Will junta focus on agricultural reform?

Friday, 29 January 2010 18:25 Salai Pi Pi

New Delhi (Mizzima) - A United Nation’s report recently urged Burma to prioritize its agricultural sector in the fight against poverty, as it has considerable growth potential. However, economic experts have cast doubts that agricultural reform can be feasible under dictatorial rule.

The Myanmar Humanitarian Partnership Group meeting, held Wednesday in Burma’s former capital of Rangoon, was attended by over 70 experts, including heads of UN agencies, diplomats and aid workers, and highlighted the crucial need of promoting the agricultural sector to address the economic challenges faced by Burma.

“Economic growth and poverty alleviation will depend on improvements in productivity and growth of agricultural crops, fisheries and livestock,” said Shafique Rahman, UNDP Policy Advisor, in a UN statement, adding, “Over 70 percent of the population lives in rural areas, and all indicators suggest that the agricultural sector has considerable growth potential.”

The Myanmar Humanitarian Partnership Group meeting is a monthly meeting attended by UN agencies, non-governmental organizations, donors and other members of the humanitarian community in Burma to discuss developmental and humanitarian issues ranging from education and health to agriculture.

The call for promoting the agricultural sector comes after Nobel Laureate Professor Joseph Stiglitz visited Burma last month, advising the Burmese regime to reform its rural credit system, invest more in education and open up to political participation in order to sustain its economy.

The recent meeting also focused on Stiglitz’s economic policy and programmatic responses related to areas like rural credit, market access, non-agricultural economy and infrastructure.

Sean Turnell of Burma Economic Watch and Australia’s Macquarie University agrees with the need of developing the agricultural sector in addressing Burma’s economic challenges, but said it is impossible without boosting overall economic growth.

“The key word is 'potential' of course. The agricultural sector has always been the source of Burma's prosperity, and for the last four decades has been operating well below its potential,” Sean Turnell told Mizzima.

“It’s all part of a bigger process of greatly needed economic reform. Just about every conceivable reform needed for Burma's agricultural sector strikes at the heart of the country's broader political economy,” he added.

With a total area of 676,500 square kilometers, Burma was once known as the rice bowl of Southeast Asia and Asia’s largest rice exporter. However, the country’s status was reduced to being one of the poorest in the world after the former military regime, led by General Ne Win, introduced the Burmese Way to Socialism.

The country’s present military rulers announced the adoption of a market economic system after the people uprising in 1988 and started to make small inroad in reforming the agricultural sector.

Recently, Burmese economist Dr. U Myint, echoing the advice of Stiglitz, suggested that Burma’s rice industry should try to again become a major exporter worldwide in order to tackle poverty among farmers in the country.

According to official statistics, rice accounted for nearly 47 percent of Burma’s export receipts in fiscal year 1938-39. However, by 2007-08 the corresponding figure had sunk to less than two percent, with earnings totaling a mere 1.2 percent of the global sum.

Turnell said Burma's agricultural sector is presently starved for capital as the military government has taken the lion's share of the country's economic and financial resources and used them for funding the expansion of military might.

“To totally re-capitalize Burma's rural economy [supply farmers with sufficient credit to buy critical inputs like fertilizer] would cost a maximum of about $1billion,” calculates Turnell. “Yet, these funds are not supplied - and instead the SPDC (junta) spends nearly $600 million on MIG 29 Fighters.”

Meanwhile Aung Thu Nyein, a Thailand-based Burmese economic researcher from the Vahu Development Institute, said despite farmers needing money for cultivating crops, between 70,000 to 100,000 kyat (US$ 70 to 100) per acre, the government only provides loans in the range of 7,000 to 8,000 kyat per acre.

“Because of the lack of sufficient loans, farmers borrow money at high interest rates, reaching 180 percent per year. In this situation, there is no profit for them,” Aung Thu Nyein told Mizzima. “If the regime does not go for further reform in agriculture, the country cannot escape poverty.”

According to the UN’s statement, millions of rural poor in Burma resort to high cost loans from moneylenders, resulting in increased indebtedness, as microfinance provided by international organizations including the UNDP and banks meet only ten percent of the potential demand.

Demand for microfinance in rural areas of Burma, according to the UN, ranges from US$ 340 million to US$ 470 million.

Aung Thu Nyein said another factor holding back Burma’s agricultural sector is the Burmese government, which continues to procure crops from farmers at less than the market price as well as procuring rice for state rations.

Yet, despite experts calling for prioritizing the agricultural sector, Aung Thu Nyein has no optimism that the Burmese regime will take any immediate action, as its priorities are elsewhere - in the completion of Naypyitaw, the modernization of the army and nuclear power.

Turnell also does not expect to see any meaningful reform of the agricultural sector, contending that the distribution of land to favored cronies seems central to the junta’s continued grip on power.

After assuming state power in 1988, the Burmese regime is planning to hold an election this year as part of its seven-step road map to so-called disciplined democracy, which critics suggest will only entrench military rule in the country.