Relocating more budget to subnational entities could be one of the means of bringing about fiscal decentralization to achieve better and efficient local services for the people of Myanmar. This can be ensured only through clear functional assignment, a transparent tax system and strong commitment from the central government to put forward an appropriate policy framework.

In the decentralization efforts made by the previous government, new institutional arrangements and increased budget allocations to public service were evident. However, the effectiveness and quality of the services provided through these improvements are debatable.  This is because there were, and still are, a number of important impediments in implementing fiscal decentralization which need serious consideration. The newly elected representatives, who came to office through the 2015 general elections with significant public support, have a great opportunity to take note of these impediments and effect reforms.

Firstly, fiscal decentralization has been a popular idea in a country like Myanmar, as in other transitioning countries, since the country took off from a long history of centralized system to a new, decentralized structure through the 2008 constitution. The constitution necessitates a union and subnational entities, each with executive, legislative and judicial arms. However, the assignment of functions to the state and region governments through Schedule II and Schedule V of the constitution remains generic and imprecise.

When decentralization kicked off with these two constitutional provisions, concerns were raised over the fiscal and administrative autonomy of the state and region governments and more autonomy and clear definitions were demanded on these provisions by state/region governments.   In response, amendments were made to these two schedules in July 2015 after a number of consultation meetings between union and state and region governments.

However, not much improvements were made to clarify the functions of the subnational governments.  Among the four pillars of fiscal decentralization –  expenditure responsibilities, revenue assignments, transfers and local borrowings – the first three are in place and have progressed in a short period of the decentralization reforms. However, large improvements are still needed in these areas.

Unlike many other developing countries, Myanmar’s decentralized hierarchal structure is large, with six tiers of government; union, state/region, district, township, ward and village tract and village. These Six tiers have similar expenditure responsibilities among elected governments and non-elected officials make it difficult to have an effective expenditure decentralization. (Expenditure decentralization is the assignment of responsibilities regarding which tier should spend on what public service.

Expenditure assignment occurs in parallel with the assignment of functions).  This discourages the political ambition of the elected governments to perform. The overlapping functions also reduces the credibility of the elected government.  As in the past, central government entities are also involved in providing local services at the township and village tract level, which makes it unclear which tier of government is most responsible to decide on the expenditure needs related to those services.  Thus, there is an urgent need to make functional assignment, and the corresponding expenditure assignment, of each tier clearer.

When it comes to raising tax revenues that are under the subnational governments, the subnational governments have little or no power in setting tax policies as most of these are set at a higher level.  There is also a lack of motivation among the citizens to pay taxes as the old centralized tax system does not allow them to correlate the public services provided with the taxes paid.  Therefore, it is important to educate both the government and citizens to understand the linkages between tax revenue and public services and how these two are interdependent on each other. A transparent tax system that shows where tax revenue goes in terms of public services could earn public trust and increase public motivation to pay taxes.

While Myanmar is new to decentralization, the country does not have a formal decentralization vision.  Without a national strategy, policy and timeline, it is difficult to achieve successful transfer of powers. Currently, efforts have been taken by a number of INGOs and NGOs to support decentralization reforms and good governance for better service delivery.

Though there are good intentions going on, there seems to have different conceptual interpretations on defining “what Myanmar local government is?”  Some have suggested to empower the village tract level with elected representatives as they are the lowest level to deliver services while some ideas where to make township level as local governments because it seems to be more capable to provide better services.  When there are a number of good thinking, wider discussion is needed at a national level with relevant stakeholders to define an inclusive decentralization vison and strategy for both demand and supply side.

Another most crucial part of the national strategy should be setting up ways to measure the outcome of public service delivery.  The outcome should be visible and show progressive improvements in the quality of the services. For this, it is very important to tackle corruption and set up independent monitoring systems to oversee the government’s activities.  The reports of the monitoring systems should be made publicly available to promote transparency.

Fiscal decentralization as an essential political tool in sharing natural resource revenue for the peace process, as in other conflict-sensitive, resource-rich developing countries. Tying up fiscal decentralization with the peace process could ensure local autonomy and self-reliant local governments, and thereby address conflict.

Devolution may take time depending on the local capacity and institutional arrangements. Nonetheless, clear assignment of functions, transparent tax system, and a national vision with systematic  deconcentration and a reasonable timeframe could be the most reasonable and beneficial approach in progressing towards greater decentralization in Myanmar.

Source: A-id. Date: 3 October, 2016