With Wednesday’s installation of a new government in Myanmar that will effectively be led by pro-democracy icon Aung San Suu Kyi, the Southeast Asian nation has arrived at a crossroads in its relationship with Japan.
After more than 50 years of military rule, Htin Kyaw, a key aide to Suu Kyi, took over the same day as the country’s president.
Suu Kyi, who has taken on four Cabinet posts, including the foreign ministry portfolio, has made it clear that while the Constitution bars her from ascending to the presidency, she will — as head of the ruling National League for Democracy party — be de facto leader of the country.
What is less clear, though, is where she intends to take Myanmar’s relationship with Japan.
Tokyo has courted Myanmar on foreign aid and investment fronts, with Prime Minister Shinzo Abe’s administration developing a particularly strong relationship with the nominal civilian government of then-President Thein Sein.
The number of Japanese companies operating in Myanmar has increased about sixfold to nearly 300 firms since the transition from junta rule in 2011, according to Japan External Trade Organization (JETRO) figures.
Last year, the Thilawa special economic zone — a massive industrial park near Yangon — opened with the help of Japan, bringing both Japanese and non-Japanese investment to the country.
Japan is also considering providing more than ¥100 billion in loans and grants in official development assistance to Myanmar in such areas as building infrastructure and urban planning at the request of Suu Kyi, a Japanese government source told Kyodo News earlier this month.
Japanese companies have high hopes that Suu Kyi, who was a visiting fellow at Kyoto University’s Center for Southeast Asian Studies from 1985 to 1986, will bring about a more transparent way of doing business.
Yet, Sayaka Hirose, a senior project officer at the ASEAN-Japan Centre in Tokyo, said companies may be required to play along with the vision of the NLD government, which has repeatedly said that foreign investment must first and foremost be beneficial to the people of Myanmar in terms of the environment and employment.
But, because the NLD does not have a well-developed policy program, experts say this vision remains obscured and it will likely take some time for changes to the government to kick in.
“I think more Japanese firms will go to Myanmar, some are taking a wait-and-see strategy as it might take time for the new government to get in gear,” said Toshihiro Mizutani at JETRO.
One of the main challenges is how much ground the military actually cedes to the NLD government.
The United States still maintains sanctions on business people with military contacts, an almost insurmountable hurdle for any company that has regular transactions with the U.S.
Still, Kei Nemoto, a professor at Tokyo’s Sophia University, said Washington might gradually relax these sanctions while paying close attention to moves by the military.
Outside of the investment arena, relations with Tokyo have faced criticism from within the ruling NLD over the Myanmar Peace Center, the government-backed organization that effectively ran negotiations on the country’s peace process.
The Japanese government was a major donor to the center and the nonprofit Nippon Foundation has also played a key role in financing its activities.
Aaron L. Connelly, a researcher focusing on Southeast Asia at the Lowy Institute in Sydney, said that Suu Kyi has been critical of the way the peace process was handled under the previous government. He noted that one of Suu Kyi’s top lieutenants, Win Htein, “accused the MPC of being a corrupt organization and wanted to audit the foreign money going into it.”
“There’s an impression within the NLD that Japan was trying to buy influence through the MPC,” Connelly said. “So how the NLD handles those questions will have a bearing on Japan’s relationship with Myanmar.”