ADB Links Corruption, Political Culture

December 10, 2012
By Colin Meyn
The Cambodia Daily

The government is beset with high-level corruption, a lack of transparency in public procurements, poor auditing practices and political interference in the country’s main anti-corruption body, a report produced by the Asian Development Bank (ADB) sent to the media yesterday states.

In a 66-page report that looks at how the government is managing its finances and fighting corruption, the ADB says that many of the country’s laws on public finances are simply not being implemented and that public procurement of goods and services needs to be improved at all levels of government, especially at a national level.

“Most aspects of governance need to recognize ongoing informal links between the dominant political party, medium-sized and large-sized businesses, and senior levels of government,” the ADB report, which was originally published in January, says.

“Furthermore, there is a limited tradition of accountability for performance through either financial oversight or political mechanisms.”

“Much of the public sector leakage that occurs in Cambodia is thought to occur in and around the systems applied in both domestically and externally financed procurement. Significant leakage is also thought to occur after the awarding of contracts, suggesting that contract management by executing agencies is weak and that penalties are seldom enforced,” the report continues.

The report also says that while corruption at lower levels of government appears to be decreasing, there is no such sign of such stabilization at higher levels of government.

“Corruption at all levels has long been regarded as the main area of concern for improving the business environment and overall governance in Cambodia, and this remains the case,” the report states.

The ADB also found that the main corruption risks likely to be experienced in the future by the government include “major challenges in building capacities in the new [Anti-Corruption Unit];” and “cultural constraints to questioning authority.”

“Though their ratings [in surveys of public opinion] have improved, the police, judges and courts, public registry, taxation, and customs, as well as the education system, continue to be perceived as the most corrupt institutions,” the report states.

Although the report notes that significant efforts have been made in the drafting of anti-corruption policy and the formation of the Anti-Corruption Unit (ACU), the ACU “has many challenges to overcome and it remains to be seen if it can become administratively and operationally effective.”

On the government’s management of finances, the ADB said that positive strides have been made in the past decade, but that progress in areas crucial to building investor confidence is still lacking. For example, the procurement process for government-funded projects still lacks transparency and regulations around procurement are insufficient and poorly enforced.

One reason for this is the fact that the Ministry of Economy and Finance acts as both a regulator and monitor in government procurement transactions.

“The need for greater transparency in public procurement is a common perception in Cambodia,” the report states.

“Also, there are suspicions (as yet not acted on) that some executing agency senior officials control some local consulting firms, who then tie up with foreign consulting firms when bidding on projects.”

The report also cites limited transparency in public projects due to few audits being carried out by the National Audit Authority (NAA).

“[O]nly around 50 percent of central government entities are covered by an external audit and the breadth of audit work undertaken within entities is limited.”

Still, the report says that the NAA “has made solid progress in recent years and, given its important strategic role in monitoring and managing governance risks, further ADB support in the years ahead is warranted.”

Vice president of the National Assembly Ngoun Nhel and Undersecretary of State at the Ministry of Finance Suong Mengkea both declined to comment on the ADB’s findings. Council of Ministers spokesman Phay Siphan referred questions to the Ministry of Finance.

Peter Brimble, country director for the ADB in Cambodia, said the report was meant as an indicator of where the country stands regarding financial management and where resources should be allocated as the country’s partnership with the ADB moves forward.

“No one is denying the need for major civil service reform,” Mr. Brimble said.

“The message is that we want to work with the government and strengthen country systems to go ahead in our partnership,” he added.

Mr. Brimble also noted that indicators of investor confidence in the country are improving despite the concerns over how the government handles its finances.

For instance, a January report by the International Monetary Fund (IMF) announced that Cambodia’s debt distress level would be upgraded from moderate risk to low risk. Still, the IMF report also noted that for confidence in Cambodia to continue to grow, improvements had to be made to the country’s borrowing strategy and financial management systems.

A report released last week by Transparency International (T.I.), also concluded that Cambodia’s government has done little to shake its reputation for corruption.

In T.I.’s 2012 Corruption Perceptions Index, Cambodia ranked 157th among 176 countries and territories listed, with a score of just 22 out of 100—a slight improvement on last year’s ranking of 164.

(Additional reporting by Phorn Bopha)