Cambodia: Second Decentralized Public Service and Financial Management Sector Development Program

Public sector management / Decentralization

The program's impact will be more efficient and more equitable services to citizens through decentralization of power to SNAs. The outcome will be improved capacity of SNAs for service delivery. This outcome will be achieved through the implementation of the following outputs:

Output 1. Capacity of subnational administrations for decentralized service delivery strengthened. Policy reforms expected under this output include the: (i) full implementation of regulations on decentralizing human resource management to SNAs; (ii) devolvement of functions from key ministries such as health, rural development, and environment; and (iii) establishment of capacity development systems for SNAs. Under this policy output, technical assistance (TA) will be provided to develop: (i) a regulatory framework for the capacity development of subnational civil servants that reflects government gender policies, (ii) a proposal for gender-sensitive curricula of subnational civil servants, and (iii) full

design and feasibility study for a local government institute.

Output 2. Adequate revenue sources for subnational administrations to fulfill their mandates granted. Policy reforms expected under this output include the assignment of tax

revenue sources to SNAs, the rationalization of the system of transfers, and sustained PFM reforms at the SNA level. The project preparatory TA will help develop an implementation

strategy for the decentralization of the property tax to districts and municipalities, the most efficient and viable option to assign own revenue sources to districts and municipalities.

Output 3. Accountability systems for subnational administrations established. Policy reforms under this output involve (i) implementing guidelines for the accountability of governors to their councils, (ii) implementing the social accountability framework, and (iii) designing and implementing inspection systems for SNAs. TA activities will assist the implementation of the social accountability framework in selected districts. This includes the implementation of disclosure policies for SNAs, participatory planning and budgeting by local citizens, and accountability systems between SNA councils and their constituents.

Unequal geographical access to basic social services is a major constraint to inclusive growth in Cambodia. Increasingly, quality service delivery will rest on skilled and accountable subnational administrations (SNAs), for which substantive investments in capacity development are required. The proposed Second Decentralized Public Service and Financial Management Sector Development Program will help improve the capacity of SNAs for local service delivery, as required under the 3-year implementation plan of the National Program for Subnational Democratic Development (2015 2018) (NCCD-S).

While poverty has decreased substantially in Cambodia, vulnerability is high and large regional differences persist. The national poverty rate fell from 22.9% in 2009 to 18.9% in 2012, but some provinces along the Tonle Sap and in the northwest still reported poverty rates of well over 30%. Only 37% of the rural population has access to improved sanitation and 44% has access to clean water sources, in contrast to over 70% in urban areas. National gains in access to health services also conceal broad provincial disparities, and several provinces will not reach the Millennium Development Goal targets for infant and maternal mortality rates.

A weak regulatory environment, lack of adequate funding for service delivery, unclear responsibilities for service delivery across levels of administration, and weak accountability mechanisms between government and citizens can explain the observed differences in coverage and quality of basic services. The government has begun to devolve the responsibilities for core service delivery to districts and municipalities. The decentralization will challenge these SNAs since they operate in fledgling local governance systems and under weak resource endowments. Total spending by SNAs in Cambodia represented 7% of overall public spending in 2014, of which districts and municipalities (the focus of decentralization efforts) accounted for 20%.

Large investment needs to boost the skills of subnational administrations. Progress on expenditure and revenue decentralization needs to be coupled with substantial investments

in capacity development of the local civil service, to allow for efficient service delivery and responsible financial management. Over 10,000 staff working in district and municipal

administrations in Cambodia require skills development in a broad range of areas. This calls for interagency coordination and adequate funding.

Since 2013, SNAs have been assigned nontax revenue sources (fees and charges) plus fiscal transfers. Despite this substantive progress, much remains to be done to build solid and broad-based revenue bases for SNAs. This involves (i) assigning tax revenues to SNAs, an essential element of accountability between SNAs and local citizens; (ii) ensuring equitable distribution of fiscal transfers; and (iii) implementing efficient user fees and charges for local public services.

A mix of firm-based and individual consultants were engaged, indicatively for 25 person-months of international inputs and 50 person-months of national inputs. ADB will select and engage consultants in accordance with its Guidelines on the Use of Consultants (2013, as amended from time to time). Recruitment of the firm is on-going and will be selected using QBS selection method. Some of the contingency funds will remain unallocated for individual consultants, to be identified as needed. Upon completion of the TA, equipment procured under the TA will be transferred to the executing agency.

Feasibility study on the National School of Local Administration was completed. Pilot training are also on-going and being delivered by MOI.