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Policy Note Series

Strengthening Subnational Governance

Energizing Subnational Oversight

This note is based on the World Bank Subnational Public Expenditure Review 2019: Fostering Decentralization in Myanmar. The recommendations made are not intended as final prescriptions, they are ideas intended to generate discussion and debate about the best policy direction for Myanmar.

December 2019

The SituationThe Myanmar Sustainable Development Plan (MSDP) places states and regions at the center of its vision for a more inclusive and decentralized system of governance. Substantial changes have already been made: the introduction of state and region Hluttaws has provided new political representation at the subnational level, and the subnational government share of total public spending had doubled in the five years to 2017-2018. Recently, Hluttaws have become increasingly assertive - increasing their legislative output and playing a more active and visible role in the delivery of services, public infrastructure investment and regulation of local economic activities. This is in line with public support amongst citizens for assigning greater service delivery responsibility to the local level.1 Hluttaws are also important forums for increasing inclusion and accountability in government

1 In a survey carried out by PACE, over 70 percent of respondents wanted to see a role for subnational governments in delivery of healthcare and basic education (see Citizens’ Mid-Term Perceptions of Government Perfor-mance (2018) PACE). Several surveys have shown popular support for greater local autonomy in both ethnic states and Bamar regions, although recent polling by the IRI (IRI.org) did find greater support for centralised governance.

and have taken steps to make subnational governance more inclusive, transparent and accountable.2

However, the aspiration of a federal Myanmar is far from being realized. The actual decentralization of powers to state and region governments has been slow. Many government functions remain centralized, while others are shared between the union and subnational governments with unclear lines of responsibility. The result is that new subnational governments are severely constrained in their legislative, financial and administrative autonomy.

Fundamental to the challenges facing states and regions is that they have constrained capacity for oversight. States and regions are constitutionally mandated to “inspect, supervise and coordinate” the functions of union ministries in their jurisdiction. However, subnational ministers have no formal leverage to hold staff working in union line departments accountable. Most human

2 For example, all states and regions in Myanmar now produce citizens’ budgets.

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resource (HR) management functions are highly centralized at the union – in sharp contrast to other federal or decentralized systems in the region (see Box 1). States and regions also struggle to access information. There is also limited information sharing between

departments (including the General Administration Department, GAD) at the subnational level, which severely limits the capacity of subnational governments to ensure that services and resources are appropriately targeted and responsive to people’s needs.

Box 1: “Ministers without Ministries”

Subnational governments have no dedicated permanent bureaucracy, instead subnational departments must implement their responsibilities via the pre-existing vertical organizational structure of the union ministries. Despite paying their salaries, the subnational governments have no formal authority over the appointment, posting, transfer, promotion, evaluation and training of GAD staff or other staff working in subnational departments. These salaries are a large expense for subnational governments, GAD staff salaries dominate the salary budget for the Shan government, for example. Control on staffing numbers, recruitment of gazetted staff and performance management all sit with centralized institutions.

This lack of control over the civil service makes it difficult for ministers to address the local priorities they are responsible for. Almost all staff members take instructions from a union ministry rather than from the relevant state or region minister, making it difficult for state and regional ministers to set policy direction. This has previously been described as having subnational minsters without ministries (Nixon et al, 2015).3

This contrasts sharply with other federal systems; in India and Pakistan, responsibilities over establishment, recruitment, promotion and performance management are either fully with the subnational government or some aspects are shared between the central and subnational governments. Even under the Philippines’ unitary system, local governments retain partial control in such areas as recruitment, career management, and performance management.

3In the absence of a formal flow of information, subnational executives rely on piecemeal information and informal networks to influence decisions within their jurisdiction.4 These informal networks function effectively while there is broad political alignment across the tiers of governments. However, they are not transparent, nor consistent. They are also inherently unstable and may come under strain as the interests of different tiers of government diverge.

3 Nixon, H. et al. 2015. “State and Region Governments in Myanmar”. Yan-gon: The Asia Foundation and Centre for Economic and Social Develop-ment

4 Even where the rules are clear, subnational governments have lacked con-fidence and capacity to use all the options available to them. For example, Article 257 of the constitution permits states and regions to “form civil services organizations” and “appoint the required number of civil services personnel”, providing subnational governments with an opportunity to build a more ethnically diverse and locally representative civil service, however this power has yet to be substantially implemented by any subna-tional government.

In this note, we suggest how the union government could foster decentralization in Myanmar by energizing subnational oversight. The recommendations center on formalizing reporting lines at the subnational level, and adjusting HR management to improve performance and accountability. The recent shift of the GAD to civilian control (Box 2) provides a unique opportunity to strengthen the oversight capacity of subnational governments, though the recommendations can be applied more broadly to other ministries as well.

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Box 2: GAD shifts to civilian control

In perhaps one of the biggest reforms of Myanmar’s governance architecture, in late 2018 it was announced that control of GAD would be shifted from the military-led Home Affairs Ministry to the civilian-led Ministry of the Office of Union Government (MoUG). This means that the omnipresent GAD, the backbone of state administration with a bureaucracy of more than 36,000 staff that reaches from the Union government down to the village level, is now subject to the oversight of the democratically elected civilian government. This transition was described by the President’s Office as important for empowering states and regions and for preparing Myanmar for a future federal union.

The Constrained Oversight of Subnational Governments Despite its importance at the local level, the GAD remains unaccountable to state and region governments. The GAD is the most “local” of all the union ministries and plays a key coordinating role at the local level (state/region, district, township, and village). However, it remains formally part of, and accountable to, its union ministry.

The GAD serves as the office of subnational government, with the GAD State Secretary playing an important role in subnational cabinet discussions. However, Chief ministers have no formal authority over who is posted to the state secretary position and, once appointed, the state secretary reports directly to the union minister.5 The result is that reporting relationships between chief ministers and state secretaries are not transparent, nor standardized across the country (dashed line, Figure 1) and the subnational executive has little, if any, formal control over day-to-day personnel management of the department.6

Ward/Village Administrator

S/R Chief Minister

S/R Ministers

Subn

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t Subna�onal Budget

Schedule Two MinistriesGAD

Director General

GAD StateSecretary

GADTownship Administrator

Union Minister

GAD District Officer

Line Dept. State Director

Line Dept. Township Officer

Line Dept. Director General

Line Dept.Union Minister

Line Dept. District Officer

Informal Coordination

Figure 1 -Blurred accountabili�es of subna�onal civil servants

5 At present, Chief Ministers are required to write a performance evaluation if the GAD state Secretary is transferring to another state. They are not, however, formally involved in regular performance evaluation or posting decisions.

6 Informal consultations are reportedly held with the Chief minister at the time of the appointment of state/region secretaries, though the process is not systematized or transparent.

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Subnational governments have a “supervisory” relationship with Schedule Two ministries.7 These ministries receive funding from the state/region government, although the accountability of civil servants working in them is blurred. Staff carrying out subnational-level functions are accountable, via their state/region-level directors, to both the relevant state/region minster and the union minister (orange box, Figure 1).

Staff working in departments housed under Schedule One Ministries are solely accountable to their union minister. While subnational departments of all union line ministries are instructed to coordinate with the chief minister/relevant subnational minister, the relationship for schedule one ministries is informal.

At the township/village level, there is a lack of coordination between departments. GAD township administrators head many committees, consisting of various department officials, but no formal reporting or evaluation systems underpin their leadership role. In urban areas, Development Affairs Organizations (DAOs) play a key role in managing municipal services however, they too lack clear authority over other union or state/region personnel and departments. As a result, little information is consistently shared between departments at this level.

7 Schedules 1 and 2 of Myanmar’s 2008 constitution divide legislative and administrative responsibilities between the union and state & region gov-ernments. At the subnational level, ‘Schedule Two ministries’ are those with mandates at least partially covered by subnational governments (e.g. transport and communications). ‘Schedule One ministries’ are those with mandates fully handled by the union government (e.g. defense).

Energizing the Oversight of Subnational Governments Subnational coordination and oversight could be energized by building on the recent GAD reform, supporting subnational ministers to set policy direction and improving the flow of information across government. Below, five changes that formalize the current informal arrangements of communication and HR management are suggested. These could be used to ensure that subnational civil servants are more formally accountable to the subnational government.

First, formally involve chief ministers in the posting and annual performance evaluation of the GAD state secretary in their jurisdiction (line 1, Figure 2). The MoUG could be required to formally seek clearance from the relevant Chief Minister for posting the GAD State secretary under their jurisdiction. Possible mechanisms include submitting a panel of three options from which the minster would choose, or requiring the MoUG to meaningfully consult chief ministers when posting or recalling a state secretary.8 The chief minister could also be authorized to provide formal input into the periodic performance evaluation processes of the Deputy Director General (DDG) and other senior GAD officials. The career management (promotion, transfers, training etc.) relationship with the MoUG would still continue.

Ward/Village Administrator

S/R Chief Minister

S/R Ministers

1 2

Subn

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t Subna�onal Budget

Schedule Two MinistriesGAD

Director General

GAD StateSecretary

GADTownship Administrator

Union Minister

GAD District Officer

Line Dept. State Director

Line Dept. Township Officer

Line Dept. Director General

Line Dept.Union Minister

Line Dept. District Officer

Figure 2 – Increasing accountability to the subna�onal government

8 This would allow the Union government to retain control over who is put forward for the position but would also place additional power at the sub-national government.

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Second, formally involve the relevant subnational minsters in the posting and performance evaluation of the state/region level director for departments carrying out Schedule Two functions in their jurisdiction (Line 2, Figure 2). In parallel to the formal shifting of reporting lines for GAD officials, director level officials of line ministries that receive funding from the subnational government could be required to formally report to the relevant subnational minister and DDG-GAD in a matrix structure. This would give subnational governments a clearer line of authority. Although within the bounds of the 2008 constitution, these first two recommendations may require amending relevant provisions of the 2014 Civil Service Personnel Act.

Third, encourage subnational ministers – where appropriate - to hire a limited number of staff to strengthen the capacity of their offices to coordinate and oversee activities. Strengthening the reporting lines as suggested above will increase the information and expertise available to subnational ministers. A small number of professional and ministerial staff could help ministers process this information and deliver better policy guidance, especially those with a wide range of responsibilities. Ministers are already entitled to hire a small number of staff and some already have GAD staff to support them with administrative tasks.9 Ministers could be encouraged to exercise this option to hire staff with specific expertise, though the opportunity cost of hiring new staff must always be carefully considered.

Ward/Village Administrator

S/R Chief Minister

S/R Ministers

Subn

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al B

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t Subna�onal Budget

Schedule Two MinistriesGAD

Director General

GAD StateSecretary

GADTownship Administrator

Union Minister

GAD District Officer

Line Dept. State Director

Line Dept. Township Officer

Line Dept. Director General

Line Dept.Union Minister

Line Dept. District Officer

Figure 3 – Formalising the flow of informa�on

9 Based on discussions with subnational government.

Fourth, formalize the flow of information (e.g. information on performance, financing and staffing) through a matrix reporting structure at the different subnational tiers (Figure 3). The resultant reporting structure would provide a framework to improve horizontal coordination and strengthen the accountability of subnational departments to the subnational ministers. To operationalize, this structure would require formal systems of horizontal information sharing, potentially mandated by the union government. Digitization of data would also facilitate information sharing.

Fifth, at the local level, encourage departments to use the MSDP framework to manage coordination. The MSDP action plans specify key departments which must work together on implementation, these action plans can be used to identify coalitions on specific issues. For example, the MSDP identifies Ministry of Planning and Finance (MoPF), Ministry of Transport and Communications (MoTC) and Ministry of Construction (MoC) as relevant agencies for developing rural road connectivity.

Collectively, the above proposals would promote greater democratic accountability by strengthening subnational oversight and localizing control over a limited set of HR functions. The changes would formalize authority over the GAD and create soft reporting lines to the subnational executive from union ministries. They would strengthen the office of the chief minister in terms of coordination and leadership. Additionally, the changes would help strengthen the resilience of intergovernmental cooperation against disputes and political heterogeneity.

There are potential benefits from progressively delegating an increasing number of day-to-day HR functions to the subnational level while preserving the policy-setting functions of union government. Myanmar has a long history of centralized control over civil servants. Dramatic devolution of HR functions is not feasible nor advisable. It is also not administratively advisable to create new parallel departments or ministries at the subnational level. Nonetheless, there are likely to be advantages from progressively localizing control over a limited set of HR functions, such as transfers within the same state/region, disciplinary and performance evaluation processes, grant of performance awards, identification of technical specifications, and recruitment and placement of non-gazetted staff. These processes could apply to all

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ministries (including health and education ministries) that may eventually be placed within the functional remit of state and region governments. It can also help foster a more inclusive capable and accountable civil service at the subnational level.

The Bigger PictureThe recommendations may face some challenges. Union government officials may not be inclined to share their human resource management power with the state/region chief ministers and cabinets. There is a strong culture of sharing information upwards, not downwards or laterally with other agencies. Matrix reporting structures, while often needed in large bureaucracies, can be cumbersome to implement, and may be resented. The GAD also faces substantial challenges of modernization and reorientation towards a citizen-focused service delivery role.

Despite these challenges, the incremental nature of these reforms makes them realistic. They are similar to the current system of public administration and are aligned with the general direction of decentralization. None of the changes suggested in this note require constitutional changes. They are also unlikely to have any immediate effects on budgets. In most cases they simply formalize and deepen ongoing informal or unstructured practices. Recently, the President issued instructions for the subnational political tier to have a greater say in posting and performance evaluation, these reforms are a first step in that direction.

The aim of the reforms is not to eliminate a strong union role in setting policy directions and managing staff careers. A weaker union role is not advisable in the near and medium term because of the capacity challenges at the subnational level.

As with any reform, consistent and wide-reaching communication is vital. Strong leadership from the top of government and a championing of the subnational political leadership will be needed to implement these changes. Communicating the incremental nature of reforms which primarily aim to formalize existing arrangements rather than introduce substantial changes could be an effective strategy.

There is still scope for other ideas to promote and implement a federal approach to government. The ongoing constitutional reform process is likely to yield weightier reform suggestions. Current and potential administrative measures could help state and region governments better exercise their constitutional mandate of inspection, supervision and coordination of all government activities at the local level, whether they are performed by the union government or by state and region governments.

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Further Information During 2018 and 2019, the World Bank and the Renaissance Institute jointly reviewed the governance, revenues, and expenditure arrangements in Yangon and Mandalay regions and cities, and Shan state. They also examined the status of digital infrastructure, the delivery of solid waste management and transport services. The findings and their discussion are detailed in the “Subnational Public Expenditure Review 2019: Fostering Decentralization in Myanmar”. The above advice is based on these findings.

For more information, including Myanmar versions of these notes, please visit www.rimyanmar.org or contact renaissance@rimyanmar.org.

This work was supported by the Australian Department of Foreign Affairs and Trade, the UK Department of International Development, and the Kingdom of Denmark through the Myanmar Multi Donor Trust Fund.