PHD Dissertation (Thuzar Linn - 13!12!2018)

An Operational Analysis of the Rice Value
Chain in the Ayeyarwaddy Region, Myanmar
Thuzar Linn
Supervisor: Prof. dr. Broos Maenhout
A dissertation submitted to Ghent University in partial fulfilment of the

requirements for the degree of Doctor of Business Economics
Academic year: 2018 – 2019

Copyright © 2018 by Thuzar Linn
All rights are reserved. No part of this publication may be reproduced or transmitted in any
form or by any means electronic or mechanical, including photocopying, recording, or by
any information storage and retrieval system, without permission in writing from the author.
DOCTORAL ADVISORY COMMITTEE
Prof. dr. Broos Maenhout
Prof. dr. Mario Vanhoucke
Prof. dr. Frederik Gailly
EXAMINATION BOARD
Prof. dr. Patrick Van Kenhove Ghent University, Dean
Prof. dr. Broos Maenhout Ghent University, Advisor
Prof. dr. Mario Vanhoucke Ghent University

Vlerick Business School
University College London (UK)
Prof. dr. Frederik Gailly Ghent University
Prof. dr. Hnin Yu Lwin Yezin Agricultural University
Prof. dr. Tarik Aouam Ghent University
Prof. dr. Theingi Myint Yezin Agricultural University

“A clear vision, backed by definite plans, gives you a tremendous feeling of
confidence and personal power.”
(Brain Tracy)
Acknowledgements
First and foremost, I would like to express my greatest thanks and my sincerest gratitude to
my supervisor, Prof. dr. Broos Maenhout, for offering the opportunity to undertake as his
PhD student, for the continuous support of my PhD study and related research, for his
valuable guidance and suggestions, for kind patience to me not only on my research but also
on the administrative procedure throughout the study. I also would like to thank Ghent
University to allow me as a PhD student.
Besides my supervisor, I would like to thank heartily, deeply and sincerely the rest of my
thesis committee: Prof. dr. Mario Vanhoucke, Prof. dr. Frederik Gailly, Prof. dr. Patrick Van
Kenhove, Prof. dr. Tarik Aouam, Prof. dr. Theingi Myint and Prof. dr. Hnin Yu Lwin not
only for their insightful comments and encouragement, but also for the questions which
motivated me to widen my research from various perspectives.
I am very grateful for the scholarship award from the LOTUS PLUS, Erasmus Mundus
Program (Action - 2) to pursue my PhD in Belgium. Without their financial support, I could
not be able to study in Belgium.
I would like to express my deep and sincere gratitude to Dr. Tin Htut, First Secretary
(Retired), Ministry of Agriculture, Livestock and Irrigation, and Dr. Myo Kywe, Rector,
(Retired), Dr. Nang Hseng Hom (Rector), Dr. Kyaw Kyaw Win (Pro-rector, Administration)
and Dr. Soe Soe Thein (Pro-rector, Academic), Yezin Agricultural University (YAU) for
their kind permission and administrative support to be able to study my PhD in Belgium.
I wish to express my serious gratitude to Dr. Cho Cho San (Professor and Head), Department
of Agricultural Economics, YAU, for her kind consideration, kind understanding to me and
valuable supports whenever and whatever I needed. I wish to express my special thanks to
Dr. Dolly Kyaw, Professor and Head (Retired), Department of Agricultural Economics,
YAU for her valuable suggestions and moral supports.
I also wish to express my heartfelt thanks to Dr. Shwe Mar Than, Deputy Director,
Participatory Knowledge Management Division, Advance Centre of Agriculture Research
and Education, YAU for her invaluable suggestions and kind supports whenever I need. My
sincere gratitude goes to Dr. Soe Soe Win, Associate Professor, Department of Agricultural
Economics, YAU for her kind supports during the survey period in Myanmar. My special
thanks go to Dr. Aye Moe San, Lecturer, Department of Agricultural Economics, YAU for
ii Acknowledgements
her kind supports by sharing some secondary data for my research and relevant
administrative documents whenever I needed.
I would like to express my special thanks to all my senior teachers and junior colleagues of
the Department of Agricultural Economics, YAU. I would like to express my gratitude to
the master students from the Department of Agricultural Economics and every single one
who helped me during survey period, without them it would not have been possible to gather
data for my research within such a short time period.
The cooperation of many people from Myanmar Rice Federation, Department of Agriculture
in Myangaung and Kyangin Townships, all respondents who participated in the study and
all of my dears who helped me to be able to collect data are highly acknowledged.
Strong acknowledgement and profound thanks also go to Ms. Charlottee Moulin, Mr.
Fredrik Berggren and Ms. Ulrica Ouline for their friendly heart with a warm coordination
and bearing patient to us since before, during, and after the program. They are always ready
for help whenever we meet the difficulties.
I would like to express my special appreciation and thanks to Martine for her kindness, kind
understanding, moral supports and sisterly supports whenever I needed. My special thanks
also go to Machteld who warmly helped me a lot in the administrative processes for my
PhD. I also would like to express my special thanks to Anneke Van den Sompel for her
administrative help in my doctoral defence.
I would like to express my gratitude to Jonas. He helped me a lot any time whenever I
needed. I really appreciate Kunal for his kind helps and attention to me. He was always ready
to help me whenever and whatever I needed. I would like to express my sincere thanks to
Babak, Mick, Foad, Mohanad, Nico, Yi, Jingyu, Weikang, Jie, Linh, Tom, Jeroen, Annelies,
Jerome, Rob and Jakob for their moral supports during my PhD study.
A special and heartfelt thank goes to Ayna who was always ready to help me with whatever
problem I had and who was always there to share happy and sad moments of my life with
me. I am really thankful to Ann for her kindness and moral supports during my PhD study.
My special thanks also go to my Burmese friends: Ko Nyan Bo Bo and Remi, Zayar Linn,
Nan Htike, Dr. Aung Tun Oo and Ame Cho, Tin Amy Chit, Khin Mar Linn and Khin Akari
Tar, and Burmese families for their caring about me and encouragement whenever I faced
difficulties during my stay in Ghent, Belgium.
Acknowledgements iii
Lastly, I would like to thank deeply my childhood teacher, Daw Aye Aye Myint, for her
invaluable supports when I had many difficulties for my education. My special heartfelt
thanks go to my beloved husband, Ko Wai Lin Aung and my beloved son, Mg Min Thu Kha
for their sacrifices, understanding, encouragement and moral support. My deepest and
greatest dedication is to my beloved elder sister Ma Thanda Winn for giving me endless
loves and moral support throughout my study and my life. Last but not the least, this
dissertation is dedicated to my late parents, U Lu Hla and Daw Khin Cho, and my late
brother, Ko Paing Soe Oo, who have been inspired me and have given endless loves to me.
Thuzar Linn
Ghent, 07 December 2018
Summary
This dissertation investigated on the operational analysis of the rice value chain in the
Ayeyarwaddy Region, Myanmar. Agriculture plays a major role in Myanmar by ensuring
food security as well as in the provision of employment and income for a growing
population. Among agricultural crops, rice is the most important agricultural product in the
country, accounting for about half of the cultivated land. The agricultural sector has suffered
persistently from insufficient investment in technology transfer, research and extension
services, infrastructure development, value chain upgrading and marketing according to
IFAD (2017). Furthermore, farmers have not received remunerative prices for their products,
leading to declining rural income. The value chain development is an approach to reduce the
rural poverty and has been adopted by governments, donors, and NGOs (World Bank, 2014).
The term value chain refers to the full range of activities that are required to bring a product
(or a service) from conception through the different phases of production to delivery to final
consumers and disposal after use (Kaplinsky and Morris, 2002). Based on the principal
challenge areas and strategic objectives that Myanmar especially needs to address and
consider for developing country’s rice sector identified by the Ministry of Agriculture and
Irrigation (MOAI, 2015b), three different studies (Chapters 2 to 4) are investigated for this
dissertation.
In Chapter 2, we follow the framework of Trienekens (2011) and start from the network
structure of the rice value chain to examine (1) the socio-demographic characteristics of the
actors in the chain and the value addition in the different stages via a profitability analysis;
(2) the major constraints that limit the operations of each actor. Therefore, we studied the
operational constraints of the rice value chain in the Ayeyarwaddy Region. The
contributions of Chapter 2 are threefold. Firstly, we estimate the marketing costs and
margins to evaluate the profits of the different actors involved in the rice value chain after
mapping the rice value chain in the Ayeyarwaddy Region, Myanmar. Secondly, we describe
the operational constraints of these different actors and the socio-demographic
characteristics of the actors in the rice value chain. Lastly, we link the socio-demographic
characteristics and operational constraints to the profitability of the different actors in the
rice value chain. The gross marketing margin across the global value chain is very wide and
is not equally distributed over the different actors. Not all actors receive a reasonable profit
vi Summary
margin. The rice miller is by far the most profitable actor whereas the farmers are the most
vulnerable actors in the value chain given their moderate profit margin and the large number
of constraints imposed. The actors suffer especially from material input constraints,
production constraints, financial constraints and distributional and institutional constraints.
All these constraints have a significant and negative impact on the profitability of the actors
and hinder the further development of the value chain. The described constraints highlight
the array of key issues that must be resolved to upgrade the rice value chain.
The impact of uncertainties and risks can change the sustainability of the value chains,
potentially affecting the performance of the chain. In an agricultural (rice) value chain,
uncertainty can emerge either from internal or external source in the supply chain.
Uncertainty can be described as the inability to predict something (Milliken, 1987).
According to Knight (1971), if it is not possible to quantify a probability of occurrence, it is
called uncertainty. According to Miller (1993), uncertainty refers to ‘the unpredictability of
environmental or organizational variables that have an impact on corporate performance’.
Agricultural food supply chain has unique characteristics with sources of uncertainty factors
which are different from those of other supply chains. Many sources of uncertainty for food
supply chains appear due to variable harvests and production yields, perishability of
products and the huge impact of weather conditions on production and customer demand
(Jack and Adrie, 2002). Uncertainties in a supply chain may cause delays, lead to a
bottleneck and may hinder the performance of the entire supply chain. Therefore, Chapter 3
investigates the impact of uncertainty on the performance of the rice supply chain in the
Ayeyarwaddy Region, Myanmar and contributes threefold to this thesis. First, we identify
the sources of uncertainty perceived by the different actors in the rice supply chain in the
Ayeyarwaddy Region, Myanmar. Second, we measure the rice supply chain efficiency as a
measurement of supply chain performance. Last, we study the impact of uncertainty on
supply chain efficiency to understand the challenges of the supply chain the region is dealing
with and to identify solutions to improve the supply chain operations. The actors in the
supply chain suffer from the specific uncertainty sources depending on their role in the
supply chain. Farmers face negative effects of climate and uncertainty in planning and
control. The millers in particular significantly suffer from the process uncertainty and the
distributors face the adverse impact of demand uncertainty. In particular, both the climate
and planning and control uncertainty present in the early production stages of the supply
Summary vii
chain and have a negative and significant impact on the different types of efficiency leading
to the poor performance of the entire supply chain.
The rice production is an essential stage not only for the entire value chain but also for the
food security of Myanmar. Increasing productivity is the important consideration to improve
the competitiveness of Myanmar’s rice in both domestic and international markets. The
production of rice cultivation in Myanmar remains low while there is still a high potential
for a production increase. According to Saysay (2016), rice production and supply is
sensitive to profitability and improving profitability provides incentives to increase the
production and the marketable surplus. The best and most effective way to improve
productivity can be realized via a more efficient utilization of scarce resources. Efficient
farm practices can enhance productivity, the farmers’ profit and the amount of rice marketed
(Saysay, 2016). Moreover, the estimation of efficiency without clearly identifying important
socio-economic and demographic, institutional and policy variables, has limited importance
for policy and management purposes (Saysay, 2016). In Chapter 4, the efficiency of the rice
production of the farmers is investigated and this chapter contributes twofold. First, we
analyze the profitability of the rice production in the Ayeyarwaddy Region. Second, we
estimate the overall technical, pure technical, scale, allocative and economic efficiency of
the rice farmers in the Ayeyarwaddy Region. Last, we determine the influencing factors on
these different efficiencies of the rice farmers. Although the farmers are somewhat
technically efficient, they are not allocatively efficient in their rice production. Therefore,
farmers suffer seriously from the economic inefficiency due to a very economic efficiency
score. More than 50% of the economic inefficiency lead to the farmers earning lower
income. They cannot generally cover the cost of rice production. According to the results of
the Tobit regression analysis, farm-farmer related variables i.e. age, education and
experience impact on the farm efficiency. The variety used (farm-production related
variable) and the extension services received by the farmers (farm-institution related
variable) also impact the technical, scale and economic efficiency of the rice farmers.
As a conclusion, Chapter 5 summarizes the general conclusions of this PhD based on three
different studies presented in chapters 2 to 4 and highlights a number of avenues for further
research.
Contents
Acknowledgements ............................................................................................................... i
Summary .............................................................................................................................. v
Contents ............................................................................................................................... ix
List of Figures ................................................................................................................... xiii
List of Tables ...................................................................................................................... xv
List of Appendices ........................................................................................................... xvii
List of Abbreviations ........................................................................................................ xix
1 Introduction ...................................................................................................................... 1
1.1 General Introduction ............................................................................................... 2
1.1.1 Importance of agricultural sector and rice industry in Myanmar’s economy ....... 3
1.1.2.1 Paddy and rice production in Myanmar .......................................................... 4
1.1.2.2 Rice milling sector in Myanmar ...................................................................... 8
1.1.2.3 Characteristics of the international rice trade .................................................. 9
1.1.3 Problem statement ............................................................................................... 13
1.2 Literature Review ...................................................................................................... 16
1.2.1 Value chain and value chain structure................................................................. 16
1.2.2 Uncertainty in the agricultural supply chain ....................................................... 20
1.2.3 Agricultural supply chain performance ............................................................... 23
1.3 Chapter Overview and Contributions ........................................................................ 24
2 An Analysis of the Operational Constraints Hindering the Development of Rice

Value Chain in the Ayeyarwaddy Region, Myanmar .................................................. 37
2.1 Introduction ................................................................................................................ 38
2.2.1 Rice value chains in some ASEAN countries ..................................................... 40
2.2.2 Rice value chain in Myanmar.............................................................................. 41
2.3 Research Methodology .............................................................................................. 42
2.3.1 Data collection and sampling technique.............................................................. 42

x Contents
2.3.2 Data analysis method: Socio-demographic, financial and constraint information

...................................................................................................................................... 43
2.3.3 Data analysis method: Explanatory factors of the actor profitability ..................44
2.4 Empirical Results ...................................................................................................... 44
2.4.1 Characteristics of the rice value chain in Myanmar ............................................45
2.4.1.1 Profitability analysis ..................................................................................... 45
2.4.1.2 Socio-demographic characteristics ............................................................... 49
2.4.2. Constraints in the rice value chain ......................................................................50
2.4.2.1 Farmers ......................................................................................................... 50
2.4.2.2 Primary collectors ......................................................................................... 52
2.4.2.3 Millers ........................................................................................................... 53
2.4.2.4 Wholesalers ................................................................................................... 54
2.4.2.5 Retailers ........................................................................................................ 54
2.4.2.6 Exporters ....................................................................................................... 55
2.4.3 The impact of operational constraints on the profitability .................................. 56
2.4.3.1 Farmers ......................................................................................................... 56
2.4.3.2 Millers ........................................................................................................... 58
2.4.3.3 Wholesalers ................................................................................................... 59
2.4.3.4 Retailers ........................................................................................................ 59
2.5 Discussion ................................................................................................................. 60
2.5.1 The farmers and their inputs ................................................................................62
2.5.2 The millers and their inputs .................................................................................63
2.5.3 The wholesalers and retailers ..............................................................................64
2.5.4 The exporters and their inputs .............................................................................64
2.5.5 The entire supply chain........................................................................................65
2.6 Conclusion and Recommendations ........................................................................... 65
3 The Impact of Uncertainty on the Performance of the Rice Supply Chain in the
Ayeyarwaddy Region, Myanmar ................................................................................... 73
Contents xi
3.1 Introduction ................................................................................................................ 74
3.2.1 The Rice Value Chain in Myanmar..................................................................... 76
3.2.2 Uncertainty in supply chains ............................................................................... 77
3.2.3 Performance measurement in supply chains ....................................................... 78
3.3 Research Methodology .............................................................................................. 79
3.3.1 Data collection and sampling technique.............................................................. 81
3.3.2 Research method: Instrument development and factor analysis ......................... 85
3.3.3 Research method: Data Envelopment Analysis (DEA) ...................................... 86
3.3.3.1 Technical efficiency (TE) and scale efficiency (SE) ..................................... 86
3.3.4 Research method: Tobit regression model .......................................................... 89
3.4 Results and Discussion .............................................................................................. 89
3.4.1 Uncertainty factors in the rice supply chain ........................................................ 90
3.4.1.1 Descriptive statistics of the uncertain factors in the rice supply chain .......... 90
3.4.1.2 Relevant uncertainty factors .......................................................................... 92
3.4.1.3 Comparisons of uncertainty perception among the rice supply chain actors 94
3.4.2 Efficiency performance of the rice supply chain ................................................ 95
3.4.2.1 Descriptive statistics of the variables ............................................................ 95
3.4.2.2 Technical efficiency and scale efficiency...................................................... 97
3.4.3 The impact of uncertainty on of the rice supply chain performance ................. 100
3.5 Conclusion and Recommendations .......................................................................... 106
3.5.1 Conclusion......................................................................................................... 106
3.5.2 Recommendations ............................................................................................. 107
4 Measuring the Efficiency of the Rice Production in Myanmar using Data

Envelopment Analysis: A Non-Parametric Approach............................................... 121
4.1 Introduction .............................................................................................................. 122
4.2 Literature Review .................................................................................................... 123

xii Contents
4.2.1 Benchmarking efficiency using Data Envelopment Analysis ...........................123
4.2.2 Impact of socio-economic and farm-specific characteristics on efficiency.......126
4.3 Materials and Methods ............................................................................................ 127
4.3.1 Data collection and sampling technique ............................................................ 127
4.3.2 Research method: Benefit-Cost Analysis ..........................................................127
4.3.3 Research method: Data Envelopment Analysis (DEA) .....................................128
4.3.3.1 Technical efficiency (TE) and scale efficiency (SE) .................................. 128
4.3.2.2 Economic efficiency (EE) ........................................................................... 130
4.3.2.3 Allocative efficiency (AE) .......................................................................... 132
4.3.3 Research method: Tobit regression model ........................................................133
4.4 Empirical Results .................................................................................................... 133
4.4.1 Rice production and profitability of the farmers in the study area ....................133
4.4.1 Technical, allocative and economic efficiency of the rice farmers ...................138
4.4.1.1 Descriptive statistics of input and output .................................................... 138
4.4.1.2 Technical efficiency and scale efficiency ................................................... 139
4.4.1.3 Allocative efficiency and economic efficiency........................................... 141
4.4.1.4 Description of the best practices for rice production .................................. 142
4.4.2 Farm specific factors related to farm efficiency ................................................145
4.5 Discussion ............................................................................................................... 148
4.6 Conclusion and Recommendations ......................................................................... 153
5 Conclusions and Future Research Avenues ...............................................................159

5.1 Conclusions ............................................................................................................. 160
5.2 Future Research ....................................................................................................... 165
References ......................................................................................................................... 169

List of Figures
Figure 1.1 Percentage shares of total cultivated area among crops grown in Myanmar in
2015 .................................................................................................................... 4
Figure 1.2 Sown area and production of paddy in Myanmar from 2004-05 to 2015-16 ..... 5
Figure 1.3 Paddy yield per hectare (in MT) in Myanmar from 2004-05 to 2015-16........... 6
Figure 1.4 Paddy yield per hectare (in MT) in ASEAN countries (Average in 2010-2012) 6
Figure 1.5 Milled rice production, consumption and residuals and export (in mil MT) in
Myanmar from 2007-08 to 2016-17................................................................... 7
Figure 1.6 Principal rice exporting countries worldwide in 2016/2017 ............................ 11
Figure 1.7 Principal rice exporting countries worldwide in 2016/2017 ............................ 12
Figure 1.8 A simplified representation of a food supply chain .......................................... 20
Figure 1.9 The link among three different studies ............................................................. 25
Figure 2.1 Structure of the rice value chain in the study area ............................................ 41
Figure 2.2 Operational constraints for farmers .................................................................. 51
Figure 2.3 Operational constraints for primary collectors ................................................. 52
Figure 2.4 Operational constraints of millers..................................................................... 53
Figure 2.5 Operational constraints of wholesalers ............................................................. 54
Figure 2.6 Operational constraints of retailers ................................................................... 55
Figure 2.7 Operational constraints of exporters ................................................................. 56
Figure 2.8 Overview of the operational constraints in the rice value chain in the study area
.......................................................................................................................... 61
Figure 3.1 Structure of the rice value chain in the study area ............................................ 77
List of Tables
Table 1.1 Frequency and milling capacity of registered rice mills in different Regions and
States of Myanmar in 2013 ................................................................................... 9
Table 1.2 Myanmar’s rice exports by destination, 1995-2012 (‘000 MT) ......................... 11
Table 1.3 Myanmar’s recent rice exports in average (‘000 MT) ........................................ 12
Table 1.4 Selected export prices, 25% broken rice, FOB, USD/MT .................................. 13
Table 2.1 Marketing profits and margins of the value chain for domestic consumption ... 47
Table 2.2 Marketing profits and margins of the value chain for export consumption........ 48
Table 2.3 Socio-demographic characteristics of the rice value chain actors ...................... 49
Table 2.4 Estimated regression coefficients of factors influencing the profitability of the
farmers ................................................................................................................ 57
Table 2.5 Estimated regression coefficients of factors influencing the profitability of the
millers ................................................................................................................. 59
Table 2. 6 Estimated regression coefficients of factors influencing the profitability of the
retailers ................................................................................................................ 60
Table 3.1 Questionnaire items of uncertainty factors ......................................................... 83

Table 3.2 Descriptive statistics of the uncertain factors in the rice supply chain (N=215) 91
Table 3.3 Structure of Rotated Component Matrix for the rice supply chain (N=215) ...... 93
Table 3.4 Descriptive statistics of the output and input variables of the rice farmers
(N=130) ............................................................................................................... 96
Table 3.5 Descriptive statistics of the output and input variables of the rice millers (N=25)
............................................................................................................................. 96
Table 3.6 Descriptive statistics of the output and input variables of the rice distributors
(N=39) ................................................................................................................. 97
Table 3.7 Percentage distribution of the technical and scale efficiency index for the actors
and the global rice supply chain .......................................................................... 99
Table 3.8 Descriptive statistics of uncertainty variables of the supply chain ................... 104
Table 3.9 Results of Tobit regression coefficients for all different actors and the global
supply chain ...................................................................................................... 105
Table 4.1 Empirical studies on efficiency measurement of rice production using DEA
approach in developing countries ..................................................................... 125
xvi List of Tables
Table 4.2 Rice cultivation steps (transplanting method) practicing by the farmers in the
study area .......................................................................................................... 135
Table 4.3 Enterprise budget and benefit cost analysis of the monsoon rice production in
2016 for the Emata rice by the farmers (N=130) ............................................. 136
Table 4.4 Descriptive statistics of the input, output and prices of the variable inputs of the
sampled farms (N=130) .................................................................................... 139
Table 4.5 Frequency distribution of rice farms on the technical, allocative and economic
efficiency index ................................................................................................ 143
Table 4.6 Distribution of input slacks for achieving the optimum paddy yield ............... 144
Table 4.7 Distribution of excess input used for achieving minimum costs of rice
production ......................................................................................................... 144
Table 4.8 Distribution of farmers following the best practice farmer in achieving optimal
output and using optimal input level ................................................................ 145
Table 4.9 Descriptive statistics of socio-economic variables for the sample farms (N=130)
.......................................................................................................................... 147
Table 4.10 Results of Tobit regression coefficients (N=130) .......................................... 148
Table 4.11 Information of input and output variables and results of efficiency scores via
DEA in rice production in some developing countries .................................... 151
List of Appendices
Table 1.A.1 Human Development Index and its components in 2015 ............................... 30
Table 1.A.2 Human Development Index for 1990-2015 and the average annual HDI
growth per country for this period.................................................................. 31
Table 1.A.3 Percentage of population below the national poverty line in 2015 ................. 34
Table 1.A.4 Population trends, mortality rates and literacy rate for top rice producing
countries ......................................................................................................... 34
Table 1.A.5 National Income in 2013 and Employment rates in Myanmar relative to the
other neighboring top rice producing countries in 2015 ................................ 35
Table 2.A.1 Sampled respondents along the rice value chain in the study area ................. 69
Table 3.A.1 Sampled respondents along the rice suppy chain in the study area .............. 109
Table 3.A.2 Characteristics of the different actors in the rice supply chain ..................... 110
Table 3.A.3 Mean comparisons of the supply uncertainty among the rice supply chain
actors ............................................................................................................ 111
Table 3.A.4 Mean comparisons of the demand uncertainty among the rice supply chain
actors ............................................................................................................ 112
Table 3.A.5. Mean comparisons of the Processing uncertainty among the rice supply chain
actors ............................................................................................................ 113
Table 3.A.6. Mean comparisons of the planning and control uncertainty among the rice
supply chain actors ....................................................................................... 114
Table 3.A.7. Mean comparisons of the competitors’ uncertainty among the rice supply
chain actors ................................................................................................... 115
Table 3.A.8. Mean comparisons of the government uncertainty among the rice supply
chain actors ................................................................................................... 116
Table 3.A.9. Mean comparisons of the climate uncertainty among the rice supply chain
actors ............................................................................................................ 117
Table 4.A.1 Sampled respondents for the rice production in the study area .................... 155
xviii List of Appendices
Figure 2.A.1 Map of Myanmar and Ayeyarwaddy Region which shows the studied
townships ....................................................................................................... 68
townships ..................................................................................................... 155
List of Abbreviations
ASEAN Association of South East Asian Nations
CRS Constant returns-to-scale
DEA Data Envelopment Analysis
DEAP Data Envelopment Analysis (Computer) Program
DMUs Decision Making Units
DOA Department of Agriculture
EU European Union
EViews Econometric Views
FAO Food and Agriculture Organization
FAOSTAT Food and Agriculture Organization Statistical Databases
FOB Free on Board
GDP Gross Domestic Product
GMM Gross Marketing Marin
GNI Gross National Income
ha Hectare
HCMC Ho Chi Minh City
HDI Human Development Index
IFAD International Fund for Agricultural Development
IRS Increasing returns-to-scale
kg Kilogram
LR test Likelihood Ratio test
MADB Myanmar Agricultural Development Bank
MAPCO Myanmar Agribusiness Public Corporation
MKK Myanmar Kyat
MOAI Ministry of Agriculture and Irrigation
MOALI Ministry of Agriculture, Livestock and Irrigation
MRF Myanmar Rice Federation
MT Metric Tons
NGOs Non-governmental Organizations
NMM Net Marketing Margin
PPP Purchasing Power Parity
RAVC Return Above Variable Cost
xx List of Abbreviations
RQ Research Question
RSC Rice Specialized Companies
SFA Stochastic Frontier Analysis
SPSS Statistical Package for the Social Sciences
TGMM Total Gross Marketing Margin
UNDP United Nations Development Programme
USD United States Dollar
USDA United States Department of Agriculture
VCA Value Chain Analysis
VRS Variable returns-to-scale
WTO World Trade Organization
1
Introduction
2 Chapter 1
Agriculture is the backbone of the economy of Myanmar not only contributing to the overall
economic growth of the country but also sustaining a standard of living for more than 70 per
cent of the Myanmar population. Among the agricultural crops, rice is the most important
crop of Myanmar. It dominates the agricultural sector, which is the largest and most
productive part of the economy and changes in rice production have a direct and profound
influence on the entire population. Myanmar’s rice output must continually increase to feed
the growing populations and boost the country’s economy. The rice industry has a main
challenge for increasing its performance and sustainability which may improve the food
security and reduce the poverty in the country. It is needed to study the challenges for
increasing the performance and sustainability of the rice industry. To that purpose, this
dissertation investigates three different aspects presented in chapters 2 to 4, related to the
operational analysis of the rice value chain which may lead to the food security and rural
poverty reduction in Myanmar. The introduction section briefly introduces the general
introduction to the situation of agriculture and rice industry in Section 1.1. Section 1.2
provides the literature review related to the different studies contributed to this dissertation.
The overview of the different chapters and contribution of this dissertation are presented in
Section 1.3.
1.1 General Introduction
In this section, we give a general introduction related to the agricultural sector in Myanmar.
In Section 1.1.1, the importance of the agricultural sector and the rice industry in Myanmar
is highlighted. In Section 1.1.2, we detail the three main functions in this supply chain to
illustrate the flow of the rice from the production to the consumption in both domestic and
international, i.e. the paddy and rice production (Section 1.1.2.1), the rice milling sector
(Section 1.1.2.2) and the rice export distribution (Section 1.1.2.3), respectively. Section
1.1.3 discusses the challenges for this industry and the motivation for conducting the
research included in this dissertation.
Introduction 3
1.1.1 Importance of agricultural sector and rice industry in Myanmar’s

economy
Agriculture plays a major role in Myanmar’s society by ensuring food security at community
and national levels as well as in the provision of employment and income for a growing
population. Agriculture is essential to the domestic economy of Myanmar and is also the
main employment factor in rural Myanmar. The agricultural sector is considered as one of
the major driving forces for economic growth and the heart for improving of social wellbeing
(World Bank, 2014). Agricultural sector which generates foreign exchange earnings through
agricultural export and to boost rural development plays as an essential role in economic
growth and poverty reduction. The agricultural sector is the mainstay of the economy of
Myanmar and more than half of the population is directly employed in farming. In 2014-
2015, 22.1 % of GDP came from agriculture, 8.5% from livestock and fisheries and 0.2%
from forestry (MOAI, 2015a). The importance of agriculture in the economy as an employer
will diminish in the coming years as a result of structural transformation. However, the
sector will continue to play a remarkable role in reducing poverty in Myanmar for many
years to come (World Bank, 2014).
Rice is in particular among the three leading food crops of the world, with corn and wheat
being the other two. Rice is a plant that is well suited to the tropical climate condition.
According to FAO (2004), rice is the important staple food for 17 countries in Asia and the
Pacific, nine countries in North and South America and eight countries in Africa.
Nutritionally, it contains 80% carbohydrates, 7-8% proteins, 3% fat, and 3% fibre (Juliano,
1985). Rice provides 21% of global human per capita energy and 15% of per capita protein.
Rice, the major staple food among crops grown in Myanmar, is central to the lives of
millions of people in Myanmar. Rice is the country’s most important agricultural product by
far, accounting for about half of all cultivated land. According to Figure 1.1, paddy (rice)
has the highest percentage share of total cultivated area (46%) among crops grown in
Myanmar. Labor is the most important resource in the rice industry. In addition, most of the
household income is earned from rice farming and related activities, especially in major rice
growing area of Ayeyarwaddy, Bago, and Sagaing Regions in Myanmar.
4 Chapter 1
Oil palm Cotton Rubber

Sunflower 1% 2% 4%
Sugarcane
3%
1%
Sesame
10%
Paddy
Groundnut
46%
6%
Peas and beans

23% Wheat
Maize
1%
3%
Figure 1.1 Percentage shares of total cultivated area among crops grown in
Myanmar in 2015
Source: MOALI (2016)
1.1.2 Major parties in the value chain of the rice industry in Myanmar
In Myanmar, rice is a major staple crop and almost all of the people in the country mainly
depend on rice for their nutrition. On the consumption side, rice contributes about 66 percent
of the population’s daily calorie intake (Myint, 2018). Moreover, rice provides food security
and poverty reduction in Myanmar and contributes export earnings to the economy of the
country. Therefore, increasing rice production is playing as an important role for the
socioeconomic development of Myanmar. In order to understand the rice industry and the
problems encountered, we describe in this section the major parties, i.e. the paddy and rice
production (Section 1.1.2.1), the rice milling sector (Section 1.1.2.2) and the rice export
distribution (Section 1.1.2.3).
1.1.2.1 Paddy and rice production in Myanmar
On the production side, out of the sown area of paddy in Myanmar, 38 percent is grown
under rain-fed conditions, followed by 30 percent under irrigated system, 17 percent under
deep water, submerged and salt affected ecosystem, 12 percent in drought prone area and
only 3 percent of paddy cultivation was in upland region (MOAI, 2015b; San, 2017). As
shown in Figure 1.2, the sown areas of paddy increased from 6.86 million hectares in 2004-
Introduction 5
05 to 7.21 million hectares in 2015-16. The production also increased from 24.75 million
metric tons in 2004-05 to 27.16 million metric tons in 2015-16. The paddy yield per hectare
increased from 3.64 MT in 2004-05 to 4.07 MT in 2010-11which is the highest for 11 years
(cf. Figure 1.3). Yield per hectare decreased again to 3.83 MT in 2011-12 and increased
again to 3.94 MT per hectare in 2014-15 and 3.93 MT per hectare in 2015-16. However,
compared to the paddy yields of other ASEAN countries, Myanmar’s paddy yield was the
second lowest one after Cambodia from 2010 to 2012 (cf. Figure 1.4).
32.68
32.58
32.57
31.45
30.92
35.00
29.01
28.32
28.19
27.70
27.68
27.16
24.75
30.00
25.00
20.00
15.00
8.12
8.09
8.09
8.07
8.05
7.59
7.39
7.28
7.24
7.21
7.17
6.86
10.00
5.00
0.00
Sown area (mil ha) Production (mil MT)
Figure 1.2 Sown area and production of paddy in Myanmar from 2004-05 to
2015-16
6 Chapter 1
4.40
4.07
4.06
4.20
4.03
3.94
3.93
3.93
3.90
4.00
3.84
3.83
3.83
Yield (MT/ha)
3.80
3.64
3.60
3.37
3.40
3.20
3.00
Figure 1.3 Paddy yield per hectare (in MT) in Myanmar from 2004 -05 to 2015-16
6.00 5.60
4.73
5.00
3.72 3.82
4.00
Paddy Yield (MT/ha)
2.85
3.00 2.68
2.41 2.52
2.00
1.00
0.00
Figure 1.4 Paddy yield per hectare (in MT) in ASEAN countries (Average in
2010-2012)
Source: MOAI (2015b)
Introduction 7
14.00
12.00
10.00
8.00
6.00
4.00
2.00
0.00
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
-08 -09 -10 -11 -12 -13 -14 -15 -16 -17
Milled rice production (mil
10.73 9.80 10.73 10.75 10.50 11.72 11.96 12.60 12.20 12.50
MT)
Consumption and residuals
10.25 9.70 10.20 9.90 10.00 10.40 10.50 10.65 10.80 11.00
(mil MT)
Export (mil MT) 0.54 0.50 0.50 0.75 0.75 1.16 1.30 1.75 1.30 1.50
Milled rice production (mil MT) Consumption and residuals (mil MT)
Export (mil MT)
Figure 1.5 Milled rice production, consumption and residuals and export (in mil
MT) in Myanmar from 2007-08 to 2016-17
Source: USDA (2009-2016)
The production, consumption and export of milled rice from 2007-08 to 2016-17 are
illustrated in Figure 1.5. The production of milled rice increased from 10.73 million metric
tons in 2007-08 to 12.50 million metric tons in 2016-17. Myanmar exports rice surplus
resulting from the deducting the consumption and residuals from the total milled rice
production (cf. Figure 1.5). The export volume increased from 0.54 million metric tons in
2007-08 to 1.50 million metric tons in 2016-17. However, Myanmar has the lowest profits
from the rice production compared to those of other rice growing countries in Asia (Zorya,
2016). Farm profits in Myanmar are the lowest in Asia as a direct result of low productivity
of land and labour. In 2013-2014, the net profit from producing monsoon paddy averaged
$114/ha. In general, farm profits are not enough to raise households’ per capita income
above the regional rural poverty line (Zorya, 2016). This also indicates that the potential of
the agricultural sector has not yet been realized for the purpose of poverty reduction.
Appendix 1.A illustrates and interprets several facts and figures regarding the poverty and
development in Myanmar in recent years as well as information about other neighbouring
countries to show the significant differences between the countries.
8 Chapter 1
1.1.2.2 Rice milling sector in Myanmar
The rice industry is composed of not only paddy production but also milling, trade,
distribution, and other rice-based food processing activities. Out of these activities, rice
milling is a major manufacturing sector in Myanmar. In the food and beverage sector, rice
milling occupied for more than 60% of the establishments in Myanmar (Kudo et al., 2012).
According to the report of the World Bank (2014), the rice milling sector operates with
obsolete processing machines which cause about 15-20 % of the losses in quality and
quantity during the milling. The average milling ratio (average 2008-2011) of the rice mills
in Myanmar is estimated to be 60% which is lower compared to other Asian countries such
as Vietnam and Philippines (63%), Cambodia and Indonesia (64%), Malaysia (65%),
Thailand (66%) and China (70%) (World Bank, 2014). In Myanmar, most of the paddy is
milled by hullers especially in the villages, and marketable rice is processed by modern
medium and large-sized mills located in the towns and cities (Aung, 2012). Table 1.1
illustrates that there were total 1,362 medium-sized commercial mills operating with the
milling capacity of more than 15 tons/day (on average 25.41 tons/day) in Myanmar in 2013.
According to MOAI (2015b), out of these mills, 348 rice mills were from 30 to 64 years of
age and 68 were more than 65 years old. Therefore, these rice mills are outdated and need
to be upgraded or replaced by new ones to improve capacity and efficiency. Among them,
most of the rice mills can process milled rice of Grade C (25% broken rice). Sixty-four rice
mills are suitable to process super quality rice (Grade A). Across the Regions and States,
the Ayeyarwaddy Region occupies the highest numbers of the rice mills (587 numbers) and
rice mills of Grade C are the majority (268 numbers or 45.66%) followed by Grade D (180
numbers or 30.66%) (cf. Table 1.1). Only 2.56% of the rice mills are rice mills of Grade A
in the Ayeyarwaddy Region. According to San (2017), the numbers of large modernized
mills and processing plants are increasing as a result of the Rice Specialized Companies
(RSC) in the rice value chain. Moreover, branded package rice marketing is also
domestically increasing due to increasing number of supermarkets and minimarkets in large
and populated cities of Myanmar (San, 2017). Therefore, the supply of packed and branded
rice is becoming higher to fulfil the increasing demand.
Introduction 9
Table 1.1 Frequency and milling capacity of registered rice mills in different
Regions and States of Myanmar in 2013
Grade A Grade B Grade C Grade D

Total
(1-5% broken rice) (10-15% broken rice) (25% broken rice) (35% broken rice)
Region/State
Milling Milling Milling Milling Milling
No. No. No. No. No.
Capacity Capacity Capacity Capacity Capacity
Yangon 17 1564 46 2327 135 2386 27 405 225 6682
Ayeyarwaddy 15 635 124 3860 268 6110 180 5049 587 15654
Bago (East) 8 282 14 619 30 890 79 1719 132 3510
Bago (West) 16 479 34 874 48 943 55 859 153 3155
Mandalay - - - - 21 315 - - 21 315
Mon - - 2 45 30 562 - - 32 607
Sagaing 8 416 45 1203 62 1074 48 1049 163 3742
Tanintharyi - - - - - - 4 70 4 70
Kachin - - - - 6 90 - - 6 90
Kayar - - - - 39 780 - - 39 780
Total milling
64 3376 265 8928 639 13150 393 9151 1362 34605
capacity/day
Note: Milling capacity per day is measured in ton and assumed 24 hours of operation.
Source: MRF (2014) and MOAI (2015b)
1.1.2.3 Characteristics of the international rice trade
In this section, we will elaborate on the characteristics of the international trade of rice. The
main goal is to identify the market access conditions, the potential of Myanmar’s rice exports
in international trade and the essential elements of global supply and demand of Myanmar’s
rice. Myanmar could export rice about three-fourths of the world rice exports and was the
major rice exporting country in the world during the first half of the twentieth century
(Kenneth et al., 1998). The bulk of these exports are sold to Ivory Coast, Guinea, and
Burkina Faso in Africa and to Indonesia, Bangladesh, and the Philippines in Asia. EU has
also been the customer of Myanmar’s rice since 2004 as shown in Table 1.2. The
government’s target for rice exports is to reach 4 million metric tons by 2019-2020 (cf. Table
1.3). Myanmar’s paddy production stood as 6th rank among top ten paddy producing
countries with the amount of 1,500 thousand metric tons (1.5 million metric tons) in the
world in 2016-17 as shown in Figure 1.6 (World Rice Production, 2017). However,
Myanmar achieves very low value of 0.113 billion USD from exporting rice because of low
price per metric ton compared to other rice exporting countries (cf. Figure 1.7). The types
of Myanmar’s exported rice are mostly of low value 25% broken rice and white rice.
10 Chapter 1
Myanmar’s rice is cheaper than rice of comparable quality from Vietnam, India and Pakistan
as shown in Table 1.4.
On the other hand, Myanmar is located between two of the most highly-populated countries
in Asia, India and China, which are vast markets that can be tapped for rice and rice-based
products. The increasing trend in rice demand is an opportunity for Myanmar to increase
rice production for both regional and global exports. Moreover, the country must diversify
the type and quality of its rice for export including aromatic, jasmine, glutinous, and
parboiled rice. The global rice demand projections are good signals for Myanmar to develop
its rice sector to gain a significant share in international trade. By 2020, China is expected
to import 4 million metric tons of rice (MOAI, 2015b). The EU has likewise offered an
incentive for Myanmar to enter the European market to sell high-quality rice. Also, the rising
demand for rice in Africa gives Myanmar the signal to continue its increasing trade with the
region for 25% broken rice. World Bank (2014) stated that Myanmar can potentially increase
more than double in the rice exports by increasing rice production and diversifying many
type of exported rice. In addition, opening the rice milling sector to foreign direct
investments and reducing export procedure costs can help many rural poor to escape poverty.
Improving agricultural productivity and promoting rice exports are top priorities for the
Government of Myanmar. The current rice export strategy favors the production of low
quality rice, which is largely sold to Africa and China. Consequently, farmers have earned
minimal profits and agribusinesses have skipped necessary investments (World Bank,
2014). Opening the rice mills to foreign direct investments is a vital step to take to increase
quality and volumes of rice export. To boost Myanmar’s rice export competitiveness, it is
essential to improve the infrastructure and to reduce the export procedure costs (World Bank,
2014).
Introduction 11
Table 1.2 Myanmar’s rice exports by destination, 1995-2012 (‘000 MT)
1995- 2000- 2005-

Destination 2008 2009 2010 2011 2012
1999 2004 2009
EU 0 15 * * * 0 12 28
Former Soviet
0 0 * 0 2 11 19 44
Union
AFRICA 43 195 261 196 899 318 506 460
-Burkina Faso 0 11 9 10 29 64 71 82
-Cameroon 2 13 14 25 24 15 37 21
-Guinea 7 31 70 44 246 85 125 173
-Ivory Coast 2 49 73 25 252 95 122 125
-Sierra Leone 5 18 18 20 44 0 4 9
-Togo 0 4 13 22 40 11 33 6
ASIA 170 264 129 403 150 156 276 72
-Bangladesh 10 108 99 385 70 116 215 0
-China 0 1 0 0 1 0 0 13
-Indonesia 122 132 5 0 11 5 2 10
-Philippines 27 2 9 0 47 16 13 33
TOTAL 222 484 391 598 1052 485 816 605
Note: * Less than 500 MT
Source: MOAI (2015b)
India 10300
Thailand 10000
Vietnam 5800
Pakistan 4200
United States 3550
Myanmr (Burma) 1500
Cambodia 1000
Urguay 850
Brazil 650
Argentia 550
0 2000 4000 6000 8000 10000 12000

Export in thousand metric tons
Figure 1.6 Principal rice exporting countries worldwide in 2016/2017

Source: Workman (2017)
12 Chapter 1
5.300
6.00
4.400
5.00
4.00
USD billion
3.00
1.900
1.400
2.00
0.905
0.565
0.427
0.351
0.347
0.252
0.242
1.00
0.213
0.196
0.168
0.156
0.154
0.134
0.113
0.107
0.096
0.00
Figure 1.7 Principal rice exporting countries worldwide in 2016/2017

Source: Workman (2017)
Table 1.3 Myanmar’s recent rice exports in average (‘000 MT)
Year 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16 2016-17

Export
('000 MT) 750 750 1163 1300 1750 1303 1500
Source: World Bank (2014)
Introduction 13
Table 1.4 Selected export prices, 25% broken rice, FOB, USD/MT
Year and Month Myanmar Vietnam Pakistan India

2011
-October 400 520 405 410
-December 345 425 390 385
2012
-March 360 415 415 375
-June 350 415 415 395
-September 390 400 400 414
-December 350 365 365 390
2013
-March 380 365 380 415
-June 370 340 410 415
Note: FOB Bangkok, HCMC, and Yangon at the end of the month
Source: World Bank (2014)
1.1.3 Problem statement
The agricultural sector has suffered persistently from insufficient investment in technology
transfer, research and extension services, infrastructure development, value chain upgrading
and marketing (IFAD, 2017). Furthermore, farmers have not received remunerative prices
for their products, leading to declining rural income. The value chain development is an
approach to reduce the rural poverty and has been adopted by governments, donors, and
NGOs (World Bank, 2014). According to MOAI (2015b), the principal challenges that
Myanmar especially needs to address to develop its rice sector are: 1) the worsening effects
of climate change which increase the farmers’ vulnerability to drought, flood, salinity, heat
waves and extreme weather events; 2) limited availability of, and farmers’ access to
improved technologies and management practices; 3) a weak extension and education
system; 4) limited access to financial services; 5) limited facilities for postharvest handling
and processing; 6) inadequate infrastructure, particularly for irrigation, power, and transport;
7) uncertain security of land tenure; 8) volatility of paddy price that contributes to low
income of farmer; 9) a poorly integrated value chain, from rice production to trade and
markets; and 10) policies that hamper investments in the rural and rice sectors. Based on the
challenges mentioned above, the Ministry of Agriculture, Livestock and Irrigation set five
strategic objectives to guide the key themes and actions to achieve Myanmar’s vision of its
rice sector (MOAI, 2015b), i.e.
14 Chapter 1
1) To improve the competitiveness of Myanmar’s rice in both domestic and

international markets through increased productivity;
2) To improve the adaptation of rice farming to the effects of climate change and to
enhance farmer’s capacity to cope with associated risks;
3) To increase the rice food quality and safety and the competitiveness and fairness in
domestic and international markets;
4) To create a positive effect on the well-being and capacity of smallholder farmers,
including women and children, in the context of long-term changes in demography,
farm size, and labor supply; and
5) To reduce the weaknesses along the rice value chain, thus improving efficiency and
minimizing postharvest losses, all to increase the market value of rice production and
improve rice food quality.
According to the challenges and strategic objectives mentioned above, it is noticed that the
rice value chain in Myanmar is not well integrated and improvements related to its efficiency
are required. The rice value chain in Myanmar is still far from perfect and limited by
weaknesses which causes high transaction costs for all actors (MOAI, 2015b). In order to
uncover insight in the weaknesses of this value chain, a value chain analysis should be
conducted by mapping the major constraints from an operational perspective. These
constraints faced by the actors can hinder the profitability and the further value chain
development and are possibly imposed by the external parties. The operational constraints
of each actors in the rice value chain should be carefully mapped in order to suggest not only
how and who is the best placed to fix them but also arrive at a rational sequence or actions
that need to be taken in tandem. Moreover, the required different interventions and response
from the government and private partners can be suggested for upgrading the rice value
chain.
Moreover, another consideration is that the impact of uncertainties and risks can change the
sustainability of the value chains, potentially affecting the performance of the chain. In an
agricultural (rice) value chain, uncertainty can emerge either from internal or external source
in the supply chain. The unique characteristic of agri-food supply chain is that the biological
agricultural production is related to nature, weather and uncontrollable natural forces,
perishability of products and environmental concerns (Wijnands and Ondersteijn, 2006).
Further the demand in agri-food supply chains is characterized by a high variability in the
consumer demand (Taylor and Fearne, 2006). Some sources of uncertainty of rice supply
Introduction 15
chain are related to the production yields and the huge impact of climate conditions on
upstream, and downstream activities (van der Vorst and Beulens, 2002). Uncertainty is
inevitable in the supply chain operation. According to van der Vorst et al. (2000) and Dong
(2006), along with the huge number of the actors, the operational complexity of the agri-
food supply chain (such as the seasonality in production, long/fixed production lead times,
varying quantity and quality standards of products, trade and buffer stock traceability)
mostly expose the chain to severe disruptions. These types of uncertainty can affect the
efficiency of the entire supply chain leading to the poor performance of the chain.
According to the first strategic objective for the rice sector in Myanmar (MOAI, 2015b),
increasing productivity is an important consideration to improve the competitiveness of
Myanmar’s rice in both domestic and international markets. The production of rice
cultivation in Myanmar remains low while there is still a high potential for a production
increase. According to Saysay (2016), rice production and supply is sensitive to profitability
and improving profitability provides incentives to increase the production and the
marketable surplus. The best and most effective way to improve productivity can be realized
via a more efficient utilization of scarce resources. Efficient farm practices can enhance
productivity, the farmers’ profit and the amount of rice marketed (Saysay, 2016). Improving
the productivity of the rice industry could contribute to a poverty reduction leading to hunger
eradication, national food security and economic development (FAO, 2004). Therefore, the
efficiency of the farmers in terms of technically, scale and economically is a very important
consideration in the rice industry.
The investigation on the operational constraints in the rice value chain, the uncertainty and
its impact on the rice supply chain performance and the efficiency of the rice production by
farmers can help how to overcome/realise these challenges/objectives of the rice sector to
improve the food security and rural poverty reduction. According to Raju and Chand (2008),
the uncertainty factors related to natural disasters, yield and price in agricultural products,
imperfect markets etc. not only impact on farm livelihoods and incomes but also constrain
or challenge the viability of the agriculture sector and its potential to become a part of the
solution to the problem of widespread rural poverty. Therefore, the uncertainty may be the
source of the constraints. The efficiency of the rice production and the good performance of
the rice supply chain are important for the development of the rice value chain. Moreover,
we should consider the constraints and uncertainty impacted the rice value chain so that the
possible solutions can be imposed for the value chain development in the rice industry of
16 Chapter 1
Myanmar. Therefore, this dissertation constructed by three different studies has been
motivated in order to discover the possible solutions and recommendations to the findings
of operational analysis of the rice value chain that may support to the food security and rural
poverty reduction in Myanmar.
1.2 Literature Review
1.2.1 Value chain and value chain structure
The term value chain refers to the full range of activities that are required to bring a product
(or a service) from conception through the different phases of production to delivery to final
consumers and disposal after use (Kaplinsky and Morris, 2002). According to Nang’ole et
al. (2011), a value chain focuses on a single firm and involves 1) the conception and design
stage; 2) the acquisition of inputs; 3) production, marketing and distribution activities; and
4) the performance of after-sale services. The broad value chain approach starts from the
production system of the raw materials used to produce a product. Nang’ole et al. (2011)
stated that it also includes linkages with other actors involved in value adding activities i.e.,
trading, assembling, processing and providing business development services such as credit
and market information. The value chains can be a different type. Based on the idea of
governance, there are two distinguished types of value chains: Buyer-driven chains and
Producer-driven chains (Kaplinsky and Morris, 2002). Governance refers to the controlling
and monitoring of the implied rules and interactions between the different actors in the value
chain by setting parameter regarding products, processes and qualifications. Kaplinsky and
Morris (2002) categorized it as buyer-driven chains, when this governance role is played by
a buyer at the top of the chain. The producer-driven chains describe the governing role to be
played by the leading producer of the chain and are most likely to be present in capital-and
technology-intensive environment. The difference in value chains not only within and
between sectors, but also the international, national and local context is an important factor
to take into account (Kaplinsky and Morris, 2002).
Bammann (2007) identified three important levels in the value chain, i.e.
x Value chain actors: The actors of the chain who directly deal with the products,
i.e. produce, process, trade, and own them.
x Value chain supporters: The services provided by various actors who never directly
deal with the product, but whose services add value to the product.
Introduction 17
x Value chain influencers: The regulatory framework, policies, infrastructures, etc.
Kaplinsky and Morris (2002) stated that the value chains differ within and between sectors.
Thereby, the context in which they operate alters too. They ranked several issues and factors
to focus on when analyzing a supply chain: A first and far most important step is the
understanding of the market. To be able to conduct a secure value chain analysis, Kaplinsky
and Morris (2002) considered firstly the way a chain is looked at and determines which
relations and actions are to be the key processors, functions, roles etc. Secondly, mapping
value chains is a second important consideration. This involves the determination of
constraint, the selection of appropriate decision variables and the assignment of amount and
values to the respective variables for each actor or step in the value chain.
Value Chain Analysis
According to Jurevicius (2013), value chain analysis (VCA) is a process in which a firm
organises its primary and support activities that add value to its final product and then
analyze these activities if they can reduce costs or can increase differentiation.
The value chain approach is mainly a descriptive tool to look at the interactions between
different actors (M4P, 2008). Value chain analysis has one advantage because it forces the
analyst to consider both the micro and macro aspects of production and exchange activities.
The commodity-based analysis can provide better insights into the organizational structures
and strategies of different actors, which is the analysis that will be used in our study. In
addition, another analysis is an understanding of economic processes which are often studied
only at the global level (often ignoring local differentiation of processes) or at the
national/local levels (often diminishing the larger forces that shape socio-economic change
and policy making) (M4P, 2008).
Kaplinsky and Morris (2002) stressed that there is no “correct” way to conduct a value-chain
analysis; rather, the approach taken fundamentally depends on the question that is being
asked. However, four aspects of value-chain analysis of agriculture are particularly
important. At the most basic level which is the first step, a value chain analysis
systematically maps the actors participating in the production, distribution, marketing, and
sales of a particular product (or products) (M4P, 2008). Second, value chain analysis can
play a key role in identifying the distribution of benefits of actors in the chain. It means that
it is possible to determine who benefits from participation in the chain and which actors
18 Chapter 1
could benefit from increased support or organization by using the analysis of margins and
profits within the chain. Third, value chain analysis can be used to examine the role of
upgrading within the chain. Upgrading can include quality and product design improvements
or diversification in the product lines served to gain the higher value. In addition, an analysis
of the upgrading process includes an assessment of the profitability of actors within the value
chain as well as information on limitations that are currently present. Finally, value chain
analysis highlights the role of governance internally or externally in the value-chain.
Governance in a value-chain refers to the structure of relationships and coordination
mechanisms between actors.
According to the framework of Trienekens (2011), the value chain analysis starts from the
network structure of the rice value chain to examine firstly the socio-demographic
characteristics of the actors in the chain and the value addition in the different stages via a
profitability analysis. Secondly, a value chain analysis requires additionally the mapping of
the major constraints within the opportunities and the institutional environment of each actor
to identify the options to upgrade the value chain network.
Agricultural Value Chains and Food Security
The agricultural value chain normally refers to the entire range of goods and services
required for an agricultural product to move from the farm to the final customer. An
agricultural value chain may include: input supply, farmer organization, farm production,
post-harvest handling, processing, provision of technologies and handling, grading, cooling
and packing, post-harvest local processing, industrial processing, storage, transport, finance,
and feedback from markets.
Development of agricultural sector has a strong impact on reducing poverty and enhancing
food security. Organization of agriculture along the value-chain framework is one of the
ways to realize the full potential of this sector (Kumar et al., 2011). According to World
Food Summit (1996), food security is defined as “when all people at all times have physical
and economic access to sufficient safe and nutritious food that meets their dietary needs and
food preference for an active and healthy life”. Food insecurity including malnutrition is
both a cause and a result of poverty. Therefore, value chain projects aiming to poverty
reduction cannot ignore food security. The integration of the value chain approach and food
security is presented in terms of three recognized dimensions of food security: 1) consistent
availability of appropriate food from domestic production and commercial imports or
Introduction 19
donors; 2) individual access to appropriate food from expending income or other resources;
3) proper utilization of food, adequate knowledge and application of nutrition and child care
techniques, and adequate health and sanitation services.
All these three aspects are important for food security and are linked. Food availability is
necessary but not sufficient for food access. Again, food access is necessary but not
sufficient for effective food utilization. Figure 1.8 clearly illustrates the different activities
corresponding actors that are needed to achieve and enhance the concepts of food
availability, food affordability, food acceptability and food quality. There are also several
alternative approaches to agricultural development that are used to encourage poor groups
of people to be part of more modern value chains. These approaches want to increase the
return to the farmers by means of improving processes, products, functions, volume and
coordination (Hawkes and Ruel, 2012). Value chain concepts have the potential to influence
both the supply and the demand of nutritious foods such as rice. The analysis gives an
indication of the availability, the price and the quality of the foods together with the
interference of the government.
Dixit (2014) stated that a value chain perspective on the agricultural sector delivers
guidelines to address certain constraints and restrictions related to the development of the
agricultural sector and the realization of food security objectives. Due to the increasing
globalization and the increased acquisition and distribution channels, research of the value
chains is becoming more important in agriculture. Dixit (2014) also stated that a value chain-
based policy framework can facilitate food security considerations and also mentions ‘food
availability on the national market’, ‘food accessibility for people’ and ‘food utilization’ as
the core aspects of assuring food security.
20 Chapter 1
Figure 1.8 A simplified representation of a food supply chain

Source: Hawkes and Ruel (2012)
1.2.2 Uncertainty in the agricultural supply chain
Uncertainty can be described as the inability to predict something (Milliken, 1987).

According to Knight (1971), if it is not possible to quantify a probability of occurrence, it is
called uncertainty. Simangunson, et al. (2012) stated that when considering the
consequences of uncertainty, if they are positive, they are called chances and if they may be
negative, then they are risks. In addition, according to Wang et al. (2014), managers have to
face and manage both supply chain uncertainty in a real environment in the world. Moreover,
since the processes involve various organizations in the supply chain network, uncertainty
cannot be avoided for a finished product. According to Miller (1993), uncertainty refers to
‘the unpredictability of environmental or organizational variables that have an impact on
corporate performance’.
Introduction 21
Agricultural food supply chain has unique characteristics with sources of uncertainty factors
which are different from those of other supply chains. Many sources of uncertainty for food
supply chains appear due to variable harvests and production yields, perishability of
products and the huge impact of weather conditions on production and customer demand
(Jack and Adrie, 2002). Based on the studies of Badri et al., (2000), van der Vorst (2000),
Li (2002), Paulraj & Chen (2007) and Thongrattana (2012), the seven uncertainty factors
are considered in this study. The details of each uncertainty factor are as follows:
Supply Uncertainty: Supply uncertainty is related to unpredictable and uncontrollable factors

in material supply. Supply uncertainty is defined as the degree of exchange and
unpredictability of the design of suppliers, quality and delivery performance. Uncertainty
caused by suppliers, such as late delivery, machine broken, quality of incoming material or
parts, and degree of inconsistency will postpone or delay a manufacturing process. Geary et
al. (2002) considered supply chain uncertainty as the results from poorly performing
suppliers not meeting organization’s needs. Li (2002) assessed supply uncertainty by
providing factors such as unpredictability of engineering level, product quality, delivery
time and quantity.
Demand Uncertainty: The variation in customer demand is one source of supply chain
uncertainty. Customer uncertainty is defined as the extent of change and unpredictability of
the needs and demands of customers (Zhang et al., 2002). Geary et al. (2002) stated that
customer uncertainty can be viewed as the difference between the actual end-marketplace
demand and the orders placed with an organization by its customers. It can be measured in
terms of how well companies meet customer demand. Moreover, customer uncertainty can
be defined as the link to the predictability of the demand for the product. Customer
uncertainty involves unknowns associated with product characteristics or environmental
factors and causes difficulties in predicting and controlling the demand for a final product.
Process Uncertainty or Manufacturing Uncertainty: Problem with manufacturing process is

another source of supply chain uncertainty which is related to unpredictable and
uncontrollable factors in the manufacturing process. Process uncertainty can be caused by a
production stop as a result of a machine breakdown, process disorder due to a computer
crash, or a production bottleneck because of improper workflow design (Davis, 1993).
Planning and Control Uncertainty: It is related to the planning and communication structure
needed to provide correct and on-time information about inventory level, production
22 Chapter 1
capacity and customer orders (van der Vorst, 2000). Information is crucial to operational
control for planning and management: the higher the quality of information input, the higher
the quality of managerial decision-making (Gorry & Morton, 1989). Poor control systems
i.e. incomplete information or wrong decision rules introduce uncertainty into the supply
chain (Childerhouse & Towill, 2004).
Competitor Uncertainty: The unpredictability of competitor actions such as reducing the

price of products is referred to competitor uncertainty (Li, 2002). In any organization, the
competitor is one external factor which can introduce perceived uncertainty into
organizations (Duncan, 1972). Competitor uncertainty is defined as the extent and
unpredictability of the competitors’ actions (Li, 2002). Globalization and demanding
customers increase the level of competency in business. Organizations that focus on
domestic markets must be able to understand foreign rivals that penetrate their markets. As
a result, firms have no choice but to develop global perspective of competition by
recognizing the entry of new competitors and the necessity of partnership with other
organizations. This competition is forcing firms to rearrange their business strategies away
from conventional, cost-based strategies to knowing which feature a customer wants.
Government Policy Uncertainty: Laws, regulations, administrative procedures and policies

formally sanctioned by the government and which impact on a firm’s profitability by altering
its costs and revenues, introduces government policy uncertainty into the supply chain
(Badri et al, 2000). Government regulation can provide both risks and benefits to business
in many ways, but unpredictable government policy can forces business decision-makers to
take risks in investment, especially in new technology (Marcus, 1981).
Climate Uncertainty: Climate uncertainty refers to the unpredictability of serious weather

events such as drought, flooding and temperature which can lead to decreased rice yield,
rice supply shock, and delay delivery time to market or transportation disruption (Curz et al,
2007). According to Darwin et al. (1995), climate is a major factor directly and indirectly
affecting most agricultural and socio-economic systems associated with land-use planning,
agricultural yield level, agricultural infrastructure, etc. especially in developing countries
where the agricultural system is mostly dependent on rainfall and there is a lack of
technological adaptations.
Introduction 23
1.2.3 Agricultural supply chain performance
The supply chain is defined as “all of the activities associated with moving goods from the
raw materials stage through to the end user. This includes sourcing and procurement,
production scheduling, order processing, inventory management, transportation,
warehousing, and customer services. Importantly, it also embodies the information systems
so necessary to monitor all of those activities” (Quinn, 1997). These efforts require
management and therefore management of these supply chains is important. The purpose of
the supply chain management is to achieve the improved long-term performance of the
individual companies and the supply chain as a whole. This result in such benefits as reduced
operation costs, increased market share and sales and solid customer relations (Mentzer et
al., 2001)
Supply chain performance on the other hand ensures efficiency in providing goods as per
market demand and thus the need for measuring performance as there exists interdependence
among supply chain partners which is important for survival and prosperity of a firm. Supply
chain performance is defined as the operational excellence to deliver leading customer
experience (Simchi-Levi, 2003).
The aim of any agri-food supply chain is to achieve a full and effective flow of goods,
services and information, transferring capital to create and provide maximum customer
value. Regardless of the organizational form of each agri-food supply chain the companies
could choose one of the following way as a developing strategy: strategic planning of
acquisitions, labour productivity growth, increased financial result and improving the
efficiency of distribution. In order to measure the performance of agri-food supply chain is
needed to permanently update information regarding the performance of suppliers and
customers (Burgess et al., 2006), knowledge of their marketing strategies, and continuous
analysis and updating component costs logistics, such as domestic and international
transport, customs, storage, packaging or repackaging and special physical distribution of
finished products (Dinu, 2016). Therefore, the correct communication in the supply chain
between chain partners, but also within the participating companies and the accuracy of the
information circulating on both the vertical and the horizontal line are key factors with major
influence in the performance of this flow of information, goods and services.
24 Chapter 1
1.3 Chapter Overview and Contributions
In the last introductory section, we provide a short summary of the studies presented in the
different chapters of this dissertation. Each of the chapters (apart from the conclusion
chapter) corresponds to an original academic paper. The link between the different chapters
and the papers is presented in this section. Although the different chapters are self-contained
academic studies, and the references for all chapters will be expressed in the last section of
this book. Chapter 2 to 4 are three different studies of this dissertation and this book is
concluded in Chapter 5. These three studies (cf. Figure 1.9) were designed to contribute to
the academic literature by answering the following research questions, i.e.:
General research question: How can the value chain of the rice industry be developed to
improve food security and reduce rural poverty in Myanmar?
Seventy percent of the rural population of Myanmar engages in rice farming for their
livelihood (MOAI, 2015b). The value chain development can improve the living
conditions of the rural population (i.e. poverty reduction) and contribute to food
security (EuropeAid, 2011). In the rice value chain development, there are different
challenges and strategic objectives in the rice sector in Myanmar. Moreover, the main
challenge considered here is “increasing the performance and sustainability of the rice
industry may improve the food security and reduce poverty in the country”. This
dissertation is compiled in consideration of these challenges and strategic objectives
and aims to provide some possible solutions for promoting food security and rural
poverty reduction in Myanmar with the perspective of the operational analysis of the
rice value chain.
In order to solve the general research question, three different studies are undertaken to
investigate the following research questions. The relationship between these different
studies is presented in Figure 1.9.
Introduction 25
Figure 1.9 The link among three different studies
RQ1 What are the operational constraints hindering the development of the rice value
chain in Myanmar and what are the solutions to these bottlenecks of the rice value
chain?
Chapter 2 presents the paper entitled “An analysis of the operational constraints
hindering the development of the rice value chain in the Ayeyarwaddy Region,
Myanmar”. In this chapter, firstly, we map the structure of the rice value chain in order
to know clearly which actors involve in the chain in the Ayeyarwaddy Region,
Myanmar. We calculate the financial data to obtain the costs of production and
marketing of different actors and then we estimate the profits of these actors by
employing marketing cost and margin analysis. This analysis identifies the distribution
of marketing costs, margins and profits along the actors in the rice value chain.
Secondly, by applying the descriptive and inferential statistics, the socio-demographic
characteristics and operational constraints of the different actors are described to know
the status and challenges of the different actors in the rice value chain. Lastly, we link
these identified socio-demographic characteristics and operational constraints to the
26 Chapter 1
profitability of the different actors. Moreover, we map the operational constraints faced
by the actors along the rice value chain and discuss the interventions of the
governments cooperating with the private sectors to develop the rice value chain in the
study area.
RQ2 Which uncertain factors influence the rice supply chain performance in
Myanmar?
Chapter 3 presents the results of the paper entitled “The impact of uncertainty on the
performance of the rice supply chain in the Ayeyarwaddy Region, Myanmar”. This
chapter emphasizes the relationship between the uncertainty and supply chain
performance of different actors and global rice supply chain in the Ayeyarwaddy
Region, Myanmar. First, we use the descriptive statistics and factor analysis to study
the sources of uncertainty and the most important uncertainty factors perceived by the
different actors in the rice supply chain, respectively. Second, we measure the rice
supply chain efficiency as a measurement of supply chain performance. We apply the
input-oriented DEA approach to evaluate the efficiency of rice production stage,
processing stage, distribution stage and finally global rice supply chain. We consider
the marketed amount of paddy and rice as the output variable and the costs of
production, financial, transportation and storage as the input variables. Third, a Tobit
regression analysis is used to determine the influence of uncertainty factors on the
supply chain efficiency in these three different stages and the global rice supply chain.
We use the seven uncertainty factors discussed in Section 1.2.2 as the independent
variables and the technical efficiency as the dependent variable in the Tobit model.
RQ3 How to improve the efficiency of the paddy production in Myanmar?

Chapter 4 presents the results of the paper entitled “The efficiency of the rice
production of the farmers in the Ayeyarwaddy Region, Myanmar”. First, we employ
the input-oriented DEA approach to estimate the overall technical, pure technical,
scale, allocative and economic efficiency of the rice farmers in the Ayeyarwaddy
Region. We consider the paddy yield as the output variable and the amount and price
of the seed, urea fertilizer, herbicide, animal power, machine power and human labor.
We determine the farmer and industry characteristics factors that impact the efficieny
of the rice farmers by using a Tobit regression analysis. The dependent variables are
Introduction 27
all different efficiencies considered in this study and the independent variables involve
the age, education and experience (farm-farmer related variables), the variety used
(farm-production related variable) and the extension services received by the farmers
(farm-institution related variable).
The answers to these research questions provide the following contributions to the academic
literature, i.e.
x The contribution of Chapter 2 is threefold. Firstly, we estimate the marketing costs
and margins to evaluate the profits of the different actors involved in the rice value
chain. Secondly, we study the operational constraints of the different actors in the
rice value chain. Lastly, via a regression analysis, we relate these operational
constraints to the profitability of an actor to detect the significant and most
important constraints. Based on this analysis, options are identified to upgrade the
value chain network in the Ayeyarwaddy Region, Myanmar.
x Chapter 3 contributes threefold to this dissertation. First, we identify the sources of

uncertainty perceived by the different actors in the rice supply chain in the
Ayeyarwaddy Region, Myanmar. Second, we measure the rice supply chain
efficiency to assess the supply chain performance. Finally, we study the impact of
uncertainty on supply chain efficiency to understand the challenges of the supply
chain the region is dealing with and to identify solutions to improve the supply
chain operations.
x Chapter 4 emphasizes the efficiency of the rice production of the farmers and
contributes threefold. First, we estimate the overall technical, pure technical, scale,
allocative and economic efficiency of the rice farmers in the Ayeyarwaddy Region.
Second, we determine the influencing factors on these different efficiencies of the
rice farmers. Finally, results of this study provide relevant recommendations for the
farmers to better control the resource usage and improve the operational decision-
making in the rice production especially for rural development and food security in
Myanmar. Moreover, the challenges of inadequate infrastructure, weak extension
and education system, volatility of paddy price that contributes to low farmer
28 Chapter 1
incomes and policies that hamper investments in the rural and rice sector can be
realized from this chapter.
In Chapter 5, we reflect on the studies of Chapter 2 through 4. While each chapter contains
a separate conclusion, this final chapter closes with more general remarks than the specifics
found in each chapter. The conclusion constitutes the finale of this dissertation and looks
back on the work we have done throughout these years of research. We also provide a future
outlook and discern limitations of the study and future research directions.
Acknowledgements
We acknowledge the support for the doctoral research project funding by the Lotus Plus
Project, Erasmus Mundus Program (Action – 2).
Unpublished working papers

x Linn, T. and Maenhout, B. (2018). An analysis of the operational constraints
hindering the development of the rice value chain in the Ayeyarwaddy Region,
Myanmar. Under revision in Asian Journal of Agriculture and Development
(Accepted for publication).
x Linn, T. and Maenhout, B. (2018). The Impact of uncertainty on the performance of
the rice supply chain in the Ayeyarwaddy Region, Myanmar. Under review in
Agriculture and Food Economics (Second round).
x Linn, T. and Maenhout, B. (2018). Measuring the efficiency of the rice production
in Myanmar using Data Envelopment Analysis: A non-parametric approach. Under
review in Asian Journal of Agriculture and Development (First round).
Introduction 29
1.A Appendix: The position of Myanmar among the rice producing countries in Asia
This part illustrates the position of rice producing countries in Asia. The following tables
show the degree of development of a country by means of the Human Development Index
(HDI) and its components. Myanmar remains one of the poorest countries in the world with
poverty in rural areas significantly higher than in urban areas. A large segment of the
population is highly vulnerable to adverse weather and experiences periodic bouts of
impoverishment. The top 10 rice producing countries in the world today are India, China,
Indonesia, Bangladesh, Thailand, Vietnam, Burma (Myanmar), the Philippines, Cambodia,
and Pakistan and all of the top rice exporting countries are in Asia. But, we will point out
the position of Myanmar relative to the other neighbouring top rice exporting countries such
as India, China, Bangladesh and Thailand. Myanmar is the poorest country compared to the
other top rice producing neighbouring countries according to the following evidences. The
following tables show the degree of development of a country by means of the Human
Development Index (HDI) and its components. The data were accessed from various
sources.
1.A.1 Human Development Index: Components and Trends

Definitions
Table 1.A.1 depicts multiple facets that represent the development of countries:
Human Development Index: A composite index that measures the average achievement in
three basic dimensions of human development: A long and healthy life, knowledge and a
decent standard of living.
Life expectancy at birth: Numbers of years a new born infant could expect to live if
prevailing patterns of age-specific mortality rates at the time of birth stay the same
throughout the infant’s life.
Expected years of schooling: Numbers of years of schooling that a child of school entrance
age can expect to receive if prevailing patterns of age-specific enrolment rates persist
throughout the child’s life.
Mean years of schooling: Average number of years of education received by people ages 25
and older, converted from education attainment levels using official durations of each level.
Gross National Income (GNI) per capita: Aggregate income of an economy generated by
its production and its ownership of factors of production, less the incomes paid for the use
30 Chapter 1
of factors of production owned by the rest of the world, converted to international dollars
using PPP (Purchasing Power Parity) rates, divided by midyear population.
Interpretation
We can divide the development status of the countries based on their Human Development
Index (HDI). According the classification of HDI, Thailand and China are included in very
high human development group within the HDI index of 0.700-0.799, and India, Bangladesh
and Myanmar are standing as the medium human development group within the HDI index
of 0.550-0.699. From Table 1.A.1, we can conclude that Myanmar’s life expectancy,
education and development is lower than those of other neighbouring top rice producing
countries. Even though Gross National Income per capita of Myanmar is a bit higher than
Bangladesh among the medium human development countries, other indicators for human
development are lower than Bangladesh.
Moreover, the evolution of HDI for different years is depicted in Table 1.A.2, as well as the
average growth of HDI over time. The average annual HDI growth is the smoothed
annualized growth of the HDI in a given period, calculated as the annual compound growth
rate. It is clear that the HDI for Myanmar is significantly lower than those of Thailand and
China and a slightly lower compared to India and Bangladesh over the years. From the
period of 1990 to 2015, even though the average annual HDI growth rate was the highest,
the HDI for every year were the lowest among other countries.
Table 1.A.1 Human Development Index and its components in 2015

Human Life Expected Mean Gross National
Development Expectancy years of years of Income (GNI)
Sr. Index at birth schooling schooling per capita
No. Country (HDI)(value) (years) (years) (years) (2011 ppp $)
High Human Development Countries (0.700 - 0.799)
1 Thailand 0.740 74.6 13.6 7.9 14519
2 China 0.738 76.0 13.5 7.6 13345
Medium Human Development (0.550 - 0.699)
3 India 0.624 68.3 11.7 6.3 5663
4 Bangladesh 0.579 72.0 10.2 5.2 3341
5 Myanmar 0.556 66.1 9.1 4.7 4943
Source: UNDP (2016)
Introduction
Table 1.A.2 Human Development Index for 1990-2015 and the average annual HDI growth per country for this period
Human Development Index (HDI) (value) Average Annual HDI growth (%)
Sr. No. Country 1990- 2000- 2010- 1990-
1990 2000 2010 2011 2012 2013 2014 2015
2000 2010 2015 2015
High Human Development
1 Thailand 0.574 0.649 0.720 0.729 0.733 0.737 0.738 0.740 1.25 1.03 0.56 1.02
2 China 0.499 0.592 0.700 0.703 0.713 0.723 0.734 0.738 1.72 1.7 1.05 1.57
Medium Human Development
3 India 0.428 0.494 0.580 0.590 0.599 0.607 0.615 0.624 1.45 1.62 1.46 1.52
4 Bangladesh 0.386 0.468 0.545 0.557 0.565 0.570 0.575 0.579 1.95 1.54 1.21 1.64
5 Myanmar 0.353 0.427 0.526 0.533 0.540 0.547 0.552 0.556 1.9 2.12 1.1 1.83
Source: UNDP (2016)
31
32 Chapter 1
1.A.2 Poverty in Myanmar

Definition
Table 1.A.3 shows the population below the national poverty line of Myanmar relative to
the top rice producing neighbouring countries: national estimates of the percentage of the
population falling below the poverty line are based on surveys of sub-groups, with the results
weighted by the number of people in each group. Definitions of poverty vary considerably
among nations. For example, rich nations generally employ more generous standards of
poverty than poor nations.
The poverty in Myanmar is also illustrated by the Table 1.A.4, which depicts the population
trends, mortality rates and literacy rate. Table 1.A.4 has included the following
characteristics statistics:
Total population: De facto population in a country.

Population growth rate: The average annual percent change in the population, resulting from
a surplus (or deficit) of births over deaths and the balance of migrants entering and leaving
a country.
Median age: Age that divides the population distribution into two equal parts – that is, 50
percent of the population is above that age and 50% is below it.
Adult mortality rate: Probability that a 15-year-old will die before reaching the age of 60,
expressed per 1000 people.
Adult literacy rate: Percentage of the population ages 15 and older who can, with
understanding, both read and write a short simple statement on their everyday life.
Table 1.A.5 consists of the following variables:
Gross Domestic Product (GDP) - per capita (PPP): This entry shows GDP on a purchasing
power parity basis divided by population as of 1 July for the same year.
Labour force participation rate: Percentage of a country’s working-age population that
engages actively in the labour market, either by working or looking for work. It provides an
indication of the relative size of the supply of labour available to engage in the production
of goods and services.
Unemployment rate: This entry contains the percent of the labour force that is without jobs.
Substantial underemployment might be noted.
Introduction 33
Youth unemployment rate: Percentage of the labour force population ages 15-24 that is not
in paid employment or self-employed but is available for work and has taken steps to seek
paid employment or self-employment.
Interpretation
According to Table 1.A.3, Myanmar had higher percentage in population (25.6%) below the
national poverty line compared to other neighbouring rice producing countries except from
Bangladesh (31.5%) in 2015. From Table 1.A.4, we can see that the population growth
became decreasing during 1960 to 2016 in all countries. However, the population is also
expected to keep increasing. It is clear that the median ages of the population in Thailand
and China are significantly higher than those of the Medium Development countries
including Myanmar. This is yet another indicator of the poor conditions in which people of
Myanmar have to live. Thereby, the adult mortality rates in female (173 per 1000 people)
and male (229 per 1000 people) were the highest in Myanmar in 2014 relative to other rice
producing neighbouring countries. According to the data presented in the table, the adult
literacy rate of Myanmar was higher than India and Bangladesh and lower than Thailand
and China in 2015. However, obviously, poverty goes together with the restrictions in terms
of education. As we can derive from the table, the percentage of population with at least
some secondary education (% ages 25 and older) was the significantly lowest in Myanmar
(23.8%) compared to other rice producing neighbouring countries in 2015.
The GDP per capita gives a better representation than the total GDP because it is taken
relatively to the population. The GDP per capita is an also an indication of the poverty in
Myanmar. According to Table 1.A.5, the GDP per capita PPP was the significantly lower in
Myanmar (1700 $) than other neighbouring countries. Employment rate or labour force
participation rate and unemployment rate are used as the indicators of the poverty of the
country. Even though the employment rate of Myanmar was the highest among the countries
mentioned in the table, the unemployment rate in total population was the highest in
Myanmar (4.7%) in 2015. As in the case of youth unemployment rate was also the higher in
Myanmar (12.1%) than other countries except from China (also 12.1%).
34 Chapter 1
Table 1.A.3 Percentage of population below the national poverty line in 2015
Population below national poverty line

Sr. No. Country
(percentage)
1 Thailand 10.5
2 China 3.3
3 India 21.9
4 Bangladesh 31.5
5 Myanmar 25.6
Source: World Factbook (2017)
Table 1.A.4 Population trends, mortality rates and literacy rate for top ric e
producing countries
Adult Populatio
Adult
Adult literacy n with at
mortali
mortality rate in least some
Total Population Median ty rate
Sr. rate 2015 secondary
Country Population in growth rate age (male
No. (female (% education
millions (2014) (years) per
per 1000 ages 15 (% ages
1000
people) and 25 and
people)
older) older)
1960 2016 1960 2016 (2015) (2014) (2014) (2015) (2015)
1 Thailand 27.4 68.9 3 0.3 38 105 207 96.7 43.3
2 China 667.1 1378.7 1.8 0.5 37 72 98 96.4 75
3 India 449.5 1324.2 1.9 1.1 26.6 145 217 72.1 48.7
4 Bangladesh 48.2 162.6 2.8 1.1 25.6 107 152 61.5 43.1
5 Myanmar 20.9 52.9 2.1 0.9 27.9 173 229 93.1 23.8
Source: UNDP (2016)
Introduction 35
Table 1.A.5 National Income in 2013 and Employment rates in Myanmar relative
to the other neighboring top rice producing countries in 2015
Gross Employment rate Unemployment

Domestic to population Unemployment
Unemployment
Sr. No. Country Product ratio rate in total
rate of youth
(GDP per (% ages 15 and population
(%)
capita PPP $) older) (%)
1 Thailand 9900 70.6 1.1 4.7
2 China 9800 67.6 4.6 12.1
3 India 4000 51.9 3.5 9.7
4 Bangladesh 2100 59.4 4.4 11.6
5 Myanmar 1700 74.3 4.7 12.1
Source: UNDP (2016)
An Analysis of the Operational Constraints Hindering
2
the Development of Rice Value Chain in the
Ayeyarwaddy Region, Myanmar
The rice industry is the most important agricultural subsector in Myanmar. However,
compared to other ASEAN countries, far lower profits are gained from producing rice. This
paper analyzes the operational constraints of the rice value chain in Myanmar for the
different actors in the rice value chain. Both primary and secondary data are collected for
the rice value chain in the Ayeyarwaddy Region, which is the main rice growing area in
Myanmar. The actors suffer especially from material input constraints, production
constraints, financial constraints and distributional and institutional constraints. In order to
provide proper policy guidelines, the profitability of the actors, together with their social-
demographic and operational characteristics are examined. It was found that the value chain
in the study area is structured in an inefficient manner, characterized by a large number of
actors that face a large number of constraints. Based upon our analysis, different policy
recommendations are put forward to upgrade the rice value chain in the Ayeyarwaddy
Region of Myanmar.
In this perspective, the stakeholders should be encouraged to undertake different actions to
increase the quantity and quality of rice produced, ranging from input quality control and
more efficient extension services. In addition, credit and sufficient working capital should
be provided to make infrastructure investments possible in different stages of the value chain
to increase rice production and profitability significantly.
38 Chapter 2
2.1 Introduction
Agriculture plays a major role in Myanmar by ensuring food security as well as in the
provision of employment and income for a growing population. In 2014-2015, 22.1 % of the
GDP resulted from agriculture (MOAI, 2015a). The rice industry is the most important
agricultural subsector in the country, accounting for about half of the cultivated land. In
2016, the paddy production in Myanmar was ranked 7th of the paddy producing countries in
the world (World Rice Production, 2017). According to MOALI (2016), paddy has the
highest percentage share 46% among crops grown in Myanmar. In addition, most of the
household income is earned from rice farming and related activities. In 2013-2014, the net
profit averaged $114/ha for producing monsoon paddy. However, these farm profits in
general are not sufficient to raise households’ per capita income above the regional rural
poverty line (Zorya, 2016). Zorya (2016) reported that in Myanmar far lower profits are
gained from producing rice compared to other countries in Asia. This indicates that the
potential of the agricultural sector has not yet been realized when it comes to poverty
reduction.
The value chain development is an approach to reduce the rural poverty and has been
adopted by governments and NGOs (World Bank, 2014). In this paper, the rice value chain
in the Ayeyarwaddy Region of Myanmar is analyzed. The issues in this region are complex
and multifaceted. There is a lack of information on the coordination and interaction between
actors of the same stage (horizontal cooperation) and of different stages in the supply chain
(vertical cooperation) since the linkages and relationships among the actors are fragmented.
In particular, the constraints of the rice value chain in the Ayeyarwaddy Region are studied
in order to identify the main bottlenecks. This paper follows the framework of Trienekens
(2011) and starts from the network structure of the rice value chain to examine (1) the socio-
demographic characteristics of the actors in the chain and the value addition in the different
stages via a profitability analysis; (2) the major constraints that limit the operations of each
actor. These operational constraints are related via a regression analysis to the profitability
of an actor to detect the significant and most important constraints. In this way, options are
identified to upgrade the value chain network in the Ayeyarwaddy Region of Myanmar.
The remainder of the paper is organized as follows. Section 2.2 provides a review on the
relevant literature. The methodology concerning the empirical data collection and data
analysis is described in Section 2.3. Section 2.4 discusses the findings for the study area. A
Operational constraints in the rice value chain 39
discussion of the findings and ways to upgrade the value chain is provided in Section 2.5.
The conclusion and policy recommendations are summarized in Section 2.6.
The idea of the value chain is based on the process view of an organization or a supply chain
(Porter, 1985). A value chain describes the product transformation and value adding
activities with inputs, transformation processes and outputs in each stage of the chain to
bring a product through different stages of production, distribution, marketing to consumer
delivery, i.e. the value chain structure (Kaplinsky and Morris, 2001). The value chain
activities require the acquisition and consumption of resources (e.g. money, labor, material)
and determine costs and profits of each actor participating in the supply chain network. The
methodology has been applied to understand commodity chains and export strategies
especially in developing countries (Kaplinsky and Morris, 2001). According to Trienekens
(2011), a value chain analysis requires additionally the mapping of the major constraints
within the opportunities and the institutional environment of each actor to identify the
options to upgrade the value chain network.
Constraints imposed on the development of a value chain are related to market access,
market knowledge and orientation, the available resources and infrastructure and
institutions. Market access is dependent on the technological capabilities of producers,
available infrastructures, bargaining power and market knowledge and orientation. Market
knowledge and orientation refers to the intelligent capturing of consumers’ needs and using
this knowledge to increase the added value of activities to upgrade the value chain (Grunert
et al., 2005). However, constraints on resources and infrastructure (e.g. lack of specialized
skills and difficult access to technology, inputs, market information, credit and external
services) may obstruct this upgrade (Giuliano et al., 2005). The value chain in developing
countries can be characterized as a local low-income chain. Producers are usually small with
traditional production systems. These chains include many intermediary parties and are
relatively long. This implies that the availability of market information is limited, the added
value is distributed over a large number of actors and transportation and distribution
problems are more profound (Trienekens, 2011). Furthermore, upgrading can be hindered
as a result of government legislation, regulations and policies by e.g. setting trade barriers
for production technology, limiting the flow of information, denying infrastructural
40 Chapter 2
investments. According to Marti and Mair (2008) developing countries are often
characterized by institutional voids, where institutional policies and regulations are absent,
weak or fail to accomplish their role. A facilitating government that supports innovation and
upgrading is often considered conditional for development (e.g. Murphy, 2007). In the
following, this paper reviews the relevant studies on the value chain analysis in the rice
industry in Asian countries (Section 2.2.1) and the rice value chain in Myanmar (Section
2.2.2).
2.2.1 Rice value chains in some ASEAN countries
In the literature, different studies reported on the value chain of the rice sector in ASEAN
countries. Especially in the low-income countries, i.e. Cambodia, Lao PDR and Myanmar,
the rice industry is the crucial agricultural subsector and is important in terms of land use,
farm income and food consumption. Improving the rice sector performance and developing
the value chain is critical to reduce poverty in these three countries (World Bank, 2014).
Compared to the neighboring countries Thailand and Vietnam, the rice value chains of
Cambodia, Lao PDR and Myanmar are characterized by less efficient input supply systems,
a lower farm productivity and profitability, higher milling and export costs and a lower
quality of exported rice (Zorya et al., 2016). As a result, the rice value chains in Cambodia,
Lao PDR and Myanmar are less competitive than those in Thailand and Vietnam, which is
detrimental in the international market as all these countries are net rice exporters, and these
countries have much lower export volumes. In addition, the profits of the individual actors
in the value chain in these countries are lower caused by lower yields, lower output prices
and higher production costs making them more vulnerable.
Zorya et al. (2016) claimed that improvements are required at all stages of the value chain
in all three countries. In the production phase, farmers should increase the productivity and
quality of paddy produced in a sustainable manner, particularly due to constraints with
respect to the availability of good-quality seeds and the lack of quality extension services.
The rice mills to process the paddy to rice should lower their costs by improving the process
efficiency and quality and increasing the processing capacity. In these countries, there are
many rice mills in operation. Many of them are (too) small dealing with capital shortage
problems and a very severe competition. In the distribution phase, the export of the country
of Myanmar relies too heavily on cross-border trade and other countries should be exploited
to increase the rice export profitability. In recent years, Cambodia has made the most
progress in the production, milling, and export segments whereas Myanmar is lagging
behind.
2.2.2 Rice value chain in Myanmar
The rice value chain of Myanmar has been studied by Wong and Wai (2013). This study
mapped the overall rice supply chain by investigating the structure, performance and
economics of rice production, marketing and trading. The authors recommended to increase
efficiency, raise productivity, reduce risk and encourage private investments along the rice
supply chain. The structure of the rice value chain in the study area is shown in Figure 2.1,
which has been validated at the start of this study. The rice value chain starts from the supply
of inputs (agrochemicals, machinery, seeds, credit and extension services) to farmers for the
paddy production. The cultivation of paddy requires different activities such as preparing
the land, sowing seeds, transplanting seedlings weeding, applying fertilizers and pesticides,
harvesting, threshing, drying, winnowing, storage and selling the surplus after allowing for
home consumption. Primary collectors buy the paddy from the farmers with the financial
support of millers. The millers give fees to the primary collectors and mill the paddy to rice.
They carry out different activities that add value such as transportation, processing, grading
and packing. The millers store and distribute rice mainly to wholesalers. Wholesalers deliver
rice on their turn to retailers in order to supply the domestic consumers or to exporters who
supply consumers in foreign countries.
Figure 2.1 Structure of the rice value chain in the study area
Source: Own survey (2017)
42 Chapter 2
A study issued by the Ministry of Agriculture and Irrigation (MAOI, 2015b) posed that the
rice value chain in Myanmar is not well integrated and its efficiency should be improved.
There are (too) many different actors in the different stages and (too) many stages ranging
from individual farmers to large scale wholesalers and exporters. The chain is characterized
by several weaknesses at various stages in the chain, which causes high transaction costs for
all actors (World Bank, 2014; Raitzer et al., 2015; MOAI, 2015b). The farmers in Myanmar
have to deal with inputs of low quality, i.e. inferior input seeds, poor water management,
inferior quality of chemical fertilizers and inappropriate use of pesticides and herbicides,
which are viewed as reasons for their low yield. In addition, they face seasonal labor
shortages and a lack of credit to upgrade their operations. The infrastructure of most millers,
i.e. the milling machines and power supply, is outdated, costly and unreliable leading to an
inferior rice quality, which does not meet the standards for export. Moreover, the
investments efforts in the rice industry, which are currently mainly done by the government,
are insufficient with respect to (1) the infrastructure (such as multi-purpose dams, irrigation
and drainage canals, farm roads); (2) the agricultural support services, i.e. research,
extension and credit (currently 100,000MMK per acre with 0.045% interest rate (San,
2017)). As a result, all actors in the supply chain encounter a lack of capital to invest in the
production, processing and distribution facilities (World Bank, 2014; Raitzer et al., 2015).
2.3 Research Methodology
2.3.1 Data collection and sampling technique
Both primary and secondary data are collected for the rice value chain in the Ayeyarwaddy
Region, which is the main rice growing area in Myanmar. This study is conducted in two
selected townships, Myanaung and Kyangin, in the Ayeyarwaddy Region (cf. Appendix
Figure 2.A.1). These two townships are two of rice special areas especially Emata rice group
in Myanmar for the local area which are rice deficit such as Pakokku, Aung Lan, Magwe,
Tha Yet and Mindon in Magway region. Emata rice is also mostly exported to other
countries. The purposive and stratified random sampling method is used to collect primary
data. As a cross-sectional survey, in-depth and key informant interviews are used to
interview sample respondents (Umberger, 2014). The stratification of the population is
based on their role in the supply chain. For each subpopulation, a random sampling method
is applied to form a test group. The sample size is calculated for each stratum in direct
proportion1 to the size of the stratum compared to the (finite) population (cf. Appendix
2.A.1) (Judez, 2006). As a result, a sample of 130 farmers, 21 primary collectors, 25 millers,
7 wholesalers, 28 retailers and 4 exporters is selected for conducting the face-to-face
interviews.
The primary data includes the socio-economic characteristics of the value chain actors,
financial information about sales volumes and prices, transaction costs and constraint
information. The constraint information is gathered via a binary response questionnaire. The
secondary data is collected from the Department of Agriculture (DOA), Ministry of
Agriculture, Livestock and Irrigation (MOALI), Myanmar Rice Federation (MRF),
FAOSTAT, websites and other relevant data sources.
2.3.2 Data analysis method: Socio-demographic, financial and constraint

information
Descriptive statistics (mean, frequency, percentage and range) are applied using SPSS to
describe the characteristics of the value chain, i.e. socio-economic and constraint data of the
sample respondents, based on the cross-sectional data obtained from the survey. Inferential
statistics are used to describe and make inferences, to apply hypothesis testing and identify
significant differences between groups of actors in the value chain. Moreover, the concept
of enterprise budget (Olson, 2009) is used to evaluate the profitability of the actors. This
enables us to evaluate the cost and return of the value adding activities. The return above
variable cost or the gross margin is calculated as follows
Return above variable cost (RAVC) = Total Gross Benefit – Total Variable Cost (2.1)
The total variable cost takes material costs, hired labor costs, family labor cost and the
interest on cash cost into account.
Furthermore, we determine the marketing costs, the marketing margins and the marketing
profits of the different actors in the value chain via a marketing cost and margin analysis,
which has been applied by Raha and Akbar (2010), Abdullah et al. (2015) and Miah (2013)
ே
1
This is based on the equation of Yamane (1967), i.e. ݊ ൌ ଵାேሺ௘ మ ሻ where N is the
population, e2 is the standard error and n is the sample size.
44 Chapter 2
amongst others. The difference between the price of any product at one stage in the
marketing process and the price of the equivalent product at another stage of marketing is
called the marketing margin (Smith, 1992), i.e.
Gross marketing margin (GMM) = Selling price – Purchase price paid by an actor (2.2)
Total gross marketing margin (TGMM) = Consumer price – Producer price (2.3)
The net marketing margin (NMM) or marketing profit is the percentage over the final price
earned by the middleman as his or her income after deducting his or her marketing costs.
The net marketing margin can be calculated as follows
Net Marketing Margin (NMM) = (GMM – Marketing cost)/Consumer price x 100 (2.4)
2.3.3 Data analysis method: Explanatory factors of the actor profitability
In order to obtain insight in the most important constraints in the value chain, factors and
characteristics of value chain actors that significantly impact the profitability, we apply a
multiple linear regression analysis to discern those constraints that significantly impact the
profitability. Regression analysis is a statistical forecasting model that describes and
evaluates the relationship between a dependent variable and a set of independent variables
(Rawlings et al., 1998). A generic multiple linear regression model is presented as follows:
ܻ ൌ ߚ଴ ൅ σ௜ ߚ௜ ܺ௜ ൅ ߤ (2.5)
with Y dependent variable
ܺ௜ independent variable
ߚ଴ constant
ߚ௜ coefficient of the independent variable
ߤ error term
2.4 Empirical Results
In this section, the empirical findings are presented to characterize the rice value chain in
Myanmar. In Section 2.4.1, the profitability and the socio-demographic characteristics of
the actors are discussed. Section 2.4.2 gives insight in the constraints encountered at each
level of the rice value chain. In Section 2.4.3, the socio-demographic and constraint
information are related to the profitability of the actors in the supply chain to identify the
significant and most important constraints. Note that the presented empirical data applies
only for the Emata rice varieties.
2.4.1 Characteristics of the rice value chain in Myanmar
2.4.1.1 Profitability analysis
In this section, we present the empirical results related to the gross marketing margins and
the marketing profits along the rice value chain. Note that paddy is marketed in the value
chain from farmers through collectors to millers. Since the millers transform the paddy into
rice, rice is marketed from millers through wholesaler to retailers or exporters. In this
calculation, we account for the conversion of paddy into rice, which is estimated at 60%
(Zorya et al., 2016). We calculate the profit and margins of paddy and rice exploited for
domestic consumption (Table 2.1) and for export consumption (Table 2.2). This distinction
is only apparent in the final stage of the value chain and is based on the distribution channel,
i.e. whether the rice is distributed via retailers for domestic consumption or via exporters for
export consumption.
The rice value chain is characterized by a wide marketing margin, i.e. a high consumer price
for rice and a low farm gate price for paddy. The gross marketing margins and profits are
not equally distributed over the different actors. In general, rice millers obtain the highest
percentage of the profit share among the value chain actors, i.e. 50.9% for domestic
consumer chain and 59.8% for the international consumer chain, which is significantly2
higher compared to the other actors. This is due to the fact that rice millers purchase the
paddy cheap from the farmers at the harvest time when the paddy price is low and they add
value by transforming the paddy into rice. Note that this margin of the rice millers may be
biased upwards due to the fact that only variable costs are taken into account, whereas capital
investment costs are not. These capital investments are the larger for millers compared to
the other actors in the value chain.
2
The applied test is F-test (p-value < 0.001). A post-hoc test (p-value < 0.001) is performed
to analyse the pairwise differences between the actors.
46 Chapter 2
The farmers have the highest gross marketing margin, i.e. 44.1% for the domestic consumer
chain and 43.3% for the international consumer chain. In contrast, their profit share amounts
only 9.0% and 10.6%, respectively. Hence, although the farmers have the highest margin,
they still have a lower profit compared to the millers which is the result of their higher
production costs.
Table 2.1 Marketing profits and margins of the value chain for domestic consumption
Costs Revenues Profits Margins

(MMK/kg) (MMK/kg) (MMK/kg) (MMK/kg)
Actor Unit Unit % Unit % Total Unit % Total
Total Added Added Unit Price Marketing Marketing Marketing Marketing
Cost Cost Cost Profit Profit Margin Margin
Farmer 210 210 77.5 236 26 9.0 236 44.1
Primary collector 236 0 0.0 241 5 1.7 5 0.9
Operational constraints in the rice value chain
Miller 255 39 14.4 402 147 50.9 161 30.1

Wholesaler 413 11 4.1 448 35 12.1 46 8.6
Retailer 459 11 4.1 535 76 26.3 87 16.3
Total 271 100.00 289 100.0 535 100.0
Note: We assumed 1USD = 1350 MMK
Unit total cost of miller (255) = unit price of primary collector (241) - return from byproduct (25) + unit added cost (39)
with Unit Marketing Margin = Selling price per unit – Purchase price per unit
Unit Marketing Profit = Unit marketing margin – Total production/transformation/distribution cost per unit
% Total Marketing Profit = (Marketing profit per unit of each actor/Total marketing profit per unit of all actors) x100
% Total Marketing Margin = (Marketing margin per unit of each actor/Total marketing margin of all actors) x 100
47
48
Table 2.2 Marketing profits and margins of the value chain for export consumption
Costs Revenues Profits Margins

(MMK/kg) (MMK/kg) (MMK/kg) (MMK/kg)
Actor Unit Unit % Unit % Total Unit % Total
Total Added Added Unit Price Marketing Marketing Marketing Marketing
Cost Cost Cost Profit Profit Margin Margin
Farmer 210 210 64.8 236 26 10.6 236 43.3
Primary collector 236 0 0.0 241 5 2.3 5 0.9
Miller 255 39 12.0 402 147 59.8 161 29.5
Wholesaler 413 11 3.4 448 35 14.2 46 8.4
Exporter 512 64 19.8 545 33 13.4 97 17.8
Total 324 100.0 246 100.0 545 100.0
Unit total cost of miller (255) = unit price of primary collector (241) - return from byproduct (25) + unit added cost (39)
Chapter 2
2.4.1.2 Socio-demographic characteristics
The empirical results related to the socio-demographic characteristics of the respondents in

the value chain are presented in Table 2.3.
Table 2.3 Socio-demographic characteristics of the rice value chain actors
Para- Primary
Items Unit Farmer Miller Wholesaler Retailer Exporter
meters collector
Male 114(62.0) 19(10.3) 23(12.5) 5(2.7) 19(10.3) 4(2.2)
Gender Numbers
Female 16(51.5) 2(6.5) 2(6.5) 2(6.5) 9(29.0) 0(0.0)
Mean 51.1 41.6 50.1 46.7 49.9 43.0
Age Years Min. 27.0 25.0 30.0 41.0 30.0 35.0
Max. 85.0 60.0 66.0 62.0 72.0 50.0
Mean 4.0 4.0 4.4 4.0 3.6 4.0
Numbers
Family size Min. 2.0 1.0 2.0 2.0 2.0 3.0
Max. 8.0 7.0 8.0 6.0 6.0 6.0
Mean 6.6 9.3 11.0 12.3 9.9 15.0
Education Years Min. 2.0 5.0 5.0 6.0 4.0 15.0
Max. 15.0 15.0 15.0 15.0 18.0 15.0
Mean 27.1 10.8 12.8 13.0 13.6 13.0
Working
Years Min. 3.0 1.0 1.0 3.0 1.0 5.0
experience
Max. 54.0 30.0 33.0 24.0 50.0 26.0
Note: Figures in the parentheses represent percentage.
Gender - According to Table 3, there are a lot of more male actors involved in the
rice supply chain than female actors. However, analysis revealed that in the distribution
stages, grouping the wholesalers, the retailers and the exporters, significantly3 more female
actors are presented in the supply chain.
Age - The mean age of the actors ranges from 41.6 years to 50.1 years. Statistical
analysis revealed that the primary collectors are significantly4 younger than the other actors
but no other differences were noted.
3
We conducted a Chi-square test (p-value < 0.05).
4
The applied test is F-test (p-value < 0.05). A post-hoc test (p-value < 0.001) is performed
to analyze the pairwise differences between the actors.
50 Chapter 2
Family size - The mean number of family members equals around 4 for all actors in
the value chain and there are no significant differences between the different groups.
Education - The education of actors enhances the decision-making and the basic
communication abilities with any support service providers such as extension officers and
other stakeholders. The education is expressed in Table 2.3 by the number of schooling years
and ranges from 6.6 years for farmers (corresponding to the secondary education level) to
15 years for exporters (corresponding to the graduate level). The education level of farmers
is significantly5 lower compared to the other actors. In general, the further upstream in the
value chain and the more the involvement in the processing and marketing activities, the
higher the education level apart from the retailers.
Work experience - Farmers have the largest number of years of work experience
(27.1 years), whereas primary collectors have the smallest number of years (10.8 years). The
millers, wholesalers, retailers and exporters have around 13 years of work experience. The
work experience of farmers is significantly5 higher than those of other actors.
2.4.2. Constraints in the rice value chain
This section gives insight in the constraints faced by each actor along the rice value chain in
the study area. These constraints hinder the actors to upgrade the value chain and are
possibly imposed by external parties. The constraints are categorised into material input
constraints, production constraints, financial constraints and distribution and institutional
constraints.
2.4.2.1 Farmers
The farmers encounter many different types of constraints (cf. Figure 2.2).
5
The applied test is F-test (p-value < 0.001). A post-hoc test (p-value < 0.001) is
performed to analyze the pairwise differences between the actors.
Difficult access of agricultural and market information 56.9

Distribution and Institutional
Difficult transportation 57.0

constraints
Malpractices in scaling paddy 57.7
Limited access to machines 63.1
Product price fluctuation 68.5
Poor extension services 70.0

constraints
Financial
Inadequate credit 50.0
Lack of capital 60.8
Salinity 19.2
Lack of storage capacity 33.8
Lack of space for drying paddy 36.9

Production constraints
Drought 48.5
Poor soil 53.1
Flooding 79.2
Pests and disease infestation 80.0
Difficult access to labor 85.4
Uneven rain during production period 89.2

Material input
Poor input quality 46.9

constraints
Inadequate use of fertilizers 51.5
Seed impurity 63.8
0 10 20 30 40 50 60 70 80 90
Percentage
Figure 2.2 Operational constraints for farmers

A large part of the farmers respond that they face different material input constraints, i.e. a
seed impurity problem (63.8%), the incorrect use of fertilizers (51.5%) or the poor input
quality of fertilizers, pesticides, insecticides and chemicals (46.9%). In-depth interviews
learned that farmers have an insufficient know-how of the quality of these agrochemicals,
which is required to improve the productivity and the product quality. We identified nine
different production constraints. Among these constraints, five are weather-related
constraints such as uneven rain during the production period (89.2%), flooding (79.2%),
52 Chapter 2
drought (48.5%), salinity (19.2%) and pest and disease infestation (80%). Further, farmers
suffer from labor scarcity (85.4%), which increases the labor cost and the waste of crops.
Financial constraints hinder the upgrade of the farming process or product quality. 60.8%
and 50% of the farmers face a lack of capital and credit, respectively. Moreover, farmers
complain about revenue losses as a result of distribution constraints, i.e. fluctuations in the
paddy price (68.5%) and inappropriate scaling, weighing and deduction when selling their
goods (57.7%). More than 50% of the farmers identify transportation problems resulting
from a poor road infrastructure, especially in the rainy season. The institutional constraints
involve the difficult access for farmers to extension services (70%) and to new agricultural
technologies and market information (56.9%). 63.1% of the farmers are not able to invest in
agricultural machinery (soil preparation machines, high-technological seeders, inter-
cultivators for weeding, etc.) because of the lack of capital and insufficient support from
(non-)government organizations.
2.4.2.2 Primary collectors
Figure 2.3 shows that the number of constraints imposed on the primary collectors is limited.
Primary collectors would obtain a higher profit, if they have sufficient capital to buy paddy
at a low price, store and sell their paddy when the price is higher. However, 28.6% of the
primary collectors face a capital shortage and 14.3% have a limited access to credit. The
major distribution and institutional constraints are related to the road infrastructure (71.4%)
and the poor paddy quality (66.7%).
Weighing scale problem 9.5

Distribution and
Institutional
constraints
Storage and lack of market problem 19
Poor paddy quality 66.7
Road access problem 71.4

constraints
Financial
Limited access to credit 14.3
Capital shortage 28.6
0 10 20 30 40 50 60 70 80
Percentage
Figure 2.3 Operational constraints for primary collectors

2.4.2.3 Millers
Figure 2.4 reveals that millers face different types of constraints. First, the sample millers
face different production constraints in order to upgrade their productivity and the quality
of the rice produced. All millers encounter problems with the electricity supply. A large part
of the rice millers points out that their milling machines are outdated, which leads to frequent
machine breakdowns and the need for skillful mechanics to repair these machines. 52% of
the rice millers lack an improved polisher and color sorter to increase the rice quality. 48%
of the rice millers indicate that they do not have suitable storage facilities. Second, their
operations are restricted by financial constraints since most of the millers (72%) have a
limited access to working capital. Especially the small-scale rice millers cannot collect the
required amount of working capital. Third, as distribution constraints, the millers face a
poor road infrastructure and high transportation cost due to high fuel costs and road toll fees.
68% of the rice millers have the idea to export their rice to other countries directly but they
claim that their rice quality is too low for export. This is due to seed impurity, a high
proportion of broken rice and improper handling by the farmers.
Distribution
Financial Institutional
constraints constraints
High transportation cost 64.0

and
Low quality of rice for export 68.0
Limited credit 64.0
Limited access to working capital 72.0

Production constraints
Lack of improved milling machine 32.0
Lack of improved storage facilities 48.0
Lack of improved polisher and color sorter 52.0
Electricity problem 100.0
0 20 40 60 80 100
Percentage
Figure 2.4 Operational constraints of millers

54 Chapter 2
2.4.2.4 Wholesalers
The survey results in Figure 2.5 reveal that the wholesalers face financial, distribution and
institutional constraints. Wholesalers need more capital to run or expand their business.
However, they face a capital shortage due to the high interest rates, high tax rates and the
difficult access to loans, which creates deficiencies in the value chain. Moreover, they face
high transportation costs, they lack an adequate market infrastructure and market
information and suffer from a high competition.
14.3
Institutional constraints
Complex license procedure

Distribution and
Lack of information and high competition 42.9
Lack of market 42.9
High transportation cost 57.1

constraints
57.1
Financial
High tax rate
0 10 20 30 40 50 60
Percentage
Figure 2.5 Operational constraints of wholesalers

2.4.2.5 Retailers
Retailers encounter financial, distribution and institutional constraints (cf. Figure 2.6). Most
of the sampled retailers need more capital to expand their business but they are not able to
collect the required credit from third parties. They operate on small, daily markets where
they have to pay a fee and high taxes to sell their goods and suffer from a high competition
possibly with unlicensed retailers. Moreover, some of the retailers have to order the different
rice varieties from other regions depending on the preferences of the consumers and do not
have enough storage space. Other constraints are the poor road and a suitable market
infrastructure.
Poor market infrastructure 50.0

Distribution and
Institutional
constraints
Fregmented distribution system 53.6
Limited storage capacity 57.1
Too much competition with other retailers 57.1
Limited access to credit 46.4

constraints
Financial
High tax rate 71.4
0 10 20 30 40 50 60 70 80
Percentage
Figure 2.6 Operational constraints of retailers

2.4.2.6 Exporters
Figure 2.7 shows the constraints of rice exporters. Exporters need to process and sort rice to
reach the required quality standards. In this process, electricity or power interruption is a
major problem, which lengthens the processing time. Exporters encounter financial
constraints as they face a high interest rate when they borrow money from the banks. Some
of the exporters suggest the government should provide loans with a low interest rate as done
in foreign countries. The banks in Myanmar are outdated and have difficulties to execute
money transactions to other countries. In these transactions, the fluctuations in the exchange
rate is also a problem since they impact the rice commodity price. All exporters face high
logistic costs and transportation costs stemming from distribution and institutional
constraints. As a result of all these factors, rice exporters in Myanmar have difficulties to
compete with the exporters from other rice countries.
56 Chapter 2
High competition 25
Institutional constraints
Distribution and
Outdated banking system 25
High transportation cost 50
High logistics cost 100
Price fluctuation 100

s constraints
raint Financial
High interest rate 100
Exchange rate fluctuation 100

const
uctio
Prod
Electricity problem 50
n
0 20 40 60 80 100
Percentage
Figure 2.7 Operational constraints of exporters

2.4.3 The impact of operational constraints on the profitability
In this section, we identify the most important and significant operational constraints that
impact the profitability of the different actors in the value chain via a multiple regression
analysis. The sociodemographic characteristics of the respondents are included in this
analysis to increase the accuracy of the findings. The operational constraints and the gender
are modelled via binary response variables. The other variables (age, work experience,
education, family size) are modelled as integer variables. This analysis could not be
conducted for exporters because of the limited number of exporters in the region and for
primary collectors since they all have exactly the same profit per unit. In our analysis, only
the significant factors are mentioned.
2.4.3.1 Farmers
The results of the regression analysis of the farmer profitability are displayed in Table 2.4.
Constraints resulting from natural disasters (i.e. flooding, natural pests and diseases and
uneven rain during the production period) are observed to have the largest impact on the
profitability of farmers. Farmers who suffer from these natural disasters have a significant
lower profit. In addition, a correlation analysis reveals a significant negative impact of the
material and/or labor input constraints, i.e. seed impurity (p < 0.001), poor input quality (p
= 0.001), inadequate use of fertilizer (p = 0.035) and difficult access to labor availability (p
= 0.025) on the profit of farmers. The same is valid for different financial and distribution
and institutional constraints, i.e. the lack of capital (p = 0.026), product price fluctuation (p
= 0.009), difficult transportation (p < 0.001) and poor extension services (p = 0.011).
The analysis of the socio-demographic characteristics reveals that the age, the education
level and the work experience of the farmers show a significant relationship with the
profitability and may impact how farmers perceive some constraints. Younger farmers earn
more profit than older farmers since they accept easier the new or higher production
technologies to increase their productivity. The higher the level of education, the higher the
profit as higher educated farmers use their scarce resources more efficiently and effectively
(Duy, 2015; Khai and Yabe, 2011 and Linh, 2012) and are better able to adopt the higher
technologies in the rice production (Ghimire et al., 2015; Mariano et al., 2012). Further,
more experienced farmers earn a higher profit since these farmers have been able to optimize
their operations over the years.
Table 2.4 Estimated regression coefficients of factors influencing the profitability
of the farmers
Variables Coefficient t-value Significance

(Constant) 77.537 1.286 0.201ns
Gender of the actors (1 = Male, 0 = Female) 37.73 1.614 0.109 ns
Age of the actors (Years) -2.687 -3.063 0.003***
Family size (Number) -2.573 -0.464 0.644 ns
Education of the actors (Schooling years) 7.717 2.381 0.019**
Working experience (Years) 2.829 3.278 0.001***
Flooding (1 = Yes, 0 = No) -96.293 -5.093 0.000***
Uneven rain during the production period (1 = Yes, 0 = No) -40.667 -2.119 0.036**
Pests and diseases infestation (1 = Yes, 0 = No) -48.458 -2.159 0.033**
Difficult transportation (1 = Yes, 0 = No) -1.721 -0.079 0.937 ns
Poor Extension services (1 = Yes, 0 = No) -9.692 -0.432 0.667 ns
R 0.719
R Square 0.518
Adjusted R Square 0.477
F-value 12.77 0.000***
Note: *** = Significant at 1% level, ** = Significant at 5% level and ns = Non-significant
Multicollinearity problem is not encountered in the model as all predictors for the value chain actors have VIF of less than 5.
The overall model is statistically significant at the 1% level as indicated by the F-value 12.77.
58 Chapter 2
2.4.3.2 Millers
Table 2.5 displays the estimated coefficients of the factors that may impact the profit of rice
millers, resulting from the multiple regression analysis. Note that 84.2% of the variance in
the profit of millers is explained by the independent variables included in the regression
model, which indicates that the model is able to obtain an accurate profit prediction. The
operations of rice millers are negatively impacted especially by financial constraints and
distribution and institutional constraints. The high transportation costs have the largest
impact on the profit of rice millers (p = 0.002). Millers that obtain rice of lower quality are
not able to distribute rice to exporters, which leads to a lower profit (p = 0.061). The limited
access to working capital and credit impacts the profit (p = 0.047) since millers with a lack
of capital are not able to purchase new technology to improve their productivity. There is,
however, a significant and positive relationship with some sociodemographic factors such
as the number of schooling years (p = 0.001) and the work experience of rice millers (p =
0.055). Higher educated millers adopt easier modern milling methods leading to a higher
productivity and profit. In addition, more experienced millers are more skilled to lead their
operations and are able to attain a larger profit margin.
Table 2.5 Estimated regression coefficients of factors influencing the profitability

of the millers
(Constant) 118.462 3.912 0.001***
Gender of the actors (1 = Male, 0 = Female) 13.996 0.979 0.343 ns
Age of the actors (Years) -0.044 -0.114 0.911 ns
Family size (Number) 2.393 0.79 0.442 ns
Education of the actors (Schooling years) 4.214 4.376 0.001***
Working experience (Years) 1.129 2.081 0.055*
Capital shortage (1 = Yes, 0 = No) -16.796 -2.159 0.047**
Low quality of rice for export (1 = Yes, 0 = No) -16.119 -2.027 0.061*
Lack of improved rice huller and polisher (1 = Yes, 0 = No) -4.326 -0.631 0.538ns
High transportation cost (1 = Yes, 0 = No) -25.622 -3.652 0.002***
R 0.918
R Square 0.842
F-value 8.886 0.000***
Note: *** = Significant at 1% level, ** = Significant at 5 % level, * = Significant at 10 % level and ns = Non-significant
The overall model is statistically significant at 1% level as indicated by the F-value 8.886.
2.4.3.3 Wholesalers
Due to the small sample size, regression analysis was not applicable to identify the
constraints with a significant impact on the wholesalers’ profit. Instead, a correlation
analysis is applied. The wholesalers suffer from a limited access to working capital (p =
0.040) to expand their business and from the high transportation costs (p = 0.014).
2.4.3.4 Retailers
The results of the regression analysis to identify the most significant constraints of retailers
are displayed in Table 2.6. Note that the independent variables included explain 83.4% of
the variance and are thus able to predict the retailer profit in an accurate manner. The profit
of retailers is impacted by financial, distribution and institutional constraints. Especially, the
retailers that experience high taxes and other fees have a significantly lower profit (p =
0.030). Moreover, retailers obtain a lower profit when they face a severe competition (p =
60 Chapter 2
0.010). The further analysis of the socio-demographic factors shows that higher educated
and more experienced retailers are more competitive. The higher the level of education, the
higher the level of advanced knowledge to market rice leading to a higher profit (p = 0.037).
Retailers with more experience are more skilled and obtain a higher profit (p = 0.006).
Table 2. 6 Estimated regression coefficients of factors influencing the profitability

of the retailers

(Constant) 46.24 1.93 0.070*
Age of the actors (Years) 0.087 0.254 0.802ns
Gender of the actors (1 = Male, 0 = Female) -6.074 -1.044 0.310ns
Family size (Number) -0.231 -0.08 0.937ns
Education of the actors (Schooling years) 1.784 2.258 0.037**
Working experience (Years) 0.923 3.082 0.006***
Faced with poor infrastructure (1 = Yes, 0 = No) 2.832 0.479 0.637ns
Capital shortage (1 = Yes, 0 = No) -5.287 -0.911 0.374ns
High taxation and other fees (1 = Yes, 0 = No) -17.211 -2.357 0.030**
Too much competition with other retailers (1 = Yes, 0 = No) -19.925 -2.859 0.010***
R 0.913
R Square 0.834
F-value 10.071 0.000***
Note: *** = Significant at 1 % level, ** = Significant at 5% level, * = Significant at 10% level and ns = Non-significant
The overall model is statistically significant at the 1% level as indicated by the F-value 10.071.
2.5 Discussion
The rice value chain in the Ayeyarwaddy Region is characterized by a large number of steps
and operational constraints that hinder the profitability and the further development of the
rice value chain. The structure of the value chain in the region is similar to the rice value
chain in Cambodia (Kula et al., 2015). In Thailand, however, Maneechansook (2011)
revealed the presence of cooperatives of farmers and brokers, which operate on the national
and international market as intermediary parties. These actors improve the market access
and market knowledge and have increased the competitiveness of the rice industry of
Thailand as a result from the increased bargaining power at different stages of the value
chain. In the studied region, the gains are not distributed equally over the actors. Millers
obtain the largest profits while farmers obtain a profit, which is lower than most actors. The
study of Maneechansook (2011) came to similar conclusions for the rice industry in
Thailand. However, the profits are more balanced between the actors and are relatively
higher for farmers and intermediary parties.
The profit and the potential upgrade of the value chain is heavily determined by the
operational constraints imposed in the different stages of the rice value chain. In the
following, we will discuss the challenges associated with the constraints identified as most
important for each stage of the value chain and the constraints that are returning over
different stages. Figure 2.8 gives an overview of the challenges for the rice value chain in
Myanmar. In addition, we pinpoint the parties from the government, private sector,
development partners and civil society that are best placed to cope with these constraints.
Figure 2.8 Overview of the operational constraints in the rice value chain in the
study area
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2.5.1 The farmers and their inputs
The analysis of the operational constraints revealed that farmers, vital for the produced rice
quantity and quality, are a very vulnerable party in the chain as they are exposed to many
constraints. These constraints are in line with the literature (De Janvry and Sadoulet, 2005;
Reardon and Barret, 2000), which states that farmers in developing countries have a
competitive disadvantage because they have limited capital, use traditional techniques,
depend on family labor and lack contact with (international) market players.
Farmers in the Ayeyarwaddy Region are foremost impeded by natural disasters.

Unfavorable weather conditions (e.g. flooding, uneven rain) cannot be avoided. However,
in dialogue with the stakeholders, risk mitigation strategies should be developed, and
different actions can be undertaken in order to increase the yield of farmers. Public
awareness of the impact of climate conditions on the agricultural production systems
deserves priority consideration and mitigating technologies must be developed, which will
require increased public and private investment. Accurate weather forecasts are crucial for
farmers to organize their activities in a proactive manner. The Department of Agriculture
and the Department of Meteorology should educate the farmers via extension services how
to effectively use weather information for their agricultural activities and how to deal with
adverse climate conditions. Best practices such as switching cultivating time, using flood
resistant rice varieties, etc. should be widespread among the farmers in the region. In
addition, the government and the private sectors should offer new financial climate crop
insurance mechanisms to protect the farmers.
The second major type of constraints is related to the input materials. Seeds, agrochemicals,
etc. significantly impact the productivity and the rice quality, which is identified in this and
later stages of the chain as a restrictive factor to upgrade the value chain and increase the
profit. The availability of good-quality and pure seeds is essential to increase the yield and
the quality of the rice production and to become a significant exporter in the global rice
market. The seeds used by most of the farmers are impure because they produce the seeds
on their own farms using traditional methods. This finding is in line with the study of Wong
and Wai (2013). As a response, the functioning of the (state) seed production companies
should be revised such that all farmers have access to high-quality seeds at the least possible
cost. Other improvements can be realized via better regulating the price and quality of
agrochemicals such as fertilizers, pesticides and herbicides. Nowadays, very expensive,
unregistered and/or banned agrochemicals enter the input market in Myanmar, which is
confirmed by Wong and Wai (2013) and similar to the findings of Rong (2013) in Cambodia.
Therefore, the government should warrant that the Fertilizer Law and the Pesticide Law are
respected in a stricter sense. The entry of agrochemical products into the market should be
regulated and registered to ensure the quality standards. In addition, farmers should be
educated via extension services to have a better knowledge about the quality of
agrochemicals and its proper utilization.
The crop cultivation is further hindered by labor scarcity and traditional farming activities,
which may be solved via the promotion and adoption of farm mechanization for preparation,
cultivation and post-harvest activities. Therefore, the government should develop a farm
mechanization and cultivation program in cooperation with private institutions and make
several interventions such as the provision of the appropriate (public) infrastructure ready
for mechanization, the knowledge transfer to learn farmers how to adapt their farm and
farming techniques and the acquisition of farm machinery by farmers via low interest loans.
Most of these constraints can only be removed if more and better agricultural extension
services are offered to farmers, which is confirmed by the studies of Rong (2013) and Wong
and Wai (2013). The main responsible institution is MOALI, which should cooperate with
non-government organizations (NGOs) and private agrochemical companies for delivering
extension education programs to farmers in a more efficient manner. The extension system
needs to be reformed, i.e. the mobility of extension officers should be increased, the links
between farmers, researchers and extension staff should be improved and farmers should be
encouraged to learn the latest technologies and new skills required for the new global
agricultural era.
2.5.2 The millers and their inputs
The millers take a prominent place in the rice value chain as they obtain the largest profit
share. The operational constraints imposed on the operations of millers have in general a
smaller impact on their profit compared to the farmers. However, in order to increase the
competitiveness of the rice value chain different constraints should be facilitated. In general,
the infrastructure of the rice millers is insufficient and outdated. The frequent power outages
during the milling process is a main constraint for the millers and hinders an increase of the
productivity. The storage facilities are insufficient to properly store large amounts of rice.
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Many millers use outdated machines to process the rice leading to an inferior rice quality,
which is also the case in Cambodia (Rong, 2013). There is lack of a standard weighing
system that is fair for all stakeholders and would smoothen the rice value chain. Major
investments are required to achieve a higher productivity and rice quality, suitable for
export. The government needs to renew the power infrastructure. Millers, however, are not
able to invest in storage facilities and high-quality modern milling machines due to financial
constraints, i.e. capital shortage and high interest rates for loans. Moreover, the paddy
delivered by the farmers is often of lower quality because of inappropriate cultivation and
post-harvest drying practices of farmers. As a result, there is a high percentage of rice broken
after the milling process strengthened by the outdated milling machines (Rong, 2013; Wong
and Wai, 2013).
2.5.3 The wholesalers and retailers
The wholesalers and retailers carry out an intermediary role in the supply chain, but are
confined. The tax payments related to the business license, marketing license, municipal tax
etc. are high for the actors given their profit. As a result, many unlicensed retailers operate
on the market creating a more severe competition. Further, the market information is very
fragmented with many different companies because of the lack of horizontal and vertical
cooperation in the value chain. The market price information from the nearest market,
supply/demand situation from focal point, and policy environment are important factors in
the wholesaler’s decision-making process. Therefore, intermediary parties should centralize
the correct and real-time market information in order to improve the supply chain efficiently.
2.5.4 The exporters and their inputs
Exporters operate on the international market where a substantial increase in revenues and
value can be realized similar to neighboring ASEAN countries. However, several
operational constraints hinder this upgrade and the increase of the competitiveness of
Myanmar.
The yield and low quality of rice produced is the main constraint on the growth as both are
not up to standard. Myanmar has an increasing demand on the international market for a rich
diversity of traditional rice varieties, which have a high branding and marketing potential.
As discussed, all stakeholders in the chain should cooperate and have their responsibility to
achieve a higher productivity and quality standard of rice. Moreover, exporters face different
financial constraints in their international transactions, i.e. difficult international money
transfers, a higher interest rate in Myanmar compared to international banks, exchange rate
fluctuations cause price fluctuations in the entire supply chain and an unstable market
structure. Therefore, the government should reform their activities in cooperation with the
bank sector and develop an effective monetary policy.
2.5.5 The entire supply chain
A major issue to upgrade the value chain is the lack of financial means, i.e. credit or working
capital, experienced by all actors in the supply chain. Farmers need affordable paddy loans
to prepare the land and buy input materials, which is mainly the responsibility of Myanmar
Agricultural Development Bank (MADB). Farmers, millers and distributors (wholesalers,
retailers and exporters) need all low interest investment credits to modernize and expand
their operations and infrastructure such that the production and rice quality can be increased.
Credits should be supported by banks in cooperation with government organizations and
interested private partners. Moreover, the different actors in the supply chain, especially
those having a distribution role in the chain, suffer from difficult transportation, high
transportation and logistics costs as a result of poor road access and high fuel costs. For that
purpose, the government should revise and update the road infrastructure in cooperation with
the private sector in order to improve its reliability and minimize the transportation costs.
2.6 Conclusion and Recommendations
The value chain of the rice supply chain in the Ayeyarwaddy Region of Myanmar is
structured in an inefficient manner, characterized by a large number of actors who face a
large number of constraints. The gross marketing margin across the global value chain is
very wide and is not equally distributed over the different actors. Not all actors receive a
reasonable profit margin. The rice miller is by far the most profitable actor whereas the
farmers are the most vulnerable actors in the value chain given their moderate profit margin
and the large number of constraints imposed. Education and experience of the actors are
positively and significantly related to their profitability. The actors suffer especially from
material input constraints, production constraints, financial constraints and distributional
and institutional constraints. All these constraints have a significant and negative impact on
66 Chapter 2
the profitability of the actors and hinder the further development of the value chain. The
described constraints highlight the array of key issues that must be resolved to upgrade the
rice value chain. However, priorities should be set to accomplish a feasible and gradual
progress of the value chain.
First of all, the stakeholders should be encouraged to undertake different actions to improve
the quality of rice. Therefore, the government and private partners are responsible to secure
the availability of high-quality production inputs (seeds, fertilizers, chemicals). The
government should strictly control these inputs. In addition, farmers should be encouraged
to have a better knowledge of cultivation and post-harvesting techniques, climate risk
mitigation strategies and new technologies via more efficient extension services. The
educational status and experiences of the actors enhances the decision making and the basic
communication abilities with any support service providers such as extension officers and
other stakeholders in the business. The government needs to invest in this extension program
by training the skills of the extension staff and providing sufficient logistic support.
Simultaneously, farmers and other roles in the value chain should organize themselves in
cooperatives in order to increase the bargaining power on the national and international
market, similar to other ASEAN countries. In this way, price fluctuations will be less
volatile, more accurate market information can be gathered and a better market orientation
is obtained, which is essential for the effective working of the value chain.
Second, investments in the different stages are needed as the rice value chain in this study
area is still very traditional. Therefore, the actors need sufficient working capital, which may
be increased via previous actions, or should have the possibility to obtain low interest loans
via banks, private parties or the government. In this way, farmers and millers may implement
the mechanization of their operations to increase the rice production significantly and further
improve the rice quality. These loans will also allow distributors to expand their business.
Third, the government in collaboration with the private sector needs to invest in the existing
road, power and market infrastructure. The development of the road network will increase
the access to the markets and avoid inefficiencies in transport and logistics. This will
decrease the (transportation) costs and increase the market competitiveness.
Future research should give more insights in order to further develop the rice value chain of
Myanmar. A benchmark of the efficient practices of actors can enhance the productivity,
profit and the amount of rice marketed of the entire value chain. Therefore, the efficiency of
the actors should be evaluated and compared. Best practices should be widespread via
extension services. Moreover, the productivity and product quality of the agricultural value
chain is heavily affected by uncertainties, which even may cancel out the intended effect of
government or private policies. Therefore, the main sources of uncertainty encountered by
the different parties in the rice supply chain should be identified.
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2.A Appendix
Visited
townships
Study area
townships
Source: Department of Agriculture (DOA), 2017
Table 2.A.1 Sampled respondents along the rice value chain in the study area
Total Sampled
Actors Townships
Population respondents
Myanaung (Laharpauk village) 399 30
Myanaung (Htanthonepin village) 327 30
Farmers
Kyangin (Kyantaw village) 663 35
Kyangin (Sonehele village) 630 35
Myanaung 105 15
Collectors
Kyangin 60 6
Myanaung 132 18
Millers
Kyangin 80 7
Myanaung 34 4
Wholesalers
Kyangin 20 3
Myanaung 103 20
Retailers
Kyangin 61 8
Rice Exporters Yangon 36 4
Total respondents 215
Source: DOA (2017) and MRF (2017)
The Impact of Uncertainty on the Performance of the
3
Rice Supply Chain in the Ayeyarwaddy Region,
Myanmar
In this paper, we study the relationship between uncertainty and performance in the rice
supply chain in the Ayeyarwaddy Region, Myanmar. The sources of uncertainty in agri-food
supply chains are different from the general supply chain due to the perishability of products,
variable harvest and production yields, and the vast impact of climate conditions on
upstream and downstream activities. Efficiency is one of the important performance
indicators in both supply chain and agribusiness. In this regard, the objectives of the study
are to identify the different sources of uncertainty perceived by the different actors in the
rice supply chain in the Ayeyarwaddy Region, to measure the rice supply chain efficiency
and to study the impact of uncertainty on the supply chain efficiency. The data of 215
respondents is collected from the Ayeyarwaddy Region by using a purposive and stratified
random sampling method and we analyse this data via descriptive statistics, an exploratory
factor analysis, Data Envelopment Analysis (DEA) and Tobit regression analysis. The
results reveal that among seven major sources of uncertainty, the climate uncertainty is the
most important factor followed by uncertainty in planning and control. The analysis of the
technical, pure and scale efficiency show a very low performance of the rice supply chain in
the Ayeyarwaddy Region resulting from the fact that most of the rice businesses are too
small and need to expand their operating size. We found that this global rice supply chain
performance is significantly impacted by the planning and control uncertainty and the
climate uncertainty. Therefore, capturing and sharing information in the supply chain is
crucial to operational control and planning because a higher quality of information input will
increase the quality of managerial decision making. Moreover, public awareness of the
impact of climate conditions on the agricultural production systems deserves priority
consideration. Mitigating technologies must be developed to reduce the impact of the
climate adverse conditions, which will require increased public and private investment.
74 Chapter 3
3.1 Introduction
population. Agriculture is essential to the domestic economy of Myanmar. In 2014-2015,
22.1 % of GDP resulted from agricultural activities (MOAI, 2015a). More than half of the
population is directly employed in this sector. The agricultural sector is considered as one
of the major driving forces for economic growth and the heart for improving of social
wellbeing (World Bank, 2014). Moreover, rice contributes export earnings to the economy
of the country and provides food security and poverty reduction in Myanmar. In 2016, the
paddy production in Myanmar was ranked 7th of the paddy producing countries in the world
(World Rice Production, 2017). Rice is the country’s most important agricultural product by
far, accounting for about half of all cultivated land. In 2015-16, the sown areas and
production of paddy in Myanmar is 7.21 million hectares and 27.16 million metric tons,
respectively (MOALI, 2016). Most of the household income is earned from rice farming and
related activities, especially in major rice growing area of Ayeyarwaddy, Bago, and Sagaing
Regions in Myanmar. The Ayeyarwaddy Region is the main rice growing area in Myanmar
and occupies 25% of Myanmar’s rice acreage and the use of farm mechanization in the
region is very low with 251 tractors and 83 combined harvesters (AMD, 2015).
In most developing countries, governments, development agencies and private sectors

recognize the role of poverty reduction and food security and, as a result, are increasingly
investing in agricultural value chains, providing inputs, financing and other services that
support their development. Over the past five decades, food availability has been greatly
improved through productivity gains in the agricultural sector (Baldos and Hertel, 2014).
However, the agricultural sector is currently under increasing pressure, i.e. (i) to be
sustainably run, which implies that the sector should be able to meet the needs of the present
without compromising the ability of future generations to achieve their own ends, and (ii) to
provide food, energy and industrial resources to satisfy the demand of a rising world
population (Yakovleva et al., 2012). At the same time, there is an increasing awareness that
uncertainty impacts the sustainability of a value chain and the performance of the entire
supply chain and of each of the involved actors. In an agricultural supply chain, uncertainty
can emerge either from an internal or an external source in the supply chain. Some sources
of uncertainty are different compared to general supply chains, i.e., the perishability of
Impact of uncertainty on the rice supply chain performance 75
products, variable harvest and production yields and the huge impact of climate and
environmental conditions on upstream and downstream activities (van der Vorst and
Beulens, 2002; Wijnands and Ondersteijn, 2006). Moreover, the operational complexity
resulting from uncertainty related to the high variability in consumer demand, production
and supply lead times, varying quantity and quality standards of products, trade and buffer
stock traceability, etc. expose the chain to severe disruptions (van der Vorst et al., 2000;
Dong, 2006; Taylor and Fearne, 2006).
In Myanmar, in particular, far lower profits are gained from producing rice compared to
other countries in Asia (Zorya, 2016). The agricultural sector has suffered persistently from
insufficient investment in technology transfer, research and extension services,
infrastructure development, value chain upgrading and marketing (IFAD, 2017). The
Ministry of Agriculture and Irrigation has mapped the principal challenges and strategic
objectives in order to further develop and upgrade the rice value chain via investments
(MOAI, 2015b). According to these challenges and objectives, the rice value chain in
Myanmar is not well integrated and efficiency should be improved to increase the market
value of rice production and the rice food quality via well-focused investments. However,
the Ministry of Agriculture and Irrigation of Myanmar has expressed its concerns regarding
the impact of uncertainty in particular related to the climate, the price volatility and arising
from the unsatisfactory integration of the value chain over the different actors in the chain
from rice production to trading and marketing (MOAI, 2015b).
In this paper, we study in an explorative manner the sources of uncertainty that impact the
rice supply chain performance in the Ayeyarwaddy Region in Myanmar. In this way, we
learn to understand the challenges the supply chain in the region is dealing with and we can
establish priorities. This helps to identify solutions to improve the supply chain operations.
To that purpose, we exploit a three-step solution methodology. In a first step, we measure
the environmental uncertainty perceived by the various actors in the supply chain. We
carried out a questionnaire survey and a statistical analysis to identify the main sources of
uncertainty encountered by the different parties in the rice supply chain, i.e., farmers,
primary collectors, millers, wholesalers, retailers and exporters. In a second step, we
measure the efficiency performance of the different sample respondents per actor category
in the rice supply chain via Data Envelopment Analysis (DEA). In a third step, regression
76 Chapter 3
analysis is applied to identify the significant sources of uncertainty that impact the
performance of the supply chain. Iets zeggen over resultaten?
The remainder of the paper is organized as follows. Section 3.2 reviews the relevant
literature on the uncertainty along the agricultural supply chain, the relevant indicators to
measure the supply chain performance and in particular the DEA approach, which is used
in this study to benchmark the supply chain efficiency. In Section 3.3, the methodology is
described to identify the main sources of uncertainty that impact the supply chain efficiency.
The findings of our study are revealed in Section 3.4. First, we present the sources of
uncertainty as perceived by the actors in the rice supply chain. Second, we measure the
performance of the rice supply chain via DEA. Third, we study the impact of the uncertainty
on the supply chain efficiency. A conclusion and some policy recommendation are
summarized in Section 3.5.
3.2.1 The Rice Value Chain in Myanmar
Agricultural value chains involve a sequence of value-adding activities to bring products

from the farm to the final consumer. The activities in a value chain link together the inputs
from providers, farmers, processors, retailers and consumers and create relationships that
enable the effective functioning of the value chain (Baldos and Hertel, 2014). The
agricultural supply chain includes all functions such as the input provision, production, post-
harvest, storage, processing, marketing and distribution, food service and consumption for
a given agricultural product (Jaffee et al., 2010).
The rice value chain of Myanmar has been studied by Wong and Wai (2013). The structure
of the rice value chain in the study area is shown in Figure 1. The farmers buy inputs such
as agrochemicals, machinery, seeds, credit, etc. to farmers for the paddy production from
the input suppliers and grow and sell paddy. Primary collectors buy the paddy from the
farmers with the financial support of millers. The millers buy and mill the paddy to rice.
They carry out different activities that add value such as transportation, processing, grading
and packing. The millers store and distribute rice mainly to wholesalers. Wholesalers deliver
rice on their turn to retailers in order to supply the domestic consumers or to exporters who
supply consumers in foreign countries.
Figure 3.1 Structure of the rice value chain in the study area
A study issued by the Ministry of Agriculture and Irrigation (MAOI, 2015b) posed that the
rice value chain in Myanmar is not well integrated and its efficiency should be improved.
The supply chain is fragmented as there are too many different parties in the different stages
and too many stages ranging from between the farmer and the end consumer. Compared to
the neighboring countries Thailand and Vietnam, the rice value chain in Myanmar is
characterized by a less efficient input supply system, a lower farm productivity and
profitability, higher milling and export costs and a lower quality of exported rice (Zorya et
al., 2016). As a result, the rice sector is less competitive on the international market.
3.2.2 Uncertainty in supply chains
Many researchers have investigated uncertainty as an important factor affecting supply chain
implementation and performance (Bhatnagar and Sohal, 2005). According to Miller (1993),
uncertainty refers to the unpredictability of environmental or organizational variables that
have an impact on corporate performance. Carter et al. (2015) stated that supply chain
uncertainty can occur at multiple levels, including the level of individual decision makers,
functional departments, organizations and, ultimately, supply chains. Uncertainty
propagates throughout the network and leads to inefficient processing and non-value adding
activities (Patil, 2012). Throughout the supply chain, agents are faced with different sources
of uncertainty which may be exogenous, endogenous or both (Chaudhuri et al., 2014).
According to Miller (1992), Davis (1993), Prater (2005) and Lee (2002), supply chain
uncertainty has been widely recognized as an issue in modern supply chain and logistics.
78 Chapter 3
Uncertainties in a supply chain may cause delays, lead to a bottleneck and may hinder the
performance of the entire supply chain. Literature stated that it is important to consider
uncertainties to achieve operational excellence and smooth operations in every link of the
supply chain since uncertainty cannot be avoided (Wang et al., 2014). Uncertainty factors in
the supply chain involve supply uncertainty (Davis, 1993, Towill et al., 2002; van der Vorst
and Beulens, 2002; Sawhney, 2006; Thongrattana and Jie, 2009; Patil, 2012 and Chaudhuri
et al., 2014), demand uncertainty (Lee et al., 1997; Lee, 2002; van der Vorst and Beulens,
2002; Sun et al., 2009; Thongrattana and Jie, 2009 and Patil, 2012), process uncertainty
(Ettile and Reza, 1992; Miller, 1992; Davis, 1993; Koh et al., 2002; Towill et al., 2002; van
der Vorst and Beulens, 2002; Sawhney, 2006; Thongrattana and Jie, 2009 and Patil, 2012),
control and planning uncertainty (Wilding, 1998; Geary et al., 2002; Towill et al., 2002;
van der Vorst and Beulens, 2002; Childerhouse and Towill, 2004; Prater, 2005 and
Thongrattana and Jie, 2009), competitor uncertainty (Ettile and Reza, 1992; Miller, 1992;
Davis, 1993; van der Vorst and Beulens, 2002; Bhatnagar and Sohal, 2005; Paulraj and
Chen, 2007 and Thongrattana and Jie, 2009), government uncertainty (Miller, 1992; van der
Vorst and Beulens, 2002; Christopher and Peck, 2004 and Thongrattana and Jie, 2009) and
climate uncertainty (Miller, 1992; Christopher and Peck, 2004; Kleindorfer and Saad, 2005
and Thongrattana and Jie, 2009). Note that these factors are perceived differently across
industries and countries.
3.2.3 Performance measurement in supply chains
Neely et al. (1991) defined performance measurement as the process of measuring the
efficiency and effectiveness of an action. According to Aramyan et al. (2006); Aramyan et
al. (2009); Chowarut (2009) and Shen et al. (2013), performance measurement has gained
attention in the agri-food chains and various performance measurements have been used. In
marketing and supply chain management literature, supply chain performance is measured
via different methods such as Activity-Based Costing, Balanced Scorecard, Economic Value
Added, Multi-criteria Analysis, Life-cycle Analysis, Data Envelopment Analysis and
Supply Chain Operations Reference model. Among these methods, Data Envelopment
Analysis (DEA) is a powerful analysis model to calculate the efficiency score of the supply
chain performance in various sectors. DEA evaluates the involved business units with
multiple inputs and outputs and takes the qualitative and quantitative measures into account
(Shafiee et al., 2014). DEA model was used to measure the supply chain performance in
various studies (Liu et al., 2000; Easton et al., 2002; Talluri and Barker, 2002; Biehl et al.,
2006; Min and Joo, 2006; Reiner and Hofmann, 2006; Li and Dai, 2009; Saranga and Moser,
2010; Jalalvand et al., 2011; Liang et al., 2011; Sanei and Mamizadeh-Chatghayeh, 2013;
Shafiee et al., 2014; Rezaei and Adressi, 2015 and Shewell and Migiro, 2016) in different
application areas, e.g. the shipping industry (Pattanamekar et al., 2011), the pharmaceutical
industry (Mishra, 2012), the dairy industry (Mor and Sharma, 2012) and the vegetable food
industry (Lu, 2006).
Uncertainty has a major impact on the performance of the supply chain and managerial
decisions. van der Vorst and Beulens (2002) pointed out that the literature recognizes that
uncertainties in supply, process and demand have a major impact on the manufacturing
function. Thongrattana and Robertson (2008) investigated that periodic rice production
losses due to a drought year may create significant problems such as inventory level
fluctuations, stock-outs and unfulfilled customer demand. The findings of Thongrattana and
Jie (2009) showed that demand and climate uncertainty lead to a significant decrease in
efficiency of the rice milling process in Thailand. The empirical model of Matanda and
Schroder (2002) measured uncertainty by means of competitive intensity and market
turbulence and pointed out that these uncertainty measurements had a direct negative impact
on the performance. The relationship between uncertainty based on subjective perceptions
by the involved decision makers and performance has been widely studied in research areas
such as management accounting but also in supply chain management (e.g. Buchko, 1994;
Flynn et al., 2016; Jusoh, 2010; Thongrattana PT and Robertson, 2008; Wong et al., 2011).
3.3 Research Methodology
In this study, we aim to identify the major sources of uncertainty that impact the performance
of the rice supply chain. In this way, directions can be determined to improve the efficiency,
i.e. to utilize the scarce resources more efficiently and to adopt the right scale of operations.
Efficient farm practices can enhance productivity, the farmers’ profit and the amount of rice
marketed, which improve the competitiveness of Myanmar’s rice sector (MOAI, 2015b;
Saysay, 2016). To that purpose, we have employed a three-step methodology for which the
specific techniques used in each step are explained in the subsections below, i.e.
80 Chapter 3
Step 1: Identify the sources of uncertainty perceived by the different actors in the rice supply
chain
Different organizational theorists (e.g. Duncan (1972); Hofer and Schendel (1978); Ansoff
(1979); Miles (1982); Rhyne (1985)) established the link between the perceived
environmental uncertainty and performance. Organizations must adapt to their environment
if they are to remain viable. One of the central issues in this process from the perspective of
the decision-making units is coping with uncertainty resulting from environmental factors.
The environmental uncertainty and its associated factors are defined in terms of perception
of the respondents given the role of individuals in the decision-making process. The research
of Duncan (1972) showed that although there are difficulties in getting respondents to
verbalize their views of uncertainty, there is a remarkable degree of similarity in the way in
which the concept was ultimately defined. Miles et al. (1974) also theorize that managers
respond primarily to what they perceive. Strategic action is dependent upon perceptions and
interpretations of the environment. In this research, we identify the components of this
environmental uncertainty for the entire rice supply chain in Myanmar and identify different
degrees of uncertainty as perceived by individuals in decision-making, i.e. the different
actors in the rice supply chain, taking their actor role into account. This study is based on
the development of a questionnaire and conducting this survey via in-depth and key
informant interviews (cf. Section 3.3.1). The results for this questionnaire are checked for
its validity and reliability and a factor analysis is applied for measuring the sources of
uncertainty and a principal component analysis is applied to reduce the number of variables
(cf. Section 3.3.2).
Step 2: Measure the rice supply chain efficiency to assess the supply chain performance
Based on his perception, the decision maker will take the relevant strategic and operational
decisions, i.e. he will determine the mix of inputs to maximize his output level and his scale
of operations. Hence, we can conclude that from the perception of uncertainty, the decision
maker within a company can change the level of efficiency. In order to relate the perceived
uncertainty with the efficiency level of the actors, we measure the efficiency by making use
of Data Envelopment Analysis (DEA) (Charnes et al., 1978) (cf. Section 3.3.3). Using this
technique, we can measure the overall technical efficiency, pure technical efficiency and
scale efficiency for all actors in the supply chain, i.e. farmers (production stage), millers
(processing stage) and distributors such as wholesalers, retailers and exporters (distribution
stage). The marketed amount of paddy is considered as the output variable. The production,
financial, transportation and storage costs are considered as the input variables in the input-
oriented DEA model.
Step 3: Study the impact of uncertainty on supply chain efficiency to understand the
challenges of the supply chain
We relate the outcomes of the first two steps in order to identify the most important types of
uncertainty, i.e. these that impact the performance of the supply chain significantly. This
analysis is performed by a Tobit regression since the dependent variable, i.e. the efficiency
of individual actors, is a latent variable and is bounded between 0 and 1. These efficiency
scores are censored, and the differences are small such that the standard regression technique
provides a biased estimate.
Both primary and secondary data are collected for understanding the uncertainty in the rice
supply chain in the Kyangin and Myanaung townships in the Ayeyarwaddy Region. A
purposive and stratified random sampling method is used for primary data collection (Kong,
2015). In this explorative study, the stratification of the sample is solely based upon the role
of the respondents in the supply chain in order to discern any differences in the types of
uncertainty and its impact between different roles in the supply chain. The sample size is
calculated for each stratum in direct proportion6 to the size of the stratum compared to the
(finite) population (cf. Appendix Table 3.A.1) (Judez, 2006). As a result, a sample of 130
farmers, 21 primary collectors, 25 millers, 7 wholesalers, 28 retailers and 4 exporters is
selected for conducting the face-to-face interviews. A representative sample for each stratum
has been constructed. Appendix Table 3.A.2 shows the socio-economic and demographic
characteristics of the respondents, i.e. gender, age, family size, education, working
experience, yield, marketed amount of paddy or rice and farm size. For example, 34.62% of
the farms have a small size (≤ 2.02 ha), 37.69% have a medium size (> 2.02 ha and ≤ 4.05
ha) and 27.69% have a large size (> 4.05 ha).
ே
6
This is based on the equation of Yamane (1967), i.e. ݊ ൌ ଵାேሺ௘ మ where N is the
ሻ
82 Chapter 3
In-depth and key informant interviews are used to interview sample respondents in order to
collect primary data (Umberger, 2014). The questionnaire uses a 7-point Likert scale with
end points ‘1 - strongly disagree’ and ‘7 - strongly agree’ to measure the relevant sources of
uncertainty. The questionnaire is constructed based on the literature (cf. Table 3.1) and
includes different sources of uncertainty with respect to the supply, demand, process,
planning and control, competitor, government policy and climate. The questionnaire items
are presented in Table 3.1. Moreover, we collect production, marketing and financial data
to evaluate the supply chain performance. The secondary data originates from various
published sources, from government and other organizations and will be revealed when
relevant in discussing the results.
Table 3.1 Questionnaire items of uncertainty factors
Aspects of
Uncertainty Questions to the
Concept measure- Code References
Factors actors
ment
Supply uncertainty is related Rice quantity from (van der
to the unpredictability of the Quantity SU1 rice producers is Vorst,
delivery of raw or packed unpredictable. 2000; Li,
materials in time, in the right Rice quality from 2002;
amount or according to the Quality SU2 rice producers is Paulraj &
Supply
right specifications. In this unpredictable. Chen,
study, paddy is supplied from 2007;
Rice producers’
farmers to rice millers, and Thongratta
Time SU3 delivery time is
milled rice from millers to na and Jie,
unpredictable.
distributors and so on. 2009)
Demand uncertainty is The volume of
related to uncertainty about Quantity DU1 customer demand is (Li 2002;
customers’ requirements as a difficult to predict. Paulraj &
combination of Customers’ rice Chen
Demand unpredictability of demand Quality DU2 preference changes 2007;
and product variety (van der over the year. Thongratta
Vorst, 2000). Both the The lead time of na and Jie,
international and domestic Time DU3 customer order is 2009)
demand are considered. unpredictable.
Process uncertainty is related Yield of production
to the production system, or processing (e.g.,
Quantity PU1
including the uncertain producing, milling,
ability to produce adequately packing) can vary.
(van der
a particular product or the The quality of rice
Vorst,
uncertain availability of after processing
Quality PU2 2000;
Process sufficient raw materials (van (e.g., milled, stored)
Thongratta
der Vorst, 2000). In this can change.
na and Jie,
study, the processor refers to
The throughput 2009)
any procedure carried out by
time of rice
supply chain members, such Time PU3
processing can
as producing, milling, quality
vary.
control and packing process.
Planning and control Information about (van der

Planning and
uncertainty relates to Quantity PCU1 stock level of rice Vorst,
Control
incomplete information and rice production 2000;
84 Chapter 3
about production, inventory capacity is Thongratta

and customer demand (van inaccurate. na and Jie,
de Vorst, 2000). 2009)
Information about
stock level of rice
PCU2 and rice production
capacity is not on
time.
Time
Information
concerning changes
PCU3 to customer orders
cannot be
distributed on time.
Competitor uncertainty Competitors’
refers to unpredictable Action CU1 actions are
actions by competitors in the unpredictable.
competitive markets. This is
related to reducing their Competition in the
Domestic (Li, 2002;
product price, the time to CU2 domestic market is
market Thongratta
Competitor market or the increasing intensifying.
na and Jie,
product quality and variety
2009)
(Li, 2002). Uncertainty about
Competition is
competitors’ actions in the Internation
CU3 intensified in
Myanmar rice industry is al market
different countries.
considered in both domestic
and international markets.
Government
policies in rice
Government policy
Rice trading (e.g., FTA, (Javidan,
uncertainty includes the GU1
production tax) directly 1984;
unpredictable set of laws,
affecting your firm Badri et.
regulations, administrative
are unpredictable. al., 2000;
Government procedures and policies
The grantee price Bran &
Policy formally sanctioned by the
Rice from government Bos, 2005;
government, which can GU2
trading regulation is Thongratta
affect an organizations’
unpredictable. na and Jie,
profitability (Badri, Davis
New 2009)
and Davis, 2000). New government
govern- GU3
regulations are
ment
introduced
unexpectedly.
Drought
occurrences
CLU1 affecting firms are
unpredictable over
Climate uncertainty is
Drought the year.
referred to the unpredictable
The duration of
occurrence of serious
drought is
weather events affecting CLU2 (Curz et
unpredictable over
agricultural lands. These al., 2007;
the year.
Climate phenomena can lead to rice Thongratta
Flooding
supply shocks, delays in the na and Jie,
occurrences
time of arrival of paddy to 2009)
CLU3 affecting firms are
market or transportation
unpredictable each
disruptions (Cruz et al.
Flooding year.
2007).
The duration of
flooding is
CLU4
unpredictable over
the years.
Source: Own compilation based on Thongrattana and Jie (2009)
3.3.2 Research method: Instrument development and factor analysis
This study measures the uncertainty perceived by the different actors in the supply chain and
uses a pilot survey to question the farmers. Some previous studies in the rice or food industry
(Thongrattana and Jie, 2009; van der Vorst and Beulens, 2002; Bran and Bos, 2005) used
the same pilot study and the Q-sort method to check the validity and reliability. For the
statistical analysis, non-parametric statistics are applied using SPSS software because of the
7-point Likert scale used for each item and each factor is composed out of a number of items
leading to quasi-normal distributed data (Lewis and Harvey, 2001). Descriptive statistics,
inferential statistics and factor analysis are applied to investigate the sources of uncertainty.
Scale reliability and scale validity tests are conducted before applying factor analysis
(Thongrattana and Jie, 2009; van der Vorst and Beulens, 2002; Bran and Bos, 2005). Factor
analysis helps to reduce the dimensionality operating on the notion that measurable and
observable variables can be reduced to fewer latent variables, which share a common
variance and are unobservable (Bartholomew et al., 2011). The factor analysis is conducted
86 Chapter 3
using principal component analysis as a method of extraction. Principal Components

Analysis is used to extract maximum variance from the dataset with each component and
thus reducing a large number of variables into a smaller number of components (Tabachnick
and Fidell, 2007).
3.3.3 Research method: Data Envelopment Analysis (DEA)
Charnes, Cooper and Rhodes (1978) originally developed Data Envelopment Analysis
(DEA), which is a very powerful service management and benchmarking technique to
evaluate nonprofit and public sector organizations. DEA has been widely used to evaluate
the firm (i.e. the decision-making unit) performance based on relative efficiency
measurements. In this way, this analysis method may contribute to improving the
productivity, reducing the costs and increasing the profit margins. In this study, we consider
the technical efficiency to measure the performance of the different actors in the rice supply
chain. In the literature, distinction is made between the input-oriented and the output-
oriented DEA model to measure the efficiency. The input-oriented DEA model minimizes
the inputs keeping the outputs at their current level. The output-oriented DEA model
maximizes the outputs are maximized keeping the inputs are fixed at their current level
(Banker et al., 1984).
3.3.3.1 Technical efficiency (TE) and scale efficiency (SE)
Technical efficiency is defined as the ability of a farm to either produce the maximum
feasible output from a given bundle of inputs or to produce the given level of output using
the minimum amount of inputs (Basanta et al., 2004). The technical efficiency can be
measured under the assumption of constant returns-to-scale (CRS), which hypothesizes that
the output will change in the same proportion as the inputs are changed (e.g. doubling the
inputs will double the output). If the technical efficiency is measured under the assumption
of variable returns-to-scale (VRS), the production technology is assumed to exhibit
increasing and/or decreasing returns to scale (Kumar and Gulti, 2008). The technical
efficiency with constant returns-to-scale (TECRS), which is further referred to as the overall
technical efficiency, helps to determine inefficiencies due to input/output arrangement as
well as the size of operations and is composed out of two components, i.e. the pure technical
efficiency and the scale efficiency (Sharma et al., 1999). The pure technical efficiency
measure, also called the technical efficiency with variable returns-to-scale (TEVRS), is
achieved by estimating the efficient frontier under the assumption of variable returns-to-
scale. The pure technical efficiency measures the technical efficiency without considering
the scale effect and purely reveals the ability of the business unit to organize its inputs
efficiently in the production process. Hence, the pure technical efficiency can be used as an
index to capture the managerial performance of a decision maker. The ratio of the overall
technical efficiency vs the pure technical efficiency provides the scale efficiency (SE). When
the overall technical efficiency is equal to the pure technical efficiency, this business unit is
called a scale-efficient unit. Scale efficiency expresses whether a firm is operating at its
optimal size. The scale efficiency gives notion of the managerial ability to select the optimal
resource input size and scale of production to achieve the expected production level (Kumar
and Gulti, 2008). The scale inefficiency may be the result from decreasing returns-to-scale
(DRS) and increasing returns-to-scale (IRS). Decreasing returns-to-scale implies that a firm
is too large to take full advantage of its scale and has a supra-optimum scale size. In contrast,
a firm that is experiencing increasing returns-to-scale, is too small for its scale of operations
and, thus, operates at sub-optimum scale size. A firm is scale efficient if it operates at
constant returns-to-scale (CRS).
Using the DEA model specification, the TE score for a given farm n is obtained by solving
the following input-oriented LP problem:
Notation
Sets
I set of farms (index i)
J set of inputs (index j)
K set of outputs (index k)
Parameters
xij the amount of input j used on farm i
xnj the amount of input j used on farm n
yik the amount of output k produced on farm i
ynk the amount of output k produced on farm n
Decision variables
λi the nonnegative weights for I farms
θn the technical efficiency of farm n (a scalar ≤ 1)
88 Chapter 3
Mathematical formulation
ܶ‫ܧ‬௡ ൌ ߠ௡ (3.1)
Subject to
ூ
෍ ߣ௜ ‫ݔ‬௜௝ െ ߠ௡ ‫ݔ‬௡௝ ൑ Ͳ Ɐj (3.2)

௜ୀଵ
ூ
෍ ߣ௜ ‫ݕ‬௜௞ െ ‫ݕ‬௡௞ ൒ Ͳ
Ɐk (3.3)
௜ୀଵ
෍ ߣ௜ ൌ ͳ
(3.4)
௜ୀଵ
ߣ௜ ൒ Ͳ
(3.5)
The objective function (eq. 1) of the input-oriented DEA model minimizes the inputs while
the outputs are kept at their current levels. If θn is equal to 1, the business unit is technically
efficient. When θn is smaller than 1, the business unit is technically inefficient with the level
of inefficiency equal to 1 – TEn (Coelli, 1995). Equation (2) is the input constraint
formulated for every input j. This constraint stipulates that the input used by farm n,
weighted by its efficiency level θn, must exceed or be equal to a weighted combination of
inputs used by the other farms. Equation (3) is the output constraint formulated for every
output k. This constraint stipulates that the output obtained by farm n must be lower than or
equal to the weighted combination of outputs obtained by the other farms. Equation (3.4)
sets the sum of all weights given to the other farms is equal to 1 and ensures that the technical
efficiency TEn in equation (3.1) is calculated under the assumption of variable returns-to-
scale (VRS) (Coelli, 1995). Model (3.1)-(3.5) is the formulation proposed by Banker,
Charnes, and Cooper (1984) and calculates the pure technical efficiency (TEn ൌ ܶ‫ܧ‬௏ோௌ೙ ).
When equation (3.4) is omitted, constant returns-to-scale (CRS) are assumed and the model
reflects the formulation proposed by Charnes, Cooper, and Rhodes (1978) to calculate the
overall technical efficiency (TEn = ܶ‫ܧ‬஼ோௌ೙ ).
The scale efficiency for farm n (ܵ‫ܧ‬௡ ) can be calculated by the following equation:
ܶ‫ܧ‬஼ோௌ೙
ܵ‫ܧ‬௡ ൌ (3.6)
ܶ‫ܧ‬௏ோௌ೙
where, ܶ‫ܧ‬஼ோௌ೙ = technical efficiency under CRS assumption for farm n and ܶ‫ܧ‬௏ோௌ೙ =
technical efficiency under VRS assumption for farm n.
3.3.4 Research method: Tobit regression model
The Tobit regression model is used to perform a regression analysis to determine the
significant uncertainty factors that hinder the rice production efficiency, which is obtained
via DEA. Tobit analysis assumes that the dependent variable has a number of factors
clustered at a limiting value, usually zero (Tobin, 1958). Hence, the following regression
model is employed, i.e.
‫ݕ‬௜‫ כ‬ൌ ‫ݔ‬௜ ߚ௜ ൅ ߤ௜ ݅ ൌ ͳǡ ʹǡ ǥ ǡ ݊ (3.7)

‫ݕ‬௜ ൌ ‫ݕ‬௜‫ݕ݂݅ כ‬௜‫ כ‬൏ Ͳ (3.8)
‫ݕ‬௜ ൌ Ͳǡ ‫݁ݏ݅ݓݎ݄݁ݐ݋‬ (3.9)
where
ߤ௜ ̱ܰሺͲǡ ߪ ଶ ሻ the error term
xi explanatory variables
βi estimated parameter coefficients
‫ݕ‬௜‫כ‬ a latent variable
‫ݕ‬௜ the efficiency scores obtained via the DEA model
3.4 Results and Discussion
In this section, we present the results of this study. Section 3.4.1 discusses the uncertainty
as perceived by the actors in the rice supply chain and investigates the most important
uncertainty factors in the rice supply chain by using factor analysis. In Section 3.4.2, we
measure the rice supply chain efficiency as a measurement of supply chain performance by
90 Chapter 3
applying a DEA approach. In Section 3.4.3, we determine the impact of uncertainty factors
on the supply chain efficiency by conducting a Tobit regression analysis.
3.4.1 Uncertainty factors in the rice supply chain
3.4.1.1 Descriptive statistics of the uncertain factors in the rice supply chain
Table 3.2 displays the perceived uncertainty factors in the rice supply chain in the
Ayeyarwaddy Region, Myanmar. The actor responses are sub-divided into three groups, i.e.,
“Disagree” (Scale 1-3)”, “Neutral” (Scale 4)” and “Agree” (Scale 5-7)” for the 7-point Likert
scale. According to Table 3.2, the rice supply chain actors agree on average on all the
uncertainty items since all averages are higher than 4. Hence, the actors in the rice supply
chain encounter the different types of uncertainty observed in the literature. There are,
however, significant differences in the uncertainty perception between different individuals
per questionnaire item (p = 0.000 for each item). The item “information about stock level of
rice and rice production capacity is not on time (PCU2)” related to the planning and control
uncertainty has the lowest mean value of 4.08. The highest mean perceived uncertainty is
observed for the items “the flooding occurrence affecting firms are unpredictable each year
(CLU3) and “the duration of the flooding is unpredictable over the years (CLU4)” related
to the climate uncertainty. This is in contrast to the study of Thongrattana and Jie (2009),
which observed a higher uncertainty for government policy.
Table 3.2 Descriptive statistics of the uncertain factors in the rice supply chain (N=215)
Disagree Neutral Agree

Items Code Mean Std. Deviation
(Scale 1-3) (Scale 4) (Scale 5-7)
SU1 15.82 3.72 80.46 5.66 1.595
Supply Uncertainty
SU2 17.22 2.79 79.99 5.53 1.795
(SU)
SU3 17.68 4.19 78.14 5.30 1.776
DU1 7.91 4.19 87.9 5.79 1.312
Demand Uncertainty
DU2 8.84 4.65 86.51 5.73 1.280
(DU)
DU3 4.66 14.42 80.93 5.47 1.126
PU1 8.84 9.30 81.87 5.47 1.314
Process Uncertainty
PU2 6.06 13.95 80.00 5.50 1.322
(PU)
PU3 8.38 14.88 76.75 5.22 1.382
PCU1 43.71 13.02 43.27 4.12 1.861
Planning and Control
PCU2 36.74 13.02 50.24 4.08 1.840
Uncertainty (PCU)
PCU3 34.88 13.95 51.17 4.14 1.781
CU1 15.82 9.77 74.41 5.17 1.629
Competitor
CU2 21.40 10.23 68.37 4.82 1.846
Impact of uncertainty on the rice supply chain performance
Uncertainty (CU)
CU3 21.86 8.84 69.31 4.84 1.818
GU1 14.88 8.37 76.74 5.40 1.745
Government Policy
GU2 12.56 9.77 77.68 5.44 1.642
Uncertainty (GU)
GU3 24.18 13.95 61.85 4.84 1.792
CLU1 10.70 4.65 84.64 5.80 1.504
Climate Uncertainty CLU2 12.56 4.65 82.79 5.73 1.598
(CLU) CLU3 7.91 3.26 88.84 6.00 1.365
CLU4 8.38 3.72 87.91 6.00 1.399
Source: Own data (2017) and SPSS
91
92 Chapter 3
3.4.1.2 Relevant uncertainty factors

According to the results of the Principal Component Analysis (cf. Table 3.3), 74.65% of the
overall variance in the observed variables can be explained by all uncertainty factors together
listed in Table 3.1. Climate uncertainty explains the largest part of the overall variance
(14.86%) followed by planning and control uncertainty (12.30%) and competitor uncertainty
(10.88%). The findings of this study are clear evidence that the actors in the rice supply
chain in the Ayeyarwaddy Region in Myanmar face a high level of climate, planning and
control, and competitor uncertainty. Our findings confirm the results of Thongrattana and
Jie (2009), Miller (1993) and Lewis & Harvey (2001) showing the impact of the planning
and control, competitor’s behavior, government policy and climate uncertainty on the rice
supply chain.
The unpredictable climate is an essential component because it effects the agricultural and
socio-economic system both directly and indirectly, especially in developing countries. The
agricultural system of the developing countries is mostly dependent on rainfall because of
the lack of technological adaptations (Darwin et al., 1995; Ogallo et al., 2000).
The second important component is planning and control uncertainty referring to the
unavailability of “on time and accurate production and inventory information”. This results
from the fact that information technology is not appropriately implemented in the rice
industry of Myanmar. The importance of acquiring appropriate information is self-evident.
The collection of appropriate information about the customer demand, sales forecasts order
status, inventory levels, capacity availability, lead times and quality is critical to the effective
functioning of a supply chain. Timely information dissemination affects a supply chain’s
ability to cope with uncertainty and faster transmission is better for supply chain members
in satisfying both their own differentiated goals and the supply chain’s interdependent goals.
The result is consistent with the findings of Mason-Jones and Towill (1998). They indicated
the importance of planning and control uncertainty in the rice supply chain, which is
concerned with the capability of an organization to use information flow and decisions to
transform customer orders into a production plan and raw material requirements. This
finding also confirms the study of Quesada et al. (2012), which investigated the supply chain
of the pallet industry in the United States.
The high level of unpredictability of competitor’s behaviour results from the severe
competition for the retailers on the domestic markets and the intensive competition with
other rice production countries, which introduce rice at a low price. The perceived high
uncertainty in the government policy gives proof that the government policy in developing
countries is turbulent and unpredictable (Badri et al., 2000).
Table 3.3 Structure of Rotated Component Matrix for the rice supply chain (N=215)
Types of Component
Code
uncertainty 1 2 3 4 5 6 7
CLU3 0.890
Climate
CLU2 0.889
Uncertainty
CLU4 0.887
(CLU)
CLU1 0.830
Planning and PCU2 0.953
Control PCU3 0.950
Uncertainty
PCU1 0.833
(PCU)
Competitor CU2 0.952
Uncertainty CU3 0.944
(CU) CU1 0.668
Government GU1 0.825
Policy GU3 0.800
Uncertainty
GU2 0.758
(GU)
Process PU2 0.824
Uncertainty PU1 0.771
(PU) PU3 0.714
Supply SU1 0.840
Uncertainty SU2 0.808
(SU) SU3 0.678
Demand DU2 0.832
Uncertainty DU3 0.727
(DU) DU1 0.700
Eigen value 3.270 2.706 2.393 2.085 2.004 1.989 1.978
% of Variance 14.864 12.298 10.879 9.478 9.108 9.039 8.989
Cumulative % of variance 14.864 27.161 38.041 47.519 56.627 65.667 74.656
Extraction Method: Principal Component Analysis 7
Rotation Method: Varimax with Kaiser Normalization.
Source: Own data (2017) and SPSS
7
Before we conduct a principal component analysis or factor analysis, we must verify if the necessary conditions
are fulfilled:
- To measure the scale reliability, we calculate the correlation matrix of the 22 uncertainty factors and the
determinant. Since the determinant is different from zero, the factor analysis may be completed. Moreover, in
order to measure scale reliability of the questionnaire, Cronbach’s alpha is used (Bryman, 2003; Haire et al.,
1995). The value of Cronbach’s alpha is accepted for an exploratory study if it exceeds 0.7 (Nunnally, 1967).
The Cronbach’s alpha of these scales ranges from 0.710 to 0.922. No items are deleted in the analysis.
- The scale validity is measured by the Kaiser-Meyer-Olkin Measure (KMO) and Bartlett’s Test. The result for
the Kaiser-Meyer-Olkin Measure (KMO) is acceptable since it is larger than 0.6 (Kaiser, 1974), and Bartlett’s
Test is highly significant at p<0.000. Scale validity indicates the construct is able to measure accurately the
concept under study (Haire et al., 1995).
- The construct validity is measured by explanatory factory analysis (EFA) (Haire et al., 1995). All components
have Eigenvalues larger than 1, which confirms the construct validity.
94 Chapter 3
3.4.1.3 Comparisons of uncertainty perception among the rice supply chain actors
In this section, we investigate the relevance of the uncertainty factors for each of the supply
chain actors since different parties may encounter different types of uncertainty. The results
of the descriptive and comparison analysis are carried out using a non-parametric Kruskal-
Wallis test in Appendix Table 3.A.3 to 3.A.98.
The exporters perceive significantly lower supply uncertainty with respect to the quantity
delivered by producers (D = 0.05) and the delivery time (D = 0.1) because of aggregation
effects and the fact that exporters typically carry out different roles in the rice supply chain,
i.e. farming, milling and wholesaling (cf. Appendix 3.A.3). The wholesalers perceive a
significantly higher demand and supply uncertainty because of their distributor role in the
supply chain. They find it very difficult to predict the customer demand (D = 0.05) (cf.
Appendix 3.A.4) because of the complexity of the sales network with many retailers and
wholesalers. The higher supply uncertainty is related to the unpredictable quantity supplied
and delivery time. Farmers perceive a significantly lower competitor uncertainty since they
are more aware of their competitors’ actions (D = 0.05) (cf. Appendix 3.A.7). Farmers
witness easily other farmers’ strategies applied in their paddy fields within the same village
and they even share knowledge about their production techniques. An analysis of the
uncertainty resulting from the government actions between different parties reveals
(Appendix 3.A.8) that wholesalers suffer from the high volatility in the grantee price (D =
0.05). Moreover, exporters encounter significantly less uncertainty resulting from the
unexpected introduction of new government regulations compared to other actors (D = 0.01)
as they are operating on the international market. For the other types of uncertainty (i.e. the
processing uncertainty, the planning and control uncertainty and the climate uncertainty),
there are no significant differences between the different actors (cf. Appendix 3.A.5, cf.
Appendix 3.A.6 and cf. Appendix 3.A.9).
8To compare the results between different actors, we apply the non-parametric Kruskal-Wallis test
to find significant differences.
3.4.2 Efficiency performance of the rice supply chain
3.4.2.1 Descriptive statistics of the variables
In this section, we investigate the supply chain efficiency to measure the supply chain
performance. We measure the overall technical efficiency, pure technical efficiency and
scale efficiency for the entire supply chain, i.e. farmers (production stage), millers
(processing stage) and distributors such as wholesalers, retailers and exporters (distribution
stage) are comprised in the analysis. In this section, we do not consider the primary collectors
to analyse the efficiency measures because they do not have any inputs and all primary
collectors receive the same fee from the millers for buying paddy. A summary of the values
of the key variables used in the DEA model is presented in Table 3.4, 3.5 and 3.6. We
consider the marketed amount of paddy as the output variable. The production, financial,
transportation and storage costs are considered as the input variables in the input-oriented
DEA model. The average marketed amount of paddy per year for the farmers is 6500
kilograms. The hired labour cost for farmers (on average 89.72 MMK/kg) is far higher
compared to the other costs. The mean marketed amount of rice per year for the millers is
1088.17 thousand kilograms and ranges from 12.68 to 3793.48 thousand kilograms (cf.
Table 3.5). The transportation cost (on average 21.44 MMK/kg) embodies the highest cost
for the millers. The distributors deliver 52189.97 thousand kilograms of rice on average with
a range between 1.38 thousand kilograms to 1700000 thousand kilograms (cf. Table 3.6).
The transportation cost (on average 6.94 MMK/kg) is slightly higher than the other costs for
distributors.
96 Chapter 3
Table 3.4 Descriptive statistics of the output and input variables of the rice farmers
(N=130)
Variables Unit Mean Minimum Maximum Std. Deviation

Output variable
Marketed amount 000’ kg 6.50 0.29 31.04 5.98
Input variables
Production cost (Total)
-Material cost MMK/kg 58.38 12.89 287.08 38.84
-Family labor cost MMK/kg 54.46 2.83 218.99 35.38
-Hired labor cost MMK/kg 89.72 3.87 359.99 51.50
Financial cost MMK/kg 7.41 2.43 32.35 4.18
Table 3.5 Descriptive statistics of the output and input variables of the rice millers
(N=25)
Variables Unit Mean Minimum Maximum Std. Deviation

Output variable
Input variables
Production cost MMK/kg 5.66 0.53 32.79 8.66
Transportation cost MMK/kg 21.44 9.08 36.84 8.66
Storage cost MMK/kg 6.28 3.06 11.22 2.77
Table 3.6 Descriptive statistics of the output and input variables of the rice
distributors (N=39)
Std.
Variables Unit Mean Minimum Maximum
Deviation
Output variable
Input variables
Production cost MMK/kg 2.21 0.00 24.00 6.76
Transportation cost MMK/kg 6.94 2.04 13.78 2.60
Storage cost MMK/kg 1.92 0.94 9.00 1.96
3.4.2.2 Technical efficiency and scale efficiency

Table 3.7 displays the results derived from the DEA model (1)-(5) and the scale efficiency
(cf. equation (6)) for the different actors and the global rice supply chain. The overall
technical efficiency of the farmers equals on average 0.225 and ranges between 0.002 and
1. Hence, the technical efficiency of farmers can be increased by 77.5% on average. The
farmers do not efficiently manage their input costs. They do not obtain the maximal possible
output given their input costs. According to the results, only a small percentage (2.31%)
obtains a high overall technical efficiency level (0.91 to 1.00). 10% of the farmers achieve
an acceptable technical efficiency level (range 0.51-0.90). Most of the farmers (87.70%)
have an inferior technical efficiency level smaller than or equal to 0.5. Hence, most of the
farmers are inefficient and are unable to produce according to their maximum potential given
their input costs. The mean pure technical efficiency is 0.610 and the mean scale efficiency
is 0.332. The mean scale efficiency is lower than the mean pure technical efficiency, which
implies that rice farms should improve firstly the allocation of their input costs to achieve a
better pure technical efficiency and then try to improve their operational scale to upgrade
the scale efficiency in order to boost the overall technical efficiency. No less than 98.46%
of the farms have increasing returns-to-scale (IRS), i.e. if these farms can expand their
production scale they should be able to improve the overall operational efficiency. Only
1.54% of the farmers have constant returns to scale (CRS) which means these farmers
operate in the desired scale and there is no need for any improvement.
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The millers have on average a technical efficiency of 41.3%. About 20% of the millers reach
a high technical efficiency score between 0.91 and 1. 20% of the millers have an acceptable
overall technical efficiency score between 0.51 and 0.90 and 60% of the millers have an
efficiency level smaller than or equal to 0.5. The average pure technical efficiency (0.873)
is larger than the average scale efficiency (0.455) for this processing stage. Hence, millers
can reduce their operating costs of the input mix to improve their pure technical efficiency
and expand their scale of operations in order to enhance the overall efficiency. The mean
overall technical, pure technical and scale efficiency scores of this study are lower than those
of the millers in Thailand and Taiwan (Wongkeawchan et al., 2004). About 84% of all
millers have increasing returns-to-scale (IRS), which indicates that they are able to improve
their overall operational efficiency if they can expand their production scale. Another 16%
of the millers are in the stage of constant returns-to-scale (CRS). These firms do not have to
upgrade the scale of their firm.
The overall technical efficiency of the distributors is on average 0.125 which implies that
most distributors have a huge improvement potential. Only 7.69% of the distributors reach
a high overall technical efficiency level ranging from 0.81 to 1.00. The majority of the
distributors (92.31%), however, obtain an efficiency score smaller than or equal to 0.5. The
mean pure technical efficiency is 0.820 and is much larger than the scale efficiency (0.145).
The distributors should try to improve the efficient use of the inputs and then adjust their
operational scale. The majority of the distributors (94.87%) have increasing returns-to-scale
(IRS), which suggests that most distributors need to upgrade the scale of their organization.
The technical efficiency amounts 0.229 on average for the global rice supply chain, which
is low. This value shows a large improvement potential of 77.1%. The majority of the actors
(85.05%) have an overall technical efficiency level smaller than or equal to 0.5. The mean
pure technical efficiency is only 0.686 due to the inappropriate management of the inputs.
The mean scale efficiency is 0.310, which is very low due to the fact that most actors are
operating in a smaller-than-optimal scale. The majority of the supply chain actors (95.88%)
have increasing returns-to-scale (IRS) suggesting they would improve their efficiency if they
can expand their production scale. Only 4.12% of the supply chain actors operate conform
to their optimal scale.
Table 3.7 Percentage distribution of the technical and scale efficiency index for the actors and the global rice supply chain
Efficiency Farmers (N=130) Millers (N=25) Distributors (N=39) Global Supply Chain (N=194)
Level TECRS TEVRS SE TECRS TEVRS SE TECRS TEVRS SE TECRS TEVRS SE
(%) (%) (%) (%) (%) (%) (%) (%) (%) (%) (%) (%)
0.00 – 0.10 39.23 0.00 19.23 24.00 0.00 20.00 79.49 0.00 71.79 45.36 0.00 29.90
0.11 – 0.20 22.31 3.85 24.62 24.00 0.00 12.00 7.69 0.00 10.26 19.59 2.58 20.10
0.21 – 0.30 13.08 3.08 13.85 0.00 0.00 16.00 0.00 2.56 2.56 8.76 2.58 11.86
0.31 – 0.40 8.46 4.62 10.00 12.00 0.00 8.00 5.13 5.13 2.56 8.25 4.12 8.25
0.41 – 0.50 4.62 13.08 6.15 0.00 4.00 0.00 0.00 0.00 5.13 3.09 9.28 5.15
0.51 – 0.60 5.38 30.77 8.46 12.00 8.00 12.00 0.00 0.00 0.00 5.15 21.65 7.22
0.61 – 0.70 2.31 16.92 6.15 4.00 12.00 4.00 0.00 12.82 0.00 2.06 15.46 4.64
0.71 – 0.80 2.31 10.77 3.85 4.00 4.00 4.00 0.00 20.51 0.00 2.06 11.86 3.09
0.81 – 0.90 0.00 6.15 3.85 0.00 8.00 4.00 2.56 17.95 2.56 0.52 8.76 3.61
0.91 – 1.00 2.31 10.77 3.85 20.00 64.00 20.00 5.13 41.03 5.13 5.15 23.71 6.19
Mean 0.225 0.610 0.332 0.413 0.873 0.455 0.125 0.820 0.145 0.229 0.686 0.310
Minimum 0.002 0.109 0.014 0.008 0.485 0.009 0.001 0.290 0.001 0.001 0.109 0.001
Maximum 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000
IRS 98.46% 84.00% 94.87% 95.88%
DRS 0.00% 0.00% 0.00% 0.00%
CRS 1.54% 16.00% 5.13% 4.12%
Source: Own survey (2017) and DEAP 2.1
99
100 Chapter 3
3.4.3 The impact of uncertainty on of the rice supply chain performance
In this section, we examine if the identified environmental uncertainty factors impact the
operational efficiency based on a Tobit regression model as suggested by Coelli and Basttese
(1996). To that purpose, the Tobit model is applied to regress the efficiency scores on the
uncertainty factors since the efficiencies vary from 0 to 1. The Tobit regression analysis is
conducted in Eviews 9. Table 3.8 describes the summary statistics of the uncertainty factors
for which the impact on the rice supply chain efficiency is verified. The dependent variables
are the efficiency scores, i.e. the overall technical efficiency, the pure technical efficiency
and the scale efficiency. The independent variables are the 7 sources of uncertainty factors,
i.e. supply, demand, process, planning and control, competitive, government policy and
climate uncertainty. This analysis is performed for the farmers (production stage), the millers
(processing stage), the distributors, i.e. the wholesalers, retailers and exporters (distribution
stage) and the entire supply chain.
The results of the Tobit regression analysis for the farmers are presented in Table 3.9. The
Tobit regression coefficients indicate the directional relationship between efficiency and the
independent variables. Table 3.9 reveals that the planning and control uncertainty has a
negative and significant impact on all efficiency measures of the farmers. The overall
technical, pure technical and scale efficiency is reduced when the uncertainty in planning
and control increases. Information is crucial to operational planning and control. The higher
the quality of information input, the higher the quality of managerial decision making (Gorry
and Morton, 1989). In-depth interviews learned that the most efficient farmers use
information to wait for a higher paddy price and increase their stock level capacity. In this
way, these farmers do not have to sell their paddy at a lower price immediately after
harvesting. The climate uncertainty has a negative and significant impact on the overall
technical efficiency and pure technical efficiency. The technical efficiency of the farms
decreases significantly as a result from the high climate uncertainty. This study confirms the
result of Muhammad et al. (2012). The effects of uncertain climatic conditions on rice
production lead to large inefficiencies and as a result a significant amount of paddy is lost.
In order to reduce the climate uncertainty, the most efficient farmers use some mitigation
strategies by proactively changing their sowing time to overcome the uneven rain at the
harvest time, using cushions to prevent rain to impact the paddy harvest piles when
harvesting, threshing, drying and transporting the paddy. These best practices related to
cultivation and post-harvesting techniques and climate mitigation strategies together with
the knowledge transfer of new technologies should be widespread via better extension
services (Naswem et al., 2016). Moreover, crop insurance is potentially a very effective
climate mitigation strategy for the farmers in the study area that can be ensured by the
government or private partners. By spreading risk, this strategy can buffer the financial
implications of unexpected crop failure following climate uncertainty and may change the
decision-making behaviour of farms and improve their efficiency level. According to Di
Falco (2014), Olivier and Charles (2010) and Ambarawati et al. (2018), agricultural or crop
insurance has been an important tool at the farm level in different agricultural supply chains
to mitigate the climate or natural disaster uncertainty and has also been implemented in many
developing countries including India and Thailand. The government and private partners are
responsible to secure the availability of high-quality production inputs (seeds, fertilizers,
chemicals). Early maturing, drought resistant and flood resistant varieties of rice should be
made available to farmers to enable them to cope with the vagaries of the climate (Naswem
et al., 2016).
The efficient operation of millers is hampered significantly by process uncertainty for all
types of efficiency measures (cf. Table 3.9). This result confirms the study of Thongrattana
(2012), Childerhouse and Towill (2004), Bhatnagar and Sohal (2005), van der Vorst (2000)
and Davis (1993). In-depth interviews learned that the most efficient millers in the study
area manage this type of uncertainty in a reactive manner by hiring skilful mechanics to
repair their broken machines immediately. Another, more preferred approach is to install
labour flexibility and machine flexibility to mitigate process uncertainty proactively, i.e.
multi-skilled workers are trained and/or general purpose machines, equipment and
technologies are implemented to increase the process flexibility (Miller, 1992; Sawhney,
2006; Ulrich, 1995). Moreover, the planning and control uncertainty has a negative and
significant impact on the overall technical efficiency and the scale efficiency of the rice
millers. The most efficient millers have sufficient storage capacity to meet the changes in
customer orders. To prevent the deterioration of the rice quality during the storage time, the
millers check the rice quality on a regular basis. The availability of a computer-based
information system, shared between different supply chain partners, may provide real-time
and accurate information and transparency and will reduce the planning and control
uncertainty along the supply chain (Prater, 2005). The climate uncertainty has also a
significant and negative impact on the overall technical efficiency and scale efficiency of
102 Chapter 3
the millers. This is primarily caused by the fact that some millers are also farmers and
produce paddy. Climate uncertainty may cause a rice shortage and inferior rice quality. In
order to reduce the uncertainty and to improve their efficiency, the millers perform a quality
inspection and adapt their price according to the rice quality. In addition, because of extreme
weather conditions, the transportation of paddy (from the farmers) or rice (towards the
customers) is impeded because of road destructions leading to customer delays. Paddy and
rice reserves help to reduce these negative effects resulting from climate conditions.
However, the efficiency of millers is significantly reduced as they cannot distribute the
processed rice on time. The government needs to invest in the existing road infrastructure in
collaboration with the private sector to increase the access to the markets and avoid
inefficiencies in transport and logistics (Linn and Maenhout, 2018a).
The results of the Tobit regression analysis for the rice distributors are also presented in
Table 4.8. The demand uncertainty has a negative and significant impact on all efficiency
measures, i.e. a higher demand uncertainty can significantly lower the efficiency. The
demand uncertainty arises from the complexity of the sales network in the distribution
system i.e. many retailers and wholesalers involved in the rice supply chain and the
unpredictable domestic and international demand and product variety. As a result of the
demand uncertainty, the rice distributors have difficulties to organize their operations
efficiently, i.e. to use the right input resource mix and to operate at the right scale. In order
to reduce this uncertainty, the most efficient distributor parties have maintained multiple
suppliers, which will guarantee availability to improve supply flexibility to be able to meet
the necessities of their customers. According to Tang and Tomlin (2008), flexible
procurement contracts can provide supply flexibility, ensure stability for the supplier, and
help the buyer respond to demand fluctuations. The climate uncertainty also has a negative
and significant impact on the overall technical efficiency and scale efficiency of the
distributors. Accurate weather information may help them to better organise the rice
distribution to other regions and to foreign countries.
Finally, we discuss the results of Tobit regression analysis for the global rice supply chain
(cf. Table 3.9). Previous results revealed that the different actors in different stages of the
rice supply chain face different types of uncertainty, each related to their role in the rice
supply chain. However, we observe that global supply chain is principally impacted by the
planning and control uncertainty and the climate uncertainty, which were mainly observed
as relevant sources of uncertainty in the early stages of the global rice supply chain and
resonates throughout the entire supply chain. The planning and control uncertainty has a
negative and significant impact on the overall technical efficiency and scale efficiency, i.e.
a higher uncertainty in planning and control leads to a decrease in the efficiency of the supply
chain. This result does not confirm the study of Thongrattana (2012). Prater (2005)
recognizes that sharing a computerised information system between supply chain partners,
enables a better and faster information flow and will reduce the planning and control
uncertainty along the supply chain. In this regard, the Myanmar Rice Federation (MRF)
encourages actors to establish cooperatives by organizing trainings, meetings and
conferences. Setting up collaborations enables the integration of the supply chain members,
i.e. all members of the chain ‘acts as one’, will lead to reductions in process, supply, demand
and control uncertainty (Simangunsong, 2012). The climate uncertainty negatively impacts
the overall and pure technical efficiency of the global rice supply chain. This result is
consistent with the finding of Nyamah et al. (2017) but does not confirm the result of
Thongrattana (2012). According to Kleindorfer and Saad (2005), Tang (2006) and Ritchie
and Brindley (2007) insurance is one of the most common strategies for mitigating
uncertainty or risk, and hence lessens the severity of disruptions such as natural disasters or
weather-related events on supply chain activities.
104
Table 3.8 Descriptive statistics of uncertainty variables of the supply chain
Farmers Millers Distributors Global supply chain
Variables Unit (N=130) (N=25) (N=39) (N=194)
Mean Range Mean Range Mean Range Mean Range
Supply uncertainty (SU) Number 5.59 1-7 5.64 2-7 5.54 1-7 5.59 1-7
Demand uncertainty (DU) Number 5.58 2-7 5.84 2-7 5.87 1-7 5.67 1-7
Process uncertainty (PU) Number 5.72 2-7 5.80 3-7 5.59 3-7 5.70 2-7
Planning and control uncertainty (PCU) Number 4.06 1-6 4.00 3-5 4.14 2-5 4.07 1-7
Competitive uncertainty (CU) Number 4.63 1-7 5.24 2-7 5.26 2-7 4.84 1-7
Government uncertainty (GU) Number 5.05 1-7 5.48 2-7 5.69 1-7 5.3 1-7
Climate uncertainty (CLU) Number 5.92 2-7 6.04 2-7 6.03 1-7 5.95 1-7

Chapter 3
Table 3.9 Results of Tobit regression coefficients for all different actors and the global supply chain
Independent Farmers (N=130) Millers (N=25) Distributors (N=39) Global supply chain (N=194)
Variables TECRS TEVRS SE TECRS TEVRS SE TECRS TEVRS SE TECRS TEVRS SE
*** *** *** *** *** *** *** *** *** *** ***
0.9696 1.0383 1.0949 2.0561 1.6660 1.6607 1.3543 1.1184 1.3112 1.1305 0.8348 1.2432***
Constant
(0.1508) (0.1483) (0.1847) (0.4420) (0.3301) (0.4275) (0.2428) (0.2252) (0.2560) (0.1346) (0.1344) (0.1526)
Supply -0.0195 -0.0151 -0.0224 0.0469 0.0218 0.0439 0.0072 0.0311 -0.0073 -0.0034 -0.0008 -0.0060
uncertainty (0.0133) (0.0131) (0.0163) (0.0346) (-0.0573) (0.0312) (0.0204) (0.0189) (0.0215) (0.0123) (0.0121) (0.0140)
Demand -0.0279 0.0027 -0.0276 -0.0063 -0.0573 -0.0449 -0.1026*** -0.0715** -0.0887** -0.0220 0.0168 -0.0203
uncertainty (0.0173) (0.0171) (0.0212) (0.0408) (0.0352) (0.0456) (0.0379) (0.0351) (0.0399) (0.0169) (0.0157) (0.0191)
Processing 0.0082 0.0022 0.0109 -0.1940*** -0.1276*** -0.1658** 0.0610 0.0255 0.0584 -0.0072 -0.0074 -0.0015
uncertainty (0.0186) (0.0183) (0.0228) (0.0697) (0.0541) (0.0701) (0.0320) (0.0297) (0.0338) (0.0174) (0.0168) (0.0197)
Planning and
-0.0435*** -0.0244** -0.0516*** -0.0585*** -0.0253*** -0.0711*** -0.0103 0.0104 -0.0045 -0.0421*** -0.0161 -0.0497***
control
(0.0104) (0.0102) (0.0127) (0.0188) (0.0153) (0.0198) (0.0208) (0.0193) (0.0219) (0.0097) (0.0095) (0.0110)
uncertainty
Competitive -0.0115 -0.0112 -0.0118 0.0056 0.0270 0.0127 -0.0052 -0.0356 0.0058 -0.0123 0.0049 -0.0152
uncertainty (0.0104) (0.0103) (0.0128) (0.0272) (0.0224) (0.0290) (0.0263) (0.0244) (0.0277) (0.0103) (0.0100) (0.0117)
Government
-0.0167 0.0112 -0.0297 -0.0392 0.0052 -0.0518 -0.0142 0.0210 -0.0238 -0.0095 0.0049 -0.0228
policy
(0.0120) (0.0118) (0.0147) (0.0381) (0.0305) (0.0395) (0.0289) (0.0258) (0.0294) (0.0118) (0.0111) (0.0133)
uncertainty
Climate -0.0374*** -0.0478*** -0.0240 -0.0999*** 0.0151 -0.0860** -0.1417*** -0.0285 -0.1339*** -0.0738*** -0.0287*** -0.0644***
uncertainty (0.0142) (0.0139) (0.0174) (0.0406) (0.0315) (0.0408) (0.0289) (0.0268) (0.0305) (0.0135) (0.0129) (0.0153)
*** *** *** *** *** *** *** *** ***
LR test 36.5817 19.9360 31.5090 35.1754 11.2776 32.1591 29.9492 9.3101 27.6637 60.9329 14.2274 55.1842***
Dependent variables are TECRS index, TEVRS index and SE index.
Note: Figures in the parentheses are standard error.
** = significant at 5% level and *** = significant at 1% level.
105
Source: Own survey (2017) and Eviews 9.

106 Chapter 3
3.5.1 Conclusion
In this study, we determined the major sources of environmental uncertainty impacting the
rice supply chain in the Ayeyarwaddy Region, Myanmar. There are different types of actors
in the rice value chain i.e. farmers, rice millers, wholesalers, retailers and exporters and we
investigate how uncertainty affects the decision-making performance of these actors. To that
purpose, we applied a three-step methodology. First, we have conducted an empirical survey
and applied an exploratory factor analysis to identify the sources of uncertainty perceived
by the different actors in the rice supply chain. The environmental uncertainty and its
associated factors are defined in terms of perception of the respondents given the role of
individuals in the decision-making process. All the seven considered uncertainty factors are
present; however, the climate uncertainty is the most important factor in the rice supply
chain followed by planning and control uncertainty and competitor uncertainty. Second, we
measure the rice supply chain efficiency to assess the supply chain performance using Data
Envelopment Analysis (DEA). Based on his perception, the decision maker will take
relevant strategic and operational decisions, i.e. he will determine the mix of inputs to
maximize his output level and his scale of operations. The mean performance of the entire
rice supply chain is by a low overall technical efficiency score, which is especially caused
by the very low scale efficiency for all actors. Therefore, the majority of the business units
need to expand their operating size. Moreover, their market knowledge and the method to
collect accurate market information should be improved to reduce their input costs. Third,
we study the significance of the impact of the identified sources of uncertainty on the supply
chain efficiency to find the most important types of uncertainty. Each type of actor suffers
from specific uncertainty sources related to their role in the supply chain. Farmers face
climate uncertainty and uncertainty in planning and control. The millers in particular suffer
significantly from processing uncertainty. Distributors face the adverse effect of demand
uncertainty. The climate uncertainty and planning and control uncertainty, which are both
in particular present in the early production stages of the supply chain, have a negative and
significant impact on the different types of efficiency leading to the poor performance of the
entire supply chain.
3.5.2 Recommendations
The described sources of uncertainty highlight the array of key issues that must be resolved
to upgrade the performance of the rice supply chain. The observed low operational efficiency
of the studied rice supply chain shows that the actors do not make use of resources in the
best possible way and can significantly improve the way their limited resources are
allocated. To that purpose, uncertainty should be mitigated, especially the uncertainty
regarding the climate and the planning and control. However, priorities should be set to
accomplish a feasible and gradual progress to improve the competitiveness of the rice sector
in Myanmar. Future research should give more insights in each of the proposed mitigation
strategies and their actual impact on the rice supply chain in Myanmar.
First, public awareness of the impact of climate conditions on the agricultural production
systems deserves priority consideration and mitigating technologies must be developed,
which will require increased public and private investment. An appropriate financial
insurance mechanism should be implemented by the government and private partners for all
rice supply chain actors and in particular for the farmers. Further research should indicate
the most suitable insurance program, i.e. a weather-based crop insurance program or an area-
based crop insurance program. In this way, the actors and especially the farmers should be
better able to use their resources more efficiently to maximize their output level as a result
from the reduced level of uncertainty.
Second, farmers and other roles in the supply chain should organize themselves in
cooperatives, which implies a horizontal and vertical integration in the supply chain. In the
era of intense global trade, it is essential for firms to exploit the benefits associated with
sharing supply chain information to improve the supply chain performance. Moreover, the
majority of the current rice companies in the supply chain are too small and via setting up
cooperatives they will expand their size. In this way, the bargaining power of actors on the
national and international market will increase and price fluctuations will be less volatile
and more accurate market information will be obtained. These collaborations support the
installment of computerized information sharing systems and decision support systems,
which will reduce planning and control uncertainty, supply and demand uncertainty. In this
way, they have more accurate information allowing better forecasts and they will be able to
react more efficiently to disruptions in the supply chain. In addition, best practices will be
more widespread among different actors, which will further increase the efficiency as actors
108 Chapter 3
will improve their decision-making skills. The strategic relationships between supply chain
actors, i.e. building linkages and sustaining a long-term partnership would increase the value
transferred between entities in the supply chain and would decrease costs. Developing an
integrated intermodal logistics system of Myanmar’s rice supply chain and trading network
becomes increasingly more competitive in the regional and international rice markets.
Third, farmers should have a better knowledge of cultivation and post-harvesting techniques,
climate risk mitigation strategies and new technologies via more efficient and widespread
extension services. Accurate weather forecasts are crucial for farmers to organize their
activities in a proactive manner. The Department of Agriculture and the Department of
Meteorology should educate the farmers how to effectively use this information for their
agricultural activities. Moreover, farmers should learn how to deal with adverse climate
conditions. Best practices such as switching cultivating time, using early maturing and flood
resistant rice varieties, improved land management e.g. erosion control and soil protection,
etc. should be widespread practices among the farmers in the region. In order to establish a
secure transportation system, the government should design and provide standard roads, rail
and other infrastructure.
3.A Appendix
Table 3.A.1 Sampled respondents along the rice suppy chain in the study area
Total Sampled
Actors Townships
Population respondents

Farmers
Myanaung 105 15
Collectors
Kyangin 60 6
Myanaung 132 18
Millers
Kyangin 80 7
Myanaung 34 4
Wholesalers
Kyangin 20 3
Myanaung 103 20
Retailers
Kyangin 61 8
Rice Exporters Yangon 36 4
Total respondents 215

Source: DOA (2017) and MRF (2017)
110 Chapter 3
Table 3.A.2 Characteristics of the different actors in the rice supply ch ain
Para- Primary
Items Unit Farmer Miller Wholesaler Retailer Exporter
meters collector
114 19 23 5 19 4
Male
Gender Number (87.69) (90.48) (92) (71.43) (67.86) (100)
16 2 2 2 9 0
Female
(12.31) (9.52) (8) (28.57) (32.14) (0)
Age Years Mean 51 41.60 50.10 46.70 49.90 43
Min. 27 25 30 41 30 35
Max. 85 60 66 62 72 50
Family size Numbers Mean 4 4 4.40 4 3.60 4
Min. 2 1 2 2 2 3
Max. 8 7 8 6 6 6
Schooling Mean 6 9 11 12.3 9.9 15
Education
years Min. 2 5 5 6 4 15
Max. 15 15 15 15 18 15
Work Mean 27 10.80 12.80 13 13.60 13
Years
experience Min. 3 1 1 3 1 5
Max. 54 30 33 24 50 26
Farm size ha Mean 3.07 - - - - -

Min. 0.40 - - - - -
Max. 15.78 - - - - -
Small farm 45
≤ 2.02 ha Numbers - - - - -
size (34.62)
> 2.02 ha
Medium 49
and ≤ 4.05 Numbers - - - - -
farm size (37.69)
ha
Large farm 36
> 4.05 ha Numbers - - - - -
size (27.69)
Yield of kg/ha Mean 3000.11 - - - - -
Paddy Min. 516.44 - - - - -
Max. 5164.39 - - - - -
Milling Mean - - 11.99 - - -
‘000kg/day
amount Min. - - 0.21 - - -
Max. - - 59.71 - - -
< 15000 19
Milling Numbers - - - - -
kg/day (76)
capacity
≥ 15000 6
Numbers - - - - -
kg/day (24)
Marketed Mean 6.50 127.29 1088.17 669.74 25.73 507500
'000kg/year
amount Min. 0.29 10.45 12.68 13.46 13.80 60000
Max. 31.04 627.00 3793.48 1776.75 189.75 1700000
Note: Figures in the parentheses represent percentage.
Table 3.A.3 Mean comparisons of the supply uncertainty among the rice supply
chain actors
Chi-Square
Items Group of actors N Mean Rank Sig.
value
Farmers 130 111.60
Primary collectors 21 70.21
SU1: Rice
Millers 25 113.62
quantity from
Wholesalers 7 123.07 13.406** 0.020
rice producers is
Retailers 28 117.80
unpredictable
Exporters 4 59.13
Total 215
Farmers 130 108.77
SU2: Rice
Millers 25 118.98
quality from rice
Wholesalers 7 103.36 5.691ns 0.337
producers is
Retailers 28 116.27
unpredictable
Exporters 4 66.88
Total 215
Farmers 130 106.47
SU3: Rice
Millers 25 118.34
producers’
Wholesalers 7 134.50 10.916* 0.053
delivery time is
Retailers 28 119.59
unpredictable
Exporters 4 33.00
Total 215
Note: Non–parametric statistics (Kruskal-Wallis) was used. ** = Significant at 5% level, * = Significant at
10%level and ns = Non-significant.
Source: Own survey (2017) and SPSS
112 Chapter 3
Table 3.A.4 Mean comparisons of the demand uncertainty among the rice supply
chain actors
Chi-Square
value
Farmers 130 101.35
DU1: The
volume of
Millers 25 127.96
customer
Wholesalers 7 157.00 11.32** 0.045
demand is
Retailers 28 119.04
difficult to
Exporters 4 83.88
predict
Total 215
Farmers 130 102.40
DU2: Primary collectors 21 93.79
Customers’ rice Millers 25 126.00
preference Wholesalers 7 141.86 8.444ns 0.133
changes over Retailers 28 121.05
the year Exporters 4 101.38
Total 215
Farmers 130 108.13
DU3: The lead
Millers 25 106.84
time of
Wholesalers 7 125.64 2.800ns 0.731
customer order
Retailers 28 116.73
is unpredictable
Exporters 4 85.25
Total 215
Table 3.A.5. Mean comparisons of the Processing uncertainty among the rice
supply chain actors
Chi-Square
value
Farmers 130 111.74
PU1: Yield of
Millers 25 103.94
processing (e.g.,
Wholesalers 7 110.07 2.317 ns 0.804
milling, packing)
Retailers 28 106.45
can vary
Exporters 4 81.63
Total 215
Farmers 130 113.46
PU2: The quality of Primary collectors 21 86.45
rice after Millers 25 117.84
processing (e.g., Wholesalers 7 107.29 7.155 ns 0.209
milled, stored) can Retailers 28 93.73
change Exporters 4 83.38
Total 215
Farmers 130 101.18
PU3: The
Millers 25 130.42
throughput time of
Wholesalers 7 128.93 8.709 ns 0.121
rice processing can
Retailers 28 103.04
vary
Exporters 4 89.75
Total 215
Note: Non–parametric statistics (Kruskal-Wallis) was used. ns = Non-significant.
114 Chapter 3
Table 3.A.6. Mean comparisons of the planning and control uncertainty among the
rice supply chain actors
Mean Chi-Square
Items Group of actors N Sig.
Rank value
Farmers 130 102.89
PCU1: Information Primary collectors 21 101.26
about stock level of Millers 25 112.90
rice and rice Wholesalers 7 100.64 7.366ns 0.195
production capacity Retailers 28 135.95
is inaccurate Exporters 4 96.00
Total 215
Farmers 130 102.17
about stock level of Millers 25 108.00
rice and rice Wholesalers 7 104.00 4.771ns 0.444
production capacity Retailers 28 122.13
is not timely Exporters 4 105.00
Total 215
Farmers 130 102.19
concerning changes Millers 25 104.94
of customer orders Wholesalers 7 105.21 5.925ns 0.314
cannot be Retailers 28 121.11
distributed on time Exporters 4 101.13
Total 215
Table 3.A.7. Mean comparisons of the competitors’ uncertainty among the rice
supply chain actors
Chi-
Items Group of actors N Mean Rank Square Sig.
value
Farmers 130 97.45
CU1: Competitors’ Millers 25 126.56
actions are Wholesalers 7 144.93 11.828** 0.037
unpredictable Retailers 28 114.59
Exporters 4 121.63
Total 215
Farmers 130 99.91
CU2: Competition
Millers 25 121.38
in the domestic
Wholesalers 7 142.71 8.423ns 0.134
market is
Retailers 28 107.54
intensifying
Exporters 4 123.88
Total 215
Farmers 130 99.31
CU3: Competition Millers 25 123.70
is intensified in Wholesalers 7 120.00 9.772ns 0.082
different countries Retailers 28 107.25
Exporters 4 123.75
Total 215
116 Chapter 3
Table 3.A.8. Mean comparisons of the government uncertainty among the rice
supply chain actors
Chi-Square
value
Farmers 130 103.16
GU1: Government
policies in rice
Millers 25 107.14
trading (e.g., FTA,
Wholesalers 7 128.86 5.046ns 0.410
tax) directly
Retailers 28 127.20
affecting your firms
Exporters 4 89.63
are unpredictable
Total 215
Farmers 130 102.92
GU2: The grantee Primary collectors 21 85.36
price from Millers 25 125.46
government Wholesalers 7 156.21 12.241** 0.032
regulation is Retailers 28 117.41
unpredictable Exporters 4 132.75
Total 215
Farmers 130 99.48
GU3: New Primary collectors 21 113.24
government Millers 25 121.82
regulation is Wholesalers 7 146.29 13.522*** 0.019
introduced Retailers 28 129.66
unexpectedly Exporters 4 52.50
Total 215
Note: Non–parametric statistics (Kruskal-Wallis) was used. *** = Significant at 1% level, ** = Significant at
5% level and ns = Non-significant.
Table 3.A.9. Mean comparisons of the climate uncertainty among the rice supply
chain actors
Chi-Square
value
Farmers 130 106.16
CLU1: Drought Primary collectors 21 114.79
occurrences Millers 25 116.48
affecting firms are Wholesalers 7 161.29 8.906ns 0.113
unpredictable in Retailers 28 92.29
each year Exporters 4 95.88
Total 215
Farmers 130 104.31
CLU2: The duration
Millers 25 120.32
of drought is
Wholesalers 7 160.71 8.641ns 0.124
unpredictable over
Retailers 28 96.98
the years
Exporters 4 97.63
Total 215
Farmers 130 105.09
CLU3: Flooding Primary collectors 21 112.50
occurrences Millers 25 121.62
affecting firms are Wholesalers 7 153.71 7.599ns 0.18
unpredictable in Retailers 28 95.46
each year Exporters 4 101.50
Total 215
Farmers 130 104.84
CLU4: The duration
Millers 25 120.98
of flooding is
Wholesalers 7 152.71 7.319ns 0.198
unpredictable over
Retailers 28 98.11
the years
Exporters 4 89.50
Total 215
Measuring the Efficiency of the Rice Production in
4
Myanmar using Data Envelopment Analysis: A Non-
Parametric Approach
Rice production in Myanmar is constrained by bio-physical and socio-economic factors.

Efficient farm practices can enhance productivity, farmers’ profit and marketed rice. We
present this study to analyze the profitability of the rice production, investigate the efficiency
of the rice production and to identify socio-economic characteristics and farm-specific
characteristics that influence this efficiency of the rice production in the Ayeyarwaddy
Region, Myanmar. To that purpose, we collected primary data from 130 respondents in the
Ayeyarwaddy Region by using a random sampling method and analyzed this data via
descriptive statistics, Data Envelopment Analysis (DEA) and a Tobit regression analysis.
According to the average overall technical efficiency, farmers have an additional rice yield
potential of 25% that can be attained by improving the input utilization. The best practices
of more efficient rice farms learn that the technical inefficiency is caused by the abundant
use of inputs, especially of herbicides and animal power. Most of the rice farms in this study
suffer from allocative and economic inefficiencies resulting from wrong combinations of
input usages. The average economic efficiency level indicates that farmers can increase their
profitability by 57% by adapting their input costs. The Tobit regression indicates that the
efficiency is significantly higher for younger farmers, farmers that are better educated, have
more experience and/or have knowledge of agricultural extension services and grow the Aye
Yar Min variety. The efficiency in the rice production can be further improved by setting up
cooperatives between different farmers to increase the scale of operations. Moreover, the
government should intervene to reduce the input prices, control the quality of the input seeds
and install an appropriate financial crop insurance mechanism. An effective agricultural
extension services should be widespread in a systematic manner to improve the efficiency
and decision-making skills of the rice farmers in the study area.
122 Chapter 4
4.1 Introduction
population. Agriculture is essential to the domestic economy of Myanmar. According to the
Ministry of Agriculture and Irrigation (MOAI, 2015a), agricultural activities resulted in
22.1% of the Gross Domestic Product in 2014-2015. More than half of the population is
directly employed in this sector. Rice plays an essential role not only in food security but
also in the nation’s economic development. In 2016-2017, rice production was reported
being more than 19 million MT and the country exports were 1.5 million MT (USDA, 2017),
worth about 439 million USD in 2016 (WTO, 2018). The country’s average rice yield
amounted about 3.84 MT/ha while the yield of Southeast Asia countries like in Vietnam was
about 5.58 MT/ha in 2016 (FAO, 2017). In 2016, the paddy production in Myanmar was
ranked 7th among the paddy producing countries in the world (World Rice Production,
2017). However, the yield and production of rice cultivation in Myanmar remains low
compared to neighbouring countries whereas there is still a high potential for productivity
increases (Zorya, 2016). According to Saysay (2016), rice production and supply is sensitive
to profitability and improving profitability provides incentives to increase production and
marketable surplus. The best and most effective way to improve productivity can be realized
via a more efficient utilization of scare resources.
The variation in the rice yield reflects the current uneven distribution of agricultural inputs
and skills. Different farmers have different resource availabilities, different input and output
prices, and different optimal operating points (Ali & Flinn, 1989; Wang et al., 1996). Aung
(2012) indicates the major factors that may increase the rice productivity are the types of
rice varieties, fertilizers, agricultural chemicals, irrigation techniques and the policies of
rural institutions supporting the agricultural sector. Improving the productivity of the rice
industry could contribute to a poverty reduction leading to hunger eradication, national food
security and economic development (FAO, 2004).
According to Amos (2007), efficiently utilizing the limited resources by the smallholder
farmers in developing countries is a prerequisite to increase the food security and the farm
income. In this study, we first analyze the profitability of the rice production using the
enterprise budget. Second, we measure the technical, scale, allocative and economic
efficiency of the rice production via Data Envelopment Analysis (DEA) to assess the
Efficiency of rice production 123
potential for increasing the rice production in the Ayeyarwaddy Region, Myanmar. Lastly,
we identify the socio-economic and farm-specific characteristics that influence the
efficiency of the rice production in the Ayeyarwaddy Region, Myanmar. Our contribution
is threefold. This is the first study to analyze technical, scale, allocative and economic
efficiency of rice production in Myanmar using the DEA approach. This study can identify
the most efficient farmers whose practices can be applied as a benchmark for others in the
study area to improve the efficient utilization of scarce resources. Results of this study
provide relevant recommendations for the farmers to better control the resource usage and
improve the operational decision-making in the rice production especially for rural
development and food security in Myanmar.
The remainder of the paper is organized as follows. Section 4.2 reviews the relevant
literature on the production and economic efficiency of rice production. We describe the
data collection, sampling procedure and methodology to examine the production and
economic efficiency in Section 4.3. Section 4.4 presents the empirical results and Section
4.5 discusses the findings for the study. The conclusion and policy recommendations are
summarized in Section 4.6.
4.2.1 Benchmarking efficiency using Data Envelopment Analysis
Efficiency can be understood in terms of a firm’s ability to convert inputs to outputs and
respond optimally to economic signals or prices in production economics. When measuring
the efficiency, we need to know the benchmarking between companies which operate in the
same industry. The most popular techniques used to measure farm efficiency are Data
Envelopment Analysis (DEA) using mathematical programming methods and the Stochastic
Frontier Analysis (SFA) applying econometric methods (Sivarajah, 2017). DEA is a non-
parametric, deterministic procedure for evaluating the frontier and employs the best-practice
frontier (Bates et al., 1996). SFA is a parametric approach that requires the assumption of a
specific function a priori even though it can estimate parameters for the function that
incorporates error components: statistical noise associated with data measurement errors and
a non-negative component that measures the inefficiency in production (Coelli et al., 2005).
Therefore, DEA approach is less sensitive to misspecification relative to SFA (Watkins et
124 Chapter 4
al., 2014). In this study, we will focus on DEA approach to measure the different types of
efficiency in rice production.
Data Envelopment Analysis (DEA), originally developed by Charnes, Cooper and Rhodes
(1978) is a very powerful service management and benchmarking technique to evaluate
nonprofit and public sector organizations. Linear programming (LP) is the methodology that
makes DEA particularly powerful compared with other productivity management tools.
DEA has been widely studied, used and analyzed by academics to evaluate the firm (the
decision-making unit) performance using efficiency measurements. In the literature,
distinction is made between the input-oriented and the output-oriented DEA model to
measure the efficiency. The input-oriented DEA model minimizes the inputs keeping the
outputs at their current level. The output-oriented DEA model maximizes the outputs are
maximized keeping the inputs are fixed at their current level (Banker et al., 1984).
Different studies investigated the farm efficiencies of the rice production in developed and
developing countries. Watkins (2014) and Nguyen et al. (2012) estimated the technical,
scale, allocative and economic efficiency of rice production using panel data and an input-
oriented DEA in the United States and South Korea, respectively. The empirical studies that
measured the efficiency of rice production in developing countries are summarized in Table
4.1. All these studies applied cross-sectional data. In total, 13 studies published between
1999 and 2017 are listed in the table. For each of these studies, we listed the country, the
type of efficiency measured, and the DEA model used (input-oriented vs output-oriented).
All studies investigated the technical efficiency. Based on the types of analysis, nine studies
use an input-oriented DEA; two studies apply an output-oriented DEA and two studies
employ both an input-oriented and output-oriented DEA depending on their objectives in
rice production and their input and output variables. Aung (2012) investigated the economic
efficiency of rice production in Bago and Yangon regions in Myanmar by applying the
technique Stochastic Frontier Analysis (SFA), used to analyze parametric data. The average
economic efficiency of rice production is estimated at 0.84 for both regions.
Table 4.1 Empirical studies on efficiency measurement of rice production using DEA approach in developing countries
No. Authors Country Efficiency Type of analysis

Technical efficiency
1. Linh et al. (2017) Vietnam Input-Oriented
Scale efficiency
2. Sivasankari et al. (2017) India Input-Oriented
Scale efficiency
Efficiency of rice production
3. Khan, Baten and Ramli (2016) Malaysia Input-Oriented
Scale efficiency
4. Ogunniyi et al. (2015) Nigeria Technical efficiency Input-Oriented
5. Mailena et al. (2014) Malaysia Output-Oriented
Scale efficiency
6. Tipi et al. (2010) Turkey Input-Oriented
Scale efficiency
7. Kiatpathomchai (2008) Thailand Allocative efficiency Input-Oriented
Economic efficiency
8. Brázdik (2006) Indonesia Technical efficiency Input-Oriented
9. Chauhan, Mohapatra, and Pandey (2006) India Technical efficiency Input-Oriented
Input-Oriented
10. Dhungana, Nuthall, and Nartea (2004) Nepal Allocative efficiency
Output-Oriented
Economic efficiency
11. Krasachat (2004) Thailand Technical efficiency Input-Oriented
12. Coelli, Rahman, and Thirtle (2002) Bangladesh Allocative efficiency Input-Oriented
Economic efficiency
Input-Oriented
13. Wadud (1999) Bangladesh Allocative efficiency
Output-Oriented
Economic efficiency
125
Source: Own compilation based on literature

126 Chapter 4
4.2.2 Impact of socio-economic and farm-specific characteristics on efficiency
The estimation of efficiency without clearly identifying important socio-economic and

demographic, institutional and policy variables, has limited importance for policy and
management purposes (Saysay, 2016). According to Rahman (2013), the determinants of
farm production efficiency are categorized into three aspects based on the nature of
relationship that exist between a farm and some factors within or outside the farm. These
three aspects are the farm-farmer relationship (i.e. the influence of the farmer’s socio-
economic characteristics on farm production), the farm-institution relationship (i.e. the
influence of agricultural extension, credit, research, infrastructure, etc.) and the farm-
production relationship (i.e. the factor-product relationship to determine the most profitable
mix of resources to produce a given output level or to determine the most profitable amount
of output to produce at a given level of input). Most of the studies in the literature focus on
the farmer-farm relationship. Linh et al. (2017), Ogunniyi et al. (2015), Mailena et al. (2014)
and Dhungana (2004) indicated that education of the farmers impacted on the technical
efficiency of the rice production. Moreover, Dhungana (2004) investigated that the
education had a positive impact on the economic, allocative and scale efficiency. Linh et al.
(2017), Ogunniyi et al. (2015), Tipi et al. (2010) and Kiatpathomchi (2008) found that total
farm size and age of the farmers influenced the technical efficiency of the rice production.
According to the study of Dhungana (2004), the age of the farmers had a negative impact on
the technical, scale and economic efficiency of the rice production. Wadud (1999) observed
that family size had a negative impact on the technical and economic efficiency. Ogunniyi
et al. (2015) investigated that farming experience had a positive impact on the technical
efficiency. However, Kiatpathomchi (2008) and Wadud (1999) indicated that the farming
experience has a negative impact on the economic efficiency of the rice production.
According to Kiatpathomchi (2008), the rice variety as an element of the farm-production
relationship impacts negatively the technical efficiency and economic efficiency. Aung
(2012) identified some relevant factors impacting the efficiency score for other regions in
Myanmar, i.e. farmers cultivating a secondary crop attain a lower economic efficiency and
farmers with a higher educational level accomplish a higher economic efficiency.
4.3 Materials and Methods
Both primary and secondary data are collected for the rice production in two townships,
Myanaung Township and Kyangyin Township in the Ayeyarwaddy Region, which is the
largest rice production area in Myanmar (cf. Appendix 4.A.1). The random sampling method
is used to collect primary data and the sample size is calculated from the direct proportion 9
compared to the (finite) population (cf. Appendix 4.A.2). A sample of 130 farmers is
selected and in-depth interviews and key informant interviews have been conducted to
interview sample respondents (Umberger, 2014). We collected socio-demographic data
(age, education level, actor’s experience in rice production and marketing, family size),
production data (such as material inputs, family labor and hired labor, animal power,
machine power, and their prices and wages) and financial data (such as credit sources and
interest rates) and other related primary data. The secondary data was collected from the
Department of Agriculture (DOA), Ministry of Agriculture, Livestock and Irrigation
(MOALI), FAOSTAT, websites and other relevant data sources.
4.3.2 Research method: Benefit-Cost Analysis
The concept of enterprise budget (Olson, 2009) is used to evaluate the profitability of the
rice production by the farmers. This enables us to evaluate the cost and return of the value
adding activities. In order to estimate the return above variable cost or gross margin, the
average yield and average price are used. To calculate the variable costs we take material
costs, hired labor costs, family labor costs and the interest on cash costs into account by
means of the mathematical expression (4.1).
Return above variable cost (RAVC) = Total Gross Benefit – Total Variable Cost (4.1)
ே
9
This is based on the equation of Yamane (1967), i.e. ݊ ൌ ଵାேሺ௘ మ ሻ where N is the
128 Chapter 4
4.3.3 Research method: Data Envelopment Analysis (DEA)
Data Envelopment Analysis enables to distinguish different kinds of efficiency such as

technical, scale, allocative and economic efficiency, which are explained below.
4.3.3.1 Technical efficiency (TE) and scale efficiency (SE)
Technical efficiency is defined as the ability of a farm to either produce the maximum
feasible output from a given bundle of inputs or to produce the given level of output using
the minimum amount of inputs (Basanta et al., 2004). The technical efficiency can be
measured under the assumption of constant returns-to-scale (CRS), which hypothesizes that
the output will change in the same proportion as the inputs are changed. If the technical
efficiency is measured under the assumption of variable returns-to-scale (VRS), the
production technology is assumed to exhibit increasing and/or decreasing returns-to-scale
(Kumar and Gulti, 2008). The technical efficiency with constant returns-to-scale (TECRS),
which is further referred to as the overall technical efficiency, helps to determine
inefficiencies due to input/output arrangement as well as the size of operations and is
composed out of two components, i.e. the pure technical efficiency and the scale efficiency
(Sharma et al., 1999). The pure technical efficiency, also called the technical efficiency with
variable returns-to-scale (TEVRS), is achieved by estimating the efficient frontier under the
assumption of variable returns-to-scale. The pure technical efficiency makes abstraction of
the scale effect and reveals the ability of the business unit to organize its inputs efficiently
in the production process. Hence, the pure technical efficiency can be used as an index to
capture the managerial performance of a decision maker. The ratio of the overall technical
efficiency vs the pure technical efficiency provides the scale efficiency (SE). When the
overall technical efficiency is equal to the pure technical efficiency, the business unit is
called a scale-efficient unit. Scale efficiency expresses whether a firm is operating at its
optimal size. The scale efficiency gives notion of the managerial ability to select the optimal
resource input size and scale of production to achieve the expected production level (Kumar
and Gulti, 2008). Scale inefficiency is the result from decreasing returns-to-scale (DRS) or
increasing returns-to-scale (IRS). Decreasing returns-to-scale implies that a firm is too large
to take full advantage of its scale and has a supra-optimum scale size. In contrast, a firm that
is experiencing increasing returns-to-scale, is too small for its scale of operations and, thus,
operates at sub-optimum scale size. A firm is scale efficient if it operates at constant returns-
to-scale (CRS).
The TE score for a given farm n is obtained by solving the following input-oriented DEA
model:
Notation
Sets
Parameters
xnj the amount of input j used on farm n
Decision variables
λi the nonnegative weights for farm i
θn the technical efficiency of farm n
Mathematical formulation
ܶ‫ܧ‬௡ ൌ ߠ௡ (4.2)
Subject to
ூ
෍ ߣ௜ ‫ݔ‬௜௝ െ ߠ௡ ‫ݔ‬௡௝ ൑ Ͳ Ɐj (4.3)

௜ୀଵ
ூ
෍ ߣ௜ ‫ݕ‬௜௞ െ ‫ݕ‬௡௞ ൒ Ͳ
௜ୀଵ
Ɐk (4.4)
෍ ߣ௜ ൌ ͳ
௜ୀଵ
(4.5)
ߣ௜ ൒ Ͳ
(4.6)
The objective function (eq. 4.2) of the input-oriented DEA model minimizes the inputs while
the outputs are kept at their current levels. If θn is equal to 1, the business unit is technically
130 Chapter 4
efficient. When θn is smaller than 1, the business unit is technically inefficient with the
inefficiency level equal to 1 – TEn (Coelli, 1995). Equation (4.3) is the input constraint
formulated for every input j. This constraint stipulates that the input used by farm n,
weighted by its efficiency level θn, must exceed or be equal to a weighted combination of
inputs used by the other farms. Equation (4.4) is the output constraint formulated for every
output k. This constraint stipulates that the output obtained by farm n must be lower than or
equal to the weighted combination of outputs obtained by the other farms. Equation (4.5)
sets the sum of all weights given to the other farms equal to 1 and ensures that the technical
efficiency TEn is calculated under the assumption of variable returns-to-scale (VRS) (Coelli,
1995). Model (4.2)-(4.6) is the formulation proposed by Banker, Charnes, and Cooper
(1984) and calculates the pure technical efficiency (TEn ൌ ܶ‫ܧ‬௏ோௌ೙ ). When equation (4.5) is
omitted, constant returns-to-scale (CRS) are assumed and the model reflects the formulation
proposed by Charnes, Cooper, and Rhodes (1978) to calculate the overall technical
efficiency (TEn = ܶ‫ܧ‬஼ோௌ೙ ).
The scale efficiency of farm n (ܵ‫ܧ‬௡ ) can be calculated by the following equation:
ܶ‫ܧ‬஼ோௌ೙
ܵ‫ܧ‬௡ ൌ (4.7)
ܶ‫ܧ‬௏ோௌ೙
4.3.2.2 Economic efficiency (EE)
Economic Efficiency (EE) is also known as cost efficiency and is calculated as the ratio of
the minimum feasible costs and the actually observed costs for a decision-making unit
(DMU) (Farrell, 1957). If a decision-making unit is both technically and allocative efficient,
it is said to be economically efficient. The EE score for a given farm n is obtained via solving
the following LP model to find the minimum cost:
Notation
Sets
Parameters
Pnj the price for input j on farm n
Decision variables
λi the nonnegative weights for farms i
*
x nj the cost-minimizing level of input j on farm n given its input price and output
levels
EE input-oriented DEA model
‫ܥܯ‬௡ ൌ ݉݅݊ఒ೔ ௫‫כ‬ ೙ೕ

෍ ܲ௡௝ ‫ כ ݔ‬௡௝ (4.8)
௝ୀଵ
Subject to
௃
෍ ߣ௜ ‫ݔ‬௜௝ െ ‫ כ ݔ‬௡௝ ൑ Ͳ Ɐi (4.9)

௜ୀଵ
ூ
෍ ߣ௜ ‫ݕ‬௜௞ െ ‫ݕ‬௡௞ ൒ Ͳ
௜ୀଵ
Ɐk (4.10)
෍ ߣ௜ ൌ ͳ
௜ୀଵ
(4.11)
ߣ௜ ൒ Ͳ
(4.12)
The objective function (eq. 4.8) of the input-oriented model to measure the economic
efficiency minimizes the costs of rice production while the outputs are kept at their current
levels. Equation (4.9) is the input constraint for every input j. This constraint stipulates that
the inputs of farm n must exceed or be equal to the weighted combination of inputs used by
132 Chapter 4
the other farms. Equation (4.10) is the output constraint formulated for every output k. The
output obtained by farm n must be lower than or equal to the weighted combination of
outputs obtained by the other farms. Equation (4.11) sets the sum of all weights given to the
other farms equal to 1 and ensures the minimum cost in equation (4.8) is calculated under
the assumption of variable returns-to-scale (VRS) (Fletschner and Zepeda, 2002; Wu and
Prato, 2006). The economic efficiency of farm n (‫ܧܧ‬௡ ) can then be calculated based on
equation (4.13), i.e.
௃
෍ ܲ௡௝ ‫ כ ݔ‬௡௝
௝ୀଵ
‫ܧܧ‬௡ ൌ ௃ (4.13)
෍ ܲ௡௝ ‫ݔ‬௡௝
௝ୀଵ
where, the numerator is the minimum total cost obtained for farm n based on model (4.8)-
(4.12) and the denominator is the actual total cost observed for farm n. EEn = 1 indicates that
the farm is economically efficient and EEn < 1 indicates that the farm is economically
inefficient.
4.3.2.3 Allocative efficiency (AE)
Allocative efficiency or price efficiency is defined as the ability of a farm to use the inputs
in optimal proportions, given their respective prices and the production technology (Farrell,
1957). In other words, allocative efficiency is the ability to select a combination of inputs to
produce a set of outputs at minimum cost. Allocative efficiency can be calculated by the
following equation:
‫ܧܧ‬௡
‫ܧܣ‬௡ ൌ (4.14)
ܶ‫ܧ‬௡
where
EEn the economic efficiency calculated for farm n using eq. (4.13)
TEn the technical efficiency calculated for farm n using model (4.2)-(4.6).
If AEn = 1 the farm is price efficient and AEn < 1 means that the farm is price inefficient.
4.3.3 Research method: Tobit regression model
The Tobit regression model is used to perform a regression analysis to determine the
significant socio-economic and farm-specific characteristics that hinder the rice production
efficiency, which is obtained via DEA. Tobit analysis assumes that the dependent variable
has a number of factors clustered at a limiting value, usually zero (Tobin, 1958). Hence, the
following regression model is employed.
‫ݕ‬௜‫ כ‬ൌ ‫ݔ‬௜ ߚ௜ ൅ ߤ௜ ݅ ൌ ͳǡ ʹǡ ǥ ǡ ݊ (4.15)

‫ݕ‬௜ ൌ ‫ݕ‬௜‫ݕ݂݅ כ‬௜‫כ‬ ൏Ͳ (4.16)
‫ݕ‬௜ ൌ Ͳǡ ‫݁ݏ݅ݓݎ݄݁ݐ݋‬ (4.17)
where
ߤ௜ ̱ܰሺͲǡ ߪ ଶ ሻ the error terms
xi explanatory variables
βi estimated parameter coefficients
‫ݕ‬௜‫כ‬ a latent variable
‫ݕ‬௜ the efficiency scores obtained via the DEA model
4.4 Empirical Results
4.4.1 Rice production and profitability of the farmers in the study area
The rice cultivation steps conducted in the study area are detailed in Table 4.2. Table 4.3
gives an adequate idea of the input uses of rice production and presents the profitability of
the rice production in the study area by calculating the enterprise budget (cf. Table 4.3). In
the study area, rice is cultivated in two seasons: monsoon and summer. This study
investigates the Emata varieties grown in the monsoon rice production period which only
relies on rainfall. For the monsoon rice, the fields are tilled around the beginning of June.
Land preparation such as ploughing and harrowing together with the application of farm
yard manure (2 ton/ha) and compound fertilizer (42.39 kg/ha) is mainly done by animal
power and human labour. Some farmers use tractors for land preparation. Before land
preparation, seed beds are prepared by sowing rice seeds (104.48 kg/ha) in nurseries in the
134 Chapter 4
last week of May. The rice seedlings are transplanted between 15 and 21 days to the rice
fields. After planting, rice crops are cared for by using herbicides (3.44 kg/ha or 0.21 L/ha),
using fertilizers (104.92 kg/ha of urea, 4.87 kg/ha of potash and 9.51 kg/ha of T-super),
controlling the weed manually, using pesticides (0.04 kg/ha or 0.35 L/ha) and irrigating
water, which are all done by human labour. Urea fertilizer and pesticides are normally
applied three times before harvesting. Harvesting and threshing is done by human labour in
the late of October and at the beginning of November. Combined harvesting machines are
rarely used to harvest and thresh the rice in the study area. After threshing, the rice is dried
by human labour and the transportation is mainly performed by animal power. The total
labour used for all rice production activities is on average 5.82 animal-day/ha for animal
power, 7.18 machine-day/ha for machine power and 68.12 man-day/ha for for both family
and hired human labour.
The results of Table 4.3 give insights in the production system and the costs and profits of
the farmers from the monsoon rice production for Emata rice varieties. The farmers in the
study area obtain the average paddy yield of 3000.11 kg/ha by using the average amount of
inputs shown in the table. The average total gross benefits 708026 MMK/ha and the average
total variable cost is 629166 MMK/ha. Hence, the return above variable cost (RAVC)
amounts 78860 MMK/ha. Based upon the return on investment, farmers receive a profit 13
MMK in return for an investment of 100 MMK in Emata rice. The total variable costs are
covered if the sample farmers receive a price of 210 MMK/kg. The rice farmers achieve
very few amounts of profit from the rice production, which just cover their cost of
production. Therefore, the rice farmers are not profitable on average in rice production in
the study area.
Table 4.2 Rice cultivation steps (transplanting method) practicing by the farmers
in the study area
Month Week Activities
1
2
May
3 Seedbed preparation for nursery, herbicide application
4 Seed broadcasting on the seedbeds
1 Land preparation for the field, application of FYM and Compound
2 fertilizers
June
3
Uprooting the seedlings and transplanting them to the field
4
1
Herbicide application, pesticide application
2
July
3
4 Application of urea fertilizer and Potash, irrigation
1 Drainage
2
August
3 Application of urea fertilizer and T-super, and herbicide application
4 Manual weeding
1 Pesticide application and urea fertilizer application
2 Pesticide application, irrigation
September
3
4 Drainage
1
2
October
3
4
Harvesting, threshing, transporting and drying
1
2
November
3
4
Note: These cultivation steps are in general. Farmers manage their rice cultivation depending on the different
conditions.
136 Chapter 4
Table 4.3 Enterprise budget and benefit cost analysis of the monsoon rice
production in 2016 for the Emata rice by the farmers (N=130)
Effective Total
Items Unit Level
Price Value
1.Gross Benefit
Yield of paddy kg/ha 3000.11 236
Total gross benefit MMK/ha 708026
2. Variable Cost
(a) Material Cost
Seed kg/ha 104.48 336 35105
FYM ton/ha 2.00 7487 14974
Urea fertilizer kg/ha 104.92 481 50467
Potash kg/ha 4.87 950 4627
T-super kg/ha 9.51 960 9130
Compound fertilizer kg/ha 42.39 520 22043
Pesticides (Powder) kg/ha 0.04 25461 1018
Pesticides (Liquid) L/ha 0.35 17500 6125
Herbicide (powder) kg/ha 3.44 7919 27241
Herbicide (Liquid) L/ha 0.21 17172 3606
Fuel gal/ha 1.51 2943 4444
Total Material Cost(a) MMK/ha 178780
(b) Family Labor Cost
Machine
Land preparation (machine) 2.24 9439 21143
day /ha
Land Preparation Amd/ha 4.18 4288 17924
Manure application Md/ha 2.57 3157 8113
Picking Md/ha 1.94 2228 4322
Seeding Md/ha 2.34 2527 5913
Transplanting Md/ha 0.51 3558 1815
Irrigation& drainage Md/ha 2.47 3083 7615
Manual Weeding Md/ha 0.65 2186 1421
Fertilizer application Md/ha 4.43 2544 11270
Pesticides application Md/ha 1.06 2641 2799
Herbicide application Md/ha 1.96 2587 5071
Harvesting Md/ha 0.27 3946 1065
Table 4.3 Enterprise budget and benefit cost analysis of the monsoon rice
production in 2016 for the Emata rice by the farmers (Continued)
Effective Total
Items Unit Level
Price Value
Drying Md/ha 0.74 3206 2372
Total family labor cost(b) MMK/ha 90844
(c) Hired Labor Cost
Machine
Land preparation (machine) 3.94 9439 37190
day /ha
Land Preparation Amd/ha 1.64 4288 7032
Picking Md/ha 3.80 2280 8664
Seeding Md/ha 1.22 2527 3083
Transplanting Md/ha 21.31 3558 75821
Manual Weeding Md/ha 7.62 2186 16657
Fertilizer application Md/ha 0.46 2544 1170
Pesticides application Md/ha 0.21 2641 555
Herbicide application Md/ha 0.23 2587 595
Harvesting Md/ha 14.33 3946 56546
Harvesting and threshing by combine
MMK/ha 0.42 42850 17997
harvester
Machine
Threshing by machine 0.58 20573 11932
day/ha
Transportation MMK/ha 7500
Drying Md/ha 0.11 3206 353
Total Hired Labor Cost MMK/ha 245096
(d) Interest on cash cost
Material cost MMK/ha 178780 0.27 48270
Hired labor cost MMK/ha 245096 0.27 66176
Interest on cash cost MMK/ha 114446
Total variable costs (a + b + c + d) 629166
Return above variable costs 78860
Return per unit of capital invested (B/C ratio) 1.13
Break-even price (MMK/kg) 210
Break-even yield (Kg/ha) 2665.96
Note: kg = kilogram, ha = hectare, MMK = currency of Myanmar (Myanmar kyats), L = litre, gal = gallon,
Md = man-days, Amd = Animal-days,
138 Chapter 4
4.4.1 Technical, allocative and economic efficiency of the rice farmers
4.4.1.1 Descriptive statistics of input and output
In this section, we use the types of inputs which are applied by the majority of the farmers
in the rice production to measure the farm efficiency. The summary of statistics of the input
and output variables to analyse the technical, allocative and economic efficiency are reported
in Table 4.4. The output is measured as kilograms of rice yield. The average rice yield of the
sampled farms is 3000.11 kg/ha with a minimum yield of 516.44 kg and a maximum yield
of 5164.39 kg. The standard deviation of the paddy yield is quite high, which indicates the
large variability among the sampled farms. The inputs are the amount of seeds, amount of
urea fertilizer, amount of herbicides, animal labour, machine and human labour and their
corresponding price information. Among the inputs, the mean total man labour used is 68.12
man-days/ha with a standard deviation of 25.33 man-days/ha, which labels the rice
production in the study area as labour intensive (Ogunniyi et al., 2015). The data in this table
is used as input for calculating the input-oriented technical efficiency using the model (4.2)-
(4.6), the economic efficiency using model (4.8)-(4.13) and the allocative efficiency using
equation (4.14). The results are shown in Table 4.5.
Table 4.4 Descriptive statistics of the input, output and prices of the variable inputs
of the sampled farms (N=130)
Std.
Deviation
Output
Rice yield kg/ha 3000.11 516.44 5164.39 818.49
variables
Seed rate kg/ha 104.48 77.47 180.75 17.27
Urea fertilizer kg/ha 104.92 0.00 247.10 52.47
Herbicide kg/ha 3.44 0.00 7.41 4.62
Animal power animal-day/ha 5.82 0.00 22.24 6.13
Machine power machine-day/ha 7.18 1.00 15.83 4.04
Human labour man-day/ha 68.12 7.41 155.67 25.33
Price of seed MMK/kg 336.26 143.54 542.25 85.82
Input Price of urea
MMK/kg 480.80 340.00 960.00 73.31
variables fertilizer
Price of herbicide MMK/kg 7919.23 3000.00 40000.00 7709.81
Wage of animal MMK/animal-
4288.46 3500.00 5000.00 603.17
power day
Price for machine MMK/machine-
20575.00 2000.00 65000.00 13286.51
power day
Wage of human
MMK/man-day 2856.91 2000.00 3428.57 283.99
labour
Note: we assumed 1 USD = 1350 MMK
4.4.1.2 Technical efficiency and scale efficiency
According to the results of Table 4.5, the average overall technical efficiency score (TECRS)
is 0.75. Hence, as this factor is smaller than 1, most of the farmers in the study area do not
utilize their production resources in the most efficient manner. Farmers do not obtain the
maximal output from the given level of inputs. As a result, the sample farmers can increase
the technical efficiency by 25% via the adoption of the best farm practices of the efficient
farms, i.e. farmers with an efficiency score θn equal to 1. The result is consistent with the
findings of different countries: Sri Lanka (0.75) (Thibbotuwawa et al., 2012); South Korea
(0.77) (Nguyen et al., 2012); India (0.76) (Sivasankari et al., 2017); India (0.77) (Chauhan
140 Chapter 4
et al., 2006) and Nepal (0.76) (Dhungana et al., 2004). The average pure technical efficiency
score (TEVRS) is 0.90, which indicates that about 10% of the inefficiency can be addressed
by improving the managerial skills of the farmers such that they are able to use their inputs
more efficiently. The result is very close to the findings of Chauhan et al., (2006) conducted
in India.
Scale efficiency
The scale efficiency provides useful information for the farmers to know whether or not
their scale of production should be changed in order to improve efficiency. The average
scale efficiency score is 0.83 (= TECRS/TEVRS = 0.75/0.90). Hence, the technical efficiency
can be improved by 17% by adapting the scale of the farms. The average scale efficiency
score obtained in our study is similar to the findings of Ogunniyi et al. (2015), Khan et al.
(2016) and Chauhan et al. (2006). However, different from the result in our study,
Sivasankari et al. (2017), Linh et al. (2017), Ogunniyi et al. (2015), Khan et al. (2016), Tipi
et al. (2010), Dhungna et al. (2004), Krasachat (2004), Coelli et al. (2002) and Wadud (1999)
observed that the scale efficiency is larger than the pure technical efficiency (TE VRS). A
further analysis of the scale efficiency reveals that 43.85% of the farmers achieve more than
0.90 showing these farms are operating quite close to the optimal rate given their scale. The
observed returns-to-scale of the sampled rice farms are presented in Table 4.5. Out of 130
farms, about 20.77% of them operate at constant returns-to-scale. About 73.08% of the farms
show increasing returns-to-scale indicating that most of the farms in the sample are too small
and, therefore, these rice farms would benefit from an increase in their scale in rice
production. Only 6.15% of the farms operate at decreasing returns-to-scale (i.e. operating
above their optimal scale). Hence, the majority of the farms in the study area have a
substantial scale inefficiency and they should be larger than their present operating size in
order to achieve a more efficient and higher production. The scale of operations can be
increased via setting up cooperatives in rice production and exploiting the economics of
scale.
Input slacks and excess input use

The optimum solution of the DEA model provides input and output slacks corresponding to
the input and output constraints. Slacks exist only for inefficient DMUs and indicate how
these inefficient farms can improve their operations and their technical efficiency (Jacobs et
al., 2006). From the concept of an input-oriented DEA efficiency analysis, the technical
efficiency can be improved by the proportional reduction of one or multiple inputs while
still attaining the same output (Kiatpathomchai, 2008). Table 4.6 gives insight in the input
slacks given the VRS assumption. Since slack indicates the excess of an input, a farm can
reduce its expenditure on the input by the amount of slack without reducing its output
(Sivsankari, 2017). Almost all the inputs are used excessively. The mean slacks for the seed
rate and the urea fertilizer are 2.61 kg/ha and 8.26 kg/ha, respectively. These excess amounts
of seed and fertilizer are wasted in the production process. The percentage of herbicide slack
is the highest (35.17%) among all inputs used in the rice production. Moreover, the mean
slack for animal power, machine power and human labour are 0.98 animal-day/ha, 0.48
machine-day/ha and 2.45 man-day/ha, respectively. The largest input excess of labor used
in the rice production is animal labour (16.84%). This data reveals that the rice production
in the study area is still very traditional and improvements can be realized via farm
mechanization.
4.4.1.3 Allocative efficiency and economic efficiency
Allocative efficiency
An analysis of the allocative efficiency reveals that most rice farmers employ an inefficient
input mix, given the input prices (cf. Table 4.5). As a result, their costs are on average 43%
higher compared to the most efficient farm and they can reduce their costs by carefully
considering the relative input prices when selecting input quantities. The mean allocative
efficiency in the study area is very low compared to other countries (United States (Watkins,
2014), Malaysia (Khan et al., 2016), Sri Lanka (Thibbotuwawa et al., 2012), Thailand
(Kiatpathomchai, 2008), Nepal (Dhungana et al., 2004) and Bangladesh (Coelli et al., 2002
and Wadud, 1999)) ranging between 0.71 and 0.91 for rice production. We may conclude
that farmers in Myanmar need better guidance and information to select the appropriate
combination of inputs given the input prices.
Economic efficiency
According to the results of Table 4.5, only one farm (0.77%) is economically efficient and
about 24.60% of the farms have an acceptable economic efficiency ranging between 0.51
and 0.90. The majority of the farms (74.63%) are not economically efficient and have a score
lower than 0.51. These results confirm that the rice farmers are economically inefficient and
the total cost of rice production for each farm could be reduced by 57% on average to achieve
142 Chapter 4
the same level of output. The economic efficiency is very low in the study area compared to
other countries (such as United States, Sri Lanka, Thailand, Nepal and Bangladesh), for
which the mean economic efficiency ranges between 0.52 and 0.78 for rice production.
Excess input use in the economic efficiency

Table 4.7 indicates the distribution of the excess inputs given the economic efficiency. We
also have displayed the optimal input combination that minimizes the input costs. Since the
percentage of excess use (prices of inputs are taken into account in the cost minimization)
in machine power (61.92%) and human labour (78.12%) is very high compared to other
inputs, the rice farmers should carefully manage their excess use of labour.
4.4.1.4 Description of the best practices for rice production
According to the results in Table 4.5, only one farmer among the sampled rice farmers is
technically, allocative and economically efficient. The remaining 129 farmers are not
economically efficient in their rice production. Table 4.8 represents the percentage of the
farmers who achieve the same output level or have the same input level compared to this
efficient farmer. The purpose of this description is to set a best practice and to allow other
farmers to learn how they can improve their efficiency. The efficient farmer yields 3098.63
kg/ha of paddy. In total, 21 other farmers (16.28%) have the same or a higher production
level. Most of the other farmers use the best practice level of seeds (75.19%) and urea
fertilizer (69.77%). However, the benchmark learns that only a few other farmers are as
efficient with respect to the other resources, i.e. herbicide (1.55%), animal power (6.98%),
machine power (7.83%) and human labour (0.78%). Table 8 further reveals the input prices
paid by the most efficient farmer for seed, urea fertilizer, herbicide, animal power, machine
power and human labour. The other farmers pay the best practice prices for the herbicides
(37.98%), animal power (36.43%), urea fertilizer (20.16%) and seed rate (15.50%)
compared to the most efficient farmer. However, all farmers do not receive the best prices
for the machine and human labour compared to the farmer of most efficient farm.
Table 4.5 Frequency distribution of rice farms on the technical, allocative and economic efficiency index
Allocative
Technical Efficiency Economic Efficiency
Efficiency Efficiency
Level TECRS (Overall TE) TEVRS (Pure TE) Scale Efficiency (SE) (AE) (EE)
Frequency % Frequency % Frequency % Frequency % Frequency %
0.01 – 0.10 0 0.00 0 0.00 0 0.00 0 0.00 1 0.77

0.11 – 0.20 4 3.08 0 0.00 3 2.31 0 0.00 6 4.62
0.21 – 0.30 1 0.77 0 0.00 1 0.77 1 0.77 15 11.54
0.31 – 0.40 3 2.31 0 0.00 3 2.31 7 5.38 43 33.08
0.41 – 0.50 5 3.85 0 0.00 3 2.31 26 20.00 32 24.62
0.51 – 0.60 15 11.54 1 0.77 6 4.62 50 38.46 19 14.62
0.61 – 0.70 24 18.46 3 2.31 8 6.15 36 27.69 11 8.46
0.71 – 0.80 24 18.46 30 23.08 23 17.69 8 6.15 2 1.54
0.81 – 0.90 16 12.31 23 17.69 26 20.00 1 0.77 0 0.00
0.91 – 1.00 38 29.23 73 56.15 57 43.85 1 0.77 1 0.77
Mean 0.75 0.90 0.83 0.57 0.43
Minimum 0.15 0.59 0.15 0.28 0.07
Maximum 1.00 1.00 1.00 1.00 1.00
IRS - - 73.08% - -
DRS - - 6.15% - -
CRS - - 20.77% - -
143
144 Chapter 4
Table 4.6 Distribution of input slacks for achieving the optimum paddy yield
Excess input
Mean Mean input used out of Number
Inputs Unit
slack used mean input used of farmers
(%)
Seed rate kg/ha 2.61 104.48 2.50 16
Urea fertilizer kg/ha 8.26 104.92 7.87 29
Herbicide kg/ha 1.21 3.44 35.17 47
Animal power animal-day/ha 0.98 5.82 16.84 38
machine-
Machine power 0.48 7.18 6.69 29
day/ha
Human labor man-day/ha 2.45 68.12 3.60 23
Table 4.7 Distribution of excess input used for achieving minimum costs of rice
production
Excess input
Mean cost
Mean input Excess input used out of
Inputs Unit minimizing
used used mean input
input used
used (%)
Seed rate kg/ha 86.04 104.48 18.44 17.65
Urea fertilizer kg/ha 103.85 104.92 1.07 1.02
Herbicide kg/ha 3.01 3.44 0.43 12.50
Animal power animal-day/ha 4.52 5.82 1.30 22.41
Machine power machine-day/ha 2.73 7.18 4.45 61.92
Human labor man-day/ha 14.90 68.12 53.22 78.12
Table 4.8 Distribution of farmers following the best practice farmer in achieving
optimal output and using optimal input level
Frequency of Percentage of
Best farmers who farmers who
Output and
Unit Practice followed the best followed the best
Inputs
level practice level practice level
(N=129) (N=129)
Rice yield kg/ha 3098.63 21 16.28
Inputs
Seed rate kg/ha 103.29 97 75.19
Urea fertilizer kg/ha 123.55 90 69.77
Herbicide kg/ha 0.37 2 1.55
Animal power animal-day/ha 9.88 9 6.98
Machine power machine-day/ha 1.00 23 17.83
Human labor man-day/ha 22.24 1 0.78
Prices
Seed rate MMK/kg 334.93 20 15.50
Urea fertilizer MMK/kg 460.00 26 20.16
Herbicide MMK/kg 6000.00 49 37.98
Animal power MMK/animal-day 5000.00 47 36.43
Machine power MMK/machine-day 50000.00 0 0.00
Human labor MMK/man-day 2300.00 0 0.00
Note: we assumed 1 USD = 1350 MMK
4.4.2 Farm specific factors related to farm efficiency
In this section, we attempt to examine factors affecting the efficiency by following a two-
step approach as suggested by Coelli and Basttese (1996). To determine the influencing
factors, the Tobit model is applied via Eviews 9 to regress the efficiency scores on the farm
characteristics. The dependent variables are the efficiency scores calculated in Section 4.4.1.
Table 4.9 describes the summary statistics of the independent farm-specific variables. These
independent variables are age, family size, education, experience (farm-farmer variables);
farm size and rice variety (farm-production variables) and received extension services (farm-
146 Chapter 4
institution variable). Among these variables, the rice variety used is an important input for
achieving a high yield (Ataboh et al., 2014). The varieties used by the farmers in the study
area are Aye Yar Min, Sin Thu Kha, Shwe War Tun, Yadanar-toe, Kayin Ma, Shwe Wa Ti
and Pale Thwe. In our analysis, we group the farmers in two groups, i.e. the farmers who
grow the Aye Yar Min variety and the farmers who do not. Farmers that grow the Aye Yar
Min variety obtain a higher profit since they receive a higher price for this variety of high
quality and the Aye Yar Min variety is also a high yielding variety (Linn and Maenhout,
2018a). Another independent variable is the agricultural extension services received by the
farmers (Taraka et al., 2011), which implies a knowledge information transfer from
extension agents to farmers such that farmers can make better decisions based on their own
objectives and possibilities. This independent variable is a binary variable, i.e. farmers
participate in the extension program or do not.
Table 4.10 indicates the results of the Tobit regression analysis for the technical efficiency,
the scale efficiency, the allocative efficiency and the economic efficiency of the rice farmers.
All independent variables except family size and farm size are significant factors impacting
the efficiency of a farm in one way or another. In our discussion, we only indicate the
significant relationships.
The age of the farmers negatively impacts the technical efficiency under the assumption of
constant returns-to-scale, which confirms the findings of Ogunniyi et al. (2015) and Tipi et
al. (2010). The age of the farmers has also a negative and significant impact on the scale
efficiency, allocative efficiency and economic efficiency. This implies that younger farmers
are more efficient than older farmers. In-depth interviews revealed that younger farmers
accept new technologies in rice production more easily. Older farmers are more likely in
need to have contacts with extension agents and are less willing to adopt new practices and
modern inputs.
Education is an important factor indicating the ability of farmers to receive and understand
information regarding modern technologies. The more educated farmers perform better in
terms of the technical, scale and economic efficiency as a result of their access to information
and good farm planning (Linn and Maenhout, 2018b). This result confirms the studies of
Linh et al. (2017), Mailena et al. (2014) and Dhungana et al. (2004) but is not consistent
with the finding of Ogunniyi et al. (2015).
Experience in rice farming has a positive impact on the allocative efficiency and the
economic efficiency, which indicates that the experienced farmers are more efficient in the
usage of their input resources. Experience improves the decision-making of farmers. This
study contradicts the findings of Kiatpathomchai (2008) and Wadud (1999).
The farmers that grow the Aye Yar Min variety are more efficient compared to the farmers
that do not. However, the type of variety used is not related to the allocative efficiency, i.e.
the allocation of inputs by the farmers in rice production at given prices of inputs. This result
is consistent with the findings of Watkins (2014) and Kiatpathomchai (2008).
According to Backman et al. (2011), extension services guide the farmers to access the well-
farm management methods and to the more effective use of scarce resources. The extension
services received by the farmers have a positive and significant impact on all types of
efficiency except for the allocative efficiency. This means that even though the extension
services are received by rice farmers, the allocation of resources is not impacted because
price information is included in the allocative efficiency. Farmers who receive or participate
to the services provided by the agricultural extension agents are more efficient as a result of
the technical assistance to the farmers, information sharing, and the training courses
supported by the Department of Agriculture and other private agricultural pesticides
companies. This study confirms the results of Jaforullah and Whiteman (1999).
Table 4.9 Descriptive statistics of socio-economic variables for the sample farms
(N=130)

Age Year 51.09 27.0 85.00
Family size Number 4.00 2.00 8.00
Education Schooling year 6.58 2.00 15.00
Experience Year 27.07 3.00 54.00
Farm size ha 3.07 0.40 15.78
Variety used 1 = Aye Yar Min, 0 = others
Received extension services 1 = Yes, 0 = No
148 Chapter 4
Table 4.10 Results of Tobit regression coefficients (N=130)
Independent
TECRS TEVRS SE AE EE
Variables
0.6225*** 0.8825*** 0.6987*** 0.5599*** 0.3361***
Constant
(0.0917) (0.0531) (0.0855) (0.0514) (0.0606)
-0.0041** -0.0009 -0.0035** -0.0021** -0.0038***
Age
(0.0017) (0.0009) (0.0015) (0.0009) (0.0011)
-0.0028 -0.0035 -0.0006 0.0089 0.0021
Family size
(0.0131) (0.0076) (0.0122) (0.0073) (0.0087)
0.0174*** 0.0014 0.0189*** 0.0056 0.0162***
Education
(0.0065) (0.0014) (0.0061) (0.0008) (0.0043)
0.0023 0.0003 0.0019 0.0019** 0.0027***
Experience
(0.0016) (0.0009) (0.0015) (0.0038) (0.0011)
-0.0000 -0.0028 0.0017 -0.0055 -0.0039
Farm size
(0.0069) (0.0227) (0.0064) (0.0220) (0.0045)
0.1479*** 0.0598*** 0.1115*** 0.0135 0.0978***
Variety used
(0.0392) (0.0185) (0.0366) (0.0179) (0.0259)
Received 0.1135*** 0.0418** 0.0885*** 0.0033 0.0697***

extension services (0.0319) (0.0185) (0.0298) (0.0514) (0.0211)
SE of regression 0.1852 0.1072 0.1726 0.1038 0.1224

Wald Chi-Square 47.3736*** 13.7616* 41.4958*** 12.4492* 61.2085***
Log likelihood 39.4354 110.4767 48.5859 114.6713 93.2603
Likelihood
40.3928*** 13.0804*** 36.0119*** 11.8880* 50.1563***
ratio (LR) test
Dependent variables are TECRS index, TEVRS index, SE index, AE index and EE index.
Note: Figures in the parentheses are standard error.
* = significant at 10% level, ** = significant at 5% level and *** = significant at 1% level.
Source: Own survey (2017) and Eviews 9.
4.5 Discussion
The profitability of the rice production by the farmers is very low. Rice farmers get lower
output prices especially during the harvesting period, but they pay higher prices for their
inputs used in the rice production. The benefit-cost ratio of rice production, i.e. 1.13, in our
study is lower than the result (1.61) of Kiatpathomchai (2008) in Thailand. The average
yield in Thailand is higher than that of Myanmar. In addition, according to Kiatpathomchai
(2008), farmers from Thailand do not use animal power in any activities and use mostly
machine power and human labour in rice production. The profitability of the rice farmers is
highly related to the efficiency. If they can manage their inputs effectively and efficiently,
they can earn more profit from rice production. Kiatpathomchai (2008), Dhungana et al.
(2004), Coelli et al. (2002) and Wadud (1999) also analysed technical, allocative and
economic efficiency of rice production. The information and results of their studies are
presented in Table 4.11. In our study, we have included many more inputs in the analysis.
In particular, the herbicide input has not been considered before as an input variable in all
other studies. The pure technical efficiency of our study is higher than the results found by
Dhungana et al. (2004), Coelli et al. (2002) and Wadud (1999) but, is slightly lower than the
result of Kiatpathomchai (2008). These benchmarking studies have been proven to be useful
by getting insight in the input resource mix decision of the efficient farms and to find the
weakness of the current cultivation techniques (Dhungana et al., 2004).
Technical inefficiency in our study results largely from the abundant use of herbicides and
animal power. We can infer from overuse of herbicides that the weeds problem in the rice
fields in the study area is serious and can cause low rice yield. Therefore, they used a lot of
herbicide unsystematically and carelessly, which makes negative effect to yield. The
inefficient mix of input resources utilized results from the perceived uncertainty by the
decision maker on the one hand (Linn and Maenhout, 2018b) and the operational constraints
imposed on the other hand (Linn and Maenhout, 2018a). In Linn and Maenhout (2018b), the
climate uncertainty was revealed as the major source of environmental uncertainty
impacting the rice supply chain. When making decisions under large uncertainty, it is much
more difficult to the select the accurate and most efficient mix of resources. In response, an
appropriate financial insurance mechanism should be implemented by the government or
private partners to buffer the financial implications of unexpected crop failure for farmers.
According to Linn and Maenhout (2018a), crop cultivation in Myanmar is still carried out
according to traditional farming activities and most farmers lack the appropriate level of
mechanization to increase the efficiency as they do not have the knowledge nor financial
resources to invest. Therefore, the government should develop a farm mechanization and
cultivation program in cooperation with private institutions and provide the appropriate
150 Chapter 4
(public) infrastructure, the knowledge transfer to learn farmers how to adapt their farm and
farming techniques and the acquisition of farm machinery by farmers via low interest loans.
On average the rice farms in the study area are scale inefficient. The result of scale efficiency
of our study is lower than those of other studies of Dhungana et al. (2004), Coelli et al.
(2002) and Wadud (1999) (cf. Table 4.10) as a result of the (too) small scale of many farms
operating in Myanmar. In order to achieve economies of scales, organization of small scale
cultivations should be promoted to be comparatively larger collective systems consisting of
multiple farmers with the collaboration of the government, farmer organizations and the
private sector (Thibbothwawa et al., 2012). Establishing cooperatives between farmers will
increase the scale of operations.
Allocative and economic inefficiency of rice production can be attributed largely to the
abundant use of labour and input seeds in our study. The economic inefficiency of rice
production in Thailand resulted from the overuse of fertilizers (Kiatpathomchai, 2008); in
Bangladesh from the abundant use of labour (both animal power and human labor) and
fertilizer (Coelli et al., 2002); and in Sri Lanka from the inefficient use of human labor,
machinery and seed (Thibbotuwawa et al., 2012). Associated with the high demand for
labour, the labour unit price is high. The agricultural activities in Myanmar are very labour
intensive as they are still carried out in a traditional manner and are not mechanized properly.
Farm mechanization plays an important role in improving the quality of paddy and reducing
postharvest losses, but the acquisition of the required machinery is too expensive for farmers
in Myanmar. The scarcity of labour during transplanting, weeding, and harvest time results
in losses, both in the quantity and quality of the rice output. Raising farm efficiency,
lowering unit costs, and reducing postharvest losses will increase rice production and thus
the profits of farmers. To solve the labour scarcity problem, government and private partners
should provide a farm mechanization extension program to transfer the required
technological knowledge to the farmers and affordable loans with low interest rates.
The input seeds and the used variety is an important factor impacting the efficiency of the
rice farms. The use of good-quality and pure seed is of high importance to maximize the
paddy quality and the resulting profit. However, the famers are thwarted as the seeds used
by most of the farmers are impure because they produce the seeds on their own farms using
traditional methods (Wong and Wai, 2013; Linn and Maenhout, 2018a). In addition, the
uncertainty related to the production inputs impacts the managerial decision-making and the
related farming efficiency (Linn and Maenhout, 2018b). Good quality and pure seed
availability is a necessary condition for a higher yield and better quality of rice production
and should be controlled by the government. The functioning of the (state) seed production
companies should be revised such that all farmers have access to high-quality seeds at the
least possible cost. The decision-making managerial skills can be further improved by public
or private investments in the schooling system and the extension system to transfer
knowledge between farmers and researchers. A better education of the actors enhances the
decision-making and communication skills with any support service providers such as
extension officers and other stakeholders in the business. In line with the research of
Dhungana et al. (2004), government initiatives in collaboration with private partners should
be installed to educate the inefficient farmers and learn the best farming practices applying
extension tools such as field days on the efficient farms (Dhungana et al. (2004). The system
of extension services needs to be reformed to increase the mobility of extension officers,
improve links between farmers, researchers and extension staff and the use of modern
technologies for agricultural extension. New skills are needed for the new era of global
agricultural engagement. The efficient agricultural extension system has to be implemented
by the Department of Agriculture, MOALI cooperated by the International Non-
Government Organizations (INGOs), Non-Government Organizations (NGOs) and private
agrochemical companies.
Table 4.11 Information of input and output variables and results of efficiency scores
via DEA in rice production in some developing countries
Mean efficiency Output
Country Authors Input variables
results variable
Seed rate (kg/ha)
Urea fertilizer (kg/ha)
TE (VRS) = 0.90 Herbicide (kg/ha)
AE (CRS) = 0.57 Animal power (animal-day/ha)
EE (CRS) = 0.43 Machine power (machine-day/ha)
This study Rice yield
Myanmar SE = 0.83 Human labor (man-day/ha)
(2018) (kg/ha)
CRS = 20.77% Price of seed (MMK/kg)
DRS = 6.15% Price of urea fertilizer (MMK/kg)
IRS = 73.08% Price of herbicide (MMK/kg)
Wage of animal power
(MMK/animal-day)
152 Chapter 4
Price of machine power

(MMK/machine-day)
Wage of human labor
(MMK/man-day)
Labor (man-hr/ha)
Machine (THB/ha)
TE (VRS) = 0.92
Seed (Kg/ha)
Kiatpathomchai AE (VRS) = 0.78 Rice yield
Thailand Fertilizers: DAP (kg/ha)
(2008) EE (VRS) = 0.68 (kg/ha)
Urea (kg/ha)
N-fertilizer (kg/ha)
P-fertilizer (kg/ha)
TE (VRS) = 0.82
AE (CRS) = 0.87 Land (ha)
EE (CRS) = 0.66 Seed (kg/farm)
Dhungana et al. Rice yield
Nepal SE = 0.93 Labor (Person days/farm)
(2004) (kg/farm)
CRS = 10.52% Mechanical labor costs (Rs./farm)
DRS = 42.12% Fertilizer costs (Rs./farm)
IRS = 47.36%
Land cultivated (ha)
TE (VRS) = 0.69
Animal power (pair-days)
AE (VRS) = 0.81
Fertilizer (kg)
EE (VRS) = 0.56
Seed (kg)
SE = 0.95
Coelli et al. Rice output Labor (day)
Bangladesh CRS = 10.90%
(2002) (kg) Land rent (taka/ha)
DRS = 58.06%
Fertilizer price (taka/kg)
IRS = 31.04%
Seed price (taka/ha)
Labor wage (taka/ha)
Animal wage (taka/pair)
TE (VRS) = 0.85
AE (VRS) = 0.87
Land (ac)
EE (VRS) = 0.79 Output
Labor (man-day/ac)
SE = 0.93 (Maund/ac)
Bangladesh Wadud (1999) Irrigated land (ac)
CRS = 16.67% (1Maund =
Fertilizer applied (kg/ac)
DRS = 62.66% 37.32 kg)
Pesticides used (milliliter)
IRS = 20.67%
Source: Own compilation based on the literature

This study first investigates the profitability of the rice production in the Ayeyarwaddy
Region, Myanmar. In order to evaluate the performance of the rice production, we estimate
the technical, scale, allocative and economic efficiency scores by using an input-oriented
DEA model. Tobit analysis is used to explore the factors influencing the efficiency scores
of the rice farmers. The lack of empirical studies in Myanmar, which focus on the efficiency
performance using DEA and the factors impacting this efficiency motivates this study.
The empirical results in this study reveal that there is a huge potential to increase the
efficiency of rice farms in Myanmar. The farmers in the study area are not profitable from
the rice production resulting from inefficiencies. The best practices of more efficient rice
farms learn that the technical inefficiency is caused by the overconsumption of inputs,
especially of herbicides and animal power. In addition, most of the rice farmers in this region
produce rice at increasing returns-to-scale indicating that they should increase their scale of
operations. Moreover, the allocative efficiency and the economic efficiency are very low
due to an inappropriate management, i.e. the selection of wrong input combinations and high
input costs. Especially the high costs for machine power and human labour are the cause for
the economic inefficiency. A regression analysis gives us some insights in the determinants
of the inefficient performance of the farmers. We found that some farm-farmer related
variables, i.e., age, education and experience, impact the farm efficiency. The variety used
(farm-production related variable) and the extension services received by the farmers (farm-
institution related variable) also impact the technical, scale and economic efficiency of the
rice farmers.
Our findings pose several important policy implications. The low economic efficiency
reveals the potential to increase the output levels considerably, which will further enhance
farm income and the welfare of the farm households. Government should intervene in the
input and output prices for the farmers in order to improve the allocative and economic
efficiency of rice production. Moreover, the agricultural mechanization should be introduced
to further lower costs and should be realized via the cooperation of private and public
organizations. The most efficient farms could be encouraged to disseminate their best
practices and to share their experience with other farms to improve the average farm
efficiency in the study area. A solution is to increase the scale of farming operations by
setting up cooperatives between different farmers, similar to other ASEAN countries. In this
154 Chapter 4
way, farmers have a stronger bargaining position leading to lower input and higher output
prices, price fluctuations will be less volatile, more accurate market information can be
gathered and a better market orientation is obtained. In addition, best practices and extension
programs will be transferred to a higher number of farmers in a more efficient manner.
The education of farmers is an important determinant of the rice farm efficiency. In the long
run, better performance in the agricultural sector can be achieved by increasing the private
and public investments in education in rural areas initiating programs to encourage those at
school-going age. However, in the short run, farmers may learn the agricultural technologies
from the benchmarking practices of the relatively efficient farms. These practices can be
spread via extension services or informally via setting up cooperatives between different
parties. Moreover, the farmer field schools (FFS) program, supported by different
development agencies cooperating with the Department of Agriculture, may be rigorously
implemented to help farmers improve their analytical and decision-making skills in
agricultural production.
Using quality seeds and growing the Aye Yar Min variety help to maximise efficiency.
Hence, the transformation of state seed production should be done with extreme care in order
not to deteriorate the seed quality. Good quality and pure seed availability is a necessary
condition for a higher yield and better quality of rice production. The seeds used by most of
the farmers are impure because they produce the seeds on their own farms using traditional
methods. Growing the high-quality Aye Yar Min variety helps to increase the farmers’
profit.
Extension programs have to be widespread among farmers to optimise the mix of farming
inputs and production methods. The extension policy needs to be reformed to reorganize the
duties of extension officials so that they can spend more time on field visits to the rice
farmers. This would reduce the variation in actual output from the maximum potential output
in the rice production.
4.A Appendix
Visited
townships
Study area
townships
Source: DOA (2017)

Table 4.A.1 Sampled respondents for the rice production in the study area
Sampled
Townships Total Population
respondents
Total 130
Source: DOA (2017)
5
Conclusions and Future Research Avenues
160 Chapter 5
5.1 Conclusions
We conclude this dissertation by summarising the major findings of the studies presented in
chapters 2 to 4 by referring to the conclusion sections of the respective chapters. Future
research ideas that related to these studies are also presented in the following section
(Section 5.2).
Operational constraints in the rice value chain

The analysis of the operational constraints that hinder the development of the rice value
chain in the Ayeyarwaddy Region has been investigated in Chapter 2. We have structured
the rice value chain with different actors: farmers, primary collectors, millers, wholesalers,
retailers and exporters. They have their own role in the value chain. After mapping these
actors, firstly, we have calculated the cost and benefit of the rice farmers for their rice
production. Based on this financial data, we analyse the marketing cost, margin and profit
of the other actors in the value chain and of the global rice value chain. We have found that
the value chain is inefficiently structured as it is characterized by many of actors who face
several constraints. Moreover, the gross marketing margin across the global value chain is
very wide and is not equally distributed over the different actors. Not all actors receive a
reasonable profit margin. Among the value chain actors, the millers receive the highest
percentage share of the profit and the primary collector and the farmers obtain the lowest
marketing profit in both the domestic and international rice value chains. We have found
that the socio-demographic characteristics and operational constraints faced by the different
actors influence their profitability. Socio-demographic characteristics such as education
level and work experience have a significant and positive impact on the profits of farmers,
millers, wholesalers and retailers. The actors suffer especially from natural disasters and
weather-related constraints, financial constraints and distributional and institutional
constraints. All these constraints have a significant and negative impact on the profitability
of the actors in the supply chain. In order to improve and upgrade the value chain operations,
we provide several recommendations.
Uncertainty in the rice supply chain

Chapter 3 has confirmed that there are several uncertainty factors in the rice supply chain in
the Ayeyarwaddy Region, Myanmar. In this chapter, we investigate how uncertainty affects
the decision-making performance of the different types of actors in the rice value chain i.e.
Conclusions and future research avenues 161
farmers, rice millers, wholesalers, retailers and exporters. The important uncertainty factors
are planning and control, climate and competitor uncertainty. The performance of the rice
supply chain is poor according to a very low mean overall technical efficiency score because
of notable scale inefficiencies. A majority of the business units need to expand their
operating size. This chapter has also confirmed that uncertainty can harm the rice supply
chain performance. Especially, planning and control and climate uncertainty adversely affect
the supply chain efficiency. We investigated the impact of the uncertainty on the supply
chain performance by grouping three stages: the production (farmers), processing (millers)
and distribution (wholesalers, retailers and exporters). The actors suffer from the specific
uncertainty sources depending on their role in the supply chain. Farmers face negative
effects of climate and uncertainty in planning and control. The millers in particular suffer
significantly from process uncertainty while the distributors face the adverse impact of
demand uncertainty. Both the climate, and planning and control uncertainty present in the
early production stages of the supply chain and have a negative and significant impact on
different types of efficiency leading to the poor performance of the entire supply chain.
Therefore, capturing and sharing information in the supply chain is crucial to the operational
planning and control as the quality of information input directly impacts the quality of
managerial decision-making. Moreover, public awareness of the impact of climate
conditions on the agricultural production systems deserves priority consideration. Mitigating
technologies must be developed to reduce the impact of the adverse climate conditions,
which will require increased public and private investment.

Chapter 4 has measured the efficiency of the rice production by the farmers in the
Ayeyarwaddy Region. The farmers in the study area are not profitable from rice production
resulting from inefficiencies. Technical efficiency score resulted from input-oriented DEA
model has confirmed that farmers have an additional rice yield potential of 25% that can be
attained by improving the input utilization. The best practices of more efficient rice farms
learn that the technical inefficiency is caused by the overconsumption of inputs, especially
of herbicides and animal power. In addition, most of the rice farmers in this region produce
rice at increasing returns-to-scale indicating that they should increase their scale of
operations. Most of the rice farms in this study suffer from allocative and economic
inefficiencies resulting from wrong combinations of input usages. Especially the high costs
for machine power and human labour are the cause the economic inefficiency. The average
162 Chapter 5
economic efficiency level indicates that farmers can increase their profitability by 57% by
adapting their input costs. We have identified some farm-farmer related variables i.e., age,
education and experience, which impact the farm efficiency. The variety used (farm-
production related variable) and the extension services received by the farmers (farm-
institution related variable) also impact the technical, scale and economic efficiency.
Government should intervene in the input and output prices for the farmers in order to
improve the allocative and economic efficiency of rice production. Moreover, the
agricultural mechanization should be introduced to further lower costs and should be
realized via the cooperation of private and public organizations. The most efficient farms
could be encouraged to disseminate their best practices and to share their experience with
other farms to improve the average farm efficiency in the study area. A solution is to increase
the scale of farming operations by setting up cooperatives between different farmers, similar
to other ASEAN countries. In this way, farmers have a stronger bargaining position leading
to lower input and higher output prices, price fluctuations will be less volatile, more accurate
market information can be gathered and a better market orientation is obtained. In addition,
best practices and extension programs will be transferred to a higher number of farmers in a
more efficient manner.
General conclusion
We have investigated three different studies related to the operations of the rice industry i.e.
a constraint analysis of the rice value chain, a study related to the uncertainty and
performance of the supply chain and an efficiency analysis of the rice production step in the
study area. We have found that the efficiency and performance of the rice value chain in
Myanmar is very poor because of unequal distribution of profits and a very low technical
and scale efficiency of the chain. The farmers are the most vulnerable actor in the rice value
chain because their profit is lower, and they are economically inefficient in their rice
production. We have observed that the actors along the rice value chain in Myanmar face
several constraints and many types of uncertainty hindering their efficiency, performance
and sustainability of the chain and causing the complexity to increase the efficiency of their
business. The higher the degree of complexity they have, the lower the efficiency of the
business they receive. This complexity depends on the number of constraints and types of
uncertainty experienced by the actors. To increase the efficiency of their business, it depends
on their managerial skills how to utilize and allocate their resources, minimize the
constraints and mitigate the uncertainty, socio-economic and demographic factors, and
institutional factors.
We could find some possible solutions to increase the efficiency and performance of the rice
value chain which may improve the food security and reduce the rural poverty.
First, the stakeholders need to undertake different actions to improve the quality of rice. The
availability of good-quality and pure seeds is essential to increase the yield and the quality
of the rice production and to become a significant exporter in the global rice market. The
government should revise the functioning of the (state) seed production companies to ensure
that all farmers have access to high-quality seeds at the least possible cost. Moreover, the
seed industry should develop the production of early maturing, drought resistant and flood
resistant varieties of rice to cope with the vagaries of the climate. This measure reduces both
the uncertainty related to the inputs and the weather and the constraints to produce high-
quality paddy.
Second, the serious problems of natural disasters, unfavourable weather constraints and
climate uncertainty for rice production that can adversely impact the performance and
sustainability of the rice industry and food security have to be considered with the high
priority. An agricultural or crop insurance mechanism should be installed at the farm level
to mitigate the climate or natural disaster uncertainty. An appropriate financial insurance
mechanism should be implemented by the government and private partners for all rice
supply chain actors and in particular for the farmers.
Third, the successful co-ordination across farmers, processors, wholesalers, retailers,

exporters and other stakeholders in the rice value chain is required to improve the rice value
chain leading to cost reduction and farm-income enhancement for the farmers. The
strengthening of the linkages between the rice value chain actors will also allow those actors
to take better advantage of market opportunities and deserves high priority to develop the
value chain and to improve the food security and reduce poverty. Linkages between
upstream and downstream segments need to improve for facilitating the strengthening of
comprehensive supply chains which compete with each other so as to contribute to increased
competitiveness and increased productivity. In addition, the scale of the business for all
actors are too small. The co-ordination and negotiation between actors in the same stage can
increase the economies of scale of their business in the supply chain. The strategic
164 Chapter 5
relationships between supply chain actors, i.e. building linkages and sustaining a long-term
partnership would increase the value transferred between entities in the supply chain and
would decrease costs.
Fourth, education and work experiences of the stakeholders are crucial to increase the rice
productivity, profitability and performance of the business for making right decisions on the
input uses and effective management to cope with the constraints and uncertainty in
operating business. In the long run, better performance in the agricultural sector can be
achieved by increasing the private and public investments in education. In the short run, the
performance of the companies can be improved by adopting the best practices of more
efficient ones. In addition, most of the constraints and uncertainty can be mitigated if more
and better agricultural extension services are offered to farmers. The extension system needs
to be reformed, i.e. the mobility of extension officers should be increased, the links between
farmers, researchers and extension staff should be improved and farmers should be
encouraged to learn the latest technologies and new skills required for the new global
agricultural era.
Fifth, the crop cultivation is further hindered by traditional farming activities, which may be
solved via the promotion and realizing of farm mechanization for land preparation,
cultivation and post-harvest activities. Moreover, many millers use outdated machines and
electricity power shortage to process the rice leading to an inferior rice quality and reduce
efficiency of the mills, respectively. Therefore, the government should develop a farm
mechanization and cultivation program for the farmers in cooperation with private
institutions and should support an affordable loan and investments to the millers to
implement the improved milling machines and reliable electricity infrastructure with low
costs.
Last, farmers, millers and distributors (wholesalers, retailers and exporters) need all low
interest investment credits to modernize and expand their operations and infrastructure such
that the production and rice quality can be increased. Increasing the rice productivity by
using good quality seeds and modern production technologies, adopting mitigation strategies
to uncertainty, developing mechanization, maintaining and upgrading road and electricity
infrastructure, and expanding the financial services for all actors will improve the
performance of the rice value chain in Myanmar leading to improve food security and reduce
poverty.
5.2 Future Research
In this dissertation, we provide a number of studies that may be expanded and adapted in
future research. Before describing the future research, firstly, we want to describe some
limitations of this study.
x This study focuses only on the horizontal rice value chain in Myanmar due to
limited time and budget. The research methodology and analysis in this study are
based only on a questionnaire approach.
x When we conducted the survey to collect the primary data, we could not reach a
sufficient number of wholesalers because of limited population size in the study
area.
x This study only emphasizes the value chain for the Emata rice varieties. Therefore,
this study could not analyse for each variety produced by the farmers, processed by
millers and distributed by wholesalers, retailers and exporters because of limited
data availability as a result of their poor data recording.
x The information on uncertainty studied in this dissertation is subjective information
from the respondents. More accurate measurements to quantify the uncertainty in
the supply chain are required.
x The efficiency inferences from cross-sectional data do not give any indication of
year to year variability in production and efficiency.
Chapter 2 investigates only the rice value chain (horizontal chain) in the Ayeyarwaddy
Region. We can expand our research by investigating the value chain of other value-added
products (vertical chain) such as rice flour, rice noodles, rice vermicelli, rice snacks etc in
order to have a better documented overview of the rice industry in Myanmar. In addition,
we can compare the rice value chain in this study area to other regions in order to uncover a
more nuanced view on the situation of the various actors and their constraints in those
regions. Another important consideration of the rice sector is to promote Myanmar rice as a
quality brand to enhance its competitiveness in international trade. Therefore, the rice value
chain analysis and competitive advantage for the high quality special rice could also be
investigated. Moreover, Chapter 2 could fill the gap related to the fifth objective of the rice
sector (reduction in the weaknesses along the rice value chain), by providing the
interventions by the government and private partners cooperation with the civil society.
However, further studies on how to minimize postharvest losses to increase the market value
166 Chapter 5
of rice production and improve rice food quality should be investigated. The supply chain
management approach to postharvest losses is also important to study because the
inefficiency and ineffectiveness of management in supply chains are the major reasons for
the postharvest losses. Therefore, the research emphasized on value chains and postharvest
operations needs further investigation in future studies because tremendous opportunities
exist for improving food quality, diversity and safety as well as reducing post-harvest losses
through enhancements of the rice value chain. This will realise the third objective of the rice
sector emphasizing the improvement of rice food quality, safety, competitiveness and
fairness in domestic and international markets. In addition, in this study, we just describe
the major constraints faced by the actors in the rice value chain. We could not optimize the
constraints because different stakeholders have their own multiple objective optimization
problems and multiple constraints. The constraint problem is a very complex problem
because each actor has their own constraints. If we study a constrained optimization
problem, first we need to know the major constraints among many constraints. Then, we can
continue in detail to get the data in quantitatively. Therefore, this constrained optimization
problem can be studied in future research.
Chapter 3 emphasizes the uncertainty and supply chain performance of the rice sector in
Myanmar. However, besides uncertainty, the risks faced by the different actors and the entire
supply chain can be investigated in an objective manner. We can emphasize the risk
identification including probability, severity and management or control, risk mitigation
strategies (proactive and reactive strategies) and risk governance for the entire supply chain.
Under the supply chain management, which is an important issue for all sectors, the rice
supply chain practices and supply chain integration should be investigated in future research.
Further, we measured only the supply chain performance in terms of efficiency. The study
could be expanded to measure the supply chain performance in the view of flexibility,
responsiveness and food quality. The ability to make good decisions can have great
implications on business performance and, therefore, supply chain management is essential
for effective planning in business processes. Forecasting plays a critical role in supply chain
planning because important decisions are based on anticipated future variables such as
marketed amount or product sales (Martine et al., 2003). Therefore, longitudinal data
analysis will be used to forecast the strong performance of the business of the rice sector in
future study. The impact of a longitudinal study is that we can establish sequences of events
i.e. cause and effect for dynamic aspects of a problem. In this way, the results are
smoothened over different years and outliers in the results will be filtered out. The results
will be less sensitive to the moment data is captured. Observations on different moment in
time will allow us to identify the impact of measures or policies set to reduce the uncertainty
and constraints in the value chain.
Chapter 2 and 3 could fill the ninth challenge of the rice sector “the unsatisfactory integrated
value chain from rice production to trading and marketing” by studying the operational
constraints and uncertainty in the rice value chain. Moreover, this dissertation revealed that
this challenge is also linked with other challenges such as adverse climate change effects,
limited access to technological innovations, imperfect facilities for the postharvest handling
and processes, insufficient infrastructure, product price volatility. However, it still needs a
detailed study on these challenges. The first and essential concern is the effect of climate
change on the rice value chain. Global climate change is an important challenge especially
for the agriculture supported for food security. The increased frequency and intensity of
extreme events such as drought and flooding, and the rise in temperature that are likely to
result from global climate change will strongly affect rice production. A research focused
on the climate change mitigation/adaptation and risk management on the rice production is
crucial because climate changes seriously impact food security. The second concern is the
product price volatility. Rice prices affect poverty, which was estimated at 37.5 percent in
2010 (World Bank, 2014). Rice price volatility is of concern to the Myanmar government,
given the high importance of rice for farm incomes and consumer expenditures, and thereby
for food security and poverty reduction (World Bank, 2014). A possible future direction
would be to study the causes of rice price volatility and to identify the options for reducing
rice price volatility to achieve food security objectives.
Chapter 4 investigates the efficiency of the rice production only for the rainfed rice.
Therefore, we can study the efficiency of the summer rice production by the farmers. In rice
production, the farmers face many types of production risk which plays a vital role in the
decision making on input allocations and, therefore, output supply. Therefore, the impact of
production risks on the efficiency of the rice production should be investigated as the future
study. Moreover, climate change affects seriously the agricultural activities and directly
impacts the rice production. The adaptation to this climate change reduces the negative
impact (Adger et al., 2003) and will be imperative to meet the food security. Therefore, the
impact of adaptation strategies to climate change on the productivity and efficiency of rice
168 Chapter 5
production which can consequently raise the returns of the farmers should be investigated
in future research. In addition, we could study the overall technical, pure technical, scale,
allocative and economic efficiency only for the rice production stage in Chapter 4. If the
price information and amount of the inputs used for all activities in the business operated by
all actors along the rice supply chain can be obtained exactly, we can measure the economic
efficiency of the entire supply chain in Myanmar.
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An Operational Analysis of the Rice Value

Chain in the Ayeyarwaddy Region, Myanmar

Supervisor: Prof. dr. Broos Maenhout

A dissertation submitted to Ghent University in partial fulfilment of the

Academic year: 2018 – 2019

Prof. dr. Broos Maenhout

Prof. dr. Mario Vanhoucke

Prof. dr. Frederik Gailly

Prof. dr. Patrick Van Kenhove Ghent University, Dean

Prof. dr. Broos Maenhout Ghent University, Advisor

Prof. dr. Mario Vanhoucke Ghent University

Prof. dr. Hnin Yu Lwin Yezin Agricultural University

Prof. dr. Tarik Aouam Ghent University

Prof. dr. Theingi Myint Yezin Agricultural University

1.1.2.1 Paddy and rice production in Myanmar .......................................................... 4

1.1.2.2 Rice milling sector in Myanmar ...................................................................... 8

1.1.2.3 Characteristics of the international rice trade .................................................. 9

1.1.3 Problem statement ............................................................................................... 13

1.2 Literature Review ...................................................................................................... 16

1.2.1 Value chain and value chain structure................................................................. 16

1.2.2 Uncertainty in the agricultural supply chain ....................................................... 20

1.2.3 Agricultural supply chain performance ............................................................... 23

1.3 Chapter Overview and Contributions ........................................................................ 24

2 An Analysis of the Operational Constraints Hindering the Development of Rice

2.2 Literature Review ...................................................................................................... 39

2.2.1 Rice value chains in some ASEAN countries ..................................................... 40

2.2.2 Rice value chain in Myanmar.............................................................................. 41

2.3 Research Methodology .............................................................................................. 42

2.3.1 Data collection and sampling technique.............................................................. 42

2.3.2 Data analysis method: Socio-demographic, financial and constraint information

2.4 Empirical Results ...................................................................................................... 44

2.4.1 Characteristics of the rice value chain in Myanmar ............................................45

2.4.1.1 Profitability analysis ..................................................................................... 45

2.4.1.2 Socio-demographic characteristics ............................................................... 49

2.4.2. Constraints in the rice value chain ......................................................................50

2.4.2.1 Farmers ......................................................................................................... 50

2.4.2.2 Primary collectors ......................................................................................... 52

2.4.2.3 Millers ........................................................................................................... 53

2.4.2.4 Wholesalers ................................................................................................... 54

2.4.2.5 Retailers ........................................................................................................ 54

2.4.2.6 Exporters ....................................................................................................... 55

2.4.3 The impact of operational constraints on the profitability .................................. 56

2.4.3.1 Farmers ......................................................................................................... 56

2.4.3.2 Millers ........................................................................................................... 58

2.4.3.3 Wholesalers ................................................................................................... 59

2.4.3.4 Retailers ........................................................................................................ 59

2.5 Discussion ................................................................................................................. 60

2.5.1 The farmers and their inputs ................................................................................62

2.5.2 The millers and their inputs .................................................................................63

2.5.3 The wholesalers and retailers ..............................................................................64

2.5.4 The exporters and their inputs .............................................................................64

2.5.5 The entire supply chain........................................................................................65

2.6 Conclusion and Recommendations ........................................................................... 65

3.1 Introduction ................................................................................................................ 74

3.2 Literature Review ...................................................................................................... 76

3.2.1 The Rice Value Chain in Myanmar..................................................................... 76

3.2.2 Uncertainty in supply chains ............................................................................... 77

3.2.3 Performance measurement in supply chains ....................................................... 78

3.3 Research Methodology .............................................................................................. 79