The operations of agricultural mechanization service providers (MSP) continue to be affected by market disruptions associated with the COVID-19 pandemic in Myanmar and related policy responses. In their research, Hiroyuki Takeshima, Myat Thida Win, and Ian Masias utilize the findings from a second rapid phone survey to assess how COVID-19 related challenges are continuing to affect the business environment for MSPs. They also provide updated policy recommendations to support the continuation of MSP businesses during the COVID-19 crisis.
The full policy note by Hiroyuki, Myat, and Ian is available both in English and in Burmese.
မြန်မာဘာသာဖြင့်ရေးသားထားသော စာတမ်းအပြည့်အစုံကို ဤနေရာတွင် ဖတ်ရှုနိုင်ပါသည်။
The Myanmar Agriculture Policy Support Activity (MAPSA) originally interviewed mechanization service providers (MSP) by telephone in early May 2020 to determine how their businesses were being affected by COVID-19 related restrictions. The results of that survey were published in a related blog post. To trace the continuing impact of the COVID-19 pandemic on their economic activities, a second phone survey of mechanization service providers was conducted in mid-June 2020.
This blog post highlights one of the many recent surveys and policy notes that MAPSA has conducted to assess the emerging constraints that key agricultural 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
As the production season progresses and the pandemic situation and policy responses evolve, MSPs continue to be adversely impacted.
To shed light on the extent of COVID-19 impacts, MAPSA conducted a second round of phone interviews in June with hundreds of MSPs in the Dry Zone and Delta regions and assessed key financial challenges and coping mechanisms.
Reported effects of COVID-19 on mechanization service providers
The second round of surveys focused primarily on tractor service providers (TSP). Most other MSPs had finished their operating season by the time of the second survey, so relatively few participated. However, most of the findings hold true for other MSPs.
The restrictions on movement across different geographies, implemented as part of the efforts to contain the spread of COVID-19, have gradually eased in the Dry Zone. However, movement appears to have become more restricted in the Delta. Furthermore, geographic restrictions have had mixed effects for TSPs depending on their normal areas of operation.
A significant share of TSPs reported that the timing of land preparation was later this year than in 2019, with the share stating so increasing from May to June in both the Delta and the Dry Zone. Many perceive that the delays were related to COVID-19 as land preparation was affected by farmers’ capacity to make payments. Nonetheless, the overall share of TSPs reporting reduced demand compared to 2019 did not change significantly between May and June.
Labor shortage has also become a relatively more serious constraint, particularly in the Delta. The share of TSPs reporting labor shortages due to COVID-19 has increased from 26 percent in May to 38 percent in June. To cope with these challenges, an increasing share of TSPs is offering higher wages or advance payment to workers, which may help attract high-skilled migrants that have returned to Myanmar from abroad in recent months.
Approximately two-thirds of TSPs continue to experience financial challenges due to the impacts of COVID-19 and related regulations. Staff wages and payments for other forms of worker compensation are becoming more difficult to meet. To cope with financial challenges, many TSPs reported selling assets, diverting other income to their businesses, and obtaining loans from private individuals.
Most TSPs continue to expect their revenues to decrease in 2020 compared to 2019 (Figure 1). The higher prices of equipment, spare parts, and repair services offset the relatively low costs of fuel. Reduced revenues will result in reduced profits and this finding applies regardless of the type of mechanization service provided.
Policy recommendations
As in the first survey round, MSP survey respondents were asked for their opinions on what policies would be most beneficial to enable them to continue during the COVID-19 crisis. Their opinions, as well as newly observed conditions on the ground, suggest the following updated short-term policy recommendations, many of which can be incorporated into Myanmar’s COVID-19 Economic Relief Plan (CERP).
- Support adjustments on loan-repayment terms on machines and equipment owed by MSPs, as well as temporary government loans for general business expenses, including wage and other worker compensation grants. Such measures can be incorporated in CERP actions 2.1.1 and 2.1.6 on financial support for small and medium enterprises. Support should be extended to both formal and informal MSPs.
- Encourage regional governments to continue granting MSPs exemptions from many of the COVID-19 related restrictions. The proportion of MSPs experiencing restrictions was observed to vary significantly across regions. Under CERP, the restrictions on MSPs should be applied appropriately and uniformly.
- Review and extend waivers where necessary on taxes and customs duties, including those on agricultural machinery, equipment, and imported spare parts. Such measures can fall under CERP 2.1.3, which proposes deferred tax payments and increased tax waivers.
Related posts
- COVID-19's effects on Myanmar's mechanization service providers (July)
- COVID-19's effects on Myanmar's mechanization service providers (May)
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.
