Download ESCAP High-level Policy Dialogue

 ESCAP High-level Policy Dialogue
Ministry of Finance of the Republic of Indonesia International Economic Summit 2013
Eleventh Bank Indonesia Annual International Seminar
“Macroeconomic Policies for Sustainable Growth with Equity in East Asia”
15-17 May 2013, Yogyakarta, Indonesia
Jointly organized by
UN ESCAP, Ministry of Finance of the Republic of Indonesia and Bank Indonesia
Session 3 – Fiscal Policy for Development and its Budgetary Implications
Presentation
Fiscal Policy for Development and its Budgetary Implications
in Cambodia
by
Kim Phalla
Director, Economic and Public Finance Policy Department
Ministry of Economy and Finance, Cambodia
May 2013
The views expressed in the paper are those of the author(s) and should not necessarily be considered as reflecting the
views or carrying the endorsement of the United Nations. This paper has been issued without formal editing.
Fiscal Policy for Development and its
Budgetary Implications in Cambodia
by
Mr. Kim Phalla
Director
Economic and Public Finance Policy Department
Ministry of Economy and Finance
CAMBODIA
ESCAP High-level Dialogue and Eleventh Bank Indonesia Annual International Seminar
on
“Macroeconomic Policies for Sustainable Growth with Equity in East Asia”
Sheraton Mustika Yogyakarta, 15-17 May 2013
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Contents
I‐Cambodia Strategic Development Plan
II‐Macro economics and Fiscal development
III‐Fiscal intervention in Crises Period
PLANNED DEVELOPMENT SINCE THE 1990S
• The 1st Five‐Year Plan was implemented during 1996‐2000 • 2nd during 2001‐2005. These were known as Socio‐economic Development Plans (SEDP)
• 3rd Five Year Plan (2006‐2010), termed as the National Strategic Development Plan (NSDP), ended prematurely in 2008 giving way to a new planning cycle to match with the term of the Legislative Assembly. • The new National Strategic Development Plan Update, 2009‐2013 (NSDP‐Update, 2009‐2013)
THE GOVERNMENT STRATEGY
• The Triangular Strategy of the Second Legislature of the National Assembly (1998‐2002) – focus on infrastructure development.
• The Rectangular Strategy Phase 1 (RS‐I) of the Third Legislature of the National Assembly (2003‐2007) ‐
serves as the socio‐economic policy agenda of the Royal Government of Cambodia.
• The RS Phase 2 (RS‐II) of the Fourth Legislature of the National Assembly (2008‐2013) serves as the socio‐
economic policy agenda of the Royal Government of Cambodia (RGC) and has been the guideline of the NSDP‐Update 2009‐2013
FRAMEWORK OF RECTANGULAR STRATEGY ‐ PHASE II
Improving agriculture
productivity and
diversification
Fisheries reform
Land reform and
clearing of mines
Forestry reform
Strengthening the
quality of education
Enhancing health
services
Implementation of gender
policy
Implementation of
population policy
Cambodia’s integration
into the region and the
world
Development of ICT
Development of the
energy sector
Creation of jobs and
ensuring improved
working conditions
Favourable macroeconomic and
financial environment
Strengthening private
sector and attracting
investment
Public
Reform of the
administration Cambodian Armed
Forces
reform
Creation of social
safety nets
Legal and judicial
reform
Promoting SMEs
Fighting
corruption
Partnership in
development
Further Rehabilitation & Management of
construction of transport water resources
infrastructure
and irrigation
Peace, political stability,
security and social order
THE RS’S MAIN ELEMENT OF DEVELOPMENT
The “Rectangular Strategy" implement for Growth, Employment, Equity and Efficiency, in which good governance is the core element in order to ensure high sustainable growth, broaden and strengthen the base of the economy, and to achieve the Cambodian Millennium Development Goals (CMDGs) in particular poverty reduction and the strengthening of peace and social harmony.
Macroeconomic Targeting
•
•
•
•
Aiming at high growth of 7% per year
Keeping inflation below 5%
Domestic revenue increasing by 0.5% per year
Wage bill will be around 4% of GDP or about
40% of current budget expenditure
• Capital Expenditure about 7% to 8% of GDP
• Government saving increase to about 4% of
GDP
• Strengthening official reserve to more than 4
months of retain imports of goods and services.
Rapid growth in the economy
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Inflation under Control
20%
Year average
15%
Year over year
10%
5%
0%
2004
2005
2006
2007
2008
2009
2010
2011
2012 2013e
‐5%
Rapid Increase in Revenue Collection
(% of GDP)
10
Current Revenue Increase Nearly Reached to the
Regional Level (% of GDP)
11
Public Expenditure Reached a Peak at the Post
Crises (% of GDP)
25%
Total
Current
20%
Capita
15%
10%
5%
0%
2004
2005
2006
2007
2008
2009
2010
2011
2012 2013e
12
Increase Domestic Finance in the Crises Period
(% of GDP)
12.0%
10.0%
Grant
Loan
Domestic
Total
8.0%
6.0%
4.0%
2.0%
0.0%
2004
2005
2006
2007
2008
2009
2010
2011
2012 2013e
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Fiscal intervention: Create Fiscal Space
 Revenue mobilization by further strengthen tax administration: strict measures to recover arrears;
 The Ministry of Economy and Finance and all relevant Ministries continue to mobilize all kinds of revenues in order to meet the objectives set in the Budget Law; and
 Rationalizing expenditure: transfer savings from current budget to increase investment in high priority areas, including social safety nets and productivity, transport, irrigation;
 Increase domestic financing, using government bank deposits and non‐bank financing;
 Increase ODA disbursements;
Fiscal intervention: Improve Monitoring
 Institutional monitoring: using existing mechanism at Ministries and agencies to monitor socio‐
economic consequences of the crisis;
 Monitoring of disbursement: for ADB and WB projects, focus on a monthly report on disbursement;  Monitoring of disbursement: for other projects by quarterly report that also improve the quarterly GDP forecast;
 For fiscal issues: TOFE, GFS;
 For monetary issues: Monetary Survey of NBC;
Fiscal intervention: Agriculture Sector
Intervention
 Create Agriculture Support and Development Fund of US$18 million;
 Zero tariff on importing agriculture materials such as seeds, fertilizers, pesticide and agricultural equipments etc.; and
 Streamlining procedures and 3 years tax holiday for agricultural investment projects.
 Provide further incentives for investment in processing facilities, rice milling for exports and investment in irrigation;
 Streamlined procedures to promote rice exports;
 Promoting farmer organization by setting up cooperatives.
Fiscal intervention: Garment Sector
Intervention
Fiscal measure: suspension of 1% pre‐
payment of tax on profit to top up and Increase minimum wage. Special fund for training program;
Improvement in labor standard, dispute resolution and better relation between employers and employees with collaboration from trade unions; and
Diversifying the markets for our garments and other manufactured goods.
Fiscal intervention: Tourism Sector
Intervention
Ensuring peace, security, political stability, social order and tourist safety;
Building more tourism infrastructures;
Improving legal framework and institutional capacity;
Developing human resources; and
Diversifying tourist market/destinations and attractive tour packages;
Fiscal intervention: Competitiveness and
Training
 Provide funds of US$6.5 million for short‐term scholarship programs to train some 40,000 workers in agriculture, industry, handicraft and services;
 Earmark US$1 million to establish “Fund for Self‐
Employment” to be managed by the National Employment Agency to provide micro‐finance to help trained workers to set up their small businesses;
 Medium to long‐term reform would be required to increase competitiveness: electricity, transport, port handling, customs clearance, reduced inspection, but improved risk management etc.
Monetary intervention: Relax Monetary
Policies
• Improve bank supervision;
• Reduce reserve requirements of commercial
banks from 16% to 8% in order to reduce
liquidity to the economy, especially to slow
down bank loans to the private sector;
• Lift the 15% ceiling for loans to real estate
trading for commercial banks.
• Pursue the exchange rate policy of managed
float, aimed at maintaining stable exchange
rate, strengthening public confidence and
sustaining the purchasing power of Riels.
Thank You!
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