'If you build it, they will come,' seems to be the rule with Japanese FDI, and it is taking this philosophy to an emerging Myanmar. Japanese FDI was initially cautious after Myanmar started to open up, put off by the country’s notable lack of infrastructure (for example, only about 25% of the population has access to electricity). Between 2012 and 20114 Japanese businessmen visiting Myanmar were famous followers of 'the three Ls': look, listen and leave.

Now they are starting to stay, thanks to the opening of the country’s first special economic zone (SEZ) in Thilawa, 22 kilometres south-east of Yangon, in September 2015. “As of June, 69 companies have made reservation agreements with Myanmar Japan Thilawa Development Company, the SEZ’s joint venture development company,” says Yutaka Araki, a representative of the Japan International Co-operative Agency [JICA] Myanmar office.  “Among those 69 companies, 36 are from Japan. The other 33 companies are from 13 countries.”

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List avoidance

Although Japan accounts for the largest number of projects booking plots of land at Thilawa, Singaporean investments are number one in terms of capital. They are not necessarily native Singaporean companies: many US and European multinationals have registered companies in the island state to invest in Myanmar as a means of avoiding US sanctions. Although Washington has lifted most of its sanctions on Myanmar, as of mid-May it continued to keep hundreds of individuals and companies on its Specially Designated Nationals (SDNs) blacklist.  Because corporate data is so hard to come by in Myanmar, and doing business with an SDN carries penalties, exercising extreme caution is still the name of the game for most Western multinationals, and will be until the blacklist is dropped.

Some of those Singapore-registered companies are also from Japan. “Even the Thilawa investment is through a Singapore company,” says Inada Kyosuke, senior representative to JICA Myanmar. Myanmar Japan Thilawa Development, the developer of Thilawa SEZ, was formed by the Myanmar and Japanese governments in 2014 to promote FDI in the former country.    

JICA was very much on a mission to get Thilawa off the ground. The Japanese aid agency has provided near zero-interest loans to the project to finance its 50-megawatt power station and other important infrastructure, such as a separate container facility (due to be completed in 2018). “As for JICA, we are expecting Thilawa to become a good example that stimulates private sector activities in the country,” says Mr Kyosuke.

Chinese catch-up

Japan will still have some catching up to do with China, its main rival for economic clout across east and south-east Asia, which has been investing non-stop in Myanmar for the past three decades, regardless of Western sanctions. San Myint, the deputy director-general of the Directorate of Investment & Company Administration, which handles Myanmar's investment applications and company registrations, says that while Japanese companies registered at the Myanmar Investment Committee and Thilawa SEZ number only 120, the total number of Japanese companies already registered in Myanmar is 756.

Many of these firms are no doubt there to win supply contracts from the Japanese government, which has committed about $3bn in development aid to Myanmar over the past three years. Others may be there to assess the right time to invest, now that Thilawa SEZ is available. “For the whole country there are 48 private industrial zones up to now,” says Mr Myint. “But for Japanese FDI they are only interested in Thilawa, and maybe Dawei in the future.” Dawei is another SEZ planned in Tanintharyi state in southern Myanmar, with the backing of the Myanmar, Thai and Japanese governments. But Dawei is a long way from Thilawa’s state of readiness for investments.