Cambodia Introduces Public Financial Management Reform

By Soy Sophea

The Royal Government of Cambodia has announced the introduction of the Public Financial Management Reform Program- stage 2 (PFMRP) in honor of a pledge to enhance public budgeting. The announcement was made by Prime Minister Hun Sen at the Council of Development for Cambodia on December 3 in Phnom Penh.

The Prime Minister said that effective and efficient public financial management is necessary for national development and poverty alleviation, especially through ensuring sustainable economic growth and improving the efficiency of public service delivery. This is the main objective of the Rectangular Strategy-Phase II and the National Strategic Development Plan.

The Premier told his ministries and agencies that failure to prepare action plans, monitor key indicators or take specified action would lead to the failure of the whole reform program.

“If we reform, 99 percent will continue to live. But if we do not reform 99 percent dies,” Hun Sen said.

The implementation of the “Public Financial Management Reform Program” has received added significance given the depth of the financial crisis, currently creating chaos on world markets. Cambodia, as a contributor to globalization cannot really escape from this kind of consequence, said Hun Sen.

He added, “We are bound to experience some negative impact out of this crisis; the question is, how much? However, we are clear that the improvement and strengthening of public financial management will help strengthen us in the face of these challenges and will help reduce negative effects of this crisis.”

Therefore, in such unfavorable conditions as this, the strengthening of public financial management is actually more important than at any other time.

“In these unfavorable circumstances, strengthening budget management is more important than ever,” he said. “The PFMRP is very important to support other key reforms of the Cambodian government.”

Effective and efficient public financial management is the necessary foundation to promote country development and poverty reduction for the people. The Royal Government of the 4th Legislature still continues to place “Public Financial Management Reform Program” as its first priority.

The Prime Minister suggested that the Ministry of Economy and Finance must continue to play core roles in leading and supporting this reform process in cooperation with all ministries/institutions within the framework of the EFPC and PFMSC.

All ministries/institutions must actively participate and take charge in preparing their own reform action plan. They must manage and implement their own reforms and lead the management of the implementation of their own reforms as efficiently and effectively as possible. Furthermore, they must continue to draw the links between public financial management reforms pillars and development pillars, along with various other reforms. This will create more cohesiveness, interconnectedness and consistency.

This linkage ensures the effectiveness of important reforms within the framework of the “Rectangular Strategy”, especially Public Administration Reform and the De-concentration and Decentralization Program. Preparing a civil administration, based on democratic development principles, which is closer to people, efficient, and transparent enough in providing public services is the highest priority of the Royal Government in the 4th Legislature.

In this regard, the Council for Administrative Reform must cooperate with the EFPC and PFMSC to enhance quality, efficiency and the loyalty of the whole public administration.
Therefore, it is very important that the Royal Government and all relevant Development Partners must learn from the experiences of the 1st stage of implementation of the Merit Based Pay Initiative (MBPI). So far, this has been carried out in the spirit of national development and continues to expand its extensive positive influence across other relevant ministries/institutions.
Aun Porn Moniroth, Secretary of State for Economy and Finance and Chairman of the Public Financial Management Reforms Steering Committee, said at the meeting that the PFMRP is one of the key elements within the core of the “Rectangular Strategy.

The Secretary of State said the long term vision of this reform program is to build an international standard for public financial management system by 2015, through implementing a long-term strategic plan consisting of four platforms—building budget credibility, improved financial accountability, budget-policy linkages and performance.

Qimiao Fan, World Bank Country Manager for Cambodia echoed the Cambodian Prime Minster’s comment saying that the success of stage II will depend upon the extent to which the control of resources is delegated to line ministries and sub-national governments. He added that the new framework in both central and sub-national government will need to support de-concentrated and decentralized financial accountability, whilst maintaining aggregate central control of the budget.

“Development partners stand ready to support this review and capacity building process, both in terms of strengthening the government’s supply side capacity and with helping with demand side initiatives,” Fan said. “We will continue to harmonize our efforts around the government owned reform program.”

He said that the current financial crisis serves to remind all that external events provide a constant challenge to securing policy goals. He stated that building strong internal PFMRP arrangements will provide an effective way of mitigating the impact of the crisis on the economy and on the lives of the most vulnerable in Cambodia.

PFMRP-stage I was introduced on December 5, 2004.//