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, Phoo Pye Zone, and Ian Masias utilize the findings from a series of surveys with ERs 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 Myanmar Agriculture Policy Support Activity (MAPSA) originally interviewed agricultural equipment retailers (ERs) in May 2020 and again in June and July 2020 to determine how their businesses were being affected by COVID-19 related restrictions. The results of those surveys were published in related policy notes (9, 16, and 18).
As in the earlier rounds of the survey, the analysis of the fourth-round survey conducted in mid-November 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 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
Movement restrictions. Movement restrictions seem to have intensified since the summer (Figure 1). The share of ERs reporting greater movement restrictions across states or regions increased in the Delta and the Dry Zone for both independent and franchise ERs.
These movement restrictions seem to be significantly limiting the operations of ERs. The share of ERs reporting major operational challenges, such as disruption to logistics and inability to deliver existing orders, increased significantly in November compared to the summer survey rounds (Figure 2). These challenges were reported across geographies and ER types.
Sales in the summer and November 2020 compared to the summer and November 2019. Year-on-year reductions in agricultural equipment sales in 2020 compared with 2019 were consistently reported in the summer survey rounds. These reductions have persisted and were generally reported to have been aggravated in the November survey around. Among the panel ERs interviewed, about 80 percent indicated that their sales of four-wheel tractors, two-wheel tractors, and combine harvesters had been less than the sales registered during the same period in 2019. In the summer, almost half of ERs reported that the reduction in sales that they had experienced had been more than 50 percent. These shares increased to about 70 percent in the November survey round.
Supply-side factors. A significant share of ERs continues to face generally lower availability and higher prices for machines, attachments, and spare parts (particularly imported ones) compared to the same month in 2019. There has been relatively little improvement since earlier survey rounds.
Financial challenges. Interviewed ERs continue to report financial challenges on many dimensions, partly due to COVID-19, but also due to other factors such as weather. Recovering loans or other credit given to buyers for the acquisition of machines and other equipment continues to be one of the most important challenges reported in November (Figure 3). In November, staff wages and related costs have also become an important financial challenge. While relatively few ERs indicated worker shortages, these responses suggest that ERs are facing more please from workers for financial support.
The share of ERs reporting no financial problems has declined significantly, further suggesting potentially aggravating financial challenges for ERs. In both the summer and November survey rounds, independent ERs have continued to face greater overall financial challenges.
Revenue prospects. As in summer survey rounds, most ERs continue to report that they are pessimistic about their business prospects for 2020. It is particularly concerning that the proportions of ERs in the Delta and franchise ERs expecting more than a 10 percent decrease in revenue increased from 20 percent in the summer to around 40 percent in November. While slightly higher shares of ERs also reported prospects of the same or increased revenues relative to 2019, these responses may also reflect a greater reduction in the market shares of other ERs.
Policy recommendations
Conditions observed on the ground as well as the perceptions expressed by the ERs interviewed in November suggest the following updated short-term policy recommendations. Several of these were stressed in the earlier reports on earlier rounds of the survey.
- While balancing the need for restricting movement to contain COVID-19 spread, minimize restrictions on the movement of equipment across regions. These restrictions have significantly worsened for ERs in recent months. 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 or disruptions in imported equipment are reported, reduce bottlenecks by facilitating the importation of agricultural equipment in line with CERP Action 2.4.2 – facilitating importation processes to promote international trade.
- Guarantee ER loans to machine buyers. This will in turn help machine buyers overcome their own financial difficulties during this period. This recommendation reflects CERP Action 2.1.2 – offer credit guarantee schemes to ease COVID-19’s impact on private sector firms. Additionally, most 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. 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 franchise and independent ERs and between zones.
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.
Related blog posts
- How COVID-19 affects agricultural production in the Dry Zone (October)
- COVID-19's impacts on Myanmar's agri-food system
- Community perceptions of COVID-19's impacts in Myanmar (October)
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. Phoo Pye Zone is a Research Analyst in DSGD of IFPRI, based in Yangon. 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.
