NA Told To Focus Budget on Poverty, Corruption

At the National Assembly on Thursday, more than 100 parliamentarians listened to advice from a range of government officials and ec­onomic experts on how to retool the 2009 draft national budget to bet­ter combat poverty in Cambodia.

In his opening address, CPP lawmaker Cheam Yeap said that the government will lower costs by cutting its gas and electricity use and demanding payment on outstanding loans lent to private companies.

“The CPP’s strategy is to collect taxes from the rich, not from the poor,” he said.

The Ministry of Defense, he said, needs a bigger budget to replace ag­ing soldiers and munitions. “In order to ensure security and peace, we must prepare for wars,” he said.

Without disputing the importance of the military budget, Chhith Sam Ath, executive director of NGO Forum, said that the government had not lived up to its own stated priorities to reduce poverty.

He pointed out that in the 2009 draft budget, the government named poverty reduction as a top pri­ority, and had listed eight key ministries that should be bolstered for that effort.

Three of the most important min­istries—Agriculture, Education and Rural Development—were al­ready underfunded, he said, and now they actually have lower capital budget allocations in the 2009 draft budget than they did for this year. Capital budget refers to the moneys dedicated to large-scale pro­jects, such as construction, as op­posed to funds allocated for costs such as salaries.

Chhith Sam Ath added that it was unclear whether the “huge in­crease” budgeted for military and police salaries is intended for new hires or for increasing pay of staff.

Human Rights Party lawmaker Nhem Ponharith said that budget shortcomings were less a matter of allocation than of corruption, and demanded that the anti-corruption law be passed soon.

“Corruption eats a lot of national resources,” he said. “Fighting against corruption can attract big international investors.”

He also advised that the government invest more money into agriculture and civil service salaries.

In an earlier panel discussion Thurs­day, economic experts discussed possible threats to government revenue in 2009.

Sok Hach, director of the Eco­no­mic Institute of Cambodia, noted that economic growth had slowed from 10.8 percent in 2007 to about 7 percent in 2008. He estimated that it would slow further to around 6 percent in 2009.

Sok Hach said he expects agriculture, tourism, the garment in­dus­try and the informal economy to stay strong or grow, but warned that the real estate and banking sectors could suffer.

The danger, he said, came not from the global economic crisis, but from the fact that bank deposits in Cambodia had remained flat or de­clined this year while credits to the private sector had grown.

“The banking sector will be facing a lot of problems next year,” he said. “I hope the [National] Bank of Cambodia will make a great effort to ease the crisis.”

Sok Hach also advised that Cam­bodia expand its burgeoning organic food sector and ease roadblocks to investment and trade.

Cambodian tax incentives, he said, are attractive, but unnecessary bureaucracy makes them too hard to obtain. Export costs are twice or three times as high as those in neigh­boring countries while smuggling makes business difficult for legal investors.

He also warned of further rice price inflation next year.

“If the Royal Cambodian Gov­ern­ment doesn’t stop the export of rice, we will have a lot of problems like last year,” he said. “The price will keep going up.”

Hussein Jalilian, research director at the Cambodia Development Re­­source Institute, vigorously disputed that last analysis.

“It is, in my view, a very serious mis­take to reduce the export of rice,” he said. “It would only serve to penalize rice producers and stall agricultural progress.”

He agreed that the global econo­mic crisis was not a particular threat to Cambodia, although he noted that garment exports might suffer.

“This country is very isolated,” he said. “Like Africa, Cambodia is actually likely to benefit from the banking crisis.”

The reason, he explained, is that investors who are now skittish about investing in the financial economy will be looking to put their money in the “real” economy: production, agriculture, and other tangible investments.

Since Cambodia has a great deal of inexpensive land with great agricultural potential, he said, the country could attract such investors.

  (Additional reporting by Eang Mengleng)