Rebuilding Myanmar's Ruined Agriculture Sector

On May 2, 2008, Typhoon Nargis tore across the Bay of Bengal and slammed into Myanmar, killing at least 138,000 people and causing US$10 billion in damage.

It was the worst natural disaster in the recorded history of the country, compounded by an incompetent and insensitive junta that initially refused large-scale international aid over suspicions that aid could be a pretext for a western invasion. It is believed that authorities stopped counting the dead at 138,000 to avoid embarrassment

The storm surge blew a wall of water 40 kilometers into the Irrawaddy River Delta, destroying 95 percent of the buildings and ruining the rice crop. Salt water, with no natural barriers after mangrove swamps had been ripped out, contaminated a huge swath of the country’s rice-growing areas, forcing the cancellation of 1.6 million tonnes of shipments to India.

Once Asia’s breadbasket, exporting 3 million tonnes of milled rice annually in the 1930s, Myanmar has continued to suffer for decades from disastrous agricultural policies stemming from its since-ended drive to implement the so-called “Burmese Way to Socialism,” more widely known as the Burmese Road to Disaster, an effort to create a self-sufficient state. Within a decade after the dictator Ne Win implemented it in 1963, the economy had collapsed. Exports fell to 175 million tonnes.

Rice exports, in comparison with those from Vietnam and Thailand, two remarkably similar producers, are the most telling indication of how disastrous policies can ruin an entire economy. A military-dominated democratic government of sorts has set out to reverse some of them.

President Thein Sein visited the International Rice Research Institute in the Philippines in 2013 to look for solutions. This week, the IRRI released a statement saying the country “is poised to not only transform its rice sector but to also recapture its prominence in the international rice market” via a rice sector development strategy.

A long list of governmental and other organizations are standing by to help. An IRRI forum aimed at providing assistance included the UN Food and Agricultural Organization, the Japan International Cooperation Agency, The World Bank, the International Fund for Agricultural Development, the Livelihoods and Food Security Trust Fund, Welthungerhilfe, the Mercy Corps, the Food Security Working Group, Action Aid, International Fertilizer Development Center, Proximity, the Korean International Cooperation Agency, and the Rural Development Administration.

Nonetheless, reversing decades of disastrous policies is not going to be easy. The Nargis episode was when Myanmar pretty much hit bottom. Despite an accelerating economy in 2013 and 2014 in which foreign direct investment grew from US$1.9 billion in FY 2011 to US$2.7 billion in FY 2012 and has continued to grow, GDP per capita by purchasing power parity ranks the country 170th of 267 entities in the world.

Despite slow improvement, according to the CIA World Factbook, “living standards have not improved for the majority of the people residing in rural areas. [Myanmar] remains one of the poorest countries in Asia – nearly one-third of the country’s 60 million people live in poverty. The previous government’s isolationist policies and economic mismanagement have left [Myanmar] with poor infrastructure, endemic corruption, underdeveloped human resources, and inadequate access to capital, which will require a major commitment to reverse.”

The agricultural sector “has long been suppressed by poor and intrusive government policy-making, a chronic lack of credit, deficient and degraded infrastructure, and an absence of secure land title and property rights,” according to a research paper by Sean Turnell and Wylie Bradford of Australia's Macquarie University. “These woes, which counter Myanmar’s bountiful natural endowments and immense agricultural potential, have long driven the dire poverty that characterizes the lives of the country’s [majority] rural populace."

Despite abundant dialogue on reforming the agricultural sector, “the record of reforms actually implemented in Myanmar’s agricultural sector is, as yet, slim. A comprehensive transformation of agriculture in Myanmar is urgently needed, beginning with the removal of the market distortions that continue to bedevil the sector,” the two wrote.

Despite a plan to export 4 million tonnes of rice by 2020, annual shipments reached only 1.3 million tonnes in 2014 against a 2 million tonne goal, partly because of a misguided government export strategy that favored the production of low-quality rice for export, largely to Africa and China, according to the World Bank, earning minimal incomes and deterring agribusinesses from necessary investment. In the meantime, its competitors, Thailand and Vietnam, are profiting by exporting high-quality rice.

The milling sector operates with obsolete processing units that cause about 15-20 percent losses in quality and quantity during the milling. Yangon Port, the main export conduit, is small, outdated and with limited capacity, leading to export costs that are among the highest in the region.

Myanmar’s agricultural system is not only largely broken, the country faces competition from exporters that have spent decades developing theirs. In 1961, Myanmar, then Burma, and Thailand were the world’s top exporters by volume to the global market, with annual exports of each 1.5 million tonnes. By 2014, Thailand was exporting 10.8 million tonnes of milled rice valued at US$5.37 billion, the highest figure in the country’s history despite the disastrous rice subsidy scheme that the Pheu Thai administration put in effect in 2010.

Likewise, Vietnam recorded annual exports of only 1 million tonnes in 1989. But by 2014, Vietnam exported 6.5 million tonnes to world markets worth US$2.84 billion in foreign exchange earnings. Myanmar’s exports have rarely topped 1 million tonnes.

U Myint Hlaing, Myanmar’s minister for agriculture and irrigation, said it is possible to break the cycle of poverty and hunger by “strengthening rural resilience, achieving social protection, and sustaining agricultural development,” all of which can be achieved through a clear road map for sustainable rice sector development, he said. But it is going to take considerably more the government’s commitment in a country where so many decades of neglect have been at work.