Myanmar Brief MYANMAR COVID-19 MONITORING draws from a monthly survey of households and en- terprises undertaken by the World Bank Poverty and Equity and Macro, Trade and Covid–19 Investment Global Practices with support from Myanmar Central Statistical Orga- Monitorıng №3 nization (CSO) to provide regular updates on households’ living conditions and en- terprises’ activities. It also includes a community assessment led by the Social Development Global Practice. Myanmar COVID-19 Monitoring was generously sup- ported through the Trust Fund for Statistical Capacity Building (TFSCBIII) by the Unit- ed Kingdom’s Foreign Commonwealth and Development Office, the Government of Korea, and the Department of Foreign Affairs and Trade of Ireland. Additional sup- port was provided by the governments of Australia, Denmark, Finland, and Sweden. 2 September 2020 EMA I L → MYA NMA R@WORLDBA NK .ORG ➚ The Firm –Level Impact of the Covid–19 Pandemic Summary of Results from Round 2 2 5 J U N E — 1 7 J U LY 2 0 2 0 T he World Bank commissioned a firm-level sur- vey to provide quantitative evidence of the im- Figure 1 Share of firms reporting temporary closures – by sector pact of the COVID-19 pandemic. Two rounds of data have now been collected for the months March May of March and May using a nationally representa- 11% 39% Services tive1 World Bank survey providing information 7% 15% on the impact of the COVID-19 pandemic. The Retail and wholesale survey includes 500 firms2 spanning a wide range of industries and 5% 12% Agriculture firm sizes, as well as the formal and informal sector. This note pro- 3% 6% vides a snapshot of how the firms’ outcomes and response to the Manufacturing pandemic have changed between the months of March and May.3 6% 16% Total Firms gradually returned to normal operation in May. Only an average of 6 percent of firms were temporarily closed in March, a 10-percentage point improvement as compared to March. Firms Figure 2 Share of firms reporting temporary closures in the service sector were the most significantly affected by – by geographical zone COVID-19 (Figure 1), and while those firms are showing signs of incremental recovery to a greater degree to other sectors, 11 percent March May of service-sector firms still remain closed. Firms estimated that it 7% 12% would take them an average of 8 weeks to resume operations. For Delta and Coastal Lowland retail and wholesale firms however, this number is five times high- 7% 13% Chin and Dry Zone er than it was in March, at 15 weeks. Firms in the hilly zone4 recov- 4% 18% Mandalay ered the most with only 1 percent remaining temporarily closed, a 7% 20% 22-percentage point improvement as compared to March. Although Yangon 1% 23% substantially fewer than in March, 7 percent of firms in the delta Hilly Zone 6% 16% and coastal lowland, Chin and dry zone and Yangon remain closed. Total Female-owned firms are more likely to report negative effects from COVID-19. The negative impact of COVID-19 in terms of reduced ac- The overall negative impact of COVID-19 remains significant and unchanged across the two months. The large majority of firms, 88 percent (Figure 3), report experienc- cess to credit, cash flow shortages, reduction in sales and temporary ing a reduction in sales due to the pandemic. Following sales reduction, cash flow shortages and reduction in access to credit were the next most commonly reported closure has, on average, affected women entrepeneurs more harsh- impacts. The shares of firms reporting these shortcomings have slightly improved from one round to the next, but they still affect over 50 percent of firms for reduc- ly than male owners (Figure 4). Reduction in access to credit is the tion in sales and cash flow shortages. Only 10 percent of firms in May reported laying key differentiator between women and male business owners, where off employees, less than half the firms reporting the same in March. women fare significantly worse than their male counterparts. Figure 3 Impact of COVID-19 on firms COVID-19 caused both sales and profit decline for the majority of firms since the onset in March. Between the months of March March May and May the share of firms reporting a profit loss compared to the same period last year increased by 13 percentage points to 80 per- cent (Figure 5). In March, medium sized firms were the hardest Reduction in sales 85% 88% hit, but in May, a larger share of micro and small firms reported Cash flow shortages 51% profit losses (Figure 6). 50% Reduction in access to credit 31% Among firms expriencing cash flow shortages, loans from 29% friends and family was the principal mechanism to mitigate Disruption of supply of inputs 29% or raw materials 23% business capital risk during both months. Firms in the agricul- Difficulty making payments on loans 26% and other business credits 21% 1 The survey was nationally representative and included firms from a wide range of Filed for insolvency or bankruptcy 13% sectors. Whereas firm-level surveys in Myanmar tend to focus on the manufacturing, 12% retail/wholesale, and service sectors, the World Bank survey provided a more accu- rate cross-section of Myanmar’s firms that encompassed the agricultural sector, Reduction in workforce due to layoff 21% small and medium enterprises (SMEs), and informal firms. 10% 2 The second round of data includes 353 of the same firms that were surveyed in round 1, the remaining firms have been substituted due to attrition reasons. 3 Firms were not surveyed in April as firms do not operate in full capacity in that month due to Thingyan holidays. Source: The World Bank’s COVID-19 firm survey 4 States and regions are grouped into zones based on their economic and geographic characteristics. Two of the five zones are single regions - Yangon and Mandalay. The Hilly Zone includes the states of Kachin, Kayah, and Shan. The Delta and Coastal Low- land Zone includes Ayeyarwaddy region, Rakhine state, Mon state, Bago region, Tanin- tharyi region, and Kayin state. Chin and the Dry Zone includes Chin state, Sagaing region, Magwe region, and Nay Pyi Taw. Myanmar COVID–19 Monitoring 02 September 2020 Brief No. 3 ture sector took out the most loans (Figure 7) to deal with cash flow shortages, pre- Figure 4 Impact on firms by owner’s gender – May ferring family and friends over banks and non-banking institutions in the month 90% of May. Only firms in the service sector Female Ownership 80% Male Ownership resorted to non-banking institutions for 70% loans more readily than family and friends. 60% March Overall, the use of loans from commercial 50% 40% banks from firms decreased between the 30% month of March and May in each sector, 20% while the use of non-banking institutions 10% and family and friends as loan sources, in- 0% Temporarily Reduction in Cash Flow Reduction in access creased between the two months. closed sales Shortgages to credit May saw an increase in firms adopt- ing adjustment measures to respond to Figure 5 Share of firms reporting a Figure 6 Share of firms reporting a operational and financial impacts of decrease in profits – by sector decrease in profits – by firm size COVID-19. Starting or increasing delivery services was the most common adjustment mechanism adopted by firms in response March May March May to COVID-19 – with 38 percent firms adopt- Agriculture 68% 71% Micro (1–4) 66% 80% ing this measure (Figure 8). Although the majority of firms continued their conven- tional production or services delivery mod- Manufacturing 67% 82% Small (5–19) 67% 81% el, over one-third of firms changed their production or service delivery to adapt to Retail and wholesale 64% 84% Medium (20–99) 76% 87% COVID-19 in May, a 6-percentage point increase with respect to March. The adop- Services 69% 86% Large (>99) 50% 72% tion of digital platforms or online systems to perform business functions and the use of remote working arrangements remain Total 67% 80% Total 67% 80% the least utilized adjustment mechanisms. Only 21 percent of firms were using digital platforms during the last month, and even fewer (5 percent) had remote working ar- rangements, a further reduction compared Figure 7 Loans from friends and family was the main mechanism for to March. Agricultural and micro-sized dealing with cash flow shortage firms remain by far the least likely to report adopting new mechanisms to cope with pandemic impacts. Overall there has also been an increase in the measures adopted to ensure customer and employee safety, with firms providing and mandating the use of sanitizing products and masks being the two most commonly adopted mechanisms. More than half of the firms were aware of economic support programs offered by local and national governments, but only 17 percent of firms applied for them, a 7 percentage-point increase compred to March. Access to loans and credit guran- tees (51 pecent) was highlighted by firms to be the most urgently needed form of government support, followed by tax de- ferrals or tax relief (12 percent), and utility Figure 8 Share of firms reporting major adjustment mechanisms subisidies (9 percent). While in March fewer small and micro firms reported being negatively impacted by COVID-19, in May smaller sized firms were significantly worse off than large firms. Only 3 percent of large firms in May reported a risk in falling in arrears over the following three months, compared to 40 and 35 percent of medium and micro firms, respectively (Figure 9). Over one-third of small firms have experienced a reduction in access to credit, compared to only 1 per- cent of large firms experiencing this set- Figure 9 COVID-19 impact - by firm size (May 2020) back in May. However, on average and re- March gardless of size, the vast majority of firms surveyed expressed confidence to remain operational for the next month. Firms in the agriculture sector have been affected the most dramatically by the pandemic, as more firms in this sector reported overall operational and financial difficulties than other sectors. While in May, an average of one-third of the firms reported falling in 0 50 100% arrears over the next three months (Figure 10), this figure was over 50 percent for ag- riculture firms. In addition, 39 percent of Figure 10 COVID-19 impact - by sector (May 2020) agriculture firms have experienced a reduc- tion in access to credit, while the share of March firms in other sectors that has experienced a similar reduction in access remains be- low 30 percent. 0 50 100% Source: The World Bank’s COVID-19 firm survey