January 18, 2018


How Rouhani can combat corruption in Iran's budget (Bijan Khajehpour, January 17, 2018, Al Monitor)

On Dec. 10, when Rouhani presented his new budget bill to parliament, many focused on the disclosure of information about the allocations to various cultural and religious institutions. While that transparency deserves to be noticed, there are more important nuances, especially structural reforms, that should be appreciated. One noteworthy aspect of the new budget was its reference to "performance-based budgeting [PBB]," which is one of the best tools to prevent corrupt dealings with state allocations. In fact, the author of the new budget bill, the Management and Planning Organization (MPO), was quick to highlight this important nuance. Concurrent with the presentation of the budget to parliament, MPO expert Nematollah Akbari named PBB, transparency, financial discipline and decentralization as the main features of the new budget bill. He also underlined the fact that the budget framework has been simplified and that more budgetary control has been transferred to the provinces.

Parliament member Mohammad Hosseini, a member of the planning and budget commission, has also commented that the PBB approach is the main strength of the new budget bill. Now that the bill is being debated in parliamentary commissions, it is important for lawmakers to maintain the provisions of the bill to increase the overall efficiency of government allocations.

Within state structures, PBB is an administrative methodology through which public funds are released to programs and projects based on their performance and the actual achievement of defined goals. As such, PBB allows funds to move toward projects that are achieving their goals as opposed to allocating resources to half-finished projects and programs that may draw resources without producing the desired results. The PBB system does not intend to penalize or reward state institutions or agencies, but rather maximize the use of available resources. PBB also introduces a higher degree of flexibility into shifting priorities due to new needs on a regional level. This is why the introduction of PBB makes more sense if it is accompanied by genuine decentralization in budgetary affairs.

In a country like Iran, where allocations have rarely focused on actual performance, billions of dollars of state budgets have flown into projects that have never been finalized, partly due to corrupt dealings or mismanagement and partly due to the changing nature of actual needs. The best example for such a scheme has been the Mehr housing project that started under former President Mahmoud Ahmadinejad (2005-2013), where a large segment of the original investments is unfinished, having wasted public and private investments in the process. Generally, tackling unfinished projects has always been a challenge to Iranian administrations.

According to the MPO, if the structural provisions of the new budget bill are passed by the parliament, about 34% of the national allotments will be supervised and released based on the PBB approach. This is an important first step in preventing the misappropriation of the country's resources. Furthermore, 868 national projects have been transferred to provincial management, facilitating the regional allocation of funds and better control on the actual performance of these projects.

Looking at international benchmarks, there is ample evidence that a PBB approach can help prevent corruption and increase accountability. PBB has also been an ingredient of the United Nations Development Program's anti-corruption initiatives in different countries. As a case study, the anti-corruption campaign in Chile is another good example where so-called performance-based incentives pushed back against corruption.

Posted by at January 18, 2018 8:03 AM