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July 14, 2010

The Platform Approach in PFM Reform – Positive for Cambodia so far, but not necessarily the magic bullet for all countries

Posted by Peter Murphy[1] 

A key strategic element of Public Financial Management (PFM) reform in Cambodia has been the use of the platform approach, a strategy designed to package and sequence reform measures (platforms) which, taken together, progressively aim to produce a higher level of PFM competence. (www.mef.gov.kh). In Cambodia four platforms were defined with overarching themes, commencing with improved Budget Credibility, and to be followed by strengthened Financial Accountability, development of Policy-Based Budgeting and finally enhanced Accountability for Performance. This sequencing reflected the recognition that strengthening aggregate efficiency and core elements of the existing PFM framework were necessary, prior to addressing more substantive accountability, policy and performance issues. 

The platform approach has been relatively successful in Cambodia in supporting implementation of a comprehensive and complex PFM reform strategy in a challenging post-conflict environment. The Cambodia experience demonstrates a positive outcome for the platform approach, in a country which has a stable political and socio-economic environment, where substantive engagement from political leadership and management is present, and where there is a preference for well-planned consensus-based change, supported by unified and continuous donor support. Periodic review (quarterly monitoring, annual retreats, bi-annual evaluations and end of stage reviews) and flexibility in the application of the platform framework has also proved to be an important element in the implementation. The political and human capital, coordination and implementation costs on both the government and donor side of the approach are substantial.

A diagnostic review[2] (IFAPER) of Cambodia’s PFM system undertaken in 2003 found pre-existing (2001-2003) interventions lacked government ownership and necessary reform incentives, involved non prioritized and separate packages of donor support and ultimately yielded limited results. 

Adoption in 2004 of the platform approach[3] enabled government political leadership, senior management and engaged donors to jointly identify and understand the key PFM challenges in Cambodia; to consider the linkages between key budget formulation and execution reform components; to develop a government vision of medium-term reform priorities; and to decide an appropriate outcome focused sequencing agenda matched to institutional capacity. Phased medium-term and annual plans were developed at a consolidated output and detailed activity level, with performance indicators (both quantitative and process) and targets. The PEFA framework was used to inform the construction of these targets.

The initial activities targeted strengthening budget credibility, including budget comprehensiveness and aggregate realism, the budget cycle, cash management and predictability of cash releases. Later platforms are intended to address financial accountability, policy-based budgeting and accountability for performance. Cross cutting issues were clearly identified (e.g. incentives, organizational reform, training and capacity building) and addressed and the reform was conceived as a ten to fifteen year effort.

Government ownership and commitment to the reform was secured by active and regular participation from the Prime Minister and Deputy Prime Minister (Ministry of Economy and Finance) at key events, chairmanship of the reform committee by the Secretary of State (MEF), active participation by the General Secretary, delegation of accountability for results to MEF Heads of Departments and establishment of a PFM Reform Secretariat under the management of the Budget Director to support planning and coordination . This was embedded in both the Government’s overall National Development Program and the overall Government-Donor aid architecture of sector specific Technical Working Groups designed to manage and monitor reform activities.

This provided the basis for other key strategic elements of the reform to be established including: i) coordinated donor support arrangements; ii) for a for government, civil society and donor dialogue and monitoring; iii) transition management and monitoring arrangements and iv) linkages to other complementary reforms (External Audit, Civil Service Reform etc)

Independent evaluations undertaken in 2007 and 2010[4] (including a PEFA) suggest the PFM reform program has contributed to achieving improved budget credibility, in what is a very challenging post-conflict environment with substantive institutional and capacity constraints.

The Cambodian experience highlights a number of important issues for other countries to consider in seeking to adopt the platform approach.

 1. In Cambodia conflict avoidance and consensus building are important, authority is relatively centralized and incremental change is preferred.   These factors, all support a planned change approach, such an approach may however be less appropriate in an environment where, for example, political or economic change is uncertain or where more opportunistic change is preferred in the face of, for example, fiscal crises. The corollary is that under the platform approach it is more difficult to respond and address urgently issues that concern later platforms, not currently under implementation.

2. There needs to be sufficient flexibility to allow for some overlap in platforms. In Cambodia the concept of stages was introduced. Stage one dealt primarily with Platform 1, but also included some preparatory activities for later platforms. Following a mid-term review of the outcome of Stage one, it was agreed with Government that, although Platform 1 was not yet fully complete, maintaining momentum and motivation meant it was important to facilitate progression to platform 2. The current second stage of the reform now consists of three sets of activities, those related to outputs outstanding from platform 1, core platform 2 outputs and preparatory work for later platforms. However it is important that this flexibility is not used to prejudice reform in areas where achieving progress is difficult.

3. The platform approach is intended to support a coordinated and progressively mainstreamed (move to full government implementation based on direct budget support) donor assistance approach.  In Cambodia a coordinated approach has been implemented through a multi-donor donor trust fund and a co-financing World Bank grant, as well as through effective liaison with other donors who earmark funds. Fully mainstreaming implementation has however been difficult due to concerns over procurement and fiduciary risks. The difficulty in mainstream has however led to implementation delays that have placed substantive constraints on program performance.

4. The platform approach taken together with donor coordination involves relatively high implementation costs. In Cambodia the reform has required substantive investment in joint government donor diagnostic planning and evaluation and the ongoing maintenance of specialist donor and government PFM Secretariats; these involve considerable government and donor engagement and substantial resource inputs (12% of total program costs of approximately US$35 million).

In conclusion the platform approach has been instrumental in helping Cambodia to implement, with some degree of success, a planned and coordinated approach to comprehensive and complex PFM reform in a challenging post conflict environment. The extent, to which the approach is transferable to other countries, depends on the degree to which the enabling factors, discussed above, are in place.

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[1] Peter has over twenty five years experience of working with donor assisted public financial management reform programs in multiple countries in Africa and Asia.  Until recently he served as World Bank task manager and lead donor coordinator for the Public Administration and Public Financial Management technical working groups in Cambodia. Following completion of his World Bank assignment, he commenced work with the IMF as a Senior Economist in the Fiscal Affairs Department in June 2010.

[2] IFAPER – Integrated Fiduciary Analysis and Public Expenditure Review – World Bank 2003.

[3] Study of Measures used to Address Weaknesses in Public Financial Management Systems in the context of Policy Based Support” by Peter Brooke, Bannock Consulting, April 2003.

[4] PFMRP Evaluation Reports – April 2007 and January 2010 and IFAPER 2010.

Note: The posts on the IMF PFM Blog should not be reported as representing the views of the IMF. The views expressed are those of the authors and do not necessarily represent those of the IMF or IMF policy.

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Comments

The practice of sequencing PFM reform has come under a lot of discussion. Sequencing based on the country context is considered a good practice. The platform approach enables sequencing reforms in such a manner. There seems to be an appetite for reform in many countries, including Cambodia. Achieving government ownership has been a very important accomplishment in Cambodia. Many country governments are attempting more parallel reforms than attempting in the past. All of us in the development ecosystem remember problems with doing too much at once - often no reform is achieved.

There are many dependencies to achieve a reform objective. This is the power of the Platform approach. It enables governments to determine readiness for the next stage. Yet, there has been more knowledge sharing in capacity building, legal reform and ICT systems, particularly over the past 5 years. Point 2 above is an important lesson. Multiple reform initiatives can be managed in parallel if the dependencies have been achieved - within reason. There is also the opportunity to make changes to subsequent phases based on experience. What was thought to be critical for reform in a future platform stage may not be so, based on macroeconomic changes or the success of other initiatives. The Platform approach can provide flexibility.

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