Japan’s Development Ambitions for Myanmar

Japan and Myanmar have had an important shared history when Japanese occupied the British colony of Burma and established the country’s first postcolonial state and army. Myanmar was turned into a battle field by the Japan, the Allies and indigenous insurgents during the period of 1941 to 1945. After independence in 1948, the country suffered insurgency and became a deeply conflicted society.

The situation became worse under the isolationist socialist regime of General Ne Win from 1962 to 1988. However, Japan has played a major role in Burma’s economic development. Japanese helped through its allocation of war reparations and official development assistance (ODA), especially yen loans. On October 6, 1954, Japan joined the Colombo Plan on October 6, 1954. This marked a memorable start of Japan’s government-to-government economic cooperation with developing countries. The diplomatic relations between Myanmar and Japan was established on 5 November 1954 after the signing of the Peace Treaty between the two countries. The launch of Japan’s economic cooperation started with the signing of Japan-Myanmar Peace Treaty and Agreement on Reparations and Economic Cooperation in October 1954.

Japan is prepared to pay reparations to the Union of Burma in order to compensate the damage and suffering caused by Japan during the war and also is willing to render co-operation in order to contribute towards the economic rehabilitation and development and the advancement of social welfare in the Union of Burma, according to Article V of the Peace Treaty.1 The agreement on war reparations was reached between Japan and Myanmar totaling US$200 million over ten years. Aids from Japan increased from US$20 million in the 1960s to around US$200 million in the 1970s. The aid amounted a total of US$2.2 billion during 1962 to 1988. Japan became the largest aid donor to Myanmar. At that time, Japan’s policy towards Southeast Asia focused on its economic diplomacy.

In fact, economic diplomacy of Japanese government was based on necessary factors of its economic development such as trade, investment and raw materials. Japan believed that Southeast Asia region could provide its needs. Myanmar has a strategic and economic important location between India and China. It also has huge economic potential and cheap labor. Japan – Myanmar relationship is very interesting since Japan had a favorable relation with Myanmar till 1988. From the time of independence to 1988, Myanmar had to rely on Japanese’s aids. Japan did not cut off the relationship with Myanmar when the military government took over in 1988.

Japanese ODA to Burma was suspended in principle. Despite the pressure from United States, Japan government continued its engagement with Myanmar. It continued its economic assistance through humanitarian aids. In 1990, the Japanese government gave US dollar 23.2 million as debt- relief grant in order to reward SLORC for their decision to conduct elections. In 2008, Myanmar suffered from Cyclone Nargis, a huge natural disaster. It caused a huge destructions and large number of fatalities.

The Japanese government offered 28 million yen in aid to help tackle the aftermath of Nargis. Over the last decade, there has been a substantial change in Japan’s foreign policy position on democracy support. Its 1992 Official Development Assistance (ODA) Charter committed the country to provide foreign aid in a manner that promotes democracy abroad. The 2012 ODA white paper not only expressed Japan’s intention to strengthen democracy abroad but also prioritized it above traditional focuses of Japanese foreign aid such as human security and hard infrastructure assistance.

When President Thein Sein formed the government, the historic election in 2010, also marked an important beginning of a new chapter in Japan Myanmar economic relationship. With the transition from junta rule to constitutional government in 2011 came a dramatic increase in Japanese ODA, as it forgave large amount of debt and invested in ambitious new special economic zones (SEZ). In order to support Myanmar’s efforts for reforms in various areas towards its democratization, national reconciliation and sustainable development, Japan announced that it would review its economic cooperation policy in April 2012 and extended its economic cooperation.

In the wake of the transition, which included the election of Aung San Suu kyi and her NLD colleagues to Pyidaungsu Hluttaw in a by election in April 2012, Japan responded enthusiastically to Myanmar’s political transition and allocated new large-scale ODA. In collaboration with the new political regime, Japan has sketched out ambitious development projects for Myanmar. If that carried out, it would be a major factor in transforming not only the economy but also society and inter ethnic relations within Myanmar.

Both the large size of Japan’s ODA to Myanmar in post 2011and its emphasis on ambitious infrastructure projects, especially SEZ, draw attention to the usual debate of ‘development’. In 2012, Myanmar became the top recipient of Japanese ODA, displacing Vietnam. In the time of the new government, the visit of Prime Minister of Japan Mr. Shinzo Abe to Myanmar in May 2013 and the visit of President U Thein Sein to Japan in December 2013 had further promoted the bilateral cooperation to a new high.

Japan was Myanmar’s largest creditor and provided not only a bridge loan to resolve the foreign debt obligations but also US$900 million to pay off debt owed by Myanmar to the World Bank and the Asian Development Bank. This made Myanmar eligible to accept new loans especially from Japan. According to the Annual report of the Japan International Cooperation Agency (JICA), the total value of its ODA projects in Myanmar amounted to only 23million JPY or 6 percent of the total for Southeast Asia region.

In other world, there is plenty of room for Japan’s aid presence to grow. On October 16 2015, the Japan International Cooperation Agency (JICA) signed loan agreements with the Government of the Republic of the Union of Myanmar in the capital of Nay Pyi Taw to provide Japanese ODA loans of up to a total of 99.85 billion yen for three projects. These projects included (1) Improving a circular railway line to support the traffic volume in Yangon (2) Contributing to the stable supply of power in Myanmar (3) Improving transportation with an improved international trunk roadway.

The 2015 election, which was a milestone in Myanmar’s democratic process, whereby the NLD won and formed the government has provided more impetus to Japan’s relation with Myanmar. Led by the National League for Democracy, the new administration of Myanmar was inaugurated in March 2016. Since then, Myanmar has focused on regional and agricultural development and on promoting investment, building infrastructure and industrial development.

A summary of the six Japanese ODA projects provided by the loan agreements signed in March 2017 is as follows: (1) Bago River Bridge Construction Project (2) Regional Development Project for Poverty Reduction Phase II (3) Agriculture and Rural Development Two Step Loan Project (4) Greater Yangon Water Supply Improvement Project (5) Power Distribution System Improvement Project in Major Cities (6) Yangon-Mandalay Railway Improvement Project Phase I (II). These new loans amounted to 114.22 billion JYP, a very large sum when compared with total aid allocations in 1986 and 1988. In the past, the majority of Japan’s ODA projects were concentrated in central areas of the country.

However, Japanese interest in ethnic minority areas, especially those where Karen and Mon people live has grown. Since 2011, Japan has showed its willingness to play a major role in the development of these regions in Myanmar. Several of Japan’s aid projects for Myanmar display and ambition and scale that exceed those of earlier infrastructure projects, including not only the development plan for Karen and Mon States but also the Dawei SEZ and Thilawa SEZ.

For the State Councillor Aung San Suu Kyi was critical about Japan’s engagement with the military government, the Japanese government started holding meetings with the NLD members and pledged their full support to help Myanmar. The visit of Aung San Suu Kyi to Japan in 2016 put to rest all suspicions and request Japan for economic assistance for Myanmar’s development. Donor nations use ODA to increase their influence in recipient countries. In the case of Myanmar has led to efforts by both Japan and the US since 2011 to offset the major economic influence of China.

To view in a large strategy, it might be to contain China’s influence throughout East and Southeast Asia. Also Japan will no doubt benefit from Myanmar as close ties are expanded. Not only will Japanese companies benefit, but also Japan will have access to Myanmar’s raw materials. Myanmar’s geostrategic location along with its huge natural resources and cheap labor makes it an attractive investment location. The personal ties between the national leaders of independent Myanmar ad Japanese army officers were certainly instrumental in the formation of favorable bilateral relations between the two countries. ODA played a leading role in both the economic and diplomatic relationship between the two countries. Japan’s ODA to Myanmar rapidly increased from the latter half of the 1970s when the military government opened up to more overseas assistance in order to overcome the country’s economic and political crisis.

Myanmar had been one of the largest recipients of Japanese ODA, often ranked within the top five. The amount of aid that Japan has been providing Myanmar is huge when compared to Japan’s support for democracy in other countries. Thus, Japan’s ODA strengthened its bilateral relations with Myanmar.