Myanmar is a country in the midst of a historic transformation. History does not have a precedent of a country this size hurtling towards a market economy within a matter of mere months. As evident from the frenetic pace of economic reforms being introduced, the current administration is committed to reintegrating Myanmar into the global business community.
Myanmar’s economy has been dominated by the agriculture sector with around 40-50 percent of GDP with around 70 percent of its population living in rural areas.
The economy still relies on resource-based industries with the biggest contribution to the GDP coming from extractive industries, especially oil and gas, mining, and forest products.
Major export items of Myanmar are mineral products such as natural gas, precious and semiprecious minerals; agricultural products including rice and rice products, pulses & bean and maize; forest products like raw rubber, teak and hard woods; and marine products.
Agriculture, which includes crop production, hunting, fishing, and forestry, is the mainstay of the Myanmar economy. This sector is responsible for much of the income and employment in the country with as much as 65 percent of the labor force is employed in this sector alone.
Myanmar produces enough food to feed its entire population. In the absence of purchasing power, however, many people go hungry. Further, about a third of the rural households do not have any land or livestock. Only half of the arable 45 million acres is under cultivation.
Burma’s agriculture is heavily dependent on the monsoon rains. While some areas suffer from too much rain, other regions receive too little. Government efforts in the 1990s increased the amount of irrigated land to 2.2 million acres. Many agricultural products like tobacco, sugar, groundnut, sunflower, maize, jute and wheat, however, have not reached their pre-1985 production levels. This reduction is offset by higher production in rice, pulses and beans. Rice production increased due to supportive government policies as well as favorable market forces.
Deforestation has been a major concern in Burma. The slash-and-burn method of agriculture is destroying the forests of the country, causing soil erosion and depletion of fertility. Periodic droughts, floods, landslides, and cyclones sometimes have devastating effect on agriculture.
The heavy reliance on monsoons is a major handicap for Burmese agriculture. The authorities have recently renovated dams and reservoirs, built new ones, pumped water from rivers and streams and taken other measures to improve irrigation. More remains to be done in this regard.
Another impediment to agricultural improvement is the inability of farmers to secure adequate loans to enhance cultivation. Private lenders charge exorbitant rates, and there are not enough banking institutions to serve people in the rural areas. As a result, farmers are not able to buy fertilizers and pesticides for their crops. Financial services need to be improved to make funds available to the cultivators.
Under the new economic system, the government distributed land among the landless, improved irrigation facilities, and increased the floor price of paddy that the government procures from the farmers. Some private activity in the export sector has been allowed since economic liberalization began in 1989. Consequently, the share of the agricultural sector in the GDPhas gone up.
As of 2007, Burma’s main countries of export were Thailand (receiving 44%), India (14.5%), China (7%), and Japan (6%).
However, by 2010, China had become a key export partner, receiving 97% of Burmeseproduced corn and 9% of beans and pulses. These figures came as a result of increasing Chinese Demand and an increasingly healthy trading relationship.
However, over the past ten years, exports have been down: in 2001-2002 Burma exported 939,000 tons of rice and 1,035,000 tons of pulses, whereas in 2010-2011 only 536,000 tons of rice and 920,000 tons of pulses were exported. This could be the result of increased demand for these products within the country, as opposed to a response to decreased production.
Moreover, the decrease in emphasis on exporting agricultural goods could reflect a response to the fluctuating value of the Burmese kyat as it relates to other nations’ currencies. Instead, attention was directed towards creating “non-traded services, like construction, or to the production of goods with a high price to cost ratio like gems, jade and natural gas.
In addition to extensive land and forest resources, the country has abundant water resources. Five major rivers flow through the country, providing the basis for increased irrigation and hydropower generation.10 Myanmar’s water resources are greatly underutilized: less than 20% of croplands are irrigated, and the hydropower potential has barely been tapped. Water availability, however, is highly seasonal—80% of rainfall occurs during the monsoon—and significant parts of the country experience serious drought during the dry season.
Associated with the country’s abundant water resources are substantial fisheries in the major rivers, the 1,900 km of coastline, and the 500,000 ha of mangrove swamps. There is also considerable potential for aquaculture development in the low-lying river delta areas in the south and center of the country. Between 1998 and 2009, fisheries production almost tripled, mainly due to aquaculture development. Fish and shrimp have become major export items.
Another significant component of the agriculture sector is livestock, which includes cattle, buffalo, swine, and poultry. Most rural households raise livestock, thereby contributing significantly to household protein (meat, eggs, and milk) and to farm economy through draft power and by-products (hides and leather).
Livestock represents a considerable portion of household income and capital; livestock production accounts for about 7.5% of overall GDP. Almost all livestock is raised in household backyards although there is some commercial production near major cities.
Livestock numbers have little changed for the past decade, except for the poultry population, which has tripled—possibly due to the spread of commercial production techniques in periurban areas. The shortage of livestock for draft power is one of the constraints to increased agricultural production in Myanmar.
Agricultural production grew strongly from 2000 to 2007, increasing by almost 10% in some years. In 2008 and 2009, however, vast agricultural areas were devastated by Cyclone Nargis, resulting in slightly negative growth in agricultural production. It recovered somewhat in 2010 and 2011, although flooding and currency appreciation subdued production.
Despite strong growth during most of the past decade, agriculture’s contribution to GDPdeclined from 57% in 2001 to 36% in 2010 (Figure 1). In contrast, the share of GDP accounted for by the industry sector more than doubled, to 26%, reflecting natural gas, oil, mineral , and gemstone exploitation.
Liberalization of the economy and opening up to FDI has prompted rapid growth of the industry sector.
Aparallel increase in employment generation in the industry sector is unlikely, as the mineral and gas sectors are capital rather than labor intensive. Although employment data are limited, it appears that the agriculture sector still accounts for about 70% of total employment.
Further, it appears to be the only sector in which employment could relatively quickly be expanded nationwide. This is an important consideration, given that about 30% of the rural population is landless and has no source of income other than providing labor to the agriculture sector.
It is expected that, in view of the central role of agriculture in Myanmar’s economy and the direct link between agriculture, inclusive growth, and poverty reduction, international development assistance will give close attention to this sector.
Equally important will be assistance to other sectors vital to the agriculture sector such as rural electrification, investment in transport infrastructure, port facilities, regulation of microfinance activities.
Restructuring of the Myanmar Agricultural Development Bank (MADB) will need to be undertaken, in the context of a strengthened overall regulatory system for the finance sector. Private sector involvement in all aspects of the agriculture sector, including the supporting sectors, would have a major impact on productivity and production by providing access to agro-processing and marketing value chains, both nationally and regionally.