Global Policy Forum

Credit Crisis Rattles Civil Society

Phnom Penh Post
October 24, 2008

Many local civil society groups are concerned that their donations will dry up as the credit crisis takes hold in developed nations, limiting future generosity. Major development partners such as the UN may be unlikely to pull out, but local NGOs are concerned about the impact of the global credit crisis on their funding.

Cambodia's civil society groups are under threat from the global credit crisis that looks set to severely limit the amount of available donor funding. "The government collects tax and has other sources of income, but NGOs have only one source of funding: donors," said Thun Saray, president of Cambodian rights group Adhoc. Adhoc has an average monthly running cost of between US$100,000 and $200,000, which all comes from donors. Were donors to reduce funding in 2009, the organisation would have no option but to cut back on lower-priority projects, Thun Saray said. According to Eric Sidgwich, senior country economist for the Asian Development Bank (ADB), inflows of foreign aid, or official development assistance, were likely to be "more resilient" than inflows of foreign direct investment, at least in the immediate future, due to the fact that aid comes from government budgets. In the long term, there is a risk that the amount of aid could decrease, but it would not be until 2009 before the effects would really be felt, he said. "It is a hope that countries like Cambodia, which are still heavily aid dependent, who still have high instances of poverty, will be somewhat shielded from these events," Sidgwich said. "But I think the jury is still out on that," he added. But for many, such as Ou Virak, president of the Cambodian Center for Human Rights (CCHR), the lack of long-term security is a major concern. "Now we have to have funds of more than $250,000 to operate our projects for next year," he said. "But we are still worried about [the credit crisis] because it will affect our organisation ... if it continues." He expressed worry over the chance that hundreds of millions of dollars of aid for poverty alleviation projects would be lost. "If donor countries have a financial crisis, they will think about whether to donate funds to Cambodia," he said.

Not such a problem

Others, such as Youk Chhang, director of the Documentation Center of Cambodia (DC-Cam), were less concerned. He said DC-Cam's annual running costs are approximately $500,000, most of which is covered by the organisation's investment endowment, which is held in New York, and funds from the sale of books, pictures and DVDs about its work. "Our investment endowment earns interest of about $200,000 per year," he said, adding that the sale of books, pictures and films earns DC-Cam about $100,000 per year. Another $200,000 comes from donors. The government is also concerned that both aid to the government and donor funding for NGOs could dry up, said Mey Vann, director of finance at the Ministry of Economy. He said that the government is currently devising a strategy to lobby donor countries to keep providing aid to Cambodia, even in difficult times, saying the Kingdom remains one of the world's least developed countries, he said.

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