CAMBODIA

Cambodia is a unitary country organised as an elective constitutional monarchy with a monarch, chosen by the Royal Throne Council, as head of state. The head of government is the Prime Minister, who is appointed by the monarch for a five-years term. The bicameral parliament consists of a lower house, the National Assembly and an upper house, the Senate. The 117 members of the National Assembly are directly elected for five-year terms, while the Senate members are elected by the commune councillors from the 24 provinces of Cambodia (except for 4 of them who are appointed by the king and the National Assembly).

Cambodia has a three-tiered subnational government system. The structure of subnational administrations is officially recognised in the 1993 Constitution (revised in 2008), in Chapter XIII. At the highest level are the provinces and the capital-city, while at the intermediate and lower levels are the districts, municipalities, urban districts, communes and quarters. The 2008 Organic Law on Administrative Management of Capital, Provinces, Municipalities, Districts and Khans establishes the functions and sets out the financial provisions of all subnational administrations.

Local administrations and agencies are accountable upwards to the Royal Government of Cambodia (RGC) for the implementation of delegated functions. The Department of Local Administration (DoLA) oversees districts, municipalities and khans, while provinces and the capital city are under the supervision of the General Department of Local Administration (GDoLA) and the Secretariat for Subnational Democratic Development.

While a highly centralised country, Cambodia has implemented several reforms to deepen and strengthen decentralisation and deconcentration since 1996. It started with the Seila programme during the second half of the 1990s’, which initiated a slow process of transferring tasks and resources to specific subnational administrations. Then, in 2001, Cambodia adopted two organic laws that led to the first democratic election in communes in 2002, and in 2005 it adopted the Strategic Framework for Decentralisation and Deconcentration, overseen by the National Committee for Sub-National Democratic Development (NCDD), which serves as an umbrella for several efforts to strengthen subnational administrationss and making national level agencies to work more efficiently in each administrative level. In 2020, Cambodia completed the first phase of its National Program on Sub-National Democratic Development 2010-2019, led by the NCDD.

In December 2021, Cambodia approved the second phase of the plan, to be implemented between 2021 and 2030. The objective of this new plan is “to promote democratic, inclusive, equitable and just development through the modernisation of sub-national governance and improved access, quality, and utilisation of public service delivery”. Measures included in the new National Program on Sub-National Democratic Development 2021-2030 include transferring competencies to the provincial and municipal levels, and re-organising the municipal level as local administrations with autonomy, capacity and responsibilities to provide public services. The Program is organised around five key components: reform leadership and coordination ; subnational administrations’ structures and systems ; human resources management and development ; fiscal decentralisation and subnational administrations’ planning and budgeting ; service delivery and local development. It also focuses on specific cross-cutting issues: gender equality, social equity and inclusiveness mainstreaming ; climate change vulnerability, disaster risk reduction and serious infectious diseases. The implementation of this new Program will require the drafting of two five-year plans detailing activities, timeframe and budget. The first five-year plan (IP-5 I) is expected to be endorsed by the central government by September 2022.

TERRITORIAL ORGANISATION
MUNICIPAL LEVEL	INTERMEDIATE LEVEL	REGIONAL LEVEL	TOTAL NUMBER OF SNGs (2020)
1 410 communes (khŭm) 236 quarters (sangkats)	162 districts (srŏk) 27 municipalities (krong) 14 urban districts (khan)	24 provinces (khaet) 1 capital city (reachtheani)
Average size: 10 157 inhabitants
1 646	203	25	1 874

OVERALL DESCRIPTION: Cambodia has a three-tiered territorial organisation. At the highest level of sub-national government, Cambodia is made up by its capital city (reachtheani) and 24 other provinces (khaet). At the intermediary level, the country is divided into 162 districts (srŏk), 27 municipalities (krong) and 14 urban districts (khan). Finally, at the lower level there are 1 410 communes (khŭm) in rural areas and 236 quarters (sangkats) in urban areas. In 2018, three new districts and one new municipality were created.

The capital city (Phnom Penh), provinces, municipalities, districts and communes are administered by councils and boards of governors. The councils are the legislative body while the boards of governors are the executive body. The communes are the only level of administration with directly elected councillors, whereas councilors at regional and intermediate levels are indirectly elected by the commune councillors.

REGIONAL LEVEL: The higher tier of sub-national administrations in Cambodia includes 24 provinces (khaet) and the capital city (reachtheani), Phnom Penh (also considered a province). Provinces oversee all aspects and business of subnational administrations within their jurisdictions.

Provinces have indirectly elected councils and are headed by an appointed governor. According to the 2019 General Population Census of the Kingdom of Cambodia, Phnom Penh is the most populous province with approximately 2.3 million inhabitants, followed by the provinces of Kandal and Prey Veng, with approximately 1.2 and 1.1 million inhabitants, respectively. Kep and Pailin provinces, on the other hand, are the least populated with 43 000 and 75 000 inhabitants, respectively.

INTERMEDIATE LEVEL: As established in the 2008 organic law on Subnational Administrations, the intermediate level of government in Cambodia comprises districts (srŏk), municipalities (krong) and urban districts (khan). While districts correspond to rural administrative territories, municipalities are generally located in provincial capitals. Khan, on the other hand, are the districts of capital cities.

Districts, municipalities and khans have indirectly elected councils (legislative power) and an appointed board of governors (executive power), headed by an executive governor.

MUNICIPAL LEVEL: Communes (khŭm) are the lowest government levels in rural areas, whereas quarters (sangkats) are the lowest in urban districts’ capitals. Councils of communes and quarters are directly elected for five-year terms. In turn, the councils elect the members of the councils of the capital city, the provinces, districts and khans through a proportional electoral system and a candidate list. Communal elections were held for the first time on 3 February 2002.

HORIZONTAL CO-OPERATION: During the first years of decentralisation reforms in Cambodia, a working group within the National Committee for Support to the Communes/Sangkat (NCSC) was established to review communal boundaries, determine the viability of subnational administrations as services delivery units and recommend the establishment of cooperative arrangements between communes. However, experience with cooperative local service provision has so far been limited in Cambodia.

In 2003, several local authorities gathered and created the National League of Communes/Sangkats, a representative body for these subnational administrations. Later, in 2006, it changed its name to the National League of Local Councils (NLC). The NLC advocates for local councils’ interests at the national level, provides services and training, and fosters cooperation between communes and sangkats. In 2014, the NLC expanded and included municipal, districts and khan councils. In addition, the current National Program on Sub-National Democratic Development 2021-2030 contemplates the creation of a programme to organise and strengthen sub-national co-operation.

Four laws regulate subnational administrations’ assignments and expenditure obligations. The Organic Law on Administrative Management of Capital, Provinces, Municipalities, Districts and Khans (2008) is the most important piece of regulation so far, which establishes general guidelines for the transfer of responsibilities to all councils. It is complemented by the Law on Provincial and Municipal Budgets and Assets Management (1998), the Commune and Sangkat Law (2001), and the Subnational Finance Law (2011) that ensures that all responsibilities delegated from the national government should be accompanied by respective resources (although it does not mention any specific assignment of functional duties). However, the assignment of responsibilities among subnational administrations in the 2008 Organic Law is not clear, and several responsibilities are shared across levels, especially between the intermediate and municipal levels.

The National Committee for Sub-National Democratic Development Secretariat (NCDDS) is responsible for reviewing the responsibilities of national agencies and ministries to be transferred to subnational councils. The regulation establishes that the transfer of skills must be accompanied by adequate resources and capacity building measures, and defines priority areas for the analysis and transfer of skills (e.g. agriculture, education, forestry, natural resources and environment; health, industry and economic development, land use).

Since 2010, the central government has undertaken several mapping and reviewing exercises to assess the need and viability of reassigning functions to subnational administrations. However, this has not led to substantive transfers or delegations. Responsibilities have been delegated in areas such as management and maintenance, waste management and educational services. More recently, in December 2019, the entire administration of health services was transferred to subnational administrations through the Sub-Decree No. 193. This document came into force in January 2020 and re-assigned the administration of Provincial Health Departments, Health Operational Districts and health service delivery, among others, to the capital and provincial administrations (grouped under the acronym CPA). CPA, moreover, shall delegate specific Health Management and Health Service Delivery functions to subnational administrations within their own jurisdictions. In addition, discussions are on-going to increase the responsibilities of subnational administrations in service delivery, and in tackling climate change challenges through better management of infrastructures.

Main responsibility sectors and sub-sectors
SECTORS AND SUB-SECTORS	Regional level	Intermediate level	Municipal level
1. General public services (administration)	Public buildings and facilities		Administrative services (marriage, birth, etc.); Public buildings and facilities
2. Public order and safety	Regional Firefighting services
3. Economic affairs / transports	Regional roads, railways, airports and ports, inter-city and regional railway transport, pupils’ transports; Employment services; Support to local enterprises and entrepreneurship; Agriculture and rural development; Regional tourism	Rural roads; Rural Drainage and Sanitation Systems (shared)	Rural roads; Rural Drainage and Sanitation Systems (shared)
4. Environment protection	Nature preservation; Soil and groundwater protection; Climate protection; Sewerage	Parks and green areas; Waste management; Street cleaning (shared)	Parks and green areas; Waste management; Street cleaning (shared)
5. Housing and community amenities	Construction and renovation; Management		Construction and renovation;Distribution of drinking water; Public lighting; Urban and land use planning; Urbanism
6. Health	Hospitals; General health service delivery.	Primary healthcare (referrals)	Primary healthcare (medical centres); Preventive healthcare
7. Culture & Recreation	Regional and local museums; Cultural heritage; Sports Libraries
8. Education	Secondary and higher education		Pre-primary education
9. Social Welfare	Social care for children and youth; Support services for families	Social Payments

Scope of fiscal data: Provinces, districts and communes

Other

Availability of fiscal data: Medium

Quality/reliability of fiscal data: Medium

GENERAL INTRODUCTION: Although subnational administrations at all levels have some autonomy to prepare their own budgets and make use of some of their own taxes, Cambodia has a fairly centralised system of finance. In fact, while subnational administrations perceive some tax revenue, their collection remains centralised. On the other hand, provinces have budgetary control over the districts, municipalities, khans and sangkats. Therefore, fiscal autonomy is limited to the highest subnational level.

However, the central government is moving towards deepening the degree of fiscal decentralisation. In 2011, the Law on Financial Regime and Property Management of Subnational Administrations established that subnational administrations should be in charge of their budgets and must manage the properties in their jurisdictions. Furthermore, one of the main objectives of the new National Program on Sub-National Democratic Development 2021-2030 is to increase local revenue from tax and non-tax sources and to improve collection capacities.

The Sub-National Budget System Reform Strategy 2019-2025 was recently approved. It is a document that seeks to improve national and subnational policy outcomes and to strengthen public finances through reinforcing budget-policy linkages and enhancing fiscal balances.

Subnational government expenditure by economic classification
2020	Dollars PPP / inhabitant	% GDP	% general government	% subnational government
Total expenditure	100	2.3%	9.3%	100%
Inc. current expenditure	76	1.7%	10.1%	75.6%
Compensation of employees	24	0.5%	6.5%	23.5%
Intermediate consumption	45	1.0%	31.9%	45.2%
Social expenditure	1	0.0%	0.5%	0.6%
Subsidies and current transfers	0	0.0%	0.1%	0.0%
Financial charges	0	0.0%	0.0%	0.0%
Others	6	0.1%	12.3%	6.3%
Incl. capital expenditure	25	0.6%	7.5%	24.5%
Capital transfers	-	-	-	-
Direct investment (or GFCF)	-	-	-	-

EXPENDITURE: Subnational expenditure has been steadily growing in Cambodia in recent years. In 2020, the total subnational government expenditure corresponded to approximately 2.3% of GDP, which is significantly higher than the 1% recorded in 2016. Current expenditure has remained more or less stable, accounting for 75% of the total expenditure incurred at the subnational level in 2020. Subnational government staff expenditure accounted for a relatively low share of total public staff expenditure (6.5%), whereas intermediate consumption accounted for up to 32% of total intermediate consumption at national level.

DIRECT INVESTMENT: In 2020, subnational capital expenditure amounted for KHR 585.2 million, representing 24.5% of total subnational government expenditures and 0.6% of GDP. 94% of all capital expenditure corresponded to fixed assets. Collaboration between the communes as regards with investment in infrastructures occurs through a joint application system for funding for capital projects. Such collaboration is supervised and must be approved by the provincial government.

The Subnational Investment Fund set up by the central government is an additional mechanism by which eligible districts (based on a eligibility criteria) can apply for grants to implement specific priority local infrastructure projects.

Cambodia has set a special unit for overseeing PPPs in the country: the Central Public-Private Partnership Unit, which acts as the Secretariat to the Inter-Ministerial Committee for PPPs (IMC). In 2021, the Cambodian parliament approved the Law on Public-Private Partnerships, with the aim to “promote the management of the Public-Private Partnerships (PPP) mechanism for the preparation and development of public infrastructure and public service projects in an efficient, effective, sustainable, transparent, accountable, and fair manner”. According to data from the World Bank's PPP Knowledge Lab, there are currently 33 active PPP projects in Cambodia, totalling 4,4 million dollars. There is no data available for PPPs at the subnational level.

ⓘ No detailed data available for this country

Data from previous years indicate that the main areas of subnational public spending are infrastructure development and maintenance (in particular for rural roads and drainage systems), followed by social benefits, and staff expenditure. There is no disaggregated data on subnational public spending by COFOG. In 2020, international institutions, including the IMF, have recommended the Ministry of Economy and Finance of Cambodia to advance in the collection and systematization of more and better data on public finances, including data at the subnational level.

Subnational government revenue by category
2020	Dollars PPP / inhabitant	% GDP	% general government	% subnational government
Total revenue	158	3.6%	15.7%	100%
Tax revenue	79	1.8%	9.2%	50.1%
Grants and subsidies	73	1.7%	-	46.4%
Tariffs and fees	-	-	-	-
Income from assets	-	-	-	-
Other revenues	6	0.1%	-	3.5%

OVERALL DESCRIPTION: According to the 2011 Subnational Finance Law, provincial and municipal sources of revenue encompass local sources (taxes, such as property tax, and non-tax, including service fees, royalties, patents and other charges), national sources (transfers of funds and service fees from functions carried out by the councils on behalf of government institutions) and other sources (revenue collection from tasks carried out on behalf of national agencies and ministries). Although the 2001 Law on Commune/Sangkat Administration establishes that lower tiers of government can levy taxes, districts and communes currently only receive resources from grants and subsidies, tariffs and fees for service delivery, and rents, whereas almost all tax revenues are allocated to the city and the provinces, and in particular to the capital city of Phnom Penh.

Similarly to expenditure, subnational revenues have been growing steadily in recent years following the latest fiscal reforms and national development programmes. While in 2016, subnational administrations recorded per capita income of USD 45 per capita, in 2020 this figure rose to almost USD 158. In 2020, subnational revenues corresponded to 3.6% of GDP and 15.7% of total public revenue at the national level, in contrast to 1.2% of GDP and 8% of national revenue in 2016.

At the beginning of 2022, the national government announced that it will increase the financing of subnational administrations for the corresponding fiscal year, providing more than KHR 1 billion to support the implementation of the new National Program on Sub-National Democratic Development 2021-2030.

TAX REVENUE: Taxes are the main source of income for provinces and municipalities in Cambodia. Subnational taxes are all collected by the Department of Taxation, located at the provincial level. They include patent tax, stamp registration tax, tax on means of transportation, public lighting tax, accommodation tax, tax on unused land, tax on property rental and a property tax.

According to data from the IMF, in 2020, taxes on goods and services were main source of tax revenue for subnational administrations, accounting for 74% of total subnational tax revenue; followed by taxes on income, profits and capital gains (17%) and the property tax (8%). In 2020, taxes represented 50% of the total income of all subnational administrations and were equivalent to 1.8% of GDP. Taxes collected in provinces and municipalities represented 9.1% of total tax revenues at the national level. The taxes collected at the provincial level are returned to the central government, which incorporates these values in the annual budgets.

The property tax, despite being considered a very important tool to strengthen finances at the subnational level, has still not been able to establish itself as a significant source of income for the provinces and municipalities in Cambodia. This is because the statutory tax rate is low, and the base has been limited exclusively to properties in capital cities. The tax is not based on the full market value, but it is based on 80% of the assessed market value, minus a general exemption of KHR100 million. In addition, a large number of properties are exempt from paying this tax.

Upcoming tax reforms seek to strengthen the collection capacity of subnational administrations, in particular the property tax. Cambodia is currently discussing how to improve the revenue performance of the property tax by focusing on administrative improvements that expand the tax base coverage, increase the valuation level, and strengthen the enforcement and compliance measures, while conducting further studies to improve social equity and raising more revenue. This started with a revaluation of properties, effective since July 2019. In parallel, to monitor the implementation and results of the ongoing reform efforts, Cambodia is developing a set of key performance indicators and targets under the Revenue Mobilization Strategy 2019–2023.

The Sub-National Budget System Reform Strategy 2019-2025, on the other hand, is to be coupled with the objectives of the sectoral strategy at the national level, which aims, among other things, to increase public tax collection by 0.3% of GDP, which is expected to benefit subnational administrations.

GRANTS AND SUBSIDIES: The dependence of subnational administrations on transfers and grants from the national government has slightly increased in recent years, reaching 46.4% of total subnational government revenue in 2020 (compared with 44% in 2016), corresponding to 1.7% of GDP.

Subnational administrations in Cambodia receive unconditional grants to cover administrative costs, delegated functions and capital development (investment). Transfers to subnational administrations are channelled through the District/Municipality/Khan (DMK) Fund and the Communes/Sangkat (CS) Fund, which are both established by the National Government with support from development partners. Transfers from these funds are managed by the NCDD, and distributed through a criteria-based formula, encompassing indicators such as population, poverty level and geographical characteristics. In the last years, these funds have gained importance in subnational budgets. Between 2012 and 2018, the DMK Fund went from representing 6.4% to 9.2% of the revenue of district municipalities, due to an increase in conditional transfers to cover new delegated responsibilities and to act as a fiscal equalisation mechanism between territories. In 2020, the CS Fund accounted for about 27% of the communes and sangkats revenue.

There are also conditional grants for which subnational administrations are eligible. These grants are allocated by line ministries to subnational administrations to ensure they have the necessary resources to implement delegated functions.

The Subnational Investment Fund (SNIF) is a financing instrument supported by the Asian Development Bank that channels additional funds to subnational administrations based on their performance. It is off-budget, and disbursed in parallel to regular grants for SNGs. The fund was established with the objective of promoting pilot investment projects in rural districts, including civil works in sanitation, health, infrastructure and education. The SNIF works as a facility to convert a sovereign loan to subnational grant or reimbursable grant, since subnational administrations are not authorized to contract loans.

OTHER REVENUE: Additionally, subnational administrations in Cambodia collect a number of revenues other than taxes and inter-governmental transfers. These revenues include the sales and rent of goods and services (i.e. administrative fees, fees from administrative permission, administrative form and other administrative management charges), revenues from service delivery (i.e. cadastre and construction fees), royalties, and others. Other revenue represented 3.5% of subnational government revenue in 2020.

In 2018, the central government adopted a sub-decree on non-tax revenue and implemented a 10-Year Blueprint for Non-Tax Revenue (2021-2030) that will cover five forms of non-tax revenue: 1) Revenue from public services; 2) Revenue from management of state assets; 3) Fines and penalties; 4) Dividends from state-owned enterprises and financial autonomous units; 5) Revenue from other sources.

ⓘ No detailed data available for this country

FISCAL RULES: In 2015, the government introduced programme budgeting and gradually moved to Performance Informed Budgeting. The principles and objectives are to improve effectiveness and efficiency in budget management and to ensure the linkage of budgeting with desired outcomes and policy goals. The implementation of programme budgeting was piloted in 12 provinces, yet issues regarding the programmes and performance indicators remain.

DEBT: Currently, subnational administrations are not allowed to undertake any form of debt financing. As mentioned above, the SNIF is a facility that enables to convert sovereign loans into subnational grants or reimbursable grants.

TERRITORIAL MANAGEMENT OF THE CRISIS: Cambodia has displayed a rather centralised management of the crisis. Measures have been issued by the central level, directly from the sectoral ministries (finance, health, interior, etc.), to establish the suspension of tourism and other economic activities, and devolve to local police the management of public spaces. There is no record of dialogue and coordination mechanisms that have been established in addition to those already existing in the country (NLC, NCDD and others). However, the national government allowed provincial officials to enforce localised movement restrictions, impose curfews and designate high, intermediate and low-risk areas. Provincial governments may also ban non-essential commercial and tourist activities in accordance with central-level guidelines. In addition, provinces and municipalities adopted some specific restrictions to prevent the spread of the virus (notably travel restrictions).

Some measures of territorial focus that have been implemented in Cambodia include the establishment of focal points from line ministries in subnational administrations, to facilitate the flow of communication and coordination in the implementation of measures. In addition, the central government tightened security and screening measures at the borders of Banteay Meanchey, Battambang, Kampong Cham, Oddar Meanchey, and Pailin provinces. Regional workshops were also held to develop or strengthen the levels of preparedness of the provinces to implement recovery plans and adequately identify action priorities. Finally, the central government allocated emergency beds to provincial and municipal hospitals.

EMERGENCY MEASURES TO COPE WITH THE CRISIS AT THE DIFFERENT LEVELS OF GOVERNMENT: The central government has deployed a series of measures to alleviate the impact of the COVID-19 crisis on the population, especially in the poorest households, such as a wage subsidy programme of USD 59 million, a reserved COVID-19 Outbreak Prevention and Treatment Fund of USD 30 million, and a USD 270 million fund to help SMEs.

Subnational administrations played a specific role to support vulnerable households throughout the crisis in the framework of the IDPOOR Program, a cash transfer program aimed at poverty alleviation. After the programme registered high demand in the first months of its implementation, the national government involved the communes and sangkats in the process, because they could more adequately identify the households most in need of aid, and ensure the program roll-out, including throughout the COVID-19 pandemic. During the COVID-19 pandemic, it is therefore estimated that a total of USD 291 million were distributed to around 700 000 recipient households.

IMPACTS OF THE CRISIS ON SUBNATIONAL GOVERNMENT FINANCE: Between 2019 and 2020, subnational finances were strongly affected by the COVID-19 crisis, specifically with regard to their income, which fell by 21%, while between 2018 and 2019 it had increased by 38%, in line with the sustained economic growth of the country. The item that decreased the most between 2019 and 2020 was grants and transfers, which went from KHR 1.8 billion to KHR 1 billion, falling by 46%. Tax revenue fell by 8%. On the other hand, during 2020, the provinces, districts and municipalities registered a significant increase in the category of “other income”, which increased by 219% (from KHR 700 million to KHR 2.3 billion) thanks to the transfer of economic aid packages from the central level. The situation, however, improved considerably in 2021, with a 59% increase in subnational revenue compared to 2020, mainly due to a 220% increase in the amounts received from grants and transfers.

Subnational government expenditure was also affected. Between 2018 and 2019 it had increased by 54%, while in 2020 it fell by 13%, going from KHR 2.5 to KHR 2.1 billion. This fall was mainly due to a 28% decrease in spending on public goods and services. As in the revenue area, subnational government current public expenditure recovered in 2021 with an increase of 48%, mainly due to higher salaries and spending on social benefits. As for capital expenditure, it remained flat in 2020 and fell by 7% in 2021.

ECONOMIC AND SOCIAL STIMULUS PLANS: In October 2021, and thanks to the stabilisation of cases due to the high vaccination rate in Cambodia, the national government announced the preparation of a post-COVID recovery plan for the period 2021-2023. This plan will aim to boost the national economy and will be financed both by public and private resources directed towards small and medium-sized enterprises. As of March 2022, this plan was still in preparation.

In addition, the national government announced an increase in financial transfers for subnational administrations (USD 247 million) during 2022, to strengthen their capacities to the ongoing pandemic and to help them implement recovery strategies.