministerial discussions to refine the bill’s language and clarify technical terms have started (April 2012)

3.2 Cambodia completed the trade policy review in 2011 3.3 The government established the Risk Management Unit in Camcontrol, which is

responsible for cross-border market surveillance activities for food safety (September 2011)

3.4 The government issued interministerial prakas clarifying delineation of various SPS (food safety) related legal responsibilities and enforcement by ministries (Camcontrol, MOC; MAFF; MEF; MIME; MOH; and MOT) (October 2010)

3.5 ILCC was awarded ISO 17025 certification for a full range of food and water tests (November 2011)

3.6 Satisfactory progress made in developing the ISC Conformity and Assessment Board for management and process standards (ongoing)

3.7 MOH strengthened capacity to implement its legal responsibilities and roles under the interministerial prakas including rapid testing capability (April 2012)

3.8 The General Department of Customs and Excise completed a national rollout and operationalized ASYCUDA. ASYCUDA now operates in Sihanoukville Port, Phnom Penh International Airport, Phnom Penh Port, and dry ports and customs border checkpoints (Tech Srun, Teng Lay, MSE-KPM, So Nguon, Bavet, Poi Pet, Trapaing Phlong, Trapaing Sre), and covers both import and export processing (January 2012)

3.9 Substantial progress has been made in implementing customs transaction valuation in line with World Trade Organization commitments (ongoing)

ADB = Asian Development Bank; ASEAN = Association of Southeast Asian Nations; ASYCUDA = automated system for customs data; Camcontrol = Cambodia Import–Export Inspection and Fraud Repression Directorate General; DTA = double tax agreement; ECOSOCC = Economic, Social and Cultural Council; FTA = free trade area; GDP = gross domestic product; ILCC = Industrial Laboratory Center of Cambodia; ISC = Institute of Standards of Cambodia; ISO = International Organization for Standardization; MAFF = Ministry of Agriculture, Forestry, and Fisheries; MEF = Ministry of Economy and Finance; MIME = Ministry of Industry, Mines, and Energy; MOC = Ministry of Commerce; MOE = Ministry of Environment; MOH = Ministry of Health; MOT = Ministry of Tourism; NATA = National Association of Testing Authorities, Australian; NIS = National Institute of Statistics; ORIA = office of regulatory impact assessment; PIU = project implementation unit; RIA = regulatory impact assessment; SMEs = small and medium-sized enterprises; SPS = sanitary and phytosanitary standards; SPS-2 = sanitary and phytosanitary standards phase 2 subproject. a

Performance of the indicators from PED Subprogram 2. b New indicator formulated in 2009.

c Based on the 2010 survey of bureaucracy. Compliance costs were calculated for the three most common licenses: in

agroprocessing, $680/firm; tourism, $800/firm; and manufacturing, $1,480/firm. Source: Asian Development Bank.

14 Appendix 2

LIST OF LINKED DOCUMENTS http://adb.org/Documents/RRPs/?id=38421-072-3

1. Loan Agreement 2. Sector Assessment (Summary): Private Sector and SME Development 3. Contribution to the ADB Results Framework 4. Development Coordination 5. Country Economic Indicators 6. International Monetary Fund Assessment Letter 7. Summary Poverty Reduction and Social Strategy 8. Risk Assessment and Risk Management Plan 9. List of Ineligible Items Supplementary Documents 10. Macroeconomic Assessment and Debt Sustainability Assessment 11. Summary Program Cluster Impact Assessment 12. Performance of PED Subprogram 3 Policy Triggers

Appendix 3 15

DEVELOPMENT POLICY LETTER

16 Appendix 3

Appendix 3 17

18 Appendix 3

Appendix 3 19

20 Appendix 4

POLICY MATRIX

Policy Actions (in bold) and Milestones for Subprogram 3, and Post-program Partnership Frameworks

Policy Actions

Subprogram 3 Policy Accomplishments under Subprogram 3 (as of July 2012)

Post-Program Partnership Framework

1. Regulatory Efficiency and Competition Policy.

1.1 Institutionalize regulatory impact assessments in government

(1) Government to make substantial progress in implementing RIA oversight within the national government including:

(i) OCM issued decision to establish ORIA. (accomplished)

(ii) ECOSOCC make substantial progress in implementing its strategy including operationalizing the ORIA, issue legal instrument to mandate RIA functions and outreach programs to selected line ministries on implementing RIA. (accomplished)

(2) Government supports gender mainstreaming in the RIA exercise, e.g., inclusion of gender impact assessment in the Regulatory Impact Statement template, and two piloted RIA unit employ female staff as a member of RIA team. (accomplished)

(1) ORIA to publish annual report that will report RIA unit’s activities, e.g., the number of PAs that were reviewed and number of regulations that passed through the RIA process.

1.2 Build awareness and capacity to undertake regulatory impact assessments

(3) MIME to extend RIA program to cover all regulatory proposals in the industry department and convert the RIA taskforce into a permanent body. (accomplished) (4) MOE to continue to implement its RIA action plan and government extends RIA to MOC and one additional ministry and or agency. (accomplished)

(2) ORIA continues to build their and IAs’ capacity in setting up regulatory impact statement (RIS), advocate and implement RIAs system in other line ministries.

1.3. Promote competition in domestic markets

(5) Working group on competition policy undertake public awareness activities on competition policy. (accomplished) (6) Working group revises draft law on competition based on best regional practices and start public consultation. (accomplished)

(3) MOC is to draft implementing legal framework of the competition law. (4) MOC is to undertake capacity development within a framework of an action plan in the implementation of competition law.

2. Investment climate.

2.1. Investor confidence and protection

(7) GDT prioritized negotiating DTA by drafting a DTA policy framework, a DTA negotiation program and a DTA module. (accomplished)

(5) MEF endorses GDT’s DTA policy framework, DTA negotiation program, and DTA module.

Appendix 4 21

Ap

pe

ndix

4 21

Policy Actions

Subprogram 3 Policy Accomplishments under Subprogram 3 (as of July 2012)

Post-Program Partnership Framework

2.2 Technology diffusion

(8) Start to implement the capacity development plan for technology and innovation policy that integrates gender issues and supports women's entry and employment. (accomplished)

(6) MIME to continue refining policies for technology diffusion, to introduce SME Information Exchange that allows SME to interact with each other through a community based platform, and to draft a feasibility study to expand the current SME Incubation Centre. (7) Provision of training on women on business management, development, accounting and finance to build their skills and confidence as well as providing information on government development services, licensing and tax requirement and market opportunities.

2.3 Access to Finance

(9) Government to establish a public-private credit guarantee facility for rice sub-sector. (accomplished)

2.4 Gender dimension

(10) Female entrepreneurs in the food processing industry are to be provided equal access to matching grants to improve their SPS technologies and to be represented equally at the Private Sector Consultative Group of food processing industries. (accomplished)

(8) Establishment of a sex disaggregated database of matching grant recipients and ensuring information on number of recipients, size of grants, key outputs related to SPS technology upgradation, technology diversification as well as qualitative data on achievements and challenges. (9) Establishment of linkages with existing women SME association to support networking, peer exchange and mobilization of women entrepreneurs in policy dialogue.

3. Trade Policy and Facilitation

3.1 Continue reforms to meet WTO legal requirements

(11) Draft trade remedies legislation and develop the implementing regulation of the legislation (accomplished). (12) Complete the trade policy review in 2011 and prioritize key trade policy reforms. (accomplished)

(10) MOC to submit the draft law on trade remedies to the national assembly. (11) MOC continues to implement recommendations on further improvement in the trade facilitation as indicated in the TPR.

3.2A Strengthen the institutional and regulatory framework for effective SPS (food safety) management systems.

(13) Government to draft food policy and to design food safety coordination mechanism. (accomplished) (14) Feasibility undertaken to determine the merits of establishing a national accreditation body or board for SPS related activities. (accomplished).

(12) Government to prepare draft Law on Food Safety and Ministry of Health to launch Food Policy in 2013.

22 Appendix 4

Policy Actions

Subprogram 3 Policy Accomplishments under Subprogram 3 (as of July 2012)

Post-Program Partnership Framework

3.3B Strengthen capacity, enforcement and awareness in SPS management systems.

(15) ILCC to make substantial progress on implementing the action plan for commercialization including for ISO 17205 certification for a full range of water and food tests, and complete lab procurement; and, 3 out of 8 ILCC staff trained on food safety are female. (accomplished) (16) Inter-laboratory proficiency testing continued. (accomplished) (17) ISC to address all non-conformities for ISO 17021 certification for process/management certification body for SPS related activities and 50% of ISC’s ISO accredited auditors are female. (accomplished) (18) ISC product and process standards awareness program implemented. (accomplished) (19) MOH strengthens capacity to implement its legal responsibilities and roles under the inter-ministerial Prakas including:

(i) Develop rapid testing capability (accomplished)

(ii) Developed and implement code of conduct for inspectors (accomplished)

3.3 Trade facilitation in custom reforms

(20) The General Department of Customs and Excise makes progress towards national rollout of ASYCUDA. (accomplished) (21) Continue to make progress in implementing effective customs transaction valuation. (accomplished)

ASYCUDA = Automated System for Customs Data; ILCC = Industrial Laboratory of Cambodia Center; IPR = intellectual property rights; ISC = Institute of Standards Cambodia; MEF = Ministry of Economy and Finance; MIME = Ministry of Industry, Mines and Energy; MOC = Ministry of Commerce; MOH = Ministry of Health; ORIA = Office of Regulatory Impact Assessment; SME = small and medium-sized enterprise; SPS = sanitary and phytosanitary standards; WTO = World Trade Organization.