May 15 (Bloomberg) -- South Korean President Lee Myung Bak met with Myanmar President Thein Sein and pledged greater economic support while discussing ways to curtail the former Southeast Asian dictatorship’s military ties with North Korea.
Lee offered expanded loans and aid during yesterday’s meeting in the capital of Naypyidaw and the two leaders agreed to increase cooperation on energy and resource development according to a statement from Lee’s office. Thein Sein asked Lee to set up a redevelopment program in the former capital of Yangon, according to a South Korean presidential official speaking on condition of anonymity.
The visit highlights South Korea’s effort to seek a stake in the energy-rich nation as it moves away from five decades of military rule and opens its markets. Lee will meet democracy advocate Aung San Suu Kyi today in the first trip by a South Korean leader to Myanmar since North Korea attempted to assassinate one of his predecessors almost 30 years ago.
“Myanmar is welcoming South Korean investment and aid because it needs to have a balanced and diversified sources of aid to reduce economic risk,” said Choi Myeong Hae, senior research fellow at Samsung Economic Research Institute in Seoul. “Lee’s visit reinforces how much South Korea values Myanmar as a strategic center and definitely boosts opportunities for South Korean businesses.”
Myanmar lawmakers are revamping the financial system after holding the most inclusive elections in two decades on April 1. Thein Sein, who took over from Than Shwe in March 2011, signed a preliminary cease-fire with the country’s largest armed rebel force in a move to end the world’s longest civil war.
Lee will meet Suu Kyi in Yangon today and hold a joint press conference. Suu Kyi took her seat in parliament this month after spending 15 years under house arrest, affirming a political opening in a nation where only one person in 30 has a mobile phone. The U.S. is lifting certain economic and financial sanctions on Myanmar and Japan last month forgave about $3.7 billion in debt.
South Korea is the fourth-largest investor in Myanmar after China, Thailand and Hong Kong. South Korea invested $110 million in Myanmar last year, according to Korea Export-Import Bank and an aggregate of $2.94 billion, Myanmar Investment Commission’s figures say.
Trade between the two countries amounted to $966 million in 2011, according to South Korean government statistics. Myanmar exported $299 million worth of clothing, beans, marine products, jade and timber to South Korea and imported $667 million of South Korean motor vehicles, engines, spare parts, tin and steel products, and raw plastic materials.
“About 170 South Korean companies are already in Myanmar and that number will only grow, especially those in the garment industry and raw material manufacturing,” said Choi of SERI. “Myanmar’s strategic location and labor costs cheaper than Vietnam and China has great significance as manufacturing hub.”
Daewoo International Corp.’s natural gas project is expected to cost $1.7 billion and may begin production in May 2013. The trading company, which is controlled by steelmaker Posco, is also South Korea’s biggest rice trader. Daewoo rose 2.4 percent yesterday to close at 29,700 won. The benchmark Kospi fell 3.4 percent.
Thein Sein denied to Lee that his country is aiding North Korea’s nuclear development program and the two discussed ways to suspend Myanmar’s military ties with the North, the South Korean presidential official said. The Myanmar president agreed to follow United Nations resolutions sanctioning new leader Kim Jong Un’s regime for its long-range rocket and nuclear tests.
U.S. Secretary of State Hillary Clinton in her visit in December expressed concern that Myanmar might be engaged in weapons trading with the North. The U.S. has blocked North Korean ships thought to be carrying arms to Myanmar.
Myanmar resumed diplomatic relations with the North in April 2007, having cut ties after the 1983 assassination attempt on South Korean Chun Doo Hwan that killed about 20 people, including the South Korean deputy prime minister and foreign minister. The incident took place as Chun was paying his respects at a mausoleum commemorating Suu Kyi’s father, Aung San.
Tensions on the Korean peninsula are high after Kim’s government last month defied international pressure and fired a rocket that disintegrated, prompting speculation it will detonate a nuclear device to reassert itself. The U.S. in response to the launch canceled a food aid deal and the United Nations tightened existing sanctions.
The Obama administration has repeatedly cited Myanmar’s opening as a possible model for North Korea to follow.
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