Royal Government of Cambodia Ministry of Economy and Finance General Department of Finance for Sub-national Administration State Budget Allocation to Sub-national Administrations Presented by : Mr. Hoy Vicheth Asian Public Governance Forum on Local Finance Management. Lombok, Indonesia. May 7-8, 2015.

Contents Cambodia at a Glance Administration System Sub National Administrations (SNA) Budgeting Summary of SNA’s Annual Budget Challenges

Cambodia at a Glance Kingdom of Cambodia Capital: Phnom Penh Area: 181 035 KM2 Border: Thailand, Lao, Vietnam. Population: >15M Language: Khmer Currency: Riel Religion: Buddhist

Administration System

Sub National Administration (SNA) Budgeting. Capital/ Province Budget (CP Budget) District/ Municipality Funds (DM Fund) Commune/ Sangkat Funds (CS Fund)

3.1. Capital/ Province (C/P) Budget The central government transfers state budget in a rate of 0.96% of current national revenue to C/P. The CP also have their own source(tax) revenues. Increment rate of CP budget 2015 is 17.65% compared to CP budget 2014.

3.1. Capital/ Province (C/P) Budget (Cont.) The C/P budget allocates based on the following indicators and formula as below: Admin Operation was allocated; Equal shares: 40% Number of councilors: 20% Number of Board of Governor: 20% Number of staff: 20% Local development component was allocated; Number of population: 20% Poverty scores: 20% Number of Districts/Municipalities: 20%

3.1. Capital/ Province Budget (Cont.) CP Budget Allocation (2010-2015) Year Amount (in million $) 2010 80.59 2011 88.30 2012 105.64 2013 124.23 2014 158.23 2015 186.16 TOTAL 743.15

3.2. District /Municipality Funds Royal Government of Cambodia has been transferred state budget to DM fund in the following rate; 0.80% of current revenues (2012-2015) 0.90% of current revenues (2016) 1% of current revenues (2017-2019)

3.2. District/ Municipality Funds (Cont.) The DM fund allocates based on the following indicators and formula as below: Admin Operation was allocated; Equal shares: 40% Number of councilors: 20% Number of Board of Governor: 20% Number of staff: 20% Local development component was allocated; Number of population: 20% Poverty scores: 20% Number of Commune/Sangkat: 20%

3.2. District/ Municipality Funds (Cont.) The DM fund in 2015 had allocated for two component as the following: 75.57% for administrative component 24.43% for development component Annual increment rate of DM funds 2015 is 14.64% compared to DM funds in 2014.

3.2. District/ Municipality Funds (Cont.) DM Fund allocation (2013-2015) Year Amount (in million $) 2013 14.42 2014 16.74 2015 19.19 TOTAL 50.35

3.3. Commune/ Sangkat Funds (CS) Royal Government of Cambodia (RGC) has allocated CS funds firstly in 2002. Royal Government of Cambodia (RGC) has to transfer the State budget into CS funds account (2002-2018) in a rate from2% - 2.80% of the approved annual national budget in the previous year. Transferring of CS Fund to CS Account will be made in 4 installments as below: - 1st Installment : 25% of total CS fund in earlier 1st quarter - 2nd Installment : 25% of total CS fund in earlier 2nd quarter - 3rd Installment : 25% of total CS fund in earlier 3rd quarter - 4th Installment : 25% of total CS fund in earlier 4th quarter

3.3. Commune/Sangkat Funds (Cont.) CS fund is allocated in two different components; Admin component (not exceed 1/3 of total fund) Development component (not less than 2/3 of total fund)

3.3. Commune/Sangkat Funds (Cont.) The Administrative Operation component allocates based on the following indicators and formula; - Equal share 30% - Number of CS councilors 60% - Poverty score 10%

3.3. Communes/Sangkat Funds (Cont.) The Local development component allocates based on the following indicators and formula; - Equal share = 30% - Number of population in CS = 30% - Poverty score = 30% - Number of villages in CS = 10%

3.3. Commune/ Sangkat Funds (Cont.) Total CS funds in 2015 is US$ 67.15 million (in average, each CS has received US$ 21,138 for general admin operations component and US$ 19,983 for local development component) Average annual increment rate of CS fund 2015 is 14.62% compared to CS fund in 2014

Summary of CS Funds Allocation in 14 years (2002-2015) Amount Increment rate (%) (in million Riel) (in million US$) 2002 30,688 7.87   2003 51,420 13.18 67.56% 2004 58,000 14.5 12.80% 2005 66,100 16.32 13.97% 2006 77,814 18.98 17.72% 2007 89,550 21.84 15.08% 2008 93,025 22.97 3.88% 2009 113,340 27.64 21.84% 2010 148,649 35.82 31.15% 2011 159,400 38.41 7.23% 2012 181,990 44.94 14.17% 2013 204,141 50.41 12.17% 2014 237,266 58.58 16.23% 2015 271,954 67.15 14.62% TOTAL 1,783,337 438.61

4. Summary Budget Allocation to SNA 2015 CS budget 2015 : 271,954 million Riels (US$ 67m) DM budget 2015 : 81,302 million Riels (US$ 20m) CP budget 2015 : 753,940 million Riels (US$ 186m) GRAND TOTAL SNA BUDGET 2015: 1,107,196 million Riels EQUIVALENT: US$ 273million

5. Challenges for Sub National Administrations The budget for SNAs’ is low. Most of annual budget (over 70%) is to cover staff salary and operation costs and the budget for local development is very tight. Lack of human resources at SNAs Lack of equipment at SNAs The financial management system is new to SNAs.

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