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Prolonged turmoil in Myanmar puts economic assistance in limbo

  • March 13, 2021
  • , Nikkei , p. 5
  • JMH Translation

The military coup in Myanmar, which has lasted about a month, has put Japan’s economic aid to the country in limbo. Since Myanmar’s democratization 10 years ago, Japan’s government and private-sector companies have been pouring resources into the country’s infrastructure and other projects. Amid the political upheaval now, these projects have come to a standstill, and the companies involved find themselves unable to either move forward or withdraw.

 

“We have been deeply committed to the development of Myanmar,” said Japan Bank for International Cooperation (JBIC) President Tadashi Maeda, unable to contain his bewilderment at the situation.

 

The JBIC established an organization in Myanmar to promote an urbanization project and has aggressively extended loans to private-sector participants in the project. “[The coup] turned back the clock,” said Maeda, explaining that because of the uncertainty going forward, the bank cannot even make a decision to halt new projects.

 

The Japanese government’s assistance had been premised on the assumption that the democratization of Myanmar would continue. In support of the newly inaugurated civilian government, Japan decided in 2011 to forgive delinquent loans that totaled about 500 billion yen.

 

The JBIC’s yen loan agreements with Myanmar have already reached a cumulative total of 1.3 trillion yen. In FY 2019, the single-year total was 168.9 billion yen, the largest of any Southeast Asian nations. In November 2020, three months before the military coup, a new yen loan of 42.7 billion yen was agreed on such projects as an arterial highway for the East-West Economic Corridor [which will connect Myanmar, Thailand, Laos, and Vietnam].

 

Japan has played a key role in the development of Myanmar’s financial sector as well: The Japan International Cooperation Agency (JICA) has helped facilitate a clearing system at Myanmar’s central bank, and Japanese firms, such as the Daiwa Institute of Research, led the development of the Yangon Security Exchange. Three Japanese megabanks have established branch offices in Myanmar, and life insurance companies have launched operations, transferring expertise in the insurance business to local firms.

 

“[Myanmar was] the last frontier. The costs of acquiring insurance companies has been rising in Indonesia and Thailand, making it harder to recover investments there,” says Fumihiko Nukii, managing director and executive officer of Taiyo Seimei, a life insurance company which opened a representative office in Myanmar and operates a life-insurance joint venture it established with a local firm in 2019.

 

The Japanese Ministry of Foreign Affairs is poised to continue financing humanitarian aid as well as official development assistance projects that are already underway, out of concern that Japan’s participating in sanctions would isolate Myanmar and push the country toward China. On March 9, the Japanese government announced an emergency grant of $19 million (2.09 billion yen) for the Rohingyas, an ethnic minority that oppressed by Myanmar’s military.

 

A month into the military junta, the situation in Myanmar has not become any clearer. On the contrary, the nation’s future appears even murkier now. Japan’s Finance Ministry has stated that it is necessary to ascertain what moves the Myanmar’s junta, the U.S., and China will take. However, there has been no sign from either the U.S. or China that indicates their potential involvement in the situation, leaving Myanmar’s domestic turmoil without any prospects of resolving.

 

For the past 10 years, Japan had imagined a future for Myanmar, where the economic development of the “last Asian frontier” would provide Japanese corporations with opportunities to expand business. That picture is now at risk of falling apart.

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