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 bottlenecks in trade flows which and to internal logistical disruptions that affect their inventory management. To trace the continuing impact of the COVID-19 pandemic on the agricultural activities of ERs, Hiroyuki Takeshima, Myat Thida Win, and Ian Masias utilize findings from their third survey of ERs in July 2020 to 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 agricultural equipment retailers in May 2020 and again in June 2020 to determine how their businesses were being affected by COVID-19 related restrictions. The results of those surveys were published in related blog posts (May 2020 | June 2020).
As in the first and second rounds of the survey, the analysis of the third-round survey conducted in mid-July 2020 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 key financial challenges are ERs 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 type 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. Though the easing of movement restrictions observed in June largely continued into July, some ERs reported reversals However, the general trend of easing movement restrictions continued to have positive effects on ERs. As such, the share of ERs reporting major operational challenges, such as disruption to logistics and inability to deliver existing orders, declined further in July (Figure 1).
Sales in May through July 2020 compared to May through July 2019. Year-on-year reductions in agricultural equipment sales per ER from Jay to June 2020 compared with May to June 2019 have persisted into July with little sign of recovery. A significant majority of ERs continue to indicate that their sales were less than half of the sales registered during the same period in 2019.
Supply-side factors. The availability of equipment has gradually improved from May to July. However, a significant share of ERs continues to face lower availability of machines, attachments, and spare parts compared to the same month in 2019. These patterns generally hold across states and regions, types of ER, and countries of import.
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 continues to be one of the most important challenges, especially in the Dry Zone. However, the extent of financial challenges between May and July also varied by franchise status.
Revenue prospects. Most ERs continue to report that they are pessimistic about their business prospects for 2020, and a significant majority expect 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 updated short-term policy recommendations. Several of these were stressed in earlier reports on the first and second rounds 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? (June)
- 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.
