The Financing of Education

In the 1990s, the education sector was under-resourced in Cambodia. Public spending on education has remained roughly constant, ranging between 0.9–1.0% of the GDP since 1994. Public spending levels have been particularly low at the primary level where it is estimated that per pupil spending was around Riels 30,000 (or US$7.5) in 1997.

These patterns are mirrored by recurrent spending on education, which remained roughly constant, hovering between 9% and 10% of discretionary spending between 1994 and 1998. Government recurrent spending on the sector grew from Riels (R) 61 billion in 1994 to R102 billion in 1998, which barely kept pace with enrolment growth. The situation improved somewhat in 1999 with an increase to R150 billion (almost 14% of discretionary spending).

The under-resourcing in the 1990s increased reliance on parental and donor contributions. For example, it is estimated that in 1998 almost one half (46%) of education expenditure was provided by donors and NGOs compared to government (27%) and private households (27%).

Predictability of available resources over the medium-term is a precondition for effective forward policy making and planning for the sector. This was problematic between 1994 and 1999, where public expenditure planning was limited to an annual basis. In addition, education aid flows were variable and systems not in place to accurately capture aid spending volumes. The uncertainty over available resources for the sector is reinforced by the absence of clear regulatory, accounting and management mechanisms for the substantial private contributions. Most of these transactions between parents, schools and teachers are made in the form of informal payments (in addition to unofficial school fees). As a consequence, these resources are not effectively captured or managed in the financing operations of the education system.

A key component of predictability is the effective channeling and disbursement of funds from the Government treasury to Ministry headquarters and the provinces. Officially, budget outturn figures for education have been encouraging in recent years. For example, in 1997 it was estimated that the budget outturn was 95% of planned expenditure and 93% in 1998. It is acknowledged that these figures are difficult to verify due to limited financial tracking and audit systems. Despite these encouraging signs, predictability and forward planning is somewhat undermined by reliance on a monthly cash accounting system and variable transparency in information on budgetary allocations to the provinces and other education units. In addition, the predictability of disbursing allocations could be at greater risk as the share of non-salary spending increases.

Current public spending patterns are not equitable. For example, in 1996/97 it was estimated that only about 40% of recurrent spending was devoted to primary education compared to 15% for secondary and 30% for post-secondary education. Much of this distortion was due to substantial donor support for higher education and TVET. The situation has improved since this period with public spending on primary and secondary education averaging around 80–85% in 1998/99. Simultaneously, donor support has shifted significantly towards a greater share of support for primary/basic education.

Public spending per student also appears to be inequitable. For example, it is estimated that in 1997 spending per primary student was around Riels 63,000 of which public spending was R30,000 (47%). In contrast, per student spending on technical vocational education was estimated at R560,000 with public spending amounting to R446,000 (80%). The public share for higher education was an estimated 67%. Clearly, these patterns are not equitable, given the under-representation of students from poorer families at later stages of the education system.

The efficiency and quality of education spending has been disappointing in recent years. The share of overall recurrent spending used for financing salaries has been roughly constant at 72–75% over the period 1996-99. However, the provincial education budgets that service primary and secondary schools show a much higher salary share (92–93%) over the same period. Per student spending on operating costs averaged only R1,700, being as low as R500 per student in Phnom Penh. This situation increases the reliance on donor and private contribution to sustain key items of expenditure such as textbooks, teacher training and school maintenance.

Improving the equity and efficiency of provincial budgets is especially critical. Current financial planning criteria for provincial budget allocations are unclear. For example, there are wide provincial variations for budget allocations per student, ranging from R33,000 (Siem Reap) to R117,000 (Mondulkiri). For the operating budgets, per student spending ranges between R500 per student (Phnom Penh) to R36,000 per student (Mondulkiri). A review of provincial budget allocations, and especially of operational budget allocations, taking account of poverty and needs indices, is a pressing issue.

In early 2000, the Government and the Ministry of Education took a number of key initiatives to improve the predictability of resourcing, providing real incentives for forward-looking education financing policy development and programme planning. A critical step has been the presentation of a three-year rolling Public Expenditure Plan (PEP), which projects an increase in education recurrent spending from R220 billion (2001) to R400 billion (2003). In the 2001 budget, education was allocated R223 billion, slightly above PEP projections. Simultaneously, the Government introduced the Priority Action Programme (PAP) mechanism, which provides protected and post-audit financing for the implementation of agreed priorities.

These proposed education financing reforms, if effectively implemented, would undoubtedly assure greater access to primary and secondary schooling for students from poorer families. Nevertheless, the projected levels of continued parental contributions, especially at post-primary levels, could represent a continued constraint on equitable access for the children from the poorest families. A complementary MEYS strategy is to provide targeted programmes and poverty-indexed scholarships and incentives for the poorest. While this strategy is appropriate, a key strategic consideration will be putting in place mechanisms that ensure that any such incentives reach the poorest (e.g. community, NGOs involvement in selection) and funds are accounted for in a transparent manner.

The provincial and district education authorities will be expected to play an enhanced role in both the operational planning and management of these proposed financial reforms. A critical step will be for the MEYS to formulate new staff deployment guidelines and norms as a basis for annual salaries budget planning, endorsed by the Ministry of Economy and Finance. Another important requirement will be to develop poverty and needs indexed provincial budget allocation criteria, preferably for both the traditional operating budgets and the new PAP programmes.

The fundamental thrust of the Education Sector Plan (ESP) financing policy for 2001-05 is to reduce average parental contributions for basic education. The policy target is to increase public spending on basic education from around R40,000 per student to R116,000 per student by 2005, meaning a reduction in average parental contributions from 50% of total (1997 figures) to 18% by 2005.

A key feature is to secure efficiency gains in the use of staff and facilities, through a number of measures. These include increased pupil-teacher ratios for secondary education up to 25:1 by 2005 and the increased use of double shifts in primary and secondary schools. The financing plan also incorporates increased public spending on quality improvement, including for textbooks. The plan projects a doubling of the schools' operating budgets support per student through public funds, alongside allocations for continuous, nationwide training of all teachers and head teachers. Another key feature of the ESP financing plan is to increase both the volume and share of non-wage recurrent spending, in order to secure sustainable quality improvement.

The overall implications for these reforms are a significant increase in public spending on basic education, which is projected to rise from around R180 billion in 2001 to R377 billion in 2005. The spending share on basic education is designed to remain consistently between 70% and 75% of total public spending, in keeping with with ESP priorities. Public spending on upper secondary is projected to grow from R14 billion to R65 billion by 2005, in order to secure the participation of rising numbers of students from poorer families as the system expands.

The Government allocated almost 16% of its national recurrent budget to education in 2001 and increased the allocation to 18.2% in 2002. Unfortunately, due to inadequacies in revenue policy and collection, the share still falls short of meeting needs. The shortfall is compounded by the fact that the level of disbursement invariably tends to be well below the amounts allocated in the national budget. This gap between promise and delivery seriously impedes the progress of educational reform. The lack of funds is perhaps most notable in the low (and often delayed) teacher salaries but also in the poor availability of adequate facilities and learning materials. This lack of minimal required finances resulted in a supplementary system whereby parents unofficially paid fees to the school or to the teacher, although this excluded poor children because of their inability to pay.