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Myanmar Private Sector Agribusiness Landscape Analysis: Rice and Pulses

 

Myanmar is one of the fastest growing economies in Asia, with real GDP growth expected to average 7.2% per year over the next five years1. Agriculture is a core driver of Myanmar’s economy, contributing approximately 35% to GDP and employing 70% of the country’s labour force2. Recent developments are expected to lead to a significant transformation of the sector, such as the approval of the Myanmar Companies Act (2017) and a bilateral trade agreement with Yunnan Provincial Government in China (currently 40% of Myanmar’s exports are to China). This presents a timely opportunity to undertake preliminary research to better understand and assess the current agribusiness landscape in order to focus further research and investment across the sector.

This SRA aims to understand and assess Myanmar’s agribusiness landscape and to develop an analytical framework to identify opportunities for inclusive agribusiness-led development in selected value chains. The objectives of the study are to:

  • Develop and apply an analytical framework and criteria to identify opportunities for inclusive agribusiness-led development.

  • Develop and apply a typology to characterise and analyse the agribusiness landscape.

  • Identify key research gaps and questions needed to facilitate inclusive agribusiness-led development and address research questions listed in the appendix.

Key Findings

  • Myanmar has the potential to significantly increase farmer incomes by over $1bn annually from an increase in rice and pulse productivity, quality, and exports by adopting similar changes that led to Thailand’s significant growth: 1) improve access to cheaper credit, 2) invest more heavily in R&D and extension, 3) focus on quality and value addition, 4) remove tariffs on inputs, and 5) expand mechanisation. For example, only 5-10% of pulses undergo secondary processing prior to export despite processed green gram (dahl) commanding ~50% higher margins; however, access to finance and technical assistance for farmers and small to medium enterprises (SMEs) sourcing from them is largely unavailable.

  • Myanmar has a range of agricultural plans and strategies that lack progress with implementation. Support for execution plans and the clarification of roles and responsibilities is recommended by convening the right stakeholders, developing partnerships, reducing risks, and improving communication along the value chain and between the private and public sectors.

  • A typology of agribusiness based on financing need (a key constraint identified) may be helpful in customising financial and technical support to SMEs along the agricultural value chain. The largest finance gap for agribusiness SMEs falls in the $25k - $1M range.

  • Development aid is concentrated largely on inputs and production with little being done with respect to post-harvest handling, finance, processing, and market access.

The analytical framework serves to focus research and investment into priority crops, geographies, and constraints based on the greatest reach and impact potential. Its application was used in this SRA on rice and pulses, crops that align with Myanmar government priorities and ACIAR’s 2017-18 Annual Operational Plan and existing research. Recognising the significant limitations in data availability in Myanmar, the market and value chain analyses were conducted to the best extent possible.

Eighty-eight stakeholders were interviewed from the public, private and social sectors to provide insights on the priority constraints and opportunities within the rice and pulse sectors. The primary constraints identified were:

  • Financial services: Farmers and SMEs experience issues in the access to and affordability of investment capital and working capital.

  • Government policy implementation and capacity: Inconsistent enforcement of government policy from the national to local levels increases risks for business, disincentivises investment, and reduces infrastructure investment focus. Lack of clear leadership and action plans has paralysed strategy implementation.

  • Seed systems and other inputs: Large amounts of fake/poor quality inputs and use of saved seed raises the cost and lowers the quality of production, creating market barriers. Poor communication between the private and public sectors leads to weak market signals through the value chain.

A private sector perception survey and a CEO survey by Oxford Business Group canvassing 135 investors provided an understanding of the business environment, the investment criteria important to the private sector and the relative ease of doing business in Myanmar. Key findings from the survey were as follows:

  • Over 50% of respondents said they were likely to recommend Myanmar to a company, investor, or organisation similar to theirs as a place to do business or invest in.

  • Policy and regulatory environment, governance and human capital were top of mind concerns for organisations operating in a new country.

  • With respect to critical investment criteria, Myanmar’s greatest gaps are in infrastructure, financing, policy and governance. The drivers of poor performance were noted as law enforcement, political stability, corruption, availability of tech expertise and the inability to secure land.

A market analysis is the first critical step to identifying commodities that provide the best opportunities for Myanmar’s growers and agribusinesses. The market opportunities and gaps in targeted regions are then used to focus the subsequent field research into the key constraints along the value chains – from research and inputs to production and downstream processing – that would have the most sustainable and scalable impact on farmer incomes, cash flow, and financial resilience if resolved.

The recommendations generated are holistic solutions that take into account the entire value chain as well as the critical interdependencies between the public and private sectors. Further research into the following recommendations are ranked from most to least complex.

  • Agricultural Transformation Agency: A small agency, reporting directly to PM, with authority to develop an inclusive agriculture strategy, coordinate new and existing initiatives across ministries, build capacity, and lead national to local strategy implementation.

  • Crop insurance bundled with input supply and training to reduce weather-, pest-, and disease-related risk to investors and banks.

  • Agricultural commercial clusters to focus development in regions where commodities are competitive and infrastructure, investment and extension have a comparative advantage.

  • Agribusiness incubators to provide entrepreneurs and SMEs with access to capital and technical assistance.

  • Blended finance facilities to reduce risk to banks and investors by creating a risk-sharing model between donors and finance institutions.

  • Traceability and quality control systems to ensure quality, integrity and regulatory compliance of inputs and production.
  • Warehouse receipt system to improve storage and logistics – allowing farmer to sell over time and crop to be used as collateral.
  • Inclusive contract farming to create tighter value chains, from retailers to input suppliers, to reduce risk and ensure quality production.
  • Investment Commission strengthening to allow the Directorate of Company and Investment Administration (DICA) to create a “one stop shop” for investors.
  • Trade policy and strategy implementation based on market analyses that explore value addition and diversification opportunities, as well as to establish trade agreements.
  • Public/private consultative bodies to provide a consultative forum to guide research and development.