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Friday, December 03, 2010

ADB, Cambodia Continue Financial Sector Reforms to Spur Growth, Cut Poverty

The FINANCIAL -- The Asian Development Bank (ADB) Board of Directors on December 2 approved a loan and grant of $15 million equivalent to the Government of Cambodia to promote the development of a sound, market-based financial sector.

According to ADB, the loan and grant will finance the final subprogram of the Second Financial Sector Cluster Program, which incorporates reform actions designed to improve public confidence and financial intermediation, strengthen sector resilience, promote good governance, and enhance system efficiency.

Key actions of the program include steps to improve check clearance and settlement amongst commercial banks and the government, regulations to guide interbank transactions, the promotion of deposit-taking by microfinance institutions in compliance with new prudential requirements, and improved prudential supervision of banks and microfinance institutions. It also promotes greater transparency in the insurance industry, measures to combat money laundering, and a new integrated accounting system at the National Bank of Cambodia.

"Finance sector development helps reduce poverty by cutting transaction costs for economic activities and expanding the reach of the formal finance sector to lower income groups, including rural microenterprises," said Samiuela Tukuafu, Principal Financial Sector Specialist in ADB's Southeast Asia Department.

The immediate gains generated by the program, which began in 2007, include new and increased loans of $1.52 billion, the creation of over 12,000 jobs, and the opening of over 980 new branches of banks and microfinance institutions throughout Cambodia.

The loan of $10 million equivalent from ADB's concessional Asian Development Fund has a 24-year term, including an 8-year grace period with an interest rate of 1% during the grace period and 1.5% for the balance of the term. The grant of $5 million also comes from the Asian Development Fund. The National Bank of Cambodia is the executing agency for the overall program, with the Ministry of Economy and Finance and Ministry of Commerce the implementing agencies.

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Monks branch out into carbon market to protect forest

Sorng Rukavorn monks Sove Ui, Kea Mony Tapkea and Sou Mai in their community forest in Oddar Meanchey, northern Cambodia. Photo: Ben Doherty

A religious order aims to tap polluters to help a community.

THE forest surrounding the Sorng Rukavorn monks' pagoda in northern Cambodia has forever been ''theirs''.

They have always depended on the forest for food, for timber and for a living. They have long understood their forest's boundaries, its cycles of wet and dry, of fire and regeneration.

Advertisement: Story continues below But they have never owned it. Until now. Having spent nearly two years winning legal control of 18,000 hectares of forest, they are now able to lock it away from logging interests and other encroachments, and rehabilitate areas previously cleared.

The carbon that saves, they hope, might soon be for sale. They want to be players on a global carbon market. ''Any revenue from the forest will be important for the people here, and for Cambodia,'' monk Lee Ragana says.

''When the revenue comes in, we can use the money to build infrastructure, to build schools … and to build better roads. And we can improve the management of the forests.

''We will use the money to educate farmers in better land practices and technical improvements. We will be able to supply patrols with trucks and equipment … do more fire suppression and replanting.''

The Sorng Rukavorn monks are on the cusp of entering what is still a voluntary carbon market, in preparation for a time industrialised countries legislate to force polluters into offsetting the carbon they produce.

They aim to be a UN-recognised REDD - Reducing Emissions from Deforestation and Degradation - project, in which governments and companies in industrialised nations that cannot reduce their own carbon emissions pay communities in poor countries to cut emissions on their behalf, usually by not cutting down trees.

Already, yellow-and-green signs mark the monks' land as a ''community forest'', and regular patrols are conducted by volunteers to see that trees aren't being felled illegally or land cleared for farming.

The monks' community forest is one of 13 such sites in Oddar Meanchey province, on Cambodia's northern border with Thailand. Combined, they preserve nearly 68,000 hectares of forest land and, maintained over 30 years, are expected to sequester 7.1 million tonnes of carbon. Within months they will seek a carbon buyer.

But even before a dollar has been paid to the monks, they feel they've won a victory in taking control of land that - informally at least - they have regarded as theirs for generations.

''Before we had the community forest, people from outside would … cut down trees illegally, clear land, and the people who depended on that forest had no right to stop them,'' Mr Lee says. ''Now we feel we own this land, we have control, and we can stop it being used badly.''

Kurt MacLeod, vice-president of Pact, a non-government organisation helping Oddar Meanchey's community forests bring their carbon to market, says REDD projects will bring enormous benefits and development to the poor communities running them.

''As soon as legislation is enacted [in major industrialised countries], there are going to be private sector companies looking for validated REDD projects,'' he says. ''The demand in five years will be much higher than supply.''

Industrialised countries see enormous value in paying poorer countries to preserve forests on their behalf. Germany, France, Norway, the US, Britain, Australia and Japan pledged $US4 billion towards REDD initiatives at the last round of climate talks in May. But just how much carbon will be worth on the market of the future is still unclear.

There is also the issue of measuring the carbon sequestered in forests, and how that might be affected by its growth, climatic change or unforseen events such as fire.

And there is concern at the sellers' end about how much of the money, in a country such as Cambodia, where a notoriously corrupt government has the sole right to ''sell'' the carbon, will ever reach those on the ground.

Cambodia has a poor record in forestry. It has experienced some of the most rampant deforestation. More than 7 million hectares of forest - 39 per cent of the country's land - was sold off for logging. In the four decades since 1970, primary forest cover in Cambodia was reduced from 70 per cent to just 3.1 per cent today.

Deforestation accounts for 20 per cent of all the world's greenhouse gas emissions - some 5.9 billion tonnes a year.

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