Rice Production, Income Diversification and Rural Development in Myanmar

Abstract

Among agricultural produce, rice is still dominating the Myanmar's agriculture sector, as it is a staple food crop and a principal export crop. Although previous market reforms and major investment in the agriculture sector have led to an increase in rice production, there have been challenges, such as limited availability of loans, poor infrastructure, application of farm inputs and the quality of seeds. My thesis comprises three essays that, together, fill the gaps in the existing literature on most of the key issues affect rural development in Myanmar. The first essay analyses the source and extent of potential productivity and efficiency gains, and investigates how Myanmar can increase its rice productivity. The data used in this thesis is taken from 634 farm households in the main rice growing regions, specifically Ayeyarwaddy, Bago and Sagaing. The stochastic production frontier and technical inefficiency models are applied to capture which farm-specific factors determine efficiency gains. The findings show that rice production in the selected regions can be improved through farm workers with better education, agricultural extension services, and efficient fertilizer and pesticide application. This essay also analyses the impact of land reforms and market reforms on rice production in Myanmar and Vietnam. Although there are differences between the two countries, especially in terms of government policy and institutions, both share some similarities when it comes to rice production. Vietnam is a more efficient rice producer than Myanmar, due to its better irrigation system, use of better quality seeds, higher application rate of fertilizers, and more intensive cropping. There may be many lessons for Myanmar to learn Vietnam's to increase the quantity and quality of its rice production by applying certified seeds and efficient use of fertilizers, and using sufficient irrigated water. The second essay examines the impact of credit policy on rice production in the selected regions. The provision of agricultural credit is used as a major tool to develop rural areas and reduce poverty in Myanmar. Despite the rapid expansion of agricultural credit by the Myanmar Agricultural Development Bank (MADB), there are some limitations on applying for credits, such as the credit amount per acre and the landholding size. A fuzzy regression discontinuity design approach is applied to identify the effects of agricultural credit, making use of the MADB's credit rule based on landholding size up to 10 acres. Although the subsidized credit scheme shows little impact on rice output and rice income, the credit program has some positive effects on total household income, suggesting a positive spillover effect on other farm income activities. The third essay assesses the determinants of income diversification from different sources and its impact upon the rural economy of Myanmar. Despite the fact that rice production still plays a major role in the rural economy, the diversity of income from both agricultural and non-agricultural activities has been part of an important strategy for rural livelihoods among farm households since the late 1980s. This essay analyses the factors determining income diversification from different sources on rural households' income, and their contribution to income inequality amongst farm households. The findings show that household's demographic characteristics, total land size, ownership of assets are the main factors leading towards income diversification. The results of the decomposition of Gini coefficient indicate that aggregate income from non-rice crops, especially pulses and beans, helps to significantly reduce income inequality among farm households in the Bago and Sagaing Regions. Overall, the results reveal that the cropping patterns for producing rice and different type of pulses and beans, as well as participation in livestock farming, are the most important factors in decreasing income inequality. Show more