“Japan-Myanmar Relations: What Will the Dog Year Offer?” by Moe Thuzar

2018/14, 21 February 2018

As one of ASEAN’s earliest Dialogue Partners, Japan’s relations with ASEAN countries draws from its commitment under the Fukuda Doctrine to assist Southeast Asia’s post- World War II development. Japan was a major aid-provider to post-independent Burma’s economic development up to the military coup in 1988.  Even with Myanmar under military rule, Japan continued to maintain people-to-people contacts and provided humanitarian aid to areas and peoples in need. Japanese academics also visited Myanmar regularly to understand the general mood and the political and economic landscape.

Myanmar’s increasing alignment with China in the post-1988 years, with deepening ties similar to Japan’s pre-1988 role, has challenged Japan to revive its bilateral relations with Myanmar in support of the political and economic reforms towards democratisation, which continues in the present day.

As countries around East Asia usher in the year of the Earth Dog, Japan, as a long-time partner of Myanmar, is viewing the mid-term juncture of the National League for Democracy (NLD) government through three critical lens. These include the NLD’s performance thus far and public sentiments in the country, the state of the economy, and external expectations of Myanmar, all of which play a part in informing Japan’s Myanmar policy.

Even with newfound freedoms in Myanmar, including a more open media environment, people remain unsatisfied with the military’s involvement in the country’s administration. There is a mismatch between the huge expectations after the NLD took office and the reality on the ground. The military’s significant presence (25 percent) in Myanmar’s parliament and in cabinet appointments for defence, home affairs, and border affairs assures it of a dominant role in the running of the country. The immense power and resources of the Ministry of Home Affairs’ General Affairs Department countrywide also makes it uncertain whether Myanmar’s de facto leader Daw Aung San Suu Kyi can maintain an equilibrium to achieve her government’s policy objectives ranging from everyday social welfare needs to nation-wide ceasefire agreements. These are exacerbated by the slowness of the decision-making process, and inefficiencies because of poorly trained bureaucrats, many of whom are dominated by military personnel, coupled with centralisation of decision-making authority at both state and central levels, frustrating both foreign investors and local businessmen.

Myanmar’s decision to boost economic development and growth have led to a crackdown on illegal construction, as part of the NLD government’s anti-corruption drive, which sent shockwaves through the business community. However, the 2016 Myanmar Investment Law, and the 2017 Myanmar Companies Act (which will enter into force in August 2018), have appeased investor wariness. There is continued interest in Myanmar’s untapped economic potential, with China, Singapore, Thailand, South Korea and the United Kingdom as the top five investors.  Japan, which ranks 11th in the investor stakes, has tried to shore this up with its USD2.72 billion debt relief and a new programme of assistance starting 2013.

In contrast to China’s high-profile infrastructure projects, including the controversial Myitsone Dam project which the Thein Sein government suspended, and the Shwe oil and gas project in southern Rakhine State with an attendant deep-sea port and special economic zone (SEZ) at Kyauk-phyu,  Japan’s  efforts focused on boosting the port capacity of Myanmar’s economic hub Yangon via the Thilawa Port and SEZ project. Several companies, including household names such as Ajinomoto have set up factories in the SEZ, but many still-vacant sites indicate a lack of dynamism. More brand-name investors will help avoid Thilawa being labelled a “showcase”. The Dawei Deep Sea Port and Industrial Park project in Southern Myanmar is also of interest to Japan, but concrete major investments have yet to materialise. Dawei’s proximity to the Myanmar-Thai border present an opportunity to consider the feasibility of linking it to the UN-ESCAP’sF East-West Economic Corridor.

Meanwhile, nationalist sentiments can deter foreign investment. A Myanmar Times article in December 2017 suggested that Toyota was lagging behind other Japanese car manufacturers such as Nissan and Suzuki in Myanmar, and should reconsider its growth strategy in Myanmar by learning from its manufacturing and assembly experience in the other ASEAN countries.  Japanese investors’ experience in Myanmar’s economic scene, however, make them more concerned with the country’s manufacturing capacity, technology needs, and the continued shortage of skilled workers. Low wages in Myanmar pushed many workers to seek opportunities abroad, prompting the government to hike minimum wages for garment workers from MMK3600 (USD2.66) to MMK4800 (USD3.55). This had an adverse effect of making Japanese investors wary as it affected their (already low) profit margins, while labour unions in Myanmar are imploring the government to consider the actual cost of living, which continues to be affected by high prices of basic food commodities.

Japan has also taken a pragmatic approach to assisting Myanmar’s humanitarian needs, by appointing a humanitarian envoy and providing on the ground assistance to communities in need. While Japan has watched with interest China’s moves to insinuate itself in the ceasefire negotiations between Myanmar government negotiators and ethnic armed groups operating along the China-Myanmar border, and to mediate the recent flare-up of tensions in Rakhine State, it has not attempted a similar political assertion, instead seeking to build the necessary economic and social capital in Myanmar’s economic hubs as well as in the rural and ethnic minority areas.
Japan’s future role and relations with Myanmar will likely continue to draw on some of the positive traits that have characterised bilateral relations since 1954: practical support and a sense of commitment towards a friend. These are also some of the enduring traits of the zodiac’s dog year.

Moe Thuzar is Lead Researcher (socio-cultural) at the ASEAN Studies Centre, ISEAS-Yusuf Ishak Institute, with concurrent responsibilities as co-coordinator of the ISEAS’ Myanmar Studies Programme.

The facts and views expressed are solely that of the author/authors and do not necessarily reflect that of ISEAS – Yusof Ishak Institute.  No part of this publication may be reproduced in any form without permission.