Establishing producer organisations to sustain smallholder inclusion in agri-food value chains: Action research in Myeik and Palaw districts of Myanmar : A thesis submitted in partial fulfilment of the requirements for the Degree of Doctor of Philosophy at Lincoln University

Abstract

In 2016, Myanmar was recognised as one of Asia’s fastest growing economies. Although agriculture is the backbone of Myanmar’s economy, accounting for approximately 30% of GDP and employing 56% of the country’s workforce, smallholders find it difficult to capitalise on opportunities to improve their incomes and livelihoods. In the remote Tanintharyi region, local produce seldom enters high-value markets emerging in regional towns and tourist destinations owing to concerns about poor food safety, quality, and consistency of supply. In 2017, the New Zealand government approved the Tanintharyi Region Rural Income and Livelihoods Development (TRRILD) project to upgrade agri-food value chains in the of Myeik and Palaw districts. Value chain researchers identified the paddy and pork chains as suitable candidates for pro-poor upgrading, and recommended that producer groups and producer organisations be established to manage and sustain the Project’s transactional and capital intensive value-adding interventions. The primary purpose of this study was to deliver functional producer groups and producer organisations for the TRRILD project. To meet this objective, the study employed a qualitative action research strategy informed by economic theory and best practice. This thesis describes the actions undertaken to design, initiate, and develop these groups, and reflects on their outputs and outcomes to answer questions about the process of establishing creditworthy smallholder organisations. Thirty producer groups were established, with a total membership of 1008 smallholders. At the research’s conclusion, twenty of these groups were operating at a transactional level, providing members with meaningful services such as access to training, bulk ordering of quality inputs, and collective marketing of members’ products. Three of these groups were selected to pilot the transition to producer organisation status. The findings highlight important roles for external facilitators to guide, train, and mentor newly established groups to operate at transactional and value-adding levels. They also highlight the importance of a flexible constitution that embeds good governance practices and provides for investor-friendly institutional arrangements that producer groups can customise to support their business strategies. A key conclusion is that producer groups need to alleviate free-rider problems by rewarding members as both patrons and investors, even if their business strategy is simply to procure and transact farm inputs. Producer organisations that invest in value-adding assets or that engage in supply contracts with premium buyers need to address both free-rider and horizon problems by aligning the benefits of investment in tradable shares with the benefits of patronage. The study revealed that smallholders have an instinctive appreciation of investor-friendly institutional arrangements. Practitioners should actively facilitate these arrangements in the formative stages of establishing a producer group. To address concerns about elitism, donor capital should be used to award grants that give all members an equal initial shareholding in their producer organisation.