FISCAL DECENTRALIZATION CAMBODIA AND ELSEWHERE. SUB-NATIONAL REFORM AND PUBLIC FINANCIAL MANAGEMENT...

FISCAL DECENTRALIZATION

CAMBODIA AND ELSEWHERE

SUB-NATIONAL REFORM AND PUBLIC FINANCIAL MANAGEMENT

FOUR MAIN THEMES

• Sub-national administration (SNA) geography • SNA governance at a glance• SNA finances

Receipts

Disbursements• SNA concepts of decentralization

The geography of SNA

• World look

• Brazil

• State of Parana

• Paraguay

• Neighbors

Malaysia

Thailand

A QUICK WORLD LOOK

• World population about 6.6 billion• Population lives in small cities• Here are some questions o How many cities over 10 million

population? o Including how many over 1 million? o What number is Phnom Penh? o What is population of city number 1,000 o What is population of city number 2,000 o What is population of city number 3,000

ANSWERS TO QUESTIONS

No.Over 10 million 8Over 1 million 311Phnom Penh 505

PopulationCity no. 1,000 357,000City no. 2,000 176,000City no. 3,000 118,000

77% of population lives in cities of less than 120,00023% live in 3,000 cities with population greater than

120,000

BRAZIL

Population (million) 190

States 26

BRAZIL--PARANA STATE

Population (million) 10.5

Cities 400

Pop. avg. per city (000) 26.2

Per capita income (US$) 13,867

PARAGUAYPopulation (million) 6.8

Provinces 17

Cities 236


Per capita income (US$) 1,982

CAMBODIAPopulation (million) 14.2

Provinces 24

Districts 185

Cities 1,621


Per capita income (US$) 540

OBSERVATIONS

Brazil and Paraguay have states and cities or TWO levels of sub-national administrations

Cambodia has provinces, districts and communes or THREE levels of sub-national administrations.

The average size of Cambodian communes at 8.7

thousand is considerable less than average size in most of the world

SNA GOVERNANCE AT A GLANCE

North and South America

State/province- Governors elected,

Board of Governors elected

Cities- Governing board elected which elects

a president of the board

TALK POINTS

• Budgets

• Political parties

• Legislation

• Execution

• Accounting records

• Bank accounts

• Cash disbursements

SNA FINANCIAL MANAGEMENTEach SNA is a legal entity

It has a budget

oRevenues

oExpenditures

oBalanced

To understand decentralization

oUnderstand cash flow

oUnderstand types of revenues

oUnderstand types of expenditures

oUnderstand current operations

oUnderstand capital operations

SAMPLE SNAAnnual Annual

1998 1999 Revenues

Ordinary 2,024,636 2,332,046Capital 792,239 317,456

2,816,875 2,649,502Disbursements

Ordinary 3,356,045 3,507,920Capital 169,202 294,424

3,525,247 3,802,344

Net surplus (deficit) (708,372) (1,152,842)

ORDINARY INCOME Annual Annual Tax revenues- 1998 1999

Corporate income tax 32,577 57,839Indvidual income tax 411,587 405,890Land tax 203,226 223,655Tax on natural resources 13,580 5,532Pollution tax 84,119 200,861Real estate tax 316,092 165,319Real estate transfer tax 12,714 24,629Local taxes 117,809 106,109

1,191,704 1,189,834Other income-

Non-tax revenues 113,650 118,461Rentals 311,282 287,751Federal transfers 408,000 736,000

832,932 1,142,212Total income 2,024,636 2,332,046

Annual Annual ORDINARY EXPENSES 1998 1999 Communal services 126,703 97,108Social and cultural services 2,358,286 2,601,044Public order and safety 16,277 10,550Municipal administration 189,744 289,625Special source expenditures 423,672 432,574Other expenditures 241,363 77,019Interest expense 0 0

________ ________3,356,045 3,507,920

NET INCOME (DEFICIT) (1,331,409) (1,175,874)

Annual Annual 1998 1999

Non-current receipts:Sales of government property 460,839 235,835Accounting with central budget 66,400 30,000New bank loans 250,000Federal transfers-capital items 15,000 51,621

_________ ________Total non-current receipts 792,239 317,456

Non-current disbursements:Repayment of bank loans 0 207,940Capital additions 12,800 38,934Extraordinary expenditures 156,402 47,550

________ ________Total non current disbursements 169,202 294,424

Excess of non-current receipts over non-current disbursements 623,037 23,032

Net current and non-current results (708,372) (1,152,842)

NONCURRENT RECEIPTS AND DISBURSEMENTS

INCOME DETAILS 1 Annual Annual 1998 1999

10 Local taxesCoroporate registration tax 117,077 103,210Gambling tax 0 0Resort tax 0 0Hotel tax 732 800Advertising fees 0 2,099Parking fees 0 0Trademark fees 0 0Other 0 0

________ ________117,809 106,109


11 Non-tax revenuesLand leases 0 0Lease on public buildings 0 260Land Privatization 58,545 33,707Municipal fees 0 12,934State Duty 17,735 17,666Municipal fnes 30,805 40,817Income from Registration 0 151Social security contribution income 0 10,948Other non-tax revenues 6,565 1,216Recovery of Loan 0 560Licenses 0 202Other 0 0

________ ________113,650 118,461

Annual Annual INCOME DETAILS 3 1998 1999

12 RentalsFees for education 0 0income from Archive 288,520 287,751Museum 3,269 0Theatre 3,172 0Share of privatization 7,645 0Other 8,676 0

________ ________311,282 287,751

13 Federal transfers Culture 76,600 96,500Sports 51,500 92,400Administration 38,000 80,100Education 191,900 331,000Special Transfers 0 0Famili Aid 50,000 81,000Other 0 55,000

________ ________408,000 736,000

ORDINARY EXPENSES DETAIL 1 Annual Annual 1998 1999

21 Communal servicesCommunal services 116,889 90,639Water and sewerage 0 0Enviornmental activities 0 0Veterinery service 9,814 6,469Agricultural services 0 0Transport and communication 0 0

________ ________126,703 97,108

22 Social and cultural servicesEducation 1,729,060 1,970,551Culture 194,224 215,557Sport 76,148 91,950Health 295,577 231,770Social security 56,774 86,522Archive 6,503 4,694

2,358,286 2,601,044

ORDINARY EXPENSE DETAIL 2 Annual Annual 1998 1999

23 Public order and safetyPublic defense 8,498 3,200Municipal police and fire 4,838 5,039Marriage bureau 2,941 2,311

16,277 10,550

24 Municipal administrationSupreme councils of automous republics 0 0Elected representative bodies 189,744 69,028Other 0 220,597

________ ________

189,744 289,625

ORDINARY EXPENSE DETAIL 3 Annual Annual 1998 1999

25 Special source expendituresFees for education 407,370 432,574income from Archive 3,269 0Museum 3,172 0Theatre 7,645 0Share of privatization 2,216 0

________ ________423,672 432,574

26 Other expendituresUrbanization fees and property register 3,000 0Bank interest and credit costs 187,139 34,352Department of youth 10,158 6,805Reserve fund (19,290) 0Other 60,356 4,365Other other 0 31,497

241,363 77,019

QUICK REVIEW

• 11 large cities, thousands of smaller

• Average population less than 30,000

• All SNAs operate with a budget

• Understand money in money out– Ordinary– Capital

• Decentralization concepts next section

COFFEE BREAK

Centralization Example

• The Cambodian provincial government– The budget

• Line department at province• Negotiated with MEF

– Source of funds• Transfers from National Treasury• Treasury account for each line department• Deposits of local revenues

• Centralized with some delegation

Decentralization Example

• Local revenue decision

• Local disbursement decision

ORDINARY INCOME Annual Annual Tax revenues- 1998 1999

Corporate income tax 32,577 57,839Indvidual income tax 411,587 405,890Land tax 203,226 223,655Tax on natural resources 13,580 5,532Pollution tax 84,119 200,861Real estate tax 316,092 165,319Real estate transfer tax 12,714 24,629Local taxes 117,809 106,109

1,191,704 1,189,834Other income-

Non-tax revenues 113,650 118,461Rentals 311,282 287,751Federal transfers 408,000 736,000

832,932 1,142,212Total income 2,024,636 2,332,046


10 Local taxesCoroporate registration tax 117,077 103,210Gambling tax 0 0Resort tax 0 0Hotel tax 732 800Advertising fees 0 2,099Parking fees 0 0Trademark fees 0 0Other 0 0

________ ________117,809 106,109


11 Non-tax revenuesLand leases 0 0Lease on public buildings 0 260Land Privatization 58,545 33,707Municipal fees 0 12,934State Duty 17,735 17,666Municipal fnes 30,805 40,817Income from Registration 0 151Social security contribution income 0 10,948Other non-tax revenues 6,565 1,216Recovery of Loan 0 560Licenses 0 202Other 0 0

________ ________113,650 118,461

Annual Annual INCOME DETAILS 3 1998 1999

12 RentalsFees for education 0 0income from Archive 288,520 287,751Museum 3,269 0Theatre 3,172 0Share of privatization 7,645 0Other 8,676 0

________ ________311,282 287,751

13 Federal transfers Culture 76,600 96,500Sports 51,500 92,400Administration 38,000 80,100Education 191,900 331,000Special Transfers 0 0Famili Aid 50,000 81,000Other 0 55,000

________ ________408,000 736,000

Annual Annual ORDINARY EXPENSES 1998 1999 Communal services 126,703 97,108Social and cultural services 2,358,286 2,601,044Public order and safety 16,277 10,550Municipal administration 189,744 289,625Special source expenditures 423,672 432,574Other expenditures 241,363 77,019Interest expense 0 0

________ ________3,356,045 3,507,920

NET INCOME (DEFICIT) (1,331,409) (1,175,874)

ORDINARY EXPENSES DETAIL 1 Annual Annual 1998 1999

21 Communal servicesCommunal services 116,889 90,639Water and sewerage 0 0Enviornmental activities 0 0Veterinery service 9,814 6,469Agricultural services 0 0Transport and communication 0 0

________ ________126,703 97,108

22 Social and cultural servicesEducation 1,729,060 1,970,551Culture 194,224 215,557Sport 76,148 91,950Health 295,577 231,770Social security 56,774 86,522Archive 6,503 4,694

2,358,286 2,601,044

The Decentralized Profile

• Local source revenue 30%• Government transfers 70%

100%• Unconditional income

– Local source revenues 30%– Government transfers 35%

65% • Conditional from gov’t 35%

100%

FISCAL DECENTRALIZATION CAMBODIA AND ELSEWHERE. SUB-NATIONAL REFORM AND PUBLIC FINANCIAL MANAGEMENT...

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