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Policy Proposals  Asia and Oceania Proposal to Strengthen Economic Relations with Myanmar

April 17, 2012


In order to support democratization and structural reforms of Myanmar through economic development, there is an urgent necessity for social and industrial infrastructure development in Myanmar, which promotes her growth and links with neighboring countries. Japan should contribute to investments in infrastructure and eventually to Myanmar's economic development, which is indispensable for sustainable growth throughout Asia. In this context, we urge both the governments of Japan and Myanmar to reinforce functions and schemes of Japan's economic cooperation and to create framework for economic exchange between two countries. As for economic cooperation, the following measures are required: (1) swift resumption of yen loans, which is currently suspended for a new round and promotion of large-scale infrastructure, (2) implementation of investment and loan from Japan Bank for International Cooperation (JBIC), (3) human resource development and business climate improvement through ODA, and (4) steady implementation and flexible operation of the expanded trade insurance announced in January this year by Nippon Export and Investment Insurance (NEXI). Also for the framework for economic exchange, we propose (1) early conclusion of investment and tax treaties and (2) establishment of a policy dialogue framework where public and private sectors of the two countries jointly work on business climate improvement in Myanmar.

Democratization has progressed in Myanmar since the transfer of government to civil administration in March 2011, and the country is steadily forging stronger ties with the international community. Japan should further encourage these efforts and promote concrete economic cooperation with Myanmar looking ahead to the ASEAN economic integration scheduled for 2015. There is a particularly urgent need for core infrastructure development within Myanmar to support industry and for regionwide infrastructure projects to build links with neighboring countries. It is important for Japan to promote economic activities leveraging Myanmar's potential through such projects and actively contribute to Myanmar's economic development, which will lead to sustainable economic growth throughout Asia.

Accordingly, we call on the governments of Japan and Myanmar to pursue the initiatives outlined below, through bilateral dialogues such as the Japan-Myanmar Summit to be held later this month.

1. Enhancing the Japanese Government's Support Schemes

(1) Swift resumption of yen loans

To help achieve sustainable growth in Myanmar and Asia as a whole, Japan should resume yen loans and support large-scale infrastructure development in Myanmar. Specifically, given Myanmar's important position to enhance regional connectivity in the Southern Economic Corridor (Dawei-Ho Chi Minh) and the East-West Economic Corridor (Mawlamyine-Danang) there is an urgent need for electricity, port, road, railway, water supply and sewerage, and telecommunications and IT projects in Myanmar. There are high hopes that Japan will undertake projects in the Thilawa and Dawei Special Economic Zones, and the public and private sectors must work together to steadily achieve this goal. In addition, it is also required to use yen loans in a speedy manner to promote cooperation in the fields of energy and natural resources.

The government of Myanmar has indicated that such projects should utilize environmentally responsible technologies and equipment, and Japan needs to be proactive in meeting this requirement.

(2) Japan Bank for International Cooperation (JBIC) investments and loans

In addition to yen loans, JBIC investments and loans are an effective means of providing prompt financing on competitive terms to advance the infrastructure projects mentioned above, and we request that JBIC respond positively to this need.

(3) Enhanced technical cooperation for human resource development and institutional improvement

Myanmar's excellent, low-cost workforce makes the country an appealing destination for investment by Japanese companies. However, there is still a shortage of highly skilled personnel to lead economic reform and industry, and Japan should actively support the training of such talent through the use of ODA. Improvement of customs, immigration control and other systems is also crucial to induce investment, and Japan should offer technical cooperation in this area.

(4) Steady implementation and flexible operation of enhanced trade and investment insurance

With a view to invigorating economic exchange, we welcome the enhancement of short- to medium/long-range plans for trade and investment insurance for Myanmar launched by Nippon Export and Investment Insurance (NEXI) in January this year. We expect their steady implementation and flexible operation.

2. Building Frameworks to Promote Economic Exchange

(1) Prompt conclusion of investment agreement and tax treaty

Reduction or abolition of barriers to cross-border investment is essential for Japanese companies engaged in global business. Such barriers include investment-related foreign capital restrictions and business rules or procedures in investment destinations. In this context, we welcome the agreement reached by the governments of Japan and Myanmar in December last year to begin negotiations for an investment agreement.

To increase investment from Japan, rather than waiting for the conclusion of an investment agreement, key measures including the abolition of remittance regulations to other countries, import/export licensing, and export-first policies that limit imports to the value of foreign currency earned through exports should be implemented as quickly as possible.

Tax treaties are another important legal foundation along with investment agreements, and there is an urgent need to conclude a treaty to prevent double taxation.

(2) Frameworks for creating a favorable business environment

To support the creation of a favorable business environment in Myanmar, it would be effective to establish frameworks where both public and private sector representatives from Japan and Myanmar draw up a joint action plan to address issues raised by the business community, promote their implementation, and evaluate the results.

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