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Regional Environmental Technical Assistance 5771 Poverty Reduction & Environmental Management in Remote Greater Mekong Subregion (GMS) Watersheds Project (Phase I)

Review of Policies and Institutions Related to Watershed Management

Myanmar

By

Esa Puustjarvi

CONTENTS

1. Introduction 3 2. Socio-economic Development 3 2.1. National Level 3 2.2. Status of Upland Development 4 2.3. Remote Watersheds 6 3. Environmental Status 7 4. Upland Policy 10 4.1. Public Investment 10 4.2. Legislative measures 11 5. Agriculture 13 6. Forest-based Production 15 7. Rural Industries & Trade Sector 17 8. Population Movements 18 9. Land Tenure 19 9.1. Agricultural land 19 9.2. State tenure vs. non-state tenure of forest land 20 Page 2 of 17

9.3. Community-based tenure vs. individual/household tenure 21 9.4. Land allocation 22 10. Institutions 24 10.1. Government Institutions 24 10.2. Patterns of Participation 25 11. Conclusions 27 11.1 General 27 11.2. Recommendations for RETA 5771 28

1. Introduction

The review of policies and institutions related to watershed management in Myanmar relies on the general analysis framework developed at the sub-regional level, and presented in the regional report of this study. Country reports are presented in a form, which allows for reading them as stand-alone documents. However, a general discussion on the issues and conclusions can be found in the regional report. As the structure of country reports and that of the regional report is largely the same, and the discussion relevant to various issues can be referred to by looking up the corresponding sub-heading.

Topics such as health, education, and gender have been excluded from the scope of this report, as they are covered under other assignments.

2. Socio-economic Development

2.1. National level

The Union of Myanmar has a population of over 46 million. The annual population growth rate is 1.9 percent, which puts it in the middle range among countries of the Mekong sub -region. At this pace the population will double in the next 35 years. Myanmar is inhabited by as many as 135 ethnic groups. The largest group is the Bamars, who account for 69 % of the population. Approximately 25 % of the population live in urban areas.

The indicators for human development show improvements, but the overall level of progress remains modest in a sub-regional comparison. Officially, between 1960 and 1995 life expectancy rose from 44 years to 58 years, adult literacy rate increased from 72 % to 83 %, and infant mortality dropped from 158 to 105 per thousand live births. However, the data are inaccurate, and may not fully reflect the actual situation. For instance, the reported adult literacy rate of 83 % is based on the last census conducted in 1983, but recent surveys report that almost 30 % of the population aged five years and above have not received formal education.

In economic terms, the latest estimates available for the year 1994, indicate a real GDP per capita (Purchasing Power Parity) of USD 1051, which is the lowest figure in Southeast Asia. Nominal GDP estimate is not available.

Between 1949 and the end of 1980’s the country maintained slow economic growth and, in particular, the late 1980’s marked a difficult period for the economy. For instance in 1988/89 the GDP slumped by 11.4 %. Since then growth has picked up and according to official figures the economy reached an average annual growth rate of 7.1 %/a in 1992-97. Rate of expansion in the agriculture sector was estimated at 5.2 %/a, in industries at 11.2 %/a and in the service sector at 6.6 %/a (Table 1). These rates of growth represent average levels in the sub-region. The mainstay of the economy is agriculture, which in 1997 represented 58.6 % of the GDP, which is the highest share in the sub -region. Industries accounted for 10.5 % of the GDP and the contribution of the service sector was 31.0 %. Page 3 of 17

Table 1 : GDP Growth in selected sectors and overall in Myanmar in 1992 -1997

Real Growth (% p.a.) 1992 1993 1994 1995 1996 1997 Avg. GDP 9.7 6.0 7.5 6.9 5.8 6.4 7.1 Agriculture 8.3 2.7 8.3 3.1 2.8 5.8 5.2 Industry 12.7 11.0 10.3 12.5 10.7 9.8 11.2 Services 7.6 6.1 8.3 7.2 5.3 5.1 6.6

Source: Asian Development Bank 1998

In general terms, the country faces a number of constraints to broad-based economic growth over the long term, including shortages of critical goods (e.g. petroleum products), rapid increased in the money supply, inadequate investment capital and foreign exchange, inefficiencies in the State Economic Enterprises, and the dual price and exchange structures.

Measured by the human development index compiled annually by the UNDP* Myanmar ranks at 131, which puts it in the middle groups in the subregion ahead of Cambodia and Lao PDR. In global terms, Myanmar qualifies as a country of "low human development".

2.2 Status of upland development

For the purposes of this analysis, 4 states and 1 division of Myanmar were classed as "upland areas". The Kachin, Shan, Chin and Rakhin states represent areas with relatively infertile soils in high elevations located in the border areas of the country. The proportion of ethnic minorities is also rather high. The Sagaing Division is a hilly area with generally more fertile soils than the four States referred to above. The available statistics are limited and do not allow a full comparison of socio-economic status between the upland areas and the nation as a whole.

The available population statistics indicate that the population density in the upland states is lower than the national average. On the other hand, only the Kachin and Chin States may be considered sparsely populated areas, whereas in other upland areas the population densities have reached rather high levels. In terms of infrastructure no clear pattern can be established. Regarding safe drinking water and sanitation, the upland states as a whole do not differ markedly from the national average(Table 2). However, some regional disparity is indicated by the energy supply, which is rather restricted in the upland areas. The main power grid reaches only very minor portions of the Shan State and the Sagaing Division. Other three upland States do not have any access to the national grid.

Table 2: Selected indicators on population and infrastructure

Province Population (1995-96) Infrastructure Total (’000) Density Access to safe Access to Extension (pers/sq km) and convenient sanitation in of main drinking water in 1995 (% of power grid 1995 (% of households) (% of land households) area) Kachin 1157 13 67 53 Shan State 4486 29 45 (S) 32 (S) 4 (When available South, East, 68 (E) 81 (E) North) 69 (N) 32 (N) Sagaing 4985 53 60 20 7 Chin 444 12 62 69 Rakhine 2524 69 33 34 Upland area 13596 33 3 WHOLE COUNTRY (TOTAL) 44744 66 60 43 25 Page 4 of 17

Source: Immigration and Population Department Multiple Indicator Cluster Survey 1995 Review of the Financial, Economic and Social Conditions for 1996/97

The social indicators do not point to a major discrepancy in the education and health standards between the upland areas and the rest of the nation (Table 3). The only indicator suggesting a major difference to the disadvantage of upland areas is immunisation. Regarding malnutrition the children living in the upland areas seem to be better off than those living in other parts of the country.

Table 3: Selected Social Indicators in 1995

Province Percentage Percentage Maternal Infant Percentage of of children of 12-23 Mortality Mortality children under- who month-old (numbers per (numbers five who fall eventually children 100 000) per 1000) below –2SD reach last immunized (moderate and year of with BCG severe primary malnutrition) school Kachin 39 57 100-116 >100 37 Shan State 30 (S) 55 (S) 100-116 >100 35 (S) (When available South, East, 31 (E) 42 (E) 48 (E) North) 39 (N) 65 (N) 37 (N) Sagaing 35 87 80-99 80-<100 42 Chin 42 55 80-99 80-<100 52 Rakhine 29 51 80-99 80-<100 56 WHOLE COUNTRY 34 83 94 43 (TOTAL)

Source: Multiple Indicator Cluster Survey 1995 UNICEF, 1995

2.3. Remote watersheds

It is worth noting that the socio-economic development within the upland areas is uneven. The differences are particularly sharp between rural and urban areas (Table 4). This suggests that while the disparity between upland areas and the rest of the country is not striking, it is the more distant areas, such as remote watersheds, that lag behind.

Table 4: Selected indicators on urban and rural areas in upland zone in 1995

Access to safe and Access to Percentage of Percentage of convenient drinking sanitation (% of children who children under-five water (% of households) eventually reach who fall below – households) last year of primary 2SD (moderate and school severe malnutrition) Urban Rural Urban Rural Urban Rural Urban Rural Kachin 77 64 80 44 51 37 24 41 Shan State (South, 87 (S) 37 (S) 61 (S) 23 (S) 52 (S) 27 (S) 34 (S) 35 (S) East North) 68 (E) 67 (E) 90 (E) 74 (E) 39 (E) 37 (E) 45 (E) 49 (E) 91 (N) 64 (N) 67 (N) 24 (N) 52 (N) 29 (N) 30 (N) 38 (N) Sagaing 77 57 12 22 46 34 30 44 Chin 99 54 86 65 56 40 59 51 Rakhine 51 29 53 26 35 28 49 57 Page 5 of 17

Source: Multiple Indicator Cluster Survey 1995

3. Environmental Status

Appraisal of Forest Resources carried out in 1989 by the Myanmar authorities indicates a declining trend in forest cover (closed and degraded forest). The 1989 forest area was estimated at 43 % of total land area* , and the annual loss between 1975 and 1989 was 220 000 ha (Table 5). The forest loss corresponds roughly to the expansion of forest area affected by shifting cultivation. Even though the relationship is not straightforward, the study suggests that in general terms the expansion of shifting cultivation has in the past been a significant factor underlying changes in forest cover. It should be noted, however, that in the upland states the situation is markedly different. The forest area remained the same and the area affected by shifting cultivation actually decreased. The upland states displayed significant variation in the development of their forest cover. The study suggests that a few areas such as the Kachin State and Sagaing Division actually increased their forest cover and the area under shifting cultivation decreased. The Chin State, on the other hand, experienced a particularly sharp drop in the forest area.

The study methodology - an interpretation made through satellite imagery - did not allow an analysis on the impact of logging, but it has undoubtedly accelerated deforestation, where it has occurred. Unsustainable and illegal logging is also a likely cause of forest degradation, but this cannot be confirmed based on available data.

Construction of dams has also contributed to the loss of forest cover, but its impact is much less significant than that of shifting cultivation and logging. By 1998 the total area under impoundment is 180 000 ha, which is less than average deforestation in one year. Even this is an overestimate as it is unlikely that the entire area inundated by the reservoir would have been under forest cover. With the exception of Sagaing Division the effect in upland areas is negligible since dam construction has concentrated in the central plains area.

Table 5: Changes in forest cover and area affected by shifting cultivation

Forest cover (% of land area) Rate of Forest area affected by shifting deforestation cultivation (% of land area) (% of forest area)

1975 1989 1975-89 1975 1989

Kachin 72 78 (-) 0.59 16 16

Shan State 27 25 0.40 59 56

Sagaing 59 63 (-) 0.55 10 13

Chin 44 30 2.15 51 68

Rakhin 60 53 0.78 12 16

Upland states total 48 48 0.00 35 34

Whole country 48 43 0.64 26 30

Source: Appraisal of Forest Resources 1989

FAO has carried out global forest assessment for periods 1980-89 and 1990-95. The FAO estimate is not fully comparable with that provided by the Forest Resource Assessment of 1989 due to differences in study methodology, but it provides an indication of the recent trend. The FAO study suggests that between the two study periods the rate of deforestation has slightly increased in Myanmar from 1.3 %/a to 1.4 %/a (Table 6). In subregional terms this is an average pace.

Table 6: Deforestation in Myanmar according to FAO Page 6 of 17

Country Forest % of land Average Annual Rate of Deforestation cover area (thousand sq. km) As % of forest area Sq. km 1995 1980-1990 1990-1995 1990-1995

Myanmar 272 41 1.3 1.4 775

Source: FAO 1991,1996

Regarding upland areas the World Resource Institute (WRI) conducted a study on selected sites in the Kachin State with a methodology similar to that used by FAO. Contrary to the results of the Forest Resource Assessment the WRI study suggests that even between 1978 and 1989 the forest cover would have been shrinking at a rate of 0.37 %/a. The difference is somewhat surprising, but it may be due to differences in definition of forest cover, sample size, study period etc. According to WRI the present net rate of deforestation in the Kachin state stands at 0.6 %/a (between 1989-96). However, the rate is still lower than the national average of 1.4 %/a estimated by FAO (between 1990-95). The gross rate of deforestation estimated by WRI, which does not take into consideration regrowth, was put at 1.23 %/a.

The main reason behind accelerating deforestation in the Kachin State in the 1990’s is probably the fact that the Government decided to abandon its former policy of strategic hamlets. The objective of this programme was to resettle the people living in the upper catchments in lowland areas in order to deny the insurgent army a popular base and a local food supply. After the Government and insurgent groups agreed to end hostilities in 1989, many of the resettled people moved back to their former settlements and re-introduced former agricultural practices including shifting cultivation. Similarly, logging of forest areas by the State companies was resumed. It is likely that the absence of logging and shifting cultivation prior to 1989, and their subsequent re-introduction after the hostilities ended largely explain the change in forest cover. Similar reversal of resettlement has taken place in the Shan State.

In conclusion, it appears that forest cover in Myanmar is steadily declining. Although recent and comprehensive analyses are lacking the main causes of forest loss are probably shifting cultivation and logging. In absence of more detailed investigations it is difficult to assess in detail, whether shifting cultivation practised in Myanmar can be environmentally sustainable. However, general estimates on population levels, which allow for sustainable shifting cultivation, suggest that 30 persons/sq. km would be the maximum limit. Population data shows that except for Kachin and Chin States, this level has been surpassed or may be surpassed in the near future. Such high densities of population have probably rendered shifting cultivation unsustainable, at least when it is practised in its original form without any modifications (cf. Table 2).

Logging has an indirect impact, and it is probably a major cause of forest degradation. For instance, overlogging of teak in the early 1990’s may not have caused direct loss of forest area, but it has reduced the value of timber stock as teak has given way to species with lower value . In the densely populated areas, logging has also been a factor accelerating the expansion of shifting cultivation.

There are no data to indicate whether the expansion of commercial agriculture has caused forest loss. However, it is likely that in upland areas it has a negligible impact. However, some effect may have been felt in the upland areas in states bordering the Thai and Chinese borders, where the expansion of border trade may have made the expansion of commercial agriculture a lucrative option.

4. Upland Policy

4.1. Public Investment

In Myanmar there is no upland policy as such, but it is effectively formed through the interplay of various sectoral policies. The regional dimensions of Government policy can be derived indirectly from investment policies and legislative measures.

Among the more direct means of upland support is the Border Area Development Program, whose geographic coverage corresponds roughly to the upland area (see map). The executive arm of this program is Page 7 of 17

the Ministry for Progress of Border Areas and National Races and Development Affairs. The objectives defined for the Ministry (Box 1) indicate that it has a wide mandate, and it is in fact the key ministry for channelling budget funds to border areas.

Box 1: Objectives set for the Ministry for Progress of Border Areas and National Races and Development Affairs

1. To develop the economic and social works and road and communication of the national races at the border areas, in accordance with the aims which are

a. non-disintegration of the Union

b. non-disintegration of the national solidarity

c. perpetuation of the sovereignty of the State

2. To cherish and preserve the culture, literature and customs of the national races

3. To strengthen the amity among the national races

4. To eradicate totally cultivation of poppy plants by establishing economic enterprises

5. To preserve and maintain the security, prevalence of law and order and regional peace and tranquility of the border areas.

By end of 1996/97 the support available to border areas totalled 4.6 million kyats of which 75 % was disbursed through the Ministry for Progress of Border Areas, and the rest through other line ministries. The funds available from the Border Area Development Program have been channelled mainly to road construction and development of social infrastructure 2.

The level of support provided by this program is fairly modest. Between fiscal years 92/93 and 96/97 the expenditure on Border Area Development Program represented on average 2.1 % of total Government capital expenditure without any discernible trend up or downwards. For comparison, the population living in the program areas is 3.7 million representing 8.4 % of total population in Myanmar. This disparity in proportions suggests that the level of state investment in border areas would be below the national average.

4.2. Legislative measures

It should be noted that in Myanmar capital expenditure does not fully reflect the level of Government support. Direct investment is just one instrument available to the state. Among the legislative measures implemented by the Myanmar Government in support of border areas was a tax "amnesty" in 1993 applied to border towns. Under this measure the investors were not required to declare the source of investment funding. This resulted in a surge of investment activity, and even though a significant part of the funds was channelled outside the upland areas, some border towns e.g. Tachilek in the Shan State benefited greatly from the increased level of investment following the "amnesty".

Probably the most significant boost to the development of border states was given by the legalisation of cross- border trade in the early 1990’s. Even if it may have been motivated by considerations other than those related to upland development, it has had a profound impact on the development of border states. Coupled with the huge receipts from narcotics production the expansion of cross -border trade has increased private investments at an unprecedented level. Even if no official figures are available there are indications that the level of private investment practically dwarfs the volume of state investments.

The effects of increased cross-border trade have probably been felt in all areas adjacent to the main three trade partners. Although official trade data must be used with great caution, the available statistics are probably reliable in indicating orders of magnitude. As Table 7 indicates India, Thailand and China are rather equal in terms of their importance as trade partners, whereas trade with Bangladesh remains modest.

Table 7 : Cross -Border Trade: Official Figures 1995 -96 (provisional data) Page 8 of 17

Border area Import Value (million Export Value (million Total Trade Value (mill. kyats) kyats) Kyats)

Myanmar-India 345 1037 1382

Myanmar-Thai 1319 534 1853

Myanmar-Bangladesh 22 57 79

Myanmar-China 1434 195 1629

Total 3120 1823 4943

Source: The Financial, Social and Economic Conditions for 1996/97

A particularly strong impact must have been experienced by the urban areas of the Shan State, which lies in strategic position between Thailand and China (the Yunnan province). There is anecdotal evidence that the benefits of surging in cross-border trade have trickled down to most communities (mostly urban or semi- urban) able to develop links with trade. It has also rubbed the established patterns of regional development providing a boost the development of new commercial centres such as Tachilek, which in economic terms have by-passed many previously important settlements farther from the border.

However, it should be noted that besides wealth an increased trade has been accompanied by social problems such as spread of the HIV-virus and "export" of prostitutes to Thailand. There are also indications that even the benefits of trade have concentrated in few hands, and that positive implications in the remote watershed areas have been limited. While the increased demand for agricultural products has brought some benefits to upper catchment areas, it is likely that the highest benefits have been captured by traders, and not by communities living in upper catchment areas. Reportedly, in 1993 in the Shan State half of the trade volume was controlled by 50 families. As expected, many large-scale investments are made by investors outside the upland areas. For instance, the lucrative transport sector in the Shan State may be run largely by companies based in Mandalay and in Kunming.

In conclusion, it appears that the measures with the highest impact on upland development have been the few legislative changes that have been effectively implemented such as the "tax amnesty" and legalisation of cross-border trade. While public infrastructure investments are absolutely necessary and do have their place, this points out that the Government’s capacity to create an environment, where all productive and human assets are effectively mobilised is of utmost importance. However, it should be noted that the ability to foresee and prevent negative implications of economic expansion has equal significance.

Another key intervention considering the remote watersheds is to ensure that the potential benefits of increased economic activity in the border areas extend to these areas. The positive effects, such as job creation and increased demand for local goods, may not automatically extend to remote areas. The problem is common to all GMS countries, and development planners have largely ignored the development of semi- urban areas as a means to support remote watersheds. However, with carefully targeted measures it may be possible to substantially strengthen these linkages (see ch. 7).

5. Agriculture

Agriculture has been accorded a priority status among production sectors, as it is considered the main vehicle for socio-economic development. In principle, this may be considered as positive from the upland perspective, since it fosters investment in the sector dominating the economy in the upland areas. However, the balance between upland and lowland areas in support of agricultural production has not been clearly defined. Even if equitable distribution of benefits and regional considerations are referred to in policy documents, it is unclear what the practical implications these statements hold. The bias towards lowlands in terms of public investment (cf. ch. 4.1) and the available statistics on agricultural inputs suggest that development of upland agriculture still had a low priority within the agricultural sector.

One of the most prominent objectives pursued by the Government in the upland areas is to reduce the area of shifting cultivation. Even if this is an objective stated in the forest policy, in practice it has not been possible to by significantly reduce shifting cultivation with means available to forestry authorities i.e, enforcement and Page 9 of 17

promotion of non-timber production and, in a few cases agroforestry. However, degradation of forest environment is often a mere extension of problems experienced in other sectors, and, unavoidably, the development of alternative livelihoods falls in the court of agriculture sector. The principal strategy pursued in agriculture has been to encourage the development of market-oriented permanent agriculture and livestock production. The same strategy plays an important role in the pursuit to suppress opium cultivation.

The experience gained in other countries in the GMS region shows that reducing shifting cultivation or opium cultivation requires substantial resources. Both infrastructure investments and extension capacity are needed to encourage alternative practices. It is unlikely that they would be available to all upland areas in Myanmar. Some international development projects have demonstrated the potential these options hold, but they rely to a large extent on external resources and cover only small areas. If larger areas were subjected to the same approach, it is unlikely that the Government of Myanmar were able to bear the cost. Therefore, it would be advisable to clearly identify areas, where interventions are urgently needed in order to concentrate the resources on priority sites.

There are indications that prioritisation has been done to some degree, but it appears that social and environmental considerations have been of secondary importance. For instance, despite a very rapid deforestation in the Chin state prior to 1990’s, it did not rank high in terms of state investment into agricultural infrastructure. The priority was accorded to eastern border areas, and it is only recently that the Government has started to channel public investment funds to western border areas. At any rate, it appears that the resources available do not match the strategy in that the geographic coverage seems too ambitious. In order to ensure that a lasting impact is achieved in the most critical areas it would be necessary to further reduce the scope of interventions.

However, a concentration of resources does not necessarily mean that the strategy to be applied outside the priority sites should necessarily be that of "no action". Instead, it might be warranted to study the feasibility of applying a "low-intensity" approach. The aim would be to contain environmental degradation by maintaining the sustainability of indigenous land uses to the extent feasible. Even if this were not fully achieved, a "low- intensity strategy" might prove cost-effective in the sense that it might be able to significantly slow down the pace of degradation. One of the key elements of such a strategy would be granting land use rights based on customary law with a view to encouraging long-term investment and some degree of sedentarization (see ch. 9.4).

Another constraint to the implementation of the market-based development strategy in the agriculture sector is the large number of small agricultural holdings and landless people. 62 % of families have less than 2 hectares of land, which is regarded as the bare minimum required to support a household above the poverty line . Unless the farm size is not increased through increased land allocation, the implementation of the present agricultural development strategy is put seriously at risk. On the other hand, land allocation to small farmers would almost certainly lead to forest clearing, but unless it is carried out, it is unlikely that farmers were able to abandon shifting cultivation. This, in turn, may have even more serious consequences in terms of deforestation and environmental degradation, at least in the highly populated areas.

6. Forest-based Production

The strategy of the Myanmar Government is to maintain forest cover by setting aside "Forest Reserves", which are used for wood and non -wood production, as well as for conservation purposes including watershed protection. Watershed protection areas may also be established as "Public Protected Forest" within the category of "Other Forest". The total area of forest reserves is 104 886 sq. km representing 15.5 % of total land area of Myanmar. However, in the upland areas except for Sagaing Division the percentage is considerably lower (Table 8).

The size of watershed protection areas is not known, nor are the regulations concerning forest management clearly defined. However, in general there is no right of entry for local population into the watershed protection areas. Limited logging by state organisations is probably allowed in some areas. In areas formerly classified as "climate reserves" even logging was prohibited, and the practice has probably continued even though detailed information is lacking. However, violations are commonplace either through encroachment by local population or illegal logging. For instance, illicit timber harvesting is estimated to account for 30 % of total logging volume. The Government has attempted to restore the degraded watershed through reforestation. By end of 1997 the Government has established 54 541 ha of forest plantations in degraded watersheds.

Table 8 : Forest area in Myanmar in 1998 Page 10 of 17

State Reserve Forest Other Forest Total Forest Area Sq. km % of total Sq. km % of total Sq. km % of total land area land area land area Kachin 5743 6.4 69258 77.8 75001 84.2 Shan State 9681 6.2 50319 32.3 60000 38.5 Sagaing 24348 25.7 39754 42.0 64102 67.7 Chin 1843 5.1 16673 46.3 18516 51.4 Rakhine 2672 7.3 19267 52.4 21939 59.7 Upland areas 44287 10.7 195271 47.4 239558 58.1 Whole country 104886 15.5 238701 35.3 343587 50.8

Source: Forest Department 1999

The primacy of agriculture on the Government’s development agenda as well as the limited size of agricultural holdings give rise to a concern that conflicts in land use will exacerbate. The strategy to augment the area of permanent agriculture foresees that expansion is implemented by converting fallow lands and culturable wasteland into agricultural production. While these land uses represent a sizeable portion of land area, 1.8 % and 11.8 % respectively, it is obvious that they are not always found in areas where the pressure to expand agricultural area is highest. It is very likely that forest areas will become under increased pressure.

On the other hand, in areas, where the size of agricultural holdings is a problem, clearing of forest land could have a positive net effect. If forests were cleared in order to increase farm size, it might be able to deflect a more harmful development, as the possibility of enlarging the size of their holding might encourage farmers to sedentarize their agriculture (cf. 5). The available guidelines for land use development are vague and give rise to inter-sectoral conflicts between competing land uses. Given the severity this conflict may have in the future, the lack of proper land use policy is one of the main gaps in the present policy framework.

Presently, the priority area for watershed management is the arid central plains known as the Dry Zone, where the construction of irrigation dams have been concentrated, and where siltation from degraded watersheds is a serious problem. The Forestry Department is focusing on reforestation and protection of natural forest through law enforcement. However, the protection of natural forest through enforcement has reportedly not been effective mainly due to lack of staff and operational capacity. Encroachment by illegal loggers or local populations is commonplace.

Plantations in watershed areas represent 9 % of total area reforested. As a rule reforestation is carried out by Department’s own staff, only a very small area has been allocated to development of community-based activities (cf. ch. 9.2). Reportedly the survival rate of these plantations is modest. Besides technical difficulties encroachment by local populations has been a persisting problem.

It appears that in Myanmar a large part of deforestation is related to social issues (along with commercial logging interests). It is probable that in areas, where population pressure is high, shrinking forest cover may to a large extent be a symptom of problems experienced in the social sphere. It should be noted that reforestation and law enforcement are attempts to deal with the symptom, not the cause. Unless the fundamental factors causing deforestation have been eliminated, the newly reforested areas run the risk of being exposed to the same pressures, and undergoing the same process of degradation.

If people’s food security is at risk, forestry appears unable to compete with agricultural production. In such circumstances it may be advisable to consider second best solutions as an alternative to reforestation. Adopting land management practices, which yield fewer environmental benefits, but accommodate better the farmers’ need for short-term returns may have higher rate of success. Examples of practices, which could be adopted in forest land are agroforestry or cultivation of agricultural tree crops. The overall net result may be better than in schemes based on reforestation in block plantations (see also ch. 9.3).

A more technical option would be to reduce the risk of financial loss associated with reforestation. To this effect, it may be worthwhile to study further the option of increasing reliance on natural regeneration or restoring some form of vegetative cover such as shrub in areas with the highest risk of renewed encroachment. The disadvantage compared to natural forest cover may be minor compared to the level of cost savings achieved. Reportedly, such approaches are being pursued by the authorities, but given the large Page 11 of 17

proportion of funds dedicated to plantation establishment, a further review of the scope of the reforestation programme might be warranted.

7. Rural Industries & Trade Sector

The industrial sector is still rather small representing less than 10 % of Myanmar’s GDP. Industries are dominated by large state-owned enterprises, there are only a little over 100 private enterprises with more than 50 employees. However, the Government’ economic policy sets the objective of gradually evolving a market- oriented economic system based on private initiative 2. More than half of the existing private enterprises is engaged in agro-processing. The Ministry of Agriculture and Irrigation has also established industrial parks to promote processing of agricultural products.

The way in which the transition from a planned economy to a market-based orientation is implemented is of paramount importance to the development of the agricultural sector. Emergence of a sufficiently large and efficient agro-industrial processing sector is vital for the success of Government’s agricultural strategy. Local processing of agricultural products would be necessary for achieving a price level for agricultural products, which makes permanent and market -based agriculture a viable option to shifting cultivation. In addition, emergence of an industrial sector would permit the absorption of the increasing number of landless people or farmers with very small areas of land.

As the available information is rather limited, it is difficult to assess the potential for the industrial development in the upland areas. The apparent disadvantages are the lack of local capital and to some extent also production volumes in agriculture, which are not sufficiently large to attract sizeable investments in agro- industries. Given the central role played by state enterprises in the industrial sector, as well as the experience from other countries with a similar situation, it is also likely that in some ways the regulatory framework may favor state enterprises.

On the other hand, in a few upland areas the expanding cross-border trade may provide opportunities for development of agro-industries, be they privately or publicly owned. In this regard, the Shan State probably enjoys the best comparative advantage. Also, Chinese and Thai tourism holds considerable development potential in the adjacent border areas in Myanmar.

However, it should be noted that the people living in the remote watersheds may not be able to capture the benefits of industrial development unless special measures are taken. The industries are likely to emerge in larger towns and they do not necessarily have strong backward linkages to remote areas, but depend more on people and endowments in their immediate vicinity. For instance, there is a risk that the benefits of increased trade accrue mainly to middlemen originating from the industrial centres, and not to upland people. One example of measures that could be taken in order to avoid this is to encourage the upland people to carry out joint marketing of their products. Another possible measure benefiting the upland people is to enhance their access to employment opportunities available in rural towns. To this end, those willing to outmigrate to nearby towns should be provided with skills needed in the urban economy.

8. Population Movements

Strategic hamleting, known in Myanmar as the Four Cuts Campaign has involved relocation of villages for the past 20 years, but reports are that the campaign has been stepped up since 1990. Uncontested figures on the scale of this activity are unavailable, but according to NGO reports over 300 000 people would have been affected by forced relocations in the border areas in the Shan State. Relocations have had a dramatic impact on the distribution of population within particular townships. For instance in Theinni Township in the Shan State, with a rural population of around 40000, some 3300 people were relocated during 1993. Most often relocations move people from upland farming areas to roadside, lowland locations. There are no conclusive reports available indicating the success of these relocations.

Voluntary resettlement was spurred by the armed conflict between the Myanmar Government and insurgent groups in the upland border areas, especially in the Shan State. The flow of migration has changed directions as the situation has changed. For instance, Mong Yawng Township population stood at around 80000 in 1983. By 1987 this had dropped to less than 40000. Afterh the hostilities ended in1989, however, there has been a marked trend towards return migration, as people return to claim land and abandoned assets. By 1993 Page 12 of 17

Mong Yawng Township was back to a level of 60000 people.

Another apparent reason for voluntary outmigration from the upland areas has been the aggravation of land scarcity and resulting economic hardships. The "pull" caused by relatively well-paid job opportunities in urban areas of Myanmar as well as in Thailand have also contributed to outmigration. There is also a sizeable contingency of people who do not report any other reason for their migration than "a wish to travel". An example from the Shan State indicates that the propensity to outmigrate is related to the ethnic background, as it seems that migrants are almost exclusively of Shan ethnicity. Besides cultural factors, one significant reason for not migrating is probably the lack of necessary language skills among other ethnic groups.

Most of the negative effects of voluntary population movements are associated with in-migration to other agricultural areas or to large urban concentrations. Therefore, a more advantageous scenario might be one, where the migrants would have an opportunity to settle in urban or semi -urban areas in the proximity of their upland settlement.

One of the advantages of such an approach is that settlers would be able to maintain much of their social networks owing to the physical proximity to their former settlement area. The migrants could also play a crucial role in forming a "social bridge" between the upland communities and majority populations and in assisting them to break their social and economic isolation. From the perspective of ethnic minorities it would provide the migrants with an improved opportunity to protect their cultural identity, as the limited size of rural towns would probably ensure that they represent a fairly large portion of the population.

In order to successfully divert part of the migration flows to small upland towns, it is necessary to generate employment and, to this effect, rural industries. However, given the early stage of economic development in Myanmar, it may be relevant only in selected locations. Furthermore, it is necessary to recognize that the negative consequences of migration cannot be entirely avoided. For instance, emergence of social problems and erosion of cultural identity are probably unavoidable. However, if migration cannot be stopped, the "small town" scenario provides an effective means to mitigate the negative effects.

9. Land tenure

9.1. Agricultural land

State is the sole owner of land in Myanmar. Farmers are given usufruct rights to agricultural land, but the legislation stipulates that "any individual has no right to hold considerable extent of agricultural land" (Constitutional Law of 1947). As a result, a sizeable portion of agricultural lands is held under individual tenure, but holdings are usually small . Almost two thirds of agricultural holdings are smaller than 5 ha (2.2 ha). This is a major constraint to production and severely hampers people’s ability to raise their living standards based on agricultural production.

On the other hand, a large part of cultivable areas are under fallow, and the Government has initiated a procedure of land reclamation, where private investors are granted land use rights to areas up to approximately 2000 ha per applicant. While most areas available for allocation to private investors are located in the lowlands, suitable sites in the upland areas may also be included in the program scope. The program is still in an early stage of implementation, only 100 000 ha of the estimated total area of 9 million ha is being developed.

The potential impact of the program in the uplands is difficult to estimate based on available information. In principle, large-scale industrial undertakings may provide employment to local people. On the other hand, the local people may be using the fallow areas for other purposes such as grazing. If this is the case, the implication would be negative, as land use rights granted to investors are exclusive. Further, given the small average area of agricultural land holdings, one may ask whether an allocation strategy aiming to expand small holdings would not benefit the local population more effectively.

9.2. State tenure vs. non-state tenure of forest land

All forest land is owned by the state with exclusive user rights except for household use by local people. However, in 1995 the Government issued instructions for the establishment of community forests, and launched pilot projects in order to experiment with the approach. Today community forests cover an estimated 7500 ha (Table 9). Until now they have been established in bare or degraded forest areas with the objective of Page 13 of 17

encouraging reforestation. In principle, natural forests could also be managed under community forest rules.

Table 9: Characteristics of Community Forests in Myanmar

Product and Responsibilities Participants Restrictions Tenure Rights Transfer Rights Household use, Protection and User’s Group Regulations of 30 years renewable Commercial Sales production according consisting of village Forest Act; no freely in adjacent to management plan households conversion to other villages; elsewhere land uses under standard rules applicable to all forest-based production

Source: Forestry Department 1999

As the most first community forests were established a little more than three years ago, it is too early to say, whether the concept is workable. So far the emphasis has been on reforestation, and reportedly the experience has produced mixed results. Even if no detailed analysis has been carried out it is probable that, in line with the experience gained elsewhere, the success of community forestry is relative to the importance of other concerns such as land scarcity and food security. The interest in forest-based production and protection is likely to be higher in areas, where people’s basic needs have been met.

Based on past experience of forest tenure elsewhere in the GMS region it appears that non-state tenure might be further expanded even in areas, where demand for land is high. The principal reason is the incapacity of state tenure to secure sufficient protection to the forest resource. Local tenure would ensure villagers’ interest to fend off external threats. It would also eliminate a situation, where - in absence of strong enforcement - everyone tries to exploit the resource as much as possible before the others do. Another strong argument in favor of non-state tenure is equity. In rural areas land is the main productive asset, and unless rural populations have access to this key resource, it may be difficult to achieve a balanced and equitable development.

It should be noted that there is no conclusive evidence on the sustainability of non-state tenure. However, in areas ridden with land scarcity and problems of food security, there is little doubt of the unviability of state tenure. Granting tenure rights to communities or households, which depend on it for their livelihood, provides at least for the possibility of obtaining their long-term commitment to resource management. Lack of tenure effectively eliminates this opportunity.

State ownership of forest land is the most relevant option in areas where the demand for land is low and where development of industrial forestry is a strategic objective. However, it would be advisable to develop strong economic linkages with the local community in order to ensure that they will receive a reasonable proportion of the benefits. State ownership may also be the preferred option in forest areas requiring strict protection, as the limited economic benefits are likely to diminish people’s interest to protect and maintain such areas. The most fragile watersheds fall into this category.

9.3. Community-based tenure vs. individual/household tenure

Community-based arrangements seem particularly suitable for promoting environmental objectives such as maintenance natural forest cover in areas where land scarcity and food security are not major problems. The experience gained in Lao PDR suggests that in such circumstances the allocation of forest land to local communities need not be restricted to protected areas. There are early indications that the well-stocked forests handed over to local communities are being managed sustainably even on a commercial basis. The particular benefit of managing well-stocked forests by communities seems to be that it reduces dependency on public investments by generating significant amounts of investment funding available to village development.

Another option, which has not been considered in the present legal framework in Myanmar is household- based tenure. In areas, where demand for land is high, the relevance of community forestry should be carefully reviewed. It may be unreasonable to expect that individual farmers, even as a group, attach a high priority to maintaining natural forest let alone reforesting bare or degraded areas. In order to avoid wasteful use of resources trying to achieve unreachable goals, it is advisable that in such circumstances the attention Page 14 of 17

of policy-makers is focused on identifying next-best solutions to be found from agricultural production (cf. ch. 5). In this case household-based tenure can be used as a powerful policy instrument enabling such transition, as it has proved effective in encouraging productive activities.

9.4. Land allocation

The best way to ensure the sustainability of transferring state land to non-state tenure, be it done for forest or agricultural land, is to couple it with appropriate and efficient extension packages. However, considering the present restrictions on state resources, this implies that the expansion of non-state tenure would be very restricted. On the other hand, there is anecdotal evidence in the GMS countries that a mere land allocation may reduce encroachment and illegal logging into forest areas, as it encourages the local population to fend off external threats.

It is also possible that security of tenure will encourage people to make investments of their own accord even in areas, where extension services and market access would not be available. Increased investment and productivity might be undertaken in order to offset the increased demand for land caused by population growth. This, in turn, would be conducive to slowing down environmental degradation. The solutions devised by local populations would not benefit from the latest technological innovations, but the approach could constitute a much needed low-intensity strategy to upland development, at least in the areas where land scarcity is not a pressing problem.

One may doubt the efficiency of the strategy in absence of technical support, and it is acknowledged that the relationship is at best tenuous. On the other hand, the approach could be experimented with on a pilot scale in order to assess, whether the potential benefits would justify the risk of the approach not being effective.

Experience from other GMS countries shows that land allocation may be a very time consuming process. In order to speed up the process, efforts should be concentrated on demarcating village boundaries instead of reallocation lands among individual farmers. Once village boundaries have been delimited, the community and local organizations should be responsible for allocating fallow land to respective groupings and individual farmers according to the customary practice found in each respective village. This approach would accelerate the land allocation process considerably, as the state officials would not be burdened with land allocation within the villages. For speed it would also be necessary that land allocation be implemented as an independent process implemented ahead of comprehensive and high-input development approaches with infrastructure investments and extension packages.

10. Institutions

10.1. Government Institutions

The principal agencies involved in watershed management include:

Ministry of Forestry/Forestry Department (FD has a total staff of 14 939 people). Watershed Management Division (17 staff in headquarters, 107 in field, approximately 20 female staff mainly in clerical positions) has the responsibility to plan interventions, mainly reforestation, which are implemented by Natural Forest and Plantation Division . Law enforcement is also the responsibility of Forestry Department 15 .

Ministry of Agriculture and Irrigation/Myanmar Agricultural Service (MAS has a total staff of 18615). Technical and financial support to development of alternatives to shifting cultivation and poppy production.

Ministry for Progress of Border Area and National Races and Development Affairs (total staff of 2600 of whom 1646/954 males/females). Development of physical and social infrastructure in border areas (mainly uplands).

The staff capacity available to watershed management cannot be estimated with the available data. However, as discussed earlier (cf. ch. 5) it appears insufficient to fully implement the present strategy either in terms of law enforcement or promotion of alternatives to shifting cultivation and opium cultivation. As dramatic increases in staff capacity it is unlikely a revised strategy may be needed. In particular, there may be a need to clearly prioritise the areas, and reduce the geographic scope of priority interventions. Page 15 of 17

Nonetheless, there is considerable potential to increase the effectiveness of the existing organisation. Administrative boundaries between the Ministries are high, and wasteful use of resource is commonplace due to lack of co-ordination between activities implemented by various ministries. For instance, it is reported that construction of irrigation dams takes usually place without any consultation between the Ministry of Agriculture and the Ministry of Forestry. As a result watershed protection is often not undertaken in priority sites. The Ministry for Progress of Border Area and National Races and Development Affairs is by nature a multisectoral body, but as it is concentrating on infrastructure development co-ordination with development activities undertaken mainly by the Ministry of Agriculture and Ministry of Forestry remains weak.

Another area, where institutional responsibilities need to be clarified is land use planning, especially as regards forest land. In administrative terms the main difference between "Forest Reserves" and "Other forests" land is that in "Forest Reserves" the decisions concerning land use are made by the Forestry Department, whereas in "Other Forests" various instances may have this mandate. Regarding "Other forests", the Forestry Department is responsible for forest management only, not for decisions concerning land use. This may be less of a concern in watershed areas, as they should fall into the category of "Forest Reserves", the confusion regarding land use in "other forest" may still have repercussions in watershed areas. While it is not suggested that Forestry Department should be the body responsible for land use planning in all forest areas, the vaguely defined responsibilities need to be clarified. Once again this points out to the need to formulate a comprehensive Land Use Policy as a basis for institutional development.

It is true that internationally-funded development projects such as the one implemented in Southern Shan State (MYA/96/007) have been able to achieve a workable co-ordination of activities between the concerned Ministries. However, this has been greatly facilitated by the fact that the project has been able to provide external funding to participating agencies. It is more than likely that in other areas where such incentives are not available inter-sectoral co-ordination remains inadequate.

In conclusion, more institutionalised forms of inter-sectoral co-operation are needed. However, as this is largely untread ground in Myanmar, it may be advisable to proceed cautiously and start with rather simple models such as the establishment of co-ordinating bodies such as the one proposed in the Forest Policy of 1995. So far this recommendation has not seen any follow-up action. If such a co-ordinating body is established, the main pitfall to be avoided is to leave it without any authoritative power in terms of activity co- ordination and resource allocation.

10.2. Patterns of Participation

Participatory planning has been recognised as a key strategy fostering sustainable development in the rural areas. For instance, it is highlighted as one of the six "imperatives" of the Forest Policy. However, it is unclear to what extent it is applied in practice. Apart from the few international development projects, it is probable that participatory planning has not yet fully taken root in the practical field work implemented by Government agencies. It is true that the methods of planning adopted by the administration reflect the general approach to governance in Myanmar, but even within the present framework there is considerable room to increase "grassroots" participation. However, this would call not only for a modification of the planning approach, but also a shift in resource allocation providing increased resources to people-centred development. In practical terms this change would imply e.g. a reduced scope for Government-run reforestation schemes in favour of community-based forest management.

The responsibility for providing Government support to ethnic minorities is vested with the Ministry for Progress of Border Area and National Races and Development Affairs. The objectives set for the Ministry include socio-economic development, protection of indigenous cultures, as well as integration of minorities with the mainstream culture. As mentioned, the focus of activities carried out by the Ministry is socio -economic development through construction of physical and social infrastructure. Yet, the resources available seem to be more restricted in the border areas as elsewhere in the nation (cf. ch. 4.1).

In the available documentation there are few references to preservation of indigenous cultures. Integration of ethnic minorities with the mainstream culture is reportedly pursued e.g. by deliberate attempts to increase the proportion of Government staff with an ethnic minority background. Some minority groups have a representation to the Constitutional Convention, even if the authority of this group is not clear. While the legacy of the armed conflict may still be underpinning the Government’s discourse with ethnic minorities, it might be advisable to provide enhanced support to those features of Government’s policy, which promote cultural co-existence.

The NGO community in Myanmar is still relatively small. However, there is a considerable number of national NGOs with a religious background with areas of work in health, education, community development. Page 16 of 17

Government-related NGOs have also increased in number and include the Myanmar Red Cross Society (MRCS), the Myanmar Medical Association (MMA), they Myanmar Maternal and Child Welfare Association (MMCWA), and FREDA in the forestry sector. The relationship between the Government and the NGO community is unclear. Reportedly, there have been attempts to find complementarities at the field level, but a dialogue on development alternatives seems restricted. However, based on experience in other countries it seems that increased collaboration would most likely cause frustrations on both sides, but the positive achievements would outweigh the negative ones.

11. Conclusions

11.1 General

Watershed management has traditionally been considered the responsibility of Forest Department. The main objective has been the maintenance of forest cover, and the principal strategies have attempted to address the issue directly either by enforcing the regulations of forest protection or by reforesting the degraded areas, where protection has been unsuccessful.

While there is no doubt that both of these strategies will feature prominently under any policy framework, there is an increasing recognition among the Government that forest degradation is underpinned by developments outside the forest sector, and that, therefore, watershed management requires a wider scope of policy. This is manifested in particular by the approaches adopted in development projects undertaken in the upland watersheds of the Shan State, in the Dry Zone and in the mangrove areas in the delta, which tackle a wide range of issues ranging from forestry and agriculture to education and health. It is of vital importance that - as a general policy - the Government adopts a significantly more holistic approach to watershed management.

However, given the limited resources available to the Government, it is unlikely that the principal development model – transition from shifting cultivation and opium cultivation towards sedentary agriculture - can be effectively implemented, unless resources are concentrated in a limited geographic area, where land scarcity is most severe. However, in other areas with a lower priority the approach should not automatically be that of "no action". It may be worthwhile to study the feasibility of a low-intensity strategy based on supporting the sustainability of indigenous land uses. A minor input could have a significant impact in terms of slowing down environmental degradation.

Another major issue hampering the effectiveness of Government’s present strategy is the small size of agricultural holdings. With almost two thirds of farmers possessing holdings smaller than 5 acres (2.2 ha), it is very difficult to make sedentary agriculture a financially attractive option. The main hurdle to expanding land allocation to farmers is the prospect of increased forest clearing for agriculture. However, it should be noted that this is likely under any scenario, the crucial issue is to devise a strategy, which will minimise the damage. Regarding forest land it should be noted that a lack of community-based or individual tenure restricts local people’s interest to ensure long-term sustainability in their resource use. Given the potential severity of land use conflicts formulating a comprehensive land use policy should have the highest priority on the Government’s agenda.

The international development projects referred to earlier have been successful in demonstrating the advantages of inter-sectoral co-ordination, but there is no facility within the permanent institutional framework fostering such collaboration. The said projects benefit from the availability of external investment funds, which obviously makes it easier to solicit the co-operation of various sector agencies. However, given the limited resources available to the Government, improving inter-sectoral co-operation should be accorded a very high priority in order to foster a holistic development approach and concentration of resources in priority areas.

Regarding Government’s support it should be noted that the main issue is to mobilise the resources local people and the private sector. Physical interventions by the Government such as infrastructure development are very necessary, but more emphasis should be accorded to the development of legal and policy frameworks. The key objectives to be pursued include enhancing people’s access to productive access and creating an economic framework, which is conducive to private sector development.

Emergence of rural industries as an opportunity for wage labour would be highly beneficial considering the development of upland areas as a whole, since it is unlikely that the agricultural sector will be able to absorb the large number of landless people. Regarding the development of the private sector, the availability of credit and a neutral regulatory framework levelling the playing field for private and state enterprises are the key Page 17 of 17

questions. On the other hand, the opportunities for rural industrialisation are still rather limited, and, therefore, the key intervention at this stage is to increase the local people’s access to productive resources. As the main productive asset in the upland areas is land, the issue of granting local land tenure is of paramount importance.

11.2. Recommendations for RETA 5771

Defining an appropriate scope for technical interventions, such as the possible extension of RETA 5771 in Myanmar, is a fundamental choice of project design. It is recommended that the scope be rather narrow than wide, since full -fledged integrated rural development projects have often proved ineffective. While technical issues can be tackled at the project level in a fairly comprehensive manner, institutional problems are usually more deeply rooted and require reforms beyond the project area. Attempts to address them simultaneously at all fronts are susceptible to be ineffective. While the problem analysis needs to be conducted in a holistic manner, the interventions should be restricted to key areas. A suitable approach might be to identify 1-2 sectors, which have the highest potential to become "engines" of village development in the project area, and concentrate the efforts on their development. Some "integrated activities" such as preparation of village development plans etc. must be undertaken, but the thrust of the effort would be on the selected priority areas of intervention.

As far as the institutional issues are concerned it is recommended that RETA 5771 focus on developing further the present policies on land use planning in the watershed areas. Another issue closely connected to land use planning is the choice of land tenure options, and the opportunities for promoting local land tenure.

In terms of environmental management, the recommended starting point for formulating RETA 5771 is the notion that environmental degradation is often only a symptom of people’s problems with their livelihood. Consequently, the thrust of development efforts should be on community development, and measures of environmental management should be able to accommodate, at least partially, people’s needs for short-term benefits. This implies, for instance, that when restoration of vegetative cover in watershed areas becomes necessary, the possibility of promoting practices such as cultivating agricultural tree crops and agroforestry as an alternative to reforestation should be examined.

Given that many of the upland areas still have extensive forest cover the potential of forestry to trigger community development should be explored in areas, where commercial forest management is technically feasible, and where forests are well-stocked forests and have potential for commercial sales. The experience gained in Lao PDR in this regard should be carefully tapped.

Increasing the staff capacity should be a primary concern for RETA 5771. Training should be undertaken in an extensive and systematic manner.