Japan Inc. Rushes to Myanmar

By YOREE KOH, April 25, 2012, 3:35 p.m. ET  ...

TOKYO—Japanese companies are jostling to line up business in Myanmar, as the country begins a historic push to open its markets and economy to the outside world, after decades of isolation.

Bloomberg News:

Myanmar President Thein Sein gets help with a helmet at a thermal-power plant in Kawasaki on Sunday.

Myanmar President Thein Sein, who just ended a five-day visit to Japan, spent much of the time talking to corporate executives. The president stayed two extra days after the regional conference he was attending ended so he could tour a pair of power plants and meet Japanese businessmen who had requested audiences in advance.

Myanmar "has natural gas, rare earth and metals, and the country will be a key market in Southeast Asia," said Daiwa Securities Group President Takashi Hibino, who met Mr. Thein Sein on Monday. Daiwa and the Tokyo Stock Exchange recently agreed to help the Central Bank of Myanmar establish a stock market by 2015.

The enthusiasm is natural as exporters jockey to sell to the long-isolated country, viewed as one of the last untapped Asian markets. Until a few years ago, new investments from Japan had been slow, particularly after the U.S. and Europe imposed tough sanctions in the 1990s over Myanmar's poor human-rights record.

Japanese companies also lag behind its peers from Thailand, South Korea and especially China, whose companies have invested massively in Myanmar in recent years.

Myanmar's recent thaw with the outside world has been driven in part by a desire to reduce its reliance on China, with which it has a historically fraught relationship. By contrast, there is little evidence that any lingering resentment in Myanmar against Japan—which occupied the then-British colony between 1942 and 1945—would get in the way of welcoming Japanese ventures.

Japan's trade with Myanmar has increased rapidly over the past few years. Export volume to Myanmar nearly doubled to ¥40 billion ($492 million) in 2011 from 2010, while imports grew 40% to about ¥47 billion, according to Japan's Ministry of Finance data.

Since the latter half of 2011, four major Japanese business organizations, including Japan's premier business group, known as Keidanren, each led delegations to Myanmar, which included blue chips like Hitachi Ltd. HIT -0.78% and Toshiba Corp. 6588.TO +0.30% The Japan External Trade Organization, or Jetro, a governmental trade-promotion organization, had to turn away about 60 companies that wanted to go on its Myanmar tour in early March, which at 38 firms was the biggest business mission from Japan to date. Some 40% of the participants said they would consider opening a production facility or sales office in the country within two years.

A week later, a group of 45 companies from cosmetics firm Shiseido Co. 4911.TO +0.77% and electronics company Canon Inc. CAJ +1.38% to auto-parts supplier Aisin Seiki Co., 7259.TO +1.00% participated in a Myanmar trade fair organized by Jetro to boost Japanese brand recognition to locals.

Japan, which is Myanmar's biggest creditor, on Saturday announced it would forgive more than half of the country's ¥502 billion ($6.18 billion) owed to Japan by Myanmar, with the rest to be repaid through a low-interest bridge loan. Part of the waiver is conditional on further democratic reforms by Myanmar. Over the weekend, Myanmar's minister for national planning and economic development also signed a deal with Japan to jointly develop the Thilawa Special Economic Zone, essentially giving Japan exclusive access to develop a region on the outskirts of Yangon. Chinese and Thai companies have been granted control over developing two other zones.

Resolving the debt issue means the Japanese government can extend new loans. That in turn gives Japanese companies more confidence to pursue opportunities now that government funds will be available to help back projects, Japanese trading companies say.

"Japan has always been described [by Myanmar authorities] as 'no action, talk only,' said Toru Hiroe, head of Japanese trading giant Itochu Corp.'s 8001.TO -1.29% branch in Yangon, in an interview. Japanese companies are now more willing to change that perception, he says.

The charge is being led by Japan's major trading houses—Itochu, Mitsubishi Corp., 8058.TO -0.56% Marubeni Corp., 8002.TO -0.18% Mitsui 8031.TO -0.31% & Co., and Sumitomo Corp. 8053.TO -0.86% All have increased the size of their offices in Yangon in recent months and plan to expand further. Most have said they intend to set up a second office in Naypyitaw, the country's capital, to be closer to Myanmar's seat of government.

"With the debt issue settled during President Thein Sein's visit it can be expected that the amount of assistance and yen-denominated loans will increase a lot," said Mr. Hiroe. "But the Myanmar government has high expectations for Japanese companies not just in terms of money. There is a booming demand for Japan's technological expertise and in that regard I think our role will increase quite a bit."

A group of three trading companies that includes Marubeni and Sumitomo will help conduct a feasibility study of potential projects at Thilawa, said a Marubeni spokesman. Some of the most attractive prospects are infrastructure projects, he said.

Marubeni is interested in fixing the company's old cement factories and railroads that are in disrepair, the spokesman said. But in a country where power outages are still a daily occurrence, the trading company is also looking to repair aged power plants, including one hydro-power plant Marubeni built 50 years ago, before building new ones. Until 2005, Marubeni and Hitachi built 25% of Myanmar's power plants. Since then, their share has shrunk to 12%.
 
—Atsuko Fukase contributed to this article.
 http://online.wsj.com/article/SB10001424052702303978104577363730176850196.html