Tension Over End of Civil Service Bonus Scheme

Minister of Finance Keat Chhon led a ministerial meeting yesterday morning aimed at discussing po­tentially adverse effects of a Dec­ember sub-decree that eliminated salary supplements for civil servants participating in international donor-funded projects.

According to an information sheet obtained at the meeting, which lasted for more than three hours, the goal was “to talk to the ministries or other relevant institutions to forecast negative impacts taking place after the termination” of the salary supplements.

According to the information sheet, the gathering should not be taken as a sign that the government was weakening in its resolve to enforce the sub-decree, which eliminated all salary supplements as of Jan 1.

Rather, those assembled yesterday would try to “reach a consensus to avoid any risky results” in the aftermath of the termination of bo­nus payments.

After the meeting, Mr Chhon de­clined to comment on what had been discussed.

“It was an internal meeting, and I cannot tell you,” the minister told reporters.

The government will be holding further meetings on salary supplements during a retreat in Preah Si­hanouk city this weekend, said Sec­retary of State Chea Peng Chhe­ang. He added that around 200 government officials are slated to at­tend but he declined to comment further on the issue.

This series of gatherings comes after a month of controversy over the government’s decision to cut the supplements, undercutting pay reforms that had been developed over many years.

In a Dec 4 letter to World Bank Country Director Annette Dixon, Mr Chhon explained that the government’s decision to eliminate the bonuses was motivated by issues of salary fairness, concerns about the global economic crisis, and a desire to undertake broader civil service reforms.

Ubiquitous, unmotivated and un­derpaid civil servants are a serious problem in many developing countries, including Cambodia.

One easy solution aid donor institutions have hit on is to pay government workers extra bonuses for working on their particular projects, be they building new roads or providing land titles for the population.

But straightforward salary supplements, which are paid directly by donors to civil servants, have long been seen as pernicious by de­velopment economists, because they create inequity in the civil service and make such workers ac­countable to donors rather than the government.

Cambodia’s donors have themselves been trying to eliminate these bonuses for at least five years.

In a joint 2004 statement, donors said the supplements were “detrimental for sustainable development” and announ­ced their resolve to phase out “distortionary, ad hoc salary supplements.”

As part of a project intended to spur pay reform, the government instituted two programs called Merit-Based Performance Initia­tives and Priority Mission Groups. These were intended to solve the worst problems posed by salary supplements by standardizing them and funneling all donor bo­nus money through the government, which would then slowly be­gin to provide a greater proportion of the funds.

A sub-decree signed by Prime Minister Hun Sen in 2005 set MBPI/PMG supplements at standard rates ranging from 1.6 million riel, or about $400 per month, for a civil servant with the rank of director-general, to 200,000 riel, about $50, for the rank of secretary.

Because these reforms had been in the works for so long, the government’s abrupt decision last month to eliminate all supplements —including the MBPIs and PMGs—caught nearly everybody by surprise.

Putu Kamayana, country director for the Asian Development Bank, said in an interview last week that it was too soon to tell what ef­fects the new policy would have.

“We haven’t received any reports of any major changes or any of the things that concerns have been raised about, like absenteeism [from projects], but I suppose it’ll take a couple of months,” he said.

“Each of our projects is working in different parts of the country, and it will take some time for feedback to filter through, but obviously it’s something we will be monitoring.”

In theory, Mr Kamayana said, civil service reform is a great idea. “There’s a logic there: It’s understandable that they want to rationalize, they want a clear system, they don’t want to have many different types of incentives that lead to in­equity and jealousy,” he said.

Although ADB and other donors are concerned about the short-term effects of abruptly eliminating the bonuses—both for their projects and the affected civil servants—Mr Ka­mayana said they also wanted to encourage reform, and suggested that the government might actually be putting positive pressure on itself with the recent sub-decree.

“This basically puts pressure on the government to complete their review and come up with a rational new compensation scheme that will provide fair compensation for everyone,” he said.

All of the supplements paid to civil servants working on ADB-funded projects come out of the government’s pocket, he added.

Sin Somuny, the executive director of medical NGO Medicam, was less sanguine, saying that he feared the pay cuts would have an immediate impact on poor and needy Cambodians who receive health care services through projects with supplement salary arrangements.

“I think there will be a tremendous adverse impact from this decision unless the government has an immediate alternative plan in order to mitigate this impact,” he said, predicting an exodus from the public sector and an eventual increased burden on the poor to pay for services out of their own pockets.

Mr Somuny was also dubious about the government’s ability at this point to implement, or pay for, civil service reform, which he called a long-term goal.

“Public administration reform will have to go hand-in-hand with the economic growth of the country, and since the current GDP per capita is about $400, I am not sure the government is in a good position to really afford it,” he said.

Sophal Ear, an assistant professor at the US Naval Postgraduate School who studies development and aid issues, wrote in an e-mail this week that the supplements, while imperfect, were still a largely positive force in the lives of the country’s government workers.

“On the MBPIs and PMGs, the last vestige of what had been a merit-based pay (the term has to be used loosely in the Cambodian context), has basically disappeared,” Mr Ear wrote.

“Were they perfect? No. Did they incentivize? Yes. Did they make a life-or-death difference in someone’s livelihood? Probably not. Will things work better as a result of their elimination? Probably not.”

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