- 1 - Table 1. Cambodia: Policy Framework Paper Matrix,

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1 - 1 - Table 1. Cambodia: Framework Paper Matrix, 1. Fiscal Reform Generate additional revenue of 4 percent of GDP over four years to a. Broaden revenue base. Review mechanism for timber royalties, in the context of budget formulation. Improve VAT administration and extend VAT coverage. Reinstitute preshipment inspection (PSI). April 2000 b. Reduce tax and duty exemptions. Adoption by Council of Ministers of implementing regulations (Subdecree 88) for Law on Investment in line with the Bank s Public Expenditure Review (PER). June 1999 Revise Law on Investment to rationalize tax and duty exemptions for foreign direct investment. December 2000 Grant no new ad hoc tax or import duty exemptions. c. Strengthen revenue administration and governance. Rationalize expenditure, toward social and basic services and reduce defense expenditure. a. Expenditure priorities. Strengthen customs administration Fully transfer nontax revenue collection from line ministries to the Treasury. Reinforce procedures to collect tax and nontax arrears. Ensure incorporation of all taxation issues in the Law on Taxation. Ensure strict implementation of annual Public Investment Program (PIP) consistent with priorities, and link it more closely to recurrent expenditure. Provide adequate funding and meet budgetary targets for spending on basic health and education, and rural development, in line with Public Expenditure Review (PER)

2 - 2 - Table 1. Cambodia: Framework Paper Matrix, (continued) b. Civil service reform. Reduce number of civil servants through elimination of redundant workers, normal attrition, a strict limit on new hiring, and further downsizing. Fully operationalize the computerized management system for the payroll and establish control. Complete functional review of all ministries based on the role of the state. March 2000 June 2000 Complete civil service census. March 2000 Adopt and implement an action program for civil service reform, including targets for downsizing. c. Demobilization. Remove ghost soldiers and ghost dependents from the payroll of the Royal Cambodian Armed Forces (RCAF) June-Dec Complete identification and registration of the RCAF. Implement demobilization and reintegration under the Cambodia Veterans Assistance Program (CVAP). January 2000 Onward Enhance the effectiveness of expenditure management. Strengthen budgetary procedures to strictly limit spending decisions outside the budget framework. Establish responsibility for performance at the level of spending units in parallel with the strengthening of technical, financial and managerial capacities. /Others Establish proper audit/accounting systems. 2. Public resource management and governance. a. Provide for an environmentally sustainable, socially responsible, and economically viable forestry policy. Publish the list of log collection quotas that have been repealed. Establish and strengthen a forestry monitoring mechanism in consultation with the and bilateral donors. Submit quarterly reports by monitoring unit to Council of Ministers and release to the public. Submit subdecree on concession management to the Council of Ministers. September 1999 onward onward / UNDP/FAO/Other

3 - 3 - Table 1. Cambodia: Framework Paper Matrix, (continued) Strengthen concession management and contract terms to improve transparency, monitoring, and enforcement. Cancel concession contracts that are in violation of contract terms or Cambodian Law. Submit to National Assembly a revised Forestry Law to provide a permanent framework for management of sustainable forestry management. Review the log export ban policy commensurate with improvements in monitoring capacity. onward January-June 2000 December 2000 January 2001 AsDB/ AsDB AsDB b. Ensure sound and transparent natural resource exploitation, and strengthen financial controls. 3. Private sector development and public enterprise reform. Develop community forestry, initiating mechanisms for the award of long term tenure rights to local communities and indigenous peoples. Conduct review of contracts on oil and natural gas by internationally reputable specialists before tendering the contract. Strictly comply with the December 1997 Prime Ministerial Order requiring explicit approval of and financial control by the MEF of all contracts involving state assets. Review and modify the above order to ensure coverage of all physical, financial and intangible assets AsDB September 1999 a. Create enabling environment for private sector development. Adopt comprehensive Commercial Code, and implementing regulations and required sub-decrees, including provisions for business organization, bankruptcy, product liability, contracts, and intellectual property rights Strengthen the rule of law and transparency, including modernizing the judiciary. Corporatize the eleven utilities and infrastructure SOEs to remain in the public sector b. Streamline the public enterprise sector. Implement restructuring plans for seven rubber plantations. Privatize first rubber plant. December 2001

4 - 4 - Table 1. Cambodia: Framework Paper Matrix, (continued) 4. Banking sector policies a. Central bank (NBC) Avoid central bank financing of the budget Complete onsite inspection for all private banks. December 1999 Improve supervision capacity, including by strengthening staff and setting supervision guidelines. b. Commercial banks Strengthen legal framework by adopting a new law on commercial banks and financial institutions. Re-license all existing commercial banks under the new financial institutions law and close those that do not comply with the law Restructure and privatize the Foreign Trade Bank. Sept Dec External sector policies Maintain a market-based exchange rate system. Reduce tariff rates and simplify the tariff structure. Ongoing Reduce the maximum tariff rate to 40 percent and the number of tariff bands to four. January 2001 Further reduce the maximum tariff rate to 30 percent. January 2002 Strengthen the debt management unit, and refrain from commercial borrowing on nonconcessional terms. Renew discussions with external creditors with a view toward concluding bilateral rescheduling agreements. AsDB September Sectoral policies a. Agriculture and rural development Increase productivity, improve food security and raise rural incomes. Increase public investment in rural infrastructure. Rehabilitate and modernize the rubber sector. Submit to National Assembly revised Land Law after appropriate national consultations. December 1999

5 - 5 - Table 1. Cambodia: Framework Paper Matrix, (continued) b. Power, transport, and water supply and sanitation Create an efficient power sector. Submit Electricity Act to the National Assembly. September 1999 Establish a regulatory body for electricity. December 1999 Commercialize EDC through a performance-based contract. December 2000 Build key transport infrastructure. Formulate and implement strategy for rural electrification and pilot projects. Repair and maintain national roads and bridges and strengthen institutional capacity. Develop and implement a comprehensive transport sector policy with the input of key constituencies. Improve water supply and sanitation. c. Human resource development Develop financing mechanisms that leverage private and community investments. Develop regulatory framework that encourages outsourcing of utility operations to the private sector. Improve health and education for the poor. Expand the network of health centers and referral hospitals. Provide a minimum package of services (focussing on maternal and child health and national disease control), and expand these services to rural areas. Implement and review pilot programs for cost recovery to develop mechanisms for sustainable health financing. Increase public spending (especially nonwage) on basic and lower secondary education, while encouraging private sector involvement in upper secondary and tertiary education. Regularize the current informal cost recovery program, especially in higher education. Increase net enrollment rates in basic education and close gender gaps at the primary and lower secondary level.

6 - 6 - Table 1. Cambodia: Framework Paper Matrix, (concluded) 7. Other areas a. Poverty monitoring Maintain regular poverty monitoring based on continued national multi-purpose household surveys. /UNDP Build institutional capacity to better link poverty analysis to policy formulation. /UNDP b. Environment Implement the action plans outlined in the National Environment Action Plan (NEAP), in particular biodiversity and protected areas management. Mobilize financial and technical resources to implement the NEAP. c. Statistics Implement recommendations made by technical assistance advisors, to improve the coverage, quality, and timeliness of economic data. Improve coverage of Government Finance Statistics, especially to incorporate donor financed expenditure into the budget World Bank//AsDB

7 Table 2. Cambodia: Macroeconomic Framework, Est. Proj. Program (Percent change; unless otherwise indicated) Real GDP GDP deflator Consumer prices (final quarter-basis) Money and credit Broad money (incl. foreign currency deposit) Net credit to Government 1/ Velocity of money 2/ (In percent of GDP) Government budget Revenue (incl. capital revenue) of which: tax revenue non-tax revenue Expenditure Current expenditure (cash basis) Capital expenditure Current budget balance (cash basis) Overall budget balance (cash basis) Foreign financing Domestic financing Domestic investment Of which: Government investment 3/ National saving Of which: Government saving (In millions of U.S. dollars; unless otherwise indicated) Balance of payments Exports 4/ Imports 4/ ,005-1,103-1,184 Current account (excl. off. transfers) (In percent of GDP) Capital account Overall balance Gross official reserves (In months of imports of g & s) (In percent of broad money) Net official reserves Debt service 5/ (In percent of dom. exports of g&s) Memorandum items: Nominal GDP (in billions of riels) 8,251 9,100 10,750 11,900 13,000 14,331 15,799 (in millions of U.S. dollars) 3,144 3,097 2,867 3,140 3,421 3,771 4,158 Exchange rates (riel per dollar, end-of-period) 2,713 3,460 3,780 3, Terms of trade (percent change) Source: Data provided by the Cambodian authorities, and Fund staff estimates and projections. 1/ Change as a percent of beginning period broad money. 2/ Ratio of nominal GDP to average stock of broad money. 3/ Includes externally financed technical assistance for implementation of capital projects. 4/ Excludes re-exports. 5/ In percent of domestic exports of goods and services (after assumed debt relief).

8 Table 3. Cambodia: External Financing Requirements and Sources, (In millions of U.S. dollars; unless otherwise indicated) Proj. Proj. Proj. Proj. Total Financing requirements 1, ,508 Current account deficit (excl. official transfers) ,833 Amortization 1/ Changes in arrears (-:increase) 1, ,083 Changes in gross reserves (+:increase) Disbursements from existing commitments Grants Medium- and long-term loans Bilateral creditors Multilateral creditors Disbursements from new commitments Grants Medium- and long-term loans Bilateral creditors Multilateral creditors Foreign direct investment Short-term flows and errors & omissions Initial financing gap 1, ,659 Debt relief (Non-Paris Club creditors) 1, ,378 disbursements Residual financing gap Memorandum items: Current acct. excl. official transfers (In percent of GDP) Gross official reserves (In months of imports of goods and services) Net official reserves (US$ million) (In months of imports of goods and services) Sources: Data provided by the Cambodian authorities, donors, and staff estimates and projections. 1/ Includes debt service to the and on rescheduling.

9 Table 4. Cambodia: Income and Social Indicators Unit of Latest Single Year Measure Population Population (mid-year) millions Population growth rate annual percent Total fertility rate births per woman Poverty National poverty line 1/ Riels per day Phnom Penh " Other urban " Rural " National Headcount Index 1/ percent of population Phnom Penh " Other urban " Rural " Income GNP per capita U.S. dollars Consumer price index Sep = Income/Consumption distribution Share of income or consumption 1/ Lowest quintile percent Highest quintile " Social Indicators Public expenditure on basic social services percent share of GDP Health " Education " Social security, welfare & others " Gross primary enrollment rate percent of school age Male " Female " Access to safe water percent of population Urban " Rural " Immunization rate Measles percent under 12 months DPT " Under-five malnutrition rate percent age group Life expectancy at birth years Male " Female " Infant mortality rate per 1,000 live births Under-five mortality rate " Adult (15-59) mortality rate per 1,000 persons Maternal mortality ratio per 100,000 live births Source: Social Indicator of Development. 1/ Povery Assement and Strategy (), forthcoming.