Japan Agrees to Give Myanmar Development Loans as Abe Visits

Photographer: Brent Lewin/Bloomberg

A man assembles a light fixture in a workshop in Yangon, Myanmar. Close

A man assembles a light fixture in a workshop in Yangon, Myanmar.

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Photographer: Brent Lewin/Bloomberg

A man assembles a light fixture in a workshop in Yangon, Myanmar.

Japan agreed to grant Myanmar 51 billion yen ($503 million) of development loans today, the Ministry of Foreign Affairs said in a statement.

The agreement comes as Prime Minister Shinzo Abe visits the South Asian nation, meeting today with President Thein Sein, whose moves to allow more political freedom and open the economy after five decades of military rule have helped end decades of international isolation.

The loans will be used to build and refurbish infrastructure such as roads, electricity and water supply as Myanmar’s government seeks to reduce poverty. They carry 0.01 percent interest and are repayable in 40 years, including a 10-year grace period, according to the statement.

Myanmar’s gross domestic product may grow 6.75 percent this fiscal year, led by natural gas sales and investment as it modernizes its financial system, the International Monetary Fund said on May 22. Natural gas is Myanmar’s most important source of export earnings, according to the Asian Development Bank.

Japan will also clear Myanmar from overdue charges of about 189 billion yen from earlier debt after monitoring the nation’s reform efforts, according to a government press release.

Japan agreed to a separate 40 billion yen of direct aid to the nation, Kyodo News reported earlier today.

Japan decided to provide new yen loans and grant assistance in support of Myanmar’s development, according to a joint statement by Abe and President Thein Sein. The two leaders agreed to build a lasting, friendly and cooperative relationship, the statement said.

North Korea

Abe also asked for Myanmar’s cooperation in resolving issues with North Korea, including abductions of Japanese citizens, missile launches and nuclear weapons development, during the meeting the Myanmar’s leader, Kyodo reported.

He is the first Japanese leader to visit the South Asian country in 36 years, as his nation’s companies seek to invest in an economy that has some of the cheapest labor in Asia.

Myanmar’s annual pay burden for a worker in manufacturing totaled $1,100 per year, less than half the cost in Vietnam and a sixth that of Thailand, according to a Jetro survey published in December.

Japanese companies are looking to diversify manufacturing operations following recent wage increases in Thailand, Malaysia and Indonesia, and a territorial dispute with China that soured ties between Asia’s biggest economies.

Corporate Ventures

Suzuki Motor Corp. got permission from Myanmar in February to form a manufacturing subsidiary to make small trucks beginning this month. Sumitomo and NEC Corp. last week signed a contract to help improve the country’s communications network.

Mitsui & Co. in March said it would import 5,000 metric tons of rice from Myanmar, its first purchase in more than four decades. The trading company may invest 15 billion yen to build three rice-milling plants in Myanmar capable of processing 300,000 tons a year for the Middle East and Africa, a Mitsui spokeswoman said in March.

Abe yesterday met opposition leader Aung San Suu Kyi, and his itinerary during the three-day visit includes a visit to the port and industrial estate at Thilawa, 25 kilometers (16 miles) south of Yangon, Myanmar’s biggest city. Mitsubishi Corp., Marubeni Corp. and Sumitomo Corp. are helping to develop the port, part of which is set to open as early as 2015.

To contact the reporters on this story: Mariko Ishikawa in Tokyo at mishikawa9@bloomberg.net; Yuki Yamaguchi in Tokyo at yyamaguchi10@bloomberg.net

To contact the editor responsible for this story: Stanley James at sjames8@bloomberg.net

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