x Abu Dhabi, UAEWednesday 26 July 2017

FNC calls for fairer federal finances

Finance committee urges Cabinet to enforce constitutional requirement that all seven emirates contribute to the federal budget.

ABU DHABI // All seven emirates should pay their fair share of the federal budget instead of allowing the burden to fall on Abu Dhabi and Dubai, members of the FNC said yesterday. Their call came as Obaid Humaid al Tayer, the Minister of State for Financial Affairs, defended the Ministry of Finance against FNC members' allegations that its policies may have led to spending shortfalls that halted vital programmes.

A report by the FNC's finance, economy and industry committee said the ministry should assert its role in collecting federal revenues, improve its services to other ministries and strengthen its role in monitoring public spending, including prosecuting perpetrators of financial irregularities. "The FNC urges the Cabinet of Ministers to ask all emirates to contribute to the federal budget," the report said.

The committee was asked last year to draft a report analysing the plans and performance of the ministry, which oversees federal spending. The federal budget for 2010 is Dh43.6 billion, of which Abu Dhabi pays close to Dh17bn and Dubai contributes Dh1.2bn. The rest comes from revenues earned by federal bodies rather than other emirates. Article 127 of the Constitution states that all the emirates must contribute a fixed percentage of their annual revenues towards the federal budget.

Contributions by the other emirates would serve as a "sign of unity" and "highlight their solidarity in carrying the burden of the budget and carrying out their responsibilities", the report said. The move is likely to attract criticism from the Northern Emirates. One member questioned the practicality of such a measure, given the lack of oil revenues in those emirates. Mr al Tayer did not dwell on the constitutionality of current budgetary practices, but said the resources of emirates that did not contribute to the federal budget were sufficient only for their local needs.

The committee also criticised the policy of fixing ministries' budgets for three years, saying it has contributed to the "mediocre" performance of the Ministry of Health. Mr al Tayer said the budgets "were not made in a vacuum", but were "based on field studies of the costs". "We know exactly the costs of schools and hospitals in every emirate, down to the cost of the beds," he said. Rashid al Shuraiqi, a representative from Ras al Khaimah and a member of the committee, questioned whether the Finance Ministry had taken into consideration the effects of inflation and the "fickle global financial system". Mr al Tayer replied: "If there are new programmes or urgent projects, then I assure you the Government will add to the budget." Federal bodies are rarely granted their requested funds, often receiving the minimum amount possible from the Finance Ministry, leading to cuts in programmes. For example, the 2010 budget for the Ministry of Interior guarantees just the ministry's minimum requirements for staffing, equipment and buildings, the report said. "The ministries that we have interviewed complained that the [Finance] Ministry's approval of budget minimum requirements has a massive impact on their goals and strategic plans," said Mr al Shuraiqi. "The ministry should have a more efficient mechanism to determine the budget." But Mr al Tayer denied that federal bodies were facing shortfalls. "Our studies have shown there is a surplus in 2011 to 2013," he said. "What these ministries need to do is to regulate their spending, to spend on the right things." The body currently has no plans for finding a stable source of revenue to boost the federal budget, the FNC committee claimed. Similarly, it has not developed any initiatives aimed at diversifying the economy away from oil, a key goal of Abu Dhabi's Economic Vision 2030. The report said there were few indicators of how the ministry would ensure public money was spent more efficiently. It also claimed there were many financial irregularities in federal bodies that have been compounded by lax oversight. The result was "the continuation of several financial violations and breaches in a lot of the state's federal institutions". Internal oversight of ministerial budgets is non-binding, and federal revenues have not been collected from several government bodies, including Dubai and Sharjah's Civil Defence, traffic departments in Sharjah, Ras al Khaimah and Umm al Qaiwain, and the Naturalisation and Immigration Department in Dubai. The committee pointed out that although the ministry sends letters to federal bodies requesting transfer of revenues, it lacks legal tools to enforce its requests. "We hope that a law will soon be enacted that will make it easier for us to enforce legal measures," said Mr al Tayer. The report also criticised the practice by some ministries of hiring expatriate workers with undefined grades and unregulated salaries. "Fundamental problems in the laws and regulations have contributed to the weakness of the [Finance] Ministry's role," it concluded. FNC members complained in a two-day budget session last year about irregularities in spending, and criticised the misspending of money earmarked for a number of major ministries. hhassan@thenational.ae kshaheen@thenational.ae