Gerhard Hartzenberg, Managing Director, New Holland Agriculture: Interview

Interview: Gerhard Hartzenberg

With the introduction of modern farming techniques, what role do you expect Myanmar to play in Asia’s future food security?

GERHARD HARTZENBERG: Looking at the current structure of Myanmar’s economy, agriculture is one of the most promising sectors for both domestic and foreign investors. The country has extremely fertile land, which allows farmers to grow almost any type of crop. The agricultural potential is historically well documented as Myanmar used to be known as the rice bowl of Asia. It remains one of the world’s top producers of beans and pulses, and is looking to recover its position as a rice producer after years of mismanagement and policies that negatively affected domestic output and blocked modernisation. Other sectors such as livestock, fisheries and food processing could also become successful.

While it might still be too early to identify Myanmar as a central player for Asia’s food security, I believe the country possesses all the necessary preconditions to become one. Myanmar’s location could push local producers to explore the opportunities generated by their proximity to the Chinese market. However, to achieve that Myanmar will have to work hard to address several challenges, including the skills gap of its farmers that makes local paddy fields the least productive in Southeast Asia. The low penetration of mechanisation means that most local farmers do not know how to operate a modern tractor, and the use of animal traction to farm land is still a common sight in rural areas.

How do you expect demand for new machinery and tractors to evolve in the upcoming years?

HARTZENBERG: For Myanmar to fulfil its tremendous agriculture potential, local farmers need to have access to new machinery and tractors. Farmers often use inferior quality, cheap machinery that lasts 20% of the expected life cycle of a premium-brand tractor supported by a strong branch network offering technical training and spare parts on the farmer’s doorstep.

Looking forward, higher levels of mechanisation will lead to productivity gains and generate efficiencies. Because of the absence of consolidated data, it is difficult to have an accurate number of tractors sold in Myanmar. However, the relaxation of trade rules and the renewed commitment of the government to support local farmers are two important indicators that will support demand for new agricultural machinery. Since the opening of the economy Myanmar quickly became a very interesting market for companies selling tractors and machinery, and today you have multiple players here, including New Holland.

Working with the Agriculture Mechanisation Department (AMD) of the Ministry of Agriculture, Livestock and Irrigation, our business rationale is very simple: to sell tractors to Myanmar farmers. This task has its own challenges. Just like the rest of the economy, transactions in the agriculture sector are essentially cash-based. Most farmers struggle to get financing from local banks because most of them do not have any credit history. Another problem we identified is tied to the absence of strong property rights, which do not allow us to clearly identify the legal owner of a specific plot of land. In many cases proof of land ownership is provided by the village head, an authoritative individual within the community, to be used as collateral. Given this challenging environment, our partnership with the AMD is crucial for us to identify the farmers that qualify to have access to credit to purchase our tractors.

Another challenge is Myanmar’s property structure. Land plots tend to be small, which generate fewer incentives for farmers to invest in machinery. That problem could be mitigated if farmers were able to organise themselves in cooperatives, but that has yet to be seen. Finally, the sector as whole would benefit from more investment in infrastructure, which in turn could contribute to the reduction of overall transportation costs, and create the conditions for growth of a nascent food-processing and agri-business sector.