In 2011, then-incoming president Thein Sein ushered in an unprecedented period of growth for Myanmar. The shift towards democratic rule was accompanied by economic reforms including the easing of restrictions on foreign companies and investment, which enabled significant economic growth: in 2011, the real GDP growth rate was 5.5 percent, compared to an impressive 8.5 percent in 2015. Much of that growth was driven by the $38.2 billion of foreign direct investment Myanmar attracted over the previous five years. However, only about 0.9 percent of that—just $336 million—was invested in agricultural projects (including livestock and fisheries).
Yet, Myanmar’s agricultural potential is immense. The Asian Development Bank estimates that the country has 12.8 million hectares of cultivable land with the potential to expand this area up to 50 percent. KPMG, a consulting firm, estimated that “investments worth $2.7bn to diversify into ‘new’ crops, such as palm oil, rubber, fruits and vegetables, livestock and fishery, soybean and corn, can deliver $7bn of export earnings to Myanmar in 2023, and in total, Myanmar’s agribusiness could potentially increase seven-fold over a 10-year period.”
Some of the most exciting and promising opportunities for Myanmar’s agricultural future are in increasing small farmer yields, formalizing trade partnerships, regulating pesticide and fertilizer use for greater market opportunities, and improving processing facilities to be more efficient and consistent. While there are opportunities across numerous commodities, this insight will focus on three that we think are particularly high-potential; rubber, rice, and aquaculture. All three were emphasized in Myanmar’s 2015 National Export Strategy and experts have estimated that each has the potential to generate an additional $1 billion or more in annual export revenue by 2023.
Bouncing back with rubber
The global industrial rubber product industry is worth about $115 billion, and is expected to exceed $150 billion by 2018. The International Rubber Study Group predicts that by 2020, global demand for natural rubber will outpace supply leaving a 10 percent gap. (However, the recent downturn in rubber demand induced by the economic slowdown of top consumer China is affecting present demand and may influence future demand.) While global natural rubber production is dominated by Southeast Asian producers, Myanmar currently produces only a fraction of the total.
Rubber farming is particularly well-suited to smallholder farmers for a number of reasons. Profitability is more accessible due to year-round tapping, the longevity and resilience of rubber trees, and the low cost and workloads of crop harvesting and maintenance. Furthermore, rubber trees can be intermixed with other crops or existing forest, processes that are formally referred to as polyculture. This is not only better for the rubber crop, infusing the soil with additional nutrients, but polyculture can provide additional income and allow farmers to better withstand market volatility. Such practices are also more environmentally sustainable, improving land efficiency and preventing soil degradation while agroforestry can prevent erosion and preserve ecosystems.
But there must be policies in place capable of protecting smallholders. Industrialized rubber farming has gained popularity in Southeast Asia, particularly in Laos and Cambodia, but such growth has been accompanied by troubling claims of land grabbing.
Land seizures, even when conducted through technically legal channels, can have devastating effects on farmer livelihoods and can reduce rural incomes as individuals shift from working their own plots to working on plantations, where labor is often seasonal and poorly paid. Myanmar, where most of the land is owned by the state, has been particularly vulnerable to land-grabbing. As it continues to open itself up to foreign investment and looks to expand rubber production, it must take care to reform land policy to protect farmers with small tracts of land.
The NLD already seems to be aware of the land reforms that must be enacted. In its 2015 election manifesto, the NLD pledged to “work towards...the fair resolution of farmland disputes, the establishment of land tenure security, and transparency in line with laws and regulations regarding the protection and transfer of farmland.” The party has even indicated that it would identify fallow, vacant and virgin lands suitable for agriculture and distribute them to landless people, who would then be given legal ownership rights.
Due to factors such as insufficient technical training, lack of fertilizers, inadequate access to certification, and outdated processing facilities, most of the refined natural rubber produced in Myanmar is of a low grade, which reduces margins for producers. Investment into processing and quality-testing facilities would increase the value of Myanmar’s processed rubber, opening up potential markets and boosting export revenue.
Taking neighboring Thailand’s lead, Myanmar could also provide more support to rubber farmers. In the past, Thailand has provided subsidies to rubber farmers and, earlier this year, bought rubber from rural farmers at a rate well above the market price as demand softened. In contrast, last year, Myanmar's Ministry of Agriculture and Irrigation refused to offer a price floor to its own rubber farmers.
Thailand, one of the world’s largest producers of natural rubber, has also capitalized on the commodity by creating more robust secondary industries around the crop, most notably tires.
Myanmar is already indicating its intention to take at least one page out of Thailand’s playbook. Late last year, the government announced plans for a centralized rubber market, modeled on the Thai system, which would likely facilitate international trade.
Filling Myanmar’s rice bowl
In the 1950s, Myanmar was a rising economic star and, as one of Asia’s largest rice exporters, known as a regional “rice bowl.” During that decade, rice exports exceeded 1 million tonnes per year. More than half a century later, rice production has increased three-fold, but the population has doubled, diets have shifted, and efficiencies have arisen so that 2015 rice exports amounted to only about 1.6 million tonnes, according to the US Department of Agriculture. While the overall growth of exports since the 1950s has been muted, the 2015 figure represented the relatively recent growth in rice exports —in the 2000s, rice exports averaged less than half a million tonnes.
A longstanding relationship with the International Rice Research Institute (IRRI), even through more insular decades, has, in part, allowed Myanmar to pursue continued rice research and investment, as well as farmer education, allowing production and yields to make modest, but steady, gains over the last half-century.
Analysts had expected Myanmar’s 2015 rice exports to be even higher, with estimates from May of that year predicting more than 2 million tonnes. However, unusually strong monsoon rains, the effects of which were compounded by Cyclone Komen, damaged more than 390,000 hectares of paddy fields, leading the Myanmar government to issue a 45 day ban on rice exports at the start of August, followed by an additional 30 days of trade restrictions.
There have been numerous challenges stunting the growth of Myanmar’s rice sector. First of all, there has been frequent flooding (and studies predict that the frequency will only increase with climate change ), which causes short-term damage to crops, but in more coastal regions, saltwater flooding can permanently damage farmland. Furthermore, many farmers have overused fertilizer or neglected to rotate crops, stripping the soil of nutrients and causing long-term damage to the land.
Most significantly, the rice sector lacks funding. At the Myanmar Rice Federation’s annual meeting, the president stated that “infrastructure constraints can only be solved with a government budget.” A World Bank report echoed the sentiment, stating that the “rehabilitation of small-scale irrigation systems could...increase paddy yields from 2.5 tons per ha [hectare] to 3-4 tons,” logistical improvements would reduce transportation costs, easing pressure on farm-gate prices, and better drying equipment would enhance the quality of milled rice and reduce spoilage. Currently, outdated equipment and irregular electricity has led Myanmar to record the lowest milling recovery rates in all of Asia. In addition to these challenges, 75 percent of the country’s mills can only produce low-quality rice.
In its manifesto, the NLD addresses the plight of rice farmers, pledging “greater protection against flood risks.” Additionally, the NLD’s promises for greater land ownership transparency and the establishment of an accurate land registry system will also help encourage more foreign investment in the sector. This could help the rice industry get the additional funding it needs to upgrade its logistics and equipment. The investment could be especially lucrative as Myanmar cultivates some of the more aromatic varieties which, when processed properly, can fetch much higher prices.
Fishing for change
Fish makes up a significant part of the Myanmar diet, but farmed fish only accounts for 20 percent of national consumption, far behind that of neighboring nations like Bangladesh and Thailand, where farmed fish account for 55 and 80 percent, respectively, of fish consumption. While the export market for traditional Myanmar fish is limited, domestic demand is expected to grow alongside incomes and anticipated rates of urbanization. What’s more, development of the aquaculture industry opens up the opportunity for Myanmar to farm more popular and expensive species of fish for export. At present, 70 percent of all farmed fish is rohu, an indigenous carp, while more valuable species such as tilapia and catfish are raised in limited quantities.
A USAID-funded report written in conjunction with the International Food Policy Research Institute, Michigan State University (MSU), and the Myanmar Development Research Institute - Centre for Economic and Social Development (MDRI-CESD), a Myanmar think-tank, focused on freshwater aquaculture opportunities. Commercial fish farm nurseries, specifically, have gained recent popularity for several reasons. Most notably, lower investment costs and rapid production cycles mean that nurseries can become solvent much more quickly and are therefore less risky than other forms of aquaculture or agriculture. In fields interviews conducted by MDRI-CESD and MSU, nurseries report earning 5-10 times more income than mango or rice paddy farms.
The aquaculture industry in Myanmar faces challenges similar to that of any other: lack of access to credit, poor infrastructure, and limited external investment. However, it also faces two slightly more unique challenges. For Myanmar’s fish farmers, feed is exceptionally expensive because competitors are limited—the few domestic producers are reportedly owned by just one firm. Currently, there is reportedly a supply shortage and much of the feed available on the market must be imported from India, Brazil, and Argentina, further driving up costs. Therefore, it is estimated that more than 80 percent of fish farmers instead source their own agricultural byproducts as feed. However, limited use of nutritious feed in the market limits the yields of fish farmers and their profit potential.
The aquaculture industry's struggles are not simply confined to fish farming. Lack of market access is particularly taxing for fish farmers and fisherman alike. An exposé in the Myanmar Times highlighted the specific infrastructure shortcomings for fisheries, particularly for remote coastal regions like Tanintharyi, in Myanmar’s southern tip. The absence of an international wholesale market forces fisherman to travel in order to trade—either 24 hours by road into Myanmar’s more urbanized regions or into Thailand. Furthermore, inadequate electricity limits cold storage and secondary processing facilities all over rural Myanmar. This forces fisherman into selling their catch immediately, or else risk spoilage. This lack of flexibility limits their ability to negotiate better prices and access other more distant and more lucrative export markets.
Despite these challenges, demand for aquacultural products is growing in Myanmar—aquacultural exports more than tripled between 2003 and 2012. If the sector continues to expand, sustainability will become imperative, especially given the fact that fish farms can be especially prone to disease and pollution. In other parts of Southeast Asia, intensive shrimp farming has decimated mangroves and poisoned coastal ecosystems with excessive antibiotics and fertilizers, resulting in a sharp decline in shrimp production. Fortunately, there are also more tangible incentives for sustainable fish farming techniques—input costs are less and organic fish can fetch prices that are more than double their non-organic counterparts.
What’s more, preserving natural coastlines of mangroves can mitigate coastal damage caused by flooding and tropical storms. This should be of particular interest to Myanmar as flooding in 2015 caused fish exports to fall below $500 million for the first time in five years, and caused $20 million of damage to fish farms, according to officials.
One of the most significant things the NLD can do for Myanmar’s agricultural sector is to develop trade partnerships. As Myanmar continues to demonstrate stability and economic potential, many nations are taking an interest in forging trade partnerships. In October, the EU announced its Trade Development Programme (TDP) with Myanmar, in which more than 10 million euros ($11.3 million USD) will be invested over three years toward initiatives that will help facilitate trade growth between the two entities. Less than two months later, the US announced it was reconsidering re-instating Myanmar with Generalized System of Preferences (GSP) benefits, which would eliminate tariffs on imports. The NLD appears to be taking existing international trade partnerships seriously. The party’s first overseas visit after the election was to Japan, where trade was one of the key issues discussed. Japan is especially strategic, because not only has it expressed interest in expanding its rice trade with the country, but it is also keen to make more direct agricultural investments, including in rice mills, a fertilizer plant, and an economic zone.
In the face of the TPP (which you can read more about in our insight piece on the agreement here), Myanmar must also get serious about its trade with high-consumption neighbors China and India. For India, Myanmar crop imports, like rice are more cost effective than shipping locally produced product across the country. The partnership appears to continue to evolve successfully. In February, India announced it would be setting up nine trading points along their shared border, in anticipation of successful negotiations of the Regional Comprehensive Economic Partnership (RCEP), a mega-trade, TPP-response agreement.
Furthermore, China has been increasing all sorts of other trade with Myanmar, while both sides have made recent strides to formalize this partnership. Currently, more than 90 percent of Myanmar’s rice exports head across the northeast border to China, despite the fact that a majority of this trade is technically illegal. Currently, the Chinese government looks the other way, but Myanmar is currently taking action to get trade officially sanctioned. Even more promising is the economic zone that was announced earlier this year. The zone would be set up at the largest point of trade between China and Myanmar. It is slated to include more formalized market buildings to facilitate trade. This zone will also help facilitate more competitive trade with China, allowing Myanmar’s farmers to negotiate better wholesale prices. The NLD must continue to foster this kind of progress in order to protect its farmers from disadvantageous trade while simultaneously opening up market opportunities.
A new president, a new precedent
Of course the agricultural opportunities are far beyond rubber, rice, and aquaculture. Myanmar’s National Export Strategy and other specialized analyses of the country’s agriculture sector have also highlighted the untapped potential of the pulses, oilseeds, specialty fruits, and livestock industries. Developing robust agricultural industries requires a multifaceted approach of increasing access to credit, improving infrastructure, strengthening trade relationships, and encouraging well-regulated foreign investment both directly into agriculture and also into the manufacturing sector.
This week marks the beginning of a new era of policy for the Myanmar people. Making good on election promises to prioritize rural populations and agricultural endeavors is essential to driving growth, alleviating poverty, and ultimately maintaining peace.