Myanmar Election Results Put Japan in Uncertain Spot

The victory of Aung San Suu Kyi’s party in Myanmar’s election leaves Japan and its companies facing some uncertainty in the country, in part because businesses and Prime Minister Shinzo Abe haven’t built close ties with Ms. Suu Kyi.

Government officials said the National League for Democracy’s victory was within the range of their expectations–although the extent of it was somewhat surprising–and they’re relieved that a peaceful transition of power seems likely to take place.

While Ms. Suu Kyi has a personal connection with Japan, having been a visiting scholar at Kyoto University in 1985-1986, few in the Japanese business community know her personally. Mr. Abe has a good relationship with President Thein Sein, the head of Myanmar’s current military-backed government, but hasn’t developed a rapport with Ms. Suu Kyi.

Japan resumed economic aid to Myanmar in 2013, and provided some $1.5 billion in concessionary loans between 2013 and 2014. In July, Mr. Abe promised an additional loans at a meeting with Mr. Thein Sein in Tokyo.

Japanese investors are helping rebuild a thermal power plant in Yangon, renovating the railroad between Yangon and Mandalay and building telecommunications infrastructure in major cities.

Most important is the development of the Thilawa special economic zone, a 2,400-hectare industrial estate southeast of Yangon. Japan’s finance minister, Taro Aso, flew to Thilawa to attend the opening ceremony of the first phase in September.

The development, however, involved resettling people living there, and it has drawn some criticism.

“Protests would likely increase against large-scale projects. Protesters think the NLD would be more willing to listen to them than the previous government,” said Noriyuki Osada, an analyst at the Institute of Developing Economies, a government-affiliated think tank. “The NLD would face great pressure to listen to them.”

Experts are also unsure how friendly Ms. Suu Kyi and the NLD would be to foreign capital. “We have little information as to how the NLD wants to deal with foreign businesses,” says Toshihiro Mizutani, an analyst at the Japan External Trade Organization, a government-affiliated body.

Japan and Myanmar have an investment treaty that took effect last year. The treaty is supposed to provide protection for Japanese investments and make business rules more transparent.

Mr. Mizutani said there are still instances of business approvals getting caught in red tape, and it remains to be seen whether the change of government will help or hurt.

Source: The Wall Street Journal

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