USAID Project Catalyzes Economic Growth, Reaches More Than 1 Million Cambodians

One of DAI’s most wide-reaching economic growth projects marked its close this fall with a remarkable tally of results that speak to the success of an approach based on unleashing the technical knowhow and market linkages already latent in the Cambodian economy.

The project—which aimed to improve Cambodia’s business friendliness and economic vitality—touched the lives of 1.3 million people in its four-year second phase alone. Funded by the U.S. Agency for International Development (USAID), the Cambodia Micro, Small and Medium Enterprise Strengthening Project (MSME) worked in five major areas: agriculture, manufacturing, water and sanitation, biodiversity, and the general business environment. Within those major categories, the project focused on far-reaching market sectors such as swine, aquaculture, clay tile production, safe water, honey, and ecotourism.

The project’s quantifiable results include the following:

• Suppliers of swine feed and medicine saw sales increase 1,765 percent over four years.

• Swine traders saw their income increase 1,246 percent over the same time period.

• Fish traders saw sales increase a whopping 6,998 percent over the four years.

• From 2006 to 2008, after the project worked closely with 58 clay tile manufacturers, those companies increased their own investment in new technology by 640 percent.

• After Cambodian private water companies received MSME assistance, 26,003 families now have access to clean drinking water in their homes. 

• Thirty-five laws and/or regulations regarding the business-friendliness of government functions were revised, most with private sector input, to decrease red tape and minimize other barriers to efficiency.

• The Forestry Administration and the Ministry of Environment, with MSME assistance, conserved more than 80,000 hectares of Cambodia’s quickly disappearing biodiversity forest assets, which are now managed by forest communities.

The project was able to maintain its guiding, but background, role in the promotion of inclusive economic growth by functioning largely as a facilitator. It enabled Cambodian firms to organize effectively among themselves through interest groups, working groups, agricultural cooperatives, and associations. By design, MSME linked private sector firms to each other, building relationships, confidence and vision for their businesses and industries, creating incentives for upgrading and capital investment by fostering a sense of community and healthy competition among the firms.

At the same time, MSME worked with the public sector to demonstrate the economic value of better regulation, easing the way for small firms to expand. The project worked with provincial authorities to improve the business and investment climate and with national government counterparts to improve their ability to draft and implement good legislation and effectively communicate with other government agencies and the private sector to draft legislation.

In its first phase, dating back to 2005, MSME was targeted at improving value chains, the first initiative of its kind in Cambodia. The project concentrated on a particular product or service market, such as pond-raised fish, and worked with all supply chain participants to improve market information, quality, delivery, and production for each actor in that chain.

“Despite the belief by most government and donor agencies at the time that these types of technical business development services didn’t exist in the private sector and had to be provided by persons outside the supply chain, such as by government and donor-funded technicians, the MSME Project Value Chain Approach proved that when provided with the opportunities to engage directly with other firms, without interference by well-intentioned donors or government officers, input suppliers, fingerling producers, feed makers and others were willing and able to provide embedded technical and management training to Cambodian businesspersons,” said MSME Team Leader Curtis Hundley.

From 2008 to 2012, a vastly expanded project proved that the methodology could be scaled up to engage many thousands of businesses in nine value chains, across 17 provinces. Despite floods that wiped out millions of dollars in value, swine and fish industry firms increased net incomes by up to 6,000 percent. Across nine value chains, Cambodian business people invested more than $35 million into their own companies.  

“Thousands of Cambodian families are now able to compete with regional neighbors to supply Cambodian markets and some have begun exporting,” said Hundley. “These business people now have better homes, send their children to better schools, and have better lives. We are confident that USAID’s investments represent permanent changes to the Cambodian business and governance cultures.”