To achieve democratic development, Cambodia’s next step towards fiscal decentralization will focus on both institutional and service delivery reform at district level so as to strengthen the capacity of the sub-national administration and better link it to sectoral service delivery. To move forwards, fiscal decentralisation needs to be comprehensive and well coordinated with other cross-cutting reforms, especially the Public Financial Management Reform Programme, and sectoral reforms. This does not mean that everything has to be done at the same time, for doing so would overwhelm existing capacity and go against the more gradual ‘learning by doing’ philosophy of Cambodia’s decentralization. Being comprehensive entails setting out the longer term vision, anticipating the kinds of challenges that lie ahead and planning realistic and flexible sequencing strategies.

Linking decentralization to sectoral policy is particularly challenging – especially given the current centralized patronage-based process associated with sectoral service delivery and state budget management. The challenges are compounded by the parallel fragmented nature of donor support through numerous vertical projects. Overcoming them requires that fiscal decentralization in the future should not be seen as mostly initiated and driven by the Ministry of the Interior, but rather by the sectors themselves. That donors be involved and supportive of decentralization is no less important.

There are reasons for both optimism and pessimism about the next step of fiscal decentralization under the Organic Law. On the one hand, successful experience with communes since 2002 engenders the strong hope that the government will again prove its adaptability and successfully navigate the reform. On the other hand, commune reform has barely touched on the kinds of tasks expected in the next step, namely functional assignment, revenue assignment, and more systematic inter-governmental transfer. Some basic components and tasks, including functional and revenue assignment, were hardly implemented under the commune reform. Starting on these tasks will definitely run into resistance from central agencies, a test that will prove how committed the government is to fiscal decentralization.

(Provided by the author)