A year after general elections gave the National League for Democracy a majority in Parliament and almost eight months since the inauguration of an NLD-led government, Myanmar is in a difficult situation. Economic growth has slowed and the progress of democratization and ethnic reconciliation remains sluggish. In extending support to the Southeast Asian country, Japan must work out policies that will help it respond to the rising expectations of its own people. Myanmar, on its part, needs to make serious efforts to improve economic conditions and ethnic relations.

Decades of sanctions against the military regime hampered the development of Myanmar’s economy. De facto leader Aung Sang Suu Kyi has scored a diplomatic success by getting the sanctions lifted. Still, in her meeting with business leaders in the capital Naypyitaw late last month, she admitted that the economy was not growing as fast as expected. The World Bank has predicted Myanmar’s economy would grow 7.8 percent with inflation at 8.5 percent in the 2016-2017 period, but Planning and Finance Minister Kyaw Win revised the growth forecast downward to 5 percent. Among the causes of the slowdown is confusion in the investment authorization procedure due to the change of government.

Following years of military rule, most of Myanmar’s population still live in poverty, and the high cost of food and fuel is hitting them hard. People’s frustration with the NLD-led government will grow if they don’t feel they have gained tangible economic benefits under its rule, possibly sowing new seeds of instability in the country.

In his meeting with Suu Kyi, who serves as Myanmar’s state counselor and foreign minister, in Tokyo last week, Prime Minister Shinzo Abe declared that the government and private sector are ready to contribute ¥800 billion in total over five years to her country’s development programs.

In extending development assistance, Japan needs to consider how to best use the aid to help improve people’s lives, including infrastructure development, the nurturing of small businesses and the development of human resources via education and training. In working out its aid policy, Tokyo should exercise utmost care to prevent the fruits of development from falling solely into the hands of the wealthy.

In September, Japan promised Myanmar ¥125 billion in loans, mainly to develop agricultural villages and reduce poverty. Tokyo should ensure the funds are efficiently used to raise the living standards of farmers, who account for 80 percent of the country’s population.

Myanmar faces problems in other fronts. Suu Kyi has placed priority on ending the fighting between Myanmar’s military and armed insurgents from 20 major ethnic groups. From August to September, she opened peace talks with representatives of 17 ethnic groups. But those meetings have not stopped the armed clashes, underlining the difficulty in building confidence with the ethnic groups, which have long been suppressed by the military.

Myanmar’s alleged human rights abuses of Rohingya Muslims in the Rakhine state have incurred international criticism. Troops who poured into the state — following attacks on border posts in early October by militants believed to be Rohingya Muslims — are accused of raping and killing Rohingya civilians, a charge that the government denies. Aid workers and journalists have reportedly been denied access to the state. The country’s Buddhist majority refuses to accept that Rohingyas are a legitimate ethnic group and insist that they are illegal migrants from Bangladesh. Rohingya Muslims have been forced into refugee camps and clashes between Buddhists and Muslims continue. Suu Kyi, a Nobel Peace Prize winner, has failed to take strong action to improve the conditions of Rohingyas, apparently fearful of alienating Buddhists.

Japan’s promised aid includes ¥40 billion for regions that are home to ethnic minority groups. Before expending the aid, Japan should look into what problems exist in these regions and ensure that the money is used appropriately.

Myanmar, seen as the “last frontier” for foreign investments with a 50 million population and rich in natural resources, has attracted some 300 Japanese businesses and more are expected to follow. Tokyo is well aware of the geopolitical importance of the country, which adjoins China and India and in which China is pushing investment and infrastructure building as part of its strategy to promote its presence in countries bordering the Indian Ocean. While such considerations are important, Japan should focus on how to best improve living conditions for ordinary Myanmar citizens and promote the country’s democratization.

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