Author : May Yee Kay Khine Seine

Summary : This study aims to investigate the resource use efficiency and competitiveness of Myanmar natural rubber production without and with AFTAs. The study covers natural rubber farmer-respondents in major rubber producing areas in Mon State and Bago Region categorized as large-, medium-, and small-scale. Policy matrix analysis (PAM) is applied as the main analytical tool of this study in order to reveal the distorting effects of government policies and measure the economic efficiency of NR industry.

The PAM analysis indicated the competitiveness and consequences of current policy effects on NR production in both study areas for a short-term analysis of 12 years. The negative divergence in revenue of NR production revealed that all groups of farmers were implicitly taxed by direct and indirect policy intervention on prices of NR output and they received a lower price for their output than their respective economic farm-gate prices. Positive divergence in tradable inputs indicated that farmers were penalized by the policy on their input use, thus incurring indirect tax. Large-scale farmers paid the largest tax on their purchased tradable inputs for NR production. Positive divergences in the costs of domestic factors created labor employment due to higher price received by labor at the time of tapping latex. Farmers had positive profitability in natural rubber farming, but their social profit was lower than private profit due to price distortion. Relative divergence in profit was all negative for all farmer groups and quite strong due to intensive use of labor in latex production. All farmer groups were found to have comparative and competitive advantage in NR production without AFTAs. However, the analysis pointed out the need for economic reform to liberalize the economy further and to remove distortions caused by direct and indirect policy interventions on agricultural incentives. The DRC values are smaller when Myanmar enters AFTAs, meaning that NR production in Myanmar will have more competitive and comparative advantage under AFTAs, especially small farmers who are expected to become more active in NR production. Sensitivity analysis with AFTAs shows that private competitiveness would be most sensitive to a change in crop yield, but social competitiveness would be sensitive to changes in world price, yield, and exchange rate.