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UAE to Revamp Budget Regime

ABU DHABI — The UAE has launched steps to reform the federal budget process as part of its efforts to move into a zero-based budget regime from 2011.

With the introduction of the new system, the UAE’s federal budget would cover a three-year period instead of the present one year, top officials at the Ministry of Finance said, while speaking at a kick-off meeting for the budget restructuring on Wednesday.

“The UAE will still have annual budgets, but they will form part of a three-year budget which will provide lot of flexibility in the implementation of the various programmes envisaged in it,” Younis Al Khoori, General 
Manager, MoF, said.

“The new system is expected to usher in more transparency in the budget preparation and tighter monitoring of the implementation of the various schemes besides ensuring maximum social impact for those schemes,” Al Khoori added.

The final version of the UAE’s first zero-based three-year budget will be announced in the summer of 2010 and will cover the period from 2011 to 2013, MoF Executive Director Khalid Ali Al Bustani said.

The UAE is probably the first country in the region to introduce the zero-budget regime which is in vogue in about 28 states in the United States apart from the UK, Singapore and several other countries, Al Bustani said.

The MoF has appointed the Boston Consulting Group (BCG) to design the core concepts of the zero-based budget regime suitable for the UAE and the modalities for its implementation. Making a presentation at the meeting, the representatives of the BCG said that the preparatory process for the transition of the UAE budget from the existing incremental structure to a zero-based regime would be completed in three key stages.

In the first “diagnostic and design stage”, the existing budget process of the various Line Ministries (LM) and Autonomous Agencies (AAs) would be reviewed and the design of the revised budget process would be prepared with the participation of the officials of those two sections.

This process is already underway starting on February 11 and would be completed on June 28, Pia Hardy, Project Leader at the BCG branch in 
Dubai, said.

The second stage starting from March 29 and reaching up to May 31, would cover the pilot projects for testing the new systems. The MoF is yet to select the three entities for implementing these projects. “We will be selecting the most complex departments for this. If the new system works for such a complex entity, then it can work for others also,’’ Martin Manetti, Partner and Managing Director of BCG branch in Abu Dhabi, said.

The first complete draft of the zero-based three year budgets for 2011 to 2013 for all the LMs and AAs will be prepared in the third “implementation” stage. The time-frame set for this stage is from June 1 to November 15 this year, Pia Hardy said.

“The final draft will then be submitted to the Prime Minister’s Office (PMO) which will amend it in accordance with the strategic plan prepared by the PMO,” she said.

As per the earlier Cabinet Decree on the timeline to reform the UAE federal budgeting, the PMO will issue the budget circular for 2011-2013 on April 1, 2010 and the Cabinet is scheduled to give its final approval for the budget on September 15, she said.

Obaid Humaid Al Tayer, Minister of State for Financial Affairs, opened the ‘kick-off meeting’ which was being attended by director-generals, executive managers, chairmen of departments and heads of sections responsible for planning the budgets at the federal level.

The session was convened within the framework of the federal government strategy, launched by His Highness Shaikh Mohammed bin Rashid Al Maktoum, Vice-President and Prime Minister of the UAE and Ruler of Dubai, to upgrade government performance.

Al Tayer said a detailed guide would be prepared to explain the new procedures for the new budget regime for all federal bodies.

The MoF will also provide training for budget planners so as to develop their capacities and ensure proper and efficient implementation, the 
minister said.

ramavarman@khaleejtimes.ae

What is Zero-based Budgeting

A zero-based budgeting means starting from a blank sheet of paper and building budget from bottom to top, the Boston Consulting Group (BCG) representatives explain. The budgeting teams are then asked to define activities contributing to agreed objectives that will exist over the budgeting time period of three years.

Thus, the various government entities implementing the budgeted schemes will get a longer time-line for prioritising their resources. Here, the officials need not be unduly burdened by the fear of some amount sanctioned to an entity getting lapsed at the end of the year or worried about the cumbersome process of getting supplementary allocations, because the allocation has been made for a time block of three years. This will also give room for moving away from the item-based budgeting process into a project-based financial allocation process.

According to the BCG, the zero-based budgeting would be useful in countries which have rapidly growing GDPs and need large-scale infrastructure development. It is also suited for countries with “low historic transparency of budgets.”

business@khaleejtimes.com