J. OF PUBLIC BUDGETING, ACCOUNTING & FINANCIAL MANAGEMENT, 22 (3), 343-375 FALL 2010 UNITED ARAB EMIRATES FEDERAL BUDGETARY PROCESS: THE DECISION-MAKING STYLES Ahmed Mustafa Elhussein Mansour* ABSTRACT. The paper concentrates on the administrative side of the United Arab Emirates (UAE) budgetary process and employs a quantitative approach to test two major hypotheses about the style of decision making and the impact of this style on annual estimations of public expenditures. Therefore, the major question of the paper is not concerned with the content of these decisions (annual estimations) in a substantive descriptive and normative manner, as in public finance studies, but rather with the analysis of the outcomes of these decisions. The paper uses data from annual budgetary allocations to test certain hypotheses and concludes that UAE budgetary decision-makers in United Arab Emirates Federal ministries use an incremental style of decision making to estimate their annual expenditure. INTRODUCTION The major objective of this paper is to analyze and test hypotheses about the style of decision making in the United Arab Emirates (UAE) federal government budgetary process. Specifically, the paper concentrates on the administrative side of the budgetary process; and employs a quantitative approach to study the style of decision making and the impact of this style on the annual estimations of public expenditures in the federal budget. Therefore, the major question of the paper is not concerned with the content of these decisions (annual estimations) in a substantive descriptive and normative manner, as in public finance studies, but rather with the analysis of the outcomes of these decisions. This approach relates ---------------------------* Ahmed Mustafa Elhussein Mansour, Ph.D., is an Associate Professor, Department of Political Science, Faculty of Humanities and Social Sciences, United Arab Emirates University. His research interests are in public policy, public budgeting, and public sector management. Copyright © 2010 by PrAcademics Press 344 ELHUSSEIN the decisions of the government budget to the agenda of public policy because public budgeting is a process of resource allocations for public goals (William, 1980, p. 320). In fact a budget is a mirror which reflects government policies and how those policies are funded. The United Arab Emirates emerged as an independent state in 1971. The UAE political system is a federal one composed of a federal government and seven highly autonomous Emirates governments (i.e. governorates sing, in Arabic (Emara). These are Abu Dhabi, Dubai, Shargah, Ajman, Ummelqwain, Rasellkhaima, and Alfujaira. Each Emara has a governor. The government has three layers of administration: the federal, the Emara and the local municipality levels. The UAE Constitution created a relatively weak federal government with limited political powers and revenues. Constitutionally the federal government revenues come mainly from the annual contributions of the seven Emirates governments and its self-generated revenues. In practice only the rich Abu Dhabi and Dubai contribute to the federal budget. The former contributes over 85% of the federal revenues. Incrementalism in UAE federal budget is facilitated by two major factors which contribute to complexity in the decision-making processes. These are the structure of government and the budget time span. The first factor is related to the policy making processes in which informal and formal structures combine to make the system highly pluralistic and complex. The informal structure of government consists of networks of patron client relationships. Each Emara has a governor who is usually the sheikh of the strongest tribe and at the same time a member of the Supreme Council of Emirates Governors which is the supreme legislative body in the country. Sub sheikhs of smaller tribes work to connect their followers to the governors and represent channels for demands for services and benefits. Since sheikhs and sub sheikhs occupy official positions in the federal government, the informal patron-client structure is integrated in the formal one without losing its clear identity. This situation puts considerable pressures on the federal budget especially for services and employment. Since annual budget allocations establish benefits for different social groups it is very difficult to change them drastically without disrupting the patron-client relationship. The second factor is related to the time span of the fiscal year in UAE which starts in January. Since the preparation of the annual UNITED ARAB EMIRATES FEDERAL BUDGETARY PROCESS: THE DECISION-MAKING STYLES 345 federal budget starts in April, budget officials have only eight months for the whole budgetary cycle. Hence in many cases the budget was behind schedule and the government resorts to the famous practice of voting "twelfths" (one month's appropriations) to finance government services while the ministries are struggling with budget preparation and endorsement. In this context the format of the line-item budget helps to simplify the process of calculating annual expenditure estimation and enhance tendencies toward incrementalism. The estimation of annual allocations is based on uniformed expenditure line items format which is mandatory to all government ministries and agencies. These items are classified into two categories: current expenditures and investment expenditures. Whereas the category of current expenditures includes routine and repetitive allocations, the category of investment expenditures contains the federal government financial and capital investment. However, certain other factors make incrementalism closer to Wildavsky's repetitive type of budgeting. These include the fact that the federal budget has limited revenues since it depends mainly on contributions from rich emirates. It has no independent source of revenues apart from self-generated revenues from government services fees and tolls which account for less than 5% percent of total federal revenues. The process of budgetary decision making is watched and coordinated by the budget division in the ministry of finance and industry. Ministries, agencies and independent units prepare annual estimations and present them to the budget division which negotiates and discusses each ministry’s budget with its budget officers with public policy and government priorities and sends it up to the council of ministers. After latter ratifying the whole budget, the Council passes it to the president who endorses it and issues it by a presidential decree that is published in the official gazette. This paper consists of an overview of the theories of budget decisions, and an analysis of budget decision types by utilizing some of the statistical models. THE GENERAL FRAMEWORK OF THE STUDY: STYLES OF DECISION-MAKING Public budgeting has been considered as an instrument of fiscal policy, a management tool, a planning tool and an instrument of accountability (Williams, 1980, pp.320-329). This complex nature 346 ELHUSSEIN makes literature on public budgeting run across many disciplines and reflects the experiences of many countries. Therefore, this review concentrates mainly on literature pertaining to the dimension of decision-making styles in the budgetary process and draw on comparative material from Arabic and English material. The objective of this section is to discuss the main general decision-making styles in public policy in general and budgetary processes in particular. These styles can be classified into four categories. First, the rational approach to decision making, including its modified version of bounded rationality, originates in the traditional managerial approach which depends on bureaucratic organization to promote rationality. Second, the new public management approach adopts a decentralized decision-making formula based on market criteria and encourages considerable degrees of subordinates' discretion. Third, the political approach encourages some sort of a pluralistic style of decision making that mainly relies on incremental decision making that only slightly modifies existing policies positively or negatively. Fourth, the legal approach favors an adjudicatory model to assess the legality of decisions. Fifth, mixed scanning which is a synthesis of these approaches, especially the rational and incremental approaches (Rosenbloom, 2005, p. 313). Although all these approaches are interrelated and relevant to budgetary decision making, in this paper the literature review is confined mainly to the discussion of two major competing approaches to the styles of decision making in the budgetary process. These are the rational and incremental approaches. Each of these two approaches will be reviewed first in general terms and then as applied to public budgeting. Rationality and Program Budgets Rationality as a Policy-Making Approach The rational style or model of decision making coincides with the general framework of the concept of scientific planning and normative policy analysis (Weimer and Vining, 1999, p.256). It can be defined as a logical process that can be used to translate policy makers' intentions, goals and assumptions into suitable policies to achieve targeted goals (Lawton and Rose, 1994, p.119). The UNITED ARAB EMIRATES FEDERAL BUDGETARY PROCESS: THE DECISION-MAKING STYLES 347 rationality model of decision making includes two main interrelated versions: comprehensive, or unbounded and bounded rationality models. The difference between the two lies in the extent of rationality, amount of information required and the range of options considered in policy making. Whereas comprehensive or unbounded rationality demands complete information and consideration of all policy options, bounded rationality considers only a limited set of options. Unbounded rationality, also called economic comprehensive rationality, is a model of policy making which seeks to maximize the values of efficiency, effectiveness and economy in order to maximize total benefits from government programs. Thus it represents the fundamental behavioral postulate which underlies all optimizing models of economic equilibrium paradigm. It also underlies the Weberian ideal type of bureaucracy in which organizations are viewed as being goal oriented and the decisions made within them are intended to find the most efficient means of achieving goals (Jackson, 1983, p. 89). In its ideal type form, the unbounded rationality approach envisages a highly structured decision situation in which the rational decision maker (a) identifies a policy problem on which there is sufficient consensus among relevant stakeholders that the decision maker can act on their behalf, (b) defines and ranks consistently all measurable goals and objectives whose attainment constitutes a solution for the problem, (c) identifies all policy alternatives that may contribute to each goal and objective and forecasts all the consequences of each alternative(d) compares these consequences in term of criteria or goals (e) chooses the alternative or combination of alternatives that would maximize the values earlier defined as being most important (Hogwood & Gunn, 1990, p. 47). Thus the basic axioms of the rational model are, therefore, that all behavior is goal directed and that individuals, when making rational choices between competing means of achieving goals, will always choose that alternative which best serves the individual self-interest. Different types of rational models are reviewed by Elinor Ostrom (1968) who discusses other forms of rationality that modify the generic ideal type by incorporating criteria such as institutional transaction costs, or redefining political, social, organizational and moral costs and benefits (see Dunn, 2004, p.48). In academia, the 348 ELHUSSEIN rational approach represents basic premises underlying the tools of statistical decision theory, operation research, project appraisal, costbenefit analysis and economic policy analysis. Central and development planning in the former Soviet Union, East Europe, and many post independence new states is the most approximate embodiment of this approach in governmental institutions. The critics of rationality specifically target its basic tenets especially its overemphasis on quantification (Halberstam, 1972, pp. 348-9), its unlimited information requirements, its assumptions about existence and consensus over clear societal goals and criteria, and the need to define and analyze all possible alternatives. Critics also highlight its unrealistic assumptions about the presence of an objective set of alternative courses of action whose outcomes can be analytically arrived at and chosen according to technical, usually economic criteria, (Cochran & Malone, 1995, p.52) and applied to the uncertain and complex environment of policy making in government (Stone, 2002; Mintzberg, 1976). In the political context of government, rationality may work if all involved stakeholders and decision-makers are in total agreement on values involved and they agree on the nature of the problem and what the solution should look like; that is to say no politics and conflict should be involved. Clearly, that is an unrealistic assumption that may be only partially satisfied in dictatorial regimes. This fact makes this type of decision making, albeit theoretically, possible in central regimes. However, these conditions may rarely be fulfilled in public sector settings in complex pluralistic political systems characterized by conflict over values, means and goals. However, it could be met in the case of structured policy problems at lower executive levels of the public sector, such as transportation issues, where the decisionmakers are one or few and there is consensus about the problem and its solution. This is not the case of most public policy issues where the problem is very often unstructured with blurred boundaries and many decision makers and stakeholders and characterized by lack of consensus on values or even on the definition of the problem itself (Dunn, 2004, p.79). Even with structured problems the public decision maker does not have the time nor will he be able to acquire and process all information relevant to the problem. Some critics find rationality as even unsuitable for business environments, for example Tisdell (1975) argues that the approach UNITED ARAB EMIRATES FEDERAL BUDGETARY PROCESS: THE DECISION-MAKING STYLES 349 makes a stronger assumption than is necessary to attain the most preferable alternative. A similar line of criticism maintains that in business decision making, decision-makers do not always intend to maximize well -defined profit or growth functions (Cyert, Simon & Trow, 1956; Cyert, Dill & March, 1958) It is exactly this demanding nature of comprehensive rationality that gives rise to Herbert Simon's bounded rationality as a substitute to comprehensive rationality. Simon argues that decision-makers are bounded by many constraints of time and cognitive ability that they tend to “satisfice” rather than maximize in their decision making. He coined the term satisficing to refer to acts of choice where "decision makers seek to identify a course of action that is just "good enough"; satisficing was coined to accommodate in one word both the concepts of satisfying and sufficing behavior to produce a "satisficing" choice". Satisficing is a decision-making strategy which attempts to meet criteria for adequacy, rather than identify an optimal solution. Simon suggests that decision-makers employ heuristics and rules of thumb to make decisions simpler rather than follow strict rigid rules of optimization. They do this because of the complexity of the decision making situation, and their inability to process and compute the expected utility of every alternative action. Deliberation costs might be high and there are often other economic activities where similar decision making is required (Simon, 1957). Simon's ideas of bounded rationality and satisficing bring the concept of rationality closer to incrementalism as developed by Lindblom who agrees with Simon that policy choices rarely conform to the requirement of economic rationality (Braybrooke & Lindblom, 1970). However, Lindblom argues that his critique of rationality equally apply to Simon's rationality. Rational Budgets In reality most experiences of rational budgeting are based on the concepts of bounded rationality and satisficing. Applied to budgetary decision making, the budget decision maker must first determine the objectives of his agency in operational measurable terms. Once agency objectives are determined the budget decision maker has to stipulate, scrutinize and evaluate some of the available programs to 350 ELHUSSEIN accomplish those objectives. It is highly unlikely that all the alternatives are evaluated in practice. According to this approach when considering the potential programs of the budget, the decision maker has to evaluate some of the consequences of each program. In the final step, the budget decision maker chooses the best of the available alternative to satisfice the values of efficiency, economy and effectiveness. Where the three values are not reconcilable, an appropriate criteria to balance them may be employed. The models of rationality develop and support certain types of budget formats and recommend the use of technical tools to estimate public expenditure and program validity. The generic format of rational budgets develops gradually from the modest performance budgeting into the more comprehensive planning programming budgeting systems (PPBS). The evolution starts with the performance budget which concentrates on the calculations of the number of work units accomplished divided into the man-hours employed or the cost of each activity (William, 1980, p.336). Program budgeting represents the transitional step between the performance budget as a tool of management and planning, programming, and budgeting systems (PPBS) as a tool of planning. The goals of PPBS provide clear illustrations of the rational model. They include careful identification of goals and objectives in each area of government activity; analysis of output of a given program in term of its objectives; measurement of total programming costs, not for just one year but for several years in the future; formation of objectives and programs extending beyond the single year of the annual budgets to long term objectives; analysis of alternatives to find the most efficient way of reaching program objectives for the least costs; establishment of analytical procedures to serve as a systematic part of the budget review (Minmier, 1975). Zero-base budgeting, which represents an antithesis of incrementalism, was pioneered at Texas Instrument in 1969 following the prescription of Peter Pyhrr (1977). In essence all rational budgets are designed to address certain perceived flaws of the traditional incremental budget. All versions of program budgets and especially PPBS address the lack of rational planning of public expenditure in the line- item budget. David Novick, who is among the most ardent supporters of this style of program budgets, argues that the essence of these budgets is the rational UNITED ARAB EMIRATES FEDERAL BUDGETARY PROCESS: THE DECISION-MAKING STYLES 351 analysis of budgetary inputs (financial resources) and outputs (government goals) to allow for comparisons between different alternative programs. Hence the programmed budgets rationalize the budgetary decision-making processes by especially using data in analyzing budget decisions (Novick, 1979, p.5). On the other hand, zero-based budgeting targets the use of the existing budget as a base to estimate next year’s budget in the traditional budget by requiring mangers to start their annual estimations from zero and justify their whole budgets every year (Minmier, 1975, p. 8). Public expenditures in these budgets are classified, unlike in the line item budget, in programs and activities with already determined measurable outcomes and outputs that reflect the operational objectives of public policy. To ascertain the value of efficiency in these programs, decisions should be based on rational quantitative techniques like cost benefit analysis. It is not the budget format per se that make the budget rational but rather the use of technical decision-making tools such as Cost-Benefit Analysis (CBA) that matters. The budget format only facilitates the use of technical tools. In practice most rational policy and budgetary decision making is based on (CBA). The rational budgets lasted just a decade, from 1961 to 1971, in USA government. The critics of these budgets, notably Gaither (1968), Aaron Wildavsky (1979) and Allen Schick (1973), have offered numerous explanations for the demise of these budgets in USA but concentrated on the inadequacy of the rational model (Most of these critical views were expressed in a symposium in Public Administration Review, 29 (2) 1969, pp.111-202). Although these budgetary innovations have originated in the USA, they have been imported to many developing countries by American, foreign and local experts trained in USA. However, despite their demise in the 1970s in USA, these budgets appear again in many developing countries especially in countries where the new public management ideas are adopted as bases for administrative reform. The most notable experiences in this respect are the examples of UAE and Jordanian budgetary reforms. 352 ELHUSSEIN Incrementalism and the Line-Item Budget Incrementalism as a Policy-Making Approach The intellectual origins of incrementalism can be traced to the works of Dewey (1933), Barnard (1938) and Simon (1965). However, the concept of incrementalism has been articulated and made popular by the intellectual contributions of Lindblom (1959), Wildavsky (1964, 1968, 1975, 1979), Dhal (1961), Dye (1966), Fenno (1966), and Braybrooke and Lindblom (1963). Lindblom, who came to be associated with this approach, developed his approach in the course of a critique of the rational comprehensive model in a famous article published in Public Administration Review (Lindblom, 1959). Incremental theorists argue that government decision -making processes operate within political and highly complex environments and therefore decision makers develop behavioral shortcuts to simplify decision making (Ibrahim & Proctor, 1992). This is in fact an echo to Simon's ideas of bounded rationality and satisficing. In fact Simon's concepts of bounded rationality and satisficing are similar, though not exactly identical, to incrementalism. The latter may be considered as an application of Simon's concepts of bounded rationality and satisficing. The difference between the two concepts lies in the fact that bounded rationality, like comprehensive rationality, supports the use of technical and computer-aided techniques in making decisions (Hogwood & Gunn, 1984, pp. 49-52). However, incrementalism is ready to accept a limited role for technical tools, analysis and planning in the policy process (see for example, Wildavsky, 1980). In incrementalism, decision making depends on political bargaining and compromise and technical tools could be used in that process. By revising the basic assumptions of comprehensive rationality, Simon's concepts of bounded rationality and satisficing pave the way for incrementalism in that they show that perfectly rational decisions are not often practical or possible due to limited time and finite computational resources available for decision-makers who encounter real problems in processing receiving, storing, retrieving, and transmitting information (Williamson, 1980, p. 553). UNITED ARAB EMIRATES FEDERAL BUDGETARY PROCESS: THE DECISION-MAKING STYLES 353 These facts limit the decision-maker's ability to formulate and solve complex problems by using comprehensive rational methodologies. In the real world, according to Simon, most decision makers do not always behave as rational beings but in many instances they behave as emotional and irrational human beings and psychological and organizational deficiencies combine to limit their capacity for comprehensive decision making and lead them to satisfice rather than maximize (Hogwood & Gunn, 1984, p. 50). Therefore, the decision-makers tend to simplify their decision making by restricting their options to those alternatives which deviate marginally from the status quo and then select options that command a consensus among decision-makers (Dahl, 1953). Thus incremental policy choices will not disrupt the relationships between different stakeholders in the political system. In governmental environments, the built-in political processes of negotiation, bargaining and compromise among many legitimate participants in the policy arena are virtually the only way to get things done. Further, the very characteristics of large-scale, complex organizations foster incrementalism; these characteristics include fragmentation, inertia, bureaucracy, conflicting goals, and financial constraints. Finally, the legal system in government operates around a set of established principles which also reinforce incrementalism. As an approach to decision making, incrementalism, also labeled disjointed incrementalism, seeks to produce decisions only marginally different from past practice. This view can be simply reformulated in the phrase "…in the end what happens during any given period determines what will happen in future periods in a particular time" (Jackson, 1983, p.16). Existing policies, the status quo, is considered as a base and new making concentrates on marginal modification of existing programs by adding to projects using many small (often unplanned) changes instead of a few (extensively planned) large jumps (Braybrooke & Lindblom, 1970). Policy makers tacitly agree to continue previous policies and this fact wins the incremental approach the tag of "muddling through" (Lindblom, 1961, pp. 297298). The criterion used in incremental decision making does not emphasize goal maximization, but rather administrative satisficing. That’s to say that slight improvement as compared with past performance is considered. Typically, only a narrow range of 354 ELHUSSEIN alternatives and consequences can be examined seriously, and even those few are narrowed further by budget official past practice. The policy chosen is likely to provide only a limited, short-term amelioration of the concrete problem posed on the political agenda. In this sense incrementalism is the antithesis of intrusive central planning, which can create, according to incrementalists, rigid work systems unable to deal with the actual problems faced at the grassroots level (Garuda & Karnøe, 2003). Incremental Budget The incremental theory of decision making has been a major element in budgetary literature since the 1950s. Influenced by the writings of Simon and Lindblom, many scholars have adopted an incremental approach in their studies (Wildavsky, 1979;, Fenno, 1966; and Davis et al., 1966). Applied to budgeting, incrementalism can be simply interpreted to mean "this year's budget is a function of the amount spent last year, i.e., last year's budget" (Jackson, 1983, p.146). Therefore incrementalism as a method of budgetary decision making concentrates on marginal changes (increments) from last year's budget in estimating expenditures of next year’s budget. Wildavsky, whose reputation is largely based on his debunking of attempts to introduce rationality to government through the introduction of rational budgeting techniques, asserts that all budgeting is incremental (Wildavsky, 1979, p.5). Wildavsky considers incrementalism as the best among budgetary decision tools because it helps to simplify and achieve control over all aspects of the budgetary process (Cochran & Malone, 1995, p.23). Using two major variables of wealth and predictability, Wildavsky distinguishes between four types of incrementalism. He argues, “Rich and certain environments lead to incremental budgeting; poverty and predictability generate revenue budgeting; unpredictability combined with poverty generates repetitive budgeting; and riches plus uncertainty produce alternating incremental and repetitive budgeting (Wildavsky, 1975, p. 12). In budgetary incremental decision making two factors are perceived as specifically helpful in simplifying decision making and coping with complexity. These are budgetary roles and aids to calculations. Budgetary roles refer to the behavior of ministries and central budget authorities. Whereas ministries try to expand their UNITED ARAB EMIRATES FEDERAL BUDGETARY PROCESS: THE DECISION-MAKING STYLES 355 budgets beyond their present base, the budget central agency tries to cut ministries' requests and push them back towards their base. Aids to calculation refer to tools used by budget decision-makers to simplify their decision making. Accordingly the budgetary decisionmaking process is viewed as the following (Ibrahim, 1993): - Experiential: modifications of expenditures are based on experience, - Not comprehensive: the simple consequences of the program are dealt with, the complex are avoided; - Satisficing: budget decision makers do not intend to maximize benefits but only look for “good enough” results; - Incremental: only marginal increases or decreases are considered. The incremental approach is associated with the line item-budget which classifies expenditures, unlike rational budgets, according to the object or objects of expenditures that reflect what the agency is planning to purchase rather than what the agency is planning to do. Decision making is undertaken incrementally according to these objects of expenditure, and the current year budget plus a percentage increase for inflation. Then decision makers haggle for funds to do a better job or take new roles (Wanat, 1974). Supporters of the incremental budget list among its advantages the stability of the budget and prospects for gradual change that permit managers to operate their departments on a consistent basis; managers can see the impact of change on their agencies quickly. Moreover, the system, compared to rational budgets, is relatively simple to operate and easy to understand and helps to avoid conflicts when departments appear to be treated similarly. Co-ordination between budgets is easier to achieve by negotiations and compromise. Critics of the incremental budget highlight its failure to take into account changing circumstances. Moreover, it encourages “spending up to the budget” to ensure a reasonable allocation in the next period. It also leads to a “spend it or lose it” mentality. Incremental budgeting assumes activities and methods of working will continue in the same way. Moreover, the list of criticism to incremental budgeting includes no incentive for developing new ideas; no incentives to reduce costs; encouragement of spending up to the budget limit so that the budget is maintained next year for the agency will be penalized by its savings which will reduce its annual base. 356 ELHUSSEIN The budget may become out-of-date and no longer relate to the level of activity or type of work being carried out and “bad” programs survive comfortably without review. Moreover, incrementalism may lead to large budget deficits which dampen any enthusiasm for tackling public sector problems on a grand scale. The priority for resources may have changed since the budgets were originally set so basing future allocation on previous allocations may hinder the implementation of programs and build budgetary slack into the budget which is never reviewed and adjusted. Under incrementalism, managers may have overestimated their financial requirements in the past in order to obtain a budget which is easier to work within and which will allow them to achieve favorable results. It should be noted that line-item budgeting is not the reason for the dominance of incrementalism in budgetary systems, yet it is one of its tools. Wildavsky explains the survival of the traditional budget, despite criticisms launched against it, by its ability to respond to the complex political nature of governmental environments (Wildavsky, 1978, p.30). However, the theoretical association of rational and incremental models with certain types of budgets does not mean necessarily that the decision style is determined by the type of budget format used. Incrementalism may persist even if the type of budgetary classification is rational and the two systems may coexist as in the case of connecting the annual budget with development planning in many third world countries. The question now is "What evidence exists to support the concept of incrementalism?" If the budget processes in different countries are investigated, then it would appear that they conform to the basic rules of incrementalism. For example, France has had since 1955 what is referred to as the service vote; that is, all past expenditures are treated as a continuing commitment. The French Parliament only votes on additions to and subtractions from past totals. In Japan, the Ministry of Finance imposed a 125% ceiling on the previous year's expenditure and when voting on next year's budget, plans of past expenditures are never challenged or questioned (Jackson, 1983, pp. 151-152). Empirical studies of budget decision making in several countries support the above conclusions. For example, empirical studies in USA such as the works of Wildavsky (1975), Fenno (1966), Davis, Dempster and Wildavsky (1966-74), Crecine (1970), and Sharkansky UNITED ARAB EMIRATES FEDERAL BUDGETARY PROCESS: THE DECISION-MAKING STYLES 357 and Hoffenberg (1969) conclude that incrementalism reproduces itself in each stage of the budgetary cycle, not just at the formulation stage. Bailey and O’Connor (1975) and Thomas Dye (1992), who studied the USA budgetary process, conclude with similar findings. The latter two studies have also attempted to provide an operational definition of incrementalism which is lacking in other studies. On the British budgetary process are the studies of Wildavsky and Heclo, (1974) and Ibrahim and Proctor (1992a, 1992b, 1992c, 1993). By using different methodologies, all these studies have substantiated incrementalism as the prevailing style of decision making in budgetary processes. Empirical Arabic studies which discuss directly the decisionmaking systems in Arab budgetary systems are rare. Most of these are found in the Jordanian context. In fact, there are no such previous studies on UAE budgetary decision making. Although most of the available Arabic studies do not address the style of decision making directly, they often conclude indirectly that incrementalism is the order of the day. For example, Ibrahim and Ghageesh (1998) studied the budget of Al-Mafraq Municipality in Jordan and using an analytical descriptive methodology and concentrating on budgetary procedures they concluded that the municipality's budget is prepared along incrementalist lines. In a similar Jordanian study conducted by Al‘annani (1990) on the role of the budget in managing public enterprises in Jordan, the study concluded that budgetary estimations are based on personal judgments and on addition of certain percentages to existing estimations. In two studies conducted by Alzau'abi (1996) and Elhussein (2001), which unlike the previous studies concentrated on the Jordanian central government budgets, both authors attributed the variance in budget estimations to the incrementalist style of decision making and the lack of coordination between government programs and their plans. With the exception of Elhussein's study all the above studies lack an operational definition of incrementalism. Another important study which has noticed the incremental nature of the decision-making style in the Jordanian budgetary process is Kharabsha’s study (2000). This study adopted an operational definition to incrementalism founded on the role played by political and social factors in shaping the style of decision-making 358 ELHUSSEIN in the Jordanian budget. The study concluded that these factors enhance incrementalism in the Jordanian budgetary system. Other relevant studies on the Jordanian scene, which did not concentrate directly on budgetary decision-making styles, include Alshibbli (1993) and Allawzi (1997). Both studies indirectly uncovered some aspects of incrementalism in the Jordanian budgetary system. RESEARCH DESIGN The Research Question Public budgeting has assumed a central place in official political concerns in Arab counties due to the problem of increasing public expenditures and foreign debt. This problem has many political, economic and social facets, yet it has not received due concern from Arab social scientists and researchers. Nevertheless, the administrative side, and especially the styles of budgetary decision making, remained largely outside the realm of academic debate in public administration. For this reason, this study concentrates on this side by raising the question what is the style of decision making used by the UAE federal decision-maker to estimate annual budgetary expenditure estimations? Is it incremental or rational? Naturally, the decisions of expenditure appropriations are taken, in the context of the UAE budgetary process, at many administrative and governmental levels involving several stages in the budgetary cycle: preparation, formulation, enactment, execution and control. These decisions involve processes that start from the smallest agency in the federal structure and go up in the hierarchy to the summit of the administrative and political system. Active actors in the budgetary decision-making system differ from one level to another. Since this study concentrates on the UAE federal level as a whole, its analytical efforts involve the final budgetary decisions that are included in the final budget documents (1990-2005) as published in the official Gazette. The figures of these budgets are not adjusted to inflation rates during the years under study for two reasons: first, the paper seeks to study the intentions of decision-makers rather than the real values of budget appropriations and policy contents; and second, budget decision-makers in the UAE federal government are requested to take into account the rates of inflation in their annual estimations. UNITED ARAB EMIRATES FEDERAL BUDGETARY PROCESS: THE DECISION-MAKING STYLES 359 Research Hypotheses There are two major research hypotheses in this study: Hypothesis 1: The style of decision making in the UAE budgetary expenditure as a whole follows an incremental pattern. Hypothesis 2: The UAE federal ministries adopt an incremental style in deciding their annual expenditures. The later hypothesis is divided into 17 sub-hypotheses related to individual ministries in the UAE federal government. These include (1) Defense, (2) Interior, (3) Justice, (4) Planning, (5) Oil & Energy, (6) Economy & Commerce, (7) Foreign Affairs, (8) Information & Culture, (9) Higher Education, (10) Education & Youth, (11) Health, (12) Public Works, (13) Communications, (14) Electricity & Water, (15) Agriculture & Fishery, (16) Labor, and (17) Social Affair. The first hypothesis considers the general pattern of decision making in the UAE federal budget using the total budget estimations in the period 1990-2005. It hypothesizes an incremental style of decision making in which the estimations of next year expenditures are determined by the estimations of the year immediately preceding it. The second hypothesis traces the nature of this incrementalist decision-making pattern to the ministerial annual budgets using the total allocations in the period 1990-2005. This hypothesis means from an operational point of view that the decision-maker has three options: (a) to preserve the status quo (current level of expenditures), (b) reduce current level of expenditures by a small margin and (c) increase the current level of expenditures by a small margin. An important point to note here is that the falsification of the first and next hypotheses does not necessarily mean that the budgetary decision style is rational. Therefore the null hypothesis for the two hypotheses is that “the UAE budgetary decision maker does not take into consideration the present budget in estimating next year budget.” Research Methodology The paper uses the SPSS and Excel programs to analyze data employing models used in non-Arabic literature. Several statistical models are used to study the style of budgetary decision making in different contexts. These models range from descriptive statistical 360 ELHUSSEIN models using percentages and measures of central tendency to linear regression models employing inferential statistics. These models differ in the kind of operational definitions they present to incrementalism. In discussing these models, this study benefits from the discussion in Ibrahim and Proctor’s study (Ibrahim & Proctor, 1992) in which the authors review a number of models used in analyzing budgetary decision making in different countries. They used these models to analyze the budgets of three municipal councils in the United Kingdom. The present paper employs two of these models, the magnitude of change and the stability models. The Magnitude of Change Model This model is based on an operational definition of incrementalism that concentrates on the annual percentage change in budgetary allocations. This model was used by Aaron Wildavsky and Richard Fenno to study the budgetary decision making in the United States of America, but they did not specify the annual percentage change that can be considered incremental. This job was carried out by Bailey and O’Connor (1975, pp.60-66) in their study in which they compared their results with those of Wildavsky and Fenno’s study. The definition of incrementalism in this paper is borrowed from their study. The Stability Model This model defines incrementalism by the degree of stability in the pattern of budgetary outputs over time. If this pattern is determined, then the incremental nature of the budget can be detected by tracing this pattern over a long period of time. If the outputs of the budgetary system coincide with the determined incrementalist pattern, then it could be described as stable. This model can be mathematically represented by the following linear regression equation. t = + t-1 + e Where: t, (dependent variable) represents budget expenditure in year t. , represents the intercept term (i.e. the value of the constant in the regression equation). , is the regression coefficient (i.e. constant percentage from the base Y). UNITED ARAB EMIRATES FEDERAL BUDGETARY PROCESS: THE DECISION-MAKING STYLES 361 t-1, is the independent variable (i.e. the budget expenditure in the previous year. e, is a random error of time. This model uses the value of the coefficient of determination (R2) in the regression equation to measure the degree of stability of the incremental pattern because it measures the variance in the dependent variable that can be explained by the independent variable. This study uses the magnitude of change model to analyze sample data to determine the existence of incrementalism. Then the stability model is used to test the degree of stability of incrementalism at both the total and ministerial levels of decision making the in the UAE budgetary system. Operational Definitions Dependent Variable: the expenditure estimations of a specific year. Independent Variable: the expenditure estimations of the previous year. Incrementalism: Style of decision making that uses the previous budget as a base to estimate the expenditures of the next budget. The basic premise of the theory of incrementalism in budgeting is that expenditure changes occur at the margin with the status quo, so that expenditure at time t is marginally different at time t+1. Increment: the annual marginal increase or decrease in the expenditure estimations of a certain budget. It is measured in this study by subtracting the estimations of a certain year from the estimations of the previous year. Measurement Criteria: To distinguish between incremental and nonincremental annual estimations the study uses Bailey and O’Connor’s criterion which distinguishes between incremental, non incremental and intermediate situations according to the following criteria: - 0-10 percent incremental 11-30 percent intermediate Over 31 percent non incremental Although the two authors have provided percentages to indicate incremental and non-incremental situations, they have not specified the rationale for their scheme beyond their reference to previous 362 ELHUSSEIN research by Wildavsky and Fenno. However, in the absence of a valid operational definition of incrementalism, the scheme seems to be reasonable, especially when governments specify an increase or decrease of expenditure between 5-10 percent to be applied across the board. Moreover, while a change between 5 to 10 percent does not constitute a drastic shift in expenditures, a change of more than 31 percent involves one third of the budget. Moreover, the two authors’ scheme considers only positive changes in expenditure (increases) and neglects negative changes (decrease). Operationally speaking the above scheme can be translated as follows. - A consistent annual increase of ±10% implies an incremental decision-making style. This range includes positive and negative values and therefore a decision to increase or decrease an agency budget in the range of ±10% represents an incremental decision. Likewise the decision to preserve the status quo (i.e. zero increment) is also considered an incremental decision. Therefore if the majority of budgetary decisions during the time interval of this study (i.e. more than 51% of all decisions) in a specific agency fall within this range, then the dominance of the incrementalist style of decision making is implied. - Annual increments ranging between ±11% and ±30% represent intermediate situations between incremental and nonincremental styles of decision making. This intermediate range indicates medium increases or decreases in the agency budget and supports the dominant style of decision making. If the general style is incremental, the intermediate range represents a small and acceptable deviation from the dominant pattern and the opposite is true. - Annual increments equal to or more than ±31% represent a nonincremental style of decision making and imply shifting and unstable government policies. The dominance of this range does not suggest a rational decision making process but rather a process in which the decision-maker does not or little relies on previous budget decisions. - The study population is composed of the annual budgets of the UAE federal government since its establishment in 1971 (35 budgets). UNITED ARAB EMIRATES FEDERAL BUDGETARY PROCESS: THE DECISION-MAKING STYLES 363 - The sample framework is the annual public budget laws which are published in the UAE Official Gazette. These laws represent the final stage in the budgetary process before its implementation. - The sample represents the budgets of the years 1990-2005 (16 budget documents). THE STYLE OF DECISION MAKING IN THE UNITED ARAB EMIRATES FEDERAL BUDGET: DATA ANALYSIS AND HYPOTHESIS TESTING Description of the Sample Data This section concentrates on describing the sample data using percentages to trace the course of annual changes of budgetary allocations during the period 1990-2005. The annual percentage changes and percentage ranges are calculated to the total budget's allocations as well as to individual ministries' allocations. These percentages are computed using Microsoft Excel according to the following equation: Yt - Yt-1/Yt -1*100 Where: Yt refers to the current budget, and Yt-1 indicates the previous budget. Table 1 shows the results of these computations. The tables show a clear incremental pattern in both the allocations of the total budget and individual ministry’s budget. The tables also show that the federal total budget expenditures have a regular incremental pattern with all the observation falling within the incremental range of ±10%. On the other hand, the tables show that the traditional ministries have a clear incremental pattern. In fact the course of annual budgeting in the Ministry of Defense is similar to what Aaron Wildavsky calls “repetitive budgeting” (Wildavsky, 1975, p.12). This is because the annual percentage change from the base in the defense budget is zero for almost all years and it went slightly down on two occasions to (-3.43%) in 1992-93 and up to (3.44%) in 1996-97. This may be explained by the fact that a substantial portion of the defense budget is not disclosed in the budget document because it is considered secret military information. The annual percentage change of expenditures in the Ministry of Interior reflects a regular 364 ELHUSSEIN TABLE 1 Annual Change of Budgetary Allocations: 1990-2005 (in %) Year 1990-91 1991-92 1992-93 1993-94 1994-95 1995-96 1996-97 1997-98 1998-99 1999-2000 2000-01 2001-02 2002-03 2003-04 2004-05 Total Budget 4.91 5.87 1.46 0.00 1.80 1.70 8.81 7.70 7.09 0.90 -1.97 2.18 0.54 2.59 -4.94 Year Oil & Energy 1990-91 1991-92 1992-93 1993-94 1994-95 1995-96 1996-97 1997-98 1998-99 1999-2000 2000-01 2001-02 2002-03 2003-04 2004-05 236.79 -70.28 8.60 0.00 -4.65 6.19 0.77 -0.16 -4.70 11.09 8.68 -2.57 9.34 8.33 78.08 Defense Interior 0.00 0.00 -3.43 3.55 0.00 0.00 3.44 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.73 2.26 1.36 0.00 3.66 8.20 9.76 1.11 -2.84 2.51 3.26 -2.92 0.00 0.81 -4.03 Ministry Justice Finance & Planning Industry 15.19 9.78 2.14 0.00 4.67 2.33 189.80 4.86 4.70 11.74 5.10 4.42 5.96 11.03 -3.30 -1.21 3.43 9.89 0.00 4.69 -0.83 8.55 7.50 -2.06 21.20 12.45 15.73 7.44 -1.54 -7.81 2.05 2.20 1.60 0.00 58.92 -30.08 -0.57 4.31 -5.00 12.04 3.28 8.05 -3.70 9.00 NA TABLE 1 (Continued) Ministry Econo- Foreign Information Higher Education Affairs my & & Culture Education Commerce 7.73 3.68 5.79 0.00 28.66 1.73 17.72 -3.01 -3.02 16.43 3.15 9.09 3.48 6.06 58.24 7.34 7.28 4.48 35.70 -20.26 11.50 4.37 9.11 -2.70 6.82 2.72 3.13 14.49 9.39 5.41 10.32 13.67 -4.05 0.00 -9.63 -59.67 11.82 9.98 -5.09 17.15 -0.31 -2.31 2.36 0.00 -7.69 359.18 25.02 1683.71 0.00 -4.94 1.97 1.68 0.57 -5.00 -0.57 -0.45 0.00 0.95 3.77 1320 7.51 5.35 -0.16 0.00 10.00 3.85 13.69 2.83 2.25 7.79 2.90 5.59 2.67 3.13 5.07 UNITED ARAB EMIRATES FEDERAL BUDGETARY PROCESS: THE DECISION-MAKING STYLES 365 TABLE 1 (Continued) Year Health 1990-91 1991-92 1992-93 1993-94 1994-95 1995-96 1996-97 1997-98 1998-99 1999-2000 2000-01 2001-02 2002-03 2003-04 2004-05 8.80 7.57 4.56 0.00 6.59 2.84 7.68 5.24 -4.71 8.34 3.85 0.00 1.85 3.03 -36.47 Ministry Public Communi- Electricity Agriculture Labor Works cations & Water 0.03 41.53 53.78 6.09 19.18 7.75 -12.15 1.17 0.46 1.97 8.28 -21.23 -0.33 3.37 1.10 0.00 0.00 0.00 0.00 0.00 -5.83 -16.05 -36.92 -0.62 0.90 2.41 6.82 -14.45 0.88 0.17 9.97 -31.30 7.47 6.27 23.61 2.85 5.62 18.88 0.47 1.62 -5.00 -4.84 -5.00 -4.00 -2.67 17.31 6.17 -98.14 11.09 4.22 6.31 -1.73 0.00 2.81 1.65 0.00 9.89 8.37 0.86 1.74 0.00 -25.41 16.56 0.51 3.08 16.67 39.34 -1.37 1.84 3.10 0.00 4.28 N/A -3.94 -1.45 incremental decision-making pattern similar to that of the total budget. The Ministry of Education, Labor, Health, Agriculture and Fishery, and Public Works have also a similar pattern despite the differences in their annual percentage changes. A slightly less stable pattern of incremental decision making can be detected in other ministries like the Ministries of Finance and Industry, Planning, Information and Culture. The other ministries show relatively high unstable incremental patterns because each experienced one or two tremendous shifts from their bases which disturbed the regularity of their incremental decision making. The highest shifts from the base are recorded in the cases of Higher Education, Electricity and Water, and Oil and Energy budgets. The Higher Education budget experienced three tremendous shifts of (359 %) in 1990-91, (1683.71%) in 1992-93 and (1320%) in 200405. These tremendous shifts are explainable by the emphasis which the government put on higher education as a priority of public policy and the administrative reorganization undergone by the Ministry of Higher Education thereof. 366 ELHUSSEIN The negative shifts in the cases of Electricity and Water, Oil and Energy, and Information and Culture were due to the gradual privatization of the former and administrative reorganization of the latter two. These shifts explain the wide percentage ranges in the budgets of these ministries. The Ministry of Justice exhibited an incremental pattern with a big shift of (189.80%) in 1996-97 that formed a new base for its incremental course of decision making. Hypotheses Testing: The Magnitude Model Hypothesis 1: The style of decision making in the UAE’S federal budget as a whole follows an incremental pattern. Hypothesis 2: The UAE’s federal ministries adopt an incremental style in deciding their annual expenditures (this hypothesis is divided into 17 sub-hypotheses related to individual ministries in the UAE’s federal government). To test the first and the second hypothesis under the magnitude model the annual percentage changes in Tables 1 are sorted out according to our operational definition of incrementalism into incremental, intermediate and non incremental categories. The results of these computations are shown in Table 2: All budget decisions in the period 1990-2005 for the UAE total budget fell within the incremental range of ±10%. Therefore, according to the magnitude model the first research hypothesis is accepted. This result confirms our previous analysis. Table 2 also shows that the same level of incrementalism is enjoyed by the Ministries of Defense and Interior with 100% of their observations falling within the incremental category. In fact with the exception of the Ministries of Communications and Electricity no budget scored less than 73% in the incremental category. Even the scores of Communications and Electricity and Water in the incremental categories represent more than half their observations. However, for all these ministries, with the exception of Higher Education, Communications and Electricity and Water, the modal score in the intermediate category is 7%. The non-incremental scores of these three ministries are less than 22%. Therefore, overall, it is possible to conclude that all the budgets of individual ministries are more or less incremental. This leads us to conclude again that the magnitude model substantiates the second hypothesis. UNITED ARAB EMIRATES FEDERAL BUDGETARY PROCESS: THE DECISION-MAKING STYLES 367 TABLE 2 Magnitude Model Frequencies of Incremental, Intermediate and Non-incremental Changes (1990-2005) Total Incremental Intermediate Non Cases 0- 10% 11- 30% Incremental Over 30% Cases % Cases % Cases % Cases % 15 100 0 0 0 0 15 0 Defense Interior 15 100 0 0 0 0 15 100 Justice 11 073 3 20 1 7 15 100 Finance & Industry 12 080 3 20 0 0 15 100 Planning 11 079 2 14 1 7 14 100 Oil & Energy 11 073 1 7 3 20 15 100 Economy & Commerce 11 073 3 20 1 7 15 100 Foreign Affairs 11 073 3 20 1 7 15 100 Information & Culture 11 073 3 20 1 7 15 100 Higher Education 11 079 1 7 2 14 15 0 Education & Youth 14 093 1 7 0 0 15 100 Health 14 093 0 0 1 7 15 100 Public Works 13 087 2 13 0 0 15 100 Communications 8 054 5 33 2 13 15 100 Electricity & Water 8 056 3 22 3 22 14 100 Agriculture & Fishery 14 093 1 7 0 0 15 100 Labor &Social Affairs 13 087 2 13 0 0 0 100 Ministry The Stability Model The previous descriptive analysis using the magnitude model establishes clearly the existence of the incremental pattern of decision making in the UAE budgetary process. Nevertheless, the question is to what extent is it possible to generalize those results to the whole population of the study and to ascertain the stability of this incremental style? To that purpose the study uses the stability model which tests the stability levels of budgetary outputs over time. The conceptual definition of incrementalism in this model is “the degree of stability in the patterns of budgetary outputs overtime”. If the underlying incremental pattern is detected in the data, then the incremental style of decision making can be substantiated by ascertaining the adherence of budgetary outputs over time to that pattern. Therefore, if the pattern of the UAE budgetary outputs at both the total and ministerial levels is perfectly compatible with the 368 ELHUSSEIN detected incremental pattern, then one may conclude that it is perfectly stable. As the number and magnitude of deviations from this detected pattern increase, the levels to which that budgetary process uses an incremental style of decision making decreases. This model concentrates on the absolute allocation levels rather than on the configuration of longitudinal change or on any decision rule underlying the budgetary process. (Ibrahim & Proctor, 1992, p. 21) In a budget with a perfectly incremental style of decision making all annual allocations would be exactly on the regression line indicating that all allocations are perfectly compatible with the mean pattern of output. To test the stability of the incremental style of decision making in the UAE budget the study uses the value of (R2) as a measure of the statistical fit of the data to the regression line. It shows the extent to which the independent variable is responsible for the variations in the dependent variable. Therefore low and high (R2) values indicate low and high levels of stability, respectively. In social science research the value of (R2) between 40% and 60% is considered to be high (O’Sullivan & Rassel, 1995, p. 418). The results of regression analysis to the UAE budget data is shown in Table 2. Table 2 shows that with the exception of Higher Education (R2 = 0.24%) and Oil and Energy (R2 = 0.5%), the total budget and all other ministerial budgets scored (R2) values higher than the specified range of 40%-60%. Expectedly, the incrementalist pattern is very stable in the Total Budget (R2 = 90%), Labor and Social Affairs (R2 = 91.8%), Agriculture and Fishery (R2 = 90.3%), Education and Youth (R2 = 98.2%), Foreign Affairs (R2 = 91.6%) and Justice (R2 = 91%). The incrementalist pattern is also relatively very stable in Public Works (R2 = 89.4%), Finance and Industry, Economy and Commerce (R2 = 80.3%). The remaining ministries scored (R2) values between 78% and 49%. The low (R2) values in the ministries of Higher Education and Oil and Energy do not mean the absence of incrementalism in the budgets of these ministries because as already seen in the previous analysis that incremental frequencies in their budgets are 73%. However their low (R2) scores reflect the instability of incrementalism in their budgetary decision making. In fact their low (R2) values are caused by the outliers in their data sets that resulted from few occasions of tremendous shifts in their budgetary process (Table 3). These shifts represent drastic changes in the federal government's UNITED ARAB EMIRATES FEDERAL BUDGETARY PROCESS: THE DECISION-MAKING STYLES 369 priorities rather than changes in their incremental style of decision making. Results and Recommendations The study concludes that the UAE budget decision-maker employs an incremental style which is very stable in some ministries and moderately stable in others. The general picture of the total federal government budget reflects an incremental model that is very stable. This result is similar to findings of Arabic studies in Jordan cited in this paper because of similarities in the types of political systems and budgetary processes. However, unlike studies undertaken in British and American contexts, the UAE federal budget reflects a sort of repetitive budgeting and this fact is explainable by differences in political systems and the types of elite-mass relationships. Incrementalism at the ministerial decision-making level in the UAE uses an incremental style of decision making in all ministries except the Ministries of Higher Education and Oil and Energy. TABLE 3 The Stability Model Ministry Defense Interior Justice Finance & Industry Planning Oil & Energy Economy & Commerce Foreign Affairs Information & Culture Higher Education Education & Youth Health Public Works Communications Electricity & Water Agriculture & Fishery Labor &Social Affairs Total Budget R2 t-test F-test p-value 63.5 21200 4.940 24.408 000 78.9 45609 7.221 52.147 000 91.0 31996 11.928 142.271 000 87.6 5236 9.954 99.076 000 47.3 602 3.417 11.679 005 0.5 176 0.271 00.073 790 80.3 2532 7.559 57.141 000 91.6 19413 11.879 141.122 000 56.2 -10390 -4.235 17.934 001 0.24 37846 2.079 4.323 0.06 98.2 15604 27.796 772.608 000 49.1 33610 3.672 13.480 003 89.4 2341 10.843 117.579 000 58.9 -1766 4.479 20.064 001 75.4 -87210 -6.317 39.905 000 90.3 2298 11.409 130.176 000 91.8 25156 12.481 155.786 000 90.3 579707 11.388 129.692 000 370 ELHUSSEIN Incrementalism in the latter two, though present, is not very stable indicating big shifts in public policy. The UAE federal government has undertaken ambitious plans in higher education that created positive tremendous shifts in budget allocations. The incremental style of decision making at both levels of the total budget and ministries is characterized by a high level of stability. This result proves that the budget decision-makers are concerned with the ceiling for the government budget which is determined by the higher levels of government. This result is, in fact, due to the weaker position of the federal government in relation to emirates governments. This situation has made the federal government dependent on emirates governments' contributions and forced to conduct budgeting with limited sources of revenues. Consequently, most of its budget decision making is characterized by repetitive incrementalism. The low-level of stability in some ministries reflects the instability in government policies in which goals change and this is reflected on ministerial budget allocations which lead to the instability of the incremental style of decision making in some ministries. This fact is clearly illustrated by the budgetary course of the Ministries of Higher Education and Oil and Energy, Electricity and Water. Traditional ministries like Justice, Interior and Foreign Affairs and Agriculture reflect a highly stable incremental pattern which can be explained by the importance and centrality of these ministries in the UAE governmental system. Recommendations Since the UAE federal government is planning to introduce and establish a program budget, the author does not consider this endeavor will change the incremental style of decision making in the federal budget. This is because of the UAE administrative and political structures which encourage the incremental style of decision making. Although the outcome of this proposed rational budget system is yet to be seen, one would think that incrementalism would continue to prevail underneath. This is because the ministries will continue to look at their previous budget as a base for their success in the system of decision making. Therefore, the author presents the following recommendations to those concerned with executing UNITED ARAB EMIRATES FEDERAL BUDGETARY PROCESS: THE DECISION-MAKING STYLES 371 programmed budgeting in the United Arab Emirates Federal Government: - Incrementalism encourages the use of bargaining and negotiation in making decisions and therefore the author recommends that decision-making forms in the programmed budget should be designed in a way that reflects the relationship between programmed goals and the money required to fund them in a quantifiable manner. - The accounting system in incrementalism is based on the concept of legality of expenditures according to budget appropriations and this leads to neglecting performance effectiveness; therefore, the author recommends the establishment of a government accounting system that is based on program evaluation in addition to legality of expenditures. - Concentration on legality of expenditures in the incremental system leads to lack of monitoring of the budget’s execution; therefore, the government should establish a review and control system based on periodical evaluation of performance and assessment of achievements in terms of objective rather than in terms of the legal expenditure of appropriated funds. - The incremental system is based on the status quo (previous budget) in making new budgetary decisions; therefore, it is important to require ministries to justify their previous expenditures annually. 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