Catalysing tran­si­tion through pub­lic fi­nan­cial man­age­ment re­form

The Myanmar Times - - Front Page - GILES DICKENSON-JONES MATTHEW ARNOLD news­room@mm­times.com

PUB­LIC fi­nan­cial man­age­ment re­forms are cen­tral to Myan­mar’s en­tire tran­si­tion. Im­prove­ments to so­cial ser­vices like garbage col­lec­tion, in­vest­ment in new roads and bridges, and rais­ing stan­dards of health and ed­u­ca­tion are all premised on the govern­ment be­ing able to raise more rev­enue and then ef­fec­tively spend it achiev­ing pol­icy goals. In or­der for the Na­tional League for Democ­racy govern­ment to achieve its goals for eco­nomic and po­lit­i­cal re­form, it is there­fore a crit­i­cal area for pri­ori­ti­sa­tion.

For in­stance, Myan­mar’s health and ed­u­ca­tion out­comes are cur­rently some of the low­est in the world, yet govern­ment ex­pen­di­ture on de­fence is still greater than ed­u­ca­tion and health com­bined. At the same time, while Myan­mar’s low lev­els of gen­eral govern­ment ex­pen­di­ture are in part ex­plained by low in­come, a 2015 Global Wit­ness re­port sug­gests that Myan­mar’s jade in­dus­try pays lit­tle tax, de­spite be­ing equiv­a­lent to around half of Myan­mar’s an­nual GDP. And while rais­ing and spend­ing more is a cen­tral con­sid­er­a­tion for re­form­ing Myan­mar’s pub­lic fi­nance sys­tem, the cur­rent is­sues faced are em­blem­atic of a his­tory of cen­tralised de­ci­sion-mak­ing and so­cial­ist plan­ning.

Yet there has been some real progress in re­form­ing pub­lic fi­nances since Myan­mar’s re­cent po­lit­i­cal and eco­nomic tran­si­tion be­gan. Take the cur­rent di­vi­sions of power. The 2008 con­sti­tu­tion, for all its weak­nesses, was an im­per­a­tive first step to­ward giv­ing the 14 states and re­gions some con­trol over pol­icy, as it pro­vides them the author­ity to make laws, raise taxes and in­flu­ence where money should be spent. As a re­sult, since 2011, each state and re­gion govern­ment now has its own par­lia­ment, bud­get and port­fo­lio of re­spon­si­bil­i­ties, which can be im­ple­mented through sub-na­tional govern­ment depart­ments. This has also been paired by ef­forts from the Union govern­ment to bet­ter share pub­lic re­sources, with an in­creas­ing pro­por­tion of Myan­mar’s bud­get be­ing al­lo­cated to state and re­gion gov­ern­ments through Union fi­nan­cial trans­fers.

At the same time, the pre­vi­ous govern­ment also in­sti­gated a num­ber of im­por­tant prac­ti­cal mea­sures de­signed to mir­ror th­ese “on-pa­per” re­forms with func­tional changes in the way de­ci­sions around bud­gets are made. Take the na­tional plan­ning process, which Myan­mar uses to frame dis­cus­sions around achiev­ing the pol­icy goals of govern­ment and how bud­get spend­ing should re­flect this. Since state and re­gion gov­ern­ments were first es­tab­lished, sub-na­tional cab­i­nets have played an in­creas­ing role in set­ting tar­gets and cre­at­ing their own plans, pro­vid­ing an im­por­tant step away from Myan­mar’s his­tory of au­thor­i­tar­ian de­ci­sion­mak­ing. As a re­sult, lo­cal par­lia­men­tar­i­ans now have a greater say about how the coun­try’s re­sources should be spent, and where this rev­enue should come from.

Such re­forms were also ini­ti­ated at lev­els closer to the community, with the U Thein Sein govern­ment hav­ing been in­stru­men­tal in es­tab­lish­ing a range of lo­cal com­mit­tees within Myan­mar’s town­ships. Th­ese com­mit­tees, while ar­guably be­ing far from demo­cratic, were an im­por­tant first step to cre­at­ing lo­cal gov­er­nance struc­tures that at least be­gin to re­flect some community needs. On a prac­ti­cal level they have also been a promis­ing move to­ward more “bot­tom-up” plan­ning, with lo­cal pri­or­i­ties they iden­tify be­ing used as in­put into the Union and sub-na­tional bud­gets as part of the na­tional plan­ning process. Th­ese moves have also been en­hanced by the more demo­cratic se­lec­tion of lo­cal rep­re­sen­ta­tives, with ward and vil­lage-tract ad­min­is­tra­tors see­ing re­cent re­forms to their se­lec­tion method.

How­ever, while it is im­por­tant not to un­der­es­ti­mate how far Myan­mar’s pub­lic fi­nan­cial man­age­ment re­forms have pro­gressed, there is still a long way to go. For in­stance, at the most ba­sic level, while the Union govern­ment bud­get is now reg­u­larly published, state and re­gion bud­gets of­ten are not.

At the same time, while published bud­gets pro­vide some in­di­ca­tion about which govern­ment body is un­der­tak­ing the ex­pen­di­ture, lim­ited in­for­ma­tion is avail­able on what they are ac­tu­ally do­ing with pub­lic funds; in other words, how funds are ac­tu­ally spent rather than sim­ply who was re­spon­si­ble. In ad­di­tion, bud­gets are only de­vel­oped on a year-to-year ba­sis as a re­sult of pub­lic spend­ing not be­ing de­ter­mined ac­cord­ing to longer-term pol­icy vi­sions. Con­se­quently, even with re­cent im­prove­ments in trans­parency, for the wider pub­lic it is still ex­tremely dif­fi­cult to mean­ing­fully en­gage in con­ver­sa­tions about how Myan­mar’s lim­ited re­sources can best be used.

At the same time, while the es­tab­lish­ment of lo­cal com­mit­tees has been wel­comed as an im­por­tant step, lo­cal au­ton­omy and cit­i­zen par­tic­i­pa­tion is of­ten min­i­mal. For in­stance, al­though state and re­gion plan­ning pro­cesses do in­cor­po­rate lo­cal in­put, de­ci­sions in many ar­eas are dom­i­nated by the chief min­is­ter, who is nom­i­nated by the pres­i­dent. In ad­di­tion, most town­ship com­mit­tees are heav­ily con­trolled by of­fi­cials ul­ti­mately un­der the author­ity of a Union min­istry, such as the Gen­eral Ad­min­is­tra­tion Depart­ment’s town­ship ad­min­is­tra­tor. As a re­sult, even with re­cent ef­forts to share power, sub-na­tional spend­ing is still heav­ily con­trolled by cen­tral author­i­ties, thereby again lim­it­ing the ex­tent to which lo­cal bud­gets can be tai­lored to the needs of lo­cal com­mu­ni­ties.

While govern­ment fi­nances may not be the first thing that springs to mind when con­sid­er­ing Myan­mar’s many pri­or­i­ties, it will fun­da­men­tally de­fine the re­sources avail­able to fuel eco­nomic and so­cial de­vel­op­ment. It is there­fore crit­i­cal. How­ever, per­haps more sub­tly, the re­form of Myan­mar’s pub­lic fi­nan­cial man­age­ment sys­tems is in­ti­mately linked with how eco­nomic re­sources are dis­trib­uted and po­lit­i­cal power is shared in a demo­cratic sys­tem. As a re­sult, for the in­com­ing govern­ment to drive long-term de­vel­op­ment, build­ing on ex­ist­ing im­prove­ments in re­source shar­ing, bud­get trans­parency and bot­tom-up bud­get con­sul­ta­tion all pro­vide crit­i­cal levers of re­form and im­por­tant av­enues to be­gin re­pair­ing Myan­mar’s so­cial con­tract.

Re­build­ing trust be­tween the pub­lic and govern­ment will also be es­sen­tial. While cur­rently many of Myan­mar’s cit­i­zens doubt the ben­e­fits they re­ceive from tax­a­tion, the rel­a­tively small size of Myan­mar’s bud­get means govern­ment is also con­strained in what it can pro­vide.

How­ever, with eco­nomic growth and ris­ing in­comes comes a clear op­por­tu­nity to change this. Yet to do this sus­tain­ably re­quires not just that govern­ment be able to col­lect more tax, but also that it do so ef­fi­ciently and fairly. At the same time, such re­forms also need to be paired with the bet­ter use of govern­ment re­sources and wider poli­cies to build the ac­count­abil­ity of govern­ment so eco­nomic and po­lit­i­cal re­forms re­in­force one an­other.

Giles Dickenson-Jones is an in­de­pen­dent con­sul­tant spe­cial­is­ing in eco­nomic pol­icy. Matthew Arnold is pro­gram di­rec­tor for the Asia Foun­da­tion in Myan­mar.

Photo: EPA

The pub­lic ed­u­ca­tion sys­tem is among the many state in­sti­tu­tions that would ben­e­fit from re­forms to Myan­mar’s tax­a­tion frame­work.

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