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 №5 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 October 2020 EMA I L → MYA NMA R@WORLDBA NK .ORG ➚ The Firm –Level Impact of the Covid–19 Pandemic Summary of Results from Round 3 2 9 J U LY — 1 8 A U G U S T 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. Three rounds of data have been collected in May, July and Au- gust, using a nationally representative1 World Bank survey providing data on the impact of the COVID-19 pandemic. The survey includes responses from 500 firms2 spanning a wide range of industries and firm sizes, as well as the formal and informal sector. This note provides a snapshot of how firms’ outcomes and responses to the pandemic have changed throughout the months of May to August. ROUNDS The share of temporarily closed firms increased slightly in Au- gust. During this month, an average of 7 percent of firms were temporarily closed representing a slight increase as compared to Figure 2 Share of firms reporting temporary closures July. Except for firms in the Chin and Dry zone, the share of closed – by geographical zone firms increased across every geographical area. Results by sector are mixed: while service and retail firms recovered, there was an increase in the share of agriculture and manufacturing firms re- maining temporarily closed. In August, firms in the agriculture sector were the worst affected by COVID-19 (Figure 1), with 10 percent of those firms still closed. The overall negative impact of COVID-19 remains significant, but most areas show improvement. Reduction in sales due to the pandemic remains the area in which firms were most adversely affected. In June, 81 percent (Figure 3) of the firms in our sample ROUNDS reported experiencing a reduction in sales. Following sales reduc- tion, the next most commonly reported impacts were – in order of prevalence – a reduction in production, difficulty selling prod- Figure 3 Impact of COVID-19 on firms ucts or services to customers, and cash flow shortages. However, the shares of firms reporting these impacts has improved since Rd 1 Rd 2 Rd 3 0% 25 50 75 100 May. Except for the areas of sales and production reduction, less Reduction in sales than half of firms now report being affected in each of the other impacted areas. For example, only 16 percent of firms reported a Reduction in production reduction in access to credit in August – a figure half of what was Difficulty in selling products or reported in July, representing a marked improvement. services to customers Cash flow shortages Female-owned firms are more likely to report negative effects from COVID-19. The negative impact of COVID-19 in terms of Reduction in access to credit cash flow shortages, reduction in sales and temporary closures Disruption of supply of inputs have, on average, affected female owned firms more dramatical- or raw materials ly than those owned by males (Figure 4). However in the month Difficulty making payments on loans and other business credits of August, the same share of female and male owned firms expe- Filed for insolvency or bankruptcy rienced a reduction in access to credit: a material change com- pared to the previous months. Reduction in access to credit is the Reduction in workforce due to layoff area where women had been disadvantaged the most compared to their male business owner counterparts, but in August there is evidence of recovery with regard to access to credit channels. That said, female-owned firms remain almost twice as likely to Note: Source: The World be temporarily closed at 9 percent compared to only 5 percent for Round 1=May Bank’s COVID-19 firm Round 2=July survey male-owned firms. Round 3=August 1 The survey was nationally representative and included firms from a wide range of sectors. Whereas firm-level surveys in Myanmar tend to focus on the manufacturing, re- tail/wholesale, and service sectors, the World Bank survey provided a more accurate cross-section of Myanmar’s firms that encompassed the agricultural sector, small and medium enterprises (SMEs), and informal firms. 2 The third round of data includes 390 of the same firms that were surveyed in round 2. Due to attrition, the remaining firms have been substituted to meet sample needs. Myanmar COVID–19 Monitoring 02 October 2020 Brief No. 5 COVID-19 caused both sales and profit decline for the majority of firms since its Figure 4 Impact on firms by owner’s gender in August onset in March. Between the months of May and June, the share of firms reporting 90% a profit loss compared to the same period Female Ownership 80% Male Ownership last year improved by almost 10-percent- 70% May age points (Figure 5), bringing the share of 60% 50% July firms losing profits to 72 percent. Howev- 40% er, this is still a higher share of firms com- 30% pared to March. While firms across all sec- 20% tors fared better in June than in May, firms 10% in the agriculture and manufacturing sec- 0% Temporarily Reduction in Cash Flow Reduction in access tor performed better at the earlier stages of closed sales Shortages to credit the pandemic in March as well (Figure 5). Focusing on size (Figure 6), medium sized firms again represent the group of most af- Figure 5 Share of firms reporting a Figure 6 Share of firms reporting a fected firms in terms of profit loss. While decrease in profits – by sector decrease in profits – by firm size micro and small firms are performing bet- ter than in May with a smaller share re- porting loss of profits, medium and large March May June March May June firms are faring worse than in both prior 0% 10 20 30 40 50 60 70 80 90 100 0% 10 20 30 40 50 60 70 80 90 survey rounds. At the earlier stages of the pandemic, large firms appeared to be those least affected by COVID-19 in terms of prof- it losses, however their resilience has been tested as the effects of the pandemic con- tinue. For example, only 50 percent of large firms in March reported profit loss com- pared to the same period last year, by June this figure reached 81 percent. On average, for firms reporting a loss in June, this rep- resented a 57 percent decrease compared to the same period last year, with medium, manufacturing and service firms reporting the highest profit loss between 62-63 per- cent. Figure 7&8 loan sources March May June Among firms experiencing cash flow F A M I LY A N D F R I E N D S NON-BANKING INSTITUTIONS shortages, loans from friends and fami- ly continues being the main mechanism to deal with this shortcoming. Firms re- lied on taking out loans from friends and family, followed by non-banking institu- tions, as only 8 percent of firms resort to commercial banks. Like in May, firms in the agriculture sector continue being those taking out the most loans (Figure 7 and 8) to deal with cash flow shortages. While firms across most sectors reduced the need for loans between the month of May and June, the share of service firms requesting a loan increased by 8 percentage points Note: For questions on sales, profits, loans and delays the recall period is lagged so firms have time to have com- pleted their bookkeeping accounts and for Round 3 they were asked to answer for June. All other questions are from family and friends and by 3 percent- contemporaneously asked and are reported as August for Round 3. age points from non-banking institutions. Overall, the use of loans from each report- ed source (of family, non-banking institu- Figure 9 Share of firms reporting major Figure 10 Most urgent government adjustment mechanisms policy response tions, and commercial banks) decreased between the months of May and June, sig- May July August May July August naling a reduced reliance on loans to deal with cash shortages, thus an improvement compared to the previous month. In August there was a further increase in firms adopting adjustment measures to respond to operational and financial impacts of COVID-19. Over one-third of firms adopted online and digital platforms for major business functions, representing over a 10 percentage point increase com- pared to July (Figure 9). This measure saw the largest increase in adoption rate and went from being one of the least utilized adjustment mechanisms to the most, with 34 percent of firms adopting some form of digitization to generate business. While over half of the firms still continued their conventional production and service de- livery model, these two areas also experi- enced a change. Although more moderate- ly than the adoption of an online or digital Source: The World Bank’s COVID-19 firm survey Myanmar COVID–19 Monitoring 02 October 2020 Brief No. 5 platform, change in production and ser- vices and the start or increase in delivery Figure 11 COVID-19 impact - by firm size May July August of their products increased by 2 and 5 per- centage points respectively. Remote work- ing saw a further reduction as only a very small share of firms (3%) still uses this mo- dality for their operations. While the use of firm-level adjustment mechanisms has increased, there has instead been a slight decrease in the share of firms adopting measures to ensure customer and employ- ee safety, with regular workplace disinfec- tion being the only measure that saw an increase in June. In August, 61 percent of firms reported being aware of economic support pro- grams offered by local and national gov- Figure 12 COVID-19 impact - by sector May July August ernments, but only 20 percent of firms ap- plied. The disparity between firms aware of government support programs and those which have applied is still large, de- spite the small increase in firms applying between July and August. By far, firms em- phasized access to loans and credit guar- antees as the most urgently needed form of government support, although with a slight decrease compared to the previous month. Tax deferral or tax relief is increas- ingly gaining support by firms as a policy priority, with 17 percent of firms reporting tax related interventions as one of the most needed (Figure 10). August saw an increase in the share of firms reporting a fear of falling in arrears in the next 3 months. While large firms had been the best positioned in respect of being able to meet repayment obligations in July, August saw a 53 percentage point increase in those firms reporting a likelihood of fall- ing into arrears in the subsequent months. This finding represents the largest single increase in reported COVID-19 negative impacts due to by firms across the entire data collection period, and was common- ly reported across every sector (Figure 11). Similarly, all firms – regardless of sector of operation – feared falling in arrears now more than in July, albeit to a lesser degree than large firms. However, on average and regardless of size and sector, almost the en- tirety of firms reported a confidence to re- main operational for the following month. The share of firms lacking that confidence reduced across the board except for small firms that saw a small percentage point in- crease. The share of firms experiencing a reduction in access to credit has also im- proved in August, with the exception of large and medium firms that saw a 5 and 11 percentage point increase in reporting this set-back respectively. Firms in the ag- riculture sector continue being those most affected, as on average, more firms in this sector reported adverse implications of COVID-19 to a greater degree than firms across any other area (Figure 12).