Local Economic Governance in Myanmar Eng

Local Economic Governance in Myanmar
Jared Bissinger
February 2016
Acknowledgements
Jared Bissinger is a development economist based in Yangon, Myanmar. He holds a PhD in economics
from Macquarie University, and has worked with a wide range of organizations in Myanmar including
the World Bank, International Labour Organization, The Asia Foundation, Overseas Development
Institute, DFAT-Australia, and others. He is currently leading the ILOs engagement with business
associations in Myanmar.
The author would like to thank Ye Thu Aung for his invaluable assistance in the research and
preparation of this report, as well as the many civil servants and businesspeople without whose time
and insights this report would not have been possible. Thanks to Kim Ninh, Matthew Arnold, Sean
Turnell, James Owen, and Andrea Smurra for the comments on earlier drafts, and to UNDP for their
assistance. Any errors of substance and argument rest with the author.
The Asia Foundation is a nonprofit international development organization committed to improving

lives across a dynamic and developing Asia. Informed by six decades of experience and deep local
expertise, our programs address critical issues affecting Asia in the 21st century governance and law,
economic development, womens empowerment, environment, and regional cooperation. In
addition, our Books for Asia and professional exchanges are among the ways we encourage Asias
continued development as a peaceful, just and thriving region of the world. Headquartered in San
Francisco, The Asia Foundation works through a network of offices in 18 Asian countries and in
Washington, DC. Working with public and private partners, the Foundation receives funding from
diverse group of bilateral and multilateral development agencies, foundations, corporations, and
individuals.
Preface
Local economic governance is a critical dimension in Myanmars drive to reform, decentralize and
achieve more inclusive and stable development. How businesses and individuals engage with the
government in their income and revenue generation efforts and creating employment in the local
communities in the process is pertinent to larger economic reforms that are being implemented and
further proposed by government and experts. In the context of a country coming out of decades of
military rule, any reform that can lead to greater transparency, fairness, and improved state-society
relations will contribute significantly to the countrys long term democratic transition and economic
prosperity. More specifically, reforming economic governance at the local level is essential if the
benefits of Myanmars transition are to reach the majority of the countrys people.
Because of initial decentralization efforts in recent years, new opportunities have opened up through
which subnational governments can make a difference in local economic governance in a number of
different areas from municipal governance to fisheries and agriculture to licensing systems. We have
begun to see some state/region governments experimenting with policy changes in the local economic
governance structure. This is still a very nascent development however, and many aspects of the old
and problematic regulations and practices remain. There are structural and regulatory impediments
and skewed incentives, as well as the lack of knowledge and confidence about how to change.
As with many areas for reform consideration, there is a dearth of information on what constitute local
economic governance in Myanmar, who are the key actors, and what are the key issues that should
be targeted for reform. In this context, The Asia Foundation is pleased to present this research report
which explores local economic governance in Myanmar and offers recommendations for reform. The
report is author by Dr. Jared Bissinger, an independent consultant and development economist who
specializes in private sector development and the business environment in Myanmar.
We hope the Foundations research agenda, of which this paper is part of, will support key actors and
the wider public in contributing to an inclusive dialogue on Myanmars reform processes and
economic development. This report is jointly funded by The Asia Foundation and the UK Department
for International Development (DFID), but the opinions expressed are the authors own and do not
necessarily reflect those of the Foundation or DFID.
Dr. Kim N.B. Ninh

Country Representative, Myanmar
The Asia Foundation
Contents
Acronyms ................................................................................................................................................. i
Executive Summary ................................................................................................................................ ii
SECTION ONE: Introduction ................................................................................................................... 1
1.1 Methodology ................................................................................................................................ 1
1.2 What Is Local Economic Governance? ......................................................................................... 3
1.3 Administrative Decentralization and S/R Governments............................................................. 4
SECTION TWO: Mapping Local Economic Governance ......................................................................... 7
2.1 Development Affairs Organizations ............................................................................................ 9
2.1.1 Licensing .............................................................................................................................. 10
2.1.2 Construction Permits........................................................................................................... 12
2.1.3 Revenue ............................................................................................................................... 13
2.2 General Administration Department......................................................................................... 15
2.3 Internal Revenue Department ................................................................................................... 16
2.4 Union-Level Sectoral Ministries ................................................................................................. 17
2.4.1 Department of Forestry ...................................................................................................... 17
2.4.2 Department of Fisheries ..................................................................................................... 19
2.4.3 Department of Livestock ..................................................................................................... 20
2.4.4 Department of Agriculture.................................................................................................. 20
2.4.5 Department of Agricultural Land Management and Statistics .......................................... 20
2.4.6 Department of Highways .................................................................................................... 22
2.4.7 Ministry of Hotels and Tourism .......................................................................................... 23
2.4.8 Directorate of Industrial Supervision and Inspection ........................................................ 24
2.4.9 Ministry of Mines ................................................................................................................ 24
2.4.10 Transport Division of Operator License Supervision and Coordination .......................... 25
2.4.11 Trade Promotion and Consumer Affairs Department...................................................... 25
2.5 Other Important State-Linked Actors ........................................................................................ 26
2.5.1 Industrial Zones ................................................................................................................... 26
SECTION THREE: The Structure of Local Revenues.............................................................................. 27
3.1 Fees and the Cost of Service Provision ...................................................................................... 27
3.2 Taxes ........................................................................................................................................... 28
3.2.1 Land Tax ............................................................................................................................... 28
3.2.2 Property Tax ........................................................................................................................ 29
3.2.3 Indirect Taxes ...................................................................................................................... 30
3.3 Other Issues in the Local Revenue System ................................................................................ 31
3.3.1 Concentration of Income Tax Contributions in Urban Areas............................................. 31
3.3.2 Rural-to-Urban Transfers in DAO Revenue ........................................................................ 31
3.3.3 Implementation Challenges with the Commercial and Income Taxes .............................. 31
3.3.4 Stamp Duties ....................................................................................................................... 32
SECTION FOUR: Auction Licenses ........................................................................................................ 33
4.1 The Auction Process ................................................................................................................... 33
4.2 Slaughterhouse Licenses ............................................................................................................ 34
4.3 Ferry Licenses ............................................................................................................................. 38
4.4 Other Auction Licenses .............................................................................................................. 39
4.5 Case Studies on Auction Licenses .............................................................................................. 39
4.5.1 Case Study 1: The Market Fee Collection License .............................................................. 40
4.5.2 Case Study 2: The Ferry License .......................................................................................... 40
4.5.3 Case Study 3: The Market Toilet Fee Collection License .................................................... 40
4.6 Key Challenges with the Auction License System ..................................................................... 40
SECTION FIVE: Key Recommendations: ............................................................................................... 42
References ............................................................................................................................................ 46
Appendix 1. List of Departments in Tanintharyi Region Government, by S/R Minister Portfolio .... 47
Appendix 2. List of Properties and Building-tax Rates from Selected Township DAO, FY14-15 H1 .. 48
Appendix 3. Detailed Case Studies of Auction Licenses...................................................................... 49
Acronyms
DALMS Department of Agricultural Land Management and Statistics (formerly the State
land Records Department)
DAO Development Affairs Organization
DICA Directorate of Investment and Company Administration
DISI Directorate of Industrial Supervision and Inspection
DoH Department of Health
DRD Department of Rural Development
FDI foreign direct investment
FY fiscal year
GAD General Administration Department
IRD Internal Revenue Department
IZ industrial zone
IZMC Industrial Zone Management Committee
IZSC Industrial Zone Supervision Committee
MCDC Mandalay City Development Committee
MEB Myanma Economic Bank
MoHT Ministry of Hotels and Tourism
MoLFRD Ministry of Livestock, Fisheries, and Rural Development
SOE State-Owned Enterprise
SLORC State Law and Order Restoration Council
S/R state and region
TDAC Township Development Affairs Committee
YCDC Yangon City Development Committee
Note: Exchange rate used is 1,281 MMK per US dollar, the Central Banks reference rate upon final
revision of the paper on November 9, 2015.
i
Executive Summary
Reforming economic governance at the local level is essential if the benefits of Myanmars transition
are to reach the majority of the countrys people. Already, some state/region governments have
begun experimenting with policy changes in the local economic governance system. This newfound
experimentation is possible because Myanmars decentralization process has created new avenues
through which subnational governments can reform economic governance in areas including
municipal governance, fisheries, forestry, land, agriculture, and others. This decentralization process
has also created new entry points for the international community to engage with Myanmar about
improving economic governance. Despite some changes, many aspects of the old local economic
governance system remain. Addressing some of these issues is a significant opportunity for the new
government to bolster its economic credibility and bring tangible benefits to Myanmars people. This
paper explores local economic governance in Myanmar, starting with a review of decentralization in
Myanmar and a detailed examination of key local economic governance actors. It then highlights two
local governance issues that are potential areas for reform: (1) the local revenue system, which is
often regressive and fee-dependent; and (2) the commonly used auction-license system, which can
restrict competition and create economic rents. The final section includes recommendations for
reforms that could help improve local economic governance.
Decentralization in Myanmar
Myanmar has many levels of subnational governments, including states and regions (S/R), districts,
townships, towns, and village tracts/wards. While there has been some decentralization to these
subnational levels of governments, they remain an integral part of the Union government system. This
duplication has created debate about the practical importance and authority of S/R governments.
Though they remain a part of the Union government system, subnational levels of government have
important new authorities over some economic activities. The Constitution of Myanmar defines the
legislative and revenue-raising authorities of states/regions; however, it also implicitly gives
administrative authority over the same economic activities to the S/R-level government. This means
that S/R governments have final authority for licensing and economic oversight in the sectors that fall
under the legislative authority of S/R parliaments and the revenue-raising authority of the S/R
government. This distribution of power is critical to the way we understand decentralization and the
role of S/R governments. In short, Myanmars decentralization process is not about the
decentralization of structures from the Union to the S/R, but instead the decentralization of specific
authorities.
Key Actors in Local Economic Governance
For most people in Myanmar, the first engagement on issues of economic governance is at the
township level. Whether it be business licensing, tax collection, or inspection of a business, the
engagement is likely to happen with a township-level official. There are many government
departments present at the township level, but three tend to have the most interactions with a wide
range of economic actors: development affairs organizations (DAOs), the General Administration
Department (GAD), and the International Revenue Department (IRD).
DAOs are the primary urban governance entity in the Myanmar government structure, sharing many
similarities with a municipal government. They play a lead role in urban service delivery and local
economic governance, including licensing businesses through both auction and normal processes,
issuing construction permits and billboard licenses, and collecting property taxes. Though these taxes
are normally significant sources of revenue for local governments elsewhere, in Myanmar they often
account for less than 10 percent of DAO revenue. For many DAOs, the majority of revenue comes from
license or other fees collected from businesses. Businesses generally obtain one of two types of
operating licenses from the DAO, depending on the sector: licenses issued through non-competitive
processes, in which there is no limit on the number of licensees; and auction licenses, which are
ii
awarded to a limited number of businesses. The dependence on business licensing, especially auction
licenses, for revenues has important consequences, which are discussed later.
The General Administration Department is the central and most powerful authority at the township
level, having many powers generally held by mayors. The GAD has a number of important authorities,
including land and excise administration, collecting some taxes, convening weekly township-level
interdepartmental meetings, and providing businesses with recommendation letters that are needed
for a range of functions, such as transferring property. Because of the preeminent role of the GAD
township administrator, the responsibility to investigate complaints and resolve/mediate them often
falls to the GAD. Finally, the GAD generally has significant implementation capacity, which it uses on
behalf of other departments that lack manpower. The IRD is the last of the departments with broad
engagement, and has the most well-defined authority: collection of revenues, which come through
commercial and income taxes as well as the stamp duty.
There are a wide range of sector-specific departments, which generally have a presence in townships
in which those sectors are key.1 These departments include:
x Department of Forestry
x Department of Livestock
x Department of Fisheries
x Directorate of Industrial Supervision and Inspection
x Department of Trade Promotion and Consumer Affairs
x Department of Rural Development
x Transport Division of Operator License Supervision and Coordination
x Department of Agriculture
x Department of Agricultural Land Management and Statistics2 (DALMS)
x Department of Cooperatives
Other government ministries, such as the Ministry of Mines and the Ministry of Hotels and Tourism,
also have important economic responsibilities, but tend to be located in a smaller number of
townships.
Auction Licenses and the Local Revenue Base
Local economic governance in present-day Myanmar shares many characteristics with the system
under previous governments; however, decentralization has created new opportunities for reforming
this system. There are two distinct but closely related areas where reforms could yield significant
dividends: revision to Myanmars local revenue base, and changes to the widespread system of
auction licenses. At the local level, a significant amount of revenue comes through avenues that
require payment in advance as a prerequisite for engaging in economic activity. While there are a few
broad-based subnational taxes, notably on land and buildings, these generally account for a small
percentage of locally raised revenues. Most revenue comes through fees and indirect taxes, which are
generally paid by businesses, though often passed through to consumers. For many DAOs, fees from
the private sector comprise the majority of locally raised revenue. The system of advance payments
helps the state circumvent the pervasive issue of poor compliance, a legacy of the former authoritarian
state, which struggled to collect taxes. However, the existing system creates a number of problems.
Because it often results in a tax on consumption or economic activity, it is relatively regressive. It also
can be distorted, for example by placing significant indirect taxes on some types of consumption but
little or no indirect tax on other, similar types of consumption.
1 Note that there are nearly 80 departments at the S/R level, with a significant share of those present at the township level.
The list presented is not comprehensive, but instead lists many of the important township-level departments.
2 Note that this department was previously known as the State Land Records Department (SLRD).
iii
For some parts of government, license fees from auctions are the single largest revenue source. Often,
the value of these auction licenses comes from the significant restrictions that accompany the license.
Slaughterhouses in some parts of Myanmar are an excellent example. Some slaughterhouse auction-
license systems divide a township into geographical territories and award the licensee monopoly
selling rights in that area. The system fixes prices and restricts transportation of meat. The result is
that the system generates significant economic rents for the licensee, some of which are transferred
to the government through the license fee and some of which are kept by the business. For some
DAOs, this slaughterhouse system is the single largest source of revenue. Licenses that have a similar
structure are present in many other areas, including fisheries, roads, pawnshops, and ferries. For most
auction licenses, the fee must be paid in advance before any income is earned, a challenge for many
small businesses in credit-poor Myanmar that can lead to reduced competition for licenses. Auction
licenses are also a significant deterrent to investment because they are commonly awarded for only
one year, and generally do not include provisions to incentivize investment during the license term.
New Space for Reform at the Subnational Level
Reforms to local economic governance in Myanmar could bring significant tangible benefits and are
well within the realm of the politically possible. The decentralization of many of these authorities to
S/R and/or township levels of government opens up important new space for policy experimentation.
Because specific authorities have been decentralized to a range of departments, there are many new
entry points for engagement with subnational governments on reform. In some states and regions,
governments have already begun to reform aspects of these systems, while in others, government
officials are already aware of the opportunities that these reforms could bring. For Myanmars next
government, these changes could form the basis for a S/R economic reform strategy that helps
promote broad-based development and poverty reduction.
Though there are many promising areas for reform at the subnational level, local economic
governance cannot be transformed overnight. The process of reforms is essential to their success.
They must be undertaken transparently, with a consultative process that builds trust, understanding,
and community support. Communities need to understand how and why these systems work, and
why they are changing. This means that many reforms should be rolled out over the course of a few
years, not months. Further, it is important that government institutions be given time to transition.
Some government departments, such as DAOs, are heavily dependent on auction-license revenue and
fees, and removing them before alternate revenue streams are available could significantly undermine
important urban service provisions. Therefore, it is important that reforms be approached as
interdependent. Changes that reduce revenue, for example restructuring the auction-license system,
should be offset by others that increase revenue, for example increasing the building tax.
Recommendations
Work with S/R- and township-level governments to develop location-specific, multi-year
reform strategies based on a transparent and consultative process that builds trust and
understanding about the reforms before they take place.
Work with government to develop effective communication strategies to explain current
and future local economic governance systems to communities.
Reform the auction licensing system to minimize the creation of rents and reduce the
harmful impact of annual price increases and the negative economic consequences of fixed
prices.
In cases of natural monopolies, revise auction-license terms to increase the governments
share of the revenue and/or incentivize improved service and investment.
Reduce the use of one-year licenses, which discourage long-term investment by creating
uncertainty for business, thereby increasing costs for consumers.
Reform the system of advance license payments to allow for incremental payment
throughout the duration of the license.
iv
Improve enforcement of sanitation and safety conditions for licensees.
Reform the building tax to make it a more important source of general revenues for DAOs.
Revise the land tax, and consider introducing a minimum so that no landowner with less
than a fixed number of acres will have to pay the tax.
Reduce S/R- and local-level administrative barriers to trade, including but not limited to the
prohibition on moving slaughtered meat between townships.
Eliminate arbitrary barriers to business entry at the local level, such as the Disciplinary
Committee on Buses or various hotel requirements from the Ministry of Hotels and Tourism.
Charge penalty fees for late payment or non-payment of land and building taxes.
Increase publicly available information, including local-level laws, rules, regulations, and
bylaws that spell out the governance framework for local businesses.
v
SECTION ONE: Introduction
Reforming local economic governance is essential if the benefits of Myanmars transition are to
become tangible for the majority of the population. Local levels of government have important
incentives to reform. They often have direct responsibility for key services and are the first to receive
criticism when they do not fulfill citizens expectations. They have some flexibility to experiment with
new policies, as long as they stay within their often limited authority. It also is easier for local levels of
government in selected locations to trial new policies, because of the comparative ease of small-scale
implementation. At the same time, local levels of government can be slow to change given their lack
of authority, capacity challenges, the multiple levels of authority separating them from the countrys
top leaders, and the vested interests of local authorities. Despite the challenges, reforming the
management of local economic governance is one of the more easily implemented and economically
meaningful changes that the new government can undertake. For the new government, reforms to
local economic governance are among the most promising low-hanging fruit.
Within the structure of Myanmars government there are numerous subnational levels involved in
economic governance, including state/region (S/R) governments, districts, townships, towns, and
village tracts/wards. Many Union-level ministries have officials at one or more of these levels, and
they have an important influence on local economic governance. Local governing authorities have a
wide range of economic powers, from collecting revenues, to awarding concessions, to giving
permissions to conduct a range of economic activities. They already possess some functionally
decentralized powers, and are often granted a wide degree of discretion over the implementation of
laws and rules in these areas. In their engagements with business, local levels of government often
have a strong emphasis on licensing and taxation, while less emphasis is placed on regulation and
service provision. However, the structure of taxation is skewed heavily towards an up-front, fee-for-
permission system. This is driven by the legacy of an authoritarian state that struggled to collect
taxes. The system of advance payments helps the state circumvent the pervasive issue of poor
compliance.
This paper focuses largely on the township level, though it also will map the relevant S/R- and Union-
level government actors that operate at the subnational level. The township level of government is a
key point of interaction for the majority of Myanmar people, and their implementation of economic
governance laws and rules is both immensely important and poorly understood. The paper starts with
a review of the methodology and the language concerning key concepts in the paper, including a
definition of the relatively broad concept of local economic governance. The following section
explores the decentralization of economic authority and the process of decentralized decision making.
The third section of the paper explores the structure of the Myanmar government, and maps the wide
range of actors with local economic governance responsibilities. It starts with a thorough review of
DAOs because of their prominent role at the local level and the flexibility they have to reform. The
section then explores the economic authority of the GAD, as well as a host of relevant Union-level
ministries and other governmental authorities. Given the large number of government departments
at the subnational level, this mapping exercise is not exhaustive, though most major actors involved
in local economic governance are covered. The fourth and fifth sections investigate two important
thematic issues for local levels of government: subnational government revenue, and licensing of
economic activities. These sections both provide descriptive details about each issue, though they are
accompanied by a significant analytical component. This analysis forms the basis for many of the
recommendations in the final section, which reviews steps for government and development partners
to address key local economic issues.
1.1 Methodology
Research was conducted in six townships across three states and regions in July 2015. States and
regions were selected based on several criteria. The first was that at least one state and one region
1
were visited. The second was determined by programming priorities of The Asia Foundation, which
has already conducted numerous research projects and workshops in each of the states and regions
visited for this project. These existing relationships helped to facilitate interviews with actors from
government and businesses. Because the Foundation has already established working relations and
has plans for additional programmatic activities in these areas, the selection of these three states and
regions also increases the likelihood of implementing, in conjunction with select government
departments, some of the recommendations from this report. Within these states/regions, five
townships and one town were selected for interviews. All S/R capitals were visited because of the
necessity of meeting with S/R governments before conducting fieldwork in other townships in the S/R.
Myitta Town, in Tanintharyi Region, was selected because of its small population, and because it was
a town instead of a township and therefore a different level in the administrative structure.3 Thabaung
was selected because it was a small, relatively rural township in Ayeyarwaddy Region. Myaung Mya
was selected because it was the site of previous Asia Foundation fieldwork. In the case of all three
fieldwork sites that were not S/R capitals, logistics played an important role in their selection,
attempting to address the need for efficiency while still covering a diversity of townships and towns.
Table 1. Interviews and Small Group Discussions Conducted, by State and Region
Business
Unstructured
State/Region Township Government Semi-structured Total
market
interview
interviews
Ayeyarwaddy Pathein 5 4 6 15
Myaung Mya 2 2 4
Thabaung 3 3
Tanintharyi Dawei 10 2 1 13
Myitta 2 2
Shan Taunggyi 9 4 13
Total 31 12 7 50
During the three weeks of fieldwork, fifty interviews, small group discussions, and unstructured
market interviews were conducted. Key government departments such as DAOs and GAD were
interviewed at most or all of the fieldwork locations. Because of the need to map the broad range of
actors that play a role in economic governance at the local level, the research team also met 16
different government departments/divisions/enterprises from 12 different ministries.4 The full list of
government interviewees includes:
x Department of Development Affairs
o Development Affairs Organizations
x Ministry of Home Affairs
o General Administration Department
x Ministry of Finance
o Internal Revenue Department
x Ministry of Commerce
o Department of Trade Promotion and Consumer Affairs
x Ministry of Environmental Conservation and Forestry
o Department of Forestry
x Ministry of Fisheries, Livestock, and Rural Development
3 Towns were formerly referred to as sub-townships; however, the new constitution specifies that sub-townships should no
longer exist, so the administrative unit is now referred to as a town.
4 Note that multiple departments were interviewed in some ministries, especially when the respective departments had
different but important engagements with businesses (for example, Ministry of Livestock, Fisheries, and Rural
Development).
2
o Department of Fisheries
o Department of Livestock
o Department of Rural Development
x Ministry of Industry
o Department of Industrial Supervision and Inspection
x Ministry of Rail Transportation
o Transport Division of Operator License Supervision and Coordination
x Ministry of Mines
o Mining Enterprise 2
o Department of Geological Survey and Mining Exploration
x Ministry of Agriculture
o Department of Agriculture
o Department of Agricultural Land Management and Statistics5 (DALMS)
x Ministry of Hotels and Tourism
x Ministry of Construction
o Department of Highways6
While many Union-level ministries have interactions with business, this research focused on those
with responsibilities covering primary-sector and urban economic activities. Most economic activity
outside of Myanmars largest cities is in the primary sector, including agriculture, livestock, and fishing,
as well as resource-related sectors such as forestry or mining. Outside of Myanmars two biggest cities,
many secondary economic activities are linked to proximate primary-sector activities. A good example
of this is the large number of rice mills in the Ayeyarwaddy delta, a manufacturing activity that has
sprung up to serve the areas robust rice production. While other Union-level ministries also engage
with business for example the Ministry of Finance, which has authority over licensing banks this
paper focuses on those with a presence at the local level and with authority over the economic
activities upon which many of Myanmars people depend.
Outside of interviews, market visits, and small group discussions, the research team also obtained a
wide range of data from government interviewees. This data varied from township to township,
depending on the government office that was interviewed and the data available. Many types of data
were collected, including sources of DAO revenues, auction-license data, and property tax schedules
and other schedules of taxes and fees.7 Though much data and many interviews were collected, the
conclusions in this paper should be taken with the caveat that they are based on a limited and non-
representative sample of interviewees. They represent the overall picture only to the degree that the
fieldwork locations visited represent the country as a whole.
1.2 What Is Local Economic Governance?

Local economic governance is a broad concept and open to a range of conceptualizations. This paper
uses the phrase local economic governance to mean the governance of private economic activity,
defined broadly to include everything from an individual entrepreneur selling produce at the market
5 Note that this department was previously known as the State Land Records Department (SLRD).
6 Note that the Ministry of Construction has undergone a restructuring. Public Works, a state enterprise under the Ministry
that was discussed significantly in the recent Asia Foundation paper on state and region revenues, has been divided into
four constituent departments, which are: the Department of Bridges, the Department of Highways, the Department of
Buildings and the Urban and Housing Department. Despite the seemingly clear division of responsibilities between these
departments, there is still regular overlap and significant interdependence. For example, it is very hard to build a road of
any great length without occasional bridges, a fact that necessitates interdepartmental coordination to complete road
projects. Interestingly, though, the Department of Bridges is not responsible for all bridge construction, only those over 50
feet in length. Given this, it may soon be renamed as the Department of Big Bridges. Interview 047 with government, July
22, 2015.
7 Many government interviewees were very open with information, and shared a significant amount of useful data without
which much of this analysis would not have been possible.
3
to large, multi-sectoral conglomerates. This paper examines the ways in which individuals and
businesses engage with government in the course of earning their livelihood. Local economic
governance covers a wide range of activities, including:
Granting permissions and licenses
x Business operating licenses (non-exclusive and exclusive)
x Sector/activity-specific licenses
x Construction permits
x Land registration
x Permission letters
Collecting revenue
x Taxes
x Fees
x Fines and other revenue
Providing services
x Local infrastructure and services8
x Sector-specific services (e.g., veterinary services from the Ministry of Livestock, Fisheries, and
Rural Development)
x Business development programs
x State-administered loan programs
x Resolution of disputes
Regulating and monitoring
x Setting rules/standards that influence business operations
x Business inspections
Engaging and dialoguing with business
x Mechanisms for constituent (citizen and business) engagement with government
x Involvement of constituents in decision making
x Providing information to businesses
Most people in Myanmar, especially those outside of Yangon and Mandalay, make their living through
agricultural production, other primary-sector activities such as natural resource harvesting or livestock
raising, or secondary economic activities linked to these primary sectors. Most people in these sectors
work on their own account, as small family farmers, casual laborers, or hired farm helpers. Though
their prospects are vital to Myanmars broad-based development, this paper has only limited insights
about the agricultural economy. While it does have some information about the primary sectors, it
often focuses on governance of the value chains instead of on the situation of the primary producer
directly.
1.3 Administrative Decentralization and S/R Governments
The 2008 Constitution transformed Myanmars divisions into regions, and created new S/R governing
structures including a chief minister, a cabinet of S/R ministers, a unicameral S/R hluttaw, and S/R
judicial institutions.9 The economic authority of these new S/R ministers and institutions was defined
8 Public provision of services is a key aspect of local economic governance; however, this report does not provide
significant detail on this. There is a strong emphasis in government on licensing, monitoring, and taxation, and service
provision is comparatively uncommon. Services that are provided are often linked to a fee, and these are regularly
addressed by this report in that context. DAOs are the main local service provider addressed in this report; however, many
of their services are related to provision of infrastructure. Selected DAO services, including construction permits, are
addressed in this report, though it is outside the scope of the paper to conduct a proper assessment of the financial
management of DAOs.
9 Hamish Nixon, Cindy Joelene, Kyi Pyar Chit Saw, Thet Aung Lynn, and Matthew Arnold. State and Region Governments in
Myanmar (Yangon: The Asia Foundation and Myanmar Development Research Institute-CESD), pg. v. This report has
4
in Schedules 2 and 5 of the Constitution. These schedules, which are the S/R legislative list and the S/R
revenue list, respectively, also guide the division of administrative authority over economic activity,
though this is not explicit in the Constitution. This point was made in State and Region Governments
in Myanmar, which notes that the Constitution essentially assigns states and regions executive
authority over the same areas as those included in the legislative list.10 This new distribution of power
is critical to understanding the functioning of local economic governance and the entry points for
potential reform.
The practical implication of this change in administrative authority is that S/R governments have final
authority for licensing and oversight in economic sectors for which S/R parliaments make laws and S/R
governments collect revenues. For example, licenses for freshwater fisheries (an area that falls under
the S/R authority in Schedule 2 of the Constitution) need to be approved only by the S/R government,
not the Union-level Ministry for Livestock, Fisheries, and Rural Development. Similarly, licenses to cut
bamboo need only be approved by the S/R Forestry Department, not the Union level. Revenue from
these activities is also allocated to the S/R budget.
S/R governments do not have the final authority for licensing and economic oversight of economic
activities for which the Union Parliament makes laws and the Union government collects revenues.
For these activities, S/R governments play an integral role in the Union hierarchy. S/R Ministers, for
example, have various responsibilities for Union-level activities, including submitting reports to Union
ministries, monitoring, coordinating plans mandated by the central government, and assisting the
Union government.11 Union ministries would not circumvent the S/R minister and work directly with
any of the levels of government under his/her authority. All engagements with the district offices, for
example, would go through the S/R minister and S/R-level government. The staff of subnational
government offices (excluding the DAOs) also remain Union ministry staff, recruited centrally and paid
according to Union government requirements.
Previous reports by The Asia Foundation, including one by this author, have asserted that S/R ministers
are ministers with no ministries, a conclusion that evidences the lack of decentralization of
structures from the Union to the S/R level. However, S/R ministers do have some administrative
authority that is, at least theoretically, fully under their control. This contrast points to a key
characteristic of the decentralization process in Myanmar: it is a process of decentralizing authority
within the existing structure, instead of a decentralization of structures themselves. The structures
of the S/R government report both to S/R ministers and to the Union government by way of the S/R
ministers.12 Decision-making authority is determined by the specific economic activity in question. This
authority-based interpretation of decentralization is evident in the functioning of administrative
structures at the S/R, district, and township levels, which are often tasked with implementing on
behalf of both the S/R and the Union. Despite their Union ministry connections, these bodies collect
(or assist in the collection of) revenue for the S/R governments. They receive funds from the S/R
government to cover some of their operating expenses, though much of these funds are provided to
S/R governments through transfers from the Union fund. An excerpt from a S/R budget illustrates this
(Table 2).13 It shows that many departments that fall under Union ministries still collect revenue and
incur expenditure from the state budget.14
significantly greater detail about the background and structures of the state and region governments, which will not be
summarized in greater depth here due to their availability elsewhere. Note that the naming designations of states
remained consistent across governments.
10 Nixon et al., State and Region Governments in Myanmar, pg. 14
11 Jared Bissinger and Linn Maung, Subnational Governments and Business in Myanmar (Yangon: The Asia Foundation and
Myanmar Development Research Institute-CESD), pg. 15.

12 Nixon et al., State and Region Governments in Myanmar, pg. 25-26.
13 Budgets from other states/regions in this same year also show the same practice, with the Ayeyarwaddy budget given as
illustrative of the broader phenomenon.

14 The table also shows two other very interesting things. First, though taxes are recorded elsewhere in the budget, the
sectoral-based ministries at the S/R level universally did not collect tax. Instead, their revenue streams were classified as
5
Table 2. Selected Ministries' Revenue and Expenditure, Ayeyarwaddy Region, FY13-14, in Million Kyat
Income Expenditure
Ministry Department Other
Ordinary Capital
Income
General Administration Department 12 7,388 1,315
Home Affairs
Special Investigation Department 0 119 138
Cooperative Cooperative Department 5 726
Water Resource Department 31 507
Agriculture and
Agriculture Department 32 1,515 26
Irrigation
Industrial Crop Development Department 28
Fisheries Department 20 476 80
Livestock and
Livestock Breeding and Veterinary
Fisheries 3 210
Department
Environmental
Conservation and Forestry Department 20 764 48
Forestry
Sports Sports and Physical Education Department 0 250 183
Finance and Revenue Budget Department 49 5
National Planning and
Economic Planning Department 0 353 43
Development
Human Settlement and Housing Development
0 121
Construction Department
Public Works 67 3,909 35,698
Labor, Employment,
Central Inland Freight Handling Committee 0 46
and Social Security
Though the S/R governments have both incomes and revenues on their own accounts, there is still
influence from the Union government, both formal and informal. Among the key avenues for Union
influence are the oversight of budget proposals and the role of the GAD in the decision-making
process. This has important consequences for the ability of S/R governments to exercise their
economic authority. It also provides additional evidence that Myanmars decentralization is in many
ways imbalanced and incomplete. Despite these continued links between the Union and the S/R,
additional decentralization of administrative authority to the S/R-level governments could have
significant benefits, because it could increase the flexibility of S/R governments to reform existing
licensing regimes.15 Some ministries, such as the Ministry of Hotels and Tourism, are currently
considering additional decentralizations, which would be significant for local businesses that currently
need approval from Nay Pyi Taw to engage in these economic activities. This type of decentralization
would also likely encourage further experimentation with policy reforms at the subnational level, to
complement the limited subnational experimentation that is currently taking place.
other, most of which is license fees. Second, the expenditures attributed to these same departments, under the
corresponding budget lines in the expenditure category, are greater by many orders of magnitude. Though the chart
shows only some excerpts from the FY13-14 budget in Ayeyarwaddy, both of these trends were true for all of Myanmars
other states and regions.
15 Note that, despite the theoretical decentralization of authority, there is sometimes informal Union-level influence in
these areas. It is not possible to quantify this influence, though, and S/R governments still exercise significant autonomous
decision-making authority. Decentralization of additional authority has been mentioned repeatedly by Parliament and
other government authorities, including the decentralization of licensing for foreign and citizen investment below a set
amount. This would presumably be done by the minister of planning at the S/R level.
6
SECTION TWO: Mapping Local Economic Governance
Local economic governance involves a wide range of government ministries and departments. At the
S/R level, there are a wide range of departments and SOEs that fall under the authority of S/R
ministers. In Tanintharyi Region, for example, there are a total of 78 different departments and SOEs
under nine S/R ministers (Appendix 1). This structural diagram reinforces the importance of the S/R
ministers in the structure of the government. Though all of Myanmars S/R governments have largely
the same departments, the structure varies somewhat between different states/regions because it is
up to the S/R to determine the configuration.
At the township level, there are fewer departments present, though there is a core of important
departments that are present across all townships. Others are present in only a limited range of
townships, a variation that is driven by differences in local economic circumstances. The GAD, IRD,
DALMS, and MEB are present in almost all townships and have a similar role and level of authority in
each. Some departments, such as the DAO and the Housing Department, are urban focused and
therefore play a more important role in heavily urbanized townships. In rural townships, other
departments, such as the Department for Rural Development, Department of Agriculture, and
Department of Forestry, play a more central role. There is also variation in the township-level
departments based on geographical characteristics. For example, in Ayeyarwaddy Region, the
Department of Fisheries has an important township-level role because of the importance of fishing in
that region. In Shan State, however, the Department of Fisheries is less important, because the area
is not heavily dependent on the fishing industry. Table 3 lists government departments commonly,
though not always, found at the township level. Note that the list is only illustrative, and a national
survey of all townships would be required to obtain the data needed for a more accurate mapping of
all township-level departments.
Table 3. List of Common Government Ministries/Departments at the Township Level
General Administration Department Police Department
Housing Department Fire Department
Cooperative Department Immigration
Department for Rural Development Department of Agriculture
Internal Revenue Department Department of Irrigation
Planning Department Department of Industrial Crops
Uphill Farmland Department Development Affairs
Livestock, Breeding and Veterinary Social Welfare
Traditional Medicine Education Office
Farm Machinery Department Health Office
Department of Agricultural Land Management and Sports
Statistics
Audit Department Road Transportation
Information and Public Relations Public Works
Myanmar Posts and Telecommunications Electricity
Labor Department Religious Affairs
Myanmar Economic Bank Law Department
Department of Fisheries Township Court
Freight Handling Department Customs
Trade Promotion and Consumer Affairs Border Affairs
Department of Highways Forest Department
Source: UNDP, personal communication with The Asia Foundation, and authors own fieldwork
7
While townships are the core administrative structure in the Myanmar government system, some
areas also have towns, or what used to be referred to as sub-townships. In the current system,
towns function similarly to sub-townships under the former system.16 While townships have a broader
array of government offices, towns have only the core government departments.17 In one town
visited, the departments present are noted in Table 4, though only a few have local economic
governance functions.18
Table 4. List of Departments/Ministries in Myitta Town
General Administration Department Department of Information
Myanmar Police Force Myanmar Posts and Telecommunications
Department of Agricultural Land Ministry of Livestock, Fisheries, and Rural
Management and Statistics Development (Veterinarian Department)
Department of Immigration Border Affairs
Development Affairs Organization Department of Forestry
Fire Department Ministry of Agriculture and Irrigation
Ministry of Construction Department of Health
Three government departments DAOs, GAD, and the IRD have relatively regular and meaningful
township-level interactions with a significant share of businesses across most economic sectors. DAOs
have a range of economic authority, including a strong focus on urban service provision and licensing,
sharing many similar responsibilities with a municipal government. The GAD is the most powerful
authority at the township level, and plays a key role in coordination, oversight, and granting
permissions. The IRD is focused on revenue collection.19 There are also sector-focused ministries,
which regularly have a presence at the township level, though they are sometimes represented by just
one or a few officers. These ministries engage with businesses working in their sector of
responsibility.20 Finally, some townships have industrial zones, which are governed by management
committees and take on some quasi-governmental functions. While the remaining township offices
with economic authority (i.e., those besides DAO, GAD, and IRD) engage in a wide range of activities,
many have a strong focus on the implementation of licensing and taxation, which is approved at a
higher level of government. Township officers conduct frequent inspections, often to ensure that
licensees are abiding by the conditions of their license and in compliance with relevant tax and fee
payments, even if they do not grant licenses or collect revenue themselves.
There is often significant overlap between government departments that are tasked with similar or
identical responsibilities. Road construction is an excellent example. In urban areas, DAOs are
responsible for road construction. In rural areas, that responsibility lies with the DRD or the
Department of Highways, depending on the type of road. In border areas, the Ministry of Border
Affairs is responsible. There is also significant local-level coordination, for example weekly
interdepartmental meetings at the township level. This section reviews the departments responsible
for local economic governance, starting with those with broad-based interactions before moving to
those with sector-specific responsibilities.
16 Interview 033 with government, July 16, 2015.

18 Note that much like townships, the departments present in Myitta Town are a mix of core departments, such as the
GAD and DAO, as well as departments with local relevance, such as Border Affairs.
19 Of course, DAOs and the GAD also have important revenue collection functions, as do the vast majority of ministries
involved in economic governance. The major difference is that for DAOs, the GAD, and others, revenue collection is one of
the many duties in their mandate, whereas IRD bears the sole responsibility to collect taxes, which form a significant part
of the countrys overall budget.
20 Note that the government departments covered in this report represent many but not all departments that engage with
business. Within any given S/R-level government, there may be as many as 90 government departments.
8
2.1 Development Affairs Organizations
Development affairs organizations (DAOs) are the primary urban governance entity in the Myanmar
government structure, and play a lead role in delivering a wide range of urban services and overseeing
the local economy.21 DAOs are the primary licensing organization for many of the countrys businesses.
They are responsible for licensing almost all businesses in urban areas, and often for licensing many
businesses in rural areas as well. DAOs are notable because, as noted in Subnational Governments and
Business in Myanmar, they are the only department of the former Union government for which all
authority has been decentralized to S/R governments, starting in 2011.22 As such, the entire legal
mandate for DAOs lies with states and regions, all of which have passed DAO laws since 2012.23
However, these laws are all either identical or bear very close resemblance to the former Union-level
SLORC law for DAOs, SLORC Law No. 5/93.24 Yet because they are passed at the S/R level, the legal
mandates of DAOs can theoretically differ between states/regions. Despite this, DAOs have limited
autonomy in their internal management. While they do control the hiring and firing of employees,
they are not free to set salary levels, and are obliged to pay pensions as mandated by the Union
government.25 These pensions, which are mostly for employees of the former Union government,
come from regular revenues.26 If the Union government raises civil servant pay, DAOs must comply
and raise their own pay, leaving less revenue for investment.27
Because they fall under the direct control of S/R governments, DAOs have no affiliated Union ministry,
and instead report to the S/R minister for development affairs. All states and regions have a S/R
Department of Development Affairs, whose major responsibility is to coordinate and supervise
township DAO offices.28 Direct implementation is handled by township DAO offices, to which the S/R
office delegates many responsibilities, including annual planning, designing activities, crafting
budgets, and routine municipal management and service provision.29 Township DAO offices can vary
in size significantly, with the smallest having 10 or fewer staff and the largest having upwards of 100.30
All DAO offices at the township level have at least two departments (administration and engineering),
with larger offices having up to five.31
DAOs are responsible for delivering a wide range of services used by businesses, and are tasked with
many economic governance functions. Among the most important services that DAOs provide are
urban road construction and maintenance, sewage and sanitation, street lighting, and urban water
supplies.32 DAOs are also charged with a significant number of economic governance functions. These
include issuing business licenses to numerous different types of businesses, including restaurants,
small shops, local lodging houses, skilled businesses, slow moving vehicles, and others. DAOs also issue
dangerous goods licenses for businesses engaged in making or selling various food products, and
21 Note that development affairs organizations were the focus of another report in The Asia Foundations Subnational
Governance in Myanmar series. That report contains detailed information on the background, structure, authority, and
activities of DAOs in much greater detail than is addressed here. See Arnold, Matthew et al., Municipal Governance in
Myanmar: An Overview of Development Affairs Organizations (Yangon: The Asia Foundation and Myanmar Development
Research Institute-CESD), pg. 3.
22 Jared Bissinger and Linn Maung, Subnational Governments and Business in Myanmar, p. 14.
23 For more information on these, see Matthew Arnold et al., Municipal Governance in Myanmar: An Overview of
Development Affairs Organizations, pg. 10.

24 Matthew Arnold et al., Municipal Governance in Myanmar: An Overview of Development Affairs Organizations, pg. 10.
25 Jared Bissinger and Linn Maung, Subnational Governments and Business in Myanmar, p. 14. Note that hiring and firing
require the approval of the state minister for development affairs.

28 Arnold, Matthew et al., Municipal Governance in Myanmar: An Overview of Development Affairs Organizations, pg. 16.
32 More details on the social service mandate of DAOs can be found in Arnold, Matthew et al., Municipal Governance in
Myanmar: An Overview of Development Affairs Organizations.
9
selected consumer goods or services.33 Business licenses for operation in some sectors, such as
slaughterhouses, ferries, and pawnshops, are available only through auctions held by the DAO, which
run once per year. DAOs also issue construction permits for private construction projects, and
participate in issuing construction permits for public projects. They issue licenses for advertising
billboards in urban areas. A comprehensive list of the social services and economic governance
responsibilities of DAOs is contained in Figure 1.
Figure 1. DAO Social Service and Economic Governance Duties and Functions34
DAO Social Services Duties and

Functions
Town planning DAO Economic Governance Duties
Water supply
and Functions
Sanitation
Sewage disposal Markets owned by the committee
Disaster preparedness Privately owned markets
Street lighting Cattle markets
Roads and bridges Slaughterhouses
Vagrant persons on streets Roadside stalls
Animal control Small loan businesses
Parks, swimming pools, public baths, and Bakeries and restaurants
recreation centers Dangerous trades
Road rules, street naming, and addresses Lodging houses
Cemeteries and crematoriums Breeding of animals and disposal of
Removal of cemeteries carcasses
Public buildings under the charge of the Ferries
committee Slow-moving vehicles
Demolition of squatter buildings
Construction permission for private buildings
Other development works in the public
interest
Other duties as needed
2.1.1 Licensing
Issuing business licenses is a key economic governance function for DAOs. In general terms, there are
two different types of DAO licenses: non-exclusive business operating licenses (i.e., there is no limit
on the number of businesses that may obtain this type of license) and auction licenses. Of the
economic authorities noted in Figure 1 above, cattle markets, slaughterhouses, privately owned
markets, small loan businesses (pawnshops) and ferries are generally handled through auction
licenses. These licenses are discussed in detail later in the paper. Roadside stalls, bakeries and
restaurants, dangerous trades, lodging houses, and slow-moving vehicle licenses are non-exclusive.
The vast majority of licenses issued by the DAO fall under these categories. Markets owned by the
committee is generally the only economic governance function that does not involve granting a
license to a business. These markets are generally administered directly by the DAO, which rents stalls
on a monthly basis and collects revenue from this.
Obtaining non-competitive DAO licenses is a comparatively simple process. Businesses must provide
a completed application form, fee, ID card copy, household list, and ward administrators
33 Information provided by the DAO, Taunggyi Township, Shan State.

10
recommendation to the DAO.35 These licenses can often be granted and renewed without visiting the
DAO office, through DAO employees who visit businesses to ensure that they are licensed.
Table 5. Examples of Various Types of DAO-Registered Dangerous Goods Businesses and Restaurants
Dangerous goods businesses Restaurants
Rice, flour, beans, and other crops trade Bakeries
Tobacco-related products Soft drinks
Food products trading Ice factories and soft drink producers
Workshops (industrial and small) Teashop/coffee shop and related
Tire-related work Rice/noodle (fried/boiled)
Sewing machine and cushion work Vermicelli/monhinkhar/Shan noodle and related
Electric/battery work Big restaurants
Firewood, charcoal, bamboo, cane, and cut wood Betel nut sellers
Cotton dying work Fried snacks
Beauty parlor Condensed milk sellers
Printing press Sunflower seeds and sweet snacks
Bicycle repair, umbrella repair, and shoe repair
Plastic work
Mills (sawmill, grinding mill, oil mill, and rice mill) Fermented foodstuff
Sand, brick storage (brick work)
Photo, movie, and recording work
Source: Mid-sized DAO, 2014-15 Dangerous Business License Fees data and 2014-15 Restaurant License
data.
Another function of DAOs not explicitly mentioned in Figure 1 is oversight of billboards in urban areas.
Private companies who want to erect a billboard in an urban area submit an application to the DAO
that includes:
x Advertisement design,
x Specific location (including the ward in which the billboard will be located),
x Size of billboard,
x Other specifications (including height and design),
x No objection letter from neighbors, and
x No objection letter from the Ministry of Construction (for billboards on Union roads).36
Despite the DAO being vested with the authority to license billboards and collect revenue from them,
the process of receiving approval goes far higher than a township DAO. Once a completed application
is submitted and approved by the township DAO, it is sent to the S/R-level office, which inspects the
site. If the S/R-level office approves the application after inspection, it is sent to the S/R development
affairs minister for submission to the S/R executive committee meeting, chaired by the chief minister.
Final approval for billboards is granted in this meeting, a process that takes three to four months and
results in very few rejections from the top level.37 Approvals are granted for one year, after which
billboard owners must apply for a renewal to the DAO. When queried about the rationale for issuing
a license for only one year, the DAO noted that the annual renewals allowed them to revoke
permissions in case they needed to expand the road along which a billboard was located. However,
35 Jared Bissinger and Linn Maung, Subnational Governments and Business in Myanmar, p. 19.
36 Interview 039 with private-sector business, July 21, 2015. Process is an example, and may vary between S/R.
37 Interview 039. This raises the important question of why such high-level approvals are needed in the first place. The
need for high-level sign-off on authorizations that have been inspected and approved by one or more lower levels of
government is a common trend in Myanmar and a potential area of administrative reform. Authority to approve could be
vested with the government official who has conducted inspections and is most knowledgeable about the circumstances.
11
the one-year permissions already contain an eminent domain clause, suggesting that annual renewals
may not be necessary.38
2.1.2 Construction Permits
Construction permits are an important responsibility of DAOs; however, the implementation process
in most parts of Myanmar differs from that of Yangon and Mandalay. In those cities, the city
development committees (YCDC/MCDC) have far greater powers than DAOs elsewhere in Myanmar.
Obtaining construction permits in the rest of Myanmar involves more departments. Official estimates
of the time needed to receive a construction permit in Pathein started at 23 days, though businesses
noted that sometimes permits could be granted in less time, for example in just two weeks.39 One
construction company, which operates in both Yangon and Ayeyarwaddy Region, noted that the time
needed to obtain a construction permit in Yangon (up to three months) is far longer than Ayeyarwaddy
because the large number of construction projects in Yangon creates a long queue for permits.40
The DAO is the government department responsible for construction permits. The normal cost of the
supervision fee paid to DAOs for construction permits is one percent of the total building cost as
noted in the budget submitted to the DAO.41 However, construction permits account for only a small
portion of the DAO budget, generally under 10 percent. DAO engineers are the primary inspectors of
commercial building sites, and the key people who must sign off on the building upon completion.42
For a commercial construction project in Tanintharyi, the requirements include:
x Cost estimate
x Design
x Form 105 (from the Department of Agricultural Land Management and Statistics) 43
Interviewees in Ayeyarwaddy noted that the requirements for a construction permit, and the length
of time it took to obtain one, varied according to the height of the building. Taller buildings require
additional paperwork to apply for the construction permit, and must be approved by higher levels of
government. These requirements are detailed in Table 6.
Table 6. Approval Authorities for Construction Permits, by Building Type 44
Type of Number of
Decision maker Requirements
building working days
Application form, ward administrator recommendation,
Township DAO
1-2 stories 23 days architectural drawings, budget, licensed engineer
office
approval, and SLRD land ownership record.
All requirements for 1-2 story building, plus soil test, fire
3-5 stories Regional DAO office 33 days department recommendation, and structural engineer
license.
All requirements for 3-5 story building, plus a structural
Regional
5-8 stories 43 days assessment, licensed contractor signature, and quality
government
assurance test.
Committee for
9+ stories Quality Control of 43+ days All requirements for 5-8 story building.
High-Rise Buildings
Construction permits for projects funded through government tenders have a different oversight
process than commercial construction projects. For government projects, inspections are conducted
38 Interview 039.
39 Interview 005 with private-sector business, July 7, 2015.
40 Interview 005.
41 According to another interviewee, costs are sometimes estimated on the basis of the engineers input forecast and a
price list created by DAOs.

42 Interview 005.
43 List may not be comprehensive. Other sources indicate that fire safety certificates are often required.
12
by a group of government officials once 25 percent, 50 percent, 75 percent, and 100 percent of the
construction has been completed. The government officials include the township administrator (GAD),
director (DAO), an official from the relevant government department (for example, schools would
include an official from the Ministry of Education), and an engineer from the Ministry of
Construction.45 Unlike commercial construction projects, the responsible engineer is not from the
DAO, but from the Ministry of Construction. While commercial construction permits cost one percent
of the total building cost, some regional governments have started making exceptions for public
projects. These companies no longer have to pay the one percent supervision fee.46 One construction
company noted that in their S/R, no construction permit was needed for government projects in either
urban or rural areas.47
2.1.3 Revenue
DAOs are unique in that they depend on revenue raised within their township for a significant majority
of their funding, and receive no funding from the Union government.48 Though they raise money
through a wide range of taxes, fees, and other sources, the auctioning of licenses in selected sectors
is one of the most important sources of DAO revenue in many townships. Among townships visited
during the fieldwork, auction licenses accounted for as little as 35 percent of revenue to as much as
70 percent. Non-auction-license fees for businesses, as well as commercial billboard fees, are also
significant income sources for many DAOs. In the townships visited, taxes especially those levied on
property are very low, and revenue from fines and administrative penalties is nearly nonexistent.
This is evidenced by the selected budgets of DAOs in Figure 2, which show that all other income
accounts for no more than five percent of revenue in most of the visited townships. Fines and penalties
account for no more than 0.7 percent of revenue in any of those townships. For DAOs, fining and
punishing violators is a challenge, because the costs and administrative challenges of enforcement can
be significant, often many times the size of the debt or fine. Instead of fining and punishing violators,
DAOs are forced to negotiate with them a poor deterrent to illegal behavior.
Figure 2. Distribution of DAO Income

100%
90%
80%
Building and Land Tax
70%
Other "Taxes"
60%
Business Fees
50%
Slaughterhouse Fees
40%
Other Auction License Fees
30%
Income Tax Transfer from IRD
20%
All Other Income
10%
0%
Pathein Tharbaung Taunggyi Dawei
45 Interview 005.
47 Interview 037 with private sector business, July 17, 2015.
Depending on how the funding from the Union government is defined, there may be one small exception to this, as
discussed in the following paragraph.
13
While DAOs are largely self-funded, they also engage in one or more types of revenue sharing with
other parts of government. The first type of revenue sharing is the receipt of five percent of the total
income tax raised by the IRD at the township level.49 For some DAOs, these transfers can contribute a
significant portion of their income. In Taunggyi, for example, 10 percent of the DAOs total income
came from this transfer.50 In others, such as Thabaung Township in Ayeyarwaddy Region, the income
tax transfer was worth less than one percent of the total revenue. Of the three states and regions in
which fieldwork was conducted, the income tax transfer from IRD to DAO was present in all. The
second type of revenue sharing is a transfer between DAOs in the same state/region.51 These
intrastate transfers are designed to help cover expenses of DAOs that cannot raise sufficient local
revenue.52 Some DAOs cannot cover staff expenses from locally-raised revenue, leaving no funds for
capital investment (a key purpose of DAOs). They receive supplementary funds from the regional
office to pay for the operating expenditure and a small amount of capital investment.53 For example,
in FY13-14, Myitta raised 4.36 million kyat locally (US$3,403), about 51.5 percent of the total budget
of 8.47 million kyat (US$6,612). In Tanintharyi, there are 10 townships, of which eight contribute five
percent of their total revenue to a regional fund, which is then redistributed. Two remote townships
and six towns do not contribute to the fund, instead receiving transfers from it.54
Notably, while DAOs have a largely urban mandate, some retain a selected range of residual
responsibilities in rural areas. Under the previous government, the Department of Development
Affairs (under the Ministry of Border Affairs) had the mandate for both urban and rural development
activities. While the urban responsibilities were moved to the S/R government, the rural
responsibilities were shifted to the newly designated Union Ministry of Livestock, Fisheries, and Rural
Development.55 The division of authority for service delivery is clear DAOs have authority to spend
only in urban areas, and DRD has authority to spend only in rural areas. However, DRDs mandate
limits it to a spending agency, one which receives a budget allocation from the central government
and collects no other revenue.56 Its only engagement with the private sector is through tendering for
public sector projects.
Because DRD has no authority to collect revenues from or issue licenses to businesses, the
responsibility for these activities has sometimes remained with DAOs. In one township visited, for
example, the township DAO office receives revenue from auction licenses for rural slaughterhouses,
ferries, pawnshops, and markets, and oversees the auction process.57 It also issues business licenses
across the whole township, in both urban and rural areas. In another, however, the DAO noted that
they did not oversee or collect revenue from auction licenses in rural areas, though they did collect
other revenue from rural slaughterhouses. This difference may be the result of a system that is still in
flux, and responsibilities may shift in coming years. Interestingly, this is not the only unusual
assignment of jurisdictions between government departments. Industrial zones (IZs), which often lie
within or near urban areas and are comprised of wards (which DAOs normally oversee), do not fall
49 Note that these transfers technically happen between the S/R IRD and the S/R Department for Development Affairs,
which then assigns the funds to the respective township DAO. Interview 032 with government, July 16, 2015, and Interview
038 with government, July 20, 2015.
50 Interview 038. In Taunggyi, the DAO noted that they also received two percent of their revenue from stamp duties.
51 During the course of fieldwork, this transfer was only noted in Tanintharyi Region; however, it was also noted in
Matthew Arnold et al., Municipal Governance in Myanmar: An Overview of Development Affairs Organizations, pg. 27, and
was documented in Shan State in that paper.
52 These DAOs are generally rural, as these areas have fewer businesses, which are the key source of DAO revenue.
53 Interview 032.
54 Interview 032.
57 Interview 001.
14
under the jurisdiction of DAOs, even if they are classified as wards.58 DAOs do not issue business-
operating licenses in IZs, and they have no mandate for service delivery there.
2.2 General Administration Department
The General Administration Department (GAD) is the central and most powerful authority at the
township level in Myanmar, and one with which citizens have regular interaction.59 A recent Asia
Foundation report on the GAD argued that townships continue to function around the executive
authority of GAD township administrators.60 According to the GADs stated policy, there are eight
principal functions of the department (including a number of important economic functions):
1. Land administration
2. Excise administration
3. Collection of four kinds of tax
4. Structural settlement of villages and towns
5. Rural development
6. Formation and registration of organizations and associations
7. Conferring honorable titles and medals
8. Functions on restriction of transferring the immovable properties61
As the central department at the township level, the GAD is also responsible for coordinating weekly
township interdepartmental meetings with all other government field offices. The GAD also oversees
township population registration data collection/aggregation, and dispute resolution.62
Of the key activities stated in the GAD policy, a number are especially relevant to business. The GAD
licenses numerous businesses, including those that sell alcohol or selected services, for instance
property.63 The GAD provides recommendation letters that are a prerequisite for obtaining some kinds
of licenses and permissions, including land transfers, construction permits, and operating licenses.64
Because the GAD plays the supervisory role at the township level, it often must give permission before
businesses can proceed with their engagement with other authorities.65 For tax collections, the GAD
is responsible for collection of four taxes: land, excise, mineral, and irrigation.66 Notably, the collection
of some of these taxes is implemented by the GAD, though done on behalf of, or in cooperation with,
other departments. The land tax, for example, is jointly administered by the GAD and the Department
of Agricultural Land Management and Statistics (DALMS) on behalf of S/R governments.67 DALMS
58 Interview 038. Note that this is not true in Yangon and Mandalay, where the YCDC and MCDC have a greater set of
powers than other DAOs, including authority over industrial zones.
59 The functions of the GAD, including but not limited to the economic authorities, have been covered in significant depth
in Kyi Pyar Chit Saw and Matthew Arnold, Administering the State in Myanmar: An Overview of the General Administration
Department (Yangon: The Asia Foundation and Myanmar Development Research Institute-CESD). This report focuses
exclusively on the GAD, and provides rich detail about the history, structure, and responsibilities of the GAD at all levels of
government.
60 Kyi Pyar Chit Saw and Matthew Arnold, Administering the State in Myanmar: An Overview of the General Administration
Department, pg. 32.

Department, pg. 18. Immovable properties refer to land and buildings.

Department, pg. 32.

63 Note that a business obtaining a license from the GAD does not necessarily mean that it does not also need to obtain a
license from the DAO. Restaurants that serve alcohol, for example, must obtain a license from the DAO for the restaurant
and a license from the GAD for alcohol sales. The license gives the business permission to engage in a particular economic
activity.
64 Jared Bissinger and Linn Maung, Subnational Governments and Business in Myanmar, pg. 15.
Department, pg. 20.

67 S/R governments separate tax collection offices, and instead receive revenue to which they are constitutionally entitled
through the Union-controlled GAD.
15
Economic Governance at the Town Level: The Case of Myitta, Tanintharyi Region
Myitta Town is a rural town (formerly a sub-township) in Tanintharyi Region, located about 1.5 hours
east of Dawei towards Thailand. Myitta has a significant Karen population and has some influence from
the KNU. Until 2012, fighting occurred between the KNU and the government in Myitta, which has since
stopped due to the ceasefire. These political considerations, combined with the lower level of
administration (town vs. township), result in a number of notable differences in the functioning of local
government. For example, the GAD does not collect excise tax in Myitta, and only started collecting land
tax over the past several years. The GAD only taxes farmland and gardens, for which the tax rates are
very low. Because the GAD at the town level is headed by a staff officer, some GAD functions such as
granting permission letters are instead conducted by the township-level GAD township administrator,
whose position is at the assistant-director level. Also, the Myitta GAD office submits budgets and reports
to the Dawei Township GAD instead of directly to the district or state/region GAD.
Despite having legal authority to raise revenue through a wide range of taxes and fees, the DAO does
not collect a number of types of revenues in Myitta. For example, the DAO does not collect property
tax, for fear of increasing animosity with local people. Instead, the Myitta DAO collects only business-
license and auction fees. It also provides fewer services, not managing street lighting, granting
construction permits, or playing a role in the transfer of urban property. Because Myitta is a very small
town in which some taxes are not collected, revenue streams for the DAO are insufficient to even cover
the cost of their staff. The Myitta DAO office is dependent on transfers from the regional DAO office,
and has a high ratio of operating costs to capital costs over 80 percent. Table 7 shows the Myitta DAO
budget for the last three years, and details the capital investments that were made by the DAO over
that time.
Table 7. Myitta DAO Budget (in Million Kyat)

Capital Ordinary Total Capital
Ordinary expenditure
expenditure expenditure expenditure investments
Staff, office, and travel
FY13-14 1.99 6.48 8.47 2 culverts
costs; city signage
1 box culvert, 6 Staff, office, and travel
FY14-15 2.74 7.69 10.43
cement pipes costs; city signage
1 box culvert, Staff, office, and travel
FY15-16 1.99 9.76 11.75
bridge renovation costs; city signage
prepares the tax bills, which are then given to GAD, which proceeds to distribute them and collect the
tax. The GAD also has a role in some land-titling activities. To change the type of land title, for example
from a garden to a residential plot, approval must come from the GAD. Similarly, the GAD is
responsible for giving land grants and leases.68 The GAD also sometimes investigates complaints about
businesses. For example, in one township, a shop that held an excise license for selling alcohol
complained to the GAD about competition from an unlicensed seller. The township-level GAD had to
investigate and deal with the complaint.69 At the township level, these types of dispute resolution
functions often fall to the GAD.
2.3 Internal Revenue Department
The Internal Revenue Department (IRD), which is part of the Ministry of Finance, is the Union
governments most important taxation office, and is generally present at the township level. The IRD
is charged with implementing the countrys two most lucrative taxes, the commercial and income
taxes, as well as collection of stamp duties and a few other various revenues. The commercial tax is a

69 Interview 019.
16
sector-specific tax on turnover, fixed at five percent of total sales for most goods and services.70 While
the cost of intermediate goods is theoretically deductible from the tax for selected businesses, in
practice this does not happen at the township level.71 Because of this, the commercial tax can be
hugely burdensome for many businesses and therefore is almost always negotiated at the local level.
Township IRD offices gather information on businesses and determine a taxation amount based on
observable business characteristics, including the amount of tax paid last year, the size of the business,
and the number of employees.72 The income tax is the other major tax, and is based on a schedule of
net income for both individuals and businesses.73 Because of poor compliance and a relatively high
threshold for the income tax, the vast majority of wage earners do not pay any income tax to the IRD.
The IRD collects revenue only for the Union government, and does not implement any taxes on behalf
of states/regions.74
2.4 Union-Level Sectoral Ministries
There are a wide range of sectoral ministries that play important roles for Myanmars private sector.
These ministries have a range of structures and authority. Some, like the Department of Forestry and
the Department of Fisheries, exemplify the way in which government administration at the township
level is shared between the S/R and the Union. Other departments remain under the sole control of
the Union government. Among these ministries, there is generally an emphasis on licensing and
taxation. The vast majority of government officials, when asked about their primary engagement
with business, responded by talking about either licensing or taxation. The converse is that service
delivery is often lacking. There is often a mindset among government departments to license it and
forget it. Township-level offices of these ministries often play an important role in ensuring
compliance with licenses and taxation agreements reached with higher levels of government, at either
the S/R or Union level.75 These township officials often did not collect the revenue directly, but instead
ensured that businesses complied with the conditions of their license, such as limits on production.
2.4.1 Department of Forestry
The Department of Forestry is one of the most important sectoral ministries at the local level in
Myanmar. It falls under the Ministry for Environmental Conservation and Forestry, and is the key
administrative body governing Myanmars forests. The Department has numerous engagements with
the private sector, both among primary-sector businesses that harvest timber and other forest
products, and among secondary businesses such as sawmills, furniture makers, and shops that buy/sell
milled timber.76 The self-described most important of these engagements is taxation.77 The
Department of Forestry collects the following taxes:
x A tax on hardwoods (to Union government)
70 Jared Bissinger and Linn Maung, Subnational Governments and Business in Myanmar, pg. 22. A turnover tax is assessed
on the total value of the sale, regardless of the cost of inputs. This can create significant problems for low-margin
businesses, for example travel agents, who charge a set fee per transaction regardless of value.
71 In some sectors, notably garment manufacturing, businesses are able to deduct the cost of imported inputs from their
commercial tax bill, but need to obtain specific paperwork documenting the value of their imports and include that with
their filings in order to receive the credit.
72 Jared Bissinger and Linn Maung, Subnational Governments and Business in Myanmar, pg. 24.
73 These local-level taxes are discussed in greater detail in Jared Bissinger and Linn Maung, Subnational Governments and
Business in Myanmar.
74 Interview 023 with government, July 13, 2015. Though not mentioned by this interviewee, a review of DAO budgets
reveals that five percent of the income tax collected in each S/R is transferred from the IRD to the Department of
Development Affairs, for distribution to township-level DAOs.
75 Some licenses in Myanmar are given with specific conditions, and township officials are often tasked with monitoring the
licensees. For example, licenses to cut bamboo will stipulate a specific amount of bamboo that can be harvested, and the
township forestry officer monitors licensees to ensure they do not exceed the limit. When licensees reach the limit
stipulated in their license, they must pay additional fees to increase the limit.
77 Interview 045.
17
x A tax on forest products such as bamboo, some softwood trees, etc. (to S/R government)
x A tax on shops that sell furniture made of timber or forest products
x A tax on elephants used in timber production (Depending on elephant height, first registration
is 100,000 kyat and annual renewals are 20,000 kyat)78
Like a number of other ministries, the Department of Forestry has oversight responsibilities for
licensing and taxing from both the S/R and the Union. While teak and hardwoods fall under the
jurisdiction of the Union government, other forest products such as bamboo, firewood, soft wood
trees, thatch, and bark fall under the S/R government. Obtaining a license to harvest these products
only requires approval from the S/R level, not the Union level.79 Land concessions for these forest
products are decided at the same level of government as production licenses (i.e., the S/R level).
License fees for many forest products are based on production, but prepaid based on the agreed-upon
production amounts specified in the license. For example, if a business applies for and receives a
license to cut 300,000 bamboo, they prepay the tax for those and then begin harvesting. Cutting is
monitored by Township Forest Department officers. Once the licensee reaches the limit, they are
required to either stop cutting or pay additional money.80 Fees are not collected by inspectors, but
instead are paid directly to Myanma Economic Bank (MEB) before the harvesting begins. These fees
go directly to the S/R government.81 Notably, though the Department implements numerous activities
on behalf of the Union government, officers at the township level noted that the Union level would
never give instructions directly to the township level. Instead, they would always come through the
S/R.82 While this chain of communication highlights how the S/R-level government is a structural part
of the Union system, the autonomy on some types of licensing and taxation highlights the S/R
autonomy over selected economic powers.
The Department of Forestry is also responsible for all licensing in the forestry sector. Licensing of
concessions is conducted as noted above. The Department also licenses a wide range of businesses
that are involved in refining, trading, and selling forest products, such as sawmills. For example, the
license for sawmills requires:
x no objection letter from neighbors,
x DAO recommendation,
x Department of Health recommendation,
x Fire Department recommendation,
x statement of raw materials consumption plan, and
x Department of Industrial Supervision and Inspection license.
The duration of sawmill licenses is determined by the size of the saw that is to be used in the
business.83 For sawmills with saws under 18 inches, licenses are granted for one year. For sawmills
with saws over 18 inches, licenses are granted for five years.84 According to the Department, licenses
cover a set number and size of saws, and sawmills are not permitted to exceed these under their
existing license.85 This licensing structure places a burden on smaller businesses, and limits the
flexibility of businesses to respond to changes in the market.
The Department of Forestry was the only department interviewed during the fieldwork whose officials
noted that their parent ministry/department had an operational state-owned enterprise (SOE). The
78 Interview 045. List is not exhaustive.

80 Interview 018.
81 Interview 018.
82 Interview 018.
83 There is no commercial or other reason that the license terms should be connected with the size of the saw used at the
operation.
84 Interview 045.
85 Interview 045.
18
Myanmar Timber Enterprise was still operational, cutting the wood itself. Notably, the Departments
interviewee stated that MTE had two kinds of wood production S/R level and Union level.86 Many
other SOEs have ceased operations and now function as licensing authorities for private enterprises.
2.4.2 Department of Fisheries
The Department of Fisheries has the responsibility to govern fishery activities, include offshore fishing,
inland fishing, and aquaculture businesses such as fishponds. The Department of Fisheries oversees a
licensing regime that requires separate permissions and payments for numerous different aspects of
the fishing process. This licensing regime is the source of most revenue for the Department, and its
administration is the Departments primary responsibility. Licenses issued by the Department include:
x Fishing licenses, which include fees for two components and their subcomponents:
o Licenses for fishing boats, based on:
The amount of fish the boat can carry,
The fishing gear used,
The boat size;
o Licenses for carrier boats that transport the fish to shore, based on:
The amount of fish the boat can carry,
The boat size.87
These rates are set by the Union government and are the same in all states and regions.88
x Fish-collecting license, which is needed by traders who purchase products directly from
fishermen.
x Processing license.
x Fishery farming license.89
Much like the Department of Forestry, the Department of Fisheries has the responsibility of
implementing on behalf of both the Union and the state/region governments. The S/R has authority
over fishing in Myanmars territorial waters, as well as oversight of inland fisheries. This authority
includes:
x Auctions of licenses to raise fish in natural ponds,
x Tenders for fishing rights in inland waterways,
x Fees on freshwater fishing equipment, and
x Licensing of existing artificial fishing ponds.90
For these responsibilities, the Department can establish its own rules and regulations for licensing and
auctions, which some S/R governments have done.91 In one S/R, for example, potential licensees must
be from that state/region in order to participate in the licensing process. Only one member per
household may bid, and all licensees are required to abide by environmental standards.92 The inland
fisheries licenses are not permitted to be subleased; however, a Departmental officer stated that it
happens on the ground.93 This raises the possibility that the licensing system can be used to extract
rents, though further research is required to determine if and why this is happening.94
86 Interview 045.
88 Interview 030.
89 Interview 030; this list is not exhaustive.
90 Interview 019.
91 This was implemented through the Ayeyarwaddy Freshwater Fisheries Law No. 02/2012.
92 Interview 019.
93 Interview 019.
94 There are numerous possible explanations for this. One is that license fees are too high for smaller potential licensees to
pay in a single, advanced lump sum. Given the lack of a financial system to facilitate borrowing, these potential licensees
are forced to sublease from others who have the capital to obtain the license.
19
The budget for the Department of Fisheries is split between the Union and S/R governments. The
budget for offshore and other activities that fall under the authority of the Union comes from Nay Pyi
Taw, while the budget for fisheries work in coastal and inland areas, which falls under the authority of
the state/region government, comes from the S/R.95 One interviewee noted that the Ministry of
Fisheries income is higher than its expenses.96
2.4.3 Department of Livestock
The Department of Livestock has a regular presence at the township level, with a greater focus on
service delivery than some other departments. Township officials noted that the Department did not
run a licensing regime, but did implement a registration system for people who raise animals.
Registration rates are low. For example, people who raise anywhere from one to 200 chickens pay the
lowest fee of 50 kyat per year (US$0.04), while people raising 10,000 chickens or more pay 1,000 kyat
per year (US$0.78).97 Each farm raising chickens also must have a PC-5 form (farm history) and a PC-7
form (registration).98 The Department also has some oversight functions, for example of the shipment
of eggs between different states and regions. In order to ship eggs between states/regions, a business
must obtain a PC-3 form and pay a fee of 25 pya per egg (US$0.002).99 In order to obtain the form,
traders must include details about all farms from which the eggs come, including the PC-5 and PC-7
forms of each of those farms.100 The same system also applies to trade in live chickens. For trade in
chicken meat, jurisdiction lies with the Ministry of Commerce. Finally, the Department also operates
livestock inspections of animals before and after slaughter. Fees are assessed per animal, at the rate
of 35 kyat/cow (US$0.03), 15 kyat/pig (US$0.01), and 10 kyat/goat (US$0.01).101
2.4.4 Department of Agriculture
While the Department of Agriculture plays an important role in Myanmars rural economy, it has few
responsibilities related to private business. Like many other ministries, though, it does have selective
authority over the licensing of some businesses. The Department is responsible for licensing:
x Pesticide sales shops three-year licenses, with a cost of 10,000 kyat per year (US$7.81). In
Shan State there are currently 344 registered shops.
x Fertilizer sales shops two-year licenses, 25,000 kyat per year (US$19.52). In Shan State there
are currently 367 registered shops.
The Department also is charged with a range of trade-related responsibilities; however, these are
concentrated at ports of entry and exit and not in townships across Myanmar. The Department
inspects agricultural imports and exports and collects service fees on these inspections. Rice, for
example, is assessed at a fee of 2,000 kyat per ton (US$1.56).102
2.4.5 Department of Agricultural Land Management and Statistics
The DALMS is the key government ministry for land registration and management. Its responsibilities
include:
x Administering farmland tax by preparing vouchers for tax to be collected and then passing
those to GAD, which oversees the tax collection.
x Administering irrigation tax by preparing vouchers for tax to be collected and passing those to
the Department of Irrigation and then to the General Administration Department for
collection.
95 Interview 030.
96 Interview 019.
98 Interview 049.
99 Interview 049. Note that 100 pya is equal to 1 kyat.
100 Interview 049.
101 Interview 049.
20
x Collecting tax on select types of urban land (including land that is leased from the government
land grants).
x Overseeing and collecting fees for the registration of land purchase/sales in urban areas.103
For businesses, the role of DALMS in registering and transferring land and buildings in urban areas is
an especially important activity. There are many different types of land-related transactions that
DALMS is responsible for, including:
x Changing the name of the landowner.
x Applications for 30-year, 60-year, or 90-year land grants.
x Form 7, for ownership of farm plots, which farmers can use to sell land or as collateral for a
loan.
x La Na 39, changing the type of land use, without which land cannot be built upon.104
Transfers of land are assessed by a board of government officials, called the land appraisal board,
which includes:
x Internal Revenue Department
x State Land Records Department
x Department of Planning/Department of Livestock (depending on township)
x Myanmar Police Force
x General Administration Department
x Development Affairs Organization105
This board is tasked with determining the value of the land to be transferred. Before the board
appraises the land, the buyer submits the contract, including the agreed price. The board can choose
to adopt this price, in which case the buyer can proceed by paying the tax and stamp duty.106 If there
is disagreement, then there is generally negotiation between the parties, though determination of the
final rate is at the discretion of the board. Private sources indicate that valuations by the board are
not always accurate. The governments official land values sometimes undervalue the land, generally
because estimated prices are outdated.107
The estimates on the length of time it took to transfer property varied significantly. In some cities,
delays came from staffing issues. In one township visited, just four officers from DALMS were
responsible for covering 10 wards of a township, leading to delays due to understaffing.108 In other
instances, delays could come from failure to pay bribes. One businessperson interviewed noted that
if you want to change the name on a land ownership certificate, you have to pay pocket money or
the process will be delayed.109 However, this also worked in reverse. In at least one city, a
businessman bemoaned the fact that he could no longer pay bribes to increase the speed of his
property transfer. Local government officials had become increasingly afraid of taking bribes, which
led to a decrease in their productivity.

105 Interview 016 with government, July 9, 2015, and Interview 022 with private-sector business, July 11, 2015. Note that
the structure may vary in other townships, and the list of participating departments given above only reflects those
townships visited for this research.
106 Interview 046.
107 Interview 020 with private-sector business, July 11, 2015. Numerous businesses in the real estate sector were
interviewed. While none mentioned that the under-valuations were the result of corruption, this may result from
entrepreneurs not wanting to incriminate themselves. One real estate professional mentioned that valuations were open
to negotiation, though did not clarify whether bribery was involved.
21
Table 8. Property Transfer Process110
Check land plot history Form 106. DALMS
Check current land ownership Form 105. DALMS
Obtain land map. DALMS
Proceed with sales agreement for land transfer. Within 4 months.
Submit contract to appraisal board. Multiple
IRD has a set rate upon which they
Receive board evaluation and agree on commercial
IRD base commercial tax on both the land
tax owed IRD.
plot and the building.
Deposit tax payment at bank. MEB
Changing name on Form 105 and
Register contract and obtain new documents. DALMS
updating Form 106.
2.4.6 Department of Highways
The Department of Highways is the key department responsible for Union roads and has a regular
presence at the township level. The Department of Highways was formerly part of the Ministry of
Constructions Public Works Department; however, this department was divided at the beginning of
FY15-16 into four new departments:
x Department of Highways
x Department of Bridges
x Department of Buildings
x Urban and Housing Department111
At the township level, the Department of Highways is primarily tasked with helping in road
construction and monitoring the implementation of road building and maintenance projects. The
primary engagement with business is tendering for construction materials.112
The Department also supports the implementation of Union-level highway concessions operated
through a build-operate-transfer (BOT) program. The Union-level highway concessions are for thirty
years, though despite being called BOT concessions, they often do not require companies to build new
roads. Instead, concession holders are only obligated to expand and improve existing roads and do
regular maintenance.113 S/R departments had little role in granting these concessions, which
happened through a non-competitive process at the Union level under the previous government,
though they do oversee the companys work in their areas.114 Some S/R departments auction tollgates,
for example Tanintharyi Region, which uses a three-step, envelope-bidding system in which
businesses compete based on the fee they offer. Finally, the Department also helps oversee billboard
licenses along Union highways. Though the licenses can be granted by the S/R level, the revenue goes
to the Union level.115
The Department of Highways conducts a significant number of tenders for construction materials,
though of course it is not the only ministry to do so. Tenders are announced in the newspapers,
including the Global New Light of Myanmar and the Mirror, which are the two largest government-
run newspapers. To bid for a tender, companies must submit:
x Company registration,
x Deposit slip (a receipt from Myanma Economic Bank showing a deposit of between 50 and
300 lakh, or between US$3,903 and US$23,419),
x Company profile,
110 Interview 020, Interview 022.

113 Interview 047.
114 Interview 047.
115 Interview 047.
22
x Detailed structure plan, and
x Estimate.116
The winner is selected by a board, which includes:
x Chief Engineer (Ministry of Construction)
x DAO (region level)
x Others
While tenders are issued by many ministries, the chief engineer of the Ministry of Construction is
generally the key decision maker for all construction-related tenders.117 Companies that win tenders
are required to deposit a bond of five percent of the total project cost at the MEB. If they do not fulfill
the contract, they lose the bond.118 The chief engineer of the Ministry of Construction also can fine
the company if he thinks there are problems with the building, with the funds being deducted from
the MEB bond.119 Some departments keep a bond of 10 percent of the total construction cost for a
period of two years after the completion of the building, as a guarantee in the event that issues with
the building arise after completion.120 These requirements significantly increase the amount of capital
required by businesses that win tenders, thereby driving up the prices of tender offers.
2.4.7 Ministry of Hotels and Tourism
The Ministry of Hotels and Tourism (MoHT) is responsible for oversight of businesses in the tourism
sector, and has a presence at some townships. Like many other ministries, licensing is an important
part of the Ministrys engagement with business. In one office, nearly a third of the staff were wholly
focused on implementing the licensing regime.121 The businesses that receive licenses from MoHT
include:
x Hotels and guesthouses. DAOs also can give licenses for guesthouses; however, foreigners are
only allowed to stay in accommodations licensed by MoHT.
x Transportation. Vehicles and boats in the tourism industry receive blue plates from the
MoHT. These vehicles and boats must be affiliated with a registered tourism company, which
takes responsibility for them. Each vehicle must be affiliated with a tourism company to
operate tourist transportation services.122
x Tour guides.
x Tourism companies. Companies must first have a license from DICA (company registration),
and then apply to MoHT. In order to obtain a MoHT license, the company must also include a
letter of explanation about the target market of their business, a company profile, and an
office location. Licenses are valid for two years.
One interviewee from a S/R office of the MoHT noted a number of unnecessary requirements for the
renewal of the business license. The office stated that the renewal of a license requires the business
to provide documentation of business activities, including income and expenses, so that MoHT can
check whether the company is operational.123 It is then up to the Ministry to renew (or not renew)
the license based on the information collected. This creates significant problems for businesses,
because the wide latitude of the MoHT in the license renewal process creates uncertainty that can
hinder investment. It also requires the provision of sensitive commercial information to MoHT, which
116 Interview 005.

117 Interview 005.
118 Interview 005.
119 Interview 005.
120 Interview 005.
122 Interview 043.
123 Interview 043 with government, July 22, 2015. No specific reason was given for the need to check the operations of a
company, though it is possible that the government may be attempting to stem money laundering through high turnover
businesses such as travel agents.
23
may create concern among some entrepreneurs. Unnecessary requirements similarly exist for hotels
and guesthouses registered with MoHT. For example, these accommodations must ensure that all
rooms have an attached bathroom, and single rooms must be at least 100 square feet. Double rooms
must be at least 144 square feet.124
2.4.8 Directorate of Industrial Supervision and Inspection
The Directorate of Industrial Supervision and Inspection (DISI), which is part of the Ministry of Industry,
conducts inspections and registrations of industrial businesses. Unlike many other government
departments, though, DISI does not issue licenses. It only handles registrations. In Taunggyi township,
businesses are registered according to three tiers: small (12,000 kyat/year [US$9.38]), medium
(25,000 kyat/year [US$19.52]), and large (50,000 kyat/year [US$39.04]).125 Despite the passage of a
new law defining small, medium, and large enterprises, DISI was still using the definition from the
1991 Private Industrial Enterprise Law while it awaited the bylaws from the new SME law.126 Licenses,
which generally come from DAOs or industrial zones, are a prerequisite for registration with DISI for
manufacturing businesses.127 DISI does not cover all industrial businesses, only those subject to the
1990 Private Enterprise Law, meaning that it does not cover military businesses, SOEs, or joint
ventures either.128 DISI also plays a key role in intergovernmental coordination regarding industrial
enterprises.129 DISI is responsible for ensuring that businesses follow procedures.130 DISI exists at
the district level, but is not present in every township.131
2.4.9 Ministry of Mines
The Ministry of Mines is a Union-centric ministry, with a local presence generally only at mine
locations. The Ministry has a range of engagements with business, including the signing of production-
sharing contracts with private companies operating in the sector. Local mining companies pay 30
percent of their revenues to the Ministry, and foreign companies pay 35 percent.132 The Ministry has
no operating responsibilities, and is only responsible for giving permission to the business to operate,
and monitoring and supervising the business according to the contract.133 Businesses must also pay
license fees, which depend on the size of the mine and are decided on a case-by-case basis.134 Fees
are determined by a pre-negotiated level of production agreed by the ministry and the company. The
company must pay these fees regardless of whether or not production meets these levels.135 Licenses
are short term generally three years though larger mines can get longer contracts, while gold mines
receive only a one-year contract.136 The Ministry monitors some mines closely, posting an officer at
the mine, who reports back daily to the main office.137 The Ministry must also endorse exports.138
Though the Ministry is Union-centric, the S/R can object to a contract between the Union Ministry and
a company, which can stop the project.139 One Ministry official noted that they are considering plans
to decentralize more powers, including revenue collection, to S/R offices.140
124 Interview 043.

126 Interview 050.
128 Interview 028.
129 Interview 028.
130 Interview 028.
131 Interview 028.
133 Interview 034.
135 Interview 034.
136 Interview 034.
137 Interview 034. Note that the Ministry has only state/region offices or field offices, depending on the location of mines.
138 Interview 034.
139 Interview 034.
24
2.4.10 Transport Division of Operator License Supervision and Coordination
The Transport Division of Operator License Supervision and Coordination, which is part of the Ministry
of Rail Transportation, is responsible for licensing commercial vehicles that transport cargo or
passengers.141 This includes local public transportation such as taxis and city buses, as well as intercity
transportation including bus and cargo lines. The Transport Division is managed and completely
controlled by the Union government.142 However, licenses are only valid in the S/R in which they are
issued, so bus operators that want to pick up or drop off passengers in a different S/R must also obtain
the same public transportation license from that state/region.143 There are a few requirements to
obtain a public transportation license, which are:
x Own a vehicle.
x Possess a brown book from the Road Administration Department.
x Possess a valid drivers license or National Registration Card.
x A bus operator must be part of a line, or bus company that has permission to operate on a
route.144
Notably, for operators hoping to start a new bus line, the requirements are somewhat stricter.
Potential operators must obtain a letter of recommendation from the Disciplinary Committee for
Buses, a committee comprising members of other private bus companies.145 Though the Transport
Division officials noted that these letters were not used to restrict entry into the marketplace, this
system presents conflicts of interest that could theoretically create barriers to entry.
2.4.11 Trade Promotion and Consumer Affairs Department
The Trade Promotion and Consumer Affairs Department is the key part of the Ministry of Commerce
at the local level. The Department often has officers at the township level, though sometimes not a
proper office. The main function of the Department at the township level is to collect data on
commodities such as rice, beans, maize, and sesame. Data collected includes the types of products,
their prices, the costs of production, the capacity-utilization rate of processing facilities, and the
cost/benefit ratio of different rice varieties.146 Special emphasis is given to paddy, as this is the top
question asked by senior officials and the most important issue for the Department. 147 The
Department calculates the amount of rice and paddy at the township level, which township officers
noted was the most important function of the Department at the township level.148
At the S/R level, the Department tracks the flow of commodities between various states/regions. 149
These efforts are driven by the governments concern about food security, and fear of a lack of supply
of essential commodities.150 The Department tracks the transportation of rice and paddy into and out
of townships, through interviews with farmers, rice traders, and rice mill owners. This research is
conducted at least two times per month.151 Private-sector interviewees noted that there are fewer
restrictions on trade than under previous governments. Rice trade is now less cumbersome: under the
previous regime, they had to notify the Ministry of Agriculture and Irrigation when they were making
a rice shipment, but that is no longer necessary.152 Similarly, under the previous government, a rice
mill needed permission to send rice to other townships or regions, but now they can send it all the

142 Interview 029.
143 Interview 029.
144 Interview 029.
145 Interview 029.
147 Interview 013.
148 Interview 019.
149 Interview 013.
150 Interview 013.
151 Interview 019.
152 Interview 021 with private sector, July 11, 2015.
25
way to Muse, on the border with China, without paperwork (though permission is needed from
Mandalay).153
2.5 Other Important State-Linked Actors
2.5.1 Industrial Zones
Industrial zones (IZs) are managed through a lengthy hierarchy of government and business. IZs are
ultimately controlled by the government, under the Ministry of Industrys DISI. Each industrial zone
under DISI has a supervision committee (IZSC), which supervises the zone, and a management
committee (IZMC), which is responsible for its operation.154 The IZMC consists of representatives from
government and the private sector, though prior to 2014 it included only government.155 Below the
IZMC are subcommittees, which could include, but are not limited to:
x Road, Water and Sanitation Subcommittee
x Vehicle Production Subcommittee
x General Industry (SME) Subcommittee
x Farmland Use Machinery Subcommittee156
IZMCs are given a number of jurisdictions and responsibilities similar to DAOs. In fact, one IZ visited
during the research had a jurisdiction that was classified as wards of the nearby city but did not come
under the local DAO.157 Instead, the IZMC was charged with many of those powers in the industrial
zone. The IZMC was responsible for providing water and sanitation in the IZ, as well as overseeing
environmental conservation.158 It was also responsible for road maintenance in the zone.159 To set
up a business, a recommendation was needed from the IZ to apply to DISI, whose permission is
required to operate in the IZ.160 IZs also issue operating licenses, from which they collect fees.161 IZs
do not receive any money from outside sources, and the IZ visited did not collect fees from land or
businesses in the zone itself (unlike Yangon or Mandalay, where businesses pay into a fund managed
by the IZMC).162 This leaves many IZs very short of money. Though it is possible for the IZ to receive a
loan for investment, it had not happened according to interviewees at the zone.163 Also, despite being
named industrial zones, some IZs have decidedly non-industrial activities. At one IZ visited, there is
a market, a school, and a range of small shops (restaurants and service businesses).164 IZs collect
money from renting stalls at the IZ market (which they own), as well as for providing water to
businesses.165 Inside the industrial zones, then, IZMCs are largely analogous to DAOs in their roles and
responsibilities.
153 Interview 021.

154 Interview 041 with industrial zone, July 21, 2015.
155 Interview 042 with industrial zone, July 21, 2015.
156 Structure is representative only and may vary between industrial zones.
157 Interview 041.
158 Interview 041.
159 Interview 041.
160 Interview 042.
161 Interview 041.
162 Interview 041 and Interview 042.
163 Interview 041.
164 Interview 041.
165 Interview 041.
26
SECTION THREE: The Structure of Local Revenues
The governance of economic activity at the S/R and township level in Myanmar is often characterized
by a fee for permission structure, requiring advance payments to obtain the permission to engage
in economic activity. This can have unintended negative consequences, including contributing to a
regressive or distorted revenue base. While there are a few broad-based subnational taxes such as
the land tax and building tax, direct taxation accounts for only a small percentage of local revenues.
Fees and indirect taxes form the bulk of the revenue. This section examines the taxes and fees paid by
businesses and individuals at the local level. It finds strong though anecdotal evidence that the
revenue base for many local economic governance actors is regressive and collected from a broad
base.166 This should raise cautionary flags for international organizations such as the IMF that advocate
broadening the tax base (e.g., the commercial and income tax) in Myanmar.167 Before such policies
are advanced, there should be a thorough assessment of the true burden of taxes and fees that looks
beyond that created by the commercial and income taxes alone.
While taxes and fees are often linked and regularly conflated in their use by the Myanmar government,
they are fundamentally different concepts. It is essential to disaggregate taxes and fees so as to
make this joint usage more than simply a synonym for revenue. Unlike fees, taxes are generally not
voluntary or directly linked to a service. They are often distinguished by three characteristics: (1) A
user fee is designed to defray the costs of a regulatory activity (or government service), while a tax is
designed to raise general revenue; (2) a true user fee must be proportionate to the necessary costs of
the service, whereas a tax may not be; and (3) a user fee is voluntary, whereas a tax is not.168 This
distinction is important in Myanmar because, especially at the local level, significant revenue is raised
through fees. Despite the name, though, some fees are taxes in disguise, used for raising general
revenue. Examples of these types of fees include auction-license fees, which are best described as
indirect taxes, and the garbage tax, which has characteristics of both a tax and a fee. Together, fees
and indirect taxes contribute to a revenue collection system which has distortions that impose
arbitrary and unequal burdens on similar members of society, and contribute to a regressive revenue
structure. By making barriers to participation in the economy high, they discourage economic activity
and limit the range of actors that can participate in these activities.
3.1 Fees and the Cost of Service Provision
Fees are common at the local level, and though often voluntary, many of them bear little resemblance
to the cost of the service provided. Instead, fees are often used as general revenue-raising
mechanisms. Two facts demonstrate the disconnect between the cost of issuing a license and the
revenue collected from it. First, because licensing procedures do not vary significantly between
businesses of different sizes, there should not be a significant difference in the cost of a license for
small and large businesses. However, data from DAOs (as noted in Table 9) shows that there is a
significant difference in these costs. For example, Pathein alone had a range of costs from 400 to
100,000 kyat for restaurants of different sizes.169 The second disconnect is the variation between
townships. Given that DAOs share the same salary structure and often have similar numbers of
personnel, the costs of administering the system of business licenses should be relatively consistent
between townships. However, the same table from Ayeyarwaddy shows that cost of these licenses
varies significantly between townships from 64 kyat for the smallest restaurant license in one
166 A broad revenue base means that a significant percentage of the population pays revenue in some form, while a
regressive revenue base is one in which the percentage of income paid decreases as the total income increases. It is
important to clarify that this refers not to the total amount paid by a taxpayer, but instead the percentage of total income
paid. In contrast, a progressive revenue base is one in which the percentage of income paid increases as total income
increases.
167 IMF Article IV report, 2014, pg. 8.
168 Michigan Supreme Court, quoted in Foundation for Economic Education, A tax is not a user fee,
http://fee.org/freeman/a-tax-is-not-a-user-fee/.
169 Note that size does not mean turnover, but rather the physical size of the business.
27
township to 972 kyat in another. The cost of some dangerous-business licenses can be considerable
as well, up to 300,000 kyat in some townships. Together, this suggests that the cost of a license may
not be directly related to the DAOs cost of issuing the license, but instead is likely a source of more
general revenue.170
Table 9. Cost of DAO-Issued Business Licenses in Selected Townships in Ayeyarwaddy Region
Township Restaurants Dangerous business
Lowest Highest Lowest Highest
A 400 100,000 6,000 25,000
B 280 18,000 8,000 100,000
C 540 32,400 8,000 300,000
D 600 32,000 11,000 300,000
E 64 19,800 6,000 45,000
F 750 750 5,000 10,000
There are some revenue streams referred to as taxes that also have some characteristics of a fee, for
example the street lighting tax and the garbage collection tax; however, they are not voluntary and
are not directly proportionate to the cost of the service. In many cities, the garbage tax is set at a
percentage of the fair rental value of the building in Dawei and Myaung Mya, for example, the tax
is valued at 10 percent of the fair rental value of the building. 171 In Myaung Mya, the street lighting
tax was an additional seven percent of the standard rental rate. These taxes, however, constitute
only a very small percentage of the budgets of almost all DAOs.
3.2 Taxes
While authorities at the local level have a wide range of revenue sources, only a few fit the definition
of a tax. The two most common are the land tax and the building tax, both of which are important
revenue sources for local governments around the world. Both of these taxes are low in Myanmar,
and account for only a small portion of the revenue collected at the local level. They both also have
key shortcomings in their current design and/or implementation.
3.2.1 Land Tax
Taxes on land in Myanmar are generally low, largely because they have a strong political element. Two
separate interviewees noted that the tax was immensely political, with one noting the pushback from
farmers that raising the land tax would create, and the other stating that even the president does not
want to increase the land tax.172 In the new Constitution, land taxes were decentralized to the
authority of the S/R governments. Through FY12-13, land taxes generally remained low. That year,
only 144.69 million kyat were collect, or about 2.8 kyat per person. There was a significant increase in
land taxes in many states and regions in FY13-14, and land taxes increased to 13.95 billion kyat in
FY13-14.173 On a per capita basis, land taxes raised 271 kyat per person that fiscal year.
Some states/regions did not raise land taxes, instead continuing to implement land taxes that are
incredibly low. In one township visited, land tax rates in FY14-15 were:
x First class land (R1): 4.75 kyat/acre
x Second class land (R2): 2.75 kyat/acre
x Third class land (R3): 1.25 kyat/acre174
170 While it is possible that business licenses for dangerous goods are charged at comparatively higher fees to offset
monitoring costs or other externalities, there is not sufficient evidence to determine whether this is or is not the case.
171 Interview 026 with government, July 14, 2015. Note that these various taxes are often bundled together with the
building tax and collected together.

172 Interview 016, Interview 019.
174 Interview 016. Note that these rates were provided by the interviewee, but may only apply to agricultural land. It is
possible that other land tax rates also exist in the same township.
28
Rates are so low that currency notes or coins do not exist in denominations small enough to pay the
vast majority of land tax bills. Further, the costs of collection for the GAD, and the administrative costs
for the DALMS, are far greater in some townships than the actual revenue collected through the tax,
making its implementation as a revenue-raising exercise questionable.
Though the land tax is mired in political considerations and opposed by many, both in Myanmar and
internationally, it has the potential to play a part in a more progressive, transparent tax collection
system while at the same time improving economic incentives. Unlike commercial and income taxes,
which depend on confidential information about individual or business finances, the land tax is
verifiable, because land ownership is generally known within the community. It is more difficult to
misstate your landholdings than your business sales or profits.175 At the same time, a higher land tax
increases the costs of holding land, a valuable factor in production, without doing anything with it.
The challenge of raising the land tax, of course, is the political element the perception that raising
land taxes hurts the poor and farmers. This political element is important. A technical solution is
straightforward changes in the land tax should include a minimum, with farmland under a certain
number of acres being exempt from tax. However, communication and consultation are essential in
any revision of a politically sensitive revenue source such as the land tax.
3.2.2 Property Tax
Property tax is also a major source of revenue for local governments worldwide, yet it is only a small
source of funds for local governments in Myanmar. Property taxes are collected by DAOs, who retain
the revenue for spending. Property tax is often used as a general term for a group of four taxes
related to property a building tax, which closely resembles what is commonly known as a property
tax; a garbage tax; a water supply tax; and a street lighting tax (where applicable).
Though building taxes can vary state by state, depending on legislation by the S/R parliaments, it was
fixed at 10 percent of the standard rental rate in all townships visited. The fee is prescribed in the
S/R DAO law, and change would therefore require approval by state/region parliaments.176 Using the
rental rate is a somewhat unusual means of calculating the tax, and civil servants noted that it was a
system that originated in colonial times.177 It can be difficult to obtain a standard rental rate on certain
types of buildings for which little rental market exists (expensive houses, hotels, etc.). Some DAO
officials interviewed noted that building-tax estimates of rental values are far lower than market
values.178
Despite legislation mandating that the tax be set at 10 percent of the standard rental rate, some
DAOs have classified properties into categories and set a minimum and maximum rate for each
category. This inadvertently results in a cap on the amount of building tax for which one can be liable.
Notably, the maximum amounts were relatively low in one township visited, the largest building
pays 300,000 kyat per year for the building tax.179 This maximum rate is not legislated in S/R law, and
instead comes only from implementation regulations (see Appendix 2 for a sample rate table).
While the theoretical benefits of increasing the building tax and changing its structure are clear, there
are also numerous challenges to its implementation. Many civil servants interviewed noted that it
would be difficult to raise this tax. According to one interviewee, its a political issue that could
cause public unrest.180 The interviewee attributed this to the legacy of previous governments.
Enforcing the existing property tax, or any increases in that tax, could present a problem. In one
township, the DAO noted that collecting property tax was its biggest challenge. They noted that they
175 Note that it is common for land to be transferred informally, with neither buyer nor seller reporting the transfer to the
government, in a bid to avoid the tax on land transfers. This would complicate efforts to collect higher land taxes.
177 Interview 011.
178 Interview 026.
179 Interview 026.
180 Interview 001.
29
sometimes had to go three or four times to collect the tax, and noncompliance was common. Because
of the cumbersome enforcement system, the DAO noted that they sometimes paid the building tax
on behalf of non-payers to avoid the hassle.181 Others thought that it would not be possible to increase
the building tax, because some people might not have the money to pay it they are comparatively
asset rich, but lack cash.182
Noncompliance is a significant problem for the building tax. DAOs noted that people think that they
should not have to pay tax on something that they already own.183 One civil servant said that if they
tried to increase the building tax, people would ignore it.184 Noncompliance is driven by the challenges
of enforcement. Officials noted that they did not have much enforcement authority: if people do not
pay, they cannot do anything.185 This is because the DAO, which collects property tax, must depend
on other government departments for enforcement, meaning that interdepartmental cooperation is
essential. They also noted that even with other departments helping, the courts remain inefficient and
a poor way to resolve disputes.186 DAOs do have an existing enforcement strategy. When property
taxes are not paid, the township DAOs executive officer reports non-payment to the regional DAO
office, which gives the township office collector power, akin to a warrant, to take control of and
auction off the property to recover the debt. Although this enforcement strategy exists, these steps
had not been taken by any of the DAOs included in this research.187
The challenges of implementation and enforcement are amplified by the lack of incentives for building
owners to pay on time. For example, in many townships, DAO officers noted that they did not charge
any penalties or interest for late payment of property taxes.188 This discourages timely payment, and
effectively constitutes an interest-free loan by government to delinquent taxpayers. DAOs noted that
they had the authority to charge penalty fees and interest on late payments.189 However, this change
would need to be accepted by the S/R Department of Development Affairs and the S/R cabinet.190 The
failure of individuals to pay property taxes on time creates numerous problems for DAOs, including
additional work for field officers to make multiple collection visits, and greater unpredictability of
revenue.
Other interviewees thought that it was possible to increase the building tax.191 In one township, the
DAO recently did exactly that, without significant challenge. An industry source, working as a property
broker, noted that the building tax was small and that an increase would not have a significant effect
on the property market.192 However, the income and commercial taxes on property transactions do
affect the market, according to one property broker.193
3.2.3 Indirect Taxes
Myanmar has a number of fees that function as indirect taxes. A common example of this is auction
licenses, which are described in detail in the next section. These licenses require large payments by
businesses that are not proportionate to the cost to the government of issuing the license
(demonstrated by the variable prices, determined at auction). Although businesses recoup these

182 Interview 020.
183 Interview 017.
184 Interview 017.
185 Interview 001.
187 Interview 011.
188 Interview 015, and Interview 025 with government, July 14, 2015.
190 Interview 015.
191 Interview 019.
193 Interview 020.
30
license fees from their customers, the effect is to create an indirect tax through this auction-license
system.
3.3 Other Issues in the Local Revenue System
The prevalence of fees and the lack of significant broad-based taxes that are linked to either wealth
or income have left Myanmar with a local revenue system that is distorted and regressive.194 However,
these are not the only issues with revenue collection at the local level. There are a number of other
problematic characteristics of the local revenue system that either worsen these problems or create
others, such as unpredictability and arbitrary taxation.
3.3.1 Concentration of Income Tax Contributions in Urban Areas
DAOs receive a portion of their revenue via transfer from the IRD. This is administered at the regional
level, as the S/R IRD transfers five percent of total income tax receipts to the S/R DAO. However, an
analysis of the budgets shows that it is likely that the transfer received by each township DAO equals
the income tax share from that township (i.e., there is no redistribution at the S/R level). This system
has the unintended shortcoming of recycling tax dollars into the development of S/R capital cities,
which are generally among the most well-off cities in each S/R. This is largely due to the fact that
income tax compliance in Myanmar is poor. In all of Tanintharyi Region, for example, there were
17,000 income tax payers out of a total population of 1.41 million. Just 1.21% of the population of the
whole region paid income tax.195 Of those that paid, many are civil servants, as they are one of the few
groups for which the government has a reliable mechanism to collect income tax. Of course, there is
a concentration of civil servants in state and region capitals, as they are the administrative centers.
The end result is a system in which income tax revenue, collected largely from civil servants, whose
salaries are funded by the Union government, gets recycled back into the development of cities with
large numbers of civil servants, instead of being distributed more equitably across the S/R.
3.3.2 Rural-to-Urban Transfers in DAO Revenue
Recent government restructuring has led to a redistribution of authority between different ministries,
resulting in unintended rural-to-urban transfers through DAOs. At present, DAOs retain the authority
to issue business licenses (and therefore raise revenue) for both urban and rural areas. They also
oversee and retain the revenue from auction licenses in both urban and rural areas. These fees and
indirect taxes constitute a significant part of the DAOs funding. However, the Department for Rural
Development has taken over a number of the DAOs former rural responsibilities, including
construction and maintenance of secondary rural roads, small rural bridges, and water supply in rural
areas. The funds for DRD come from the Union budget, and the Department does not collect taxes on
rural populations. The continued collection of revenues from rural businesses and individuals flows to
an organization (the DAO) that has no mandate to spend those revenues on the people from whom
they were raised. Therefore, they constitute a transfer from the (generally poorer) rural areas to the
(generally richer) urban areas, though one that is possibly temporary in nature.196
3.3.3 Implementation Challenges with the Commercial and Income Taxes
Commercial and income taxes are the most important taxes in Myanmar by a significant margin, and
the vast majority of these are collected through township IRD offices. Interviews suggest that the
implementation of these taxes can regularly be incorrect, arbitrary, or unaccountable. These
problems, however, are not simply attributable to corruption or a lack of capacity in government, but
194 When a revenue system is distorted, the payers of taxes and fees are not well aligned with the beneficiaries of the
spending funded by those taxes and fees. In many tax systems, there is an element of redistribution from wealthier to
poorer; however, distorted systems are characterized by arbitrary and often unintended redistributions.
195 Interview 023 with government, July 13, 2015; and Myanmar Census data, available at:
http://countryoffice.unfpa.org/myanmar/census.
196 Interview 017. According to the interviewee, the organization had a mandate to spend on rural roads and bridges
through FY14-15.
31
instead are closely tied to the longstanding distrust between business and the state for the last half
century. During Myanmars socialist era, from 1962 until 1988, many types of businesses were not
legal people had to hide their economic activity for fear of arrest or worse. During the military era,
many types of businesses remained illegal, though other sectors were liberalized and opened to
private participation. However, taxation, licensing, and other aspects of business-government
engagement were arbitrary and often perceived by businesses as unfair. At the same time, the state
lacked legitimacy among the private sector. Businesses often did not perceive that taxes translated
into goods and services that helped the private sector, but instead thought taxes were used to keep
the oppressive state apparatus functioning.
Because of this history, government officials at the township level often use their own judgment when
assessing taxes. Tax officers note that businesses are not truthful about their taxes. They note that the
tax culture is low in Myanmar, and compliance is poor.197 To circumvent this, officials use various
methods to attempt to estimate tax due. For example, if the tax officer wants to determine income,
an assistant revenue officer/site inspector will go check the business. During these visits, the officer
attempts to observe income and turnover. For example, if the business is a hotel, the revenue officer
will look at room types and vacancy rates to determine income.198 They also attempt to assess
expenses through rules of thumb. For example, for a shop, if the selling price is 100 kyat, they
assume 85 kyat input cost, five kyat transportation cost, and 10 kyat profit.199 For businesses without
good records, officials simply collect evidence and make a judgement call.200 The end result is that,
even though the IRD purports to use a self-assessment system, IRD officials can override the self-
assessment. The final decisions on tax payable are made by the IRD.201 This type of system has
significant room for negotiation. For example, fish vendors at one market reported paying an
unspecified tax to the IRD. The vendors readily admitted that no one tells the truth when asked
about their sales. Despite this, they thought that their tax was too high and negotiated a new tax rate
with the IRD based on the shop size. For one interviewee, the tax fell from 100,000 kyat to 40,000
kyat, though it remained completely disconnected from either net income or turnover.202
3.3.4 Stamp Duties
Stamp duties are a common source of revenue for the IRD, and official stamps are required for legal
certification of a wide range of documents.203 Much like the taxes noted above, the final price of
stamps needed for some items, such as contracts, is administratively determined by the board, which
is headed by the township IRD officer. The value of the contract does not matter, but instead depends
solely on the boards assessed value.204 This is driven by the pervasive forgery of contracts at the local
level in Myanmar.

198 Interview 023.
199 Interview 031.
200 Interview 031.
201 Interview 031.
203 Interview 031.
204 Interview 031.
32
SECTION FOUR: Auction Licenses
Auction licenses are a key source of revenue for many parts of government at both the Union and the
S/R level, including but not limited to the Department of Forestry, the Department of Fisheries, and
DAOs. Auction licenses are operating licenses awarded to businesses by auction, generally on an
annual basis, in selected economic sectors. This licensing system was integral to local economic
governance during the SLORC/SPDC period, and has continued in many areas under the new
government. At present, many states and regions use legislation to create monopolies and oligopolies.
They then license out these monopolies through auction licenses, which enables the government to
extract part of the subsequent rent. Some of the licenses function as indirect taxes on consumers or
suppliers. License holders can extract monopolistic rents at the expense of consumers and suppliers,
who bear the burden of the indirect tax. Some auction licenses, for example DAO slaughterhouse
licenses, include arbitrary government-set limits on the prices that licensees can charge.205 The system
removes market characteristics from the sectors involved, and creates a largely planned system. This
runs the risk of creating inefficiencies, significant disincentives for investment, poor or nonexistent
markets and price signals, and private sector rents. However, many government officials interviewed
were cognizant of the issues in this system. Some had already embarked on reforms, while others
were anxious to do so. It is in these auction licenses that the decentralization of authority to S/R
governments has led to an important development rarely seen in local economic governance in
Myanmar: local-level experimentation by township and S/R officials. The local-level experimentation
with the auction-license system that is already underway foreshadows the immense opportunity for
positive reform in these areas, and a chance for the Myanmar government to bolster the local
economy.
Though the use of auction licenses is common for many ministries in Myanmar, this section highlights
their use by DAOs. DAOs issue auction licenses for many different types of businesses, most of which
were originally placed under the authority of municipal governments in the colonial-era Municipal Law
of 1898.206 While the sectors in which oversight authority has been exercised have stayed largely the
same over time, the way in which that authority has been exercised has changed significantly. At
present, DAOs issue auction licenses for a range of activities, as noted in Table 10.
Table 10. Auctioned DAO Operating Licenses
Slaughterhouse
Ferry Service
Pawnshop
Vehicle and Truck Wheel Tax Collection
Bus Terminal Entrance and Guard
Jetty
Market Fee Collection
Park, Swimming Pool Entrance Fee Collection
Public Toilet and Bathroom Fee Collection
Cattle Market
4.1 The Auction Process

While the auction-license system is common across Myanmar, the auction process varies between
states/regions because final oversight of DAOs lies with S/R governments. In many of the townships
visited during fieldwork, auctions are announced publicly and open to bids from anyone, though
205 Government-set prices are not uncommon; however, the price levels set in Myanmar appear to be based more on the
consumers ability to pay than detailed research of the sector.
206 See The Municipal Law, 1898.
33
winners must be in compliance with the rules and regulations for the license.207 Some township
auction licenses have floor prices, set by the local DAO, which are announced prior to the auction. 208
To enter a bid, businesses complete a form with a secret bid and submit it in a closed envelope to the
auction committee, which is comprised of TDAC and DAO staff.209 Bids are opened at a public meeting
and the winner announced. The winner is then required to put down a deposit on the licenses on the
day of auction. In some townships, businesses that receive auction licenses with a cost of greater than
500,000 kyat may pay in installments, though licenses under this amount must be paid up-front.210 In
some areas, there is significant competition for auction licenses. In others, there is rarely competition
for auction licenses. In one township, out of 16 ferry concessions auctioned for FY15-16, only two had
more than one bid.211 Most of these ferry concessions were in rural areas and had low license fees.212
The DAO officer noted that these small, rural ferries were not perceived as a good business the
estimated net profit per day was 5,000 to 6,000 kyat.213
Auction licenses are all described, in detail, in township-level DAO bylaws, and contain a number of
noteworthy and useful conditions. Amongst these bylaws are specific provisions requiring many
license winners to list prices on vinyl posted in the shops, and include the phone number for the
Township Development Affairs Committee. If a customer has a complaint about the business, they are
encouraged to call the posted phone number and report their concerns directly to the TDAC. In
Pathein, this system led to changes in the rules for local ferry service. Through FY14-15, one ferry
service in Pathein noted that they were permitted to charge double for nighttime service. These
nighttime operations were defined as going from 6 p.m. to 6 a.m. However, this produced
complaints to the DAO office, which adjusted the definition of nighttime in FY15-16 license to 7 p.m.
to 6 a.m.214 This type of accountability is rare in Myanmar, yet an excellent case study of an important
accountability mechanism.
4.2 Slaughterhouse Licenses
Slaughterhouse license are one of the most important and lucrative auction licenses overseen by
DAOs. In some townships, they account for a significant portion of revenue (up to 50 percent in some
townships).215 However, some of the very characteristics of the slaughterhouse auction-license system
that make them valuable to DAOs are also key shortcomings of the system. The value of these licenses
often comes from the administrative restrictions that accompany them, restrictions that often create
artificial monopolies with state-mandated prices. This generates rents that are shared between the
DAO and the licensee, which should theoretically lead to a reduction in farm-gate prices for livestock
and an increase in retail prices for meat. These consequences have been noticed by many local
policymakers, some of whom have begun changing the auction-license system because of the
perception that it harms the public interest. In the six townships visited for this fieldwork, four
different slaughterhouse licensing systems were in use. It is an exceptional and rare case study in post-
reform, local-level policy experimentation.
Among the fieldwork sites visited, the slaughterhouse license system in Ayeyarwaddy most closely
resembles the system from the previous regime. Licensees are awarded not just the right to slaughter
beef, pork, or mutton, but also the exclusive rights to a pre-defined geographical territory in which
only the licensee can wholesale meat (others can resell, but must buy from the licensee).216 Within
207 Interview 001.

208 Interestingly, though floor prices are given, some final auction-license prices were below the floor, because no bids
were received at or above the floor price.
209 Interview 001, Interview 015 with government, July 9, 2015, and Interview 017.
210 Interview 001.
211 Interview 017.
212 Interview 017.
213 Interview 017.
216 Interview 001.
34
these territories, meat must be sold in specific predefined areas, as the example from Pathein
Township in Table 11 shows.217 These geographic restrictions effectively give licensees artificial
monopolies. In order to prevent monopoly pricing, DAOs in Ayeyarwaddy set the prices at which
licensees can sell meat.218 There are specific restrictions in DAO bylaws that expressly prohibit license
holders from one township from selling meat in another.219 These restrictions on moving slaughtered
meat between townships mean that consumers in one township cannot benefit from lower prices in
nearby townships. Some DAO bylaws also prescribe the number of animals to be slaughtered in a day.
For example, the city market pig license calls for 15 animals to be slaughtered per day, while the goat
and beef licenses call for seven animals.220
In Ayeyarwaddy Region, meat prices have increased on an annual basis over the last few years, at a
rate of 10 percent per year. This rate of increase is determined by the DAOs and does not reflect
market signals. However, it has also been recognized by DAOs as a key problem with the system, as
they see the negative consequences of annual price increases. The administratively set prices vary
from township to township, with the key consideration generally being local income levels and not
market considerations. Fixed prices of mutton, beef, and pork are also enforced by DAOs, which post
signs at each selling station with a contact number that consumers can call to file complaints if meats
are not sold at the listed price.221 DAOs do provide some enforcement related to meat slaughtering,
namely conducting slaughterhouse inspections and ensuring that the slaughtering does not occur near
residential areas.222 Though the bylaws spell out a number of conditions for license holders, including
provisions regarding mosquito and fly protection to prevent insects from resting on the meat, market
visits evidenced the need for improved enforcement.223 DAOs also supervise the transportation of
meat.224 Furthermore, DAO bylaws call for the submission of biographies, registration data, household
lists, and police recommendations for each slaughterhouse manager, staff person, sales clerk, or
related laborer.225
Table 11. DAO-Prescribed Meat-Selling Locations, According to DAO Bylaws for Pathein Township for
FY15-16
Licensee DAO-prescribed selling locations
All meat-selling stalls, as designated by the committee, in all the markets in
All city market
Pathein (Myoma market, Myothit market, Aungthiri market, Aung Ayeyar
slaughterhouse license
market, Nagwon Kyanthar market, Shwewahton market, Padauk Chang
holders
market, Ayarwin market, Ayermin market, Strand market, Kyunchan market).
Wayachaung pig license Wayachaung Village market, edge of Wayachaung Village.
Shawpyar pig license Shawpyar market/U Kyi Soe Company at the edge of Shawpyar Village.
Shawpyar beef license Shawpyar market, in front of the police station, in the middle of the village.
Kyi Tha pig license Kyi Tha Village market, Kyi Tha Village.
Kyat Pang pig license Kyat Pang Village market, Kyat Pang Village.
Kyat Pang beef license Kyat Pang Village market, Kyat Pang Village.
Zin Pyon Kon beef license Zin Pyon Kon market, Zin Pyon Kon Village.
Ywa Haung pig license Ywa Haunggyi Village market, Ywa Haunggyi Village.
217 Interview 003 with private-sector business, July 7, 2015, and Interview 017. There are also meat resellers in these areas
who purchase meat from the licensee and then resell it at another location. However, they must purchase the meat from
the licensee at the fixed rate, meaning that they cannot compete on price or quality. Instead, they can resell only by finding
a more convenient location, at which people are willing to pay a premium.
219 Selected DAO Bylaws, pg. 4, no. 12.
222 Interview 015.
224 Interview 015.
35
The auction-license system faces a number of problems, some of which certain DAOs are already
addressing, and others of which are not yet being addressed. First, administratively dictated annual
price increases artificially create inflation at a rate not linked with the inflation rate of the economy
more broadly. Secondly, the license restrictions create artificial monopolies that prevent competition
and allow businesses to capture economic rents. These rents are partially, though not fully, captured
by the government through payment of license auction fees. The monopolistic licenses segment the
market, and discourage businesses from increasing the scale of their operations and reaping improved
efficiencies from economies of scale. Restrictions on trading between townships further segment
markets, and prohibit goods from moving from areas of low price to areas of high price. Another
potential problem created by the system is that it likely lowers the prices of live animals, because it
removes competition from the marketplace for live animals. The licenses also contain a clause that
sellers must have good character and deal well with purchasers.226 Those deemed not having met
this standard could have their licenses revoked, a source of uncertainty for licensees because of the
vague nature of the clause. Fundamentally, the license system removes many market-related
characteristics from the sale of pork, beef, and mutton, instead closely resembling a government-
planned system. It removes price signals that help communicate to producers what to raise,
consumers what to buy, and entrepreneurs where to send meat.
While some slaughterhouse license systems are largely unchanged from the previous regime, others
evidence the reforms undertaken by local-level policymakers to try to address the shortcomings of
this licensing system. In Taunggyi Township, for example, auction licenses were abolished at the end
of FY13-14 at the behest of a local MP, who complained that meat prices were too high.227 License
holders are now subject to two fees paid to the DAO: (1) five percent of meat sales price, and (2) a fee
per animal.228 Given the implementation challenges of calculating exact numbers of animals
slaughtered, the DAO uses an estimate instead.229 Though DAOs are responsible for licensing
slaughterhouses, inspections for health and sanitation of animals immediately before slaughter are
conducted by the Veterinary Department of the Ministry of Livestock, Fisheries, and Rural
Development. The animals are inspected, and a fee of 200 kyat (US$0.16) per animal per inspection is
assessed.230 The overlapping authority of the MoLFRD and DAOs in regards to ensuring the safety of
meats was present in all townships visited.231 Despite changes to the auction-license system in
Taunggyi, the DAO has not formally liberalized the fixed prices of meats, though in practice there has
been some change (the intended goal of the change in the auction-license system).232
Businesspeople in the sector noted that since the removal of the auction-license system, there are
now more competitors, and wholesale and retail prices for meat have decreased. Income for the DAO
has also decreased, which suggests rent dissipation.233 Since the removal of auction licenses, the prices
for live animals have also increased.234 One interviewee noted that the changing structure of the sector
incentivized him to raise pigs to slaughter and sell himself a move to improve profit by vertical
integration that would not have been feasible under the former laws.235 Lastly, the licensee noted that
during the last year of the auction-license system, business was unpredictable, but that it has since
improved and encouraged him to begin raising his own pigs.
Other townships have also reformed the slaughterhouse auction-license system. In another township,
licenses now have a set price (50 million kyat, or US$39,032); however, a license can be awarded to

227 Interview 038 with government, July 20, 2015, and Interview 040 with private-sector business, July 21, 2015.
228 Interview 040.
229 Interview 038.
230 Interview 040.
231 Interview 015.
232 Interview 038.
233 Interview 040.
234 Interview 040.
235 Interview 040.
36
more than one business, in which case all licensees split the license fee.236 Anyone who wants to
operate a slaughterhouse license can apply, and all businesses that meet the requirements will win.
This license is required to sell pork at the market, and market stalls are awarded to all licensees by
lucky draw.237 Given that stalls are awarded by lucky draws on an annual basis, businesses have little
incentive to invest in their physical shop. Notably, these slaughterhouse licenses do not include
geographical subdivisions, and therefore there is no DAO-granted license for rural slaughterhouses.
Instead rural residents purchase meat from the main market or from resellers, or, in remote areas, kill
the meat themselves (a practice that is technically illegal but permitted by the DAO).238
A similar system applied in other locations. In another township, anyone with a National Registration
Card can apply for a slaughterhouse license, and the price is fixed at 500,000 kyat (US$390.32). If more
than one bid is received, the fee is split equally between all bidders.239 This system has been in effect
since FY14-15, though previously the licenses had been distributed through auction, where fees could
reach as high as five million kyat. The prices of pork and beef remain fixed by the government, though
they have not risen for at least the last three years.240 The DAO officers thought that the current
licensing system had a number of benefits, including creating business opportunities for locals
(businesses from other townships are not eligible to receive a license), as well as keeping the meat
price stable (the officials perceive that auction licenses drive prices higher, despite their fixing of the
price).241
DAO-mandated list of prices for beef at a market

One of the most interesting aspects of the governance of meat products is the contrast between the
tightly regulated and heavily distorted markets for pork, beef, and mutton and the relatively open

237 Interview 026, and Interview 036 with private-sector business, July 17, 2015.
238 Interview 026.
239 Interview 032.
240 Interview 025 and Interview 032. Notably, in Myitta the sale price of meat has historically been below the fixed price.
This did not seem to be an issue for the DAO there, and they did not state that this was against the DAO bylaws that govern
the sector.
241 Interview 032.
37
markets for chicken and fish. Prices of chicken and fish are not fixed by the DAO, and change
depending on supply and demand.242 Vendors selling chicken and fish compete with other sellers on
price, and are free to buy from any supplier and sell to any consumer. Vendors of all meats, including
those subject to auction license and those who are not, are subject to inspections by the DAO for
sanitation.243 Yet the costs of licensing differ dramatically. Fish vendors in Dawei pay a small fee for
use of a stall at the market (2,500 kyat per month or US$1.95).244 Vendors of pork at the same market
share an annual fee of 50 million kyat (US$39,032).
The result of the auction licensing of slaughterhouses is to create an indirect tax on consumers and
suppliers of pork, mutton, and beef. This tax is often one of the largest sources of revenue for DAOs
in many parts of Myanmar. This system raises the obvious question: why should consumers and
suppliers of pork, beef, and chicken, who are often from rural areas, bear the burden of taxation to
pay for urban roads, sewage, and other basic social services while vegetarians are not obliged to
contribute? Not only is the indirect taxation that occurs through these auction licenses arbitrary, it
may also be regressive. Though expenditure on food grows as income increases and consumers shift
to a diet with more meat, the share of income going to food consumption decreases as income rises.
Therefore, revenue raising indirectly linked to food consumption could result in the poor paying a
greater share of their income than the rich.
4.3 Ferry Licenses
Ferry licenses are another important form of auction license, sharing both structural similarities and
differences with slaughterhouse licenses. The need for ferries, and therefore ferry licenses, is heavily
dependent on geography and the existence of alternate infrastructure (bridges). Ferry licenses were
only observed in the fieldwork visits in one S/R. The structure of the licenses in that S/R shows
similarities to the slaughterhouse system, in that they grant geographical exclusivity to a single
operator, who operates the concession for a one-year term at a fixed price mandated and enforced
by the DAO. Floor prices for ferry auction licenses also have increased at a DAO-mandated 10 percent
per year, though there are exceptions to the floor price. DAO officials interviewed noted that they
inspected ferries; however, one noted that inspections in more remote rural regions were less
common than in urban areas near the DAO office because of logistical constraints.245
Unlike other auction licenses, the operation of ferries requires significantly greater capital outlay.
Operators must purchase ferries, and sometimes build piers and shelters (if these do not already
exist).246 If a new operator wins a license, they are free to negotiate with the former operator to
purchase their existing capital. However, there are no provisions for the transfer of capital between
old and new license holders, which creates significant uncertainty for existing operators.247 If the old
license holder does not reach an agreement with the new one, the old license holder can take down
their infrastructure and remove it.248 Ferry license holders are aware of the insecurity of their
investments and take steps to try to mitigate that insecurity. For example, one license holder
constructed a new structure at one end of the ferry route. He submitted receipts to the DAO office,
despite not having any formal framework to receive any reimbursement or protection for the costs.249
The high capital costs of ferry operation draw attention to another shortcoming of the current auction-
license system the nearly universal limit of one-year terms, which is a direct and significant
disincentive to the development of more durable infrastructure. With a license lasting only one year,
and prices fixed by the DAO, businesses cannot justify or afford significant investments in

245 Interview 017.
247 Interview 012.
248 Interview 012.
249 Interview 012.
38
infrastructure (nor is it mandated as a condition of receiving the license). One ferry license holder,
when asked how he would change his business strategy if the DAO awarded five-year licenses, noted
that he would build a concrete pier and remove the decrepit wooden pier, which was mangled and
collapsing into the river.250 The one-year limit for licenses forces businesses into short-term thinking,
and fails to create incentives to mobilize private capital for investment.
4.4 Other Auction Licenses
There are numerous other types of DAO licenses; however, they have many different characteristics.
Two other auction licenses, pawnshop and cattle market licenses, also partially resemble the artificial
monopolies that make slaughterhouse and ferry licenses valuable. These licenses take an activity often
done by the private sector, and create artificial barriers to entry and geographical monopolies that
allow the government to extract rents from the licensing process. Pawnshops, like slaughterhouses,
enjoy DAO-sanctioned monopolies to operate in a selected area. Despite being listed in the DAO
budget, no township visited had licensed any cattle markets.
Many other auction licenses function as subcontracts to collect revenue on behalf of the state. For
example instead of the DAO having its own personnel collect revenue from street vendors in the
market, some townships subcontract this responsibility. Auction licenses that fit this description
include the wheel tax collection license, the public toilet and bathroom fee collection license, and
market fee collection license. However, these licenses do not necessarily maximize the revenue
captured by the DAOs. Instead of giving the contractor a share of total revenue collected, the
contractor pays a flat fee and keeps all revenue collected in excess of that fee. In some cases, this
leads to the DAO capturing a significant share of the revenue, while in others they capture a small
portion. In a few cases, auction licenses have been used when direct revenue collection became
unprofitable for DAOs, which happened for the wheel tax in one smaller fieldwork location.251 Private
contractors could conduct collections profitably because of their comparatively lower labor costs.
However, most revenue collection licenses have been auctioned off, even though the DAO could
directly collect the revenue at a profit.
A last group of auction licenses allow the licensee the exclusive right to provide a service in a selected,
government-controlled area. Auction licenses that fall under this category include the market parking-
fee collection license (not listed above). For this license, consumers can choose to park in the
concession area and pay a fee, or park elsewhere for free. In exchange for the fee, the licensee
assumes responsibility for guarding the vehicle parked in the concession area.
4.5 Case Studies on Auction Licenses
Though auction licenses are an integral part of raising revenue for local levels of government, they can
also be inefficient, and sometimes allow private actors to capture the majority of the profit (rent).
During fieldwork, three case studies were undertaken in order to better understand the financial
details of the auction-license system. These case studies are based on limited data collection and
insights about the revenue and expenses of the businesses of auction-license holders. However, they
show that the auction-license system sometimes collects only a small portion of the total potential
revenue. Detailed calculations corresponding to each case study are presented in Appendix 3.
250 Interview 012.

251 Interview 017.
39
4.5.1 Case Study 1: The Market Fee Collection License
The Market Fee Collection License is an important source of revenue for some DAOs. It gives the
license holder the right to collect daily fees from all vendors selling from temporary locations (i.e., in
open areas, but not in market stalls in the building). In the surveyed township, fees are 500 kyat per
day (US$0.39) for one plot, which is approximately one square meter. Interestingly, the fees are
greater for these vendors than for proper market stalls. While the fees are small, there were 323 plots
being used by vendors on the day of the survey, for which the licensee collected an estimated daily
revenue of 279,850 kyat (US$218.46). Over the course of a year (with an estimated 292 selling days),
the total estimated revenue for the licensee is approximately 81.7 million kyat (US$63,790). Operating
costs are minimal just the cost of labor and some small miscellaneous expenses. Of the estimated
revenue, the DAO collected the majority through the annual license fee, which was 62.7 million kyat
(US$48,946). However, the business made a significant profit, estimated at over 58,000 kyat
(US$45.27) per day, or 16.97 million kyat (US$13,249) for the year.
4.5.2 Case Study 2: The Ferry License
The Ferry License covers operations of a wide range of different sizes, from small ferries in which one
person and a wooden boat serve occasional traffic, to large ferries that cater to thousands of
customers per day. The Ferry License in this case study is for a large ferry operation with significant
expenses compared to many other auction licenses, given the costs of boats, infrastructure, and staff.
The ferry in this study catered to nearly 5,900 customers (rate: 50 kyat) on the day of the study, as
well as 678 motorcycles (rate: 350 kyat) and 886 bicycles (rate: 50 kyat). Based on the given rates, as
well as additional charges for nighttime operations, the gross revenue of the ferry was 658,200 kyat
(US$513.81) per day, or an estimated 240 million kyat (US$187,543) per year. There were a number
of costs associated with the operation, including jetty fees, staff costs, fuel and maintenance costs,
and capital costs. The estimated annual total for these operating costs was over 68 million kyat
(US$54,142).
However, because of the need for significant capital (besides the license cost), the license auction is
likely to be less competitive, which should allow the private licensee to capture a greater share of the
revenue. Evidence from the case study confirms the theoretical conclusion. The DAO was only able to
capture less than half of the total rent from the ferry auction license, through an annual fee of 75
million kyat (US$58,548). The remaining share of the profit, 97.2 million kyat (US $75,853) was
captured by the private company. This case study illustrates how these monopolistic businesses create
rents and therefore high profit margins for the licensee.
4.5.3 Case Study 3: The Market Toilet Fee Collection License
Though the smallest of the three licenses studied, the Market Toilet Fee Collection License illustrates
a core problem with the auction-license system. In the case study, the toilet facilities were built by the
DAO and then licensed out. The licensee has few costs wages for the fee collector, basic supplies for
cleaning, and some maintenance. Though the fee is 100 kyat (US$0.08), the toilet license still
generated a significant profit. For estimated annual revenue of 12.6 million kyat (US$9,847), the
license holder paid an annual fee of only 2.5 million kyat (US$1,951). The bulk of the estimated rent
from the operation of the concession approximately 7.86 million kyat (US $6,137) accrued to the
licensee.
4.6 Key Challenges with the Auction License System
The auction-license system limits the revenue collected by government, hurts the profitability of
companies, discourages investment, and collects money in arbitrary and potentially inefficient ways.
The key challenges of the system include:
x The up-front license fee. This reduces competition, especially for smaller licenses that could
attract a wide range of bidders and require little (if any) skill to operate. The current system
40
favors larger businesses with cash in hand. Given that the financial system makes it difficult to
get a loan, this system reduces competition and hurts smaller entrepreneurs.
x The mechanism for setting government-mandated fixed prices for some licenses. While
these prices are made available before the auction is held, they remain administratively set
and are only somewhat related to the cost of provision. Further, government generally does
not conduct research to understand how much revenue license holders generate, and tends
to set floor prices arbitrarily, without reference to relevant data.
x Township-level licensing. This inhibits growth of larger, more efficient businesses that can
produce goods and services at lower prices. In a competitive environment, these efficiency
gains would result in lower costs for consumers, which is especially relevant for
slaughterhouses.
x One-year license terms. These discourage investment and create uncertainty for licensees.
Licenses could be offered for longer than one year, according to one DAO executive officer.252
Longer auctions used to exist, but some S/R governments have since pushed for auctions
every year.253 The DAO officer noted that longer licenses could result in negative perceptions
among the population.254
x Collusion. This is commonplace and difficult for government to prevent or track. Further, given
that it is very uncommon for fines and administrative penalties to be issued by the
government, businesses face few deterrents to collusion. One interviewee noted that bidders
would sometimes enter the competition for a license, not because they wanted to win, but as
a way to extract a payoff from other bidders not to compete. The interviewee noted that this
was bothersome and cost him money.255
x Discouraging needed infrastructure investment. This system can alter the incentives for
infrastructure development, dissuading DAOs, for example, from approving bridges to replace
ferry concessions because ferries are lucrative revenue sources for DAOs.
252 Interview 015.

253 Interview 015.
254 Interview 015.
255 Interview 012. One official noted that, in an effort to prevent collusion, auction licenses were awarded through a lucky
draw system. However, the lucky draw system gives businesses no incentive to offer a high price for the license it is
based on luck, not the offer price. As such, the official attested, the government lost a significant amount of revenue from
the licenses. Interview 014.
41
SECTION FIVE: Key Recommendations:
The scope for local-level reform that can lead to tangible economic benefits is immense. Yet, unlike
many other reforms that would yield tangible benefits, many of the reforms recommended below
especially in restructuring the local revenue base and changing the auction-license system are within
the realm of the possible. There are many reasons for this. For many of the economic powers under
the authority of subnational governments, especially auction licenses, some local officials are already
aware that the existing system is problematic and can be improved. Because it does not require Union-
level approval, local-level reform may be easier and less time-consuming, while enabling local
experimentation with economic policy. While some of the suggested reforms do affect vested private-
sector interests, these businesses would also be well-situated to compete in a more liberal economic
system. These types of reforms also may be more feasible because they focus on improving the
functioning of relatively unimportant local systems. Finally, local levels of government have significant
flexibility to improve the implementation of laws and rules under their control. This reform in the
implementation of existing laws and rules should complement changes to the laws and rules. It is
important to change how things are done, not just what is supposed to be done.
It is important to note that many of the recommendations are interdependent. One key objective is
to increase revenues for local service provision and infrastructure development. While the
recommendation as a whole can raise revenue, some selected recommendations (especially those on
removing aspects of the auction license system) will decrease revenue. This is especially problematic
given that some local authorities, such as DAOs, are heavily dependent on this licensing revenue.
Therefore, it is essential that reforms to the auction-license system happen in tandem with changes
in the building-tax system, to prevent a significant drop in DAO revenues and a serious degradation of
important local service provision.
Finally, it is essential to note that changes in the structure of local revenue raising cannot happen
overnight, and may be better pursued over a longer period of time (for example, three to five years).
This is because changes are not simply technical, but are instead connected to societys long-standing
distrust of the state. Reforms should be carefully designed to incorporate trust building, transparency,
and consultation with the community. It is essential that people understand the current system, the
proposed changes to that system, and the reasons behind those changes. This broad-based
consultation and education will take time, but will also increase the likelihood that reforms will be
successful and adopted by a majority of the population. Lastly, it is important to remember that there
are long-standing and deeply rooted practices of community contributions to local investments, which
will not be immediately supplanted by changes in the local revenue base. People have long
contributed to local development in this way, and the practice should be allowed to continue at the
same time as more formal revenues become available.
Recommendations:
x Develop reform strategies that are transparent and consultative and build trust. S/R- and
township-level governments as well as partners should work together to develop location-
specific, multi-year reform strategies for local economic governance. These strategies should
take into account local realities, and should not be based only on standard recommendations.
These strategies should be developed through a transparent and consultative process that
builds trust and understanding of the reforms before they take place.
x Communicate reforms and the reason for them. S/R- and township-level governments as well
as partners should work together to develop effective communication strategies to explain
current and future local economic governance systems to communities. Communication and
consultation should precede significant reforms and attempt to build local understanding and
support for reforms.
42
x Reform the auction license system to eliminate artificial monopolies. This includes
eliminating any legislation that creates unnecessary monopolies, for example through the
creation of geographical territories in which exclusive selling rights are licensed.
o Remove requirements for existing licensees to conduct business in specific locations,
allowing them to engage in business at any location as long as they abide by zoning
laws (if any exist).
o Allow businesses to compete in areas where there were formerly auction licenses. For
example, allow anyone to sell pork or beef in any location, as long as relevant
sanitation and other laws are followed. This should encourage competition on service,
price, and quality.
x Remove government-controlled prices from all licenses except in the case of natural
monopolies (such as ferries or roads) and allow prices to fluctuate more freely.
o If the price cap cannot be removed at the present time because of political
considerations, allow licensees to sell at any price below the established price if they
choose.
o Harmonize the price cap across proximate townships and eliminate restrictions on the
transportation of slaughtered meat between townships when not directly related to
ensuring proper food safety and sanitation.
x Where natural monopolies exist, design licensing regimes to minimize rents and/or
incentivize investment and service improvements.
x Increase the length of selected licenses to create incentives for investment. License terms
should reflect investment costs and give longer licenses in areas where greater capital
investment is required (e.g., ferry licenses).
o At a minimum, if one-year licenses are continued, DAOs should offer a right of refusal
to existing license holders if they matched the highest bid at the annual auction.
x Restructure licenses to mobilize private investment in infrastructure.
o Introduce a framework within the licenses for private infrastructure construction
through a BOT system.256 These BOT schemes should specify the conditions under
which investments made by the operator would be transferred to the government or
the next operator at the end of the license term. New licenses could include two
components: (1) a fee payable to the government; and (2) construction of agreed-
upon infrastructure, to be overseen by the government in the same way they oversee
other construction projects.
o Complement longer-term licenses with provisions about the rights of license holders
regarding investments made during their license tenure.257
x Remove unnecessary barriers for bidding on licenses.
o Allow licensees to prepay on a quarterly or monthly basis instead of requiring an up-
front annual fee. Reducing the amount of up-front capital needed to win the bid
should increase competition, and therefore revenue, for the government.
o Remove requirements for license bidders to have fixed property as a prerequisite for
bidding. Because license fees are collected before the activity is undertaken, this
requirement is a needless barrier to greater competition for licenses.
x Clarify license conditions.
o DAOs should explicitly state the conditions under which a license may be suspended,
and refrain from suspending a license for other reasons.
256 Note that, unlike many other BOT agreements in Myanmar, in which very little or no new infrastructure is actually
constructed, these licenses would be most beneficial if they involved the actual construction of new infrastructure.
257 For example, incorporate depreciation schedules into the license that detail how much the license holder can be paid at
the end of the license term, when the investment is transferred to the DAO.
43
o Billboard contracts should include explicit and precise eminent domain clauses,
including details about compensation provided in the event of a government
confiscation of land.
x Focus on safety and sanitation, not just raising revenue. Some licenses, such as
slaughterhouses, were originally created to ensure the safety of meats. Local authorities
should return to a focus on safety and sanitation and away from revenue generation through
rent creation.
x Revise the land tax. Tax rates should be reviewed, and a minimum number of acres should be
introduced. Any landholder with less than the minimum number of acres would not be subject
to any land tax.
o The minimum should be set at a reasonable level. This means that any individual
landholder with less than a specific number of acres would not be liable for any land
tax.
o Corporate landholdings should be excluded from the minimum and pay tax for all land
held. This will prevent single individuals from registering land under multiple
corporate entities.258
o After consultation and the development of significant support, raise the land tax,
which will increase tax revenues wholly from large landholders.
o Reduce the costs of buying and selling land through a reduction in the stamp duty.
x Reform the building tax to make it a primary source of general revenues for DAOs.
o Conduct long-term and widespread information campaigns about the purpose of the
building tax, and how the building-tax system works.
o Further investigate the challenges faced by townships that have attempted to raise
the property tax to 25 percent of the standard rental rate, to understand the
successes and failures of past changes in property tax in Myanmar.259
o Modify the existing system of building classifications to remove maximum amounts
of building tax that can be paid in a one-year period. These limits are not mandated
in any laws, and therefore should be relatively simple to change.
o Change the calculation of the building tax to one based on estimated market sales
value.
o Ensure that building taxes are the responsibility of the owner, not the renter.
o In consultation with government, community members, and other stakeholders,
review and revise building-tax rates.
o Use publicly available real estate information to review and value buildings on a
regular basis, which should help align administrative rates and market values.
o Tier the building tax rates so that primary residences incur lower rates, while
secondary residences and investment properties incur higher rates. This will help
reduce the burden of the increased building tax on families with low cash flow and
only one residence.
x Change the budgeting structure to allow DAOs to carry over locally raised revenue from one
year to the next.
x Increase availability of public information on local-level laws, rules, and regulations.
o Local-level laws, rules, regulations, bylaws, etc. generally exist, and spell out
important details that are relevant for private businesses. These resources should be
made available in both hard- and soft-copy formats, including potentially a mobile-
based tool (preloaded onto phones) that could help connect information to
businesses.
258 Note that 10 acres is simply a suggested figure, selected because it is the maximum number of acres for which a loan
can be obtained from MADB. This minimum should be established only with significant research into the distribution of
landholdings and the financial situations of the landholders.
259 Interview 025.
44
o Make all tax rule books publicly available, for free, at GAD, IRD, and DAO offices.260
x Charge fines, interest, and administrative penalties.
o DAOs should begin charging penalty fees and interest for building taxes or other
taxes/fees that are not paid by the deadline. Deadlines should be enforced.
o DAOs could offer marginal discounts for early payment of building taxes. This might
have very low take-up rates, but would serve the purpose of communicating
information about payment many months in advance.
o Changes to the rules and enforcement of building taxes should be accompanied by an
outreach campaign that describes the purpose of the changes, the new penalties that
apply, and any changes in procedure.
o Given challenges around enforcement with other departments, DAOs may consider
not spending undue resources pursuing strict enforcement, but instead keeping
coherent internal records of individuals with past-due accounts. These individuals
could be prevented from accessing DAO services (business licenses, auction licenses,
construction permits, etc.) until their accounts are settled.
x Find creative ways to incentivize compliance. One example practiced elsewhere in Myanmar
is the Union-level top taxpayer lists. The local and S/R levels of government could adopt a
system of public taxpayer recognition similar to this, which would introduce important
transparency and accountability to building and land taxes.
x Further investigate various administrative processes and consider removing some.
o Remove the requirement that licenses be renewed every year. Instead, licenses
should renew automatically with payment of fees by the given date.
o Eliminate the requirement for a letter of recommendation from the Disciplinary
Committee for Buses as a prerequisite for receiving permission to open a new bus
line. The requirement is a conflict of interest, as the Committee is composed of other
private companies in the same sector that have incentives to restrict new entrants.
o Eliminate the Ministry of Hotel and Tourisms arbitrary requirements for
accommodations. For example, there is no need for MoHT to require all
accommodations that have foreign guests to have attached bathrooms and a
minimum square footage. Allow businesses to build what they believe there is a
market for, and then allow customers to select their preference.
o Eliminate MoHT requirements for businesses to submit any form of financial records
to renew their business license.
o Make transport licenses accepted across all states, not just in the one state in which
they are granted. This would eliminate the need for bus operators to obtain a license
in each S/R in which passengers embark/disembark.
x Stop giving construction permit fee waivers after the award of contracts.
o Regional governments should stop giving construction companies a waiver of the one
percent construction supervision fee normally paid to DAOs to receive a construction
permit. Despite the arguments of businesses that they should not have to pay fees for
public projects, this rebate only serves to improve the construction companys bottom
line, because it is given after the contract and price are agreed (i.e., this rebate is not
passed along to government and does not enhance the quality of the building).
x Restructure the transfer of five percent of S/R income tax from the IRD to the DAO so that
it is distributed equally across the S/R based on township population, not the origin of the
income tax collection.
x Offer incentives for business start-ups, such as discounted rent to new businesses at the
market. Link the incentive to a personal identifier such as an NRC number or another unique
identifier, to prevent abuse.
260 Interview 037.
45
References
Arnold, Matthew et al. 2015. Municipal Governance in Myanmar: An Overview of Development
Affairs Organizations (Yangon: The Asia Foundation and Myanmar Development Resource Institute-
CESD).
Bissinger, Jared and Linn Maung. 2014. Subnational Governments and Business in Myanmar (Yangon:
The Asia Foundation and Myanmar Development Resource Institute-CESD).
Development Affairs Organizations. 2015. Various DAO Bylaws.
Government of the Republic of the Union of Myanmar. 2015. 2014 Myanmar Population and
Housing Census. Available at: http://countryoffice.unfpa.org/myanmar/census.
International Monetary Fund. 2014. 2014 Article IV Consultation Staff Report. (Washington: IMF
Country Report No. 14/307).
Kyi Pyar Chit Saw and Matthew Arnold. 2014. Administering the State in Myanmar: An Overview of
the General Administration Department (Yangon: The Asia Foundation and Myanmar Development
Resource Institute-CESD).
Michigan Supreme Court quoted in Reed, Lawrence. 1999. A Tax Is Not a User Fee. Foundation for
Economic Education. Available at: http://fee.org/freeman/a-tax-is-not-a-user-fee/.
Nixon, Hamish, Cindy Joelene, Kyi Pyar Chit Saw, Thet Aung Lynn, and Matthew Arnold. 2013. State
and Region Governments in Myanmar (Yangon: The Asia Foundation and Myanmar Development
Resource Institute-CESD).
46
Appendix 1. List of Departments in Tanintharyi Region Government, by S/R Minister Portfolio
Security and Border Finance Agriculture and Forestry and Electricity and Development Affairs Social Welfare
Planning Minister Transport Minister
Affairs Minister Minister Livestock Minister Mining Minister Industry Minister Minister Minister
Department of
Budget Agricultural Land Forest Myanma Electric Development Affairs Dawei/Myeik
Regional Court Planning Department Dept. of Highways
Department Management and Department Power Enterprise Organization University
Statistics
Auditor Environmental Business License and Directorate of Information and
Regional Attorney Department of Dawei/Myeik
General's Conservation Department of Labor Transport Coordination Industrial Supervision Public Relations
General's Office Agriculture Education College
Office Department Department and Inspection Department
Internal Department of Road Transport
Myanmar Police Myanma Timber Department of Labor Department of Myanma Radio and Department of
Revenue Industrial Crops Administration
Force Enterprise Relations Religious Affairs Television Education
Department Development Department
Immigration and
Myanma Factories and General Dawei/Myeik
National Department of Mining Enterprise Department of Civil Directorate of Hotels Department of
Economic Labor Laws Inspection Computer Science
Registration Fisheries 2 Aviation and Tourism Health
Bank Department University
Department
Department of Department of
Agricultural Dawei/Myeik
Bureau of Special Cooperative Geological Survey Archaeology, Clinical
Mechanization Social Security Board Myanma Airways Technology
Investigation Department and Mineral National Museum Department
Department University
Exploration and Library
Myanma Sports and Department of
Correctional Pension Myanma Petroleum Technical High
Agricultural Physical Education Myanma Port Authority Traditional
Department Department Products Enterprise School
Development Bank Department Medicine
Regional Myanma Pearl
Myanma Irrigation Central Statistical Department of Marine Dawei/Myeik
Development Production
Insurance Department Organization Administration Nursing Institute
Supervisory Office Enterprise
Directorate of Water
Livestock Breeding Department of Trade Relief and
Customs Resources and
Fire Department and Veterinary Promotion and Resettlement
Department Improvement of River
Department Consumer Affairs Dept.
Systems
Myanma
Anti-Human Water Resources Department of Human
Microfinance Social Welfare
Trafficking Police Utilization Settlements and Housing
Supervisory Department
Force Department Development
Enterprise
Small-Scale Department of
#8 Crime Combat Department of
Industries Meteorology and
Force Rural Development
Department Hydrology
Myanma Posts and
Special Branch
Telecommunications
Myanma Railways
47
Appendix 2. List of Properties and Building-tax Rates from Selected Township
DAO, FY14-15 H1
Building type Grade No. of buildings Rate (MMK) Rate (USD) Total (MMK) Total (USD)
First 244 1,100 $0.86 268,400 $209.52

1 Wooden mat
Second 3,828 1,000 $0.78 3,828,000 $2,988.29
First 258 1,600 $1.25 412,800 $322.25
Second 918 1,550 $1.21 1,422,900 $1,110.77

2 Wooden
Third 719 1,350 $1.05 970,650 $757.73
Fourth 2,311 1,200 $0.94 2,773,200 $2,164.87
First 187 3,000 $2.34 561,000 $437.94
Second 125 2,600 $2.03 325,000 $253.71

3 Brick foundation
Third 312 2,200 $1.72 686,400 $535.83
Fourth 904 2,000 $1.56 1,808,000 $1,411.40
4 One-story building First 752 4,000 $3.12 3,008,000 $2,348.17
5 Two-story building First 1,077 4,600 $3.59 4,954,200 $3,867.45
6 Three-story building First 115 8,000 $6.25 920,000 $718.19
7 Four-story building First 27 9,200 $7.18 248,400 $193.91
First 30,000 $23.42 0 $0.00
8 Five-story building Second 20,000 $15.61 0 $0.00
Third 3 15,000 $11.71 45,000 $35.13
9 Six-story building First 1 50,000 $39.03 50,000 $39.03
Total 11,781 22,281,950 $17,394.18
Note: rates are for the first six months of the year.
48
Appendix 3. Detailed Case Studies of Auction Licenses
Market Fee Collection License Holder Case Study
Income
Price
Number of per plot
businesses (kyat) Total (kyat)
Daily income from fee collection 323 500 279,850
x 292 days per year
Total annual income 81,716,200 (US $63,790)

Expenses
Daily laborer fees 2 2500 5000
Daily miscellaneous 1 2000 2000
Total daily cost 7000
x 292 days per year
Annual operating cost 2,044,000
Annual license fee 62,700,000
Total annual expenses 64,744,000 (US $50,542)
Estimated profit for licensee 16,972,200 (US $13,249)
Share of revenue to expenses 2.5%

Share of revenue to business (private rent) 20.8%
Share of revenue to DAO (public rent) 76.7%

* Note that the market fees are not 500 kyat per business, but instead 500 kyat per plot. Some
businesses occupy more than one plot. The total figure includes all revenue collected that day
from all plots. 292 days is an annual estimate, and excludes fees collected on days when the
market is closed (Sundays and public holidays). Figures above are based on one day of data
collection, and therefore should be treated as illustrative (though there is no reason to suspect
massive variation in either income or expenses from day to day).
49
Ferry License Holder Case Study
Income
No. Fee Total
Passengers 3073 50 153,650
Day Motorcycles 651 350 227,850
Bicycles 646 50 32,300
Ferry 1
Passengers 164 100 16,400
Night Motorcycles 27 600 16,200
Bicycles 23 100 2,300
Passengers 2618 50 130,900
Day
Bicycles 214 350 74,900
Ferry 2
Passengers 34 100 3,400
Night
Bicycles 3 100 300
Total income (daily) 658,200
x 365 days
240,243,000
Total annual income (US $187,543)
Expenditure
Jetty use fee 1 1,000 1,000
Daily Staff (boat drivers) 7 9,000 63,000
Total (daily costs only) 64,000
Cashier 4 100,000 400,000
Fuel 8 100,000 800,000
Monthly
Maintenance 2 200,000 400,000
Total (monthly costs only) 1,600,000
Boats Large 1 12,500,000 12,500,000
Small 2 6,000,000 12,000,000

Auction license fee 1 75,000,000 75,000,000
Annual
Department of transportation fee 1 15,000 15,000
Other costs 1 1,000,000

Total (annual costs only) 100,515,000
Total annual expenses 143,075,000
(US $111,690)
97,168,000 (US
Estimated profit for licensee $75,853)
Share of total revenue to expenses 28.3%
Share of total revenue to business (private rent) 40.4%
Share of total revenue to DAO (public rent) 31.2%

*Note that figures above are based on one day of data collection and should therefore be treated as illustrative.
Further, it is likely that businesses incur other expenses that were not cited during the interview process. For
example, one interviewee referred to the need to pay other ferry bidders during the auction-license process.
50
Market Toilet Fee Auction License Holder Case Study
Income
No. Price Total (per day)
Toilet usage fees 432 100 43,200
x 292 days per year
12,614,400 (US
Total annual income $9,847)
Expenses
Laborer fees 1 5,000 5,000
Daily Miscellaneous 1 1,000 1,000
Total daily cost 6,000
x 292 days per year
Annual operating costs 1,752,000
Miscellaneous capital costs 1 500,000 500,000
Annual Auction License Fee 1 2,500,000 2,500,000
4,752,000 (US
Total annual expenses $3,710)
7,862,400 (US
Total revenue to licensee $6,138)
Share of revenue to expenses 17.9%
Share of revenue to business (private rent) 62.3%
Share of revenue to DAO (public rent) 19.8%
51

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Local Economic Governance in Myanmar

The Asia Foundation is a nonprofit international development organization committed to improving

Dr. Kim N.B. Ninh

1.2 What Is Local Economic Governance?

which much of this analysis would not have been possible.

Myanmar Development Research Institute-CESD), pg. 15.

illustrative of the broader phenomenon.

16 Interview 033 with government, July 16, 2015.

Development Affairs Organizations, pg. 10.

require the approval of the state minister for development affairs.

Myanmar: An Overview of Development Affairs Organizations.

DAO Social Services Duties and

33 Information provided by the DAO, Taunggyi Township, Shan State.

price list created by DAOs.

Figure 2. Distribution of DAO Income

Department, pg. 32.

Department, pg. 18. Immovable properties refer to land and buildings.

Department, pg. 32.

Department, pg. 20.

through the Union-controlled GAD.

Table 7. Myitta DAO Budget (in Million Kyat)

68 Interview 022 with private-sector business, July 11, 2015.

78 Interview 045. List is not exhaustive.

103 Interview 046 with government, July 22, 2015.

110 Interview 020, Interview 022.

116 Interview 005.

124 Interview 043.

141 Interview 029 with government, July 14, 2015.

153 Interview 021.

building tax and collected together.

181 Interview 017 with government, July 10, 2015.

197 Interview 031 with government, July 15, 2015.

4.1 The Auction Process

207 Interview 001.

226 Selected DAO Bylaws, pg. 5, no. 17.

DAO-mandated list of prices for beef at a market

236 Interview 026 with government, July 14, 2015.

242 Interview 004 with private-sector business, July 7, 2015.

250 Interview 012.

252 Interview 015.

260 Interview 037.

First 244 1,100 $0.86 268,400 $209.52

First 258 1,600 $1.25 412,800 $322.25

Second 918 1,550 $1.21 1,422,900 $1,110.77

Fourth 2,311 1,200 $0.94 2,773,200 $2,164.87

First 187 3,000 $2.34 561,000 $437.94

Second 125 2,600 $2.03 325,000 $253.71

Fourth 904 2,000 $1.56 1,808,000 $1,411.40

4 One-story building First 752 4,000 $3.12 3,008,000 $2,348.17

5 Two-story building First 1,077 4,600 $3.59 4,954,200 $3,867.45

6 Three-story building First 115 8,000 $6.25 920,000 $718.19

7 Four-story building First 27 9,200 $7.18 248,400 $193.91

First 30,000 $23.42 0 $0.00

8 Five-story building Second 20,000 $15.61 0 $0.00

Third 3 15,000 $11.71 45,000 $35.13

9 Six-story building First 1 50,000 $39.03 50,000 $39.03

Total 11,781 22,281,950 $17,394.18

Daily income from fee collection 323 500 279,850

x 292 days per year

Total annual income 81,716,200 (US $63,790)