Japan Sprints to Myanmar’s Aid

Until recently Myanmar – also known as Burma – was considered a pariah state, virtually inaccessible to the outside world, and ruled by a repressive military junta with an appalling human rights record. The U.S. and E.U. placed sanctions on the country during the 1980s, but since the establishment of a new nominally-civilian government in 2010, Myanmar has passed sweeping reforms in hopes of opening and developing the country.

The rest of the world has not hesitated to use this opening: foreign governments and multi-lateral institutions, are boosting their aid and development packages after decades of absence that left the country of 60 million people one of the poorest in Asia. Private firms, too, are vying for access to the “next economic frontier” and perhaps one of the last major untapped markets.

While the U.S., E.U., World Bank, and Asian Development Bank have each committed hundreds of millions in development aid, so far Japan has been one of the most eager donors.

April 2012 Japanese Prime Minister Yoshihiko Noda, left, shakes hands with Myanmat President Thein Sein, after their bilateral meeting at the Mekong-Japan Summit at the State Guest House in Tokyo.
April 2012: Japanese Prime Minister Yoshihiko Noda shakes hands with Myanmar President Thein Sein after their bilateral meeting at the Mekong-Japan Summit at the State Guest House in Tokyo.

Japan is Myanmar’s largest creditor, and has committed some $18 billion in aid, investment, and debt forgiveness from government and private sources.  This includes forgiving $3.7 billion in bilateral debt, $3 million in donations from The Nippon Foundation to help ethnic refugees who have suffered from five decades of civil war, and a $22.4 million contribution to The United Nations World Food Program in Myanmar.  While Japan never formally applied sanctions, all aid and investment was effectively halted during the sanctions era for fear of upsetting relations with the U.S. and E.U.

With sanctions easing, Japanese private investment is taking off. In April 2012, an agreement was signed between three major Japanese conglomerates, the Japan International Cooperation Agency (JICA) – the Japanese government agency administering foreign aid – , and the Myanmar government to develop the initial phase of Thilawa; a 1,000 acre site outside of Yangon that will feature housing, commercial space, and an industrial park.

In addition, Japanese companies are rapidly increasing their presence throughout the country.  During the sanctions era, Mitsubishi maintained a small office in the country that was active in the trading of fibers, food provisions, steel and machinery.  The company is now opening an additional office in the new capital of, Nay Pyi Daw that will focus on infrastructure development projects, which will be funded through international yen loans and other sources. Mizuho Financial Group Inc., the second largest financial services group in Japan, has decided to provide banking technology to both the government ministries and private companies.

August 2012:  Opening ceremony of Maruhan Japan Bank in Yangon, Myanmar
August 2012: Opening ceremony of Maruhan Japan Bank in Yangon, Myanmar

Myanmar sees working with the Japanese as preferable to working with the Chinese. Even though China has historically been one of the country’s closest allies – with Chinese investment accounting for some 87% of all FDI in 2009 – Myanmar perceives China as exploiting its natural resources for Chinese interests, and in April 2012 President Thien went to Tokyo to ask for assistance.  This is widely viewed as a means of diversifying away  from China.

For Japan, strengthening ties with Myanmar and other Southeast Asian countries is one method of countering China’s growing influence in the region.

Despite these new changes in the country, Japan, China, private investors, and NGOs continue to face significant barriers operating in one of the poorest countries in the world.  Myanmar is urged to make the creation of a legal framework and almost every kind of infrastructure a top priority in order to take full advantage of the new investment possibilities.

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