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. To trace the continuing impact of the COVID-19 pandemic on their agricultural activities, Hiroyuki Takeshima, Myat Thida Win, and Ian Masias utilize the findings from the second survey of ERs in late June. They also provide updated policy recommendations to help ERs maintain operations and adapt to COVID-19 challenges.
The full policy note by Hiroyuki, Myat, and Ian is available to view in English here and Burmese here.
မြန်မာဘာသာဖြင့်ရေးသားထားသော စာတမ်းအပြည့်အစုံကို ဤနေရာတွင် ဖတ်ရှုနိုင်ပါသည်။
Background
The current blog post highlights one of the many recent surveys and policy notes that the Myanmar Agriculture Policy Support Activity (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.
MAPSA originally interviewed ERs in 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.
As in the first round of the survey, the analysis of the second round sheds light on the following questions:
- To what extent have the operations of ERs been restricted by COVID-19 related regulations?
- How do equipment sales in recent months compare to one year ago?
- How do equipment prices and availability compare to one year ago?
- What are the key financial challenges ERs are facing? How are they coping with them?
- What are the current business revenue trends?
- What short-term policy recommendations would best enable ERs to meet the demand for agricultural equipment? How might these recommendations vary across businesses by types of equipment handled, location, or size?
- What issues related to the supply of agricultural equipment need to be monitored over the next few months?
Potential effects of COVID-19 on agricultural equipment sales
Restrictions on business. The easing of movement restrictions has been a positive change since the May survey. In May, most ERs reported movement restrictions within their states or regions. However, by June, most reported that they could operate across states and regions. The eased restrictions on movement have had positive effects among ERs. The share reporting major operational challenges, such as disruptions to logistics and an inability to deliver existing orders, declined between May and June. These improvements were reported across zones and types of ERs (Figure 1).
However, even in June, about half of ERs still consider the disruption to logistics to be a serious challenge, indicating further scope for improvements and need for continuous monitoring.
Sales in May and June 2020 compared to May and June 2019. Most ERs continue to indicate that their sales were less than half of the sales registered during the same period in 2019. Though this may be partly due to the effects of COVID-19, it may also be due to the delayed monsoon cropping season or the gradual saturation in Myanmar’s agricultural equipment market. Furthermore, reduced sales have been found to be particularly more pronounced among independent ERs, relative to franchise ERs during the May-June period.
Supply-side factors. Reduced availability of equipment reported in May has largely persisted in June. While the share reporting reduced availability declined somewhat for locally manufactured attachments or spare parts, the change has been offset by an increased share of ERs who stopped handling the equipment. The share reporting rising prices for machines and imported attachments/parts has increased since May as well. These patterns suggest that cost increases due to potential COVID-19 related supply-chain disruptions of imported equipment may affect Myanmar’s ERs for some time.
Financial challenges. The confluence of COVID-19 and weather-related factors continues to affect ERs in many dimensions in 2020. Recovering credit or loans given to buyers for the acquisition of machines and other equipment was one of the most important challenges in May and has remained so in June.
Furthermore, most ERs continued to expect their revenues to be lower in 2020 compared to 2019, and a significant majority expects this decrease to be by more than 10 percent (Figure 2).
Policy recommendations
Conditions observed on the ground as well as the perceptions expressed by the ERs interviewed suggest the following short-term policy recommendations. Several of these were stressed in the report on the first round of the survey.
- Where significant reductions or disruptions in imported equipment are reported, reduce bottlenecks by facilitating the importation of agricultural equipment in line with Action 2.4.2 of the COVID-19 Economic Relief Plan (CERP) of the Myanmar Government – 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. Additionally, most ERs are likely to fall under small and medium enterprises. Therefore, support measures for ERs can be a component of CERP Action 2.1.6 on financial support for small and medium enterprises.
- Continue providing ERs with temporary relief on taxes or financing costs (particularly independent ERs), and support for rent payments (particularly franchise ERs). This is especially 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.
- Continue streamlining the movement of equipment across regions, which has improved since May but is an element of uncertainty for ERs depending on how the COVID-19 epidemic evolves in Myanmar in the coming months. Under the CERP, any restrictions on the business activities of ERs should be applied appropriately and uniformly.
- Maintain flexibility in these support measures, as the challenges faced by ERs can vary between franchise and independent retailers and between zones.
Related blog posts
- How has the pandemic affected Myanmar's agricultural equipment retailers (July)
- How has the pandemic affected Myanmar's agricultural equipment retailers (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.
