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Paper: Natural resources and subnational governments

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This paper  provides an overview of state and regional governments’ roles in natural resource governance, highlighting the mining, oil and gas, timber, and hydropower sectors. It provides an overview of the current laws, systems and practices surrounding natural resources, and is intended to lay the groundwork for future research and to inform policy debate.

From February to May 2014, researchers interviewed civil society members, political parties, subnational government officials, and business associations in Kachin and Shan States, Yangon, and central-level ministries in Nay Pyi Taw, in order to address the following questions:

  1. What are the current roles of the Union, Region and State governments in natural resource management and revenue flows in Myanmar?
  2. What discussions of natural resource wealth sharing are now taking place?
  3. What are the potential benefits, risks, and economic trade-offs involved?

The report concluded with the following recommendations:

  • Collect and share information: To understand the potential effects of natural resource wealth
    sharing, stakeholders need more knowledge about

    • The amounts of current government revenue coming from each kind of natural resource, and the amounts of revenue derived from each region or state
    • The total resource endowment and the potential for new discoveries of resources
    • Quantities of production, exports and domestic consumption and the sales value for each resource disaggregated if possible by state and region
    • The populations, poverty levels, and subnational government expenditure needs in each region or state
    • Environmental, social, infrastructure or other costs of resource development
  • Public financial management: Key aims should be to strengthen the role of the Ministry of Finance so that all funds flow into a single budgetary account and ensure that the Internal Revenue Department (IRD) has full audit and collection rights for taxes over which the Ministry of Finance has control.
  • Open subnational communication channels around resource management: Increased transparency in resource management can help to build trust and to move public discussion about wealth sharing beyond debates about numerical splits. There is a desire for more channels for routine communication around resource governance at subnational levels.
  • Clarify subnational roles and build institutional capacity
  • Legal regulation and implementation: The several separate laws pertaining to natural resource governance should be harmonized. The rules and regulations accompanying laws should be made public as soon as possible, as should the standard processes in applying for extraction licenses. Overall enforcement of laws in these sectors also needs to be improved, and implementation of the provisions of the new Environmental Law should be a national priority.
  • Measurement, mitigation, and compensation for environmental damage or other costs: Environmental, health, infrastructure, and social costs of natural resource extraction need to be systematically measured, and compensation for these costs be paid.
  • Processes for designing any wealth-sharing system should be carefully considered and sequenced
  • Consider the goals of natural resource governance reforms and the range of available policy options: Any resource-specific reforms should be well-coordinated with broader fiscal decentralization. Stakeholders inside and outside government should consider the potential benefits and risks of a full range of options, including: fiscal decentralization mechanisms which are not resource-revenue specific; the assignment of some specific resource taxes to state and region governments; a subnational role in natural resourcestabilization or investment funds; and targeted social service spending or infrastructure projects.

This report was generously funded by the United Kingdom’s Department for International Development (DFID).

Publication name: Subnational Governance in Myanmar Discussion paper #4: Natural resources and subnational governments: key considerations for wealth sharing

Author(s): Thet Aung Lynn and Mari Oye

Supported by: The Asia Foundation and United Kingdom’s Department for International Development (DFID)

Publication date: June 2014

Language(s): Myanmar and English

Download the report from the following link(s):

Link to the MDRI-CESD press release, “New report maps subnational role in Myanmar natural resource governance”