Cambodia: Education Sector; A Short Fiscal Assessment
Cambodia :The Education Sector, A Short Fiscal Assessment (September 2011)Jean-Marc LepainPublic Finance Management Specialist1. Background and sector general assessmentThe education sector has made very substantial progress during the past years but remains beset bya number of serious weaknesses, which for many of them can be corrected only in the medium whenmore fiscal space will be available.Access to primary and tertiary education has significantly improved. Enrollment rate in primaryeducation has moved from 91.3 percent in 2006 to 95 percent in 2010 while student assessmentsshow that quality of education has made some progress. School fees have been removed from theprimary level, and a scholarship programme has been put in place contributing to significantimprovement of the retention rate. The number of teachers grew from 71,000 in 2001-02 to 83,000by 2009-10 with a marked improvement in qualification. The share of teachers with only a lowersecondary qualification level fell from 66 percent in 2001-02 to 46 percent in 2009-10. Specialincentives to attract teachers to remote areas have shown good results and significant efforts intraining and retraining teachers have been made.On the negative side, at 2.3 percent of GDP in 2010, overall government spending on education,including donor support, is lower than most countries with similar income levels. As a consequencefamilies’ out-of-pocket expenditures are nearly as large as government spending. Progress fordeveloping the early education programme has been very slow and is affected by the lack of funding,while education experts see it as an important element for primary education success. In primary andsecondary education the number of pupils per teacher remains very high with an average of 50.Drop-out rate also remains very high. Only 38 percent of children who enroll in grade 1 continuethrough grade 9. Repetition rate shows some slight improvement but remains high, especially ingrade 1. Teacher salaries have improved but remain too low compare to the private sector. Provisionof textbooks to students remains a major issue beset by different types of difficulties linked toinsufficient budget, procurement and distribution difficulties, and lack of a management system ableto reduce losses. In practice the printing and distribution of textbooks has never been able to keepthe pace with a growing demand.A declining demography should help reducing pressure on the education budget. A reduction of afertility rate that started a decade ago is translating itself in lower enrollment numbers, representinga 12.5 percent decline in the current number of primary students compared to five years ago. This
new situation could offer scope for substantial saving if the authorities can redeploy resources fromschools and districts.Improving education in Cambodia will require rationalizing teacher wages and introducingperformance-based incentives, increasing the number of teachers with further improvements in theirtraining, a rapid development of early education, reducing family out-of-pocket expenditures toensure better social equity, an expansion of the scholarship programme for lower secondaryeducation, and a larger supply of textbooks. All this cannot be achieved without a broadening of thefiscal space.2. PlanningA data management system, the Educational Management System (EMIS) has been successfullyimplemented and provides high quality and timely data that allow a good analysis of medium termtrends. This has allowed defining a manageable and realistic set of targets and objectives that can beclosely monitored. In 2005 an Education Strategic Plan (ESP) covering years 2006 to 2009 has beenput in place followed by a new plan covering the period 2010-13. The new ESP is considered asrelatively realistic showing a significant improvement in MOEY planning capacity. The ESP is correctlyreflected in the budget, despite some inevitable adjustments, ensuring a close integration betweentargets, policy measures and expenditures.3. BudgetingEducation expenditures have increase in absolute amounts but declined relative to GDP due toreduced donor support that has not been compensated by a government contribution. As aconsequence, education sector budgetary indicators have been deteriorating during the period 2006-2009. Education expenditures declined from 18.5 percent of overall recurrent government spendingin 2006, or 3% of GDP, to 17 percent by 2009, representing 2.5 percent of GDP. By comparison,government outlays are 3.8 percent in developing East Asia and 4.6 percent on average for IDAcountries. The Government has only partially substituted his own resources to donor support, withinsufficient effort in some areas such as the printing of textbooks. Inflation has considerably erodedthe purchasing power of school budgets for non-wage recurrent expenditures. The relative value ofper capita allocation has declined from 100 in 2007 to 80.2 in 2010 while during that period thepurchasing power of the riel declined from 100 to 71.8. Meanwhile the primary school operatingbudget per student has increase of only of 11.7 percent, much less than inflation during that period(source UNICEF/SIDA/EC: Formulation Mission for a Proposed Program of Education Budget Support,2011-13).The share of education expenditure in the general budget remains low at 18% in 2010. Whiledeclining enrollment number help to stabilize the primary education budget, in secondary educationthe number of student has risen significantly faster than the real budget.
The sums of MOEY’s budget allocated to programmes remain relatively unchanged over recent yearswhilst the total budget has grown considerably, reflecting the Government policy to give priority tosalary increase. This erosion should be a matter of concern. It reduce MOEY’s ability to deploy largesub-programmes able to tackle structural issues such as the quality of education, the printing of bookand pro-poor actions such the scholarship programme in need of expansion.4. Financial PracticesMOEY has already introduced strong elements of programme budgeting and plans to move to full-programme-based budgeting within a few years. Currently the recurrent budget is broken down intoprogramme and non-programme budgets with further disaggregation into various chapters, accountsand sub-accounts. The balanced between programme and non-programme budgets has remainedrelatively stable during the past years, despite significant increase in absolute value of the recurrenteducation budget.Until 2007, Priority Action Plans (PAP) were one of the main instruments for the execution of theeducation budget. In 2007, PAP budget were superseded by programmes, which now represent 15.4percent of the total recurrent budget. Programmes are organized in five groups made of thirty sub-programmes. Allocations to sub-programmes are decided in a top-down budget planning approachthat can be far from field realities. This approach tends to undermine accountability, blur priorities,and reduce the effectiveness of the provided funding. In addition, the prohibition of transfer fromone sub-account to another has introduced a lot of rigidity in school budget.5. AuditThe internal audit function has been established in 2003 and was transferred in 2005 to the InternalAudit Department (IAD) whose chief officer reports directly to the minister. IAD officials havereceived some formal training under a former EC programme followed by on-job training. Animportant recent development has been the adaptation of the audit function to programmebudgeting. Later development will build capacity to audit all other expenditures and associatedperformance.Programme budgets have strict execution rules requiring documentary evidence of liquidation ofprevious advance as well as documentation showing the compliance of new expenditures withbudget appropriation and allotment allowing ex ante and ex post budget execution controls. Cashbooks maintained at different levels, complete the audit trail that links budget control process todisbursement that can be verified by the Internal Audit Department. A recent internal audit of asample of schools and District Offices of Education concluded that appropriate internal controls werein place in the great majority of institutions.
6. Decentralization / DeconcentrationThe PFM system of Cambodia is fairly centralized with no fiscal autonomy of provinces.Decentralization in MOEY has been established through four levels: centre, provinces, districts andschools. This decentralization policy includes the implementation of budget management centreswith increasing accountability in central departments, provinces and districts and the setting up ofsection in the central finance department in charge of monitoring programmes’ budget execution.Allocation of funds to provinces and districts is made through programmes using budget normformula. However the allocation of funds to individual school is far from being based on needs andfurther decentralization will have to give more budgetary autonomy to schools. 7. PFM challenges The matching of school budget with development and maintenance requirements (especially between urban and rural areas) remains a challenge. The trend of a reduction of non-wage expenditure in the recurrent budget must be reversed as it threaten MOEY’s capacity to maintain its current educational standards and reduces its capacity to launch new actions or to address structural issues. Additional resources should be mobilized to close the financing gap identified in the 2005 FTI/UNICEF report that and allow MOEY to reach its long terms objectives and reduce its dependence on donor support. The gap for 2010 has been estimated at USD 154 M, equivalent to 75 percent of the 2010 recurrent budget. Additional resources should also be found to improve the quality of upper secondary education and increase the number of students in this sub-sector without jeopardizing the budget for basic education. Programme budgeting should be gradually expended. Although MOEY use a number of formula to calculate the amount of fund to be transferred to the provincial and district levels, matching the allocation of these fund to schools with disparate maintenance and development The current rigidity in school budgets, which prevent the transfer of funds from one sub- account to another, must be removed giving more autonomy to school in deciding over expenditures. This will require capacity building and a proper regulatory framework.