Draft Budget Banks on Tax, Duty Collection

A proposed $1.5 trillion riel ($395 million) budget for 1999 boosts spending in health and education, predicated on a projected increase in revenue collection, a version of the budget signed by Finance Minister Keat Chhon shows.

The draft budget calls for health spending to increase by 47 percent, education by 13 percent and agriculture by 59 percent, although those areas still make up only a small percentage of overall spending.

The budget calls for funding for the Council of Ministers and Finance to drop by more than a third.

The proposed budget drew cautious approval from economic analysts Wednesday.

“What we are looking for is a workable plan. Not instant re­sults, but a clear intention,” said Bill Costello, the first secretary for development cooperation at the Australian Embassy.

The National Assembly still must pass the budget before it becomes law.

Minister of the Council of Ministers Sok An said Wednes­day there were some chan­ges to the budget that Keat Chhon sent for approval Friday. Sok An would not specify the changes, but said they included ways to increase revenue and decrease some ex­penses.

In the version Keat Chhon signed, the country is budgeting for a 38-percent increase in do­mestic revenues from 1998. The largest part of that income is to come from customs duties. A value-added tax expected to start  Jan 1 is budgeted to bring in the second-largest chunk of revenue for the country with about 167 billion riel ( about $44 million).

The budget outlines an in­crease in revenue from non-tax sources of income. Money collected by the government from forest use is expected to triple in the next year to about 73 billion riel ($19.2 million). The number is still far short of the $100 million environmental critics say the government could earn if it collected revenues from illegal logging.

An outstanding $10 million bill that telecommunications companies have racked up for unpaid international calls is projected as country’s biggest source of non-tax revenue. Finance Ministry officials acknowledged the mo­ney will not be easy to get.

“I know it will be difficult to collect the money, especially be­cause almost all of the ministries owe the companies money. But I’m optimistic,” said Touch Leng, the director of the budget department at the Ministry of Finance.

Though still the largest expenditure at about 40 percent of the budget, the military budget is to drop about 6 percent. Salary spending is slated to rise, especially as opposition and former Khmer Rouge soldiers are reintegrated in the government. But operational costs for equipment may drop since fighting may end with the latest rebel defections.

“If we consider the need of the armed forces, we can say this is the bare minimum,” Sok An said.

Public Works spending is set to rise dramatically, but the budgeted increase reflects road projects funded by Asian Devel­op­ment Bank loans scheduled for the coming year, analysts said.

The budget and surrounding proposals will form a key part of the country’s package to donors at a tentatively-planned international donors meeting in Feb­ruary. Some foreign aid was suspended after fighting in the capital in July 1997 effectively ousted then-first premier Prince Noro­dom Ranariddh.

The International Monetary Fund and the World Bank suspended new loans, citing the government’s inability to conduct civil service reform and collect revenues.

It was not clear whether the Keat Chhon budget included costs for the new Senate expected to be formed soon. One economic analyst familiar with the budget said it was included and would cost 47 billion riel ($12.4 million), or about half the money allocated for the Ministry of Health. Sok An declined to comment on the Senate’s budget.

The number of civil servants is budgeted to increase by about 6,500 people, despite earlier claims that the government’s rolls would be trimmed lean.

A challenge for the government will be its ability to collect more revenue, something it has tried—and failed— to do before.

“Basically the proposals they are making do not seem to be unrealistic or unreasonable. But then, as the English would say, the proof of the pudding is in the eating. This pudding looks very nice on paper,” a senior economic analyst said.

(Additional reporting by Kay Kimsong)


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