No. 25 — June 30, 2000


Weekly Review

--- by Marc Castellano

At a June 25-26 bilateral meeting in Yangon (formerly Rangoon), some 50 representatives from government, industry and academia discussed Japanese support for economic reform in Myanmar (previously Burma). Tokyo has provided only minimal help to the Southeast Asian nation since the military-dominated State Law and Order Restoration Council — subsequently renamed the State Peace and Development Council — took control in a 1988 coup. However, in a historic meeting held on the sidelines of the November 1999 summit of the Association of Southeast Asian Nations, then-Prime Minister Keizo Obuchi promised junta leader Gen. Than Shwe that Japan would consider resuming limited financial aid if Yangon made substantial progress in reforming its political and economic structures (see JEI Report No. 47B, December 17, 1999).

Tokyo's aid policy toward Myanmar has been more accommodative than that of either the United States or the European Union. Washington has criticized the heavy-handedness of the SPDC regime and imposed a long list of sanctions on Yangon (see JEI Report No. 11B, March 20, 1998). In its regular six-month review delivered to Congress in April, the Department of State again condemned the military junta for ongoing human rights abuses, failure to improve the quality of life for ordinary citizens and lack of progress toward democratization. The White House has suspended all aid and excluded Myanmar from the generalized system of preferences, a scheme that allows duty-free imports into the United States of products from certain developing economies. In addition, the United States has cut Overseas Private Investment Corp. programs, implemented an arms embargo, blocked assistance from international financial institutions, downgraded U.S. diplomatic representation and imposed visa restrictions on Myanmar's senior officials and their families.

In 1996, the commonwealth of Massachusetts went so far as to pass a law that effectively excluded from state business any company engaged in commercial relations with Myanmar. The Burma Trade Act, however, was ruled unconstitutional by the Supreme Court June 20 because it infringes on the federal government's right to determine foreign policy.

The EU also has adopted a relatively aggressive stance toward Myanmar. In October 1996, it implemented a range of sanctions against the military regime, including an arms embargo and visa restrictions that prohibited visits from Myanmar's official ranks. About six months later, the EU also suspended tariff preferences, a move that affected roughly $31 million worth of European imports. Moreover, with the exception of humanitarian aid, all EU assistance programs have been stopped. In April, after European foreign ministers had concluded that Yangon was intensifying its repression of civil and political rights, Brussels tightened the screws, adding a ban on trade in equipment that might be used for repression and implementing a freeze on funds held abroad by members of Myanmar's politburo. Furthermore, visa restrictions were strengthened by adding a list of specific officials who are banned from visiting Europe.

Western capitals would be disappointed if Japan were to restart regular financial assistance to Myanmar. At best, however, that will not occur for at least a year, which is when the workshop is scheduled to release a progress report on Myanmar's reforms. The stakes are high for an economy that has suffered at the hands of the ruling SPDC. Fiscal mismanagement and fallout from the 1997-99 East Asian financial and economic crisis also have taken a toll. According to a recent World Bank report, one-third of the population of the country once called the "rice bowl of Asia" lives below or near the poverty line.

Although strengthening relations with Southeast Asian nations is a key policy objective of the Ministry of Foreign Affairs, Japanese economic interests in Myanmar are limited. In 1999, two-way trade was ¥32.7 billion ($297.3 million at ¥110=$1.00), an insignificant amount compared with the ¥36.2 trillion ($329.1 billion) in Japan-Asian trade. Moreover, as of August 1998, the cumulative value of Japanese investment in Myanmar stood at a paltry $219 million. Tokyo officially maintains a neutral stance on investment in Myanmar, but it does provide occasional updates to businesses on the political and economic situation.

Resuming lending to the struggling Southeast Asian country surely would help bilateral relations, but Japanese multinationals would gain little; their interest in Myanmar is minimal and, in fact, decreasing. Policymakers in Tokyo acknowledge that Yangon's financial, monetary, industrial, trade and investment policies have a long way to go before a conducive business climate can be created. Moreover, if Japan eased its restraints on official development assistance, it would have to answer to a host of Western critics. Although the ultimate goal is to end the loan suspension based on genuine reform in Myanmar, Japan's restrictive aid policy toward that country likely will not change anytime soon.

The views expressed in this report are those of the author
and do not necessarily represent those of the Japan Economic Institute

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