One of the major challenge of the on-going reform process in Myanmar is de-centralization.

The report analyzes state and regional government's relationships between the union government and the decentralization process. It states that although, regional governments have started to open up more political space and the union  government has come to commit to a people-centered development approach, they face significant limitations.

On the one hand, the emergence of elected representative bodies at regional level is a significant step in the reform process, while on the other, regional parliaments face major capacity constraints.

Additionally, executive bodies at the state and regional level are still dominated by a top-down appointment process. State and regional ministers are yet to exercise sufficient authority over administrative apparatus, limiting the effectiveness of the newly formed governments.

The report also states that in spite, of the various limitations and constraints, there are many areas of promise and potential in the sub national reforms. Furthermore, it says that it is still early in the de-centralization process  and the emergence of new local political and institutional space is already increasing the awareness and sparked the interest of diverse groups for further de-centralization.

The report recommends six issues to be highlighted during the reform process, namely, to develop a systematic and rational state and regional government administration and management of human resources; to reduce complete control of power exercised by union ministries; to broaden the scope of state and regional government's esponsibilities; to strengthen public spending management, budgeting and resource allocation; to develop transparent and rules-based inter-government fiscal policies and resource sharing mechanisms; and to strengthen the capacity of state and regional governments.