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The rapid rise of agricultural mechanization in Myanmar

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The rapid rise of agricultural mechanization in Myanmar

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The rapid rise of agricultural mechanization in Myanmar

  1. 1. The rapid rise of agricultural mechanization in Myanmar Ben Belton¹, Mateusz Filipski², Myat Thida Win¹, Xiaobo Zhang² (¹Michigan State University, ²IFPRI) Food Security Policy Project South-South Knowledge Sharing on Agricultural Mechanization IFPRI, CIMMYT, Ethiopian Agricultural Mechanization Forum Addis Ababa, Ethiopia November 1, 2017
  2. 2. Myanmar recent historical context • Recently emerging from 50 years isolation - political & economic reforms from 2010 • Least developed economy in SE Asia • Agricultural GDP = 38%; Population 70% rural • Conventional view of Myanmar’s rural economy is gloomy one of stagnation: “The level of agricultural mechanization in Myanmar is still low… not a surprise given the low wages in rural areas, the excess agricultural labor, and the still- lacking infrastructure and regulatory environment for machinery service providers… Farmers in general do not have the access to long-term capital, preventing investments in agricultural machinery” (World Bank, 2016) • BUT, situation changing very quickly
  3. 3. Data sources • Two recent household surveys: • Delta: Myanmar Aquaculture-Agriculture Survey 2016, 4 townships, 1100 HH • Rural Economy and Agriculture Dry Zone Survey 2017, 4 townships, 1600 HH • Both aim at generating ‘benchmark’ of current status of rural economy (farm & non-farm) and recent changes within it, including mechanization • Survey of agricultural machinery supplier businesses from main ‘cluster’ in Yangon (2016) • Surveys of suppliers and rental service providers in Dry Zone (ongoing)
  4. 4. Dry Zone Delta
  5. 5. DELTA
  6. 6. Machines displacing draft animals; Mechanized harvesting
  7. 7. 7
  8. 8. DRY ZONE
  9. 9. Combined use of machines and draft animals Cattle only 22% Machine only 2% Both cattle and machine 76% Neither 0% Share of farmers using draft animals and machinery for land preparation
  10. 10. Increasing ownership of machines 0 5000 10000 15000 20000 25000 30000 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Cumulativenumberofmachines Feed cutter Water pump Thresher 2WT 4WT Cumulative purchases of selected machinery (1997-2017)
  11. 11. Increasing value of machines owned - 10.0 20.0 30.0 40.0 50.0 60.0 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 MillionUSD Feed cutter Water pump Thresher 2WT 4WT Real annual value of agricultural machinery purchases at 2016 prices, by year and machine type (1997-2017)
  12. 12. Rental services enabling access to machines 27 52 10 39 0% 10% 20% 30% 40% 50% 60% 10 years ago 5 years ago Today 10 years ago 5 years ago Today 10 years ago 5 years ago Today 10 years ago 5 years ago Today 2WT 4WT Combine Harvester Thresher ShareoffarmHHs Own Rent Share of farmers using machinery, by machine type, year and ownership status (2017-2007)
  13. 13. 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% Any machine 2WT 4WT Combine Thresher T1 T2 T3 Rental services → scale-neutral technology Share of HH using machinery by landholding tercile and type of machine
  14. 14. Drivers: rural-urban migration Cumulative share of all long-term migrants by year first migrated (%), 1995-2016 0 10 20 30 40 50 60 70 80 90 100 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Domestic International
  15. 15. Migration → large rural wage increases +20% +15% 0 500 1000 1500 2000 2500 3000 3500 4000 4500 2012 2014 2016 Realdailywages(MMK) Change in real daily wages for male casual workers (2012-2016)
  16. 16. Price of machines falling -5.8%/year -7.1%/year 0 500 1000 1500 2000 2500 3000 3500 2007 2009 2011 2013 2015 2017 USD Water Pump 2WT Trend in real price of small machines (2007-2017)
  17. 17. Simultaneous improvement in access to formal financial services • Hire purchase agreements with commercial banks began in 2013 • Agricultural land titles can be used as collateral since 2012 • Reduced capital constraints for machine suppliers, cost of credit to buyers 35 68 77 17 5 248 27 22 2WT 4WT Combine Harvester Shareofsales(%) Bank Dealer Customer Source of finance for machinery purchases (2016)
  18. 18. Geographical spread of machine supply businesses 2010 2013 2016
  19. 19. Conclusions • Demand side drivers: Migration; rising wages rates, labor shortages • Supply side drivers 1: Hire purchase finance from banks; transferrable land use rights (collateral) • Supply side drivers 2: Falling cost of machines; no restrictions or tariffs on imports • Supply side drivers 3: Dynamic informal private rental markets (very limited reach of government rental services) • Result 1: Extremely rapid mechanization in main agricultural zones, following crop specific patterns (power tillers and combines in main paddy growing areas, 4 wheel tractors drylands) • Result 2: Machine access scale neutral at point of use; saves time/reduces risk; helps farms remain viable in face of rising production costs

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