Revitalized Agriculture for Balanced Growth and Resilient Livelihoods: Toward a Rural Development Strategy for Mon State, Myanmar

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August 5, 2016 - Author: Ellen, Payongayong, ,

CESD, IFPRI, and MSU, 2019. Revitalized Agriculture for Balanced Growth and Resilient Livelihoods: Toward a Rural Development Strategy for Mon State, Myanmar. Feed the Future Innovation Lab for Food Security Policy Research Paper 20B. East Lansing: Michigan State University.

The purpose of this report is to provide national- and state-level policymakers, private-sector investors, civil society, and donors with an analysis of the rural economy of Mon State and pathways to improved prosperity for its population. The analysis is based on a representative survey of rural households, which make up 73% of Mon State’s 2 million residents, and extensive interviews with farmers, traders, processors, local leaders, and government officials. Whereas some parts of the Mon State economy are quite dynamic, such as construction, others are stagnant and far from reaching their full potential. Furthermore, the dynamic sectors are heavily dependent on remittances from migrants to neighboring countries. The current pattern of donor investment is heavily focused on necessary infrastructure and energy investments, but with only very limited support to productive sectors, especially agriculture and fisheries. Major investments in education, both formal and vocational training, are also necessary to support the growth of a modern economy. The analysis in this report identifies options for more balanced growth, leading to a vibrant economy in which returning migrants can invest and find employment

According to the Mon State Rural Household Survey carried out in 2015, the main sources of rural household income are agricultural production (24%) followed by remittances (22%), nonfarm business (18%), wage labor (14%), and fishing (11%). The most dominant factor driving Mon State’s economy in the last decade has been outmigration of labor to Thailand and other countries. Agriculture, however, has not performed to its full potential. The two main crop sectors in the state, rice and rubber, have both been hindered by low yields, low prices, and inefficient processing, leading to declining returns. Other promising and potentially profitable activities, such as cultivation of fruits and vegetables or aquaculture, are currently implemented on a relatively small scale. With 31% of individuals aged 15 to 45 migrating (84% of them to Thailand), rising wages are further eroding farm competitiveness and profitability. Low agricultural profitability is thus both a cause and a consequence of high levels of migration.

The poor performance of agriculture can be overcome through appropriate policies and investments that modernize and reinvigorate the state’s agriculture, while providing infrastructure and institutions that provide foundations for sustained growth in nonfarm enterprises. We offer specific policy and investment options to achieve balanced and sustainable growth in two broad areas: (1) stimulating growth in agricultural and sustainable management of natural resources, and (2) providing public infrastructure and services that strengthen the enabling environment.

The actions presented below are not intended to be a rigid set of requirements but rather a set of initial recommendations toward a rural development strategy for Mon State based on analysis of current evidence. As new information comes to light and the economic conditions change, rural development strategy needs to adapt with new or modified policy and investment options.

Area 1. Growth Opportunities for Agriculture and Resource Extraction Activities

Revitalize rubber, the main cash crop in Mon State. Almost one in five rural households owns a rubber plantation. The world price of rubber spiked during the late 2000s, leading to a significant increase in planted area. The result is that about half of rubber trees in Mon State are too young for tapping. Meanwhile, world prices have fallen to levels roughly 20% below their 10-year average. Squeezed between falling prices and rising costs of labor, the profitability of rubber farms is now compromised. Profitability is further compromised because of the low quality of processed rubber, resulting in discounted prices from international buyers relative to Myanmar’s neighbors. Revitalization of the rubber sector requires a value-chain approach to raise productivity and quality, and thereby, competitiveness on international markets.

Develop high-value fresh produce, an emerging cash crop sector. Fruit and vegetable crops are each grown by about one in 10 farmers in rural Mon State, and each generate a sixth of all crop income. Their high profitability makes them attractive alternatives to rice and rubber, but lack of access to irrigation constrains their expansion. Mon State is famous nationally for certain fruit crops, such as pomelo, mangosteen, rambutan, and durian. However, the lack of consistency in quality as well as reliable certification standards has prevented such crops from entering international markets and competing with neighboring Thailand. Vegetable production volumes remain low, and Mon vegetables hold only a minor share of Myanmar’s market. Lack of technical knowledge in terms of input requirements and pest control methods makes vegetable farming somewhat risky. The dissemination of knowledge, improved varieties, water-efficient irrigation techniques, and adequate commercial inputs are prerequisites of further development in the fruit and vegetable sectors. 

Improve rice productivity. Rice is cultivated by one in five rural households and contributes about half of all agricultural incomes. The majority of paddy is grown in the monsoon season under a low-intensity production model. Higher-yielding varieties from other parts of Myanmar are not well adapted to Mon State’s late and long monsoon floods. Fertilizer use is less than half of the officially recommended amounts. In the coastal areas, a snail infestation has blighted harvests for the past few years. In the short run, the provision of extension and financial services can bolster yields through better input use and pest management. In the medium run, investment in water management infrastructure to prevent against salinization and flooding would be necessary to keep coastal areas productive. Only 5% of the state’s 700,000 acres of paddy land is irrigated and able to produce in the dry season. Any investment in large infrastructure should be preceded by careful assessment of long-term economic viability.

Modernize land and input markets, as a key step toward the development of a high-performance crop sector. In 2015, only 30% of farm households held an official title (Form 7 or Form 105) to their agricultural land. Continued effort in land titling is needed to facilitate the emergence of a vibrant land rental market for efficient land allocation. A dynamic seed sector geared toward local agroecological conditions could rely on a network of private seed multiplication farms producing certified seeds and seedlings not just for paddy but also for vegetables, fruits, and rubber. Similarly, developing quality control for fertilizers and other agrochemicals (most of which are imported from Thailand) can promote optimal input use. Effective quality control of inputs is also a step toward adhering to domestic and international food safety standards.

Expand access to loans for machinery and seasonal input purchases. Extending Myanmar Agricultural Development Bank loans and encouraging private banks to lend to farmers cultivating nonpaddy crops is essential to encourage farm income diversification. Current loans to rice farmers (150,000 Myanmar kyat per acre for up to 10 acres) are insufficient to cover the costs of recommended input use at current prices, and strict loan repayment schedules leave many farmers reliant on high-interest bridge loans from pawn shops or private lenders. A review of loan cycles and repayment schedules is an appropriate step toward catering loans to farmers’ needs.

Strengthen agricultural extension services to ensure dynamism in the Mon State farm sector. For all crops farmed in Mon State, there is a need to disseminate improved varieties that are adapted to Mon climatic conditions and have been tested in the field. In the current changing agricultural landscape, establishing local agricultural research stations and demonstration farms that cater not only to the rice and rubber sectors but also to other crops such as fruits, vegetables, or pulses should be seen as a priority. In addition, delivering business training to farmers can help develop a dynamic and commercially viable agricultural sector.

Improve management of marine capture fisheries. These make a major contribution to the incomes of coastal households that are often landless, asset poor, and with few other livelihood alternatives. With increased fishing effort, the productivity of coastal fisheries and hence the capacity to support fisher livelihoods is under threat. The Myanmar Constitution supports the decentralization of authority over coastal fisheries to states and regions. This leaves scope for Mon State to establish fisheries governance and management mechanisms to sustain the coastal natural resource base, through co-management arrangements with local communities. Further, there is scope for raising incomes through improvements in small-scale processing, food safety, hygiene, and packaging.

Facilitate expansion of aquaculture, still nascent in Mon State. With higher prices for local farmed fish compared to that sourced from the delta, fish farming has the potential to generate high income streams and job opportunities. There exist several well-watered lowland areas suitable for fish farm development. Relaxing constraints on the conversion of paddy land into ponds may give rise to a thriving aquaculture sector.

Area 2. An Enabling Environment for Balanced Growth in the Farm and Nonfarm Sectors

Accelerated economic growth will require an economic and regulatory environment that fosters the development of profitable business activities. This entails a responsive local government able to channel investment in key infrastructure, promote strategic growth sectors, and provide efficient public services.

Improve the budgetary and fiscal process at regional and Union levels to enable locally driven public investment. Although the 2008 Constitution devolves a taxation and budgetary power to regional governments, the budgetary process at the Union of Myanmar level lacks channels for adequate regional participation and leads to inefficient resource allocation and coordination problems at the regional level. In addition, regional governments have not taken full advantage of this devolution framework to take on all responsibilities under their purview. The Mon State regional government may consider building the capacity of its ministries so they may effectively play the new role as provisioned by the Constitution.

Improve access and reliability of infrastructure to support economic activity, including in energy and transportation. Rapidly increasing traffic flows are putting a strain on major national and international road transportation arteries. In addition, many rural areas are not well connected to this network. Commercial links to international markets also need improvement: upgrading the port and the airport with storage, cargo-handling facilities, and adequate safety measures can yield dividends for Mon State’s agricultural exporters and tourism industry. Currently, a little over half the rural population in Mon State has access to an electricity connection, and outages are frequent. Electricity supply may substantially improve in 2017 with a World Bank–financed upgrade of a power plant in Thaton projected to supply 50% of Mon State’s electricity demand.

Expand the formal credit market to enable business growth. In rural Mon State, 60% of loans come from moneylenders or friends and family. Migrants primarily use informal hundi channels to transmit remittances. Encouraging formal banks to extend their reach to rural communities should be coupled with disseminating financial education to rural households.

Promote productive investment by the private sector, key to the creation of remunerative employment locally. The existing chambers of commerce and industry and trade associations can lead, with the regional government’s support, in organizing business fairs and networking events, as well as exploring joint ventures with businesses from other regions, states, or countries including Thailand. Registration and licensing requirements can be simplified to encourage business creation. Investments to improve water access would support the Mawlamyine Industrial Zone. With partnership from private firms, technical colleges could be strengthened to focus training on key vocational skills integrated with on-the-job training.

Strengthen regulatory frameworks for the construction sector to avoid jeopardizing the long-term sustainability of this rapidly growing sector. Clear and enforceable laws regarding construction permits as well as sound building codes and regulations are necessary to prevent unlawful land occupations, ensure building safety, and avoid legal disputes.

Exploit the potential for the development of tourism from a long coastline, a tropical climate, and a wealth of historical and religious monuments in relative proximity to Yangon and Bangkok. Currently only Golden Rock at Kyaikto generates significant tourism flows, and the majority of Mon’s potential as a tourist destination remains untapped. There is need to undertake a comprehensive evaluation of the potential for different types of tourism in the state and necessary investment for physical (for instance, a well-regulated airport) and institutional infrastructure (for instance, inspection of eateries).

Improved quality of and access to education and health services is a necessary condition for longterm economic growth. With only 61% of the rural population having access to a local medical facility where they live and only 37% to a secondary school, the existing medical and educational infrastructure needs physical upgrading as well as greater human resource allocation. Public provision of social security programs enabling the poor to access basic medical and educational services is warranted, as is encouraging private sector and donor investment in medical and educational facilities. Strengthening existing social safety nets and creating new ones are requirements to ensure that rural communities and economies are resilient to shocks.

In conclusion, while the Mon State rural economy faces substantial challenges, there is good reason for optimism if the Mon State and Union of Myanmar governments can work together with the private sector, including farmers, to develop a vibrant rural economy that raises rural incomes and improves the welfare of the rural population. Achieving this goal requires the design of a comprehensive rural development strategy for Mon State that adheres to the following principles:

  • Inclusiveness: clearly understanding the strengths and weaknesses, and the respective role, of all stakeholders—government, the private sector, and civil society;
  • Decentralization: practicing decentralized decision making, bottom-up planning, and co-learning; and
  • Sustainability: balancing short-term gains with long-term growth.

 

 

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Tags: agrifood system transformation, c1-c2, feed the future, feed the future innovation lab for food security policy, fsg research paper, fsp research paper, household income and livelihoods, input use and market development, myanmar, policy research and capacity building, sustainable agricultural intensification


Related Topic Areas

Myanmar, C1-C2


Authors

Ben Belton

Ben Belton
beltonbe@msu.edu

Duncan Boughton

Duncan Boughton
boughton@msu.edu


For more information visit:

Feed the Future Innovation Lab for Food Security Policy
Food Security Group

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