Out-Law / Your Daily Need-To-Know

Japan agrees 43 billion yen in loans to Myanmar for infrastructure

17 Nov 2020, 1:34 am

Japan and Myanmar signed a $414 million (¥42.78 billion yen) in low interest loans for infrastructure build-up and development of finance for small and medium-sized businesses in Myanmar.

According to the Japanese Foreign Ministry, $268m (¥27.78bn yen) of the loans will be used for a project to build a bridge on a road in the east-west economic corridor, a route that crosses Myanmar, Thailand, Laos and Vietnam. The project involves a bridge on the road linking Bago and Kyaikhto, northeast of Yangon, a measure that will boost the logistics sector’s efficiency.

Since the volume of trade with Thailand, the largest trading partner with Myanmar, is expected to continue to increase, it is essential to develop the east-west economic corridor to boost the logistics sector's efficiency, the ministry said.

The maximum amount of the loan to finance small and medium sized businesses in Myanmar is $144m (¥15bn yen), which will allow them have enough funds to stabilise their business and expand operations.

The repayment period will be 40 years, with a 10 year grace period. The loans will help weaken the economic impact of the pandemic on development of Myanmar’s industrial and business sectors, and create and retain employment, according to the ministry.

Special Economic Zones (SEZs) in Myanmar received foreign investment worth $362.28m in 2018-2019, a report said. 106 companies from 18 countries and four local businesses have invested $1.84 billion in the zones up to 2019. Japan topped the list of foreign investors in 2018 with more than 36% of the overall investment.

James Harris, an infrastructure expert at Pinsent Masons, the firm behind Out-Law, said, "Myanmar needs this kind of support. As was experienced in Vietnam around 25 years ago when international sanctions were first lifted there, Myanmar has been pushing for a similar level of 'catching up' over the past eight years or so. The need for investment in the domestic transport sector is considerable. "

"Government agencies in Japan have been at the forefront of this for some time, alongside other multilateral development organisations, NGOs and national donor agencies such as the World Bank/IFC, Asian Development Bank, AFD, and DIFID. It is encouraging to see that this is continuing," he said.