Cambodia - Military Spending

The setting of national defense priorities is a key factor in preparing strategic plans and for effective implementation of all these strategic plans. It also helps to simplify the performance of roles and duties of every soldier in the RCAF. In addition, constant adherence to the priorities can help to ensure transparency and effectiveness in utilising resources; especially the national defense budget.

The Cambodian government has had one of the lowest rates of revenue collection in the world, at about half the average for low-income countries in 1998, its primary goal in reforming public finance is to increase government revenue. Without sufficient revenue, the Cambodian government is unable to provide adequate public services or to finance programs that will improve economic growth and reduce poverty. To increase revenue, the government is making improvements to its customs and tax administration. To raise revenues and improve budget management, the government must determine how to expand its small tax base, reduce corruption among public finance officials, and enhance management of public funds.

No matter what strategic initiatives are carried out, financial support is always required. Because Cambodia has a weak management system for national defense resources coupled with a limited budget, there have been interruptions and inertia in some areas of the reform process. Supplies must be delivered directly to units with transfer and handover among parties concerned of the Ministry, the High Command and the receiving unit. The receiving unit must, avoiding misappropriation, distribute all supply entitlements as directed. Authorised qualities of supplies must be distributed to the recipient units and a regular audit must be done.

More than 30 years of conflict have left the government budget heavily skewed toward defense and security expenditures, which together accounted for 42.7% of official government spending in 1999. Freeing budget resources to address poverty reduction is the overriding goal of the government’s reform program, and the government has committed to significantly increase spending on the priority social sectors of health, education, agriculture, and rural development. However, actual budget disbursements in these sectors lag significantly, especially at the provincial level.

Since 1999, the government had pledged to reduce military spending (officially 20% in 1998 and 14% in 2002) and increase social sector spending, but budget credibility is very weak, and year after year the military exceeded budget allocations while health, education and welfare received less than their budget allocations. Because of non-transparent parallel budgets, no-one really knows how much is spent on defense; one estimate put it close to $300 million in 2005, or almost half the official government budget, while another put it at $112 million in 2001.

The recent history of the RCAF resulted in it becoming a numerically large force with a large proportion (50%) of expenditure devoted to salaries and the daily living costs. The remainder is spent on uniforms, fuel, maintenance and equipment, training and accommodation. It is insufficient to support effective defense operations or to provide for the acquisition and maintenance of any significant military equipment. Conditions of service for soldiers continued to be inadequate. At the same time, the defense proportion (23.7%) of national gross revenue was a major diversion of resources from development, even though the actual size of the defense budget is much less than some nations of comparable size.

With the return of peace and stability since the formation of a new government on November 1998, Camnbodia is emerging from three decades of armed conflict that led to the significant depletion of its human and social capital and the destruction of vital physical and productive infrastructure. With the priority now given to social development and poverty reduction, the demobilization project should be considered within the wider context of the reform of the armed forces in an effort to recast their role in a peaceful and democratic society. The number of military personnel has been a subject of constant debate. The situation has been made more difficult by the integration of soldiers belonging to different political factions into the army. There have been recurrent reports on the existence of "ghost soldiers" who contribute to an artificially high military bill.

No progress had been made to improve soldiers' living conditions because the limited defense budget is not balanced with the needs of the defense force. This situation, if prolonged, would adversely affect the development of military capability and force sustainment and may also have undesirable consequences for the implementation of the compulsory military service law.

As a share of total spending, budgetary spending on defense and security have both declined over time, and together fell from 45.3% in 1996 to 17.8% in 2005, indicating a clear reorientation of policy toward poverty reducing expenditures (at the same time social sector spending rose from 19.5% to 28.7% of total budgetary expenditure).

The defense budget is very limited if compared to the requirements of defense reform and RCAF development. As of 2006 about 61 percent of the overall budget was used to cover salary and about 36 percent of the budget is allocated for food, fuel and military equipment. Therefore, the remnant of the meagre budget cannot fully respond to other major needs such as the reduction of military personnel, base construction, repair and maintenance of military material, training, and capability building for international cooperation, etc.

To sustain force development, maintenance of the defense budget package at about 2.7 percent of the Gross Domestic Product for a further period of 5 years must be taken into consideration. This undertaking would offer a possibility to progress military reform while the national economy grows and the number of RCAF personnel is gradually reduced. A reduction of the defense budget each time there is a demobilisation of military personnel would not allow an opportunity for reform to progress. In addition, the defense institution remains unable on its own to implement a number of strategic policies of the Royal Government, especially the downsizing of military forces. Nevertheless, the use and management of the defense budget in accordance with priorities and transparency is a key element.

The national defense budget is small in amount, if compared to the present size of the defense force. The budget condition can be improved when there are further demobilisations. Nevertheless, the Royal Government must always maintain and a stable defense budget while the Ministry of National Defense is undertaking demobilisation.

The Defense budget has averaged around less than US 70 million, but was increased to USD 78 million for 2007. The basic pay for a soldier is around USD 25 monthly, and even generals receive less than USD 400 monthly. Military personnel survive through additions to their salary for occupying particular positions, through corruption, and (for many lower and mid-ranking personnel) taking second and even third jobs, which results in their rarely being present for duty. The major exception is the B70 Brigade, the only unit located in Phnom Penh, which serves as the regime protection unit and includes the Prime Minister's personal bodyguard.

A growing budget deficit was projected to rise to 6.75% of GDP in 2009 (up from 2.75% a year earlier). The expanding deficit is due in part to large salary increases for civil servants and the military, an increase from 1% of GDP to 5% of GDP in 2009. Domestic financing of the growing deficit could erode domestic deposits and foreign reserves, threatening macroeconomic stability.

Military and security spending accounted for 11.8 percent of the total budget for 2009, or 1.85 percent of estimated GDP for 2009, with military spending enjoying the greatest increase, up 68.8 percent. Security spending grew by 56.8 percent. A portion amounting to 21.2 percent of the 2009 budget is allocated to social affairs, a 22.5 percent increase over 2008. Economic spending also grew by 21.2 percent from 2008, equal to 4.7 percent of the 2009 budget.

Government revenue, measured as a share of GDP, was expected to decline slightly from 2008 levels due to slower economic growth anticipated for 2009 (reftel). The increased government spending in 2009 should help to mitigate the slowing growth, but the decline underscored the need for continued improvements in revenue administration.

Public Expenditures (millions of Riels)
 Sector                          2000           2001           2002         2003         2004          2005
Defense and Security           450,724       425,953         406,753      411,014       422,820      451,183
Social Sectors:                298,620       395,938         487,361      506,812       550,562      670,737
Public Health                  102,226       134,040         164,391      172,966       192,062       224,550
Education, Youth and           169,861       229,574         289,669      300,458       325,908       350,768
Sport
Min. of Social Affairs.         26,533        32,323          33,301      33,388        32,592        95,419
(MSAVYR)


Share of Total Spending on Defense and Security (%)
          1996     1997      1998      1999      2000      2001      2002      2003     2004       2005
Defense 32.5       32.7      29.5      25.2      20.2      16.5      12.3      11.6     12.7       11.4
Security 12.8      14.6      13.7      10.1      9.3       8.5       6.6       6.3      7.5        6.4
Total     45.3     47.3      43.2      35.3      29.5      25        18.9      17.9     20.2       17.8