Agriculture in Myanmar: Current State and Challenges – Part 1

In Myanmar, UNCDF is enhancing the agricultural ecosystem by leveraging digital tools and services to achieve economies of scale. Through its initiatives, over 326,000 low-income women in rural areas have access to enhanced or new digital financial services. The focus extends beyond merely introducing technology; it aims at empowering people and communities, building economic strength, and effecting substantial change. UNCDF not only supports the development of the different components of the agriculture value chain but also contributes to broader economic empowerment and resilience, with a deep commitment to transformative progress.

 

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Agriculture is crucial to Myanmar’s economy, being the second-largest export, involving over half the country’s workforce, with more than two-thirds of the population living in rural areas, and significantly contributing to the national GDP. Despite its importance, the sector faces unique challenges, which have intensified due to the recent economic and political changes. This blog, the first one of a series, provides a comprehensive overview of the state of the agriculture sector in Myanmar. The second blog in the series introduces potential solutions leveraging digital services.

From 2017 to 2023, the share of the country’s workforce in the agriculture sector decreased by 6 percentage points. At the same time, the sector attracted more educated individuals who were unable to find jobs in other areas that add more value to the economy, such as secondary or tertiary sectors. This trend is due to the agriculture sector’s relatively stable wages compared to other sectors, which stand out in an economy where job markets are generally volatile and employment growth is low, including in agriculture, as outlined in the World Bank Myanmar Economic Monitor of June 2023.

Agricultural production and export challenges

• Environmental and Political Disruptions: Disruptions in major agricultural centers across the country, driven by ongoing crises and natural disasters such as Cyclone Mocha, the ongoing conflict and the socio-political crisis, have severely impacted local agricultural value chains.
• Economic Pressures: rampant inflation (28.6 percent as reported in another World Bank Monitor), and the soaring cost of imports such as fertilizers, alongside conflicts have impacted the cultivation of essential crops. Over the past few years, the sector has encountered significant difficulties in exports, with notable fluctuations in the aftermath of the COVID-19 pandemic and the coup d’état. The production level is forecasted to be below average due to difficulties in accessing agricultural inputs and lower yields, as the FAO country brief on Myanmar states in October 2023. Additionally, transport difficulties and occasional border suspensions further complicate the situation.
• Access to Finance: agriculture in Myanmar is crucial for its GDP and 70% of its population. The sector receives less than 2% of bank lending, highlighting significant financial barriers. The challenges stem from the geographic spread of farmers, the need for specialized financial products, and unique risk management. Although government and microfinance support exist, they often bypass critical growth sectors like oilseed production and fisheries.
• Policy and Regulatory Environment: On the policy front, uncertainties persist, with issues like mandatory and overvalued official exchange rates, compared to the unofficial one, and high costs for imported inputs posing significant challenges for exporters. However, recent improvements offer some hope. The government has eased the compulsory foreign currency conversion rule for the Myanmar Kyat to 35 percent, reduced from 50 percent as per an official notification on 6 December 2023.

The situation remains uncertain for 2024, with high prices and shortages of agri-inputs due to import processes and foreign exchange regulations, as stated in this IFRI blog, potentially worsening crop yields and making it more difficult to access staples such as rice, with a price already at record high.

Towards a Sustainable Agricultural Finance

The agriculture sector in Myanmar plays a vital role in the country’s economy, supporting the livelihoods of a significant portion of its population. Despite facing numerous challenges, including economic and political upheavals, natural disasters, lack of access to finance, and market fluctuations, the sector shows resilience. The recent easing of certain government policies is a positive step, but uncertainties remain. Addressing the issues of high input costs and transportation difficulties, and ensuring stable market conditions are crucial for the sustainability and growth of agriculture in Myanmar. Future efforts should focus on improving agricultural practices, supporting farmers, and stabilizing the economic environment to secure the path forward for this essential sector.

The insights presented in this blog originate from research in collaboration with the University of Southern California (USC) Price School of Public Policy. The USC programme is an annual initiative where UNCDF in Myanmar collaborates with students from the USC Price School of Public Policy on their capstone practicum. The most recent research project, led by Harold Aaronson, Yifei Chen, Fernanda Martínez-Montesinos and, Riley Erion, focused on agricultural value chains in Myanmar.

Read Part 2 on Agriculture in Myanmar: Digital Financial Pathways to Growth