Investor Presentaiton

Malaysia's government moved away from incremental budget approach to zero- based budgeting approach to improve spending efficiency Malaysia Context BERSEKUTU BERTAMBAH MUTU Previous years budget always used as baseline for new budget Set revenue allocation for projects exist every yr. without a needs assessment, resulting in Wasteful expenditure Increased spend every year Built in inflation mechanism that's not justified What did Malaysia do? Moved away from copy paste budget model towards zero based budgeting · Expenditures determined from zero each year vs. using last years numbers as baseline Removes assumption that project spend simply increases by inflation and any other cost each year Forces stakeholders to think from fresh about spend for each project, break it down & remove wastage Stakeholders have to justify each need based on objectives vs just looking at previous budget All tenders are reviewed and all expenses must be justified Alternative scenarios provided by stakeholders (e.g.: sourcing options to reduce costs) Key successes Goal is to improve spending efficiency Already seeing spending cuts Operating expenditure estimated to decrease Savings from non-essential expenditure & cost efficiencies resulting from scrutinizing each expense from base zero Helps reduce fiscal deficit Enhances transparency & accountability Forces stakeholders to think about needs & assess expenses yearly • Solves problem of some departments being overfunded & others underfunded Learnings for Plateau State Avoid using a copy paste budget model as a baseline and move to zero based budgeting Allows for more efficient allocation of resources Given growing urgent spending priorities, this method proves more practical & sustainable Eliminates trap of falling into increased demand for funds for projects every year (baseline+inflation+new items to buy) Helps prioritize projects that need attention by having a view on the needs and expense analysis of each project yearly Expenditure needs analysis helps to save costs & reduce fiscal deficit Source: New Straits Times Article 'Government to implement zero based budgeting for procurement process; BCG analysis 259 Copyright 2019 by Boston Consulting Group. All rights reserved.

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