Japan unveils major aid and loan package for Myanmar

Featured Japan — 27 May 2013

Japan on Sunday announced a development aid and loan package for Myanmar worth hundreds of millions of dollars as it boosts trade ties with the fast-changing nation seen as a key regional emerging market.

Prime Minister Shinzo Abe, who has pledged “all possible assistance” to kick-start Myanmar’s long-neglected economy, agreed the plans in talks with reformist President Thein Sein in the capital Naypyidaw, according to a joint statement released by Japan’s foreign ministry.

“…in laying a new foundation for taking the relationship between Japan and Myanmar to a higher level and establishing a lasting, friendly and cooperative relationship, Japan and Myanmar will work together,” it said, before outlining areas of cooperation.

Abe’s visit, the first visit by a Japanese premier since 1977, heralds a further improvement in already warm relations between Japan and Myanmar, as political reforms and the removal of most Western sanctions spur investment in the former pariah state.

As part of the new deals, the Japanese premier pledged up to 51 billion yen ($498.5 million) in new loans to Myanmar.

This covers countrywide infrastructure development, including road, electricity and water supplies; power station maintenance; and development of the Thilawa special economic zone near Yangon, a project agreed by both countries in December.

Japan also confirmed it would forgive 176.1 billion ($1.74bn) of Myanmar’s debts — the final portion of the 300 billion yen ($3.4 billion) that Tokyo pledged in April 2012 to cancel.

The move was contingent on further reforms.

“In support of the development of Myanmar and having implemented its arrears clearance operation with Myanmar, the Government of Japan decided to provide new yen loans as well as grant assistance,” the statement said.

Japan also announced an aid package worth up to 2.4 billion yen ($23 million) for water management in Yangon and a scholarship programme for young administrators overseeing the country’s social and economic development.

On Saturday Abe visited the Thilawa project — a 2,400 hectare (6,000 acre) site which will include a port and industrial park — as part of efforts to promote Japanese firms and his country’s infrastructure-building expertise.

A memorandum of understanding was also signed for the project between nine Myanmar companies and three from Japan — including Mitsubishi — according to the state-backed newspaper the New Light of Myanmar.

Abe is accompanied by a 40-strong delegation of bosses from some of Japan’s top companies, including Mitsubishi, Mitsui and infrastructure firms Taisei and JGC.

“Japan’s investments in Burma are truly extraordinary, and I think have taken many by surprise,” said Myanmar economics expert Sean Turnell before the announcement, using the country’s former name.

He said its investment push into Myanmar was both economic and geopolitical, with “rivalry with China” also driving policy.

Turnell said Japan had become the “dominant player” in Myanmar, with China facing flak from communities concerned over the environmental and social impact of several major infrastructure projects.

“China has been blind-sided, I think, and has a great hole of unpopularity to climb out of. The West is interested, but much of their money remains hovering nervously above the table as yet,” he said.

Unlike its Western allies, Japan maintained trade ties and dialogue with Myanmar during junta rule, which ended in 2011, saying a hard line could push it closer to Beijing.

Abe follows in the footsteps of other world leaders who have flocked to the country since it was welcomed back to the international community after Thein Sein’s nominally civilian government was installed two years ago.