Keynote Address By Samdech Techo Hun Sen At the Annual and 5-Year Review Meeting of the Public Financial Management Reform Program (PFMRP)

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Keynote Address By

Samdech Akka Moha Sena Padei Techo Hun Sen
Prime Minister of the Kingdom of Cambodia
At the Annual and 5-Year Review Meeting of the Public Financial Management Reform Program (PFMRP)
Phnom Penh, 20th April 2018

– Samdech, Excellencies, Members of the Royal Government of Cambodia;

– Excellencies, Ladies and Gentlemen, National and International Guests!

Today, I have great pleasure to be here with all of you at this Annual and 5-Year Review Meeting of the Public Finance Management Reform Program (PFMRP), which has been officially launched since 2004.

Taking this opportunity, I would like to note with full satisfaction and highly appreciate the progress achieved by this reform during the past more than 13 years, particularly those recent achievements made in the last 5 years while our reform was undergoing rapid changes in external and internal environment, which I used to call it “an action or moving situation”. This has allowed us to press on with our reform efforts, and to test the “responsiveness” of our PFM system particularly in responding to the newly emerging development needs and growing aspirations of the Cambodian people, after this Reform has passed two critical stages in supporting the RGC’s achievement of newly emerging policy priorities that have become more difficult and sophisticated.

-Samdech, His Excellencies, Her Excellencies, Ladies and Gentlemen

Throughout the course of my leadership, I have made all kinds of sacrifices to achieve three important strategic goals: First– leading a movement to liberate Cambodian people and her country from Pol Pot’s genocidal regime; Second-preventing the return of this regime and putting to rest the civil war and bring about full peace for the people and nation; and Third- nurturing, strengthening and expanding the culture of peace, while safeguarding the hard-earned peace and social order in order to achieve the objectives of national development and social progress. At this point in history, I would say that I had achieved the first two strategic goals since early 2000s. And, I am now making a journey, together with the whole Cambodian nation, toward achieving the third final goal, which is a common cause for building a future prosperous nation. In my mission to safeguard peace and national development over the last two decades, I have observed that Cambodian people have always cherished peace and development, which has become a powerful force to defeat any attempt to push Cambodia back into chaos and political disturbance.

Undoubtedly, peace and political stability are the prerequisite and necessary condition for macroeconomic stability, which is a sufficient condition for progress, development, and prosperity of any society. For this mandate, Cambodia has achieved yet another development milestone, graduating from a low income to become a lower-middle income country. At the same time, Cambodia is approaching the graduation from Least Developed Countries (LDCs) status in the forthcoming future. With such a potential, Cambodia has been named a New Tiger of Asia. Indeed, in all our efforts, public finance management is an indispensable mechanism and tool for not only achieving this objective, but also realizing the vision of becoming a high middle-income country by 2030 and high-income country by 2050.

– Samdech, Excellencies, Ladies and Gentlemen!

Although the review of the PFMRP is always organized annually and at every stage, today this review meeting is also a stocktaking exercise of the last 5-year progress, whereas the fifth term of the Royal Government is approaching an end. In this regard, I would like to some comments and assessments on the progress of the PFMRP as following:

1- The achievement of macroeconomic stability and sustainability of public finance, which include ensuring annual economic growth of around 7.0%, maintaining 3.0% annual inflation rate and stable exchange rate of around 4 000 Riels/USD, maintaining annual fiscal deficit of less than 5.0% of GDP, and well managing public debts. Additionally, budget management has become more efficient, accurate, transparent, effective, and accountable—which has contributed significantly to the improvement and effectiveness of public service delivery, building quality infrastructure, and raising living standards of people. This macroeconomic achievements have also contributed to poverty reduction of more than 1% every year.

2- The achievement of full credibility in national budget, which reflects in regular cash surplus, an increase in government’s deposit and constantly raising public wages that have been disbursed timely in the fourth week of every month. Taking this opportunity, I would like to express my appreciation for the efforts made by the Ministry of Economy and Finance, with active participation from other relevant line ministries at both national and sub-national levels, in strengthening the revenue mobilization. This has been achieved by improving efficiency without introducing new taxes while, at the same time, eliminating or reducing some other taxes including adjustments to tax rates and non-tax tariffs in implementing the government’s policies to improve the living standard of people as well as to provide fiscal incentives for business and investment activities in Cambodia. As a result, an increase of current revenue by 1 percentage point of GDP per year for the last five consecutive years has been achieved which is the proof of these efforts. In addition, annual budget preparation has been remarkably improving as budget allocation strongly links to the priorities of the government and disbursed directly to implementers in line ministries and departments, at both national and sub-national levels.

3- Responding to priorities of the government and the new expectations of the people, the government has been able to meet higher expectation of the people, proportionately in line with improvement in the capacity of PFM, including a prompt response to natural disasters, border conflicts, and immediate intervention on rice sector, expansion of the scope of social protection for both government officials and workers, in both formal and informal economies, investment in physical infrastructure, as well as to buy-back the infrastructure projects under PPP’s scheme, to meet people’s needs and to ensure the pace of socio-economic development etc.

4- A functioning Financial Management Information System (FMIS), which is a framework to strengthen the public financial management and reduce the informal payments involving financial transactions. A key decision was the introduction of banking system for payroll and pension that has allowed us to address chronic challenges of ‘demanding’ informal payments and delayed disbursement. Conceptually, I believe that when the FMIS is in full operation, the public expenditure management would be more effective, efficient, transparent and accountable. The system will provide comprehensive and real-time information of public financial position, which is the basis for analysis and decision making on public resources allocation and utilization in the most effective manner.

5- Setting clear reform directions and activities, while pushing for steady implementation in a flexible and practical manner and with strong ownership. At the beginning of the program in 2004, the government is expected to finish the reform by 2015. However, based on actual progresses, we have periodically adjusted the strategies, programs, and timelines in line with it and capacity of Cambodia. To set directions of the reform in a long term, the government endorsed the “Budget System Reform Strategy 2018-2025”, which I will officially launch shortly. This strategy is the core of the PFMRP for moving PFM from Stage 3 to Stage 4 and have formulated with full ownership of Cambodia and relevant to Cambodia’s context in transforming the budget to be an effective policy tool for the development.

– Samdech, Excellencies, Ladies and Gentlemen!

In the near future, the PFMRP will be approaching the final platform and stage, which is “Performance Accountability”. This requires active and responsible participation from all LMs. I would like to remind you that Steering Committee of PFMRP has to be pragmatic, to have strong ownership, has to be firm but flexible and adhere to the principle of my reform motto, “Looking into the mirror, taking shower, scrubbing the dirts, treating the wounds, and admitting to surgery”, by focusing on key aspects as following:

1- Building ownership of public financial reform at Line Ministries. Ministers and heads of public institutions must take ownership and push the financial management reform, following the common principles laid out by the government. Financial management must go hand-in-hand with their respective missions and objectives granted by the government. Every ministries and public institutions have to regularly follow up and review the financial management reform activities. Furthermore, Every ministries and public institutions have to strengthen its leadership and organizational structure, in parallel with the capacity building and right deployment of staff to improve the organizational performance.

2- Providing incentive to PFM working groups at Line Ministries. The Royal Government already approved the incentive scheme for PFM working groups based on reform performance. Hence, I would instruct and urge the Steering Committee of PFMRP as well as the heads of ministries/institutions and the PFM working groups at line ministries to actively and responsibly engage in the PFM reform activities.

3- Improving coordination and interlocking among the three reform areas, of which the Steering Committee of the PFM, the National Committee for Sub-National Democratic Development and Committee for Public Administrative Reform. Good governance requires three components: efficient public financial management, quality human resources and appropriate delegation of power. In this regard, we need to maintain consistency among those reforms, at both overarching framework and at implementation level. By so doing, harmony, interlocking and complementarity could be assured. Once the three reform programs are in conflicting directions and at different paces, it will compromise the effectiveness of each individual reform program.

4- Placing attention on the implementation of the “Budget System Reform Strategy 2018-2025”. As already mentioned, the core or backbone of PFM is budget system reform, by forging it as efficient tool for achieving objectives of the Royal Government. It is a tool for sustainably mobilizing national resources and reallocating them effectively and efficiently for development purposes. Thus, we have to harness this opportunity and create favorable condition to successfully implement this panned strategy following Cambodia’s contexts.

Samdech, Excellencies, Ladies and Gentlemen!

Without the participation of all line ministries, these results, achievements, and remarkable progress would never be delivered. On behalf of the Royal Government, I would like to take this opportunity to express my sincere thanks to all line ministries that have involved in the PFM reform since 2004, particularly amongst the managements and officials who have taken part in the first stage and up to now.

At the same time, I highly appreciate, commend and thank H.E Dr. Aun Pornmoniroth, the chairman of PFM Steering Committee, as well as Excellencies ministers/heads of institutions and all government officials, for your utmost efforts in leading and implementing PFM reform with strong courage, ownership and responsibility thus achieving these prideful outcomes.

Furthermore, the Royal Government would like to sincerely thank Development Partners for their financial and technical supports provided to this reform by coordinating and cooperating with line ministries under sector-wide approach and respecting ownership of Cambodia.

Before ending, I strongly wish that our goodwill, responsibility, hard works, contribution and good cooperation will be further nurtured to be a strong foundation for effective and efficient implementation of PFM reform program for the benefit of Cambodia and its citizens.

Finally, on the occasion of belated Khmer New Year, I wish Samdech, Excellencies, Ladies and Gentlemen Distinguished National and International Guests the happiness and success in all your endeavors; I wish you all the four gem Buddhist blessings:  Longevity, Nobility, Healthiness and Strength.

On this auspicious occasion, I would like to officially announce the opening of the Annual and 5-Year Review Meeting of the Public Financial Management Reform Program and the official launch of Budget System Reform Strategy 2018-2025 from now!

Thank You!