JAPAN
25 March 2014
Japan's and Myanmar's strategic partnership
Emanuele Schibotto writes of the impressive strategic partnership unfolding between Japan and Myanmar.
Emanuele Schibotto writes of the impressive strategic partnership unfolding between Japan and Myanmar.
“I hope your country will use Japan’s technology”, Japan's Minister of Industry and Trade, Toshimitsu Motegi, told the President of Myanmar, General Sein, during a recent visit to the Southeast country.
One of the pillars of Myanmar's democratic transition lays in its capacity to foster economic development through foreign investment. However, a huge infrastructure deficit, combined with significant electricity shortages, are serious concerns for foreign companies interested in this promising new market. As Asia's second poorest country, Myanmar's leaders know they need to find a reliable foreign investor which has both the financial capabilities and the industrial skills required to cope with the challenge. This partner is Japan!
Last year the two countries signed a framework agreement which represents a new chapter in the bilateral relationship. Japan has pledged up to $18 billion in new loans to Myanmar. This covers infrastructure and development of the Thilawa special economic zone near Yangon. In addition, Japan also announced an aid package for water management and a scholarship program for young administrators. Tokyo also confirmed that it would forgive $2.7 billion of Myanmar's debts. This has all the signs of a strategic partnership for the decades ahead.
But why Myanmar did not sign such an agreement with China? Over the past two decades, its northern neighbor had the closest economic and political relationship with the Burmese junta.
Or why not an agreement with the US? After all, it was the main sponsor of Myanmar's democratic transition and opening towards the West.
There are four main reasons.
The first one is Japan's reputation as an industrial powerhouse in the eyes of the Burmese leaders. The world's third largest economy is still today an example of unparalleled industrial innovation and efficiency throughout Asia' emerging economies. Just read the joint communique released after Japan PM's visit to Myanmar, which explicitly stresses “the importance of Japan’s technical cooperation for institution development and capacity building of the Government of Myanmar”.
Second, Tokyo kept political and economic cooperation alive over the past decades, notably through economic development aid schemes – the most important of which is the Japan-Mekong cooperation initiative. This, along with its 'business as usual' approach, make Japan seem like a trusted partner.
Third, corporate Japan has already in place a regional supply chains, which make investments in Myanmar particularly attractive. From Thailand to Bangladesh to Vietnam, Japanese multinationals send roughly 80% of the exports from their Asian subsidiaries to other Asian countries. The recent acquisition of 49% of Burmese air company Asian Wings Airways by Japan's ANA highlights the optimistic expectations around the development of Myanmar's tourist industry.
Fourth, Tokyo has been chosen in order to limit China's overwhelming economic influence in Myanmar. With $14 billion of foreign direct investment, Beijing is by far the largest foreign investor in the country. General Sein is determined to avoid over-dependance on China, which is not considered a reliable partner capable of implementing the sustainable industrial development that the country strongly needs. And let's not forget that Tokyo is Washington's main Asian ally, meaning that Japanese economic influence goes hand-in-hand with ever-growing US military influence. This is the best way to keep China at bay.
In sum, Burma needs Japanese industrial expertise to develop its economy. So Japan will be granted privileged access, for decades to come, to a prospective significant market located in its own backyard.
All things considered, it looks like a win-win situation.
“I hope your country will use Japan’s technology”, Japan's Minister of Industry and Trade, Toshimitsu Motegi, told the President of Myanmar, General Sein, during a recent visit to the Southeast country.
One of the pillars of Myanmar's democratic transition lays in its capacity to foster economic development through foreign investment. However, a huge infrastructure deficit, combined with significant electricity shortages, are serious concerns for foreign companies interested in this promising new market. As Asia's second poorest country, Myanmar's leaders know they need to find a reliable foreign investor which has both the financial capabilities and the industrial skills required to cope with the challenge. This partner is Japan!
Last year the two countries signed a framework agreement which represents a new chapter in the bilateral relationship. Japan has pledged up to $18 billion in new loans to Myanmar. This covers infrastructure and development of the Thilawa special economic zone near Yangon. In addition, Japan also announced an aid package for water management and a scholarship program for young administrators. Tokyo also confirmed that it would forgive $2.7 billion of Myanmar's debts. This has all the signs of a strategic partnership for the decades ahead.
But why Myanmar did not sign such an agreement with China? Over the past two decades, its northern neighbor had the closest economic and political relationship with the Burmese junta.
Or why not an agreement with the US? After all, it was the main sponsor of Myanmar's democratic transition and opening towards the West.
There are four main reasons.
The first one is Japan's reputation as an industrial powerhouse in the eyes of the Burmese leaders. The world's third largest economy is still today an example of unparalleled industrial innovation and efficiency throughout Asia' emerging economies. Just read the joint communique released after Japan PM's visit to Myanmar, which explicitly stresses “the importance of Japan’s technical cooperation for institution development and capacity building of the Government of Myanmar”.
Second, Tokyo kept political and economic cooperation alive over the past decades, notably through economic development aid schemes – the most important of which is the Japan-Mekong cooperation initiative. This, along with its 'business as usual' approach, make Japan seem like a trusted partner.
Third, corporate Japan has already in place a regional supply chains, which make investments in Myanmar particularly attractive. From Thailand to Bangladesh to Vietnam, Japanese multinationals send roughly 80% of the exports from their Asian subsidiaries to other Asian countries. The recent acquisition of 49% of Burmese air company Asian Wings Airways by Japan's ANA highlights the optimistic expectations around the development of Myanmar's tourist industry.
Fourth, Tokyo has been chosen in order to limit China's overwhelming economic influence in Myanmar. With $14 billion of foreign direct investment, Beijing is by far the largest foreign investor in the country. General Sein is determined to avoid over-dependance on China, which is not considered a reliable partner capable of implementing the sustainable industrial development that the country strongly needs. And let's not forget that Tokyo is Washington's main Asian ally, meaning that Japanese economic influence goes hand-in-hand with ever-growing US military influence. This is the best way to keep China at bay.
In sum, Burma needs Japanese industrial expertise to develop its economy. So Japan will be granted privileged access, for decades to come, to a prospective significant market located in its own backyard.
All things considered, it looks like a win-win situation.