Budgeting practices and procedures in Asia, Jaehyuk Choi, OECD Secretariat

Budgeting Practices and

Procedures in Asia

Budgeting and Public Expenditure Division

Public Governance Directorate OECD

Dec 2015

I. Objective and Structure of the Survey

II. Main Survey Results

III. Key Findings and Next Steps

Content

• To create an international comparative database

• OECD survey : Two previous surveys in 2003 and 2007 and recent survey executed in 2012/2013

• Regional Survey: Eastern Europe/Central Asia (PEMPAL) + Latin America countries (LAC) + Asia

• Asia Budget survey was carried out in partnership with World Bank (PEMNA)

– OECD Budget Survey Training (Jan, 2015)

– Most Asia (15) participated in the survey

– Bhutan, Cambodia, Chinese Taipei, Indonesia, Lao PDR, Malaysia, Mongolia, Myanmar, Philippines, Singapore, Thailand, Timor-Leste, Vietnam + Japan, Korea

Objectives and background of the Survey

Structure and sections of the Survey

Formulation

Approval Execution

CBA

Budget cycle •Central/federal level

General Information

Fiscal Sustainability

MTEF

Top-down budgeting techniques

Capital budgeting

Relaxing Central Input Controls

Budgeting Transparency

•Main Areas

Key Findings of

Main Survey Results (Draft)

1. General Information : Location of

Central Budget Authority (CBA)

The ratio of MOF being CBA is relatively low in

Asia

28

1

3 1

Location of CBA : OECD

Ministry of Finance/Economy

President's office

CBA is split

Other central government institution

10

3

1 1

Location of CBA : ASIA Ministry of Finance/Economy

CBA is split

Prime Minister's Office

Other central government institution

1. General Information : Head of CBA

Asia: 60% of the head is political appointee

OECD : 2/3 of the head is civil servant

6

9

Head of CBA: ASIA

Senior civil servant Political appointee Other

21

11

1

Head of CBA : OECD

Senior civil servant Political appointee Other

2. Fiscal Sustainability :

Prudent Macroeconomic Estimates

Macroeconomic estimates are mostly developed

by CBA rather than other actors in Asia

0%

10%

20%

30%

40%

50%

60%

70%

Central budgetauthority

Ministry of Finance(other department)

Prime Minister's office Other Governmentbody

Independent body Private sector

Actors responsible for macroeconomic estimates

ASIA OECD PEMPAL

2. Fiscal Sustainability: Fiscal rules

The most widely adopted fiscal rules in Asia

are budget balance rules and expenditure rules

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

Budget balance Debt Expenditure Revenue

Percentage of countries using fiscal rules, according to type of rules

ASIA OECD PEMPAL

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Percentage of countries using fiscal rules

ASIA OECD PEMPAL

2. Fiscal Sustainability:

Fiscal projections

Time span of projections is short (up to 10 years)

in most Asia, while 31-50 years in OECD

0 %

10 %

20 %

30 %

40 %

50 %

60 %

70 %

OECD ASIA OECD ASIA OECD ASIA OECD ASIA OECD ASIA

Up to 5 years Between 6-10 years Between 11-30 years Between 31-50 years Over 50 years

Revision frequency

Time span of long-term fiscal projections

Time span and revision frequency of long-term fiscal projections

Every year Every three years Other intervals Not applicable

3. Medium Term Expenditure Framework

(MTEF)

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

MTEF in place MTEF not in place

Percentage of countries with MTEF in place

ASIA OECD PEMPAL

Many Asia report having as MTEF in place, but

lower than OECD

4. Top-down Techniques :

Ceilings on the line ministries

Overall expenditure of line ministry is more

used and program (sector) is less used in Asia

0%

10%

20%

30%

40%

50%

60%

70%

Total/overall expenditure ofthe line ministry

Other aggregate levels (e.g.programme or sector)

Agency level or otherorganisational level

No such limits

Ceilings on the line ministries' initial request ASIA OECD PEMPAL

4. Top-down Techniques :

Resolution of allocation disputes

The ratio of allocation disputes are resolved by

the cabinet is low in Asia

0%

10%

20%

30%

40%

50%

60%

70%

Resolved by the cabinet Resolved by the financeminister

Resolved by the Presidentor the Prime Minister

Other The issue is sent to aministerial committee

Resolution of disputes between ministries in the budget formulation process

ASIA OECD PEMPAL

5. Capital budgeting : PPP unit

More than 70% have established PPP unit in

Asia

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

50%

No Within the MoF Separate agencyunder the MoF

Within a lineministry

Separate agencyunder a line ministry

Delegated to lineministries (no MoF

unit)

Other unit

PPP unit in central governments

ASIA OECD PEMPAL

6. Relaxing central input control :

Carry-over regime

The central input controls are more strict in

some aspects in Asia

0%

10%

20%

30%

40%

50%

60%

70%

80%

ASIA OECD ASIA OECD ASIA OECD

Yes without requiring any approval Yes but requiring approval No, carry over not permitted

Carry-over regimes Discretionary Operational Investment

6. Relaxing central input control :

increase spending after budget approved

The central input controls are more strict in

some aspects in Asia

0

5

10

15

20

Investment Operational Mandatory Discretionary

ASIA

Permitted Not permitted

0

5

10

15

20

25

30

35

Investment Operational Mandatory Discretionary

OECD

Permitted Not permitted

7. Budget Transparency :

Economic assumptions publicly available

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

ASIA OECD PEMPAL

Are the economic assumptions underlying the budget and the methodology used to establish them publicly available?

Publicly available Not publicly available Not applicable

The ratio of disclosing underlying assumptions

are low in Asia

7. Budget Transparency : Publicly available budget documents

0

2

4

6

8

10

12

14

16

Pre-budget report Budget proposal Citizens budget

Publicly available budget documents ASIA

Publicly available Not publicly available Not applicable

0

5

10

15

20

25

30

35

Pre-budget report Budget proposal Citizens budget

Publicly available budget documents : OECD

Publicly available Not publicly available Not applicable

The ratio of publicly available budget documents

is low in Asia

Main Suggestions

1. Fiscal Sustainability can be improved

• Adopting longer time span of fiscal projections help identify fiscal risks (pension, population)

• Prudent macroeconomic estimates

2. More countries can consider adopting MTEF

3. Budget transparency should be improved (economic assumptions, budget documents)

4. The balance between CBA and line ministries on ex-ante controls (input control, Top-down techniques) can be reconsidered in relation to performance budgeting

Next Steps

• Encourage additional participation in the

survey those who have not participated in yet

• Data Quality Control considering late, new

participation and 1st survey in Asia

• After going through above mentioned steps,

publication process will be proceeded

THANK YOU !