The Rice Economy in Myanmar and Relevance for the Delta

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The Rice Economy in Myanmar and Relevance for the Delta Keynote Presentation by Francesco Goletti Agrifood Consulting International (ACI) Roundtable Meeting on Rice Sector in the Lower Delta: Creating a More Enabling Sustainable Environment Pathein, 16 May 2017

OUTLINE 1. Importance of Rice in Myanmar 2. Rice Centric Agriculture 3. Towards Rice Farming Systems and Rice Value Chain 4. Linking Regional and National Strategies 5. Implications for Ayeyarwaddy

1.IMPORTANCE OF RICE IN MYANMAR

Rice is cultivated everywhere in Myanmar

Importance to the: Item Importance of Rice in Myanmar Economy GDP rice (USD) USD 7,000 million Value Percentage of GDP and AGDP (%) Exports 13% of GDP and 43% of Agricultural GDP USD 600 million Production Percentage of Cultivated Area 45% Food Security and Nutrition Total daily dietary energy requirement Food Budget 73% (urban) and 80 % (Rural) 25% of the consumption of richer hh and 50% of the consumption of poorer hh

Backward and Forward Linkages from Rice Production Input Suppliers Equipment Traders Finance Maintenance Ag. Insurance Transportation Storage Packaging Industry Distribution RICE PRODUCTION Warehouses Transportation Trade Services Export Services Port Infrastructure Road construction Packaging Industry Finance Milling Industry Food Processing (noddle )

Importance of Rice in Ayeyarwaddy

2. RICE CENTRIC AGRICULTURE

Rice is at the center of most efforts done in agriculture 1 Most of the Investment 2 Most of the Extension 3 Most of the Research 4 Most of the Credit

Existing Investment Budget Budget MOALI 2016-17 (Billion Kyat and %) Mechanization, 82, 11% Others, 38.7, 5% Kyat 350 billion or 49% of budget Rural Development, 350, 49% Irrigation, 253, 35% 3 departments absorb 95% of budget

Of 52 million tons of agricultural produce, paddy weighs 28 million (53% of the total). This is transported over rural roads.

Agricultural Credit MADB provides about Kyat 1,000 billion to farmers for rice cultivation (currently Kyat 150,000/acre). This could basically finance most of the cost of production (inputs and hired labor) of the entire rice production. In comparison MFI provide about 200 billion of credit overall (not just to farmers)

Micronutrient Deficiencies Even in the food and nutrition security debate, most of the emphasis is on rice. When micronutrient deficiencies are identified, one preferred solution is through rice fortification, rather than promoting non-rice foods (animal products livestock and fisheries) or fruits and vegetables, nuts and oilseeds.

3. TOWARDS RICE FARMING SYSTEMS AND RICE VALUE CHAIN

Rice Farm Budgets in Different Eco-Regions of AYEYARWADDY Wet Season Wet Season Brackish Wet Season Wet Season Dry Season RICE BUDGET Salt Water Water Fresh Water Ayeyarwaddy Salt Water REVENUE (MMK) 201,425 252,926 207,950 220,889 315,118 Inputs 41,570 46,446 35,713 41,241 83,581 Hired labor 47,855 55,089 52,977 52,000 37,560 Services 64,993 36,191 38,019 46,283 55,826 GROSS MARGINS (MMK/acre) 43,671 112,225 78,504 78,351 134,328 Family Labor 60,297 42,955 39,090 47,366 24,597 NET MARGINS (MMK/acre) (16,626) 69,270 39,144 30,895 109,731 Yield (kg/acre) 846 1,266 1,112 1,076 1,476 REVENUE PER FARM (MMK) (76,480) 311,715 262,265 167,367 888,821 Return to Labor (MMK/day) 1,753 3,214 2,435 2,472 8,279

Other Crops Farm Budgets in AYEYARWADDY Black Gram Black Gram Green Gram All Grams Maize OTHER CROPS Brackish Fresh water Brackish Ayeyarwaddy (4 provinces) REVENUE (MMK) 210,087 180,094 387,006 206,874 474,010 Inputs 37,382 25,086 47,619 32,093 54,619 Hired labor 39,538 28,102 47,277 34,505 33,784 Services 21,046 10,346 26,581 16,228 36,218 GROSS MARGINS (MMK/acre) 110,005 115,131 269,034 122,621 346,585 Family Labor 14,514 8,455 20,037 11,938 46,203 NET MARGINS (MMK/acre) 95,491 106,676 248,997 110,683 300,383 Yield (kg/acre) 286 451 562 383 668.794 REVENUE PER FARM (MMK) 102,175 81,074 219,117 99,435 210,268 Return to Labor (MMK/day) 6,409 10,130 12,604 8,602 15,009

Two conclusions from the analysis of farm budgets in Ayeyarwaddy 01 Income of smallholder farmers from rice is low 02 Productivity in terms of land, labor, and yield is low

From Rice Farming To Rice Farming Systems 1. Substantial increase in productivity of rice is possible. 2. However, even a substantial increase of the current rice productivity of land would not be enough to create a sustainable livelihood for smallholder farmers. 3. For sustainability of smallholder famers, the increase in rice productivity should be combined with other income generating activities.

Many ways to Increase Productivity of Rice Farming Systems 1. Agricultural research to spur innovation 2. Agricultural extension to promote adoption 3. Research-extension coordination to focus on relevance 4. For Develop effective Discussion education and training to build human capital 5. Irrigation and water management for more responsive and reliable irrigation and drainage services and more during efficient and sustainable the water management systems 6. Available Quality Crop inputs for improved farm production 7. Mechanization for increased application of appropriate working mechanization the agricultural Groups value chain 8. Livestock breeding, health, and nutrition to add to hh income 9. Fisheries and aquaculture to add to hh income 10. Good Agricultural Practices (GAP) for sustainable farming 11. Improved Resilience of Farmers to prepare and respond to Climate Change and Disasters

Sustainability of Rice does not Stop at the Farm In addition to Farm Productivity we need to increase Competitiveness

Many Ways to Increase Competitiveness of Rice Farming Systems 1. Improved business environment along the supply chain. 2. Improved investment regulations for agrifood investors. 3. Protected intellectual property rights for the agrifood sector 4. Developed a reliable quality system that will help farmers and For food processors Discussion to get higher prices for higher quality goods, incentivizing quality upgrading. 5. Rural communities empowered and enabled to initiate locallygenerated development initiatives 6. during Expanded and improved rural the road network integrated with national transport plans. 7. Improved access to rural electrification and renewable energies 8. Enhanced access to potable water by rural households 9. working Market and logistics infrastructure Groups developed and managed 10. Enhanced food quality and safety 11. Improved access to a range of financial services for farmers and agribusiness enterprises 12. Improved access to market information and market intelligence 13. Growth of small and medium agro-enterprises 14. Growth of food and agricultural products exports

4. LINKING REGIONAL AND NATIONAL STRATEGIES

1. The Myanmar New Export Strategy by MOC in 2015 A number of initiatives to guide the development of the Rice Economy 2. The Myanmar Rice Sector Development Strategy (MRSDS) by IRRI in 2015 3. The Agricultural Development Strategy (ADS) by MOALI in 2017 4. The MRF initiatives 5.

Ambitious Rice Export Targets 4 million tons by 2019 6 million tons by 2030

2,000,000 Rice Exports of Myanmar (mt) 1,800,000 1,600,000 1,400,000 1,200,000 1,000,000 800,000 600,000 400,000 200,000-2012-13 2013-14 2014-15 2015-16 Border Normal Total

1000 900 800 Unit Value of Rice Exports (USD/mt) 851 928 Low Unit Export Values 700 600 537 613 625 500 400 442 459 455 446 393 328 376 300 200 100 0 India Thailand USA Viet Nam Italy Uruguay Cambodia Argentina Paraguay Australia Spain Myanmar

Rice exports are feasible, but not necessarily the most attractive option. An increase in competitiveness, based on higher quality and higher productivity, will make rice exports more attractive

In addition to Rice other agrifood exports are important Rice: USD 600 million Pulses: USD 1,000 million Fisheries: USD 500 million Fruits and vegetables Livestock

Two main strategies related to rice 1. The Myanmar Rice Sector Development Strategy ( Rice Strategy ) 2. The Agricultural Development Strategy ( ADS ) ADS builds upon the Rice Strategy The ADS supports rice farming systems and value chains

Rice Strategy Vision MRSDS Vision Food-secure farmers and consumers enjoying the economic benefits provided by a transformed, dynamic, environmentally sustainable and internationally competitive rice sector. and Agricultural Development Strategy Vision ADS Vision An inclusive, competitive, food and nutrition secure and sustainable agricultural system contributing to the socio-economic well-being of farmers and rural people and further development of the national economy.

The Rice Strategy Recognizes the Strengths of Rice Economy in Myanmar 1. Rich natural resources, particularly land areas suitable for rice cultivation 2. A rich diversity of traditional rice varieties with high branding and marketing potential 3. A fast-growing private sector actively engaged in the rice value chain 4. Strong potential for increasing rice yield and producing quality rice 5. Strong interest and presence of development and funding institutions 6. Increasing demand for rice in the international market 7. An excellent geographic location for serving the Asian and global rice markets 8. Willingness to create a positive policy environment

The Rice Strategy Identifies 10 Key Challenges 1. The worsening effects of climate change, which increase farmers vulnerability to drought, flooding, salinity, heat, other stresses, and extreme weather events 2. Limited availability of, and farmers constrained access to, improved technologies and management practices 3. A weak extension and education system 4. Limited access to financial services 5. Limited facilities for postharvest handling and processing 6. Inadequate infrastructure, particularly for irrigation, power, and transport 7. Uncertain security of land tenure 8. Volatility of paddy price that contributes to low farmer income 9. A poorly integrated value chain, from rice production to trade and markets 10. Policies that hamper investments in the rural and rice sectors. For Discussion during the working Groups

The Rice Strategy Approach 1. Disseminate Good Agricultural Practices (GAP) 2. Adoption of good-quality high-yielding varieties (including hybrids) in favorable ecosystems 3. Transformation of conventional farming into mechanized production system 4. Conversion of rainfed farms into irrigated lands to intensify rice farming 5. Achieve higher production by promoting labor productivity, water productivity, and input-use efficiency 6. Encourage local and foreign private sector participation in developing a sustainable rice seed system in Myanmar 7. Value Chain Development

ADS builds upon the Rice Strategy It emphasizes rice farming systems and value chains

1. Twelve Principles ADS pursues a Systematic Approach 2. Vision 3. Pillars 4. Each Pillar has a number of Outputs (42 total) 5. Each Output has a number of Activities (263 total) 6. Each Activity is Costed into a balanced Investment Plan 7. An implementation Plan is defined 8. Participatory process is embedded into ADS

ADS VISION An inclusive, competitive, food and nutrition secure and sustainable agricultural system contributing to the socioeconomic well-being of farmers and rural people and further development of the national economy. PILLAR 1 PILLAR 2 PILLAR 3 Governance Productivity Competitiveness FOUNDATION: Building collaborative relationships among farmers, businesses, and Government.

Key Results under Pillar 1 on Governance Key Results under Pillar 2 on Productivity Key Results under Pillar 3 on Competitiveness Effective integrated planning based on participatory processes both at the union and at the state/region level. Timely and Effective Monitoring and Evaluation processes Improved research system for crop, livestock, and fisheries Transformed agricultural extension system delivering improved (crop, livestock, fisheries) products and technology for adoption and adaptation Increased competitiveness in 7 prioritized value chains Enhanced food quality and safety Strengthened farmers land rights and enhanced capacity of institutions involved in agricultural land. Irrigation and water use - More efficient and sustainable irrigation and water use systems Expanded and improved rural road network integrated with national transport plants

5. IMPLICATIONS FOR AYEYARWADDY

KEY MESSAGES 1. Adopt the Rice Farming Approach. Focus not only on yields, but also on farm income. Farm income includes different activities, including non-rice crops, livestock, and fisheries. 2. Integrate smallholder farmers with the value chain. Ensure that farmers, enterprises, and service providers work collaboratively to translate comparative advantage at the farm level into competitive advantage. 3. Ensure that Regional Planning is linked to the ADS preparation and implementation. 4. Increase the effectiveness of investments. There is no point in investing billions in an irrigation system, if the economic return is low or negative; similarly, there is no point in investing in rural roads if they are washed out after one year of construction because of poor design, construction, or lack of O&M. 5. Ensure that development of human resources and institutional capacity are key parts of the solutions you identify.

Consultations for ADS Sr States / Regions Consultation 1 Nay Pyi Taw Council 11.5.17 2 Kachin State 15.5.17 3 Chin State 15.5.17 4 Shan State (South) 15.5.17 5 Rakhine State 17.5.17 6 Tanintharyi Region 17.5.17 7 Kayah State 22.5.17 8 Shan State (North) 22.5.17 9 Magway Region 22.5.17 10 Ayeyarwady Region 22.5.17 11 Shan Sate (East) 22.5.17 12 Kayin State 25.5.17 13 Mandalay Region 25.5.17 14 Mon State 29.5.17 15 Sagaing Region 29.5.17

THANK YOU!

PRINCIPLES OF THE ADS