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Revitalizing Agriculture in Myanmar

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Revitalizing Agriculture in Myanmar Revitalizing Agriculture in Myanmar: Breaking Down Barriers, Building a Framework for Growth Prepared for International Development Enterprises | Myanmar DISTRIBUTION, CITATION, OR QUOTATION NOT PERMITTED WITHOUT PERMISSION July 21, 2010 This paper was written by David O. Dapice ([email protected]), Thomas J. Vallely ([email protected]), and Ben Wilkinson ([email protected]) of the Ash Center for Democratic Governance and Innovation at the Harvard Kennedy School and Michael J. Montesano ([email protected]) of the Institute of Southeast Asian Studies in Singapore. The views expressed herein are the authors’ alone and do not necessarily reflect those of IDE, the government of the Union of Myanmar, the Harvard Kennedy School, Harvard University, or the Institute of Southeast Asian Studies. We wish to extend our sincere thanks to our colleagues at IDE/Myanmar and the Ministry of Agriculture and Irrigation for their contributions to the research and for organizing the complex logistics the assessment demanded. Partial funding for the study was provided by the Royal Norwegian Government. Revitalizing Agriculture in Myanmar July 2010 Page 3 of 64 Distribution, Citation, or Quotation Not Permitted Without Permission of IDE TABLE OF CONTENTS MAP | Union of Myanmar ........................................................................................................................... 4 INTRODUCTION ......................................................................................................................................... 5 I. Objectives and Conceptual Framework ........................................................................................... 5 II. About This Paper ................................................................................................................................ 8 PART ONE I The Myanmar Rice Economy in 2010 ..............................................................................10 I. General Impressions ..........................................................................................................................10 II. Myanmar’s Rice Economy in Regional Perspective .....................................................................11 III. Output Trends ...................................................................................................................................14 A. Declining productivity ...................................................................................................................14 IV. Explaining Declining Per Capita Rice Output ..............................................................................17 A. Underinvestment ..........................................................................................................................17 B. Domestic rice prices and exports: the cost of policy uncertainty ...........................................19 V. Dry Season Irrigation and Self-Sufficiency by Division ...............................................................20 VI. Soil issues, Research, Extension and Seeds ..............................................................................20 VII. Post-Harvest Losses ......................................................................................................................22 VIII. Port Efficiency.................................................................................................................................22 IX. Important Recent Initiatives in Rice Policy ...................................................................................23 A. The Myanmar Rice Industry Association ..................................................................................24 B. The special agricultural development companies....................................................................24 PART TWO | Credit: Current Situation and Policy Options ..................................................................27 I. Sources, Access, Cost .......................................................................................................................27 A. Formal sources .............................................................................................................................27 B. Informal sources ..........................................................................................................................27 C. Recent entrants to credit market ................................................................................................29 D. Impact on livelihoods ...................................................................................................................29 E. Why low-cost credit often doesn’t benefit the poorest farmers ..............................................30 II. Building a Robust and Diversified Credit System .........................................................................30 A. Removing regulatory and legal barriers to effective farm lending .........................................31 B. The creation of formal-sector rural financial markets ..............................................................32 PART THREE | The Humanitarian Consequences of Economic Stagnation ....................................35 I. Rural Poverty .......................................................................................................................................35 II. Children’s Welfare .............................................................................................................................36 III. The Dry Zone ....................................................................................................................................38 A. Overview ........................................................................................................................................38 B. Recommended short-term responses to reduce vulnerability ...............................................39 PART FOUR | Short and Long-Term Solutions .....................................................................................41 I. Agricultural Development in Context ...............................................................................................41 II. How Countries Grow .........................................................................................................................44 A. How fast is Myanmar growing? ..................................................................................................44 B. Determinants of growth ...............................................................................................................45 III. Conclusion .........................................................................................................................................49 APPENDIX A | Nutrition Survey: Additional Analysis and Background..............................................53 APPENDIX B | Estimating Revenue from Natural Gas Production ....................................................56 APPENDIX C | Financial Development for Rural Areas .......................................................................58 APPENDIX D |Export Policy Options ......................................................................................................61 APPENDIX E |Background, Methodology, and Field Visits .................................................................62 Revitalizing Agriculture in Myanmar July 2010 Page 4 of 64 Distribution, Citation, or Quotation Not Permitted Without Permission of IDE MAP | Union of Myanmar Revitalizing Agriculture in Myanmar July 2010 Page 5 of 64 Distribution, Citation, or Quotation Not Permitted Without Permission of IDE INTRODUCTION I. Objectives and Conceptual Framework This is a study of the rice economy in Myanmar. It seeks to identify barriers and bottlenecks that are hindering growth and depressing value in a sector that must play a central role in alleviating the extreme poverty that currently afflicts an expanding proportion of rural households. The worst way to read this report is to turn directly to its ―Conclusion‖ and to look for a set of detailed recommendations from the research team. While the concluding section of this report does indeed offer a series of general recommendations, they are neither so detailed as to permit of immediate implementation nor readily comprehensible without reference to the report as a whole. What Myanmar needs to do to revitalize its farm sector will require many complex decisions and important choices. It cannot be reduced to a simple five-point list. The issues that this paper addresses are of importance to the entire Myanmar economy and its prospects for achieving a higher level of growth and delivering prosperity to the Myanmar people. This is because many of the barriers to greater productivity in the rice economy are also obstacles to growth of the economy as a whole. From electricity and transport infrastructure to banking and trade policy, the Myanmar economy is being held back by inappropriate policies and limited state capacity to implement them. In some instances these policies are well-intentioned but poorly designed and implemented; in other cases the policies appear to have been conceived in order to benefit particular interest groups. The dysfunctionality of economic policy in Myanmar flows directly from the lack of a common understanding among political, business, and policy elites regarding the institutional structure and core logic that drive
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