Jul 11, 2016

Japan turns on the charm in Myanmar in effort to counter China

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In the five-year transition to Myanmar’s landmark new government, the number of Japanese businesses in the country has grown sixfold, language courses have boomed and billions of dollars have been pumped from Tokyo into industrial and social projects.

The investment spree is part of a wider Japanese push to win new markets and reduce dependence on China by building closer ties in emerging countries to the south, such as Vietnam.

“There are so many ‘déjà vus’ here,” says Hirokazu Yamaoka, Myanmar head of Jetro, the Japanese trade promotion agency, referring to his previous posting in Vietnam during its foreign investment boom. “And the real business has not yet started.”

Japan is one of several big powers jockeying for position in fast-growing Myanmar, where political change has yielded the first civilian-led government for more than half a century.

While Japan is competing hard in other Southeast Asian emerging markets, such as Vietnam, it has enjoyed particular competitive advantages in Myanmar thanks to the chemistry of the political transition.

Since Myanmar’s junta formally stepped down in 2011, the US and some other western countries have been cautious because of lingering sanctions imposed during the most repressive days of dictatorship.

At the same time, Myanmar signalled it wanted to reduce its dependence on China, most notably by suspending the giant Beijing-backed Myitsone dam project in 2011.

Japan was well-placed because it had always kept a business and cultural foothold in Myanmar, never imposing sanctions even as the western measures squeezed the junta during the 1990s and 2000s.

Now Japanese government and corporate finance from the likes of Mitsubishi, Marubeni and Sumitomo have powered the development of the giant Thilawa industrial zone south-east of Yangon, where dozens of factories are complete or under construction. Japanese development money has gone into plans ranging from an overhaul of Yangon’s British colonial-era sewage system to the building of three radar installations to warn of dangerous weather events.

“Japan has grown so much here in the past two years or so,” says Kyaw Naing, a 34-year-old engineer, speaking beside the blue and white Yangon weather tower he is helping construct. “And more is coming.”

Official loans from Tokyo to Naypyidaw almost doubled to ¥98.3bn in 2014 from the year before, the latest figures available, while debt relief amounted to ¥300bn in 2013 alone. Membership of the Japanese Chamber of Commerce in Myanmar climbed from 53 at the end of military rule to 310 by May this year, a number that could rise higher if big companies resolve concerns ranging from lack of power supply to restrictions on foreign ownership. Some Myanmar state businesses have joint ventures with Japanese companies including brewer Kirin and telecommunications company KDDI.
chart Japan and Myanmar trade

Daiwa Securities, the giant Japanese brokerage that was central to the creation of the Yangon Stock Exchange, envisages businesses emerging from the evolution in Myanmar’s domestic business scene. “We want to try to get more companies to consider listing on the Yangon exchange and that is going to mean more education. We want to get more people involved in trading too,” said Atsuo Tachikawa, Daiwa’s head of international business planning.

Japanese language courses have also flourished as young Myanmar nationals aim to land jobs with the companies now coming in. The number of institutions in Myanmar teaching Japanese has climbed to 200 from 44 five years ago, according to Japanese official estimates.

Myanmar nationals have also embraced study and work in Japan as travel restrictions have eased. One Myanmar student moonlighting illegally at a convenience store in central Tokyo says she decided to learn Japanese not Chinese because the quality of work offered by Japanese companies seemed “a lot better”.

“We want to make money, I want to have a family one day and the Japanese companies seem to have real jobs,” she says.

Meanwhile, an increasing number of Japanese are learning Myanmar language. A course for mature students was so popular when it debuted in 2015 that the Tokyo University of Foreign Studies increased the numbers of classes by 75 per cent this year.

But the bilateral relationship also faces uncertainties under the new government led by Aung San Suu Kyi’s National League for Democracy.

Gen Aung San, the assassinated Myanmar nationalist leader and Ms Aung San Suu Kyi’s father, did a pragmatic second world war deal with occupying Japanese forces to fight the British colonialists. But the relationship unravelled when Japanese forces committed atrocities and it became clear Tokyo was not going to allow independence.

Some analysts question whether Japan’s standing might be damaged by perceptions it was close to the previous government, with which Ms Aung San Suu Kyi had a tense relationship.

Japan has also faced criticism for allegedly drawing up development plans in Myanmar without sufficient consultation in the affected communities.

Jetro’s Mr Yamaoka insists Japan has handled local people’s concerns sensitively, including in a dispute with villagers displaced by the Thilawa industrial area that remains unresolved.

“We want to help Myanmar be an industrial society,” he says. “We want a win-win relationship with our neighbours.”

Source: Financial Times