Ja­pan set to reap re­turns on in­vest­ment in Myan­mar

The Myanmar Times - - News - PA­TRICK STREFFORD news­room@mm­times.com

AF­TER over 20 years of sanc­tions and in­ter­na­tional pariah sta­tus, Myan­mar has be­gun to come in from the cold. It has taken the 2010 elec­tions, a new “civil­ian” pres­i­dent and the by-elec­tions of 2012 to con­vince the in­ter­na­tional com­mu­nity that the tran­si­tion to democ­racy is “real”.

The sub­se­quent flurry of diplo­matic ac­tiv­ity with Myan­mar has re­sulted in most of the sanc­tions be­ing sus­pended. On the sur­face, this re-en­gage­ment with Myan­mar ap­pears to have been ini­ti­ated by the US Obama ad­min­is­tra­tion. But, while this is un­doubt­edly true, it misses the key role that Ja­pan has played.

Ja­pan has al­ways taken its own ap­proach to Myan­mar, fol­low­ing a “car­rot and stick” method through­out the 1990s and 2000s. The car­rot here was the prom­ise of Ja­panese pub­lic and pri­vate in­vest­ment to en­cour­age po­lit­i­cal and eco­nomic re­forms.

For Ja­pan, geostrate­gic com­pe­ti­tion with China and sup­port for ASEAN, com­bined with its own eco­nomic in­ter­ests, are the pri­mary fac­tors mo­ti­vat­ing en­gage­ment with Myan­mar. Un­der­pin­ning all this is the widely held per­cep­tion that Ja­pan has in­vested heav­ily in Myan­mar since its in­de­pen­dence and now it’s time to reap the ben­e­fits.

Ja­panese in­vest­ment in Myan­mar dates back to the repa­ra­tions agree­ment of 1954, when Ja­pan be­gan sup­ply­ing half of then-Burma’s de­vel­op­ment aid. This continued through to the post-Cold War sanc­tions pe­riod, when Ja­pan continued to pro­vide piece­meal aid on a case-by-case ba­sis.

Im­por­tantly, be­cause of the in­com­pat­i­bil­ity be­tween the “Burmese Way to So­cial­ism” and the Ja­panese for­eign eco­nomic pol­icy of keizai ky­oryoku (eco­nomic co­op­er­a­tion) – through which pri­vate ac­tors utilise pub­lic funds to sub­sidise their in­vest­ments – eco­nomic re­la­tions be­came to­tally de­pen­dent on pub­licly fi­nanced Of­fi­cial De­vel­op­ment As­sis­tance (ODA). But due to Burma’s long-term eco­nomic de­cline dur­ing the Cold War and the post-Cold War era sanc­tions, Ja­pan has never re­ceived any re­turn on its in­vest­ment.

As early as 1999, the Ja­panese govern­ment promised loans to Myan­mar if progress was made on democrati­sa­tion. And so in 2012, when Daw Aung San Suu Kyi won a seat in par­lia­ment, the Ja­panese govern­ment quickly can­celled a large por­tion of Myan­mar’s debt. A year later, Ja­pan can­celled an­other large amount of Myan­mar’s debt, bring­ing the to­tal debt can­ce­la­tion to US$3.8 bil­lion. In 2012, Ja­pan was also in­stru­men­tal in clear­ing Myan­mar’s ar­rears to in­ter­na­tional fi­nan­cial in­sti­tu­tions, thereby also en­abling re-en­gage­ment be­tween them and the govern­ment of Myan­mar.

Ja­panese busi­ness pow­er­houses such as Ni­hon Koei, Marubeni, Itochu Cor­po­ra­tion, Mit­subishi and Su­mit­omo have been in­volved in ODA fi­nanc­ing projects in Myan­mar since the Cold War. The Thi­lawa spe­cial eco­nomic zone (SEZ), which is be­ing jointly de­vel­oped by Ja­pan and Myan­mar, is one ex­am­ple. The Thi­lawa SEZ was of­fered to Ja­pan in 2011 in re­turn for Ja­panese sup­port and has now be­come a key des­ti­na­tion for Ja­panese pub­lic and pri­vate in­vest­ment. By 2013, Ja­pan was pledg­ing con­sid­er­able pub­lic fi­nance for the Thi­lawa SEZ, and Prime Min­is­ter Shinzo Abe was vis­it­ing with groups of Ja­panese busi­ness­men, ex­plic­itly demon­strat­ing Ja­pan’s sup­port.

This pub­lic-pri­vate part­ner­ship goes even deeper. While the usual Ja­panese cor­po­ra­tions have been awarded the con­tracts for in­fra­struc­ture con­nected with the Thi­lawa SEZ, the Ja­pan In­ter­na­tional Co­op­er­a­tion Agency – Ja­pan’s pub­lic aid agency – is in fact a share­holder in the Thi­lawa SEZ. Along with Mit­subishi, Marubeni and Su­mit­omo, the Ja­panese own 49 per­cent of the Thi­lawa SEZ. This is the first-ever Ja­pan-Myan­mar pub­licpri­vate ini­tia­tive.

So is Ja­pan re­vert­ing back to its Cold War keizai ky­oryoku for­eign eco­nomic pol­icy? Cer­tainly pri­vate and pub­lic ac­tors have co­op­er­ated to a high de­gree, and have been highly proac­tive in their at­tempts to ‘open up’ Myan­mar. It may also be that such pol­icy never re­ally dis­ap­peared, and is now merely op­er­at­ing in a more amenable en­vi­ron­ment. Or per­haps the geopo­lit­i­cal im­per­a­tive of coun­ter­ing the rise of China is forc­ing Ja­pan to re­vert to its Cold War strate­gies. What is cer­tainly true is that many Ja­panese stake­hold­ers feel that Ja­pan has a per­ceived “right” to Myan­mar, which stems from its long-term in­vest­ment.

Re­gard­less of the ra­tio­nale, Ja­panese eco­nomic ac­tiv­ity in Myan­mar will surely in­crease dra­mat­i­cally in the near fu­ture. In 2015 alone, Ja­pan agreed to new loans to­talling about $1 bil­lion and, in early 2016, it an­nounced that the new Yangon In­ter­na­tional Air­port – worth $1.5 bil­lion – would be 49pc fi­nanced by the Ja­panese. Through such meth­ods, Ja­pan will fi­nally be­gin to see a re­turn on its in­vest­ment in Myan­mar.

– East Asia Fo­rum

Pa­trick Strefford is an as­so­ciate pro­fes­sor at the Depart­ment of In­ter­na­tional Re­la­tions, Ky­oto Sangyo Univer­sity.

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