Some government officials will soon be getting their salary electronically credited to their bank account, instead of being paid in cash.

Chhim Sareth, deputy director of the National Treasury, said the direct-crediting of salaries is a pilot scheme, which will be limited at first to several hundred officials in the Ministry of Economy and Finance (MoEF) and the Ministry of Health whose salaries are 600,000 riel ($150) a month or more, including those in the merit-base pay initiative (MBPI) or whose rank is department deputy director or above.

According to the World Bank the number of civil servants is about 165,000. The civil administration and defense and security wage bill was about $184 million in 2005.

Sareth said the MoEF sent a proposal to all 17 commercial banks on February 2 inviting their participation. Five banks replied by the February 15 deadline expressing interest in the scheme: Canadia Bank, ANZ Royal Bank, Vattanac Bank, ACLEDA Bank, and Cambodian Public Bank. Two others said they did not have enough human resources and capital.

Sareth said a committee was set up to evaluate the proposals and inspect the quality of services at each bank. "I don't know exactly how many banks the committee will select, but the project will proceed soon," he said. The banks chosen to run the project are required not to charge service fees, he said.

Sareth said if the pilot scheme succeeded it would expand to other ministries.

"It is very useful for our government officials to have their salary on time and this encourages officials to use bank system as they do in other countries," he said.

Tal Nay Im, general director of the National Bank of Cambodia (NBC), said the MoEF was implementing the government's Public Financial Management Reform Program, and the NBC had sanctioned the National Treasury to work with the private banks on the project.

"I think there is no problem with the negotiation between the government and those commercial banks as they provide standard quality service," Nay Im said.

She said the banks were building confidence with their clients through quality of service and competition and she said the number of people depositing money in banks was increasing.

ACLEDA Bank's In Channy, who had submitted a letter to the National Treasury indicating his bank's intent to provide the payroll service, said he is waiting to see a prompt result from the committee.

He said ACLEDA had experience in payroll service through banking system with private companies and other NGOs. "By providing a banking payroll service the government will have transparency in public expenses," Channy said.

Channy said ACLEDA is flexible with the National Treasury conditions, though both partners would have to respect any contract so that there would not be any trouble with transferring money.

"At present under the cash-payment system, the National Treasury has the money, but poor management of transfer results in slow delivery of salaries," Channy said.

Chroeng Sakhan, vice director of the Drugs and Food department within the Ministry of Health, welcomed the new bank-payroll system and said he is waiting to see the progress of the project.

"Getting money from the bank will be easier and faster than [cash] through the ministry, but I'm afraid that my salary will be cut for a servicing fee [by the bank]," Sakhan said.

Keo Remy, an opposition lawmaker, said this was just the first step. The government, by using the banking system to pay civil servants, could prevent corruption and keep officials' money safe. He said the National Treasury should transfer salaries to officials' bank accounts in the month it was due.

"In foreign countries government officials use this kind of policy, but the [Cambodian] banking system management is not good enough yet," Remy said.

Ouk Rabun, secretary of state at MoEF in charge of inspecting could not be reached for comment.

The Government's Public Financial Management Reform Program is supported by the World Bank and ten other donors.

Rob Taliercio, World Bank Senior Country Economist, said the pilot will help make the government budget more credible.

"Reducing reliance on the cash transactions will not only make the budget process more efficient, but will also reduce opportunity for corruption," he said. "In addition, civil servants will receive their salaries on time and there will be no cost of them for this new service.

"Donors are encouraged to see the MEF's commitment on these reforms."