Jan. 3 (Bloomberg) -- Japan’s Finance Minister Taro Aso met with Myanmar’s president and senior officials today in a sign the nation plans to tap a market of 64 million people that has been dominated by China.
The visit is the first overseas trip by a member of Prime Minister Shinzo Abe’s cabinet that took office last month. It coincides with the U.S. and the United Nations expressing concern over government strikes against ethnic rebels in Myanmar’s north.
“It sends a message that Myanmar was chosen as the first overseas country to be visited by officials of the new government,” Aso told reporters outside the parliament building in Naypyidaw, the nation’s capital. “We’ll help build an environment in which economic growth can flourish in Myanmar,” he said, adding that help depends on democratic reforms.
Japan’s push into the nation bordering India and China may produce trade opportunities for its stagnating economy while helping Myanmar President Thein Sein meet a pledge to attract labor-intensive industries to create jobs. Competing Chinese and Japanese efforts risk further straining relations between Asia’s two biggest economies, already at odds over islands in the East China Sea.
“China considers Myanmar as its turf, and China is very sensitive of the U.S. and Japan making headway,” said Takuji Okubo, Tokyo-based chief economist at Japan Macro Advisors. “Myanmar could be another source of conflict.”
Japan plans to provide Myanmar with a 50-billion yen ($574 million) loan by the end of March and to continue with previously announced plans to waive debt that it is owed, according to three Japanese government officials, who asked not to be identified in line with procedures for such briefings.
Aso, who is also deputy prime minister, will visit tomorrow an economic zone south of Yangon, the former capital, that companies including Marubeni Corp. and Sumitomo Corp. may help to develop.
The U.S. is “deeply troubled” that the military is using aerial weapons in the region of Kachin, State Department spokeswoman Victoria Nuland said yesterday. UN Secretary-General Ban Ki-Moon said that the government should “desist from any action that could endanger the lives of civilians” or intensify the conflict.
Democratic reforms since Thein Sein took power in 2011 prompted Western nations to ease sanctions and galvanized lawmakers to focus on economic growth after about five decades of military rule left Myanmar disconnected from the global financial system.
Direct foreign investment into the nation will have risen 40 percent to a record $3.99 billion last year, according to a forecast from the International Monetary Fund. Rich resources span gas, gems and possibly oil, the World Bank says.
The Asian Development Bank forecasts that Myanmar’s gross domestic product may expand 6.3 percent this year after an estimated 6 percent gain in 2012. The country has high potential for rapid growth and development given its natural resources, abundant labor force and strategic location between China and India, the ADB said in an August report.
“Myanmar could become one of the next rising stars in Asia if it can successfully leverage its rich endowments,” the development bank said.
Relations between Japan and China have been strained by a dispute over sovereignty of uninhabited islands in the East China Sea. China accounted for about half of the foreign investment Myanmar has attracted since 2008, according to the Central Statistical Organization, a government agency in Naypyidaw.
In 2011, Thein Sein halted work on the $3.6 billion Myitsone hydropower dam across the Irrawaddy River that was being built with China Power Investment Corp., saying the project was against the “will of the people.” China Power called the decision “bewildering” and said it would hold talks with the government to resume the project.
China National Petroleum Corp., China’s biggest energy producer, is building pipelines in Myanmar, and China Nonferrous Metals Co. is developing a nickel mine in the country.
“Myanmar has been a kind of protectorate of China, but Myanmar is currently seeking alternative sources of investment, given the excessive presence of China,” said Okubo, who formerly worked at Goldman Sachs Group Inc. and Societe Generale SA.
Aso had planned to visit the Southeast Asian nation before his ministerial appointment, as a member of the Japan-Myanmar Association, a group established to boost Japanese business opportunities. In November, Barack Obama became the first sitting U.S. president to go there.
Mitsubishi UFJ Financial Group Inc. said Dec. 28 it would ally with Myanmar’s Co-Operative Bank Ltd. to tap growing demand for financial services. Japan’s biggest lender joins Sumitomo Mitsui Financial Group Inc. in forming tie-ups with local banks.
China today reported an increase in a services-industry gauge, adding to signs that the world’s second-biggest economy is rebounding after seven-quarter slowdown.
The non-manufacturing purchasing managers’ index was at 56.1 in December after a 55.6 reading the previous month, the National Bureau of Statistics and China Federation of Logistics & Purchasing said in Beijing today. A reading above 50 indicates expansion.
The U.S. will report mortgage applications and initial jobless claims today and the Bloomberg Consumer Comfort Index is set to give the latest reading on sentiment in the world’s biggest economy.
To contact the reporter on this story: Andy Sharp in Tokyo at email@example.com
To contact the editor responsible for this story: Paul Panckhurst at firstname.lastname@example.org