By CHHIENG Pich,Director, DICONational Project Director, TDSPDirector, EIF-NIU

Progress Update on Trade SWAp, TDSP and EIF

1. Progress Update on TDSP

2. Audit Findings in 2014

3. Communication cooperation

4. EU Funding Program 2014-2020

1. Project Development Objectives (PDOs): TDSP will contribute to increase the Royal Government of Cambodia's efficiency in formulating and implementing effective trade policies.

2. Multi-Donor Trust Fund : EU, DANIDA & UNIDO3. Trust Fund Manager : World Bank4. Executing Agency : DICO/MoC5. Board approval date : 07 Jan 20096. Effective date : 09 Mar 20097. Duration : 5 years (until 31 Mar 2012)8. Original budget : US$12,350,0009. Additional budget : US$3,100,00010. First extension : 31 Jan 2014 (22 months)11. Second extension : 31 Mar 2015 (14 months)12. Third extension : 14 Aug 2016 (17 months)13. WB Implementation Support Mission : 27 Oct – 27 Nov 201414. Next Implementation Support Mission: mid Sep 2015

No Identified Projects # Projects

1. Total project under TDSP 29

2. Projects completed and closed 12

3. Ongoing projects 15

• Projects will be completed and closed by Mar 2015 Implementing Agency Capacity Enhancement Program (RSA) – (completed) Reviewing commercial laws (DNLC) – (completed) Support drafting E-commerce Law (DLAD) – (completed) Rules of Origin (DMUL) – (completed) MoC Core HR Function (DoP) – (completed) Strengthen Capacity of ISC (ISC-MIH) – (completed) Support to G-PSF (CCC) – (completed) Better Quality of Fish and Fishery Products (FiA-MAFF) – (completed)

8

• Projects will be completed and closed by Aug 2016 ASYCUDA World System (GDCE-MEF), ICT Master Plan – Automation of Certificate of Origin (MoC), Automation of Business Registration (BRD), Automation of SPS Certificate (GDA-MAFF), Trade Training and Research Institute (TTRI-MoC), Drafts of Rice Standards – Certification Schemes for Rice (Accreditation System) (ISC-MIH), Development of a stronger National system for IP generation, protection, administration

and enforcement (DIPR), Support for the Arbitration Council and Dispute Resolution in Cambodia Strengthening the Operational Capacity of the National Commercial Arbitration Centre

9

Cumulative Expenditure $10,799,666

(70%)

Funds Required for DICO Operations & including various consultants

$1,069,955(7%)

Balance Commitment under all MOUs including GDA, TTRI, ACF, NCAC & ICT but excluding the closed

projects $ 3,580,379 (23%)

TDSP Funds PositionAs of 30th June 2015

(Unaudited - Expressed in Percentage of the Total Grant Amount of US$ 15.450 million)

• We have $4,650,334 to spend in the next 14 months,

• We need to spend $332,167 each month,• Or $930,067 each quarter

TDSP FundActual Disbursement against Projected Disbursement by Quarter, 2004/2015

As of 30 Jun 2015

0

100,000

200,000

300,000

400,000

500,000

600,000

700,000

800,000

Q2/2014 Q3/2014 Q4/2014 Q1/2015 Q2/2015

593,715 592,966

798,281

551,935

400,259361,490

482,675

653,425

586,610

262,511

Disbursement Projection Actual Disbursement

61%

81%

82%

106%

65%

TDSP FundDisbursement by Year, As of 30th June 2015

(Expressed in Percentage of the Total Grant Amount of US$ 15.450 million)

0

500,000

1,000,000

1,500,000

2,000,000

2,500,000

3,000,000

2009 2010 2011 2012 2013 2014 2015

116,584615,558

1,674,943

2,751,160

2,087,570

2,704,645

849,121

17.5%

5.5%4%

0.75 %

10.8%

17.8%

13.5%

NOTE: *. Cumulative Disbursement = USD 10,799,666**. Cumulative Disbursement as a Percentage of Total Grant = 70%

0

200,000

400,000

600,000

800,000

1,000,000

1,200,000

1,400,000

1,600,000

Q3/2015 Q4/2015 Q1/2016 Q2/2016 Q3/2016

1,076,144

864,387

1,460,262

703,375546,166

TDSP FundFuture Disbursement Projection by Quarter (2015/2016)

Estimated Disbursements of Grant Balance – US$ 4,650,334

Findings I ImplicationRecommendation

Some advances were not cleared within the time frame.

The absence of liquidation of cash advances within the set time frame was not in compliance with the SFMM. Moreover, Projects’ progress might not be accurately monitored and reported on a timely basis.

We recommend that liquidation of advances should bemade within the time frame set out in the SFMM. Long outstanding advances should be promptly followed up.

Previously 10 working days and now 20 working days

Findings II ImplicationRecommendation

All fixed assets held in the Information Communication Technology ( ICT) office are not tagged.

The absence of fixed assets tagging indicated weakness in the administration controls and may give rise to misappropriation of assets without the knowledge of management.

The project management should tag all fixed assets for tracking and safeguarding of assets purchased with funds granted and to ensure that they are being used for the Project’s intended purposes.

Findings III ImplicationRecommendation

There was no advance register maintained at EIF tier 2 CEDEP I from January to December 2014.

Absence of the advance register would result in difficulties for the project management to control advance and monitor activities.

We recommend that the advance register should be prepared and maintained for the whole year.

Findings IV ImplicationRecommendation

PV and supporting documents were not stamped “ PAID” .

The absence of “ PAID” and POSTED” on PV an supporting document could lead to double payments on the same expenditures and double recording of transaction into the system.

The project should cancel the supporting documents once payment was made by stamping “ PAID” and POSTED” after recording of such transaction and indicate the date of payment accordingly.

Findings V ImplicationRecommendation

Project Management did not withhold and declare the tax on consultant services to the tax authority.

Here are the penalties if failed to comply with the withholding tax: • 10% of the amount of

underpaid tax for tax negligence;

• 25% of the amount of underpaid tax for tax serious negligence;

• 40% of the amount of underpaid for a unilateral tax assessment ;

• 2% interest per month.

The project should withhold and declare tax on consultant services to the tax department in accordance with the applicable rate as defined in the LOT to avoid any potential penalties being imposed.

Findings VI ImplicationRecommendation

Delay in cash transferred to bank

Cash is highly liquid and the project is exposed to higher risk of losses if it keeps high cash on hand balance.

We recommend that the cash that refunded from liquidate of advance should be transferred immediately to the bank to avoid the risk of theft or misappropriation.

Findings VII ImplicationRecommendation

1. No cash count was performed in EIF Tier 2 CEDEP I during the year.

2. Bank reconciliation an d petty cash book in EIF Tier 2 CEDEP I were not prepared by the accountant and reviewed by management on a regular basis.

1. If cash counts are not performed, errors in cash transactions either accidental or intentional may not be detected and discrepancies may not be resolved in a timely manner.

2. Without regular bank reconciliation, discrepancies between the book and bank balances may not be investigated and resolved promptly.

1. We recommend that cash counts should be performed by a cashier to ensure that the physical cash on hand agrees to the cash book.

2. We recommend that formal ban reconciliation be performed on monthly basis.

Findings VIII ImplicationRecommendation

The amount of the cash on hand recorded in system is different from the actual amount on the confirmation.

The difference between the actual amount and the confirmation may lead to incomplete record of transactions during the year.

We recommend that the project should maintain the accurate financial information for the preparation of the financial statement.

• TDSP project will be closed by August, 2016.• Visualizing results/achievements is critical importance.• DICO is implementing Communication Action-Plans

2015-2016 which requires strong inputs from IAs.

Status

Suggestion• IAs to initiate and propose communications activities • IAs to work and consult with DICO’s Communication Unit• IAs to attend training on “Strategic Communications” to be

organized by DICO’s consultant.

EU Funding Program (MIP)Multi-Annual Indicative Program 2014-2020

Fund for Bilateral: EUR 410 million Fund for Regional: EUR 50 million

• Focus sectors:• Agriculture/national resources management: 144m• Education/skill: 140m• Governance and Administration: 120m• Support measure: 6m

• Three expected results: Improved business enabling environment for the agriculture

and NRM related sectors, through the improvement of existing national capacities, policies and regulations which support the development of sustainable agricultural and forestry use and commercialisation, stimulate innovation and private sector investment, and ensure protection of natural resources.

Strengthened value chains, including increased productivity, processing efficiency, improved product quality and increased market competitiveness in domestic and export markets that result in increased rural incomes and employment creation.

Empowered local communities to participate in the conservation and management of agriculture and natural resources including sustainable forest management (FLEGT) through the improvement of national and sub-national capacities, regulations and law enforcement.

• Identification mission: May-Jun 2015• Formulation mission: Q4 2015• Programs to start by early 2017

• Focus Areas: support the ASEAN Economic Integration beyond 2015:

Support improvements in customs, transit, standards, services, investment, food safety, IPR.

Narrowing the development gaps in the public administrations of CMLVs

Further integration into the global economy of ASEAN Member States

Euro 35 million for ASEAN Secretariat Euro 15 million for Cambodia, Laos PDR and Myanmar Will include regional programs (ECAP IV, ARISE) and national

envelopes (Cambodia)

• Identification mission: finalised in January 2015• Evaluation and Formulation mission: 22-26th June 2015 • Programs to start: Q4 2016 • Exploring new modalities for implementation, building on what has

been achieved, more RGC ownership.

• Any project must be based on Rectangular Strategy, NSDP, CTIS, IDP• This program will approve by EU Parliament in Sep 2015

The 1st Mission (identification mission) took place (Mar 29 - Apr 11, 2015),

Debriefing of the 1st mission findings organized on 10 April 2015, Preliminary list of possible additional TA needs has been prepared

and shared with key stakeholders during the debriefing meeting, Inception Report submitted to MoC/DICO on 19 April 2015, List of the Ten Clusters was endorsed by 21st SSC Meeting on 03

Jun 2015, and prioritized by MoC Management on 24 Jun 2015 (MoC Weekly Meeting),

The 2nd mission (formulation mission) is set for 21 Sep – 02 Oct 2015,

1. Trade Policy, Sector Policy, Legal and Regulatory Reform: Formulate Trade Policy in view of AEC, RCEP, TPP and erosion of preferences including RoOs; develop sector policies (e.g. cassava, fish, rubber, others); identify sector-specific NTMs; implement the Government’s 2012-2015 Work Program on Legal Reform, including key reforms identified in the Trade SWAp Road Map 2014-2018.

2. Trade Facilitation and Transport Logistics: Establish the NSW including automation of trade related documents; respond to the Bali Agreement on Trade Facilitation; develop, adopt, implement a national transportation logistics plan; improve cross-border transit agreements; improve and enforce road transport regulations; encourage modernization of road transport fleet.

3. SPS and Other Quality Systems for Trade: Complete key legal reforms in SPS; develop capacity of key agencies not only in Phnom Penh but in field offices as well especially in areas of surveillance and inspections; promote a culture of SPS including through encouraging agro exporters to adopt SPS standards required by importing markets, develop various quality systems to support export sectors (e.g. rubber, silk.)

4. Private Sector Structuring: Strengthen sector associations and private sector in rice, cassava, fisheries, rubber, and hospitality including ability of sectors to articulate positions and engage government through G-PSF or other venues; strengthen and promote branding through sector-specific collective marks, GIs, Quality Seals, other means as well as through “Made in Cambodia” branding; strengthen export promotion capacity including through capacity building in sector associations.

5. Development of Inclusive Value Chains: Build capacity of priority export sectors identified by Government in the Trade SWAp Road Map 2014, including in light manufacturing, agro-processing, rubber and tourism.

6. Trade Mainstreaming and Management of Aid for Trade: Continue to build capacity for monitoring and communicating Trade SWAp as a program instead of a collection of projects; continue to mobilize and coordinate AFT support; strengthen capacity of MoC and other line ministries to participate in SWAp; improve fiduciary management of AFT projects using different disbursement modalities. Deepen trade build trade-related training and research capacity in Government;

7. Skills for Exports: Address the lack of skilled technical personnel as a result of the absence of a robust TVET structure is a serious bottleneck in Cambodia’s ability to move up value chains; address the lack of well-trained engineers (mechanical, structural, agricultural, chemical, biologist, etc.); strengthen collective bargaining environment and dispute resolution mechanisms.

8. Investment Environment, Integration in Regional Value Chains, Backward Linkages: Complete supportive legal framework including encouraging development/deepening of backward linkages in garment, bicycles, footwear, hospitality (horticulture); diversify investment in regional and global value chains beyond garment, footwear and bicycles; develop investment promotion capacity including at provincial level.

9. Rural Development for Exports including Extension Services, Cooperatives Development, Surveillance Services: Develop structured value chains between farmers and semi-agro-processors or agro-processors through farmers groups, cooperatives, contract farming arrangements, etc; strengthen quality of seeds, seedling, and other plantings;

10. Access to Finance: Address the lack of access to working capital and trade finance especially for SMEs and other small producers/exporters as it is a significant constraint to export development.

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(១១៣េប), ភមទកថ‌� , សង‌� តទកថ‌� , ខណ� ែសនសខ,

រ‌ជធានភ�េពញ ១២១០២

ទរសព�/ទរសារៈ ០២៣-៨៦៦-០៧៤

Email: chhiengpich@gmail.com

www.moc.gov.kh | www.moc.gov.kh/tradeswap

Ministry of CommerceDepartment of International Cooperation

Lot 19-61, MoC Road (113B)Phum Teuk Thla, Sangkat Teuk ThlaKhan Sen Sok, Phnom Penh 12102

Cambodia

Tel/Fax: 023-866-074

Email: chhiengpich@gmail.com

www.moc.gov.kh | www.moc.gov.kh/tradeswap