April 21 (Bloomberg) -- Myanmar’s President Thein Sein won a debt forgiveness deal from Japan on his first visit as head of state that opens the way for the Southeast Asian nation’s biggest creditor to resume financing ports, bridges and roads.
Japan will forgive 303.5 billion yen ($3.7 billion) in loans and interest to Myanmar, according to a statement distributed to reporters before Prime Minister Yoshihiko Noda met Thein Sein today. Japan will also roll over 198.9 billion yen of debt with a new loan, while vowing to resume aid.
Thein Sein is courting investment from Japan amid a shift toward democracy over the past year that’s encouraged re- engagement with developed nations after five decades of military dictatorship. Honda Motor Co. is among companies expressing interest in Myanmar, a nation of 64 million people between India and China.
Japan will extend economic cooperation to “support Myanmar’s efforts for reforms in various areas towards its democratization, national reconciliation and sustainable development,” Noda said in the statement.
Japan agreed to complete a feasibility study by year’s end to develop a port and industrial estate at Thilawa, 25 kilometers south of Yangon, Myanmar’s biggest city, according to a statement. The industrial zone would promote Japanese investment and help grow Myanmar’s economy, the statement said.
The world’s third-largest economy pledged 403 billion yen in loans to Myanmar between 1967 and 1987, according to foreign ministry data. Japan attached conditions to parts of the debt deal announced today, such as canceling 176.1 billion of overdue charges after “monitoring the continuation of Myanmar’s reform efforts in a one-year period,” according to the statement.
As part of the agreement with Japan, Myanmar agreed to discuss settling arrears with the World Bank and the Asian Development Bank, it said.
Cheap wages, natural resources, historical ties and concern over China’s influence in Myanmar make the nation important for Japan, said Kei Nemoto, a professor specializing in Myanmar at Sophia University in Tokyo. Policy makers “are now thinking that the time is right to deepen engagement with Myanmar, otherwise Japan may lose in the competition with other countries,” he said, noting that China, India and South Korea have increased ties with the Southeast Asian nation.
European Union envoys on April 23 will reassess sanctions on Myanmar following by-elections this month that included dissident Aung San Suu Kyi. EU governments will probably suspend most sanctions against Myanmar to reward the country for progressing from military rule toward democracy, an EU official told reporters in Brussels yesterday on condition of anonymity.
The U.S. has announced that it will ease trade and financial restrictions on certain sectors, without providing details.
Thein Sein met Noda after a regional summit involving leaders from Cambodia, Vietnam, Thailand and Laos. Tomorrow Thein Sein will visit power plants run by Tokyo Electric Power Co. and Electric Power Development Co., also known as J-Power, according to Japan’s foreign ministry.
Yangon had the cheapest wages among 31 cities in Asia, according to a Jetro survey last year. Workers in the former capital earned less than $2 per day on average, compared with $4 in Cambodia, $5 in Vietnam and $14 in Thailand, the report showed.
Italian-Thai Development Pcl, Thailand’s biggest construction company, is pushing Japan to provide financing for an $8.6 billion deep-sea port and industrial estate in Dawei, a Myanmar coastal town less than 300 kilometers (186 miles) from Bangkok. The company has named Mitsubishi Corp. and Mitsui & Co. as potential investors.
Honda is interested in building a motorcycle plant in Myanmar, Hiroshi Kobayashi, president and chief executive officer of Asian Honda Motor Co., told reporters in Thailand on March 31. NTT Data Corp., the Tokyo-based provider of network- system services, said on April 19 it plans to form a subsidiary in September that will have as many as 500 employees by 2017.
--Editors: Patrick Harrington, Mark Williams