Wikileaks: Contract farming in Burma

Viewing cable 09RANGOON25, CONTRACT FARMING IN BURMA (C-AL8-02135)

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	C O N F I D E N T I A L SECTION 01 OF 03 RANGOON 000025 
 
SIPDIS 
 
STATE FOR EAP/MLS, INR/EAP 
DEPT PASS TO USDA 
DEPT PASS TO USAID 
PACOM FOR FPA 
TREASURY FOR OASIA, OFAC 
 
E.O. 12958: DECL: 01/12/2019 
TAGS: EAGR ECON EFIN PREL PGOV BM
SUBJECT: CONTRACT FARMING IN BURMA (C-AL8-02135) 
 
REF: A. CHIANG MAI 175 
     ¶B. 08 STATE 118949 
 
RANGOON 00000025  001.2 OF 003 
 
 
Classified By: Economic Officer Samantha A. Carl-Yoder for Reasons 1.4 
(b and d). 
 
Summary 
------- 
 
¶1.  (U)  This is a response to an INR request (Ref B). 
 
¶2.  (C)  Since 2005, the Burmese Government has encouraged 
investors from China, Thailand, Bangladesh, and Kuwait to 
invest in contract farms; to date, only the Thais have a 
formal agreement to farm 120,000 acres along the Thai-Burma 
border.  Over the past six months, several Burmese companies 
-- Tay Za's Htoo Trading, Zaw Zaw's Max Myanmar, Steven Law's 
Asia World, and Aung Thet Mann's Aye Ya Shwe Wa -- were given 
more than 100,000 acres of farmland in the Irrawaddy Delta 
and Rangoon Division for contract farming.  The Ministry of 
Agriculture denies any land seizures associated with contract 
farming, saying the government is the sole owner of farmland 
and takes it away only if farmers do not use it for farming 
purposes.  According to agricultural contacts, the GOB 
encourages contract farming because private investors help 
shoulder the costs of improving Burma's dilapidated 
agricultural infrastructure.  There is no information on how 
much the contract farming investments in Burma are worth. 
End Summary. 
 
Why Contract Farming 
-------------------- 
 
¶3.  (SBU)  The Burmese Government since 2005 has actively 
promoted contract farming, encouraging farmers and 
businessmen from China, Thailand, Bangladesh, India, and 
Kuwait, during high level visits and meetings, to invest in 
Burma's farming industry.  According to our agricultural 
contacts, the Burmese Government views contract farming as a 
win-win situation.  Foreign investors provide Burmese farmers 
with new equipment and farming inputs in exchange for 
high-quality agricultural products.  Our contacts note that 
Burmese farmers are permitted to sell any surplus 
agricultural products for a profit once they meet their 
contractual obligations, and are not required to give the GOB 
a cut of the profits garnered from the surplus. 
 
Foreign Interest in Contract Farming 
------------------------------------ 
 
¶4.  (C)  To date, Thailand is the only country with a signed 
agreement for contract farming in Burma.  In 2005, the 
Burmese and Thai Governments agreed to allow private Thai 
farmers to cultivate up to 120,000 acres of beans, corn, 
sugarcane, and cassava in Karen State, along the Thai-Burma 
border, for export to Thailand.  Contrary to news reports, 
this document was not a formal MOU; the Thai Embassy 
confirmed that the Burmese and Thai Governments never signed 
the final MOU.  According to Ministry of Agriculture 
contacts, Burmese farmers in Karen State enter into 
agreements with Thai investors:  the Thais provide seeds, 
tools, and other farming inputs to the Burmese in exchange 
for farm products of a certain value.  Our contacts note that 
these contract farming agreements, often unofficial, benefit 
both sides.  The Thais are able to import high quality 
produce at low prices and the Burmese farmers obtain new 
equipment and can sell any remaining food for a profit. 
 
RANGOON 00000025  002.2 OF 003 
 
 
 
¶5.  (C)  While other countries, including Bangladesh, India, 
and Kuwait, have expressed interest in contract farming in 
Burma, they have yet to sign MOUs dictating the terms of 
investment.  According to SGS Consultants Managing Director U 
Kyaw Tin, during a September 2008 trip to Burma, the Kuwaiti 
Prime Minister relayed his interest in helping the GOB 
redevelop its fisheries sector, but did not sign a formal 
agreement, contrary to exile news reports.  Meanwhile, the 
Burmese Government continues to negotiate with Bangladesh 
over a lease of up to 50,000 acres in Rakhine State for 
contract farming of corn, rice, and beans.  U Kyaw Tin also 
noted that the GOB offered the Indian Government up to 40,000 
acres of land along the border for the joint cultivation of 
palm oil. 
 
Land Allocation 
--------------- 
 
¶6.  (C)  According to U Kyaw Tin, the Ministry of Agriculture 
specifies where the contract farms are to be located.  Per 
the Burma-Thai agreement, Thai farmers, working with the Thai 
Ministry of Agriculture and Cooperatives, can cultivate up to 
120,000 acres, but only in Karen State.  He explained that 
should Thai farmers want to start contract farms in Shan 
State, for example, the two governments would need a new 
agreement.  U Kyaw Tin noted that Thailand, India and 
Bangladesh prefer to cultivate land along their borders with 
Burma because the proximity would lower transport costs. 
 
¶7.  (C)  Our agricultural contacts doubt whether the Ministry 
of Agriculture, the GOB Ministry responsible for contract 
farming, has discussed with farmers the implications of 
contract farming.  According to the Karen Human Rights Group 
(KHRG), several small-scale farmers living along the 
Thai-Burma border were evicted so other farmers could work 
with the Thais.  Despite the allegations, the KHRG never 
reported such forced confiscations to the ILO.  Aung Kyaw 
Htoo, SGS Agricultural Specialist, told us that many farmers 
in Karen State actually prefer contract farming with the 
Thais because they receive financial assistance and have a 
guaranteed market for their products. 
 
Crony Companies Leading the Way 
------------------------------- 
 
¶8.  (C)  During the past six months, the GOB has expanded its 
potential pool of contract farming investors to include 
Burmese cronies, U Kyaw Tin told us.  Recently, selected 
companies, including Tay Za's Htoo Trading, Aung Thet Mann's 
Aye Ya Shwe Wa, Zaw Zaw's Max Myanmar, and Steven Law's Asia 
World, were given large plots of farmland in the Irrawaddy 
and Rangoon Divisions for contract farming.  According to SGS 
Consultant contacts, after Cyclone Nargis, the Ministry of 
Agriculture established a plan to assist farmers who lost 
their cattle and/or lacked resources to farm by pairing them 
with the crony company responsible for reconstructing the 
area.  Allegedly, the companies were to provide the farmers 
with inputs (seeds, cattle, and fertilizer) and the farmers 
were to repay the companies by December, after they sold 
their harvest.  Until the loans were repaid, the companies 
would maintain control of the land.  U Kyaw Tin noted that 
because rice prices in November were so low, farmers did not 
earn as much as expected.  Consequently, many were unable to 
repay the companies.  Although farmers have yet to be 
officially evicted, U Kyaw Tin surmised that it is only a 
matter of time. 
 
RANGOON 00000025  003.2 OF 003 
 
 
 
The Ministry of Agriculture Perspective 
--------------------------------------- 
 
¶9.  (C)  Ministry of Agriculture officials paint their own 
picture of domestic contract farming.  Director General for 
Agricultural Planning Tin Htut Oo told us that the Ministry 
is promoting contract farming with private domestic companies 
to enable farmers to share costs and expand their production. 
 According to the Ministry, private companies establish 
informal agreements to provide farmers with inputs and 
receive payment after harvest.  Tin Htut Oo emphasized that 
the land remains in the hands of the farmers, not the 
companies.  He also explained that, while farmers in Burma 
have the right to work the land, they never own the land per 
se.  Under Burmese law, the GOB is the sole owner of 
farmland, and has the right to take possession of land not 
used for farm purposes -- similar, he claimed, to Vietnam's 
land use policy.  In Burma, farmers are not allowed to sublet 
the land to other farmers.  Tin Htut Oo, acknowledging severe 
problems for farmers to obtain credit, claimed the Ministry 
is working to establish a policy whereby farmers would be 
able to loan their land rights to landless people. 
 
¶10.  (C)  Tin Htut Oo told us that the stories of the GOB 
taking land from Delta-based farmers after Cyclone Nargis 
were not true.  In some instances, farmers lacked the ability 
to purchase farming inputs, so the land was not farmed.  In 
those cases, the land was turned over to the village land 
committee for temporary redistribution.  Since then, some 
farmers have regained their land, he claimed.  (Note: With at 
least 138,000 cyclone deaths, nearly all in rice-growing 
areas of the Delta, many farm families undoubtedly lost their 
lives, not just their ability to purchase inputs.) 
 
An ILO Perspective 
------------------ 
 
¶11.  (C)  According to Steve Marshall, ILO Liaison Officer, 
in general the GOB only confiscates land when farmers fail to 
meet their contractual obligations to farm.  While there were 
many allegations of land confiscation after Cyclone Nargis, 
the ILO never received a formal complaint and thus could not 
investigate the validity of the stories.  In the case of 
contract farming, should a farmer enter into a loan agreement 
with a company and fail to meet the terms of the agreement, 
the farmer might have little option but to relinquish control 
of the land, Marshall stated. 
 
Comment 
------- 
 
¶12.  (C)  We will continue to pursue leads on the 
contract-farming issue.  If the process is as benign as 
Ministry of Agriculture officials describe, it could indeed 
be a winner for all sides.  However, if the bargain is forced 
or land is simply confiscated, serious human-rights concerns 
would arise. 
 
¶13.  (U)  This cable was cleared by Embassy Bangkok and 
AmConsul Chiang Mai. 
 
DINGER