Mon Paing Ga Ghu, Hein Paing Htoo Chit, Karl Flecker and Yee Mon Hsu report on the economic impacts of COVID-19 in Mon State.
Since COVID-19 was discovered, it has spread around the world. On March 11, the World Health Organization (WHO) announced that the virus had become a global pandemic.
To limit the spread of the virus, communities were put on lockdown, leaving the doors of businesses and institutions closed. Additional mitigation measures have included frequent hand-washing, avoiding close physical contact and large gatherings, as well as wearing face masks. While such measures can slow the spread of the virus, they also have a significant impact on livelihoods and economies around the world including Myanmar and Mon State.
In late March, The National Enlightenment Institute (NEI) and SEED for Myanmar, two not-for-profit organizations based in Mawlamyine, conducted an initial assessment of the economic impacts to the Mon State economy from COVID-19. This preliminary report was made possible with the support of Konrad-Adenauer-Stiftung (KAS)-Myanmar.
Interviews were conducted with businesspersons in different economic sectors to collect on the ground information and insights, to help develop potential policy responses. This report was also shared with the Consumer Affairs Department under the Ministry of Commerce on 7 April 2020.
Although some of the dynamics described here have changed since the analysis was conducted, sharing this assessment can contribute to ongoing state- and region-level studies in other parts of Myanmar.
COVID-19 had an immediate and significant impact on Mon State. More than 90 percent of hotel and tourism-related businesses stopped their operations. Retail businesses soon faced supply and demand gaps in consumer goods. The impacts were varied. For instance, while the demand for basic consumer items was strong, construction materials quickly suffered from reduced demand. Overall sales were reportedly down 5-10% compared to the pre-pandemic period. Supply chains were disrupted due to the mitigation and containment measures required for public health reasons, which in turn, impacted the retail sectors. While the manufacturing sector struggled to maintain operations, companies have also struggled to maintain their workforces in the long run.
Economic background of Mon State
Mon State is located in the southeast of Myanmar on the Tanintharyi coastal region and has rich natural resources (inland and coastal). There are more than 2 million people living in Mon State. Agriculture, livestock, fishery, trading, and service sector operations are the major drivers of its economy. There are also many micro, small, and medium enterprises (MSMEs).
Rubber is the main crop for Mon State. In 2018-2019, government statistics indicated there were 497,153 rubber plantation acres across the state, accounting for almost half of the national total. Mon State produced 110,603 tons of rubber in 2018-19, equal to 30 percent of the national rubber production figure. In 2018-19, there were 733,957 cultivated acres of paddy (rice) in Mon State and 470,981 baskets can be produced from this acreage. Mon State also produces salt for national consumption with 396,693 acres of salt farms. There are 89 salt businesses operating across the state. According to state-level data for 2018-2019, 11,346 metric tons of purified salt, and 396,693 metric tons of raw salt were produced.
COVID-19 impacts on Mon State business sectors
The pandemic is having a significant economic impact on Mon State. Mon State’s commodities are either reliant on a single export market or they suffer from limited access to alternative markets. During March and April, the impact varied from small reductions in business activities to businesses that were wiped out completely.
Exports reliant on Chinese markets–such as the fishery sector, rubber, and fruit producers like watermelon and pomelo–have stagnated. Truck operators are carrying goods one-way on demand but mostly with no round-trip services, which has resulted in increased prices for the movement of goods. All wedding services, cosmetics, furniture, souvenirs, and tailor shops (which are largely MSMEs) have suspended their operations.
The crisis has forced families to sell their gold or other jewelry in return for cash. Because of the surge in the number of people selling gold, some gold shops have closed down since they cannot afford to buy the surplus. This has led some villagers to sell their gold at a low price. Disturbingly, knives or other sharp products made with iron are being sold at a higher volume than previously.
In Mawlamyine, most businesses interviewed decided to cease their sales or manufacturing functions when they learned of one infected case in the city. The economic impacts of such closures extend to the dependents of workers who may no longer have employment.
1 – Fishery sector
Mon State fishery exports significantly rely on the Chinese market, employing than 20,000 direct workers. With the closure of the Chinese market, fish and prawns are now on-hold in cold storage in Yangon. China is not guaranteeing it will buy the stored seafood during the crisis and these products are perishable. This creates an economic risk for the sector bearing unanticipated storage costs. Seafood products destined for the national hotel and tourism sector have also experienced a significant drop in sales.
Even if the Chinese market opens in the near future, the fishery sector will be impacted by the severe drop in market prices, excess supply, imposed transportation challenges, and the length of time left in the regulated fishing season. The State government established a limited fishing season to allow for conservation and fish stock replenishment.
2 – Hotel, tourism and other relevant services sectors
Being a highly contagious disease, measures to mitigate the spread of COVID-19 demands adherence to strict physical distancing guidelines, i.e. 6 feet apart. The hotel, tourism, and related services sectors typically rely on large gatherings such as pilgrimages. Physical distancing measures are not easily implemented within this sector, due to the realities of infrastructure and the nature of social events.
According to 2019 statistics from the Hotel and Tourism department of Mon State, there were 2,634,950 international visitors and 177,306 domestic visitors coming to Mon State. This is a total of 2,812,265 and represents an increase of 824,000 visitors compared to 2018. Hotels within Mon State rely on international and local visitors who are often attending events hosted by INGOs or NGOs, as well as visitors participating in national holiday events, international days of significance, and other celebrations. COVID-19 has meant almost a total loss of customers for this sector.
A majority of Mon State hotels operate with a bank loan and if the current trend continues for another 3 to 6 months, some hotels will fail. Approximately 50 to 100 workers are employed in each hotel. Currently, hotel operators are struggling to meet salary expenses due to loss of bookings from COVID-19. Most businesses in this sector might be entirely wiped out if emergency measures are not taken. Attention is needed to protect the tourism sector now to maintain skilled persons and to enable it to recover in the post-pandemic period.
Most tea shops and restaurants have seen a major decline in the number of their customers. Those surveyed estimated a 50% drop in customers. When there is a report of a positive COVID-19 infection in their towns, shops have ceased their operations.
3 – Agriculture sector
Rubber, rice (paddy), betel-nut, and various fruits are export products from the agriculture sector of Mon State. However, rubber produced in Mon State is generally of poor quality and is largely destined for China. Although rubber sheets can be safely stored for many months, buyers in China are not ordering the product. In addition, there are logistical and transport challenges to moving the products due to lockdown, curfews, and other restrictive mobility measures.
Although there are high-quality rubber producers, they are small in number, representing less than 30% of the sector. With a high degree of uncertainty, traders are reluctant to use their capital to buy rubber. Restrictive capital investment and cash flow, along with the high percentage of low-grade rubber produced across the state have essentially shut down the rubber market.
Mon State also produces rice, but it, too, is largely of poor quality and mostly consumed domestically, though some are exported. Locals tend to consume imported high-quality rice from other regions of the country, such as Irrawaddy and Mandalay. COVID-19 has led to panic buying of commodities like rice. Although local markets currently have sufficient supply, most are poor quality rice. Longer COVID-19 restriction measures will impact the supply chain for commodities like rice. As supply and quality diminish, a rise in price for consumers is expected.
4 – Construction sector
The construction sector has not yet been hit as hard by COVID-19, although travel restrictions create challenges for workers to get to job sites. When the monsoon rains arrive, construction work will stop. The construction sector employs a large number of laborers and casual workers. The lack of permanent work makes it difficult for these workers to support their families. Any protected period without work due to COVID-19 will add these workers to the unemployment queue. Construction projects linked to government tenders continue to operate but respondents noted their sale point has dropped by 50%.
5 – Warehouse and consumable foods distribution sector
Cooking oil is an imported commodity as there are insufficient levels of national production to meet demand. Panic buying has led to shortages and prices have doubled. Basic food commodities are seeing some increases in wholesale prices due to increased demand and transportation and logistics difficulties. Sellers are adjusting their prices according to the capacity of their supply lines and inventories.
6 – Entertainment sector
All cinemas have been closed. Local entertainment, such as zat pwe theatre performances, and dances (theatres) have also stopped their operations. This creates a multiplier effect on those reliant on this sector for employment. Typically, the sector operates by paying cultural workers in advance, but that is no longer possible.
Perspectives on COVID-19 impacts
Casual workers and laborers are the most vulnerable group and least likely to survive without income for no more than one month. It is estimated that workers in other sectors may be able to withstand unemployment for three months, with considerable hardship. Should the pandemic and the necessary public health restrictions limiting people’s movements and quarantine or shelter at home protocols continue beyond that time frame, serious social problems will likely follow.
Suggestions from Business sectors
1 – Subsidize worker salaries with a Social Welfare fund
The government should develop a subsidy plan for local businesses to cover their workers’ salaries. Example: Subsidize 50% of a worker’s former salary with a government support initiative and 30% be provided by the employer, or vice versa.
The 2012 Social Security Law needs to be re-visited in the context of the pandemic. Currently, workers are only able to access this benefit if they have accrued 36 months of joint payments (employer and employee) in the Social Security Benefit fund. For many workers, the pandemic arrived before they were able to contribute to this length of employment service. In addition, the eligible benefit amounts are too small, given price increases in basic consumer items.
In addition, the Social Security benefits exclude tens of thousands of others, such as those working in the informal sector, i.e. street vendors, piece workers, domestic workers, daily wage earners, and more (See Sections 12 a and b of the Law). The government must revise the Social Security Law to address these shortcomings and develop a plan for a social welfare fund that provides an adequate safety net for all citizens.
2 – Provide loans, decrease interest rates and postpone interest payment calculations
Banks typically do not provide loans for the livestock and fishery sectors due to the high risk inherent to these businesses. Although the fishery sector produces a surplus for an export market, the pandemic has shut that down. A large number of laborers and their families rely on these sectors for their economic survival. The government should prioritize providing accessible loans for these sectors, so that impacted workers and families can be adequately supported. The government should negotiate with the banks to renegotiate loan payment schedules for the hotel and tourism sectors. The goal should be to avoid the widespread unemployment of workers in this sector.
Considerable care between the government and business owners is necessary to develop a plan that ensures such funds are properly and fairly distributed. Any subsidy or loan extension initiatives must be designed to ensure funds reach the workers, rather than stay unduly with business operators/owners. This, in turn, will enable people to use that income within their communities for basic commodities and staples. A circular benefit will accrue to business owners.
Great care is needed in the design and delivery to ensure that any social welfare funds end up in the hands of those most vulnerable, while also promoting financial circulation incentives at the community level.
3 – The government should take care of gold prices
As is the rural custom, people buy gold, rather than rely on banks. When cash is needed, they resell the gold. This is happening now on a small scale, but with increasing amounts of gold surplus in the market, the price will drop significantly. Gold shop owners operate under supply and demand factors impacting the price of gold. Excess supply will lower the price, negatively impacting people in rural areas. Maintaining a stable price for gold will be an effective measure for rural people and permit the circulation of money in rural areas. Similarly, the government must make efforts to stabilize the value of the Kyat with the dollar.
4 – Develop an emergency response budget at least 5-10% of State GDP
Governments from other countries around the world are using a portion of their budgets to provide social welfare and business supports during the crisis. Myanmar should adopt this practice and re-allocate between 5 to 10% of its budget in a similar manner. For Mon State, 5-10% of the state’s GDP is equal to 2 to 4 billion Kyat. When someone is spending, their money becomes income for another person. The use of government budgetary resources has a multiplier effect that will reach local people and ensure money circulation within communities.
5 – Helping the business community by reducing taxes
In order to maintain a healthy business environment, a stable and paid workforce is needed. This, in turn, supports a multiplier effect for monetary circulation within communities and adds stability for businesses. At the moment, all economic sectors are being impacted by COVID-19. A reduction in supply and demand is creating a weak business environment and limiting the multiplier effect for money circulation.
The government should consider a reduction of export taxes as well as some tax relief in the wholesale and retail distribution and construction sectors, in order to stabilize and strengthen the business environment.
In order to better support logistics supply chains, government support is needed to offset fuel costs in cases where one-way transportation of cargo is impacting prices. Weak functioning of the logistics supply chain causes higher prices for commodities in the marketplace. In order to stabilize commodity prices, government subsidies are required. Direct payment of one-way fuel costs would be an effective measure and could be relatively easy to implement.
6 – Design a strategic plan, with business owners, for large scale employment projects
The government has numerous construction project plans in play that rely on the State budget. Employing jobless people on these projects will provide livelihood opportunities. Such a plan should include reducing some tax burdens for companies, as an incentive to facilitate the large scale hiring of laborers for these projects and their related supply chains. Policies and regulations, including occupational health and safety concerns in light of COVID-19, should be reviewed as needed during the crisis. Attention must be maintained to protect the environment, workers’ safety, and public health.
The government should empower and incentivize entrepreneurs to expand into new employment opportunities, such as delivery services, technologies that aid in the development of affordable lab testing for COVID-19 virus, or developing either cell phone tracing applications or labor-intensive tracking systems. The public health strategy is referred to as test-trace-isolate or quarantine. Such measures have been proven to help with warning others of their potential exposure to the COVID 19 virus. However great care must be taken with the privacy rights infringements, as well as the implications of unwanted surveillance of citizens.
The post-pandemic environment includes the potential for new employment opportunities for citizens, which will likely require new vocational training programs.
7 – Proper record keeping of migrant workers returning to Myanmar
According to the 2014 Census, 426,589 people from Mon State were categorized as migrant workers. Mon State has an additional population of 133,376 internal migrant workers, meaning they are located in Yangon or other cities within the country. The total number of migrant workers abroad (plus internal migrants) is more than half a million people (559,962) This represents 28 percent of the total Mon State population.
We estimate at least several thousand more are dependent on the remittances of these family members working abroad or internally. The loss of income from migrant workers has a major impact on those left behind and can lead to a significant breakdown of communities’ social fabric, including increased hunger, violence, and crime.
Labour activists estimate there are three million Myanmar migrant workers in Thailand. Media reports have cited tens of thousands of Myanmar migrant workers being stranded in Thailand due to that country’s state of emergency declaration, shutting down factories, construction, and manufacturing projects. Thailand has also implemented strict travel restrictions and Myanmar has closed many border crossings.
Many of these migrant workers are abroad in construction and manufacturing jobs. Their remittances (earnings while abroad) represent important income support to families here in Myanmar. The premature return of these migrant workers due to Thailand’s emergency declaration will have a deep ripple effect on the Mon State economy.
The bar chart below shows the unemployment rates of Mon’s 10 townships. Existing levels of high unemployment coupled with high numbers of returning migrant workers can create serious difficulties for local governments. According to updated statistics from the GAD Mon State 2019, in September there were 131,275 persons unemployed and 265,974 casual workers. Plans are needed to quickly create employment opportunities, or there will be increasing instability that could threaten the rule of law.
There is a large-scale migration of workers from neighboring countries underway due to COVID-19 shutting down their manufacturing plants, construction projects, and factories. The government should undertake proper research and assessment of the skill sets, education, and salary levels of returning migrant workers. Building an inventory of this information can help the government in guiding these workers into the state’s labor force where gaps exist, and where effective use of their human resources can benefit the country as well as the workers themselves.
Consideration should also be given to cases where a migrant worker has acquired skills while abroad that could be shared with those unemployed and unskilled within the state. A migrant worker training program could be developed to share these skills with the unemployed.
8 – Have a plan to prevent the consequences of financial difficulties
Due to worries created by the pandemic, people with bank accounts are withdrawing cash or lending cash amongst trusted circles. This creates a shortfall in money circulation and impacts the cash flow for business and industries. An increase of cash liquidity in communities during a time of crisis runs the risk of increased crimes, theft, or individuals defaulting on loans or cash advances secured from microfinance operations.
Measures are needed to allow for greater ease to borrow money from banks or micro-finance operations, with modest interest rates and/or reasonable repayment terms during the pandemic.
Myanmar, like the rest of the world, is facing an unprecedented economic depression. Carefully designed economic measures and policies to minimize the suffering and prepare for economic recovery are needed more than ever in the days ahead.
(Featured Image courtesy of Yee Mon Hsu and NEI)
Mon Paing Ga Ghu is a Researcher and Analyst at Nordic International Support Foundation (email@example.com).
Dr. Hein Paing Htoo Chit is the Founder and Executive Director of SEED for Myanmar, a youth organization in the southeast of Myanmar training youth to become active citizens, responsible leaders, and social entrepreneurs. He is also the President of US Ambassador’s Youth Council in Myanmar (2019-2020) and the Economic Empowerment Professional Fellow of Young Southeast Asian Leaders Initiative He can be reached by email: firstname.lastname@example.org
Karl Flecker has worked on human rights, labour migration and economic justice issues in Asia, Africa, Europe and the Americas. He spent a year volunteering with the National Enlightenment Institute based in Mawlamyine, Myanmar (2019-20). He has also worked with progressive civil society organizations, within academe and with governments in a variety of capacities. His email is: email@example.com
Yee Mon Hsu is Executive Director and co-founder of National Enlightenment Institute (NEI) which is based in Mawlamyine, Mon State, Southern Part of Myanmar. After graduating with an Honours Degree in Computer Technology Mawlamyine Computer University in Myanmar, she continued her studies in Tourism Management at Singapore. Currently, she is also involved in the Regional Tourism Development Committee of Mon State as a Tourism Expert in that committee. She is also a member of Advancing Leaders for Myanmar Prosperity Program of Deboer Fellowship, Young Political Leaders in Asia Program of Konrad Adenauer Fellowship, Rural E-commerce development program (Mekong Institute- Mekong Lancang Countries Program). She also works as a consultant, expert for local businesses, tourism and regional economic policy issues in order to promote Mon State development.