red : Burma - Agricultural development and credit

Report No. 454a-BA Agricultural Development and Credit in the Union of Burma July 31, 1974 General Agriculture Division South Asia Projects Department Not for Public Use Document of the International Bank for Reconstruction and Development International Development Association This report was prepared for official use only by the Bank Group. It may not be published, quoted or cited without Bank Group authorization. The Bank Group does not accept responsibility for the accuracy or completeness of the report.  BASIC DATA CURRENT EQUIVALENTS - DECEMBER 1973 US$1 - 4.85 kyats K 1.0 - US$0.21 WEIGHTS AND MEASURES 1 acre (ac) 0.40 hectares (ha) 1 hectare 2.47 acres 1 mile (mi) - 1.61 kilometers (km) 1 lb 0.373 kilograms (kg) 1 long ton 2,240 lb; 1,016 kg 1 kilogram = 2.20 lb 1 cusec 1 cubic foot per second ' viss 3.6 lb 1 basket(paddy) 46 lb or 17 kg .iREA POPULATION Total: 678,528 km' 29.6 million (1973) 167 million acres Rate of growth: 2.3% (1962/72) Cultivated land: 22 million acres DEh43ITY POPULATION CHARACTERISTICS (1969/70) 42 per km2 (Selected Urban Areas) 148 per km2 of arable land Crude birth rate (per 1,000) 36.2 Crude death rate (per 1,000) 10.8 Infant mortality (per 1,000 live births) 62.8 HEALTH (1970/71) NUTRITION (1969/70) Population per physician 9,177 Calorie intake as % of requirements 124 Population per hospital bed 1,370 Per capita protein intake (grams) 60 EDUCATION (1970/71) DISTRIBUTION OF USUFRUCT (1973) Adult literacy rate % 70 % land held by top 10% of farmers 35 Primary school enrollment % 88 % land held by smallest 10% of farmers 2 FARMING UNITS GNP PER CAPITA IN 1973 Number: 4.4 million US$85 (IBRD estimate at current prices) FISCAL YEAR April 1 - March 31  Tnis report prepared by Messrs. R. P. Christensen and G.B. Fox is based upon the findings of a mission which visited Burma from November 20 - December 19, 1973. The mission comprised: Mr. R. Christensen (Mission Leader) Mr. G. Fox (Agriculturalist) Mr. P. Van Dooren (Consultant, Credit and Financial Specialist) Mr. R. Adair (Consultant, Rice Specialist) Mr. H. Rashid (Consultant, Economic Geographer) Messrs. R.P. Christensen and G.B. Fox returned to Burma in June, 1974 to discuss the draft report withI Government and to update the information on which it is based. This report incorporates revi- sions resulting from these follow-up discussions.   ABBREVIATIONS AND GLOSSARY AC - Agriculture Corporation AMD - Agricultural Mechanization Department ARI - Agricultural Research Institute BSPP - Burma Socialist Program Pirty GDP - Gross Domestic Product GOB - The Government of the Socialist Republic of the Union of Burma HYV - High-Yielding Variety (Crops) ID - Irrigation Department MAF - Ministry of Agriculture and Forests SAB - State Agriculture Bank TC No. _ - Trade Corporation No. _ UBB - Union of Burma Bank USUFRUCT - Land Cultivation Rights   UNION OF BURMA AGRICULTURAL DEVELOPMENT AND CREDIT TABLE OF CONTENTS Page No. SUMMARY AND RECOMMENDATIONS ..... ................... i-xi I. INTRODUCTION ................., 1 II. THE AGRICULTURAL SETTING .......................... 3 A. Employment and Income from Agriculture ....... 3 B. Rural Households ................. 5 C. Income Distribution .......................... 7 D. Rural Living Conditions ...................... 8 E. Land Tenure .................... 9 F. Land Use ................. .................... 10 G. Regional Characteristics ................... .. 11 H. Government Organization .......... ............ 14 III. PERFORMANCE AND POLICIES DURING THE LAST DECADE ... 15 A. Production and Consumption Trends .... ........ 15 B. Foreign Trade ................................ 18 C. Efforts to Expand Production .... ............. 19 D. Factors Affecting Output and Productivity .... 23 E. Capital Investments .......................... 24 F. Price Policies and Programs .... .............. 26 G. Supporting Services ..... ..................... 30 IV. AGRICULTURAL CREDIT AND COOPERATIVES .... .......... 32 A. Background ................ ................... 32 B. The Village Bank System .......... ............ 33 C. Cooperative Societies ........... ............. 37 D. Advance Purchase System .......... ............ 39 E. Other Types of Credit ........... ............. 41 F. Shortconings of Credit Programs ...... ........ 43 G. Government Plans Relating to Credit .......... 45 H. Recommendations ...... ........................ 45 V. DEVELOPMENT PLANS, POTENTIALS AND POLICIES .... .... 49 A. Development Plans ............................ 49 B. Crop Production Possibilities .... ............ 51 C. Livestock Production Potential .... ........... 56 D. Price and Income Incentives .... .............. 57 E. Institutional Services ..... .................. 60  -2- Page No. VI. EXTEIqAL ASSISTANCE AND INVESTMENT PROJECTS ... .... 62 A. Technical Assistance . . 62 B. Agricultural Credit and Cooperatives ......... 63 C. Seeds Research ............................... 64 D. Rubber Rehabilitation ........................ 65 E. Irrigation and Resource Development .......... 65 APPENDIX TABLES 1. Changes in Number of Rural Households by Size of Land Holdings 2. Number of Households, Land Area, and Average Size of Holdings by Types of Land and Size Classes 3. Number and Land Area of Rural Households by Regions and Size Classes, 1970/71 4. Number and Land Area of Rural Households by Regions and Types of Land 1970/71 5. Government Procurement of Selected Agricultural Crops 6. Producer and Retail Prices of Selected Products 7. Number, Membership, and Volume of Business of Cooperative Societies, 1972/73 8. Paddy Production, Government Compulsory Delivery Quotas, and Retention of Paddy for Home Use or Sale for Holdings of Different Sizes and Yields per acre MAPS 10956 Burma - Agricultural Regions 10957 Burma - Land Use 10958 Burma - Land Capability ANNEXES 1. Government Organizations and Services in Agriculture 2. Agricultural Regions and Development Possibilities 3. Rural Development 4. Agricultural Education and Extension 5. Livestock Development 6. The Rice Sub-sector  UNION OF BURMA AGRICULTURAL DEVELOPMENT AND CREDIT SUMMARY AND RECOMMENDATIONS i. This report assesses potentials for accelerating agricultural development in the Union of Burma and the contribution that credit insti- tutions can make to such development. The report was prepared to meet the following objectives: (a) improve the Bank's knowledge of Burma's agriculture sector to facilitate Bank Group agriculture lending opera- tions 1/, and (b) provide the basis for a response to government requests for technical assistance in the field of agriculture credit. The emphasis of the report is on production rather than equity aspects. This recognizes the substantial success of government efforts to avoid wide income dispari- ties in the society. It also reflects the mounting concern of the Govern- ment with the productivity aspects of its agriculture policy. Agricuiture's Role in the Economy ii. Government policies during the last decade have been principally concerned with social reform. Economic growth has been a secondary consi- deration. Official statistics indicate that total net output (GDP) of the economy, measured in constant prices, has barely kept pace with population growth. Although efforts have been made to industrialize the economy, other sectors have grown at about the same rate as agriculture and there has been little structural change. iii. Agriculture dominates the Burmese economy accounting for 35-38% of GDP, 90-95% of exports, and almost 70% of total employment. Slow growth of agricultural output has retarded national economic growth in the last decade. Total agricultural output (value added by the crops, livestock and fishery, and forestry sub-sectors) increased 2.4% a year during 1963/72. However, crop production which contributes 72% of total agricultural output, increased only 1.9% a year. Rice production which accounts for half of total crop out- put has been stagnant. Official statistics show that population iLcreased 2.3% a year during 1962/72, but the population growth rate has risen in the last few years and now may be close to 2.8% a year. 1/ Due to budget constraints, it has not been possible to mount a full- scale sector review for Burma. This sub-sector study follows on a general review of agriculture problems and prospects conducted as part of the economic mission in 1973 which published the repor-t: The Current Situation and Prospects of the Union of Burma, July 25, 1973, Report No. 1682-BA, pp. 34-51.  iv. Increased domestic consumption resulting from population growth and a slow rate of growth in crop production in the last d_cade has seri- ously reduced agricultural exports and placed Burma in a critical balarnce of payments position. Of greatest concern is the lowr race of growth in rice production. Before World War II Burma exported 70% o-f the rice it produced and rice accounted for over 80% of export earni,ngs. Rice exports have declined from over 3 million tons annually in 1937/'.1 to less than 2 million tons a year in the early 1960s to 600,000 tons in 1971/72 and 300,000 tons in 1972/73. The only crop for which exports have increased is jute. RICE: PRODUCTION, EXPORTS AND DOICESTIC USE (Million long tons) .1936/41 Ave. 1961/62 1971!72 1972173 Paddy 7.4 6.7 8.0 7.2 Rice 4.4 3,9 4,7 4.5 Exports 3.2 1.7 .3 Domestic use 1.2 2.2 401 4.2 V. Export earnings from agricultural products declined from over US$200 million a year in the early 1960s to less than UJS?200 million in 1971/72. This decline has been a major factor limiting economic growth. Burma has had a negative balance of trade amounting to U'S50-70 million annually in recent years due mainly to declining rice exports. Lack of foreign exchange earnings to finance imports of capital goods, industrial raw materials and consumption goods has severely limitee national economic growth. Rural Living Conditions vi. Approximately 85% of Burma's population live in rural villages. In addition to the 70% directly dependent upon income fro5, farming, fishing and forestry, another 15% live in rural towns and villages and work in trade and service occupations closely associated with agricult:are. Qaly 15% live in urban areas and many of these people are engaged -in marL-eting, input sup- ply and other activities closely associated with agriculue. vii. After independence in 1948 Burma reduced the nui-w