Farm­ers face hur­dles

The Myanmar Times - - Front Page - SU PHYO WIN su­phy­owin@mm­times.com

Decades of mis­man­age­ment, limited public ex­pen­di­ture and low-cost re­turns are way­lay­ing one of Myan­mar’s largest sec­tors.

AGRI­CUL­TURE ac­counts for al­most one-third of Myan­mar’s GDP and growth in the sec­tor is key to the coun­try’s eco­nomic de­vel­op­ment. But decades of mis­man­age­ment mean pro­vid­ing the nec­es­sary in­fra­struc­ture, fi­nanc­ing and or­gan­i­sa­tional re­form will be a her­culean task, ac­cord­ing to in­ter­na­tional and lo­cal ex­perts.

“There are a lot of con­straints,” Daw Than­dar Kyi, di­rec­tor at the Min­istry of Agri­cul­ture, Live­stock and Ir­ri­ga­tion, said at a panel dis­cus­sion at the an­nual Euromoney Con­fer­ence on Septem­ber 14. These range from what she called “mi­cro-level in­sta­bil­ity” – the lo­gis­ti­cal and fi­nan­cial chal­lenges faced by in­di­vid­ual farm­ers – all the way up to fund­ing for re­search and de­vel­op­ment (R&D).

In terms of public ex­pen­di­ture, there is only a limited bud­get for any one sec­tor given the over­all gov­ern­ment bud­get deficit, she said. Some 70 to 80 per­cent of the bud­get al­lo­cated to the agri­cul­tural sec­tor goes to ir­ri­ga­tion, and very lit­tle to ex­ten­sion ser­vices like ed­u­ca­tion and R&D, she said.

Speak­ing on the con­fer­ence side­lines, deputy min­is­ter U Tun Win told The Myan­mar Times that ed­u­ca­tion and R&D have re­ceived around 1pc and 0.1pc of the agri­cul­ture bud­get re­spec­tively in re­cent years.

Ir­ri­ga­tion is key for pro­duc­tion, but de­vel­op­ing the agri­cul­tural sec­tor re­quires a much broader ap­proach. “In the past we cared about pro­duc­tiv­ity, but now it isn’t just about that,” Daw Than­dar Kyi told del­e­gates. The sec­tor is in des­per­ate need of mod­erni­sa­tion, and more fo­cus on agri-busi­ness and mov­ing pro­duc­tion up the value chain, she said.

“[In the past] the coun­try forced the farm­ers to in­crease yields but failed to con­nect them [to the] mar­ket,” said U Tun Win. The re­sult has been that farm­ers re­ceive a much smaller share of agri­cul­tural prof­its than traders and mid­dle-men.

“The farm gate prices and the free on board [FOB] prices dif­fer by as much as 80pc,” he said. Farm gate prices re­flect the value of an agri­cul­tural prod­uct when it leaves the farm, while FOB is the value when the goods are fi­nally trans­ferred to the end buyer. U Tun Win used the ex­am­ple of rice, where the rice trader sells to buy­ers at a price around 80pc higher than what they paid the farm­ers.

“The farm­ers will never make money given the low paddy prices at har­vest, and the econ­omy will not grow,” he said. “Forc­ing farm­ers to be pro­duc­tion-ori­ented while for­get­ting about sup­port­ing [progress up through] the value chain with af­ford­able in­fra­struc­ture ser­vices has been a prob­lem for the last 50 years.”

De­spite the fo­cus on pro­duc­tiv­ity, Myan­mar’s pro­duc­tion lev­els across var­i­ouos crops are still volatile and lower than neighour­ing peers, said Daw Than­dar Kyi. U Tun Win said ef­forts to cre­ate a reg­u­lar and sus­tain­able flow of agri­cul­tural ex­ports had failed, lead­ing to an in­abil­ity to com­mit to ex­port quo­tas with other coun­tries.

Fel­low pan­elist Vicky Bow­man, di­rec­tor of the Myan­mar Cen­tre for Re­spon­si­ble Busi­ness, told con­fer­ence del­e­gates one key prob­lem is that pre­vi­ous gov­ern­ments have “never lis­tened to the voices of the pro­duc­ers, and the rest of the voices in the mar­ket”.

“They only lis­ten to the voices of the do­mes­tic traders,” she said. “Agri­cul­tural ex­perts tell me that ba­si­cally noth­ing changed in the 25 years in agri­cul­ture.”

The new gov­ern­ment needs to lis­ten to small­holder pro­duc­ers as well as to bro­kers and buy­ers, she said. Do­mes­tic and in­ter­na­tional agri­cul­tural com­pa­nies and foreign buy­ers should also be consulted to as­cer­tain which prod­ucts are in de­mand, Ms Bow­man added.

This should help farm­ers tar­get more pop­u­lar and prof­itable crops for ex­port.

“If the coun­try con­tin­ues in­creas­ing pro­duc­tiv­ity with­out in­creas­ing prof­itabil­ity it may have higher out­put but [farm­ers] won’t have higher in­comes and you won’t get eco­nomic de­vel­op­ment,” said Ken­neth Kyaw Shein, group chief ex­ec­u­tive of­fi­cer at Prime Hold­ings, on the same panel.

Cal­i­for­nia’s agri­cul­tural pro­duc­tion in 2012 mea­sured in farm gate prices was higher than the whole of Thai­land’s for the same year. Last year Myan­mar ex­ported US$1.5 mil­lion or $1.6 mil­lion in beans and rice, he said. Cal­i­for­nia made $500 mil­lion in car­rot ex­ports alone, he added.

“The point here is that you need to look at pri­mary pro­duc­tion and the [whole] agri­cul­tural sec­tor based on the mar­ket,” he said. “The so­lu­tion to agri­cul­tural and eco­nomic de­vel­op­ment is to look at what we are pro­duc­ing and for which mar­ket.”

One ex­am­ple would be look­ing at In­done­sian de­mand for pota­toes and onions, which Myan­mar has the cli­mate to grow, he said.

“We have a com­par­a­tive ad­van­tage [for cer­tain prod­ucts],” he said. “We should be look­ing at var­i­ous eco­nomic zones and fo­cus­ing on var­i­ous spe­cific crops mixes. It should not be just rice ev­ery­where.”

Mr Kyaw Shein pointed out that Myan­mar has com­par­a­tive ad­van­tage in cli­mate, labour and pro­duc­tive land. But in or­der for Myan­mar’s agri­cul­tural sec­tor to meet its po­ten­tial, which he es­ti­mates at $3 bil­lion an­nu­ally, there must be in­vest­ment in down­stream post-har­vest processing such as cold stor­age and cold chains.

The down­stream process is where higher value-added prod­ucts – potato chips and other pro­cessed snacks – can be pro­duced. But this re­quires the in­fra­struc­ture to con­nect the farmer with the mar­ket, he added.

Mr Kyaw Shein said in­creas­ing pri­mary pro­duc­tion of high-value crops at stan­dards com­pli­ant with in­ter­na­tional mar­kets will help bring more in­vest­ment into down­stream processing.

“We have an agri­cul­tural value chain but part of it ei­ther doesn’t func­tion very well or isn’t func­tion­ing at all,” Ewan La­mont, chief op­er­at­ing of­fi­cer at Myan­mar Awba Group, told the au­di­ence.

But that also means in­vestors have huge op­por­tu­ni­ties in Myan­mar, al­though the key is­sue will be mak­ing sure that in­vest­ment al­lows small­holder famers to par­tic­i­pate in the ru­ral econ­omy, he said.

Ir­re­spon­si­ble in­vest­ments in agri­cul­ture, how­ever, have cre­ated a neg­a­tive view of foreign di­rect in­vest­ment (FDI) in the sec­tor. Firms in some coun­tries have planted crops un­suit­able for the lo­cal soil or have farmed un­sus­tain­ably.

Ms Bow­man said that in­ter­na­tional and lo­cal NGOs and re­search in­sti­tu­tions should raise con­cerns about the risks of more FDI. “At the mo­ment we hear that FDI in the sec­tor is very small,” she said. “So I think it is re­ally im­por­tant for foreign in­vestors who want to in­vest to be very open and trans­par­ent about what they are do­ing.”

“Look­ing at the com­pet­i­tive­ness of Myan­mar, one sec­tor [that has] ev­ery­thing go­ing for it is agri­cul­ture,” said Vikram Ku­mar, coun­try man­ager for the In­ter­na­tional Fi­nance Cor­po­ra­tion in Myan­mar. But to make it a com­pet­i­tive part of the econ­omy you need com­pet­i­tive­ness in­fra­struc­ture and ser­vices that do not ex­ist in Myan­mar to­day, Mr Ku­mar said.

Al­though there are “tremen­dous op­por­tu­ni­ties” for agri­cul­ture, the chal­lenge is how to cre­ate the nec­es­sary in­fra­struc­ture and pro­vide fi­nan­cial ser­vices over a short pe­riod of time with limited gov­ern­ment resources, he added.

With­out them the sec­tor can­not be com­pet­i­tive, Mr Ku­mar said.

‘The farm­ers will never make money given the low paddy prices.’ U Tun Win Agri­cul­ture min­istry

Photo: AFP

A farmer ploughs his field. In­dus­try ex­perts warn that Myan­mar’s agri­cul­ture sec­tor faces many chal­lenges.

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