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Budget for a Rising Economy

May Kunmakara / Khmer Times No Comments Share:
Workers at a construction site in Phnom Penh. An increase in government spending next year is expected to fuel growth. KT/ Fabien Mouret

Government spending on social welfare and economic development could both see double-digit growth next year, according to a document summarizing expenditures in next year’s budget that will be discussed at a Cabinet meeting chaired by Prime Minister Hun Sen today. 

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He is expected to approve a 16 percent increase in the budget for next year, to $4.36 billion, from $3.75 billion this year, according to Cabinet-level sources.

Phay Siphan, spokesman for the Council of Ministers, confirmed that a cabinet meeting would be held today to discuss the budget for next year. He said the budget would increase but said he did not know the amount because he had not examined it.  

Social spending will see a double-digit rise of 15.68 percent to $1.209 billion next year, from slightly more than $1 billion this year, according to the document obtained by Khmer Times. The funding will be spread across nine ministries, including education, health and environment, though the document does not stipulate how much funding each ministry will receive.

The smallest increase will go to administrative costs. They will rise just 1.7 percent, according to the document. This includes already scant allocations for provincial governments, the Ministry of Planning, the Anti-corruption Unit and the National Election Committee. General administrative costs will rise to about $428 million from $420 million this year, according to the document, which does not provide a breakdown on how much funding will flow to particular agencies or ministries. 

Spending on “defense, security and public order” will rise 16.51 percent to about $711 million next year, from about $610 million this year. These funds will flow to three ministries: defense, interior and justice, according to the document. 

Economic Spending

The major rise in spending will be for economic development, which will see funding increase by 20 percent to about $1.3 next year from about $1.07 billion this year. The funding will flow to nine ministries as well as the Civil Aviation Secretariat, according to the document.

An additional $609 million in funding has yet to be allocated. This represents a jump of nearly 20 percent over the amount of unallocated spending set aside in budget for this year.

Economist Srey Chanthy welcomed the increase in spending, saying it would support the growth of the economy and the development of Cambodia. “Taking inflation into account, this seems the right amount of increase. More spending in the social and economic sectors is welcome,” he said.  

However, he said the funding boost still falls short of the country’s needs. “Given the sizable need for inclusive and sustainable economic development and poverty alleviation in Cambodia, the amount is not enough,” he said. Moreover, he cautioned that the slight increase to administrative expenses would result in public administration remaining ineffective. This could prevent the government from supporting economic and social development, he added. 

Lack of Transparency 

Son Chhay, a lawmaker from the opposition Cambodia National Rescue Party, warned that a lack of transparency in government spending could hamper development, especially when expenditures are rising. “We need to have the detailed expenditures of each ministry because we need to see where the spending goes,” he said.   

“So, I think that the government’s spending is still not going in the right direction,” he said. 

“It is time to change,” Mr. Chhay said. “We should not make unclear spending like this,” he said after being told what was in the document. “Look at the public service. It is still too bad and corruption remains,” he said. 

The government lacks clear mechanisms for preparing the national budget, he said, describing the process as a scramble for cash by competing ministries. “They just keep increasing the expenditure requested by each government institution or ministry,” he said. 

“The way the government prepares the budget is not proper,” Mr. Chhay said, explaining that it arrived at its figures from the wrong direction. 

The process top-down rather than bottom-up. He said that requests for funding should begin at the local level and then move to the provincial level. “We need participation from provincial authorities to make suggestions [for the national budget],” Mr. Chhay said. 

The opposition lawmaker also described the process of budget requests within ministries as lacking structure. He said they needed systems in place to identify the most pressing needs, prioritize projects and develop action plans, especially in health and education.

Economist Mr. Chanthy, who was also briefed on the details of the document, agreed with Mr. Chhay that more spending should be channeled into education, health and social welfare. 

Mr. Chhay also questioned the increase in spending on security. “I am wondering why we increase spending in defense, security and social order so much. This is something to be considered. Why is this spending [boost] necessary?” he asked.

Revenues Rising

Cambodia collected $2.4 billion from taxes last year, up 27 percent from $1.88 billion a year earlier, according to official figures.

The General Department of Taxation collected $1.06 billion in tax revenue last year, up 18 percent over the year before, while the General Department of Customs and Excise collected $1.34 billion in taxes on goods entering and leaving the country, up 33.5 percent from the year before. 

Mr. Chhay said he supported the effort made by the government to increase revenue through taxes. “Particularly, we notice that the government has enhanced efforts to increase revenue from tax collection, which gives it more money to spend,” he said.  

He also called on the government to start paying down its debt and weaning itself from foreign aid as its revenues increase. “We should find ways to decrease taking loans because the amount of debt has not fallen,” Mr. Chhay said. “I see that the figure from the Ministry of Economy and Finance shows our foreign debt is around $8 billion. So, we have to double check the possibility of repayment,” he said.

Cambodia’s total debt as a percentage of gross domestic product (GDP), however, has fallen significantly, according to official data. It has fallen from more than 36 percent of GDP in 2006 to slightly more than 28 percent last year. Moreover, at a Cabinet meeting last month Prime Minister Hun Sen requested that officials at the Finance Ministry develop new strategies for debt management and repayment, cabinet-level sources said. The move is being made in anticipation of Cambodia’s transition to a lower-middle- income country, which will make it more difficult to access foreign aid and soft loans from multilateral lenders and development partners, according to documents obtained by Khmer Times. Additional reporting by Vincent MacIsaac

Workers install scaffolding at a construction site in Phnom Penh yesterday. The construction industry is seeing a swift and accelerating influx of investment. KT/ Fabien Mouret

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