Agricultural production, land use and investment policies were reviewed in this paper rather than other three major economic policies related to natural rubber industry in Myanmar, which will be presented in the next paper. The focus was on the policy changes and support to natural rubber industry in Myanmar from the early days until the time when the country started to prepare for its integration to ASEAN in 2020 onwards.
Key words: Myanmar, Natural Rubber Industry, ASEAN Integration, agricultural production policy, land use policy, investment policy.
Natural rubber (Hevea var.) is farmed as the “White Gold” in Myanmar because the latex of this perennial crop is precious to the nation not only for domestic industries but also for foreign exchange earnings from its export. The Myanmar natural rubber sector has developed throughout various political changes by area expansion not only in traditional rubber growing areas but also in non-traditional areas. The whole industry was predominantly in private hands (Hla Myint, 2013; Tin Htut Oo and Kudo, 2003) since the British colonial era. With the political change in 1962, there emerged two types of rubber estates: state-owned and private-owned by both local citizens and foreigners. Nationalization in the years of 1964 to 1973 caused the loss of interest by the private sector in rubber industry and reduction in rubber planting areas until 1980. Natural rubber industry was prioritized as a potential export-earning perennial crop since after the launching of market-oriented policy with partial liberalization in 1989.
Policy shift over time
The chronological shifts in economic system of Myanmar have resulted from political changes through the years (Table 1). Over six decades of the period 1948-2010, the economic systems varied notably, a mixed and free economy in 1948-1962, a centrally-planned socialistic economy in 1962-1988, and a market-oriented economy with partial liberalization under military regime 1988-2011. Starting from 2011 to present, the new democratic administrations undertake steps forward toward a fully-liberalized economy with Myanmar integration to ASEAN and the world in order to build a modern industrialized nation.
Myanmar once has been the most developed nation with stable economy in Asia until 1962, but it declined to the status of least developed country in 1987 (Tin Soe, 2008). Thus, Myanmar’s economic policies are differentiated into three phases, namely, Pre-economic reform (1962-1988) with monopolized policy, Post-economic reforms (1988-2011) including two-step trade reform process of partially-liberalized and liberalized policies, and Myanmar Integration to ASEAN and the global economy (2011-2015 onwards) which is the next prominent economic reform of the nation.
After a long period of protection to the nation’s economy, Myanmar has initiated economic reforms in 2010 and until the present, serially and gradually, although starting as early as 1989. Fundamentally, the major change has given intention to the reintegration to regional and global economy aiming at the state’s comprehensive economic development. The reforms have covered trade liberalization and foreign investments as its integral part. Myanmar is now accelerating structural changes step-by-step to become a developed and competent nation in the near future.
There are only a few studies regarding economic policy analyses on natural rubber. Thus, this study emphasized the major economic policies which encompassed natural rubber production alongside its history. At present, a fully-liberalized economy is being engaged starting in 2018 as a new member of ASEAN economic integration in order to build a modern industrialized nation.
MAJOR ECONOMIC POLICIES RELATED TO NATURAL RUBBER INDUSTRY IN MYANMAR
Agricultural policy on natural rubber
With a long history of about 130 years ago, natural rubber has largely contributed to the country’s economy since before the World Wars. It was commercially produced since 1905-09 in Myanmar and the industry boomed in the 1960s due to a Rubber Project under the Agriculture and Rural Development Corporation (ARDC) initiated in 1956. But many private rubber estates (local or foreign-owned) suffered much from the consequences of nationalization and isolation policy in 1964 (NAPA, 2016) and centrally-planned economic system since the agriculture sector was adversely affected during the socialist regime. Then, Myanmar’s economy was protected for about 50 years through monopolized policy in 1962-1988 and centrally-planned and partially-liberalized policy in1988-2011. Myanmar is an exporter of primary commodities, and agriculture still dominates the economy, thus the policy restriction has largely affected agricultural trade.
With all the centralized, partially-liberalized and liberalized economies, Myanmar agricultural policy mostly emphasized the increase in production rather than not only quality control, market creation and manufacturing industry for final rubber goods but also the maximum income of natural rubber farmers.
The rubber planting industry was controlled by the government under the centralized economy through direct ownership of production, distribution of the limited supplies of inputs and provision of occasional advice to rubber planters (Tin Htut Oo and Kubo, 1993).
With the partially-liberalized economy, agricultural policy is set out in short, medium and 30-year long term plans. Natural rubber has been prioritized as economically important exportable and industrial crop. Private sector participation in rubber production was encouraged to accelerate area expansion, increase production and export, and develop the downstream value-added products industry.
Natural rubber development was initiated in 1956 through a Rubber Project (1956-1964) under the Agriculture and Rural Development Corporation (ARDC) for renewal of old and unproductive plantations with high-yielding clones. Rubber Rehabilitation Project Phase 1 (1979-1984) and Phase 2 (1985-1993) were implemented with grants from the International Development Association (IDA), UNDP and FAO. These projects mainly concentrated on area expansion and achieving higher productivity rather than quality improvement. The Applied Research Centre for Perennial Crops (ARCPC) Project in 1991-1994 established a research center for all perennial crops including natural rubber in Pa-Out, Mawlamyaing with the aid of UNDP/FAO. This project contributed to institutional and technical support, and staff trainings for applied research and extension services.
The potential of natural rubber was realized as an export earning industrial crop to increase its production after the agricultural (crop) sector was first liberalized in 1989. Rubber smallholders responded to the policy relaxation by participating again in rubber trade due to high price (Woods, 2012). With some institutional reforms, the Myanmar Perennial Crop Enterprise (MPCE) was founded in 1994, and its name was changed to the Myanmar Industrial Crop Development Enterprise (MICDE). Since then, natural rubber was on top priority among perennial crops as agricultural development was promoted in the partially-liberalized policy. MICDE was renamed as the Department of Industrial Crops Development (DICD) which is currently under the Department of Agriculture (DOA), Ministry of Agriculture, Livestock and Irrigation (MOALI). As DICD, it aimed towards the development of industrial agriculture not only to increase production and exports but also to develop downstream value-added product industry. Hence, area expansion of natural rubber accelerated.
In 1995, with the idea of “Bago Yoma must be the Land of White Gold”, a plan of area expansion was set and largely implemented in both traditional and non-traditional rubber growing areas in 1996-1997. The traditional rubber areas are Mon State, Tanintharyi Region, Kayin State, Bago and Yangon Regions. Now rubber plantations can be seen in almost every part of Myanmar where the agro-climate condition is favorable (Table 2) except in less rainfall areas such as central dry zone and Chin State. The 1995 rubber expansion policy led to high interest in rubber production by private entrepreneurs. Large-scale rubber estates have emerged since private agribusiness was encouraged by allowing large-scale agricultural concessions to achieve the national target of rubber development. Over 90% of rubber planting industry is in the hands of private sector with 97% of sown area and 98% of latex production in 2010-11 (Hla Myint, 2013).
Being able to produce only raw rubber, 75% of production goes for export to China through border trade and some to Malaysia and Singapore, and 25% is used for domestic shoe manufactures (Hla Myint, 2013). The raw rubber exporters in Myanmar are also the importers of final rubber products.
According to the first National Export Strategy 2015-2019, the natural rubber is now being emphasized by the Democratically Elected Government for expansion of production, export and developing the domestic industries of rubber goods. Although the rubber industry has big potential for growth, it much depends on the government’s policy since natural rubber sector is facing many challenges. The constraints include lack of government support, poor production methods and a severe slump in global rubber prices, according to Mr. Hla Myint who is the advisor of Myanmar Rubber Planters and Production Association (MRPPA) (Vrieze, 2015).
Land use policy for natural rubber
Land use policy is playing a crucial role in rubber development process in Myanmar. It is reviewed into two parts as land use policy on natural rubber throughout the British colonial era after independence to liberalized economy and information on land use management of natural rubber (Seine, 2020).
Land belongs to the State in all the centralized, partially-liberalized, and liberalized economic systems after Myanmar Independence as it is quite different from the British colonial era.
Special land rules were set in the mid-1910s for large-scale rubber plantation (Keong, 1973) in Myanmar as high price of natural rubber pushed more land acquisition up. In those rules, administrative procedure was shortened, and district officers were allowed to manage land transfer process up to 1,000 acres for rubber plantation. Moreover, to lease land for 30 years, rubber investors were exempted from tax payment for the first 12 years, to be applied later at a rate of up to US$ 3.40 per acre. Since the demand for land became very high, the land rules were amended in 1916 so that only legitimate planters were granted land with strict cultivation clauses. Also, tax exemption was applied only for the first 8 years; after that period, annual tax rate was at US$ 27 per acre for each 20 years interval until 1936. From all land grants, 2% of the net value of rubber was collected as land revenue. This revised policy distracted foreign investors in the rubber industry in Myanmar (called Burma before). But the rubber sector grew gradually with market improvement. In 1918, the colonial government encouraged private rubber planters and supported new rubber estates with loan at low interest rates for area expansion. In 1922-1926, more assistance was provided to raise production and lower the cost for rubber estates to become financially viable. This is how the land use policy played a symbolic role in the development of Myanmar natural rubber sector in the British colonial era until Socialist era when land policy was announced that the State is the owner of land. In that policy, land holders had to pay land tax and to cultivate it for successive 12 years, and then they had the right to choose their crops, they could freely buy, sell and mortgage their landholdings, and inherit it; and all these features remained unchanged until 1963.
Soon after independence in 1948, the Parliamentary Democratic government passed a land nationalization act on all agricultural lands (especially large holdings by foreigners and moneylenders) with the aim of protecting poor farmers from being landless. That 1948 act was not enforced, but the 1953 act was passed in 1954 and partly succeeded in land reform process.
Under the Socialist regime (1962-1988), land use policy was remarkably changed and described in the Land Nationalization Act 1953, Tenancy Act and Rules 1963, and Procedures Conferring the Rights to Cultivate Land 1963. The State is the ultimate owner of land. The farmers had only the rights to cultivate their holdings and to inherit it. The land could not be sold or transferred or mortgaged, or taken instead of loan repayments. Absentee ownership is illegal (Khin Maung Kyi et al, 2000). In 1963, the Tenancy Act was revised to eliminate rents on farmland. The Agrarian Committees controlled the right of tenancy (Khin Maung Kyi et al, 2000) and reallocated the land with the concept of equity. In this period of pre-economic reforms, private rubber estates were seized under nationalization policy with isolated economy. Thus, the development of rubber sector became stagnant and foreign investments left the country.
The land use policies for rubber sector basically remained unchanged until 2011 under the partially-liberalized market economy (Post-economic reforms). However, the 1995 area expansion plan has encouraged commercial rubber production through permitting private entities large-scale concession of agricultural land in both traditional and non-traditional rubber growing areas. Natural rubber plantation in non-traditional area has been expanded to 21% of the total Natural Rubber (NR) sown area (Byerlee, D. et al., 2014).
In March 2012, an essential land reform was undertaken in order to attract Foreign Direct Investment (FDI) in the development of agribusiness including rubber sector. The two land laws were implemented in August 2012, namely, the Farmland Law (FL) and the Vacant, Fallow and Virgin Land Management Law (VFV) which was improved from the 1991 Land Management Law. New land laws grant large-scale land use to private investment in commercial agriculture and industrial business for long-term use. In Myanmar, the land reform is usually coupled with investment policy when considering the country’s economic development.
Land use management for natural rubber
When some aspects of land use policy and investment policy were amended in 2012, farmers have acquired the right to till the land, inherit it, sell it, mortgage, and enter into contract farm with foreign investors and private domestic companies, but they have no right to own the land.
Land use management system in Myanmar is quite complicated since cross-sector coordination is very weak in land resource utilization where each agency only focuses on its own sector (Maung Maung Than, 2006). It was reported that forest land is managed by the Ministry of Natural Resources and Environmental Conservation and agricultural land is managed by the Ministry of Agriculture, Livestock and Irrigation while other sectors like the Ministry of Electricity and Energy, and Ministry of Transport and Communications manage the natural streams and their physical conditions.
There are two types of rubber growing land found in Bago Region under the area expansion plan of 1995 of “Bago Yoma must be the Land of White Gold”. These are the virgin land which is granted by the Department of Agricultural Land Management and Statistics (DALMS) and the forest land granted by the Forest Department.
In virgin land, NR farmers need to secure a permit from DALMS for the right to use the land for rubber plantation. In forest land, farmers have to apply for a 30-year grant for right to grow natural rubber but they have no right to transfer the land to others. With the old land law, payment is different for virgin land and forest land. With the 30-year grant in forest land, rubber farmers had to pay only one-time official fees of US$ 0.07/ac in 1995 which increased to 500 MMK/ac in 2007. However, the actual payment is quite different from official fees. For rubber farmers who obtain the permit from DALMS for virgin land, official fee per acre per year ranges from US$ 0.001 to US$ 0.003 (DALMS, 2015), but actual fees charged are from 100 times to 1,000 times of official fees. (Note: Exchange rate: 1 US$ = 1500 MMK as of 2019)
Until 2015, NR farmers had to pay tax to Forest Department (FD) when they produce latex (i.e., starting on the 7th year of plantation) since FD allowed farmers to grow rubber in forest areas and natural rubber products were specified as forest products. But the forest tax was removed in 2015 (Customs Department, 2015). In addition to payment to government, some farmers have to pay annual fees to local ethnic armies especially in Shwe Kyin, Tha Hton and Paung townships since their NR plantations are in remote areas near those ethnic armies.
According to the amended land use policy of 2012, NR growers can apply using Form 7 and Form 105 since 2014 for their rights of land use and other rights. Some farmers are still applying using those forms at the time of survey while a few have already obtained their permits. With the new land law, land tax is not specified yet for Form 7 or Form 105.
It was found that farmers lack knowledge on land use policies in each administrative era. Even the 2012 amended land policy is not well-known among most of NR farmers except some large-scale ones. Only very few farmers know the basic changes about their rights in the 2012 amended policy. Land disputes in the study areas still exist for several reasons.
Investment policy on natural rubber
Investment policy contributes as one of the key stimulators to the economic growth of Myanmar. The first Investment Law of Myanmar, a “Union of Burma Investment Act,” emerged in 1959 during the Parliament Democratic administration and it had provided more incentives for investors than in the Investment Policy Statement of 1955 (Mya Than, 1990).
The socialist rule practiced isolated economy by excluding FDI and limiting official development assistance (ODA). In post-economic reform, the State ran its economy through open door policy in 1989 inviting FDI and allowing private participation. The Myanmar Investment Law was introduced in 1988 and Myanmar Citizens’ Investment Law in 1994 together with other relaxations of restrictions on the country’s economy. In November 2012, a new foreign investment law (FIL) was formulated. It allows foreign investment in all activities except those listed as prohibited or restricted. Moreover, foreign investors can do business in Myanmar with either 100% equity ownership or a joint-venture with a private or public domestic entity. It includes incentives for FDI, land-use terms and legal structures to address concerns expressed by foreign investors. The Citizens’ Investment Law (CIL) of 2013 adjusts the investment incentives and procedures for national and foreign investors.
It seems Myanmar rubber was very popular among foreign investors in the British colonial era until the beginning of the Socialist era according to Keong (1973). Since after adopting market economy in 1989, the investment in rubber industry comes only from domestic private enterprises for plantations and there is no FDI in both plantation and manufacturing. There are several reasons why foreign investment in the development of rubber sector was less attractive. Trade restrictions, uncertain political and socioeconomic environment, inadequate provisions for investor protection, international sanctions, undeveloped financial institutions, lack of technology for quality ribbed smoked sheet (RSS) and inadequate access to electricity are the major ones. The long-time (ethnic) conflicts (civil war) between local ethnic-armed groups and military seem the particular challenge among others for natural rubber industry being unattractive to FDI. Some farmers especially from Shwe Kyin, Taung Ngu, Mudon, Tha Hton, and Paung townships pointed out that they have to pay annual fees to KNU (local Karen ethnic army) for growing their rubber plantations in remote area close to where Karen army has settled. Physical infrastructure and logistical services were also particularly poor in plantations located in remote areas.
Although there is no foreign investment in natural rubber sector during both periods of pre-economic and post-economic reforms (and very few FDIs in the whole agriculture sector until now), it has been once an interesting area of industrial agriculture among foreign business companies in the history of Myanmar economy of British colonial era. Under the investment policy with no restriction of more open economy today, there are many opportunities for FDIs in the development of Myanmar rubber industry, especially in producing final rubber products via manufacturing firms. Cheap labour force, abundant land resources in Shan state, Tanintharyi region, Bago region, and Rakhine state, huge potential for export, opening up of the economy, and absence of restriction on FDIs can create flexible environment for foreign investment in Myanmar natural rubber sector (NES, 2015).
The Myanmar natural rubber sector has developed throughout various political changes by area expansion not only in traditional rubber growing areas but also in non-traditional areas. Although rubber growing areas have expanded, the quality of natural rubber is still low. In every political era, the government tried to increase sown areas of rubber instead of upgrading the quality of raw rubber. Since the political change in 2010, the rubber market seems to be more open and after 2012 there has been increasing interest in Myanmar rubber among top rubber consumers such as Japan and USA. Thus, there is a good potential for Myanmar’s natural rubber sector. But these buyers prefer quality rather than quantity since there are many country suppliers of natural rubber in the international market. Therefore, Myanmar needs greater efforts to take advantage of these opportunities by upgrading the quality of its raw RSS for maximizing income of rubber farmers. In the domestic market, it also needs to supply quality rubber to the downstream rubber industry which are necessarily promoted or developed further.
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 Source: Customs Department, Yangon. The rate of forest tax was not available.
 The certificate of grant for the right to use the land
 The certificate of Map for the granted land by Form 7