21 February 2014

Photo: Rice grows near the capital of Karen State, Hpa-An (Alex Bookbinder).

Myanmar’s rice farmers remain vulnerable despite reforms

Life moves at a languorous pace in Myanmar’s Irrawaddy Delta, where rice farmers eke out a living off the land like their ancestors did, frozen in a pre-industrial era. A patchwork of mangrove-lined, silt-filled tributaries bisects lush, green paddy fields. The rice is still planted by hand, and teams of oxen plough the fields much as they have for centuries.

Myanmar was once the world’s biggest rice exporter, but decades of inward-looking economic policies and mismanagement have left the country’s agricultural sector decades behind its neighbours. A ban on private rice exports – a sector formerly the exclusive purview of the military – was lifted in 2000, but trade sanctions, poor quality and low yields limited the success of exporters. Economic reforms since 2011 have proven to be a mixed blessing thus far, and for farmers, the outcome has not been entirely positive.

“Now that Myanmar has a market economy, everything has changed. That’s a problem, because expectations are very high. Labour costs are very high and rental fees [for agricultural land] are very high,” Soe Tun, joint secretary-general of the Myanmar Rice Federation, told The Edge Review. “In a very short [period], everything is booming up… the costs of production are increasing, but actual production has stayed the same for the [past] ten years.”

Myanmar does not have a comprehensive national rice policy, and has no strategic reserve except from a small-scale private initiative spearheaded by the Myanmar Rice Federation with government support. A patchwork of recently introduced and pending legislation provides a skeletal framework for regulating agriculture, but many of these laws are insufficient or poorly thought out, and enforcement is spotty.

In July, a parliamentary committee released a draft of the Protecting Rights and Enhancing Economic Welfare of Farmers Law, which proposed guaranteed prices for agricultural products in a bid to improve rural welfare. The bill was quickly met with sharp criticism from economists, who compared it to the ill-fated rice-buying scheme in Thailand, which has wracked up enormous government spending and left many farmers unpaid. A revised version of the bill was passed in October last year that allows for the Myanmar government to establish a rice-buying scheme only under exceptional circumstances.

Many of Myanmar’s farmers do not have formal title to the land they live on, because all private property was abolished in the early 1960s under Ne Win’s socialist military dictatorship. In the late 1980s, the government sold off vast tracts of agricultural land at fire-sale prices to a clique of crony businessmen, even as private land ownership remained technically illegal. Because millions of farmers across the do not have title to their land, they are vulnerable to eviction when powerful people decide to make use of it – often for commercially lucrative projects.

Notably, the version of the farmer protection bill passed into law includes provisions to protect landless labourers that were absent in the initial draft. But this is no guarantee that farmers’ rights will be respected. The prospect of greater foreign investment has prompted a surge of property speculation, and land prices across Myanmar, both urban and rural, have skyrocketed over the past few years. In 2012, the government passed the Vacant, Fallow and Virgin Lands Management Law, ostensibly to remedy this. The law requires landowners to make their land economically productive, but also raises the spectre of further displacement as owners interpret the law as justification to kick out farmers who stand in the way of development.

A revised Farm Law passed in 2011 reaffirmed the government’s role as the sole owner of all agricultural land, but allowed farmers to take out mortgages against their properties. While this is an important step towards increasing rural access to credit, the law also contains some problematic statutes, including one that stipulates seizure of land if farmers fall too far behind on their debt repayments.

Compounding their problems, farmers in Myanmar, unlike their counterparts in neighbouring countries, have no access to crop insurance schemes. If bad weather ruins their crops, they are left with no way to pay back microfinance loans – one of the few sources of credit for farmers in Myanmar – and they receive scant support from the government.

Myanmar’s convoluted land tenure problems have also scared away foreign direct investment (FDI) in agriculture. The sector accounts for only 0.45 per cent of total FDI, Soe Tun said. “That’s the same as three years ago.”

Logistical nightmares arising from poor infrastructure also hamper the export prospects for Myanmar’s rice producers, with antiquated ports, ancient roads and a rail network barely upgraded since the colonial era.

According to the Myanmar Rice Federation, 60 per cent of Myanmar’s rice exports go to China – but that isn’t reflected in official Chinese trade statistics. China imposes a 17 per cent import tax on foreign rice, so the vast majority of cross-border rice exports are smuggled across the rugged, 2,200-kilometre border between the two countries. “In Myanmar, you can get an export permit to China,” Soe Tun said. “But from China’s side, we don’t see any data – they say there are no imports from Myanmar.”

Smugglers along the Thai border, meanwhile, have cashed in on Thailand’s rice pledging scheme, where they were able to command a premium in Thailand – even for their inferior product – owing to price distortions caused by the rice-pledging scheme.

West Africa was the most important export market for Myanmar rice during the socialist era, and 35 per cent of Myanmar’s annual rice exports still end up there today. Europe may also prove to be an important export market: last June, Myanmar was re-added to the European Union’s Generalised Scheme of Preferences (GSP) programme, which allows tariff-free access to the European market for Myanmar and 49 other least-developed countries.

Last year, Myanmar revived rice exports to Japan after 46 years, exporting 5,000 metric tonnes in November. Another shipment of 6,000 tonnes is expected to occur in April or May.

With the rice-pledging scheme in Thailand at a standstill because of difficulties financing it, and the Thai government sitting on a huge rice surplus, much of that rice may make its way over the border to Myanmar. If cheap Thai rice crowds out local producers, it may initiate a cycle of crippling debt that will be difficult for farmers to overcome.

“The world rice market is around 30 million metric tons. Thailand controls around half. Thailand can shape world rice markets, and Thai rice is higher quality… All of our buyers may move to Thai rice,” Soe Tun said.