YANGON, Myanmar (AP) — Japan's government on Sunday extended its first loan to Myanmar in 26 years and canceled the remainder of the Southeast Asian country's debt, as Tokyo looks to re-establish strong economic ties with the former pariah nation.
The 51 billion yen ($504 million) loan agreement was signed in Myanmar's capital, Naypyitaw, after Japanese Prime Minister Shinzo Abe met with Myanmar President Thein Sein.
Abe arrived in Myanmar on Friday on the first visit to the country by a Japanese leader in 36 years, a major part of Tokyo's effort to reassert its position as a top economic partner after decades of frosty relations with the previous military regime.
Abe had met with Myanmar democracy icon and lawmaker Aung San Suu Kyi in the main city of Yangon on Saturday.
The low-interest loan was signed between Japan's ambassador to Myanmar, Mikio Numata, and Myanmar's deputy minister for finance and revenue, Dr. Lin Aung, Japan's Foreign Ministry said in a statement. Japan also canceled the remaining 176.1 billion yen ($1.74 billion) owed by Myanmar, after forgiving 326.3 billion Yen ($3.58 billion) in debt in January.
The loan is Japan's first to Myanmar since 1987.
"The government of Japan considers it important to continue to back up the progress of Myanmar's reforms and will continue its support to Myanmar," the Foreign Ministry's statement said.
According to the notes exchanged Sunday, 17 billion yen ($168 million) is to be used for infrastructure improvement in Myanmar, 14 billion yen ($138 million) for electricity generation, and 20 billion yen ($198 million) for power generation and transmission and distribution of energy at a special economic zone.
The development of the 2,400-hectare (5,900-acre) Thilawa Special Economic Zone, located near Yangon, is Japan's biggest investment project in Myanmar, led by trading companies Mitsubishi Corp., Marubeni Corp. and Sumitomo Corp.
Japan, Myanmar's largest aid donor, helped clear part of its unpaid debt in an effort to boost Myanmar's democratic reforms and open ways to resume fresh loans for infrastructure building and major development assistance that will support Japanese business interests in the Southeast Asian nation.
Japan had close ties with Myanmar before the junta took power in 1988, prompting Tokyo to suspend grants for major projects. Although it scaled back most business activity and cut government aid when the U.S. and other Western nations imposed sanctions in 2003 after the military regime put Suu Kyi under house arrest, Japan did not impose sanctions on Myanmar.
But with no major development grants or Japanese loans, major Japanese corporations maintained branch offices in Myanmar with minimal business operations during the previous regime, while neighboring China gradually became Myanmar's major trade partner and investor after Thailand and Singapore.
Japan's investments and involvement lag far behind those of China and India, but that is fast changing. A high-powered delegation of business leaders, including top executives from Toyota Motor Corp., Hitachi Ltd. and Sumitomo Chemical, toured Myanmar, also known as Burma, in February and pledged to cooperate in encouraging more investment.
As of late February, Japan was the 11th-largest investor in Myanmar, with $270 million in overall investments, way behind the $14.2 billion committed by China and $9.6 billion by Thailand, the top two sources, with 33 percent and 23 percent, respectively, of total foreign direct investment.