Thu 3 Jan 2013
Filed under: News
Japan’s new government has moved swiftly to engage Myanmar as it looks to the long-isolated Southeast Asian nation as a potential market for Japanese goods, confirming it will start waiving some debt claims on Myanmar although it stopped short of committing to a major development project in the south of the country.
Finance Minister Taro Aso, appointed only a week ago, chose Myanmar for his initial overseas trip—the first by a member of Japan’s cabinet of Prime Minister Shinzo Abe—as Tokyo seeks generally to bolster ties with emerging economies in Asia, meeting Thursday with Myanmar’s President Thein Sein. The two held discussions for over an hour in the capital Naypyitaw.
Myanmar for more than two decades shut itself off from the international community, having been condemned for cracking down on pro-democracy movements in 1988. But the former military regime handed power in 2011 to a quasicivilian government that has embarked on a series of overhauls and encouraged foreign investment.
Japan has been taking the lead on Myanmar’s debt relief, putting the issue on the frontline of the annual International Monetary Fund meeting that Tokyo hosted in October, in an effort to facilitate the entry of Japanese businesses to the resource-rich country with cheap labor. Japan is also trying to regain the influence it lost during Myanmar’s quarter-century isolation under its military dictatorship, where China’s presence looms.
Mr. Aso confirmed Thursday that Japan will as an initial step waive about a quarter of its debt claims on Myanmar this month and will extend ¥50 billion ($573 million) of new loans to the country. Japan is the largest creditor of Myanmar, with $6 billion currently in arrears. Japan will eventually forgive more than half that debt, lending to the country afresh to finance development projects.
“Myanmar has been unable to make new investments because it is bound to the old debts. The debt waiver is meant to remove this obstacle to Myanmar’s economic growth,” Mr. Aso said.
Mr. Aso also affirmed Japan’s support for the Thilawa project, which aims to create an industrial estate on the outskirts of Yangon, Myanmar’s largest city and its economic capital. Japan and Myanmar last month agreed to jointly develop the site, a 23-kilometer stretch of empty land, into a manufacturing hub. “We want to focus on making a success of the Thilawa project for now,” he told Mr. Thein Sein, a Japanese official with knowledge of the talks said.
Myanmar’s finance minister Win Shein, speaking to Mr. Aso with reporters present, said “our relationship with Japan has passed a major milestone. With Japanese technology, I am convinced the Thilawa project will be successful.”
The new loans include ¥17 billion for rural development, in addition to ¥19 billion for power-plant rehabilitation around Yangon and as much as ¥20 billion for the Thilawa project, and likely reflect some concern on Japan’s part over continuing conflicts between the central government and ethnic minorities in rural areas.
The Rakhine region has been embroiled in violence in recent months that has left tens of thousands of minority Muslim Rohingya people homeless. Analysts have warned that various ethnic and sectarian rivalries that had been suppressed by the military now present a challenge to its fledgling democracy. “While the ethnic violence continues, investors would be reluctant to invest in the country,” said Yuji Mori, director for international programs at the Tokyo-based Nippon Foundation.
Mr. Aso did steer clear of a specific commitment to the ambitious Dawei project, a $50 billion deep-sea port industrial zone in the south of the country that Thailand has been helping to develop with the Myanmar government.
Mr. Thein Sein said Japan’s participation in the Dawei project would be much appreciated as it would potentially allow Myanmar to become “an east-west corridor” connecting the Indian Ocean and the Pacific Ocean via Thailand, the Japanese official with knowledge of the talks said.
But while Mr. Aso replied that Japan would consider that request, he gave no specific indication as to when or if Tokyo might join the project. The Japanese official added that Tokyo hadn’t been fully briefed about the project and it would be difficult for Japan to ascertain at this point how it could contribute.
Japan’s aid package is conditional upon overhauls being implemented in Myanmar. Japan officials have described Myanmar’s efforts so far as deserving of support, and Myanmar officials said they were serious about reform.
“Myanmar is undergoing a major change. We have embraced a new system and a new age. We are undertaking various initiatives under this new framework. One of the most symbolic signs of change is the fact [opposition leader] Aung San Suu Kyi is now allowed to do political activity as a member of parliament,” Aung Min, minister responsible for ethnic minority groups, said Thursday.
Write to Mitsuru Obe at email@example.com