The operations of agricultural mechanization service providers (MSPs) 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 third 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 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 MSPs by telephone in May 2020 and again in June 2020 to determine how their businesses were being affected by COVID-19 related restrictions. To trace the continuing impact of the COVID-19 pandemic on their economic activities, a third phone survey of MSPs was completed in early July 2020.
Analysis of the third phone survey sheds light on how the situation has changed since the first and second survey rounds through qualitative findings regarding the following questions:
- To what extent have MSP activities been restricted by COVID-19 related restrictions?
- How has farmer demand for mechanization services been affected?
- How has the supply of services been affected? What changes in the availability of equipment, repair services, technical labor costs, and fuels have resulted?
- What are the key financial and other challenges MSPs face under the COVID-19 crisis? What coping mechanisms are they adopting?
- What is the expected effect of the crisis on MSP business revenues?
- What policies and interventions would enable MSPs to better meet farmer demand and remain in operation? How does the support that MSPs require vary across types of mechanization services and locations?
Reported effects of COVID-19 on mechanization service providers
In July, movement restrictions implemented as part of efforts to contain the spread of COVID-19 have eased in both the Dry Zone and the Delta and the availability of equipment and workers have improved for tractor service providers (TSPs) (Figure 1). While these geographic restrictions have had mixed effects for TSPs depending on their normal areas of operations, the overall easing of operating constraints has been beneficial.
However, as the season progressed, TSPs now have more pessimistic financial prospects for 2020. Demand for tractor service across the country has remained lower compared to one year ago, particularly in the Dry Zone. Many TSPs reported charging a lower rate for their services than in 2019, which has contributed to reduced revenue. Furthermore, a growing share of TSPs, especially in the Delta, reported delayed land preparation in 2020. They increasingly attribute this to COVID-19 related disruptions to farming.
In several areas, the Agricultural Mechanization Department of the Ministry of Agriculture, Livestock, and Irrigation also provided tractor services to farmers. Though access to cheaper tractor service is beneficial to farmers, some TSPs thought that government services might end up competing with their own businesses for customers (Figure 2). Thus, the long-term development of machinery services for crop production in Myanmar could be better provided by private sector TSPs rather than by the government.
Approximately two-thirds of TSPs continue to experience financial challenges due to the impacts of COVID-19 and related regulations. Additionally, as the peak operation season comes to an end and prospects for further revenue earnings from mechanization services become scarce, more TSPs are concerned about invoice payments and loan repayments for their equipment in July than in June. As in the June survey, to cope with these financial challenges, many TSPs reported selling more assets, diverting other income to their businesses, and obtaining loans from private individuals. Consequently, more TSPs now ask for temporary financial aid.
Policy recommendations
As in the first and second survey rounds, 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).
- As was suggested in the first and second survey rounds, it remains important to support adjustments on loan-repayment terms on machines and equipment owed by MSPs, as well as temporary government loans for general business expenses. Such measures can be incorporated in CERP Actions 2.1.1 and 2.1.6 on financial support for small and medium enterprises. Such support should be extended to both formal and informal MSPs.
- Explore options for reforming tractor service provision by the Agricultural Mechanization Department to be more private-sector oriented. Where requests are received, try to focus on identifying private-sector TSPs in the area that can meet such requests instead of utilizing the government’s direct service provision.
- Continue minimizing TSP movement restrictions across regions. Also, continue reviewing and extending waivers, when necessary, on taxes and customs duties, including those on agricultural machinery and 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 (June)
- 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.
