Post-coup relations between Myanmar and Japan

by Gota Seto

In this third piece of a series of blogs on the relations between Myanmar and Japan, I examine how the relations between the two nations changed after the 2021 coup. As described in my previous blog, Japan’s massive economic assistance through aid and increased investments in Myanmar are the key developments in the relations between Myanmar and Japan after the former’s political reforms that began in 2011.

Japan extended ODA totaling about 1.8 billion USD in fiscal year 2019-2020, being the largest contributor. On the investment side, Japanese companies invested more than 1.3 billion USD in Myanmar during the NLD government (2016-2021), making Japan the fifth-largest investor in Myanmar. However, as in the case of the 1988 coup, the military takeover that occurred in February 2021 again changed the relations between the two nations significantly.

Response of Japan to the coup

Japan’s response to the coup first came in the G7 Foreign Minister’s statement as a signatory on 3 February, which condemned the military coup. Subsequently, on 21 and 28 February, the Japanese government said again that it denounced the situation in Myanmar, and strongly urged the Myanmar military to release the political detainees, including Aung San Suu Kyi, and to immediately restore democratic political system in Myanmar. Furthermore, following the bruta

l crackdown by the military on anti-regime protesters on Armed Forces Day, 27 March 2021, Japan decided to suspend new aid programs to the regime (although existing projects continued).

While Tokyo has not yet slapped targeted sanctions on the coup leaders unlike the Western governments, Japan, as the largest provider of development aid in Myanmar, is using its ODA projects as a way to put pressure on the Myanmar military.

Responses from the Japanese business sector

Japanese firms in Myanmar responded to the coup in various, mostly negative, ways. Japanese beer giant Kirin announced on 4 February 2021 that it would terminate its joint venture Myanmar Brewery with the junta-linked conglomerate, Myanmar Economic Holdings Public Company Limited (MEHL), citing the deep concerns over human rights violations by the military. Mitsubishi Cooperation, along with Malaysia’s state-run company Petronas, divested its stakes in Myanmar’s Yetagun gas field for the reasons of technical and economic difficulty after the coup. Also, Japanese energy conglomerate ENEOS Holdings Inc. decided to withdraw from the Yetagun gas project in response to social problems, amidst the growing criticism that the project was funding the Myanmar junta.

However, according to a report by the Japan External Trade Organization (JETRO), about 65 percent of Japanese companies investing in Myanmar intend to sustain or even expand their operations in a year or two despite the waned economic prospects of Myanmar caused by the coup and the COVID-19 pandemic. And most of the companies in the Thilawa Special Economic Zone (SEZ), which is the best illustration of the economic reforms initiated under U Thein Sein’s government and bilateral economic cooperation with Japan, have no plans for a permanent shutdown or to withdraw completely from Myanmar as they have made long-term investments in Myanmar.

Yet many foreign businesses in the Thilawa SEZ have been forced to halt their operations due, in a large part, to a decline in demand and limited availability of raw materials amid post-coup social and economic turmoil. As of July 2022, of 113 firms which have invested in the Thilawa SEZ, only 45 factories are in full operation whereas 27 factories have reduced their production by half and others have suspended their operations.

Among the Japanese companies which stopped operations are automobile maker Suzuki and instant noodle producer Acecook Myanmar Co. And, it is less likely that the Thilawa SEZ will attract more investments under the SAC government considering the current social unrest and economic uncertainty.

Three large-scale projects outside of the Thilawa SEZ backed by Japanese investors, with an estimated aggregate investment of 1.3 billion USD, have also been suspended since the military takeover. Furthermore, Japan’s foreign minister has raised the possibility of freezing even ongoing ODA projects in Myanmar unless the situation improves.

In sum, Japan’s deep engagement with Myanmar which began in 2011 through massive ODA and significant investments by the business sector has necessarily become weaker and weaker over the last 20 months. Although it is true that Japan has still maintained connections with both the National League for Democracy and the Tatmadaw, Japan has no option but to reduce the engagement with the Myanmar junta, considering its cruelty as can be seen in the execution of four democracy activists conducted in July despite Japan’s expression of strong concern.

Gots Seto is a Master of International Relations student at University of Melbourne and current intern with the Myanmar Research Network.

References

1. The Irrawaddy, “Myanmar and Japan Talk of Continued Expansion of Investment and Military Relation,” he Irrawaddy, 20 January 2021, https://www.irrawaddy.com/news/burma/myanmar-japan-talk-continued-expansion-investment-military-relation.html.

2. AFP, “Japan’s Kirin cuts ties with Myanmar military-owned firm”, Frontier Myanmar, 5 February 2021, https://www.frontiermyanmar.net/en/japans-kirin-cuts-ties-with-myanmar-military-owned-firm/.

3. The Irrawaddy, “Myanmar Army Unit Accused of Rohingya Atrocities Used in Deadly Crackdown: UN,” The Irrawaddy, 21 February 2021, https://www.irrawaddy.com/news/myanmar-army-unit-accused-of-rohingya-atrocities-used-in-deadly-crackdown-un.html.

4. The Irrawaddy, “Japan Weighs Halting New Assistance Projects to Myanmar After Coup,” The Irrawaddy, 25 February 2021, https://www.irrawaddy.com/news/asia/japan-weighs-halting-new-assistance-projects-myanmar-coup.html.

5. The Irrawaddy, “Japan Suspends New Aid Programs to Myanmar After Massacres,” The Irrawaddy, 31 March 2021, https://www.irrawaddy.com/news/burma/japan-suspends-new-aid-programs-myanmar-massacres.html.

6. Kyodo News, “FOCUS: Myanmar's economic woes may help Japan persuade junta to end crisis,” Kyodo News, 30 April 2021, https://english.kyodonews.net/news/2021/04/61c409d14535-focus-myanmars-economic-woes-may-help-japan-persuade-junta-to-end-crisis.html

7. Myanmar Now, “Japan considering ODA freeze to Myanmar after activist pressure,” Myanmar Now, 21 May 2021, https://www.myanmar-now.org/en/news/japan-considering-oda-freeze-to-myanmar-after-activist-pressure.

8. AFP, “Japan should use its clout to help political prisoners, says freed journalist”, Frontier Myanmar, 21 May 2021, https://www.frontiermyanmar.net/en/japan-should-use-its-clout-to-help-political-prisoners-says-freed-journalist/.

9. The Irrawaddy, “Factories Shuttered in Myanmar’s First Special Economic Zone Amid Post-Coup Turmoil,” The Irrawaddy, 9 June 2021, https://www.irrawaddy.com/news/burma/factories-shuttered-in-myanmars-first-special-economic-zone-amid-post-coup-turmoil.html.

10. The Irrawaddy, “Japan’s Kirin to End Beer Joint Venture With Myanmar Military ‘by December’,” The Irrawaddy, 12 November 2021, https://www.irrawaddy.com/news/burma/japans-kirin-to-end-beer-joint-venture-with-myanmar-military-by-december.html.

11. Kyodo News, “Most Japanese Firms Investing in Myanmar Remain Despite Coup,” Kyodo News, 11 January 2022, 70% of Japan firms keep, expand business in Myanmar even after coup (kyodonews.net).

12. Reuters, “Mitsubishi and Petronas to sell stakes in Myanmar’s Yetagun gas field”, The Japan Times, 18 February 2022, https://www.japantimes.co.jp/news/2022/02/18/business/corporate-business/myanmar-mitsubishi-gas-field/.

13. Reuters, “Japan energy giant Eneos plans to withdraw from Myanmar gas project”, The Japan Times, 25 March 2022, https://www.japantimes.co.jp/news/2022/03/25/business/corporate-business/eneos-myanmar-gas-project-withdrawal/.

14. The Irrawaddy, “Japan's ENEOS Withdraws From Myanmar Gas Project,” The Irrawaddy, 2 May 2022, https://www.irrawaddy.com/news/burma/japans-eneos-withdraws-from-myanmar-gas-project.html.

15. AFP-JIJI, “Kirin offloads Myanmar beer business over coup”, The Japan Times, 30 June 2022, https://www.japantimes.co.jp/news/2022/06/30/business/corporate-business/kirin-myanmar-exit/.

16. The Irrawaddy, “Foreign Firms in Myanmar's SEZ Struggle Under Junta Restrictions,” The Irrawaddy, 28 July 2022, https://www.irrawaddy.com/news/burma/foreign-firms-in-myanmars-sez-struggle-under-junta-restrictions.html.

17. The Irrawaddy, “Japan to Stop Training Myanmar Military Officers,” The Irrawaddy, 21 September 2022, https://www.irrawaddy.com/news/burma/japan-to-stop-training-myanmar-military-officers.html.