As part of the government’s broader approach to risk management, the Ministry of Planning and Finance approved the country’s first-ever crop insurance programme for local farmers in early 2018. While crop insurance is available in neighbouring Thailand, India and China, it was a luxury Myanmar farmers had not previously been widely exposed to.
Myanmar’s agricultural output has suffered from a range of inefficient policies, including ambiguous land rights and poorly timed public interventions; however, the greatest constraint on farming output in recent history has been extreme weather conditions. The most notable example occurred in May 2008 when the country was devastated by Cyclone Nargis, the tropical storm that took the lives of over 138,000 people and destroyed more than 600,000 ha of farmland with strong winds and torrential rain.
The ability of farmers to mitigate the financial impact of natural catastrophes has historically been limited by the lack of available agricultural insurance. In addition to erratic weather conditions, farmers battle crop damage caused by pests and disease. Their situation is further exacerbated by low rice prices, poor infrastructure and limited technology.
Pilot
More than a decade after the cyclone, the agriculture sector is being bolstered by the approval of a crop insurance scheme, which will help protect farmers against losses when yields are lower than expected due to unpredictable weather. Private insurance companies are working closely with the government, and a two-year pilot scheme was approved in January 2018. As a climate mitigation mechanism, the pilot scheme is to be implemented by Global World Insurance, with paddy fields in Yangon, Ayeyarwady, Magwe and Mandalay to be the initial beneficiaries.
While farmers still have a host of challenges to face, the introduction of crop insurance will support the long-term development of the sector. Given Myanmar’s severe weather conditions, particularly during the monsoon season, small-scale farmer incomes remain vulnerable to heavy rainfall, a situation exacerbated by the lack of modern irrigation systems. During the monsoon season, farmlands are often subject to flooding, with paddy rice the crop most affected in terms of losses and damage. Following Cyclone Komen in the summer of 2015, the Food and Agriculture Organisation and the World Food Programme noted that flooded paddy fields experienced a 30% annual reduction in yields in comparison to the previous year, with paddy rice accounting for 89% of the total amount of crops damaged.
Despite the strong need for agricultural insurance, Global World has indicated that initial interest from farmers has been muted. “The Insurance Business Regulatory Board supports the two-year pilot crop insurance initiative, but we need deeper involvement from the public sector if this project is to succeed,” U Soe Win Thant, managing director of Global World Insurance, told OBG. “In order to have more security, the government should partly subsidise crop insurance.” He added that the National Crop Committee is working on a Crop Insurance Law that will establish the framework through which the government and private sector can further develop this segment.
Premium
While the implementation of a crop insurance scheme is seen as a very necessary development, stakeholders still have a number of significant barriers to address. With no prior benchmark in the agriculture sector, one of the challenges Global World Insurance will need to address early on is the application of premium rates. According to local media reports, the premium rate is to be calculated on the market price of paddy across one acre of farmland. However, given that the amount of rainfall varies across Myanmar, the rice varieties cultivated and their resistance to floods are also different. For this reason, the criteria used to decide eligibility and compensation are expected to differ across regions.
Read More from OBG
