Agricultural equipment retailers (ERs) play an essential role in meeting the demand for machines and equipment needed for Myanmar’s agricultural production. However, ERs can be particularly sensitive to disruptions in trade flows which affect their inventory management. In their research, Hiroyuki Takeshima, Myat Thida Win, and Ian Masias utilize the findings from recent phone surveys to assess how COVID-19 related challenges impact the timely supply of agricultural equipment. They also provide policy recommendations on actions that the government might support to enable ERs to better weather the COVID-19 related economic crisis.
The full policy note by Hiroyuki, Myat, and Ian is available to view in English here and in Burmese here.
မြန်မာဘာသာဖြင့်ရေးသားထားသော စာတမ်းအပြည့်အစုံကို ဤနေရာတွင် ဖတ်ရှုနိုင်ပါသည်။
The Myanmar Agriculture Policy Support Activity (MAPSA) is monitoring the impact of COVID-19 on key actors in Myanmar’s agri-food system. This blog post highlights one of the many recent surveys and policy notes that MAPSA has conducted to assess the emerging constraints that these key actors face and to mitigate the possible impacts of COVID-19 on rural livelihoods and food security.
Additional blog posts are available highlighting MAPSA’s research on the impact of COVID-19 on key actors in Myanmar’s agri-food system. Surveys are ongoing, and findings and recommendations will be periodically updated.
Background
The COVID-19 pandemic and related policy responses in Myanmar have affected key aspects of the business operations of ERs. With the potential to severely cripple the timely supply of agricultural equipment for the coming season, the pandemic is likely to negatively impact the business environment for ERs. Thus, measures to support equipment retailers and to ensure the access of equipment and services to buyers should be guided by an understanding of the situation on the ground.
To shed light on the extent of COVID’s impacts on ERs, the MAPSA research team conducted phone interviews with hundreds of ERs in the Delta and Dry Zones and assessed key financial challenges and coping mechanisms. Types of equipment sold by ERs include four-wheel tractors, combine harvesters, two-wheel tractors, reapers, threshers, water pumps, and spare parts.
Potential effects of COVID-19 on agricultural equipment sales
The structure of the supply chain for agricultural equipment has implications on the effects of COVID-19 related restrictions. As illustrated in Figure 1, most ERs that directly import agricultural equipment are based in Yangon or Mandalay and equipment is transported overland through Muse and Lashio (from China), Myawaddy (from Thailand), and Ka Lay (from India). ERs in Yangon or Mandalay then sell directly to customers in their respective areas and supply equipment to their branch offices.
Most ERs experienced a shutdown of their operations at some point due to COVID-19 and those in Yangon or Mandalay were more likely to experience a ban on conducting their business. Though almost all ERs are now back in operations, many are still facing restrictions in moving their equipment. These restrictions disrupt the flow of equipment between townships and states or regions.
As shown in Figure 2, sales of agricultural equipment per ER are reported to have been considerably lower in May 2020 compared with May 2019, though COVID-19 effects appear to be only one of the reasons. Other factors depressing sales include a delayed monsoon this year and a gradual saturation in Myanmar’s agricultural equipment market with increasing numbers of ERs entering the market.
While the causes of reduced sales and the direct effects of COVID-19 on them are expected to be examined more thoroughly in future surveys, supply-side factors appear to be one of the major drivers. Limited availability of machines, attachment, and spare parts is commonly reported, regardless of type of equipment sold or size of the ER. ERs generally perceive that this challenge is due to the restricted movement of equipment, recent low levels of importation of equipment, or reduced production of locally manufactured parts.
To cope with the challenges of limited availability or higher prices for equipment, agricultural ERs are seeking new channels of supply, increasing sales prices, or outsourcing the procurement and sales of equipment. However, the combination of COVID-19 and weather-related factors have negatively affected ERs in many dimensions.
The key financial challenges expressed by the ERs interviewed relate to recovering credit or loans given to buyers, higher labor costs, and payment of invoices or repayment of own loans. Furthermore, business prospects for ERs have been affected. A majority expect that their revenues will decrease in 2020 compared to 2019, and a significant majority of them expect this decrease to be by more than 10 percent, as displayed in Figure 3. This negative outlook is held across different types of ERs.
Policy recommendations
The survey of agricultural ERs also asked respondents about their perceptions of what effective policies would be beneficial for their businesses. Their opinions, as well as observed conditions on the ground, suggest the following short-term policy recommendations.
- Streamline the movement of equipment across regions by granting exemptions to allow transportation of agricultural equipment. Under the COVID-19 Economic Relief Plan (CERP) of the Myanmar Government, any restrictions on the business activities of ERs should be applied appropriately and uniformly.
- Where significant reductions in imports are reported, reduce bottlenecks for imports of agricultural equipment by facilitating the importation of agricultural equipment in line with CERP Action 2.4.2 – facilitating importation processes to promote international trade.
- Guarantee loans that ERs provide to machine buyers. This will help machine buyers overcome their own financial difficulties during this period. This recommendation reflects CERP Action 2.1.2 – offering credit guarantee schemes to ease the impact of COVID-19 on private sector firms.
- Provide ERs with temporary relief on taxes, social security premium payments, and other fees. This especially is needed by larger ERs who employ more workers. Such measures fall under CERP Action 2.1.3, which proposes deferred tax payments and increased tax waivers.
- Maintain flexibility in these support measures, as the challenges faced by ERs can vary between tractor and non-tractor retailers, urban and rural ERs, large and small ERs, and by regions and states.
Related blog posts
- How has the pandemic affected Myanmar's agricultural equipment retailers (July)
- How has the pandemic affected Myanmar's agricultural equipment retailers (June)
Hiroyuki Takeshima is a Senior Research Fellow in the Development Strategy and Governance Division (DSGD) of the International Food Policy Research Institute (IFPRI), based in Washington, DC. Myat Thida Win is a Ph.D. candidate in the Department of Agricultural, Food, and Resource Economics of Michigan State University, East Lansing, MI, USA. Ian Masias is a Senior Program Manager in DSGD of IFPRI, based in Yangon, Myanmar.
This blog post was prepared by Michael Wang, Mickey Leland International Hunger Fellow in DSGD of IFPRI, based in Yangon. The analysis and opinions expressed in this piece are solely those of the authors.
