Agricultural sectors in a fragile situation – The case of rice in Myanmar – Myanmar


An estimated 1.8 billion people, almost a quarter of the world’s population, lived in fragile states in 2020. This proportion is expected to rise to 26% in 2030 and 31% in 2050 (OECD 2020). Moreover, three-quarters of the world’s extremely poor live in fragile states (OECD 2020). Yet, despite the enormous importance of these areas for the reduction of poverty and food insecurity around the world, there is relatively little research on livelihoods and trade, as the collection of safe and reliable data is often a challenge. Access to food, food prices and the functioning of food value chains are essential when states fail, but information on the functioning of agricultural markets and food value chains is scarce in these disaster-affected areas. conflict. In this article, we examine agricultural value chains in Myanmar during a period of major political instability. Myanmar’s military took control of the country in a coup on February 1, 2021, setting the country on a path of widespread violence and major economic collapse. In protest against the coup, the people of Myanmar organized a civil disobedience movement (CDM) and workers’ strikes, which led to disruptions in service delivery by public institutions and private companies. Banks shut down in-person services and faced severe cash shortages, limiting businesses’ ability to pay employees and suppliers, and residents to access their money. Access to formal and informal credit has largely dried up. Internet access and communication were restricted. Violence and insecurity increased sharply after the coup. Cumulatively, these disruptions had major economic consequences, as GDP fell by 18% and poverty rates rose to between 40 and 50% of Myanmar’s population (Boughton et al. 2021, World Bank 2021, UNDP 2021). We study the rice value chain for two reasons. First, rice is the main staple food in Myanmar, accounting for 51 and 62 percent of urban and rural calories consumed, respectively, making it crucial for the country’s food security. It is also the predominant crop for a large number of farmers and an important export. Second, about 70 percent of the rice consumed is purchased. Value chains are therefore essential for ensuring the sales of paddy by farmers, the processing of paddy into rice and the distribution of rice to consumers. Rice is generally traded over large distances in the country, implying that coup-related disruptions to the functioning of the value chain will be widely felt. To study the rice value chain, we use unique primary data collected by telephone before and after the coup at the midpoint (thousands of rice) and downstream (retail sellers) and combine this data with a number of number of secondary data sets. We address three research themes. First, we assess the extent of rice value chain disruptions following the military coup by investigating en route and downstream disruptions, and the availability of rice in markets. Retail. Second, we analyze the size of processing and distribution margins within the value chain and assess how they were affected by the coup. Third, we examine the spatial dispersion of prices from mills to food vendors by comparing rice prices before and after the coup using a market pair regression methodology of miller-vendor pairs with miller fixed effects and seller. We test which explanatory variables of price dispersion used in the international literature matter in this context and to what extent these factors have been affected by instability. We examine travel costs (Minten and Kyle 1999, Minten et al. 2016), border crossings (as a proxy for export market access) (Aker et al. 2014) and differences in composition of ethnic groups across markets (Aker et al. 2014, Robinson 2016). We also assess the direct effects of measures of violent events in source and destination markets on price dispersion. Our data reveals significant business disruptions for post-coup food vendors and rice millers related to banking and transportation. Yet, despite these challenges, local trading and milling continued, albeit at lower than normal levels of activity, ensuring the availability of rice in most retail markets in the country. Upstream, agricultural prices and milling margins were mostly stable after the coup. However, we are seeing retail rice price increases of 11% on average. The results of the simulation of these increased distribution margins indicate considerable welfare costs for rice consumers and producers, estimated at nearly USD 0.5 billion nationally (equivalent to about 3% of agricultural GDP in 2020). The regressions reveal that the spatial dispersion of prices increased after the coup, with the distance between factories and sellers widening price gaps. Violence near mills or vendors, which increased dramatically during the coup, also increased price dispersion. However, contrary to previous results (Aker et al. 2014, Robinson 2016), we find that differences in ethnic composition of source and destination townships/markets do not affect dispersion. Price dispersion further decreased with the proximity of food vendors to land borders, possibly due to the price-reducing effects of export competition in these markets. However, the border effect was strongly weakened during periods when borders were closed. The results indicate that the most severe effect of the coup on retail prices was seen in areas furthest from export opportunities and major production areas that were affected by the violence. When the state fails to assume its normal role and private sector activities are reduced, it is crucial that agricultural value chains continue to function well to ensure food security and prevent increases in retail food prices. to avoid further suffering for vulnerable households. Our results indicate that easing transport restrictions, stabilizing fuel prices, and facilitating safe spatial arbitrage of food commodities would reduce the social costs of market disruptions by preventing food price inflation while ensuring remunerative prices for farmers. To the extent possible, maintaining safe cross-border trade in agricultural products can help stabilize prices in the domestic market. Finally, as mobile phone use is often widespread, even in the event of an outage, close monitoring of a number of important aspects in such environments may take place and should therefore be encouraged. The paper unfolds as follows. In the following section, we provide important background information on the political conflict and the rice value chain in Myanmar. The econometric specification used to empirically test price changes during the crisis is discussed in Section 3, along with our data and survey methods. Section 4 illustrates the disruptions found in the value chain. Section 5 presents graphical analyzes of price and markup changes, revealing retail price increases following the coup, as well as the results of price regressions. Section 6 examines the implications of our findings and Section 7 concludes by summarizing the main findings and discussing key policy implications.

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