Gov’t Promotes Land-for-Infrastructure Deals Amid Shrinking Budget

6 min read
Workers repair part of a sidewalk in central Sihanoukville on December 2, 2020. (Danielle Keeton-Olsen/VOD)

A policy of “using palm leaves to package palm sugar” will help the government save costs amid a decline in revenues due to Covid-19 — in other words, using available resources like swapping state land with investors to support needs like road-building, an official said.

According to the Finance Ministry’s 2021 national budget document, national-level revenues are expected to drop 14 percent from about $7.6 billion to $6.6 billion. Expenditures will fall just 2 percent, from about $7.8 billion to $7.6 billion, it says.

Spending on “investment projects” — categorized under miscellaneous expenditures that do not fall under any ministry — is set to be the biggest item at just over $1 billion, increasing about $81 million from the year before.

Public works and transport sees the biggest fall, its budget dropping by just over $200 million to about $600 million.

The government said in a statement that it would spend savings as well as make deals, especially in Sihanoukville, to prop up the budget.

“Financing through ‘using palm leaves to package palm sugar,’ for restoring investment and infrastructure in Sihanoukville, will transform Sihanoukville to become a modernized city and become a multisector [economy],” it said.

Government spokesperson Phay Siphan said the “palm leaves” policy was about getting cooperation from the private sector using existing resources, and included giving land to businesses and receiving both investment and infrastructure in return. He said it works, benefits both sides, and was not irregular.

Siphan added that the budget for investment projects was a reserve fund available to pay for urgent projects, possibly including emergency food and health responses.

Budget Trends 2010-2021 2010 Breakdown: 2011 Breakdown: 2012 Breakdown: 2013 Breakdown: 2014 Breakdown: 2015 Breakdown: 2016 Breakdown: 2017 Breakdown: 2018 Breakdown: 2019 Breakdown: 2020 Breakdown: 2021 Breakdown: Historical miscellaneous spending data not available, several suspected typos corrected, from NGO Forum’s cambodianbudget.org // $1 = 4,000 riel // Sources: NGO Forum, Finance Ministry Education $254M Education $269M Education $273M Education $279M Education $335M Education $453M Education $551M Education $684M Education $859M Education $915M Education $934M Education $825M Defense $175M Defense $194M Defense $219M Defense $245M Defense $280M Defense $330M Defense $387M Defense $464M Defense $549M Defense $604M Defense $634M Defense $641M Transport $30M Transport $10M Transport $61M Transport $63M Transport $76M Transport $443M Transport $605M Transport $602M Transport $618M Transport $748M Transport $804M Transport $599M Interior $124M Interior $130M Interior $146M Interior $173M Interior $208M Interior $262M Interior $299M Interior $365M Interior $414M Interior $462M Interior $520M Interior $507M Health $150M Health $205M Health $216M Health $225M Health $284M Health $324M Health $355M Health $424M Health $491M Health $455M Health $525M Health $384M Social Affairs $57M Social Affairs $68M Social Affairs $92M Social Affairs $116M Social Affairs $147M Social Affairs $166M Social Affairs $178M Social Affairs $189M Social Affairs $222M Social Affairs $251M Social Affairs $285M Social Affairs $325M

This year has seen a series of land allocations, including lakes and forests, to tycoons and the families of the prime minister and other government officials, raising questions of transparency and accountability. Siphan previously said that some state land given to private investors in Preah Sihanouk was likely sold to pay for roads.

Transparency International executive director Pech Pisey said he was concerned about the gap between spending and revenue — a shortfall of almost $1 billion, which would likely need to be covered by development partners and borrowing from foreign countries.

“We have a double crisis of Covid-19 and partial withdrawal of the EBA, and we have unemployment, the closing of many factories and enterprises, especially in the tourism sector,” he said, referring to the E.U. suspending trade benefits this year over human rights concerns.

It was important to support small and medium-sized businesses to help livelihoods and restore tax revenues, he said.

Pisey added that he hoped the government would transfer some defense spending for social services during the crisis.

The government statement on the budget said the first priority was “to maintain peace, political stability, security and public order,” and it would work to protect people’s livelihoods and promote an economic recovery.

“Cambodia must turn this crisis and these challenges into an opportunity to speed up the reform of all sectors, more deeply and more concretely than before, especially daring to cut down on chronic structural problems to improve and facilitate commerce, and make it convenient to make investments and do business, for both local and outside investors,” the statement said.

Line Items National Budget 2021 Source: Finance Ministry $1 = 4,000 riel *As listed under miscellaneous spending Supreme Councils: $3M (0M) National Audit: $3M (0M) Council for the Development of Cambodia: $3M (0M) National Assembly-Senate Relations: $10M (0M) Anti-Corruption Unit: $10M (-2M) Women’s Affairs: $11M (-2M) Civil Service: $15M (+0M) Civil Aviation: $16M (-8M) Religion: $16M (-1M) Senate: $19M (-2M) Royal Palace: $20M (-5M) Information: $21M (-6M) National Election Committee: $21M (+5M) Planning: $23M (-1M) Environment: $27M (-2M) Tourism: $31M (-9M) Land Management: $38M (-4M) Foreign Affairs: $40M (+1M) National Assembly: $40M (-7M) Justice: $42M (0M) Culture: $43M (-5M) Current Projects*: $50M (-12M) Telecommunications: $65M (+33M) Commerce: $66M (+3M) Labor: $94M (+11M) Industry: $95M (-22M) Finance: $119M (-107M) Council of Ministers: $123M (-8M) Financial Burden*: $155M (+19M) Investment Contributions*: $165M (+7M) Rural Development: $167M (+0M) Agriculture: $169M (+13M) Unplanned*: $174M (-35M) Energy: $180M (+36M) Decentralization of Education, Health*: $206M (+206M) Funds to Support the Budget*: $214M (+151M) Water Resources: $216M (-64M) Sub-National*: $265M (-6M) Borrowing Costs*: $296M (+19M) Social Affairs: $325M (+39M) Health: $384M (-141M) Interior: $507M (-12M) Transport: $599M (-205M) Defense: $641M (+7M) Education: $825M (-108M) Investment Projects*: $1,053M (+81M)

Major increases in the 2021 budget include telecommunications, more than doubling from a low base to about $65 million.

Siphan said last week that Cambodia needed to keep up with digital advances.

“We operate everything digitally now, so we strengthen the digital and telecommunications systems to make it faster and effective,” he said.

Education and health spending drops sharply, but is compensated by a new $206 million item on decentralizing education and health.

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