Urban Proximity Conflict And Agricultural Development Evidence From Myanmar

Urbanization and violent conflict have been two global trends gaining more and more momentum in recent years. This has important implications for agricultural development, which unfortunately are still not well understood. Urban proximity is generally associated with agricultural intensification and improved market participation, while farming systems in remote areas are characterized by larger shares of subsistence production. Such differences along the remoteness gradient likely also play a role in how conflict exposure affects agricultural production. That is, we must assume that the effect of conflict on agricultural development is location-dependent—a fact that is generally neglected in empirical analysis. We address this gap by drawing from a unique nationally representative data set of 2,292 paddy farmers in Myanmar and estimating the effect of conflict exposure and travel times on agricultural production during the monsoon season of 2021. By applying multivariate additive models, we allow for nonlinear and interacted effects of conflict exposure and urban proximity, thereby explicitly exploring spatial variation in the effect of conflict exposure. We find strong positive effects of urban proximity on paddy rice intensification and sales, while conflict exposure has disproportionately negative effects in direct proximity to urban centers and very remote areas. For agricultural development—and smallholder incomes in general—this means that productive areas, on the one hand, and the poorest areas of the country, on the other hand, are especially affected by conflict.

This study explores the transformation of Myanmar’s rice value chain (VC) over a period of liberalization, reform, and infrastructure expansion from 2013 to 2019, and over a period of multiple crises from 2020 to 2022 including a military coup and widespread conflict. We analyze modernization over these periods at different levels of the VC, including upstream (farms), midstream (mills), and downstream (rice vendors). We rely upon unique data from large-scale phone surveys collected at different segments of the rice value chain – including farm and post-farmgate – complemented with insights from key informant interviews, and secondary data. The major findings are the following: There have been large transformations within the rice value chain over the last decade, but modernization in some areas decelerated due to conflict. We note a process of modernization, upscaling, quality improvements, and increased outsourcing of agricultural activities to specialized service providers by farmers. The majority of this transformation occurred during the period of relative stability from 2013 to 2019. We show that although modernization continued during the crisis years that followed, including an improvement in rice quality and an expansion of modern mills, many modernization processes decelerated. Mills and farms in insecure and conflict-affected areas participated to a lesser extent and the modernization gaps widened during the crisis years. Local rice market conditions improved with better-quality rice sold locally. A large share of food vendors indicated better rice quality overall at the time of survey compared to 3 and 10 years earlier. Sixty-eight percent of vendors reported that there was no foreign matter in the rice that they sold a decade ago. That share has increased by 23 percentage points to 91 percent in 2022. In domestic retail, modern retail is (yet) negligible in rice distribution at the national level. Rice exports quadrupled, with Myanmar becoming globally the 5th biggest exporter of rice by the end of 2019. Rice exports have proven to be resilient during the crisis years. Rice exports increased dramatically despite more stringent, and costly, non-tariff measures for exports such as phyto-sanitary requirements. Rice is exported through different channels, moving away from low-quality rice trucked to China, to relatively better-quality and often certified rice being shipped on large vessels to a more diverse set of countries. We see shifting challenges over time – due to banking, electricity, and mobility problems that millers and traders adjusted to, at an increasing cost – but national exports mostly stabilized, in the crisis years compared to the period before, seemingly as major rice producing areas - except Sagaing - were less affected by conflicts, Midstream, we see rapid uptake and investments in modern drying machines – especially mechanized dryers – and modern milling machinery in the form of new mill starts and upgrading from traditional mills. The average number of modern mills operating in the miller’s same village tract/ward increased by about 60 percent from 2013 to 2019 and by a further 10 percent in 2022. The trend for traditional mills is the opposite: declining by 50 percent between 2013 and 2019 and a further 15 percent in 2022. This modernization has been driven by local firm investments as Foreign Direct Investment (FDI) has been limited. Upstream (at the farm level), we note a substantial expansion of modern input use. Rice seed markets have become more active in the 2010s. The sale of branded rice seeds doubled over the last decade. Chemical fertilizer use also increased over the last decade. While use was lower in 2022 than before the crisis, they were still at a higher level than a decade earlier. We also see increased use of modern harvest and post-harvest technologies and more outsourcing of harvest and post-harvest activities, mostly linked to these modern technologies and practices. In 2022, 54 percent of the farmers reported to have used a combine-harvester on most rice plots. Farmers hiring in tractors increased by 33 percentage points over the last decade. Outsourcing drying services has also increased, but the growth has been more modest: 22 percent of the farmers indicated that they outsourced the drying of paddy. Modern dryer use increased accordingly. We find significant negative relationships between severe local conflict and many modernization outcomes. Severe conflict is found to negatively impact various modernization aspects, notably the adoption of tractor services and modern dryers at the farm level, and the prevalence of modern mills and drying equipment in midstream operations. Modernization has not been everywhere inclusive. More remote and smaller firms are participating less in modern practices. More remote farmers show smaller growth in adoption of combine harvesters, modern dryers, and modern mills, while smaller farmers have smaller growth in the use of combine harvesters and drying service providers. In the midstream, mills in remote areas show smaller changes in the share of modern mills in their areas, while smaller mills have significantly slower growth in modern service provision and lower investment rates in value-added machinery. For many of these modernization outcomes, the gaps across firm size and remoteness widened during the crisis years. Our findings point to three main implications for the modernization of Myanmar’s rice VC. Private-market oriented reform leads to rapid modernization in VCs, while heavy intervention – e.g., low reference prices for rice; limits on intranational trade; control of imports and exports through an export licensing system; and currency manipulation through a dual exchange rate system – may jeopardize VC modernization and increase uncertainty throughout VCs. More inclusive transformation should be promoted. Smaller and more remote farms and mills are showing slower growth across many modernization outcomes, raising concerns about livelihood improvements for those participating less in the VC’s modernization. Conflict negatively affects modernization at the farm and VC midstream. The study reaffirms the crucial need for stable political and economic environments to foster effective agricultural growth and transformation.

After decades of isolationism and economic stagnation, Myanmar opened its economy in the beginning of the 2010s, leading to rapid economic growth (Myanmar’s Gross Domestic Product (GDP) was almost 50 percent larger in 2020 than in 2011). But the COVID-19 health crisis that started in 2020 and a military coup in the beginning of 2021 – and the subsequent increase in conflicts, forced displacements, and migration – dramatically reversed that outlook, with Myanmar’s GDP in 2022 estimated to be 13 percent smaller than three years earlier. The agricultural sector also changed accordingly during this period.

"The ongoing COVID-19 pandemic marks the most significant, singular global disruption since World War II, with health, economic, political, and security implications that will ripple for years to come." -Global Trends 2040 (2021) Global Trends 2040-A More Contested World (2021), released by the US National Intelligence Council, is the latest report in its series of reports starting in 1997 about megatrends and the world's future. This report, strongly influenced by the COVID-19 pandemic, paints a bleak picture of the future and describes a contested, fragmented and turbulent world. It specifically discusses the four main trends that will shape tomorrow's world: - Demographics-by 2040, 1.4 billion people will be added mostly in Africa and South Asia. - Economics-increased government debt and concentrated economic power will escalate problems for the poor and middleclass. - Climate-a hotter world will increase water, food, and health insecurity. - Technology-the emergence of new technologies could both solve and cause problems for human life. Students of trends, policymakers, entrepreneurs, academics, journalists and anyone eager for a glimpse into the next decades, will find this report, with colored graphs, essential reading.

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