Japan, India bet on aid, loans to boost influence in Myanmar.

Nay Pyi Taw/Yangon: In an indication of the growing importance of Myanmar, countries such as Japan and India are trying to leverage their aid and loan programmes to counter Chinese influence on the emerging economy.

A case in point is Japan International Cooperation Agency (JICA), which plans to increase its loan and aid assistance from $700 million a year towards helping to create infrastructure.

“Japanese firms such as Suzuki Motor Corp., Honda Motor Co. Ltd and Panasonic Corp. are looking at setting up facilities here for four-wheelers, two-wheelers and electronic equipment manufacturing,” said Masahiko Tanaka , chief representative of the Japanese state-owned agency in Myanmar. “A lot of Japanese firms want to shift base here. There is no emerging economy like Myanmar right now.”

Similarly, India plans to use its buyer’s credit scheme under the National Export Insurance Account, which is operated by the Export-Import (Exim) Bank, to economically engage Myanmar. Through this scheme, Exim Bank extends “credit facility to overseas sovereign governments and government-owned entities for import of goods and services from India on deferred credit terms”.

The other scheme that India wants to attract Myanmar with is its 2% interest subvention scheme for project exports to SAARC (South Asian Association for Regional Cooperation) countries, Myanmar and Africa having an initial kitty of $500 million.
“We are trying to help in their infrastructure building programme,” an Indian government official said, requesting anonymity.

Myanmar’s leaders want more developed economies to help improve skills of its people to be self-sufficient.

“When you help either in the form of development programmes or humanitarian programmes, I want the people involved to gain skills so that they earn and they learn,” Aung San Suu Kyi, chairperson of the National League for Democracy, said at a session of the World Economic Forum (WEF) in Myanmar on Friday. “We don’t want our road workers to remain at the level of road work. Give us the skills to solve our own humanitarian and development problems ourselves.”

India’s interest in Myanmar also stems from the promise of the country’s economy growing to $90 billion by 2018. India has stepped up engagement with its neighbour. This was reflected in Indian Prime Minister Manmohan Singh’s visit to Myanmar last year that marked the first visit by an Indian prime minister to the previously isolated state in a quarter century. India has also extended a $500 million credit line to Myanmar.

In comparison, Chinese loans are more commercial in nature with a comparatively higher rate of interest of around 4% with shorter time duration of 20 years for repayment.

The trade between Myanmar and India accounts for $1.8 billion, of which Indian exports to Myanmar in the last fiscal year were $532 million with imports valued at $1.33 billion. A target of $3 billion of bilateral trade by 2015 has been set up. India’s total investments in Myanmar are $273.5 million, with the investments in the next few years expected to touch $2.6 billion. India is Myanmar’s fourth-largest trading partner after Thailand, Singapore and China.

India and China have been trying to secure energy resources in Myanmar. There has been considerable interest in Myanmar’s energy sector from its neighbouring countries. Myanmar borders China and India, both fast-growing major economies. Of Myanmar’s overall trade of around $19 billion, China accounts for around $5 billion, and India nearly $2 billion.

Japan’s interest in Myanmar also comes at a time of wage increases in the Chinese manufacturing sector, making Japanese firms scout for new locations in the region for cheap labour. Myanmar, rich in untapped natural resources, has a low-wage population. This interest was reflected in Japanese Prime Minister Shinzo Abe’s visit to Myanmar last month, the first by a Japanese premier in 36 years.

“Myanmar is very important to us. It can be gauged from the fact that of $1 billion that we lend every year globally, Myanmar has accounted for $700 million. This value of both grant and loan will go up this year,” said JICA’s Tanaka, who travels once a week to Nay Pyi Taw, Myanmar’s capital, from Yangon.

Of the $700 million assistance in 2012-13, $500 million was a concessional loan at an interest rate of 0.01% over a period of 40 years for electricity generation in the Yangon area, development of Thilawa port, and road transportation projects. The remaining $200 million was aid meant for rural areas in electrification, transportation, sanitation and safe drinking water programmes.

More than 70% of Myanmar’s 60 million people live in rural areas. Myanmar’s annual budget is $1.06 billion, or around 2% of its $53 billion economy.

“We are forming a team of the donors and are looking at areas where to focus to help the poor. We want the help of our development partners in the areas of rural electrification, rural water supply and rural transportation,” Khin San Yee, deputy minister in Myanmar’s ministry of national planning and economic development, said in an interview.

“We are ready to help,” announced Hiroto Arakawa, vice-president, JICA, on Friday in Nay Pyi Taw at a session of the WEF.
Japan waived off its $2.97 billion debt to Myanmar. JICA has 35 employees in Myanmar, and plans to open another office in Nay Pyi Taw. Also, around 100 Japanese experts are helping in capacity building programme for Myanmar.

“Japan is more involved in the country than many would have not expected some years ago,” said author U. Myint Thant, also the chairman of the Yangon Heritage Trust.

The Myanmar government wants more aid from its development partners.

“There is very little funding from the development agencies,” Khin San Yee said.

According to a McKinsey report, Myanmar needs $650 billion of investment by 2030 to support growth. Of this, $320 billion is required in infrastructure.

Source : livemint.com