Effects of COVID‐19 restrictions on mechanization service providers and mechanization equipment retailers: Insights from phone surveys in Myanmar

• Published date: 01 February 2023
• Author: Hiroyuki Takeshima,Ian Masias,Myat Thida Win,Phoo Pye Zone
• Date: 01 February 2023
• DOI: http://doi.org/10.1111/rode.12940

REGULAR ARTICLE

Effects of COVID-19 restrictions on

mechanization service providers and

mechanization equipment retailers: Insights

from phone surveys in Myanmar

Hiroyuki Takeshima

1

| Ian Masias

2

| Myat Thida Win

3

|

Phoo Pye Zone

2

1

International Food Policy Research

Institute (IFPRI), Washington, DC, USA

2

International Food Policy Research

Institute (IFPRI), Yangon, Myanmar

3

Department of Agricultural, Food, and

Resource Economics of Michigan State

University, East Lansing, MI, USA

Correspondence

Hiroyuki Takeshima, International Food

Policy Research Institute (IFPRI), 1201

Eye Street NW, Washington, DC 20852,

USA.

Email: h.takeshima@cgiar.org

Abstract

Agrifood sector mechanization service providers (MSP)

and mechanization equipment retailers (MER) have

increasingly become the providers of mechanical tech-

nologies for smallholders in developing countries,

including Myanmar. Evidence remains scarce on the

effects of COVID-19 on these MSPs and MERs. This

study provides insights into the effects of COVID-19

restrictions on MSPs and MERs in Myanmar, using

unbalanced panel data from five rounds of phone sur-

veys. Direct responses to COVID-19 involving move-

ment restrictions, market disruptions, and growing

financial challenges had significant negative effects on

revenue prospects, service delivery, and sales of

machines and equipment. Negative revenue prospects

during a particular period can further hurt revenue

prospects in subsequent periods. This is consistent with

the hypotheses that MSPs who had incurred high sunk

costs in machines can engage in more desperate and,

thus, potentially suboptimal business practices to

recover the sunk cost. Overall, policies to minimize

movement restrictions and various financial struggles

and mitigate any pessimism at the beginning of the

production season are all important to make sure MSPs

Received: 1 November 2021 Revised: 17 May 2022 Accepted: 1 September 2022

DOI: 10.1111/rode.12940

Rev Dev Econ. 2023;27:323–351. wileyonlinelibrary.com/journal/rode © 2022 John Wiley & Sons Ltd. 323

and MERs continue to function effectively under

COVID-19.

KEYWORDS

COVID-19, mechanization equipment retailers, mechanization

service providers, Myanmar, panel data

1|INTRODUCTION

The COVID-19 pandemic and measures to contain its spread have had serious effects on society

and the economic functions of small businesses in the agrifood sector (IFPRI, 2020; Minten

et al., 2020; Zidouemba et al., 2020). These preventative measures, combined with the direct

health effects of the disease, can have significant adverse effects on global food security and eco-

nomic livelihood. As the pandemic persists, it remains critical that policy measures that are

aimed at dealing with COVID-19 and other related crises are developed to effectively support

the agrifood sector. An understanding of the effects of these preventative measures on actors in

the agrifood sector is integral to the policymaking process.

One function within the agrifood sector, disruption of which can potentially lead to signifi-

cant economic losses, is the supply of agricultural mechanization services. The use of mechani-

cal power for farming operations has historically had significant economic effects both on-farm

and off-farm. In the United States, between 1910 and 1954, the replacement of animal powers

by tractors and related equipment alone contributed to raising U.S. GDP by 8% (Steckel &

White, 2012). In smallholder-dominated Asia, tractors alone accounted for 15%–16% of rice pro-

duction growth during the early phase of the Green Revolution (Barker et al., 1985). Agricul-

tural mechanization through the use of tractors and combine harvesters has spread extensively

in the developing world in the past few decades (Diao et al., 2020). In some of the least develop-

ing countries like Myanmar, which has seen rapid mechanization growth during the past

decade, the economic roles played by mechanization subsector actors have expanded substan-

tially (Win et al., 2020). These actors include mechanization service providers (MSP), who serve

many smallholders that still account for much of farm production without having the capacity

to own machines by themselves, and mechanization equipment retailers (MER), who work

through long supply chains of machines most of which are imported from abroad or man-

ufactured mostly in a few major cities.

Despite the growing literature on the effects of COVID-19 on the agrifood sector, evidence

on MSP and MER remains scarce. MSPs, who provide custom hiring mechanization services to

farmers, and MERs, who sell machines, attachments, and spare parts, have distinct characteris-

tics that are different from other inputs and service providers (SP) in the agrifood sector. In

developing countries, land preparation, harvesting, and other farm operations have increasingly

become mechanized (Diao et al., 2020). Mechanical power can reduce the drudgery for rural

workers, including women and children, and the nonfarm economy more broadly.

A key question on how COVID-19 restrictions on movement and sales practices have

impacted MSPs and MERs remains. Movement restriction may not have constraining effects on

MSPs if the mobility of machines is inherently low (e.g., Takeshima et al., 2015). However, if

the mobility is sufficiently high, movement restrictions can be binding constraints. Equiva-

lently, if disruptions to the acquisition of machines, equipment, and attachments occur before

324 TAKESHIMA ET AL.