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)