Prime Minister Yoshihiko Noda announced Saturday that Japan will resume yen loans to Myanmar and cancel about 60 percent of the debt and overdue charges it is owed to assist the country’s recent moves toward democracy.

The announcement coincided with the first visit to Japan by a Myanmar head of state in 28 years, when the country was known as Burma. During a bilateral meeting with Myanmar President Thein Sein at the State Guest House in Tokyo, Noda welcomed the country’s recent steps toward democratization and promised continued support to improve the lives of its people.

“Myanmar’s democratization drive is definitely moving forward. As it is entering a crucial stage (in the process), we will further support the country’s reform efforts and provide assistance so its people can enjoy the fruits of democracy,” Noda said during a joint news conference.

The meeting and subsequent dinner were held on the sidelines of Saturday’s conference of leaders from the Mekong region nations — Myanmar, Cambodia, Laos, Thailand and Vietnam.

At the meeting, Noda agreed to implement a two-step process to reduce Myanmar’s financial burden: a ¥127.4 billion debt writeoff and the cancelation of ¥176.1 billion in overdue charges from the past two decades. The cancelation is contingent on a year of joint monitoring of the country’s democratic reforms. For its part, Myanmar will return ¥198.9 billion in previous borrowings from Japan by taking out a new long-term concessionary loan.

During the news conference, Thein Sein thanked Noda for canceling around 60 percent of Myanmar’s debts to Japan, and stressed the importance of Tokyo’s financial support.

“With the problem of Myanmar’s debt resolved, Japan’s cooperation and support will be extremely beneficial in our development and reform efforts,” Thein Sein said.

As for the low-interest yen loans that had been suspended since 1988, when Myanmar cracked down on prodemocracy campaigners, Japan will officially resume them once the two governments determine the best way to use the funds to improve Myanmar’s infrastructure.

Japan will also provide ¥5 billion in aid to assist ethnic minorities and improve medical care, as well as to support disaster prevention, agriculture and rural development programs.

In addition, the two governments signed an agreement to cooperate on developing the port of Thilawa, a 2,400-hectare special economic zone 25 km south of Yangon. Japan is especially keen to develop this area, as it links Yangon to the Andaman Sea.

Myanmar’s recent moves toward democracy have caught the attention of many investors around the world, including in Japan, where various companies are looking for a slice of the pie.

Shigeru Tsumori, Japan’s ambassador to Myanmar between 2000 and 2002, pointed out that the country is rich in natural resources and said it is “very meaningful” for Japan to assist its infrastructure development.

“The role of development aid is to establish a base so that companies can expand in the country,” Tsumori said. “And the potential of Myanmar is great, maybe even infinite.”

For decades, Myanmar’s junta-led government had to rely mainly on China for aid. But thanks to its reform push, Western countries that slapped rigid sanctions on Myanmar are suddenly jumping at the chance to do business.

Earlier last week, the U.S. eased financial restrictions on the country to allow financial transactions in support of certain humanitarian activities.

Tsumori, now a visiting professor at Ritsumeikan Asia Pacific University in Oita Prefecture, said Japan needs to ensure it builds a foothold in Myanmar as quickly as possible.

“Japan can play a unique role by placing itself in the middle between China and the U.S., so that Myanmar’s relationships with other countries can maintain a certain balance,” Tsumori said.

“Japan has always had a good relationship with Myanmar and I think that will become an asset for future cooperation.”

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