Auditor’s Report Shows Financial Problems of Yangon Government
By Kyaw Phyo Tha 9 January 2020
YANGON—On Wednesday, the Yangon Auditor-General submitted a summary report on the Yangon government’s spending in fiscal 2017-18 to the regional parliament. As the current regional government took office in 2016, the auditor-general’s report is an assessment of the U Phyo Min Thein administration’s management of public funds in its second year in office. It not only lists the regional government’s expenditures, but also reveals the extent of public funds lost due to mismanagement. Here are some interesting takeaways from the report, detailing government revenue losses resulting from, among other things, its failure to impose fines on unruly businesses; its defiance of presidential directives aimed at ensuring transparency; and irregularities in spending, which together have left Yangon taxpayers millions of kyats poorer, at least.
Yangon Secretariat project: immune from fines?
From holding a private birthday party to its recent hosting of a spa business, the historic colonial building in downtown Yangon has become a source of controversy. The previous U Thein Sein government leased the complex to Anawmar, a private business group run by relatives of Tun Kyi—a Lt-Gen in the former military junta—which was to renovate the building to host a museum and provide other services. The auditor-general’s report sheds light on the fact that the Yangon government has failed to fine the group for overdue payments and discloses little-known information including the following:
1. Owner: Yangon government
2. Length of lease: 50 years (from Jan. 29, 2015 to Jan. 29, 2065)
3. Leasing price: 25 million kyats per month (about US$17,100) for a total of 15.963 acres (about 6.5 hectares)
4. Renovation period: From Jan. 29, 2015 to Jan. 29, 2017. However, the Myanmar Investment Commission extended it to June 28, 2018.
5. Date of commencement of business operations: June 28, 2018. The lease payments were to commence from this date, according to the terms of the contract between the Yangon government and Anawmar.
- An audit in January 2019 revealed that the Anawmar Group had failed to pay its annual lease (for June 28, 2018 to 27 June 2019) amounting to 300 million kyats, to the Yangon government. The auditor-general’s report discloses that the group only made the payment in April 2019.
- However, the Yangon government didn’t impose a fine on Anawmar for the overdue payment, contrary to the terms of the contract between the government and the group. The contract states that any failure to make a payment on time will incur a fine of 10 percent of the payment.
Costly and opaque: 25 MW trailer-mounted gas and diesel turbine generator
The Yangon government spent 30 billion kyats from the Myanmar President’s Special Fund in FY2016-17 to fulfill the city’s electricity needs during power outages in summer. However, the auditor-general’s report found that the project is too costly, because…
- The generator consumes 1,680 gallons (about 6,360 liters) of diesel per hour.
- Since its installation in July 2017, the machine has operated for only five months as of May 2019, but has consumed 926,346 gallons of diesel.
- Total electricity units generated in the five months was 11.806 million.
- The total fuel cost for the five-month operation was 3.844 billion kyats. (Note: According to the auditor-general’s report, if you purchase the same number of units from Myanma Petroleum Product Enterprise [MPPE], you will only have to pay 708.368 million kyats!)
- Violating a Myanmar President’s Office directive to call an open tender in purchasing the generator, it was done as a limited tender, the auditor-general says.
Failed night market on the Strand Road
Probably inspired by some neighboring countries’ popular street-food stall areas, shortly after becoming the city’s chief, Yangon Chief Minister U Phyo Min Thein collectively relocated Chinatown’s sprawling hawkers and food vendors into a designated area on the city’s Strand Road in 2016, in order to regulate them. Two years on, the move failed to impress the auditor-general because:
- It generated revenue of only 114.482 million kyats in FY2017-18, while the total investment in the night market was 1.569 billion kyats in FY2016-17 and 2017-18.
- There were only 533 shops left in March 2018—just over 30 percent of the 1,763 outlets that have been registered.
- The auditor general’s comments: The place is “Deserted. Better to find a proper way to achieve the vision.”
Traffic Control Center: out of control
To ease traffic congestion in Yangon, a contract was signed under the previous U Thein Sein administration (the predecessor of today’s National League for Democracy government) between the Yangon government, Myanmar Shwe Ying International Co., Ltd and China Railway 21st Bureau Group Co., Ltd in FY2015-16 to build a traffic control center. However, the auditor-general’s report found that operation of the center wasn’t handed over to the regional government until April 2019 due to technical issues. Here are some more details about the center you may want to know:
- Total cost: 18.938 billion kyats
- Due to its failure to meet the project deadline, the company is liable to pay a fine of 100,000 kyats per day to the Yangon government.
- A quality control committee for the center was formed in September 2018.
- The companies starting paying fines in August 2016. After paying total fines of 28.6 million kyats, they stopped paying in May 16, 2017, violating the contract terms, the summary report says.
Yangon Region Transport Authority: tax-evader
The Yangon government formed the Yangon Region Transport Authority (YRTA) in 2016 to oversee the city’s public transport system. Under the body’s supervision, 100 bus lines for commuters were launched in 2017 under the Yangon Bus Service (YBS), among other entities. According to the summary of the auditor general’s report for FY2017-18:
- YRTA had a surplus of 7.691 billion kyats from 9.487 billion kyats in earnings.
- Its expenditure was 1.796 billion kyats.
Despite the surplus, the transport authority failed to pay income tax to the government, a legal requirement for every business in Myanmar.
The Yangon government invested 35 billion kyats each in Yangon Urban Public Transportation Public Co., Ltd (YUPT) and Yangon Bus Public Co., Ltd. (YBPC) in FY2016-17 to upgrade the city’s bus service. It then imported 1,000 yellow buses—500 for each company—at a cost of US$56 million from China. However, for FY2017-18, the report finds that both companies lost more than 3.857 billion kyats. Furthermore, it says:
1. YUPT and YBPC borrowed 8 billion kyats from a local bank, Aya Bank—4 billion kyats each—as the government investment was not enough to purchase the buses from China. The annual interest rate is 13 percent.
2. As of January 2019, YBPC had returned 2.848 billion kyats of the loan. The report doesn’t mention if YUPT paid it back or not.
Unreasonably priced land leases
The Yangon regional government under the previous U Thein Sein administration leased large public gardens in the city, in whole or in part, to businesses on a long-term basis. The leasing prices were far below the current rate, causing a loss of millions of kyats for the government annually. The auditor general’s summary for FY2017-18 finds that the current Yangon government still has to fix the problem. Here are some examples:
1. The government earned 10.237 billion kyats less than the market price from leasing land to Natural World Co., Ltd in the city’s People Park.
2. In Kandawgyi Park, 19.11 acres of land has been on a 30-year lease to Zay Kabar Company. But in FY2017-18, the government got 474.257 million kyats for 3.055 acres. The amount is 2.719 billion kyats less than the current land lease price set by the government’s Internal Revenue Department.
According to the auditor-general’s report, Myanmar President’s Office directives made in 2017 and 2018 urged state and regional governments to make sure land lease prices are in line with suitable current prices for the area where the projects exist. The Yangon government failed to follow them.
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