Green Growth Policy in Cambodia

This blog summarizes the frameworks and institutions (as of mid-2016) of the Royal Government of Cambodia (RGC) relevant to green growth policy, climate change, energy efficiency and SME development in general.

It comes from the inception report to a EMC Prefeasibility Study (PFS) for a ‘Fund’ to encourage Cambodian SME to invest in energy efficiency technology.

It is not an assessment – simply a useful summary of instruments and institutions. It is fair to say that in key areas the intent and the practice have diverged to a significant degree.

National Development Plans

Cambodia has a top-down approach to developing national development strategies. The highest level is the ‘Rectangular Strategy’ (RS), which sets broad goals to serve the government’s  socioeconomic policy agenda. Below this is the ‘National Strategic Development Plan’ (NSDP) providing guidance on the implementation of the RS. Line ministries and their subordinate departments then develop specific policies and strategies to implement these top level strategies and plans. The RS was launched in 2004 and is in its 3rd iteration, 2014-2018. The RS makes explicit references to green development, climate change and energy efficiency; in particular, “the reduction of the impact of climate change by strengthening the adaptation capacity and resiliency to climate change, particularly by implementing the Cambodia Climate Change Strategic Plan 2014-2023, National Policy on Green Development and the National Strategic Plan on Green Development 2013-2030″. (National Policy on Green Development and the National Strategic Plan on Green Development 2013-2030 have been superseded as described in the following paragraphs).

Green Growth and Energy Efficiency

To ensure alignment with RGC’s goals, the proposed Fund (subject of EMC’s Prefeasibility Study) needed be embedded within the existing policy framework.  This sub section describes the current policies that support the development of the Fund, and how the Fund would serve those policies.

Policy Objective & Relevance to PFS
National Policy on Green Growth (2013) & National Strategic Plan on Green Growth 2013-2030 (2013a) To balance economic development with environment, society, culture, and sustainable use of national resources through integration, matching and adaption.  Of relevance to the PFS, the Strategic Plan provides action plans including; attracting green investors, promotion of renewable energy, energy saving and efficiency, mainstreaming of green growth into the financial banking and economic systems and a green certification program for the private sector.
Cambodia Climate Change Strategic Plan (CCCSP) 2014-2023 (2014) CCCSP integrates climate change in to national policy (NSDP 2014-2018), and ministry action plans;
Climate Change Strategic Plan for the Manufacturing Industry and Energy (MME, 2013) The strategic action plans detailed in the policy include adopting and transferring green technology to manufacturing industry (and energy sectors). In particular;

Incentives to the private sector to invest in energy saving (i.e. importation and implementation of energy efficiency projects)

Establishment of information sharing and consultation mechanisms.

Climate Change Action Plan 2016-2018 (MoE) MoE has identified 17 priority actions to contribute to resiliency of the country to climate change, among which includes; technology hub for food, energy and water security, GHG Inventory system, GHG Emission Reduction Facility, urban development plans and programs addressing climate change, climate change Knowledge Management System, climate change public awareness raising, mainstreaming climate change at subnational planning, climate change M&E system, developing capacity of climate change national coordinating mechanisms.
National Policy Strategy and Action Plan on Energy Efficiency (2016) Seeks to improve Cambodia’s energy efficiency whilst contributing to reduced greenhouse gas emissions. The action plan lays out targets for reduction of national energy demand (20% until 2035), national CO2 emissions (3m tons by 2035) and for industrial sectors.
Cambodia’s Intended Nationally Determined Contribution (INDC), 2015 Outlines mitigation actions. These include developing new renewable energy sources and promoting SME energy efficiency including garment factory, rice mills, and brick kilns.
Cambodia National Environment Strategy and Action Plan (NESAP) 2016-2023 Outlines priority actions that would include modernizing resources use, development and conservation, improving resource use efficiency and productivity, and ensuring sustainable financing mechanism.
Environmental Code (in progress, as of mid 2016) The making of this code is in progress. The Code seeks to create an enabling legal and policy environment that will strengthen the conservation of natural resources and wildlife, build climate resilience, promote the use of renewable and environmentally friendly energy, and build sustainable cities with the capacity to deal with air and waste pollution. The end product also aims to reduce ministerial inefficiencies and overlap in implementation of various legal and policy instruments related to environmental protection and natural resource management.

 

The Ministry of Environment, (MoE) has a broad mandate to protect natural resources and to prevent environmental degradation. The Minister of Environment chairs the National Council for Sustainable Development (NCSD), whose General Secretariat is at the Department of Climate Change of MoE. NCSD was established in May 2015 as a single national coordinating mechanism, replacing the National Climate Change Committee (NCCC) and the National Council on Green Growth (NCGG). It has the mandate to prepare, coordinate and monitor the implementation of policies, strategies, legal instruments and plans. It also serves as national coordinating mechanisms in international climate change framework.

The Ministry of Industry & Handicrafts (MIH)[1] has the broad responsibility in regulating industrial and handicraft sector. Recent ministerial action plans for this sector include the following actions to cope with climate change and to promote energy efficient as well as green growth: promoting climate resilient low carbon production; using renewable energy and encouraging energy diversification including on-site renewable energy captive generation for industrial production processes; introducing technologies for low-carbon production industries, and managing industrial waste.

National Cleaner Production Office-Cambodia (NCPO-C) was established in 2009. Residing in the Ministry of Industry and Handicraft (MIH), its key responsibility is to disseminate and promote sustainable development through resource efficiency and cleaner production (RECP) in the industrial sector, with a focus on subsectors within the scope of the SEM EE Fund, including garments & textiles and food processing. With financial and technical assistance from Global Environmental Facility (GEF) and UNIDO, the institution has so far implemented various Cleaner Production projects such as the Industrial Energy Efficiency Project (IEEC). NCPO-C activities also include matching investors and Cambodian businesses with suppliers of EE technologies.

SME Development

The development of green growth is inseparable from development of the private sector in general and SMEs in particular. This section outlines Cambodia’s SME development policies and their relevance to the PFS and a future Fund.  It can be seen that the formalization of SMEs, financial sector development and industrial diversification are significant components of industrial policy and supportive of the PFS and eventual fund.

To this end, the government has set a target is to reach 80% of small and 90% of medium businesses registered by 2025.[2] This is relevant to the Fund in that it could increase the market of potential borrowers by increasing formalization and improving credit-worthiness.

Policy Objective and Relevance to PFS
Industrial Development Policy 2015-2015 (2015) The IDP aims to ensure the transformation from a labor intensive to a skill-based economy by 2025. It lays out strategic objective to upgrade SMEs, and establishes the need for a policy action plan to formalize SME and improve access to financial services.
SME Promotion Policy (an updated version; still in draft) SME Promotion Policy will provide a comprehensive update to current SME policy and seek to develop existing initiatives. Of particular relevance to the PFS are the existing initiatives:

  • MIH’s newly developed web-based SME Registration system (expected online soon)
  • MoC’s new online business registration system, launched early 2016, and
  • Enhancement of a One-stop window for licensing SMEs.
  • Secured Transaction Law

 

Council for Development of Cambodia (CDC) is the main government body implementing the IDP and is the main point of contact for foreign investors

The Ministry of Commerce (MoC) and Ministry of Industry and Handicraft (MIH) are the two leading agencies directly responsible for day-to-day engagement with the private sector. While MoC is responsible for business registration, the General Department of Industry and the SME Secretariat are within MIH.

The MIH is also responsible for the ‘Single Window Office’ for SMEs, including business development services, assisting with access to finance, improving the business enabling environment, and facilitating SME participation in trade. Both the Committee for Economic and Financial Policy and the Steering Committee for Private Sector Development (SCPSD) have subcommittees on SMEs. The SCPSD also serves as a forum for consultation with development partners.

Direct consultation with the private sector occurs primarily through the Government-Private Sector Forum (G-PSF), which consists of eight Private Sector Working Groups (PSWGs) and associated joint Government-Private Sector Working Groups. The PSWGs have regular meetings and serve as a platform for members of the private sector to make recommendations related to either law and policy.

[1] MIH and Ministry of Mines and Energy were formed in 2015, splitting up the former Ministry of Industry Mines and Energy (MIME).

[2] Industrial Development Policy 2015-2015