Communiqué: Myanmar’s Old Problems and New Challenges

December 9, 2011
Communiqué: Myanmar’s Old Problems and New Challenges
Communiqué: Myanmar’s Old Problems and New Challenges 

New Report by Ash Center Team Assesses the Country’s Growth

By Jessica Engelman and Kate Hoagland – Communiqué: Fall 2011, Volume 9

Recent news indicates that Myanmar might be making steps to end its diplomatic isolation and reintegrate into the global economy. In March of this year, the country held its first elections in 20 years. While most argue that these elections were not fair or democratic, newly elected President U Thein Sein has introduced a series of reforms and policy changes that critics view with cautious optimism. Sein’s administration has suspended construction on a controversial $3.6 billion dam project to have been built with China’s support, and for the first time ever, has acknowledged the country’s high poverty rate. The country released Aung San Suu Kyi last November, a political prisoner and leader of the National League of Democracy under house arrest for the last 15 years. An additional 6,300 political prisoners will be freed under general amnesty according to a recent government announcement.

“It may be that a lot of serious problems in Myanmar will get attention now, especially those of the rural poor,” said David Dapice, Vietnam Program Economist and a member of Ash Center team that recently visited Myanmar. “Our latest visit revealed some serious problems impeding progress, but some steps were being taken to relieve pressures.”

The team’s resulting new report, “Myanmar Agriculture in 2011: Old Problems and New Challenges,” examines the factors hampering the growth of rural incomes and suggests a range of measures to revitalize Myanmar’s agricultural sector. When they revisited the country in 2011, the researchers encountered important changes in Myanmar since their earlier visits in 2009 and 2010. Most notably, the amount of agricultural credit being offered to farmers was increasing, which was an important recommendation of an earlier report.

However, upon closer inspection, the team found evidence that many of the new loans made available to farmers were not being repaid. This was partly because the farmers were already deeply in debt and were using large portions of the new, cheaper credit to repay existing high-interest loans rather than investing in production. To make matters worse, the “strengthening” of the kyat-to-dollar exchange rate combined with cost inflation was holding down rice prices and “ruining the profitability of production for many farmers and manufacturers.” This was forcing a sizable number of farms and businesses to close down altogether.

The report’s major conclusions are that the exchange rate needs to be stabilized to allow farms and factories to compete; credit needs to be offered at reasonable rates; and other steps are needed to reduce farmers’ debt burden and increase their chance of success. The authors’ suggestions include improving access to better quality seed and certified fertilizer (there is currently no quality control on the nutrient levels in fertilizer, as much of it comes from China); improving the existing rural road network (not building highways) to lower the costs of transport and provide employment to off-season workers; supplying villages with tractors and tillers for communal use; and providing expert agricultural advice through extension services to solve problems such as pests, seed selection, and cropping combinations. Finally, broader policies are needed that support export-oriented agriculture.

This report was written by David Dapice, Thomas J. Vallely, Ben Wilkinson, and Malcolm McPherson of the Ash Center; and Michael J. Montesano of the Institute of Southeast Asian Studies in Singapore. The report was prepared for Proximity Designs, a Myanmar social entrepreneurship organization. Funding for the study was provided by the Royal Norwegian Government.