History of shocks

Covariate Shocks

Beyond severe poverty and poor human development indicators, the problem of vulnerability is pervasive in Cambodia. A large proportion of the population in both rural and urban areas is at risk to various idiosyncratic and covariant shocks (World Bank, 2006). Even minor shocks to household productivity can push non-poor households into poverty and poor households further into desperate circumstances.

Households in Cambodia face a variety of risks which can, individually or in combination, push even relatively wealthy households into poverty, and poor households into destitution. Covariant shocks (that is, shocks which affect many households at once, and so are likely to overwhelm social coping strategies based upon support within families and communities) include extreme floods in 2000 which affected some 3.4 million people, causing crop failures and extensive damage to houses, livestock and property, damaged public goods in the form of infrastructure, and spread illness and droughts in 2002 and 2004 also affected millions of people (World Bank 2006).

At the community or national level, natural disasters pose a threat to all households, but especially to poor households with few assets or savings. Cambodia experiences extended periods of flooding and drought which lead to low crop and animal production, destruction of infrastructure such as roads and bridges, and contamination of clean water sources. A series of almost consecutive annual disasters in recent years has been particularly devastating. The 2000 floods, which were thought to be the worst in 40 years, caused extensive damage and food shortages. A total of 760,000 families (3.4 million people) were affected, with over 84,000 families (400,000 people) evacuated. Droughts are considered to be even more devastating as they affect larger geographical areas and greater numbers of people. The last major drought occurred in 2002, affecting eight provinces and over two million people. According to a study by WFP and the National Committee for Disaster Management (NCDM), around 270 communes out of total 1,621 communes in Cambodia are prone to drought and around 260 communes are prone to flood. Provinces such as Prey Veng may even be hit by both floods and drought in the same year. However, only about 40,000 out of the 310,000 hectares of cultivated land in Prey Veng are estimated to have irrigation systems, meaning that over 80 percent of cultivation depends completely on seasonal rainfall and weather[1] . Therefore, most farming households bear the full brunt of floods, droughts, and pest infestations.

Idiosyncratic Shocks

Idiosyncratic shocks or individual-specific shocks which typically affect particular households include: Illness, which has been found to be a major factor in leading to land loss.

Without a high quality, accessible, affordable public health system, illness, particularly an emergency illness or injury, can prove extremely expensive, both in terms of costs and foregone labour of the patient.

At the household level, one of the biggest threats to livelihood is the illness or death of a family member. The poor risk losing whatever savings they have accumulated and/or incurring debts they cannot repay to obtain medical services. In the PPA, people in over 40 percent of villages surveyed cited ill health as being a major reason for their fall into poverty. Surveys conducted in two villages south of Phnom Penh suggest that while crop failure and ill health can both be devastating for households, the consequences of health shocks are more damaging to immediate and long-term livelihoods as they require a lump sum of money for urgent treatment. Even wage workers who may not be considered poor or vulnerable per se cite fear of illness as a serious concern and potential source of poverty. Missing work due to illness can result in reduced income or job loss which oftentimes has broader repercussions beyond the individual worker, as extended families often depend on remittances from family members working for wages in urban areas or abroad. The death of a family member, especially if the family member is young, can also have a devastating impact as it represents a loss of productive labour (World Bank, 2006).

Poor living conditions and limited access to health services increase the risk of illness pushing families into poverty. Lack of adequate hygiene and sanitation continues to pose a serious problem in many areas of the country, increasing the likelihood of illness. According to the 2005 Human Development Report, only 34 percent of the population had sustainable access to an improved water source in 2002, and only 16 percent of the population had sustainable access to improved sanitation. For poor and vulnerable groups in isolated areas, lack of access to health centres exacerbates the problem of health risks. The affordability of health care poses an additional barrier. The bulk of health care spending continues to come from out-of-pocket payments and user fees, which are estimated to account for 75-85 percent of total funding. Based on the 2004 CSES data, out-of pocket payments for health care are estimated to be about US$15.48 per capita per year, although this figure is believed to be an underestimate. The Health Sector Support Strategy 2002-07 estimates that households pay an average of 12 percent of their income for health care, but the burden of out-of-pocket expenditures is much higher among the poor given their very low incomes. Just one outpatient visit to a commune clinic or district health centre can consume one-third of annual non-food spending for those in the poorest quintile, while an inpatient visit to a public hospital can cost more than twice as much as one year’s non-food spending (World Bank, 2006).

The World Bank published a detailed report on managing risk and vulnerability in Cambodia in 2006. Data on common shocks affecting households across the country was collected. The below table summarizes the shocks reported by households during interviews in case study sites. It should be noted that this list is neither exhaustive nor completely representative but merely illustrative of the problems households face.

Table 8.1: Types of Shocks / Risks in Selected Provinces

Source: Muny et al. 2004

Thus, as seen above, households in Cambodia are exposed to a variety of risks that could cause even relatively wealthy households to become poorer and drive the poor into destitution (World Bank, 2005). Idiosyncratic shocks such as illness, field or farmer specific crop failure, loss of livestock, theft or violence expose the vulnerability of the poor. Every year mines/UXOs cause death or injury to family member – the “breadwinner”, the caregiver (mother), or children. They can also cause loss of livelihood assets – death or injury to draft animals. The household’s vulnerability to these shocks is heightened by the following factors: (i)Limited asset base, (ii) Underdeveloped basic services; (iii) Lack of economic diversification among rural poor households; (iv) Over-dependence on common property resources (v) insufficient access to cultivable land and (vi) Unstable weather conditions with persistent drought in some parts of the country.