Home MMBIZ News Myanmar’s Institutional Infrastructure Constraints and How to Fill the Gaps

Myanmar’s Institutional Infrastructure Constraints and How to Fill the Gaps

Infrastructure both physical and institutional are the key drivers for rapid economic growth and development in any country. With the number of physical infrastructure projects taking place in Myanmar involving roads, rail lines, maritime ports, airports and inland waterways; rarely mentioned in the same breath is institutional infrastructure which encompasses several other segments of society including human capital, legal instruments, administrative oversight, farmers organisations, microfinance, last-mile logistics along with health and education facilities.

Implementation of countrywide projects to speed Myanmar’s overall development to date have been slow in part due to limited financing options, economic and legal reforms plus the bottleneck of capital inflows of institutional foreign investors through the country’s banking system. These are hurdles institutional investors experience, but little focus is paid on micro-level development throughout the rural sector which comprises 70 percent of the country’s population of 60 million. More specifically the movement of goods and services into and out of villages where local economies stagnate because of lack of options for transport, warehousing, processing, micro-financing, monetary transactions and crop yield boosting inputs.

How can a parallel set of institutional infrastructure designed to fill the gaps be implemented in rural locations and what improvements in livelihood will it provide upon completion, not only for local regions and farming communities but the country as a whole?

Major impediments to doing business in Myanmar cited by a survey of foreign managers were the inefficient or lack of electric power, poor internet service, inflated transportation costs and unrealistic office rental rates. Considering that 70 percent of the country has zero access to grid delivered electricity in 2014, what other upgrades or issues might be addressed to boost output of commodities from remote locations onward to main trunk lines in order to economically stimulate pockets of rural populations organically?

Scenarios and suggestions

A common example of institutional infrastructure systems are the actual trucks that run collection routes through the countryside for farmer’s products, not the actual roads. The only sales point available for farmers is the single company vehicle that comes to the village. The buyers at this juncture have monopoly pricing in a take it or leave it scenario to their advantage.

If farmers say no to these offers, crops rot and there is zero value, if they say yes, the price is substantially below fair market price, literally pennies on the dollar. Farmers remain exploited by those that can bring in trucks and access the products at the farm gates.

The solution calls for a combination of several mechanisms to counter exploitation by traders and middlemen.

These mechanisms are: i) Presence of strong and dynamic farmers organisation capable of serving the multi-dimensional needs of rural farmers in pricing and value-adding; ii) Presence of adequate warehousing, drying and processing facilities; iii) Presence of a solid network of rural roads with adequate connectivity to major roads, highways, waterways to move goods and services from and to the farm-gates to expedite transactions; iv) Transportation facilities for moving farmer’s products and inputs at least cost. v) Functional social services e.g. clinics, schools, farmers’ educational training centres.

All these factors are institutional infrastructure that compliment physical infrastructure thereby creating a complete set of usable infrastructure which will enable development of rural Myanmar and the majority of its population.

Farmers organisation: An important accelerator for rural development

One aspect of institutional infrastructure that merits attention is efficient dynamic farmers’ organization which must meet the following 3A’s criteria in serving the multi-dimensional needs of the farmers: Accessibility – to and from farmers; Availability – resources both services and inputs; Affordability – reasonable price of inputs.

In other words any infrastructure must take into account the above 3A’s criteria to be effective and realistic.

Farmers’ organisations are very important institutional instruments that will drive rural development and create productivity along with income contribution in both rural and national development. First and foremost, multi-purpose farmers’ organisations that can provide bargaining power for the farmers in sales transactions must top the list. This will prevent small farmers from being exploited by opportunist middlemen/traders. In well-organised and institutionalised farmers associations the farmers are constantly kept informed on prices of their produce/products which allows them to react to market forces and obtain the best price based on daily spot rates.

For example in Taiwan, which has a very efficient system of multipurpose farmers organisations, even in the remotest locations you see farmers with AM/FM radios slung on tree branches listening to updated price quotes for farm produce sold onward to Taipei and abroad. Standardised pricing to farmers should be addressed first.

The Taiwan model of multi-purpose integrated farmer organizations has been adopted in Malaysia and backed by the Farmers Organisation Act 1973 passed by the Malaysian Parliament. This model works and could be rapidly administered in Myanmar if the Union Government chooses to do so.

Following quickly behind that in terms of implementation would be ways to create higher selling prices through value-add processing in the villages. Something as simple as portable expeller presses to crush seeds and collect oil on site, or small rice milling machines to polish rice and sell on to wholesalers at a higher price point. A secondary benefit would be reduced logistics costs by transporting only extracted oil, leaving the bulk weight of pressed oil cake which stays in the village to be used as animal feed.

Currently most farming communities are unable to obtain necessary machineries to process and send out higher value goods in the supply chain. Consider machineries for processing higher value products itself as agriculture infrastructure.

The trump card would be modern warehousing facilities along with training of locals in proper storage and handling techniques for their localised crops. If village Farmers Organisations have modern warehouses this will quickly would alleviate the “rush sale”  “take it or leave it” sales model for their products. Goods could be stored for longer periods of time until the next buyer comes along and this in turn will send the monopolistic collection trucks back empty unless a fair price is paid.

Pricing mechanisms, market intelligence, united selling/bargaining policies with Farmers’ Organisations in place in addition to multiple transporters involved in supply chain deliveries,  is what we mean by institutional infrastructure/framework.

On the flipside, these same transporters can bring in fertilisers to boost agricultural output. In reality, if you can’t move people or crops you sure can’t move income and the economy stagnates.

In both Taiwan and Malaysia when Farmers’ Organisations set collective uniform pricing and more money flowed to local communities, the countryside economy grew organically by itself without national economic growth policies. Simply put, more money in farmer’s pockets meant more people spent more money locally, with positive effects of stimulating local businesses.

Repeating patterns

This pattern will repeat itself in Myanmar when these simple institutional mechanisms are put in place. It may take time for the smallest of roads to be built or resurfaced by the Union Government but the pattern will repeat as has already been observed across the Irrawaddy Delta in Township Development.

As a success story from the Delta where villages receiving more money for their rice after starting their local rice entrepreneurs association created their own road building fund and re-paved 10km leading from the main Pathein Highway road, themselves. This in turn created a faster economic delivery device to enter their villages with the result being a pocket of economic prosperity based on self-funded road access, which came from collective uniform pricing to buyers and rice millers.

A short cut to development is using business models that have worked over and over again during the past years of poverty alleviation case studies. There is no need to re-invent the wheel.

Another example of institutional infrastructure would be training centres focused on effective education programs for fertilizer and pesticide usage. Regulatory approval for imported agriculture products into Myanmar should be properly labelled for usage in the local language. Companies that follow these procedures should be granted fast track approval for products such as hybrid seed strains, fertilisers and pest control. Also firms offering training on seed selection and seed storage for higher yield the following year should be given priority approval.

Even with a severe shortage of skilled labour, Myanmar’s farmers know how to work their indigenous land and with a few pointers they could turn the tables from poverty to prosperity.

When building Special Economic Zones (SEZ’s) serious consideration should be given on where the products to fill the containers will come from and how and how the localised infrastructure be aligned to expedite this movement within Myanmar.

We have presented you with some thoughts on the problems and the solutions facing Myanmar’s rural development.  With the current governments dynamic policies directed towards alleviation of rural poverty, enhancing rural productivity and boosting agrarian families’ income, the time is opportune for us to move in a direction to meet these challenges with realistic and practical approaches suggested in this paper.

Hishamuddin Koh has 25 years of experience in agriculture and rural development and is Executive Chairman of Hisham Koh and Associates and the Myanmar Plantation Management & Advisory Co (MPMAC) along with Myanmar Food Technology. He can be reached at kohisham@gmail.com.

David DuByne is Myanmar Operations Director at One Global Sourcing a firm focusing on Myanmar’s agricultural export sector and acts as Chief Editor for Oilseedcrops.org. He can be reached at ddubyne@oneglobalsourcing.com.

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