CHAPTER IV

COST, RESOURCES, AND PROGRAMMING

Costs / Resources needed / Financial Outlay

4.01     Successful and timely implementation of NSDP strategies and achievement of NSDP targets needs the necessary resources. Taking into account all the emerging factors, including the high growth levels now expected, the estimates for possible levels of investments envisaged in the NSDP have since been revised upwards from a total of US$ 6,401.10 million to US$ 10,014.6 million, most of the increases attributable to investments in the private sector, both domestically and externally financed   – see detailed revised figures at Annex I:2. The new projections do not however include fully all the additional needs for investments in the public sector, particularly in infrastructure so necessary to spur and maintain momentum of robust economic growth, the social sectors like education and health, technical assistance and surveys as well as additional needs of current expenditure engendered by more investments in the public sector. Thus, the needs of funds for public sector investments for implementing NSDP during 2006 - 2010 remain at US$ 3,500 million, the same as before, amounting to about US$ 700 per year increasing progressively every year. However, the detailed breakdown of this total has changed somewhat as in the Table below:

Table 4.1: Levels of Public Sector Investments Needed, 2006-2010
(US Dollar Million)

4.02     As per revised figures, the following sources are expected to contribute to the total of US$ 3,500 million in public sector outlay:

• About US$ 651.1 million from domestic resources (current budget surpluses); this is less than US$ 783.3 million anticipated in NSDP but is based on more realistic and latest estimates.

• US$ 2,500 million from external sources (traditional EDPS), unchanged from NSDP.

• The balance of US$ 348.9 million is likely to be made available from (1) by non-traditional EDPs; (2) better budget performance; (3) likely additional resources accruing from successful exploitation of oil and gas resources; (4) funds from possible past debt relief; and (5) additional funds from traditional EDPs by raising global development aid flows to the promised 0.7% of their GDPs.

4.03     The gap of US$ 348.9 million in public outlay resources could widen further if allocation and use of funds do not get fully aligned to the priorities of NSDP - in other words: if they get spent on non-priority projects/investments/activities. In the past, substantial part of EDP resources bypassed the national budget. It is therefore of highest importance, that from now on budget allocations and EDP support will not only be made available, but are also fully aligned to NSDP priorities. Furthermore, freestanding TA needs to be limited (to about US$ 500 million).

4.04     The critical challenges ahead are therefore to ensure that (where possible through the already established TWG mechanisms):

• all ongoing programmes and activities funded by EDPs are critically re-examined and if needed to realign them to NSDP priorities;

• in particular, try to reduce the free standing technical assistance components as much as possible, in order to achieve maximum transfer of net resources for investment;

• all new programmes supported by domestic or external  resources clearly adhere to NSDP priorities;

• EDPs, including in particular, provide assistance only in the form of grants, loans (mainly in the concessional forms) being restricted to clearly capital investment projects;

• EDPs, both bilateral and multilateral, start providing debt relief for past debts as soon as possible;

• all modes of delivery of external assistance are aligned to and harmonised with the procedures and processes adopted already by RGC for its work, with the view to ultimately resort to “budget support” as the most preferred mode of providing external assistance; and

• speedy preparation of sector wide strategies and action plans with priority attached to  critical sectors like agriculture which impact on the lives and livelihoods of the majority. 

4.05     Projections for private sector investments in various spheres of economic activity have been raised to US$ 7,660.8 million¹ during 2006-2010 compared to US$ 4,016.5 million assumed in the NSDP document. Such an increase of around 90% may seem overly optimistic but is considered quite realisable; it is based on the anticipated high increases in private sector investments, from domestic and foreign resources, expected to take place particularly in the oil and natural gas and power and electricity sectors. RGC will strive its best to progressively and proactively improve the investment climate in Cambodia through various targeted efforts including better infrastructure, reform and strengthening of the financial sector to release dormant funds for productive investments and support through facilitating legal and regulatory framework to provide a stable and level field for competitive activities.

4.06     NSDP allocations and details of overall financial outlay: NSDP has already allocated² the overall outlay of US$ 3,500 million to various sectors in order to achieve its overall quantitative and qualitative goals and objectives in particular poverty reduction and CMDGs. This allocation providing 32.86% to the social sectors and 62% to benefit rural areas, remains unchanged as in Table 4.2.

Programming of NSDP outlay

4.07     The financial allocation projections made for various sectors under NSDP (table 5.2) are broad directions or indications for moving forward. In order to become operational, they have to be further broken down into clear proposals for specific capital and current expenditure on an annual basis. For this purpose, the following instruments have been put in place:

• the three-year rolling Public Investment Programme (PIP) consisting of investments and technical assistance, both from domestic budget and external resources, but excluding current expenditure, prepared by MOP;

• the three-year rolling Mid-Term-Expenditure Framework (MTEF) comprising budget expenditures, both capital and current (done by MEF);

• the annual Budget (comprising investments and current expenditures), prepared by MEF; and

• regular consultations conducted between RGC and EDPs by CRDB³ and line ministries and agencies to ensure that EDP assistance is fully channelled to the NSDP priorities.

4.08     Two PIPs for 2006-2008 and for 2007-2009⁴ which have been prepared so far have attempted to clearly align projects to NSDP priorities though for the period 2007-2009 about 48% of funds required for the period (US$ 1,060 million out of the identified needs of US$ 2,205 million) still need to be identified or secured. While Table 4:2 indicates the most preferred allocations under NSDP, PIP 2007-2009 at Annex I:4 provides details of programmes or projects (including several shown as high priority but still to be funded) envisaged by RGC to make necessary investments in the public sector.

4.09     Efforts are already underway to properly sequence preparation of various documents – PIP, MTEF, Budget and the DCR – and to bring synergy and harmony among them. This process and the overall monitoring of NSDP progress is being conducted, as envisaged in the NSDP, by close coordination and cooperation among the four main central agencies, viz., MOP, MEF, SNEC and CRDB.

Table 4.2: NSDP Allocations by Sector, 2006-2010
(Amount in millions of US$)

Explanatory Notes:

1.  (a) Amounts against each sector include: resources available from all sources: RGC & EDPs (spent directly or thro'  RGC) 

      (b) capital outlays, additional current expenditure, TA, cost of monitoring, data gathering, maintenance of websites

      (c)  Rural - Urban figures are indicative and should be adhered to.

      (d) amounts also include all subventions to province, district and commune levels to be implemented by them.

2.   (a) includes youth and sports.

      (b) of the total, 60% will be earmarked for Basic Education.

3.  Includes fisheries, de-mining & activities except for "seasonal" crops; excludes forestry shown under Environment & Conservation

4.  RD: Includes SEILA, rural roads, markets, irrigation schemes; water supply & sanitation; D& D; local governance.

5.  Includes: employment generation and labour issues

6. Excludes rural roads; primary & secondary roads help rural areas -- hence (50%); private sector to be involved; includes
    additional maintenance costs.

7. Excludes activities in rural areas included under Rural Development.

8. Most investments in this sector should be sought from the private sector.

9. Most investments in this sector should be sought from the private sector.

10. Mainly for awareness creation and mainstreaming; other individual sectors will incorporate activities in their work.

11. Includes Forestry.

12. Includes: (a) all reforms like Judicial & Legal; Public Administration; Macro-Economy; Fiscal & others.

                     (b)  NIS studies and surveys such as Census 2008, poverty assessment; CSES, NSDP monitoring, etc. 

                     (c)  Development cooperation management.

                     (d)  Various elections.

                     (e)  all other public admin., activities.

13. Reserve to enable redirection of resources if needed.

14. Slight difference in total figures (rural, urban) and grand total due to rounding of decimals.

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