Fiscal Policy for Development and its Budgetary Implications in Cambodia

Transcription

1 ESCAP High-level Policy Dialogue Ministry of Finance of the Republic of Indonesia International Economic Summit 2013 Eleventh Bank Indonesia Annual International Seminar Macroeconomic Policies for Sustainable Growth with Equity in East Asia May 2013, Yogyakarta, Indonesia Jointly organized by UN ESCAP, Ministry of Finance of the Republic of Indonesia and Bank Indonesia Session 3 Fiscal Policy for Development and its Budgetary Implications Presentation Fiscal Policy for Development and its Budgetary Implications in Cambodia by Kim Phalla Director, Economic and Public Finance Policy Department Ministry of Economy and Finance, Cambodia May 2013 The views expressed in the paper are those of the author(s) and should not necessarily be considered as reflecting the views or carrying the endorsement of the United Nations. This paper has been issued without formal editing.

2 Fiscal Policy for Development and its Budgetary Implications in Cambodia by Mr. Kim Phalla Director Economic and Public Finance Policy Department Ministry of Economy and Finance CAMBODIA ESCAP High-level Dialogue and Eleventh Bank Indonesia Annual International Seminar on Macroeconomic Policies for Sustainable Growth with Equity in East Asia Sheraton Mustika Yogyakarta, May Contents I Cambodia Strategic Development Plan II Macro economics and Fiscal development III Fiscal intervention in Crises Period

3 PLANNED DEVELOPMENT SINCE THE 1990S The 1 st Five Year Plan was implemented during nd during These were known as Socio economic Development Plans (SEDP) 3 rd Five Year Plan ( ), termed as the National Strategic Development Plan (NSDP), ended prematurely in 2008 giving way to a new planning cycle to match with the term of the Legislative Assembly. The new National Strategic Development Plan Update, (NSDP Update, ) THE GOVERNMENT STRATEGY The Triangular Strategy of the Second Legislature of the National Assembly ( ) focus on infrastructure development. The Rectangular Strategy Phase 1 (RS I) of the Third Legislature of the National Assembly ( ) serves as the socio economic policy agenda of the Royal Government of Cambodia. The RS Phase 2 (RS II) of the Fourth Legislature of the National Assembly ( ) serves as the socioeconomic policy agenda of the Royal Government of Cambodia (RGC) and has been the guideline of the NSDP Update

4 FRAMEWORK OF RECTANGULAR STRATEGY PHASE II Improving agriculture productivity and diversification Land reform and clearing of mines Fisheries reform Forestry reform Peace, political stability, security and social order Management of water resources and irrigation Further Rehabilitation & construction of transport infrastructure Development of ICT Development of the energy sector Cambodia s integration into the region and the world Fighting Legal and judicial corruption reform Public Reform of the administration Cambodian Armed reform Forces Favourable macroeconomic and financial environment Partnership in development Promoting SMEs Creation of social safety nets Strengthening private Creation of jobs and sector and attracting ensuring improved investment working conditions Strengthening the quality of education Enhancing health services Implementation of gender policy Implementation of population policy THE RS S MAIN ELEMENT OF DEVELOPMENT The Rectangular Strategy" implement for Growth, Employment, Equity and Efficiency, in which good governance is the core element in order to ensure high sustainable growth, broaden and strengthen the base of the economy, and to achieve the Cambodian Millennium Development Goals (CMDGs) in particular poverty reduction and the strengthening of peace and social harmony.

5 Macroeconomic Targeting Aiming at high growth of 7% per year Keeping inflation below 5% Domestic revenue increasing by 0.5% per year Wage bill will be around 4% of GDP or about 40% of current budget expenditure Capital Expenditure about 7% to 8% of GDP Government saving increase to about 4% of GDP Strengthening official reserve to more than 4 months of retain imports of goods and services. Rapid growth in the economy 8

6 Inflation under Control 20% 15% Year average Year over year 10% 5% 0% e 5% Rapid Increase in Revenue Collection (% of GDP) 10

7 Current Revenue Increase Nearly Reached to the Regional Level (% of GDP) 11 Public Expenditure Reached a Peak at the Post Crises (% of GDP) 25% 20% Total Current Capita 15% 10% 5% 0% e 12

8 Increase Domestic Finance in the Crises Period (% of GDP) 12.0% 10.0% 8.0% Grant Domestic Loan Total 6.0% 4.0% 2.0% 0.0% e 13 Fiscal intervention: Create Fiscal Space Revenue mobilization by further strengthen tax administration: strict measures to recover arrears; The Ministry of Economy and Finance and all relevant Ministries continue to mobilize all kinds of revenues in order to meet the objectives set in the Budget Law; and Rationalizing expenditure: transfer savings from current budget to increase investment in high priority areas, including social safety nets and productivity, transport, irrigation; Increase domestic financing, using government bank deposits and non bank financing; Increase ODA disbursements;

9 Fiscal intervention: Improve Monitoring Institutional monitoring: using existing mechanism at Ministries and agencies to monitor socioeconomic consequences of the crisis; Monitoring of disbursement: for ADB and WB projects, focus on a monthly report on disbursement; Monitoring of disbursement: for other projects by quarterly report that also improve the quarterly GDP forecast; For fiscal issues: TOFE, GFS; For monetary issues: Monetary Survey of NBC; Fiscal intervention: Agriculture Sector Intervention Create Agriculture Support and Development Fund of US$18 million; Zero tariff on importing agriculture materials such as seeds, fertilizers, pesticide and agricultural equipments etc.; and Streamlining procedures and 3 years tax holiday for agricultural investment projects. Provide further incentives for investment in processing facilities, rice milling for exports and investment in irrigation; Streamlined procedures to promote rice exports; Promoting farmer organization by setting up cooperatives.

10 Fiscal intervention: Garment Sector Intervention Fiscal measure: suspension of 1% prepayment of tax on profit to top up and Increase minimum wage. Special fund for training program; Improvement in labor standard, dispute resolution and better relation between employers and employees with collaboration from trade unions; and Diversifying the markets for our garments and other manufactured goods. Fiscal intervention: Tourism Sector Intervention Ensuring peace, security, political stability, social order and tourist safety; Building more tourism infrastructures; Improving legal framework and institutional capacity; Developing human resources; and Diversifying tourist market/destinations and attractive tour packages;

11 Fiscal intervention: Competitiveness and Training Provide funds of US$6.5 million for short term scholarship programs to train some 40,000 workers in agriculture, industry, handicraft and services; Earmark US$1 million to establish Fund for Self Employment to be managed by the National Employment Agency to provide micro finance to help trained workers to set up their small businesses; Medium to long term reform would be required to increase competitiveness: electricity, transport, port handling, customs clearance, reduced inspection, but improved risk management etc. Monetary intervention: Relax Monetary Policies Improve bank supervision; Reduce reserve requirements of commercial banks from 16% to 8% in order to reduce liquidity to the economy, especially to slow down bank loans to the private sector; Lift the 15% ceiling for loans to real estate trading for commercial banks. Pursue the exchange rate policy of managed float, aimed at maintaining stable exchange rate, strengthening public confidence and sustaining the purchasing power of Riels.

12 Thank You! 21