Public Financial Management Reform Program

Public Financial Management Steering Committee

Annual Review Meeting 2009

Opening Remark by

H.E. AUN PORN MONIROTH

Minister attached to the Prime Minister, Secretary of State, and Chairman of the Public Financial ManagementSteering Committee

on Annual Review Meeting for Public Financial Management Reform Program

Sihanoukville, 16 January 2010

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-Your Excellency Deputy Prime Minister, Minister of Economy and Finance

-Excellencies, Ladies and Gentlemen,

  1. First of all, together with His Excellency Deputy Prime Minister, I would like to welcome and thank all of you who take your valuable time to attend this 4th Annual Review Meeting of the Public Financial Management Reform Program. I want to recall that after the budget credibility was achieved in Stage 1, the Stage 2 was officially launched by Somdech Akka Mohasena Padei Techo HUN SEN, Prime Minister of the Kingdom of Cambodia on December 03, 2008. Even though the implementation of the reform program was started during the preparation of action plans for Stage 2, especially, during the preparation of Consolidated Action Plan (CAP) and Departmental Action Plan (DAP), much more times were spent to develop the Ministry Action Plan (MAP) right after the official launching. Furthermore, it was already spelled out that moving to “Financial Accountability” of Stage 2 based on the foundation of “Budget Credibility” achieved in Stage 1 is a complex process and facing many more challenges because Stage 2 is larger in scope than stage 1 and involves all Line Ministries and Government Institutions; and there is a need to coordinate with other reform programs, especially the Administrative Reform and Decentralization and Deconcentration Reform so as to ensure the consistency and to mutually support each other.
  1. Actually, the strength of this reform is that we have clear target, strategy, and action plans; and we also have indicators which provide clear direction mechanism, and monitoring framework such as this Annual Review Meeting; and we always welcome any kind of review on our achievement from any Development Partners, including the External Advisory Panel as well as all constructive criticism because these are means to construct and improve our PFMRP. Therefore, the objectives of this Annual Review Meeting as stated in the Agenda are to review the annual progress against the objectives of the indicators, the External Advisory Panel’s report, and objectives strategy, action plans, indicators, target as well as mechanism and monitoring framework in order to improve and increase the effectiveness and efficiency of the implementation.

Your Excellencies, ladies and Gentlemen!

  1. as the Chairman of the PFM Government Steering Committee and as Chairman of PFM Technical Working Group for PFMRP, I would like to recall that our long term vision is to build a Public Financial Management System with internationally accepted standard by 2015 through the implementation of 4-platform long-term strategic action plans: Budget Credibility, Financial Accountability, Budget-Policy Linkages, and accountability for performance. During these four years of implementation, we feel that we have achieved much, but that there is still a long road ahead of us. The more we do, the more we come to understand the length of that road and the demanding nature of the task that we have set ourselves.We are all really proud of the achievement of the budget credibility which is the main objective in Stage 1 although some activities need to be strengthened in Stage 2. we also acknowledge the need to continue implementation in order to ensure that achievement in Stage 1 remains robust which and is the basic foundation for financial accountability which is the main objective of Stage 2 Platform 2. The Achievement of Stage 1 includes:

(1)Improve and Strengthen forecast and management of revenue collection. As a result, annual revenue collection is increasing and the deposit of those revenues into the National Treasury is smoother as well as the “chronic cash shortage” was converted to “cash surplus”.

(2)Improve and strengthen cash management as well as the creation of Treasury Single Account and the use of banking system for transaction.

(3)Improve and revise procedure and process of budget execution including the deconcentration of financial control and public procurement.

  1. I recall that at the time of the Annual Review on May 28, 2008, we, together said to ourselves that a key test of our success in implementing Platform 1and in sustaining its achievement is whether we would survive a period of fiscal stress without serious erosion of the gains made and the collapse of Platform 1 as a structure on which we can build further reforms with confidence. Well the test has perhaps come somewhat earlier than what we have liked in the form of the current economic crisis from which the world is only just beginning to emerge. But it is with satisfaction that we feel able to say that we have been able to manage our way through this crisis while:
  • Building more realistic budgets based on more realistic assessments of the resource available.
  • Making better use of our overall cash reserve and being more aware of our consolidated cash position.
  • We have avoided cash shortfalls and arrears
  • Managing in-year risk in a more realistic and strategic way with a view to minimize disruptive effects on service delivery.
  • Having more timely and accurate information available to us about changing circumstances.

I certainly do not think we would have been able to say this without the reforms that we have put in place.

Your Excellencies, ladies and Gentlemen!

  1. It is obvious that the implementation of Reform Program Stage 2 presented us with new challenges; as I mentioned above that The more we do, the more we come to understand the length of that reform road that we have to continue our journey and the reform work we have to complete as well as the new challenges we have to overcome. But we also knew that the potential rewards and benefit are also very high. Having removed as many as we can of the excuses for poor financial management in the past (payments were behind schedule, long procedure and process and centralization ) achieving greater accountability by those who use public resources is fundamental to the improvements in public service.

New challenges include:

  • The need to get Line Ministries and other budget entities actively and positively involved in reform activity. This next stage of reform is largely about them and how well they perform the management of resources.
  • We should need to learn to work with IT systems in a way that we have not experienced before. Not just to develop them , but also to manage them once developed.
  • We recognized that the processes changes that we have already put in place and propose to put in place during stage 2 have implications for the way we organize ourselves and changes will need to be made to bring organizational structure and new processes together in a complementary way.
  • Change management, therefore, takes on a particular importance as our reforms work through many more agencies and staff.
  1. As I say we welcome the reports prepared by the External Advisory Panel (EAP). And we welcome the opportunity to step back and take stock provide that by this Annual Review. We may not always agree with some of the assessments and you will hear from our different coordination group shortly our response to some of the technical findings, where we agree and disagree and what we intend to do about those suggestions that we agree with. This afternoon our discussion will focus on our strategy for the Stage-by-stage and Platform-by-Platform PFMRP. We remain confident in our overall strategy and the direction that we are going in. We do not see anything in the EAP report that undermines that confidence. But we do agree on the need to review our focus and things that we need to give priority to within our plan. And this Annual Review is a mechanism and forum for improvement of our action plans which have already been regarded as living document. Meanwhile, we have also learned from our first full year of attempting to implement Stage 2 of the reform program. Achievements in Stage 2 have been:

(1). Budget credibility remains robust in spite of the economic and financial crisis, natural disaster and border security problem via the further improving revenue policy and administration, debt management, public procurement; and cash and bank account management.

(2). Financial Accountability is increasing via further improving lines of accountability, implementation of new budget classification and new chart of account, new budget execution process in the framework of new business process of FMIS, accounting and financial reporting, Internal Auditing/Inspection, Fiscal Decentralization policy and strategy, institutional capacity building.

(3) Meanwhile, we also further improve work for late platform, especially by further improving and strengthening the preparation and implementation of program budgeting and the development of comprehensive budget integration.

Your Excellencies, ladies and Gentlemen!

  1. We also recognize that performance in Stage 2 has been patchy and in some cases key areas have yet to take off in meaningful way. Some of the reasons I think include:
  2. the Developments of Management structure, monitoring of progress, coordination, and recruitment use of technical assistance in Stage 2 are larger in scope and more complex. These issues were touched upon during our management retreat in September Last year, and we will be saying something about this in agenda 3.
  3. we have not been very effective in the way we have mobilized technical assistance in key areas where we need advice and support. A crucial element of our stage 2 plan was to get in place 7 core advisors who we would build a relationship with and could call upon on a flexible basis. As at the middle of last year, we only had 2 of these advisors in place. The number has now grownto 5, but the two missing positions are in key areas of accounting and budget execution which are very important to Stage 2.
  4. Decentralization and Deconcentration reform for sub-national administration were late in implantation in PFMRP pending the development of a 10 year national program in order to be revisited to ensure consistency and complementary to one another.
  1. During this one day and half Annual Review, we will hear the annual progress report along with experiences and challenges we are facing, and the presentation from the EAP team in order to review, compare and discuss in plenary session in Agenda 1 and 2 this morning. In the afternoon, we will hear the review on direction, strategy and overall action plans for Stage 2 which will be presented by the Technical Chief Advisor; and which will be the topic to be discussed in agenda 3 in this afternoon. After the presentation in each agenda, we will have a chance to exchange views and reflect on what we are all hearing. So what I would like to come away from this Annual Review Meeting with are some clear views about:
  2. Budget Credibility is sustainable and financial accountability is strengthened as well as the readiness for later platform is also strengthened. during the implementation of Stage 2.
  3. Confirmation of our strategic direction is still correct and appropriate
  4. Some ideas about prioritization within our plans and what we should be focusing in 2010.
  5. The key impediments to reform and some realistic options about what we can do about them .
  1. Once again, as the Chairman of the PFM Government Steering Committee and as Chairman of PFM Technical Working Group for PFMRP an on my own behalf, I would like express my profound thanks to Your Excellency Deputy Prime Minister, Excellencies, Ladies and gentlemen for your participation in this 4th Annual Review Meeting of PFMRP. I would also like to sincerely thank all colleagues from General Departments, Departments form the Ministry of Economy and Finance, and all Line Ministries, PFM Working Groups, Steering Committee Secretariat, PFM Commissions, PFM Committee as well as all Development Partners who have been working cooperatively and so hard to in order to arrange this important meeting.
  1. To conclude, I believe that our 4th Annual Review Meeting will give us a precious chance to review, discuss and exchange views as well as to share experiences and lessons learned which are of additional inputs to improve our action plans indicator framework, management and monitoring mechanisms in order to ensure the effectiveness and efficiency of implementation.

I wish this Annual Review Meeting a success!!

THANK YOU

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Opening Remark by H.E. AUN PORN MONIROTH on Annual Review Meeting of PFMRP