Show me the money

(© Ian O’Hanlon/Dreamstime)

IN opposition leader Datuk Seri Anwar Ibrahim’s 13 Oct 2008 speech in Parliament, he called for a fresh budget, considering the ongoing global financial crisis. He said it was impossible for Members of Parliament (MPs) to debate an outdated budget. Furthermore, he said the budget was tabled under the former finance minister.

The coming weeks will see Parliament scrutinising a thick document on national revenues and expenditures, before it is due to be passed in December 2008 as the Supply Act. Opposition parliamentarians are bound to question the government, in critical analysis of this important document that outlines the nation’s money matters.

That parliamentarians are given the opportunity to debate the Supply Bill before it is passed is indeed an element of the democratic process. However, is the debate itself enough to qualify as being reflective of a well-governed country?

The debate is premised on the need for a budget that is well thought through. Sufficient details will be answered by respective ministries on how and where the money is going. It is therefore necessary to outline principles of what makes for a “good budget”, applicable even to budgets tabled at state-government and local-government levels.

Malaysians often mistake the prime minister’s “budget speech” that is delivered in August or September as the budget itself. The speech merely gives highlights of new announcements.

The two important books are actually the Estimates of Federal Government’s Revenue and Estimates of Federal Government’s Expenditure. These documents have full details of where the funds come from and are being allocated towards. Combined, they constitute the “budget”, although other documents are also important, such as the Federal Public Accounts and the Economic Report.

 

Following the money

The budget document is possibly one of the most essential documents that a citizen should have access to on an annual basis. The budget is the government’s key policy instrument that should encompass all of its revenues and expenditures. Extensive consultation should be done to include the views from as wide a spectrum of society as possible.

(© Steve Woods/sxc.hu)

In many countries, a “citizen’s budget” is put together to represent the interests of society, as an alternative to the government budget. Although a citizen’s budget would be ideal, the closest thing Malaysia has is the opposition’s budget. This year, two were released, one from Parti Keadilan Rakyat (PKR) and the other from the Democratic Action Party (DAP).

Some consultative process is practised in Malaysia, where the Treasury, under the Ministry of Finance, calls together stakeholder groups annually to receive proposals and recommendations. The Treasury is tasked with budget documentation.

While this is a positive move, it has its shortcomings. Only a small number of organisations are called on for their views. Often, the proposals get sucked into a black hole without any feedback as to whether the recommendations are being seriously considered.

After the Treasury receives input from government ministries, external organisations, and other agencies, it compiles the information and drafts the budget, which is then unveiled in Parliament. MPs receive hard copies of the document on the same day the prime minister announces it.

More important is how citizens can use the document as a monitoring tool. Civil society can use the document to monitor the implementation of the budget. What does the budget say it will do, and what does it end up delivering? Do funds allocated to building better schools or roads actually arrive, or do officials end up pocketing the money?

From this document, stakeholder groups from all layers of society can retrieve information pertaining to their particular interest groups. The more detailed the information, the better, since it would reveal discrepancies that members of the public can point out. Without details, parliamentarians, reporters, civil society and policy analysts would be unable to ask the right questions.

Budget process

However, it is not merely the contents of the budget documents that need to be squeaky clean. The budget process can be roughly divided into four stages: budget formulation (as discussed above); budget approval (where Parliament debates, amends and passes it); budget execution (where Parliament implements the budget); and budget oversight (where accounts are audited, and findings reviewed in Parliament). Each of these stages has detailed checklists of best practices that a country should adhere to, to qualify as executing a transparent budget of good governance.

(© Paul Gibbings/Dreamstime)

This year, the Centre for Public Policy Studies (CPPS) embarked on a research project investigating the budget process in Malaysia. The CPPS explored budget transparency in Malaysia — how publicly accessible are budget documents, and how open are the books in detailing accurate financial flows?

This was done in conjunction with the International Budget Project (IBP). The initiative covers more than 100 countries around the world. The results will feed into an Open Budget Index (OBI), ranking countries on their levels of budget transparency. This is the first time that Malaysia is being included into the global index, which will be launched in December 2008.

Some of the broad principles related to budget transparency and accountability are comprehensiveness (where financial activities should be disclosed throughout the year, and not just with one budget document); specificity (grand totals are not good enough, and the description of every budget item needs to adhere to internationally accepted classification systems); legality (all expenditures and activities must be in keeping with the law); user-friendly structure (they must be understood and manageable by all levels of society, including being accessible in different languages); publicity (the documents must be widely available to the public); and prior authorisation (the legislature must approve the budget  before the executive spends it).

Faulty financing

Without wanting to reveal too much before the OBI’s December launch, suffice to say there are several faults in the budget process in Malaysia.

By right the budget-approval process, between being tabled in August and approved in December, should include the possibility of amendment. However, this has rarely been the case. The budget debate has become a purely perfunctory exercise.

The question-and-answer sessions now merely seek clarification on matters within the budget, as opposed to real scrutiny on elements that some MPs may thoroughly disapprove of. The budget is passed in the exact original form it was tabled. The debate becomes a show.

(© Stephen Finn/Dreamstime)

Finally, even without delving into the details of the budget process, there is truth to the criticism made by Anwar. The government budget does not reflect the rapidly changing situation faced by the world, and by default, the country, today.

Singapore has announced it is officially in recession mode, and has spelt out policies that will seek to counter this. However, Finance Minister and Deputy Prime Minister Datuk Seri Najib Abdul Razak has said that Malaysia is sufficiently cushioned from effects of the global financial crisis.

Citizens of Malaysia need to request for a reality check of the situation. Are current predicted growth rates for 2009 realistic? Do inflation and unemployment figures need to be revised?

A good budget is one that is able to capture the changing needs of the nation, responding acutely to different challenges and demands. For a good budget to work, it has to be transparently accountable to the people — both in content and process. Citizens should lay claim to this right, and start to follow the money trail.

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Tricia Yeoh is the director of the Centre for Public Policy Studies.