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Are Municipalities the Champions of Reform in Myanmar?

February 28, 2018

By Alison Chan, James Owen

2017 was a difficult year for Myanmar. The rocky peace process and the humanitarian crisis in Rakhine have complicated the government’s effort to put together a reform agenda following five decades of authoritarian rule. In such a challenging context, it is easy for the system to become risk averse and fall prey to bureaucratic inertia.

Myanmar

As Myanmar undergoes reform, municipalities are stepping up to improve how their municipalities work and serve the public. Photo/Kaung Htet

Yet there are pockets of reform that the democratic transition, however nascent, has unleashed. Despite Myanmar’s highly centralized governance system, its municipalities, known as Development Affairs Organizations (DAOs), are free to raise their own revenues and experiment in the way they provide urban services. This has enabled committed and determined municipal officials in some areas to begin pushing the boundaries of what can be done to improve how their municipalities work. For example, with support from The Asia Foundation, a new app, Myankhon developed by the Yangon-based social enterprise Koe Koe Tech, for the first time allows municipal staff in Ayeyarwaddy Region, Shan State, and Kayin State to review and input tax data in real time, digitize tax records, and generate tax bills. Other municipalities are introducing the first-ever water meters to gather revenue and reduce waste and are using online technology to simplify business licensing processes.

Township staff use Myankhon. Before the app, property tax collection in Taunggyi took nearly six months to finish, now it takes two months with barely any paperwork.

However, the unusual freedom DAOs enjoy presents some obstacles. As the country transitions out of an authoritarian government, the decentralization of powers from the Union government to subnational governments requires support in this unfamiliar territory. But without a Union-level line ministry, DAOs receive little guidance and few opportunities to learn from each other.

The Asia Foundation and Renaissance Institute (RI), a leading policy think tank in Myanmar, facilitated a three-day workshop last month that brought together major municipalities from all of the country’s 14 states and regions to share specific problems they face related to a particular government function (e.g. waste management), the solutions they have tried, and the lessons they had for others.

The Foundation and RI presented data to better inform the discussions, including findings from our pilot City Life Survey (to be released in April) and RI’s review of the property tax system in Myanmar, which highlighted the extremely low levels of municipal revenue being collected in Myanmar cities. For example, in Taunggyi, the capital city of Shan State, the typical household pays just $1, or the equivalent of less than what four cups of tea cost each year in taxes. As property tax is the only tax DAOs can collect and spend with full autonomy, this is a significant source of municipal revenue that clearly is not fulfilling its potential contribution to urban development.

reform in Myanmar

A display showcases that in Taunggyi, the capital city of Shan State, the typical household pays just $1, or the equivalent of less than what four cups of tea cost each year in taxes. Photo/Amy Ovalle

Participants from Taunggyi city also showcased their pioneering work to reform the country’s regressive business licensing process, including the widespread and problematic business auction license system. In part a legacy of the government’s inability to collect taxes directly from citizens, auction licenses are operating licenses awarded to businesses who outbid others and serve as a key source of revenue for municipal government. This outdated system is problematic for many reasons, one of the most glaring of which is that it creates monopolies and oligarchies, resulting in higher prices of goods and services.

One lucrative auction license overseen by DAOs is slaughterhouse licenses, which account for a significant portion of municipal revenues (up to 50 percent in some townships). In a bold move in 2013, city officials in Shan State began abolishing city slaughterhouse auction licenses to increase competition and fees tied to the sale of livestock. While they once made up 44 percent of the township’s municipal revenue, that figure is now only 17.7 percent. While revenues fell at first, they increased overtime as more businesses were allowed to enter the market. According to the Foundation’s report on local economic governance in Myanmar, such competition has in fact encouraged greater investment into livestock and slaughterhouses. The public also benefit from lower meat prices, creating a unique win-win outcome for all.

Myanmar reform

The Asia Foundation and Renaissance Institute (RI) brought together municipalities from all of the country’s 14 states and regions to share challenges and solutions.

Some municipal officials and state/region ministers at the workshop were surprised and questioned whether such an outcome was possible. While the reforms are relatively new, the early signs are promising. The workshop showed that reform and experimentation is possible as novel approaches are tested to increase municipal revenues and improve urban service delivery. As the Minister for Development Affairs in Chin State argued, those municipalities that are fortunate to have the authority to find their own solutions, make quicker decisions and be more responsive to local needs, are a “test for decentralization in Myanmar.”

However, we stressed that the objective is not to have all municipalities simply emulate one another. While there are many similarities in the problems they face, the local context still matters. The aim is also to embolden those who are already leading the way and to encourage other would-be reformers with experimentations and solutions that are being tried and implemented by their peers, some of whom they are meeting for the first time. As Yangon’s mayor, U Maung Maung Soe, said: “Placing these state and region authorities in the same room is already a success.” We aim to sustain this success by continuing to support subnational actors in the decentralization process.

James Owen is the economist and Alison Chan is the gender advisor for The Asia Foundation’s governance program in Myanmar. The views and opinions expressed here are those of the authors and not those of The Asia Foundation or its funders.

Related locations: Myanmar
Related programs: Strengthen Governance, Technology & Development

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