By Elaine KurtenbachTOKYO -- Japan's long-deferred aspirations for a larger role in Myanmar are getting a boost this coming week with a visit by Nobel Peace Prize laureate and opposition leader Aung San Suu Kyi. The visit by Suu Kyi, in Japan for the first time in 27 years, is highlighting Japan's interest in helping to craft a blueprint for Myanmar's economy and tapping its growth potential. So far, Japan's investments and involvement lag far behind those of China and India. But that is fast changing, after Tokyo forgave about half of Myanmar's more than $6 billion dollars in debt, clearing the way for renewed international lending to the impoverished Southeast Asian country. A high-powered delegation of business leaders, including top executives from Toyota Motor ( NOK), Hitachi ( HIT) and Sumitomo Chemical, toured Myanmar, also known as Burma, in February and pledged to cooperate in encouraging more investment. Although Suu Kyi is not in government, she is widely respected, especially in Japan, where she is expected to meet with Prime Minister Shinzo Abe and other top officials and give speeches at two of Japan's most prestigious universities during her seven day visit that starts Saturday. "Aside from being the opposition leader and an icon for democracy and political freedom, she is a goodwill ambassador. The idea is to encourage the Japanese government and corporate Japan to support Myanmar," said Jeff Kingston, a professor at Tokyo's Temple University. The handover of power by Myanmar's military junta in 2011 to a nominally civilian government ushered in sweeping political and economic reforms, including releasing prominent political prisoners and allowing Suu Kyi, who spent years under house arrest, to run in parliamentary by-elections. As of late February, Japan was the 11th largest investor in Myanmar, with $270 million in overall investments, way behind the $14.2 billion committed by China and $9.6 billion by Thailand, the top two sources with 33% and 23%, respectively, of total foreign direct investment.
Although it scaled back most business activity and cut government aid when the U.S. and other Western nations imposed sanctions in 2003 after the previous, military regime put Suu Kyi under house arrest, Japan did not impose sanctions on Myanmar.Suu Kyi and the current Japanese government thus are still developing relations, said Eitaro Kojima of the Japan External Trade Organization, who lived in Myanmar for years. "We need to understand each other," he said. Over the past decade, Japan continued small-scale humanitarian assistance to Myanmar as part of its policy of engagement with the regime. Many Japanese businesses also kept their offices and business registrations. The maintenance of commercial and government relations is proving vital now that Myanmar is embarking on its economic reforms Japan's biggest contribution so far to Myanmar's economic reform effort has been the debt forgiveness arrangement, involving billions of dollars in bridge loans by Japanese banks, that enabled the Asian Development Bank and World Bank to resume lending for crucial humanitarian and infrastructure projects. Underscoring the government's keenness for closer cooperation, Finance Minister Taro Aso made Myanmar his first overseas destination after taking office late last year. Although the visit had been planned much earlier, it also reflected Tokyo's determination to drum up business in fast-growing Southeast Asian markets to help counterbalance Japan's vulnerability to problems with China over territorial and other disputes. Of the 35 Japanese projects under way in Myanmar, the biggest is one to develop the 2,400 hectare (5,900 acre) Thilawa special economic zone south of the capital, Yangon, which is being led by a Japanese consortium of major trading houses, including Mitsubishi ( MTU), Marubeni and Sumitomo ( SMFG). To support that project, Japan has promised 20 billion yen ($200 million) in long-term loans for related infrastructure such as power plants, roads and bridges at an interest rate of 0.01%.
Another major trading house, Mitsui & Co. ( MITSY), is beginning imports of rice and is planning to build rice mills in Myanmar, once the world's biggest rice exporter, to help it process 300,000 tons a year for export.In the financial sector, Daiwa Securities Group and the Tokyo Stock Exchange are working with Myanmar's financial regulators to help set up a stock market by 2015. Meanwhile, convenience store operators such as Family Mart and Lawson are considering opening outlets. China's investments, largely in energy and mining, have generated controversy over exploitation of Myanmar's rich natural resources that has done little to resolve the country's chronic power shortages. In response, last year the Myanmar government abruptly suspended construction of the China-backed Myitsone dam, which would displace thousands and flood the spiritual heartland of Myanmar's Kachin ethnic minority. The Japanese focus on manufacturing, services, and infrastructure projects such as road building has gotten a much warmer reception. "Myanmar is very keen to attract investment from places other than China. Japan in particular is very welcome because the Japanese have shown they are interested in investing in projects that add real value," said Rachel Calvert, a risk expert at the IHS consultancy in Singapore. Though Myanmar was one of Asia's strongest economies in the 1950s, conditions declined steadily after a military coup in 1962. Its market of more than 60 million people, with average per capita income of only about $715, offers huge potential, analysts say. But the risks are likewise high, given the lack of many modern legal and political institutions, endemic corruption, relatively scarce skilled labor and crumbling infrastructure. Only a quarter of the Myanmar population has access to electricity, which is intermittent at best. "It's not all smooth sailing. The country was under military rule since 1960s. There's a lot of basic building block things that have to happen to make Myanmar a more effective investment environment," said Temple University's Kingston.
Now that Myanmar is open for business, the rush of investors means strong competition: The list of visitors to Myanmar's Directorate of Investment and Company Administration, which shows scores of photos of visitors perched on brown leather sofas topped with white lace antimacassars, reads like a "Who's Who" of international commerce: equity investors from China, Japanese logistics companies and megabanks and big global conglomerates such as Nestle, Unilever ( UL) and Dupont ( DD).American brands Ford Motor ( F), PepsiCo ( PEP), Coca-Cola ( KO), GE ( GE), Caterpillar ( CAT) and Danish brewer Carlsberg have all signed distribution deals in Myanmar. Balancing the interests of competing foreign investors and the public can be tricky, as Suu Kyi herself found after villages confronted her to demand an explanation for her support of the Letpadaung copper mine project, which is partly owned by a Chinese company. An official panel headed by Suu Kyi that assessed the situation ruled that the mining contract should be honored for the sake of good relations with China, and to reassure other foreign investors. China is not the only investor to face scrutiny over its projects: A nongovernmental group, MekongWatch, has been lobbying on behalf of some 3,900 villagers who were ordered to vacate land to make way for the Thilawa special economic zone. "The Myanmar government says they are squatters and until recently the Japanese government said it was the responsibility of the recipient government to do something," said Yuki Akimoto, a spokeswoman for the group. Akimoto said she was thinking hard about how to broach the issue with Suu Kyi in a planned meeting in Tokyo, given the various complications of the issue. As is often the case, land titles and ownership remain unclear, and a surge in property prices in booming Yangon is prompting speculative buying. But ultimately, it is the poor who are most likely to lose their livelihoods. "Despite the so-called reforms, there are few tools ordinary citizens can use to protect their rights," she said.