Development Partner Response on Progress toward Compensation Reform
and Priority Operating Costs

delivered by HE Frank Mann, Ambassador of Germany
at the 16th Meeting of The Government-Development Partner Coordination
Committee,
Phnom Penh, April 29^th 2010

1. Introductory Remarks

On behalf of the Development Partners I would like to convey to you our appreciation for the dialogue on the twin-track approach of the Priority Operating Costs (POC) and Compensation Reform (CR) within the broader Public Administration Reform framework, in particular the open and constructive April 9^th meeting with HE DPM Sok An.

We acknowledge the strong commitment and ownership by the Royal Government of Cambodia for both track one Compensation Reform and track two POC reflected in a number of key agreements:

1. mandate for the technical teams to elaborate a Joint Monitoring Indicator (JMI) on Compensation Reform for the CDCF;
   

2. joint understanding that POC should focus on the implementation of NSDP priorities;
   

3. establishment of a Government Steering Committee for the development of POC;
   

4. agreement that POC is replacing all other salary supplements and incentive schemes and therewith contributes to harmonisation of the previous ad hoc schemes;

5. mandate for the technical teams to elaborate on the details of POC to ensure that POC can be implemented from the 1^st of July.

Development Partners believe that both tracks are critical: POC as a transitional measure and Compensation Reform as the key component of long-term civil service reform that will contribute to improved service delivery in Cambodia We would like to reemphasize that in our understanding POC is a transitory mechanism and that we agree with your view that civil service effectiveness - including development program implementation - should not rely on such scheme. We therefore trust that as we progress with the implementation of the compensation reform, POC will gradually end. We welcome the suggestion at the high level meeting to elaborate principles and milestones that would lead to this ending of POC (in 18 to 24 months).

We recognise the complexity of the Compensation Reform, especially as it has to be part of broader civil service reform. It is important in our view to use the JMI as a basis to lay out some of the key milestones and parameters of these complex reforms. These milestones should include a sequenced strategy to implement the reform including the identification of key sectors to start with. We welcome that the RGC through the Council for Administrative Reform Secretariat has, based on the mandate of the high level meeting, started to develop and engage in a technical dialogue on the JMI for the Compensation Reform within a broader Public Administration Reform Agenda.

2. Issues to be addressed

Track one: Compensation Reform

What is the Government’s vision for completing the compensation reform? (We believe it would be useful to have a final vision, as an anchor to work backwards to various milestones)

• What specific decisions will Government make on the National Public Administration Reform (NPAR) - as the broader framework for the compensation reform - in the next couple of months? (in terms of adoption of NPAR, definition of CR / NPAR studies, prioritisation of policies, adoption of an implementation strategy and plan)
  

• What is the Government’s approach to create fiscal space for this reform? (Options: a mix of raising revenues, redirecting ODA from POC to salaries, and possibly budget-support, budget reallocations and savings) What are the steps MEF is taking to enable further elaboration of NPAR and compensation reform?
  

• Given the reform complexity, but also recognizing complex equity issues, how does the Government intend to sequence the implementation of the compensation reform? What is the expected timeframe for early implementation, to enable sequencing and learning from initial experience for example by starting in selected sectors?

Track two: Priority Operating Costs (POC)

• What are the implementation parameters for POC as a tool for the implementation of NSDP?
  

• What are the next steps for the development of the POC grid?
  

• We welcome the suggestion at the high level meeting on April 9^th to jointly develop principles and milestones for POC such as the date for its revision and the ending of the scheme. When and how does Government envisage a review of POC?