The coup has presented a moral and practical crisis to the more than 400 Japanese companies that have invested nearly $2 billion since Myanmar’s democratic transition began in 2011.
London: Japan’s close relationship with Myanmar has made it one of the most influential among Asian countries. Their deep roots can be traced back to the founding of the Burmese army in 1941 by independence hero General Aung San, with help from imperial Japan. The joint aim was explicit: they both wanted to oust Burma’s colonial ruler—Britain.
Today, the democratically elected leader of Myanmar’s National League for Democracy party, Aung San’s daughter, Suu Kyi, who spent a postgraduate year in Japan in the 1980s, is in jail, following the coup last month by Myanmar’s military. Japan now faces a multifaceted dilemma. If it sanctions the military in the name of a values-based foreign policy, as carried out by the US and other western countries, it may lose access to and leverage over Myanmar’s military leaders. As a key foreign investor in Myanmar, it might also lose business interests. More importantly, it could lose the upper hand in geopolitical competition with China.
In the past, the Japanese government has taken a more favourable stance to the Myanmar government and military than Western countries. Even when the West imposed economic sanctions on Myanmar following the accusations of genocide against the Rohingya Muslims, Japan didn’t follow suit. While Western countries were removing capital and intensifying criticism of Aung San Suu Kyi for her alleged complicity with the military, Japan took a pragmatic stance in seeking an early solution to the problem through large-scale grant aid and continued investment.
Foreign direct investment is a vital source of growth for Myanmar, one of Asia’s poorest countries, and Japan is a big partner, with official loans from Tokyo to Yangon reaching nearly $10 billion over the past decade. According to the Directorate of Investment and Company Administration, a government agency in Myanmar, inward investment from Japan stood at $768 million, or roughly 14% of total foreign investment between 2019 and 2020, by comparison with the $553 million that came from China.
With Myanmar’s future in question and huge crowds still on the streets, bravely standing up to the murderous attempts to dispel them, the coup has also presented a moral and practical crisis to the more than 400 Japanese companies that have invested nearly $2 billion since the country’s democratic transition began in 2011, hoping to capture growth from what the UK firm PwC called “Southeast Asia’s last frontier market”.
An early casualty of the coup was the Japanese brewer, Kirin, which decided just four days after the generals took over to quit their joint venture with Myanmar Economic Holdings Limited, (MEHL). “It was no longer tenable”, said Kirin’s chief executive, one of Myanmar’s largest investors. His swift action was because of the direct ties MEHL had with the Tatmadaw, Myanmar’s military, which had been censured internationally following the coup. Even before this, the huge Kirin group, founded in Yokohama in 1885, was under intense pressure from activists to review its operations in Myanmar after an investigation failed to uncover where the proceeds from the beer ventures ended up.
Other major Japanese companies operating in Myanmar have no clear links to the military. Japanese businesses in automobile and food production are aimed at Myanmar’s domestic market. These investments were made in anticipation of future economic growth in Myanmar and with no exports, company bosses believe that they will be able to manage any broader sanctions.
Suzuki Motor was established in Myanmar in the late 1990s and has two assembly plants, currently closed for employee safety. Last year, because of strong compact-vehicle demand, Suzuki announced that it would open a third site at a cost of $110 million, an investment which now remains in doubt because of the coup. Recently, another major Japanese automobile company, Toyota, invested $53 million in setting up a vehicle assembly plant in Myanmar which was due to open in February. Worried about the possible image of endorsing the military government if it proceeded with the opening of the plant at a time when people are protesting against the coup, Toyota announced last week that it would delay the opening until an unspecified date in the future. Among Japanese retailers, supermarket operator Aeon Co recently revealed plans to open its first Aeon Mall shopping complex in 2023, in the Special Economic Zones (SEZ) promoted by Tokyo, plans of which are now on hold.
On the other hand, mindful of not being seen to abandon local workers at a time of crisis, many Japanese companies in the SEZ are carrying on with their operations, hoping for a rapid resolution. These include the many garment manufacturers which have flocked there in recent years in search of low labour costs. Other offices, factories and power plants owned by Japanese investors have also declared their intention to remain operating for as long as possible, although even these could be forced to close if Myanmar is hit by new sanctions brought about by the greater use of military force against demonstrators.
To the dismay of Tokyo, the coup came precisely at a time when hopes were rising for Myanmar’s economic progress and further democratic government. Even before events in February, Japan had been cautious about promoting political values, believing that if it tried to push the country towards further democratisation, there could have been a backlash from the military, which would have resulted in less influence. But now Japanese caution following the coup is seen by the protestors as simply indecision on the part of Prime Minister Suga Yoshihide and they are rapidly losing faith. Japan was viewed by protestors as an important negotiator that might be able to break the situation and turn the military around. However, after six weeks, they have seen no noticeable results and Japan is fast becoming a source of anger among the demonstrators.
Even the promise last week by Japan of an emergency grant of $19 million for Rohingya refugees has been met with condemnation from the people of Myanmar, who fear that the money would go directly to the national army. They recall that Myanmar’s government agencies and the national army confiscated relief supplies sent from abroad in the 2008 Cyclone Nargis disaster relief effort, and they are convinced that the same will happen again.
Three years ago, former Japanese Prime Minister Shinzo Abe pledged at a meeting with Aung San Suu Kyi to fully support Myanmar’s democratic nation-building efforts, envisioning an “Arc of Freedom and Prosperity” sweeping across Southeast Asia’s democratic states. Words that the people remember. Any back-tracking by Japan would quickly lose the trust of Myanmar’s strongly pro-Japanese population. If Abe’s successor, Prime Minister Suga, dithers and casts aside the issues of values and democracy in order to protect Japanese business interests, the military will simply wait this situation out, just as it did in the past, and the people will again live under a dictatorship.
Japan is now facing real dilemmas and challenges in dealing with the coup and the demonstrators are expecting some action rather than just warm words. The long love-affair appears to be cooling and it remains an open question whether the Japanese government will be able to fully regain the trust of the people of Myanmar.
John Dobson is a former British diplomat, who also worked in UK Prime Minister John Major’s office between 1995 and 1998.