Deputy Prime Minister Taro Aso’s trip to Myanmar marked the start of an economic diplomacy drive by the newly inaugurated administration of Prime Minister Shinzo Abe.
“Myanmar was chosen for the first overseas trip by a member of the Abe Cabinet,” Aso, who concurrently serves as finance minister, told a news conference after meeting with President Thein Sein, stressing the emerging economy’s importance to Japan.
Abe is known to be keen on embracing developing Asian countries to seek new growth opportunities for Japanese businesses, and Myanmar, which some analysts describe as the region’s last economic frontier, is one of the countries his Liberal Democratic Party government is aiming to forge a close connection with.
Aso, a former prime minister himself from 2008 until the electorate booted the LDP from office in September 2009, has been serving as the top advisor of a bilateral association focused on promoting mutual business interests.
Through his own channels, Aso had long sought an opportunity to visit Myanmar and boost Japan’s local influence, and to encourage further democratic reforms and market liberalization under the government of Thein Sein. His visit came just days after Abe’s Cabinet was formed Dec. 26.
After decades of harsh military rule, a reform-oriented government in Naypyitaw was allowed to embark on a startling reform initiative in March 2011 that has swiftly opened up the country, which previously was viewed as a pariah by the global community, and seen international sanctions against it lifted. Japan has taken the lead in slashing Myanmar’s massive outstanding debt to various global lenders — estimated at around ¥500 billion in Tokyo’s case — and in offering new financial assistance.
The ousted Democratic Party of Japan-led government last year agreed to relinquish its claims on around ¥300 billion of this debt by the end of January, on condition that Myanmar remains on the path to democracy. Naypyitaw is expected to apply for fresh loans from Japanese financial institutions to refinance the remaining ¥200 billion.
One local reporter said Naypyitaw highly rates what it views as Tokyo’s provision of financial and other aid from a long-term perspective.
Others who extended now long-overdue credit to Myanmar include the World Bank, the Asian Development Bank, Germany and Denmark. Tokyo has been encouraging institutional lenders, especially the ADB, to provide fresh financing to Naypyitaw.
“Myanmar is heavily in debt and has been unable to attract investment. Japan will remove these obstacles and support the country,” Aso pledged during his visit.
Tokyo’s support is not unconditional, however, and in order for more Cabinet members to follow in Aso’s footsteps and visit Myanmar, the country will have to continue demonstrating its “willingness” to steadily implement democratic and probusiness reforms, a ranking Japanese government official said.
Japan’s support is also aimed at checking the rise of China, which maintained friendly ties with Myanmar during its decades in the diplomatic and economic wilderness under junta rule. Officials in Tokyo are said to be on their guard against Beijing gaining the upper hand in promoting economic development projects in Myanmar in the years ahead.
“One of the top issues for industrialized countries in the area of Asian diplomacy is to check China from taking the sole lead in fostering relations with Myanmar,” an official at a major domestic trading house said.
The White House is also alert to this danger, resulting in Barack Obama last year becoming the first incumbent U.S. president to pay a visit to Myanmar, a sign of the country’s remarkable rehabilitation on the international stage, and of Washington’s foreign policy “pivot” toward Asia.
Tokyo’s assistance to Naypyitaw could play a role in backing this strategic shift by the U.S. Abe is scheduled to travel to Washington in late January to meet with Obama, during which Myanmar’s democratization and economic development may well be on the agenda.
Due to its long military dictatorship, Myanmar lacks a bureaucracy capable of providing administrative and technical support for economic development projects or private businesses looking to tap the country’s expanding and potentially lucrative new market.
Overseas assistance is considered vital in many areas, including training workers, transferring technologies, establishing a business framework and developing Myanmar’s financial markets.
“At least for the time being, the Myanmar government has to rely on foreign capital,” a trade ministry official said in Tokyo, noting the growing number of foreign-owned hotels and office buildings under construction in the commercial capital of Yangon.
It will be up to Abe’s new LDP government to ensure the financial assistance promised by the previous DPJ administration resumes, and that bilateral cooperation continues to deepen.
Not all of Myanmar’s problems have been resolved, however. Its government is still trying to forge a peace deal with armed ethnic insurgencies in various parts of the country, while a degree of concern still lingers about the future of its democratization process.