Slipping through the Net

Cambodian Social Safety Nets seem to have Many Gaps

Healthcare is just one component of a comprehensive social security net

By An Channthla
Economics Today

The global economic crisis has turned the tables on free market economies, exposing the flaws in no-holds-barred capitalism. Nations like France with comprehensive social security systems seem to have weathered the storm well so far, but poor countries like Cambodia may find providing a similar safety net difficult.

Cambodia is one of many poor countries facing challenges that could set back development, especially as the downturn undermines traditional economic drivers. The rapid policy responses required to effectively deal with such a situation could be lacking, experts said.

Development partners have stressed to the Cambodian government the importance of social safety nets in any period of crisis. Along with other development partners, the UN has urged social safety nets as a priority to continue social, cultural, and economic growth, and attain Cambodia’s Millennium Development Goals (MDGs).

Without safety nets, the gains achieved through rapid growth are more likely to be reversed during an economic downturn, said Tim Conway, the World Bank’s (WB) senior poverty specialist. Safety nets contribute to poverty reduction in at least two ways, he told Economics Today.

Firstly, they help households avoid falling into penury and, in terms of public spending, preventing a household slipping under the poverty line in the first place is generally far cheaper than trying to lift them back out later.

Secondly, safety nets help households to make long-term investments, for example in their children’s education, which improve human development, skills and economic productivity.

An Unclear Concept

But, while their benefits are obvious, what social safety nets actually are is not always apparent.

According to a WB definition, safety nets are “non-contributory transfer programs targeted to the poor or vulnerable,” which play important roles in social policy. Safety nets, says the WB, redistribute income, thereby immediately reducing poverty and inequality; they enable households to invest in the human capital of their children and in the livelihoods of their earners; they help households manage risk, and they allow governments to implement macroeconomic or sectoral reforms that support efficiency and growth.

Still, defining social safety nets in terms of their consequences only begs the question further, as do loose descriptions like “mechanisms that mitigate the effects of poverty and other risks on vulnerable households.”

Formal programs, run by governments, donors or NGOs, that provide additional income or in-kind transfer programs, subsidies and labor-intensive public works programs are more in line with Western ideas of a safety net, though a lot less cushy. Government-led programs to ensure access to essential public services, such as fee waivers for health care services, and scholarships to mitigate schooling costs are what many are expecting of the Cambodian government.

Nevertheless, the majority of Cambodian social safety nets are provided either informally or by development partners and NGOs, said Douglas Broderick, UNDP resident representative in Cambodia. Largescale support is associated with organizations such as WFP, UNICEF, ADB, ILO and WHO, he added.

Many Cambodian households have become increasingly vulnerable to poverty over the last 20 months, according to the Development Partners’ Background Paper on Mitigation of the Adverse Impact of the Economic Crisis. Longstanding risks for poor and foodinsecure people were exacerbated by the escalating prices of food and other essential commodities in 2007-08, and while some farmers were able to benefit from higher prices, most farming households are subsistence producers, many of whom suffered a net negative impact from price increases.

Structural changes to the rural economy also mean that households are less able to withstand these shocks than in the past. The number of landless and land-poor households is higher, and access to common property resources has been significantly reduced. Reinforcing safety nets is therefore important, both to mitigate effects of the economic downturn, and to complement the government’s long-term growth-oriented development.

Increasingly Vulnerable

Cambodians remain vulnerable to a wide range of shocks, including harvest failure, macroeconomic and trade shocks, natural disasters and livestock losses, said Broderick. Even ill health can often force households into debt and the sale of assets, pushing relatively wealthy households into poverty, and forcing an already poor household into destitution.

Healthcare is just one component of a comprehensive social security net

Thus, Cambodia is more in need of robust social safety nets than most, Broderick said, and not just to stimulate economic growth and improve human development indicators such as health and education.

“Every way you look at it, social safety nets make good economic sense. When Cambodia invests in its poorest, it is helping a third of its people reach their full potential. Today’s poor and disadvantaged could be tomorrow’s best and brightest individuals whose talents, skills and innovations could be harnessed to drive and inspire Cambodia’s future socio-economic growth.”

NGOs and the government have a number of relevant policies and programs, said the WB’s Tim Conway, including food distribution and vulnerable and scholarships to help poor families keep their children in school.

Still, the government’s provision of social safety nets seems a confusing ad-hoc hotchpotch scattered across several ministries. The Ministry of Social Affairs, Veterans and Youth Rehabilitation, Ministry of Labor and Vocational Training and the Ministry of Woman’s Affairs are all mandated with managing state social services and protecting specific vulnerable groups. In collaboration with the WFP, the Ministry of Rural Development and the Ministry of Water Resources and Meteorology have a food for work program that distributes 3,500 tons of rice per year to approximately 20,000 households.

The WFP and the ADB fund socalled food-based transfers, support that includes school feeding, foodfor- work schemes—whereby people receive food for work, usually on rural infrastructure projects such as canals, dams and roads—and free food distribution, said Broderick. UNICEF and UNFPA also fund a number of Health Equity Funds (HEFs) whereby poor patients are exempted from paying patient fees, which are paid by a third party from so-called health equity funds. A number of HEFs are administered by local NGOs.

In response to a June 2008 government request, the ADB provided a grant and a loan to alleviate the needs of areas around the Tonle Sap Lake, said Ngy Chanphal, secretary of state for the Interior Ministry, in a February 2009 report. The Emergency Food Assistance Project, providing short-term transitional support, met unexpectedly high expenditure due to higher food, fuel, and agricultural prices. The program also saw questions raised over the eligibility of some families for aid, with unsubstantiated accusations of nepotism.

Such threats to the sustainability of short-term stopgaps are perhaps why the WB is working with development partners such as the WFP, UNICEF and the ADB to help the government develop a coherent safety net strategy, said Conway. “Along with other organizations, they are providing advice, analysis, and lessons from experiences in other countries to help government policy-makers develop their strategy and programs.”

Health equity funds are one example of the progress of social safety nets in Cambodia, Conway claimed, having evolved from a set of experiments to mainstream national health policy. The system for household targeting developed by the Ministry of Planning can now be used to target a number of different safety nets, which would create consistency and cost-effectiveness across the system, he added.

Broderick noted that the government is currently developing an integrated national social safety nets system to be unveiled at the end of 2009. The government is updating its National Strategic Development Plan (NSDP) to incorporate this new strategy, he said.

Long-term Lag

Despite these best laid plans, the devil is the detail, experts warned. Implementation, the stage where theories meet with rude reality, is raising concerns.

Cambodia’s weaknesses make the transfer of resources to the poor all the more challenging, said Broderick. He listed little absorptive capacity, poor infrastructure and a shaky banking system as areas of concern.

The safety net programs currently in place are mostly modest, covering only certain parts of the country, said Conway. Some parts of the country, some common forms of vulnerability, and some significant vulnerable social groups are not yet covered by any scheme, he warned. Existing schemes are funded largely from development cooperation, which makes them unsustainable in the long term.

The challenge, Conway maintained, is to stitch together the existing patchwork of programs into a coherent framework, scale up existing schemes or introduce new ones to fill in the gaps in coverage, and to ensure all schemes fit together.

But, as with any public service, safety nets cost money, a commodity not currently in abundance. “One obstacle is low levels of government revenue and difficulties in coordinating flows of funds from development agencies,” he explained. “The other challenges are to do with capacity and institutional coordination. Operating a good safety net scheme requires skilled staff working within a well-structured organization and good coordination between line Ministries and between different levels of government. All of this takes some time to develop.”

Rapid responses could be unlikely in Cambodia, a country which, according to the Council for the Development of Cambodia (CDC), is not yet able to develop an integrated system or a sustainable program to respond to crises as they occur. The Background Paper on Social Safety Nets in Cambodia characterized current efforts as fragmented, uncoordinated and unsustainable.

Another major constraint for the development of safety nets and rapid assistance responses is the lack of a government body with a clear mandate to coordinate safety net interventions across ministries; there is no central authority to implement cross-sectoral interventions.

Broderick urged the government to complete a national strategy on social safety nets and, most importantly, commit more resources to new and existing programs.

Other countries in the region spend between 1 and 2 percent of GDP on social safety nets. Cambodia spends less than 1 percent.

“It would seem, therefore, that there is room for the government to expand its financial commitment to the provision of social safety nets,” Broderick said. “It is also important that any new social safety nets are developed in conjunction with existing informal structures so as not to undermine the systems already in place.” Coordination between government, NGOs and development partners will be important.

Safety net development looks increasingly like a long-term prospect, to be developed in line with old age pensions, health insurance, disability and illness benefits. Can poor Cambodians wait?