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15. Overall, year 2001 was the year of strengthening security and social safety, enhancing democracy and increased respect for the basic rights and dignity of Cambodians from all walks of life and preparing for the devolution of power to the grassroots level through decentralization and commune elections. 2001 also witnessed the strengthening of institutional capacity at both central and provincial levels and gradual improvement in the living standards of the population by embarking on reforms in all sectors and in particular implementing the government’s poverty reduction strategy. These achievements have been made possible by active participation of the authorities at all levels, Cambodia’s development partners, NGOs and many international organizations, that have displayed their strong commitment to Cambodia. 16.
In terms of political developments and the progress in implementing
the government’s strategy, 2001 reflected our endeavors to prepare the
grounds for the following: First,
organizing the commune elections, strengthening democracy, promoting the
respect of basic rights and dignity of the Cambodian people at the
grassroots level; Second,
pursuing the implementation of the reforms, in particular continuing to
implement the Governance Action Plan (GAP); Third,
preparing and commencing implementation of the Second Socio-Economic
Development Plan (SEDP II); Fourth,
implementing the poverty reduction strategy. 2.1.1.
Strategy for Poverty Reduction 17. Since the June 2001 Consultative Group Meeting in Tokyo, the Royal Government of Cambodia (RGC) has made significant progress in implementing its poverty reduction strategy and formulating a comprehensive package of policies to attain this goal. For the Royal Government, the war on poverty is not just a convenient slogan or a mere policy issue but a deep felt passion. Progress and social justice are the two bedrocks of our government’s policies and strategies. The Second Socio‑Economic Development Plan (SEDP-II) 2001-2005, which was adopted by the Council of Ministers in December 2001, reflects this commitment. The Government’s poverty reduction strategy embodied in SEDP II has three main components:
18.
The strategic message of the SEDPII is that economic growth is a
prerequisite for poverty reduction and the key to growth is private sector
development, which will be achieved through sustained improvement in the
governance environment. SEDPII also presents quantitative targets and
outlines the processes for monitoring and evaluating the progress and
impact of our policies. SEDPII also presents targets for various social
development indicators for the Plan period, including a target to reduce
the poverty headcount index from 36 to 31 percent in order to reduce
poverty by half in fifteen years. 19.
A Poverty Reduction Strategy Paper (PRSP) is being prepared that
uses the SEDPII as its key building block. Key areas where additional work
is needed to build on SEDPII to develop the PRSP include: (i) improving
monitoring and evaluation mechanisms; (ii) developing more comprehensive
performance indicators and targets; (iii) improving the costing of
priority public policies and programs and their linkage to the budget;
(iv) integrating the macroeconomic framework and the overall poverty
reduction strategy, and (v) developing a trade strategy within the
framework of the poverty reduction strategy. To elaborate on the PRSP
process, the RGC has institutionalized the PRSP framework by establishing
the Council for Social Development (CSD), which is responsible for
monitoring and facilitating the implementation of the government’s
poverty reduction strategies and policies. The CSD is assisted by a
General Secretariat, which is responsible for formulating the PRSP, as
well as for coordinating poverty policy and program formulation,
implementation and monitoring; capacity development in poverty monitoring
and analysis; and facilitating consultation and consensus building
regarding pro-poor policy questions among development partners. In
addition, CSD is assisted by four working groups focusing on general
administration, poverty reduction, sector work, and social aid. The PRSP
process is expected to be completed by the end of 2002. 2.1.2.
Economic and Fiscal Reform Agenda 20.
Fiscal performance in 2001 has broadly been good, with improved
revenue mobilization and expenditure restraint. Concerted efforts have
been made to implement fiscal reform, including improved budgetary
management, broadening the tax base, avoiding ad hoc customs duty
exemptions, and improving customs administration; re-orienting government
spending to priority programs in agriculture, rural development, health
and education; improving administrative procedures to ensure that social
sector spending targets are met; and improving public sector governance,
transparency, accountability and adherence to the rule of law. More
importantly, the RGC has set the target of reconstructing all the existing
paved roads by 2005. 21. The 2001 Budget was implemented cautiously to make room for financing the commune elections and to reach the targeted fiscal balance. The increased spending on flood relief in 2000 and the financing of commune elections have had a major impact on the fiscal position in 2001. Domestic tax revenues increased 7 percent from 2000 level, reflecting increased collection of non-tax revenues. The total expenditure has been contained below targets, thus minimizing the need for domestic budget financing. In 2001, the overall fiscal deficit (excluding grants) has been contained at 5 percent of GDP, while the current surplus was maintained at 1½ percent of GDP. 22.
Considerable progress has been made in restructuring
the banking sector by reducing
the number and improving the quality of commercial banks in an
effort to instill public confidence. Recapitalization, strengthened
banking supervision, and improved management of the Foreign Trade Bank of
Cambodia are designed to protect depositors. Moreover, these reforms are
aimed at promoting a strong and well-functioning financial sector that can
overcome the problems of self-financing and to mobilize the idle financial
resources for productive investment. To this end, the Royal Government
adopted the "Vision and Financial Sector Development Plan for
2001-2010", which outlines a long-term vision and strategy for
sequencing policy reforms to develop the financial system over the next
ten years. We hope that by rigorously implementing this strategy over the
next 10 years, Cambodia will be able to establish a vibrant, efficient and
modern financial sector based on international standards. 2.1.3
Public Administration Reform 23.
To highlight some of the major achievements, in the area of public
administration reform, the RGC has successfully completed the civil
service census, issued ID cards to government officials, established a
computerized payroll, put in place a classification system for civil
servants and introduced a human resources management information system (HRMIS).
In this context, on 19 October 2001, the Cabinet approved the strategy for
the rationalization of civil service. At the same time, within the
framework of the 2002 budget, the RGC has introduced a new remuneration
and classification system more conducive to career professionals. The
establishment of the priority mission groups by using the government's
budgetary resources is a project to increase labor productivity and
provide incentives to those involved in priority missions. In the area of
administrative reforms, which are key to improving public services
delivery, the Government has taken big steps forward and created a
momentum to support reforms in all areas. These efforts will accelerate
economic growth and promote poverty reduction. 24.
An important part of the program for state reform is the
introduction of decentralization at commune level and the
associated deconcentration of management functions to the
provincial level in order to ensure improvement in governance at the
grassroots level. The devolution of power that is being carried out
through decentralization and deconcentration will shift the focus of
development closer to the people in all our endeavors including the
implementation of structural adjustment, strengthening democratic local
governance, enhancing the efficiency and impact of public services
delivery and the alleviation of poverty. Based on our experiences over the
last five years with piloting decentralization under the Royal
Government's Seila Program, we have concrete evidence that this process
enhances the participation of the people, increases local ownership and
strengthens the bonds between the State and civil society. Under the
National Committee for Support to Commune Councils (NCSC), these
experiences are now being institutionalized and transformed into a
decentralized regulatory framework at a rapid pace. Regulations on powers
and functions of the Commune/Sangkat Councils (C/S Councils), delegation
of authority to the provincial governors for supporting the Councils and
the role of the Commune Clerks have been formulated and approved. The
Commune/Sangkat Fund has been established and regulations on the systems
for fiscal transfers and financial management have been designed and
approved. Also, regulations on the Commune Planning and Budgeting System,
with a high degree of public participation and accountability have been
designed and approved. 25. The Royal Government is well aware that the adoption of regulations must quickly be followed by training and capacity building of the C/S Councils on their duties as well as the systems that will enable them to function, so that the critical process of “learning by doing” can commence. In this regard, three cycles of training have been designed and budgeted focusing on General Orientation, the Financial Management System and the Planning and Budgeting System. The Orientation Training for all 1,621 commune/sangkats has been successfully completed, training on the Financial Management System is underway and will be completed in July and the training on Planning and Budgeting will be carried out from July to September of this year. The strong commitment of the Royal Government's commitment to this important reform process is reflected in the first transfer of 12.5 billion Riels ($ 3.2 million equivalent) in May to the commune/sangkat accounts that included 10 billion Riels from the national budget and 2.5 billion Riels from UNDP support to Seila financed by Sweden and the United Kingdom. In over one third of the rural communes, bidding and contracting of private sector entities has been completed by the C/S Councils and implementation of first-year investment priorities is underway. While the Royal Government is fully aware that local democratic governance and the decentralization process is a long road, we are confident that our critical initial steps are meeting the challenge. 2.1.4
Legal and Judicial Reforms 26.
The legal reforms are on track, and the RGC has been
successful in enacting many of the needed laws and regulations. Legal
reforms are necessary to support the evolutionary process of social and
economic change, and the legal system must be adjusted to support the new
economic strategy. Hence, our efforts are being focused on putting
in place basic elements of the legal framework to underpin the development
of a vibrant market economy and the promotion of trade and investment by
developing the legal framework on property rights, the creation and
winding-up of business entities, contract and a fair marketplace, banking,
tax and accounting. Moreover, in the next few years attention will be
given to the development of laws pertaining to accounting, insurance,
secured transactions, commercial enterprises, bankruptcy, contracts and
commercial credit, and law on negotiable instruments and payment
transactions in order to ensure the effective functioning of the financial
sector. Other efforts concentrate on streamlining the process of
formulation of the laws and regulations and their wide dissemination. 27.
To speed up the judicial reforms, the Council of Ministers
drafted a Master Plan for Legal and Judicial Reforms. Given the importance
and the sensitivity of the legal and judicial reforms, in-depth
discussions and extensive consultations will be held on developing a
Master Plan in order to identify effective and efficient measures and
improve the quality of this important document for submission to the
Council of Ministers as soon as possible. The Council for Legal and
Judicial Reform will also carry out a comprehensive assessment study to
identify the specific needs for human, financial and material resources to
accelerate the reforms process. Cambodia's development partners, including
relevant local and international organizations should consider providing
technical and financial assistance, if we really want to see tangible
progress in implementing legal and judicial reforms. Indeed, a lot remains
to be done and it requires close cooperation between the RGC, the
Parliament, the courts and all our external partners, who want to see
Cambodia’s judicial system to be independent, impartial and
professional. Efforts are already underway to build the capacity of the
judiciary system. For example, the Royal School for the Magistracy is
being established and training of trainers is being provided. 2.1.5 Military Demobilization 28. An important element of the RGC’s agenda for the next two years left in the second term of its office is the implementation of the reform and restructuring of the Royal Cambodian Armed Forces (RCAF), as specified in the Defense White Paper adopted by the Royal Government in February 2001. The reform process will substantially reduce current manpower levels of RCAF's to a level that will allow the RCAF to fully and efficiently discharge its duties as stipulated in the Constitution and in line with regional and world developments in the 21st century. The RGC will launch Programs that will transform the demobilized soldiers into productive members of the civilian labor force who will contribute to sustainable economic development and poverty reduction among the Cambodian people. 29. Significant progress has been made to implement reform and restructuring of the Royal Cambodian Armed Forces (RCAF). Building on the experiences and lessons learnt from the Pilot demobilization program and the strong moral, material and financial support from the donor community, the Council for the Demobilization of Armed Forces had successfully completed by late last year the discharge of the first batch of 15,000 military personnel plus their family members. The process of this first full-scale reduction-in-force was carried out in an orderly, manageable, efficient, smooth, transparent, accountable and timely manner, as planned, without any problems or incidents. This year the CDAF will continue to closely cooperate with the Donor Working Group on Demobilization to procure and deliver the four options of reintegration assistance packages as well as other assistance planned in the demobilization program to the 15,000 veterans who had been discharged last year. The CDAF will also begin to lay the foundation for the second full-scale demobilization of another 15,000 soldiers to achieve RGC’s target of reducing the armed forces by a total of 55,000 soldiers over a period of five years (1998-2003). Prompt implementation of the full military demobilization program is crucial for budget savings and redirecting resources to the priority sectors: physical infrastructure, social and economic sectors, especially education, health, agriculture and rural development. This demobilization program when fully implemented would result in savings of up to 2 to 5 billion CRs. 30. Therefore, prompt implementation of the full military demobilization program is crucial for budget savings and redirecting resources to the priority sectors: physical infrastructure, social and economic sectors, especially education, health, agriculture and rural development. Hence, this demobilization program will create favorable conditions for the government to implement the reform of public expenditure, especially focusing on shifting resources from non-productive to priority, productive sector. 2.1.6
Sound Management of Natural Resources 31.
Rigorous implementation of the forest management policies is
the top priority of the RGC and it remains vigilant in this area. Since
the fifth CG meeting, several decisions and actions have been implemented
by the RGC to create conditions conducive to the sustainable management of
forest resources. The RGC is committed to strengthen the Forest
Crime Monitoring Unit (FCMU) by providing it with additional financial
support. The FCMU has assisted the RGC in monitoring illegal logging in
order to effectively stamp out corruption from this sector. The
legislative and policy framework that is indispensable for achieving
sustainable resources management has been strengthened considerably with
the passage of the long-awaited new forestry law. The Law concerning the
protected areas is under preparation to provide the framework for the
sustainable management of the bio-diversity and natural resources
contained in the 23 protected areas. A sub-decree on community forestry
has been developed through a nationwide participatory multi-stakeholder
process to enhance local community participation in forest management
decision-making processes. The initial steps on the development of a
forest policy statement and a restructuring of the forest administration
have been taken by DFW/MAFF. The RGC is firmly committed to complete the
reform process in the forestry sector to eliminate illegal logging, to
enhance capacity building for DFW's staff and public awareness, strengthen
forest rehabilitation and reforestation activities, and to enlarge natural
forest conservation for eco-tourism with the assistance of our development
partners. 32.
The plight of the poor can be improved by widening their access to
forests, fisheries, water resources and other public goods. Providing
access to fisheries and water resources to improve livelihoods of the
people living in the Tonle Sap and the Riparian region has been a high
priority of the Government. A comprehensive reform of the traditional
fishing lot system has been completed. The RGC has cancelled or
reduced the size of official fishing lots by a total of 536,302 ha,
accounting for some 56 percent of the total fishing lots to allow the poor
free access to fishing and to earn a living in 12 provinces. Fisheries
reform has improved access by poor farmers and fishers to fisheries
resources, thus contributing to the implementation of the government’s
poverty reduction policy. The MAFF has drafted a new Fisheries Law,
prepared a Fisheries Master Plan, and a sub-decree on Community Fisheries
and Fishing Lot Auctions has been issued after extensive consultations
with all stakeholders. 33.
The RGC has accorded priority to the preparation and implementation
of land policy, which focuses
on land distribution, land management and land administration. After the
enactment of the new Land Law, attention has been given to the
establishment of a mechanism for systematic enforcement of this law with a
view to securing land tenure, providing a basis for reduction in land
conflicts, and facilitating land management. To ensure efficient
enforcement of the Land Law, nine governmental sub-decrees have been
drafted. At the same time, priority is given to strengthening
institutional capacity in land dispute resolution by organizing seminars
to train government officials in techniques for land dispute resolution,
and drafting a sub-decree on Cadastral Commission. 34.
The RGC is preparing a framework for land policy. The core elements
of the RGC land policy will support systematic land registration, tax
reforms, the establishment of a legal framework to enforce property
rights, the establishment of provincial, municipal and national master
plans and zoning, and the development of a housing policy.
With technical assistance from the Federal Republic of Germany and
Finland, the RGC has carried out a systematic land registration pilot
project using state-of-the-art technology and delivered land title
certificates for the first time to the inhabitants of Samrong District,
Takeo Province. Data has been collected on 62,046 parcels of land. Of
these records for 26,534 parcels have been put on public display for
verification, So far, certificates of land title have been issued to 2000
legal landowners. Overall, 15 percent of land in the Kingdom of Cambodia
has been registered. To fully
implement this daunting task, we have organized training courses for
government officials on the methodology for cadastral index mapping and
land registration. The next step is to develop maps for land use in
priority provinces and cities. A request for the establishment of a master
plan for Sihanoukville has been made and a land use plan along National
Route 4 is being prepared. Also, a Land Management and Administration
Project to complete the registration of land throughout the country and to
strengthen the political, legal, institutional and technical aspects of
land management has started in May 2002. This project, that has a total
budget of US 33.9 million for the next five years, is being supported by
the World Bank, Germany, Finland, and the Royal Government of Cambodia. It
will cover 10 provinces and one municipality. 2.1.7
Strengthening Good Governance and Combating Corruption – The
Backbone of Reform 35. The RGC has made serious efforts and achieved significant successes in implementing the Governance Action Plan (GAP). Most of the year one initiatives under GAP have been completed. Based on our experiences with the implementation of GAP and the progress we have been able to achieve, the Royal Government has undertaken to update the GAP to introduce new initiatives and priorities. The new priority initiatives evolve around needs and issues in the areas of social development, investment and commerce, demobilization, administrative reforms and anti-corruption. The details on the updated GAP are being provided to you in separate discussion papers. 36.
The RGC recognizes that transparency is essential to fight
corruption, which takes a toll on economic performance and undermines the
efforts to reduce poverty. For those without money and connections,
corruption in public services can have debilitating consequences.
Corruption diverts government spending away from socially valuable goods,
such as education and health and undermines public investment on the
rehabilitation and development of the infrastructure, such as roads,
bridges, dikes and canals, that is needed by our poor rural communities.
To this end, streamlining bureaucratic procedures, simplifying and
modernizing the tax system, eliminating excessive regulations, and
motivating public servants by giving them a decent level of salaries can
help reduce the opportunities for corruption. Enacting anti-corruption
laws and regulations is just one part of the equation. Rigorous
implementation of those laws and regulations is another part. And we know
very well that changing the mentality of the people will take some time. 37.
Notwithstanding tremendous difficulties and impediments, the RGC
has made significant progress in combating corruption. The GAP itself is a
compendium of measures that in way or another combat corruption by
addressing its root causes. Cracking down on illegal logging, the increase
in tax revenue, the removal of ghost workers from the public service and
the army payrolls and the confiscation of land, which had been sold off or
held illegally, were among the measures aimed at tackling corruption. The
RGC has made considerable efforts to establish and operationalize the
National Audit Authority. These measures will substantially contribute to
our fight against corruption. The government is committed to rigorously
improving governance by implementing the principles and measures that have
been stipulated in the Governance Action Plan (GAP). 38. The RGC considers the private sector, both domestic and foreign, as an engine of growth. A vibrant private sector requires that crucial elements of structural policy be in place. The RGC has doubled its efforts to create a climate that fosters investor confidence through improved dissemination of information to investors about the “rules of the game”, with regards to taxation, regulations and the protection of property rights. The RGC has completed the review of the Law on Investment and a draft Law is awaiting approval of the legislature. This Law will ensure the maintenance of balance between the need for increased revenues and Cambodia’s competitiveness with countries in the region. Thus, the draft amendment to the Law on Investment while rationalizing the investment incentives, provides a simplified and transparent mechanism to automatically qualify investment projects for incentives. 39.
Sustained economic
growth cannot be achieved without the supply of skilled manpower that is
needed by the private sector. Similarly, in spite of the Royal
Government’s commitment and substantive efforts, successes in the areas
of administrative and governance reforms are hampered by a lack of
capacity within the public sector to effectively enforce and manage the
implementation of the approved laws and regulations. It is important to
note, that while Cambodia can benefit from the experiences of its
development partners in the formulation of policies and processes,
effective enforcement and management of the implementation of the approved
policies, laws and regulation is likely to remain constrained, at least in
the short- to medium-term, by the existing gaps in Cambodia’s human
capital base. 40. Procurement constitutes an integral part of budget execution. A major proportion of public expenditure at every level of government is incurred through the procurement of goods and services and construction activity. The performance criteria for evaluating procurement activities is economy, i.e. acquisition at the lowest price without sacrificing quality and timely delivery. To this end, the government adopted in 1995 a decree (No 60) on Public Procurement, based on international standards and best practices. However, since 1997, because of domestic political turmoil and regional financial cataclysm, some of the important provisions of this decree have not been fully implemented. To remedy these shortcomings, the government adopted a decision in December 2001 requiring full implementation of public procurement procedures for four priority ministries (Education, Health, Agriculture and Rural Development) in the acquisition of goods, services and construction activities, except for heavy capital investment in road, bridge and sewerage construction. 41.
The Royal Government would like to reassure its development
partners that it has been firmly resolved to fulfilling its commitments
made in Tokyo in June 2001. It has scrupulously supported the
implementation of all the ten recommendations made during the Tokyo 2001
CG meeting. It is true that for different reasons we have moved faster in
some areas than others, at the same time, RGC has remained committed to
make use of every opportunity to improve and accelerate these complex
reforms in all areas. In the final analysis, our development partners with
a comprehension of the constraints we face can judge what we have
achieved. From RGC’s perspective we can honestly state that we have come
a long way from where we were not too long ago. The Royal Government
remains committed to implementing policies and programs that will lift
Cambodia to a higher destiny, to a new plateau of sustainable development. |
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