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Cablegate: Japanese Trade with Burma On the Rise

VZCZCXRO2749
RR RUEHBZ RUEHCHI RUEHDT RUEHHM RUEHNH
DE RUEHGO #0754/01 2290626
ZNR UUUUU ZZH
R 170626Z AUG 07
FM AMEMBASSY RANGOON
TO RUEHC/SECSTATE WASHDC 6362
RUCNASE/ASEAN MEMBER COLLECTIVE
RUEHGG/UN SECURITY COUNCIL COLLECTIVE
RUEHBJ/AMEMBASSY BEIJING 1482
RUEHBY/AMEMBASSY CANBERRA 0434
RUEHKA/AMEMBASSY DHAKA 4581
RUEHLO/AMEMBASSY LONDON 1978
RUEHNE/AMEMBASSY NEW DELHI 3973
RUEHUL/AMEMBASSY SEOUL 7528
RUEHTC/AMEMBASSY THE HAGUE 0640
RUEHKO/AMEMBASSY TOKYO 5082
RUEHCN/AMCONSUL CHENGDU 1167
RUEHCHI/AMCONSUL CHIANG MAI 1036
RUEHCI/AMCONSUL KOLKATA 0030
RUEATRS/DEPT OF TREASURY WASHDC
RHHMUNA/CDR USPACOM HONOLULU HI
RUEHGV/USMISSION GENEVA 3231
RHEHNSC/NSC WASHDC
RUCNDT/USMISSION USUN NEW YORK 0879
RUEKJCS/SECDEF WASHDC
RUEHBS/USEU BRUSSELS
RUEKJCS/JOINT STAFF WASHDC

UNCLAS SECTION 01 OF 02 RANGOON 000754

SIPDIS

SENSITIVE
SIPDIS

STATE FOR EAP/MLS, EB/TRA
PACOM FOR FPA
TREASURY FOR OSIA:SCHUN

E.O. 12958:N/A
TAGS: ECON ETRD EINV PREL BM
SUBJECT: JAPANESE TRADE WITH BURMA ON THE RISE

RANGOON 00000754 001.2 OF 002


1. (SBU) Summary. Trade relations between Japan and Burma have
improved during the past five years, in Burma's favor. According to
the Japan External Trade Organization (JETRO), Burma exported more
than $245 million in products to Japan in 2006, an increase of 139
percent since 2001. Burma imported $103 million from Japan in 2006,
a decrease of 47 percent since 2001, but an increase of almost 13
percent over the previous year. Japanese Embassy officials point to
the construction of the new capital in Naypidaw as the main reason
for the increase of Japanese exports, primarily heavy machinery and
vehicles, to Burma between 2005-2006. The Japanese Government
continues to discourage new investment in Burma, although Japanese
companies would quickly return when the situation changes. End
Summary.

Burmese Exports on the Rise
---------------------------

2. (SBU) During a meeting with Norifumi Ichikawa and Atsushi
Igarashi, Japanese Embassy economic officers, we discussed the
changing nature of Japanese-Burmese trade, the possibility of new
Japanese investment, and Burma's worsening investment climate. Mr.
Igarashi explained that Burmese exports to Japan consist of lower
value added products such as agricultural goods, wood, footwear and
apparel. Although the value of Burmese exports to Japan increases
annually, the trend is not reflected in Japanese exports to Burma.

--------------------------------------------- ----------
Burma-Japan Trade, 2001-2006
In USD millions
--------------------------------------------- ----------
Year Burmese Percent Burmese Percent
Imports Change Exports Change
--------------------------------------------- ----------
2001 187.113 -- 102.500 --
2002 114.700 -38.7 110.200 7.5
2003 123.700 7.8 138.800 25.9
2004 105.371 -14.8 180.077 29.7
2005 91.835 -12.8 203.528 13.0
2006 103.647 12.9 245.280 20.5
--------------------------------------------- ----------
Source: Japan External Trade Organization (JETRO), July 2007

3. (SBU) In 2006, Japan imported more than $245 million from
Burma, an increase of 20 percent over 2005 values. Between
2001-2006, Japanese imports of Burmese products rose more than 139
percent, from $102 million in 2001 to $245 million in 2006. Mr.
Ichikawa elucidated that there is a growing demand in Japan for
certain Burmese products, including agricultural products, fish and
seafood, textiles and footwear. In the past year alone, Burmese
exports of fruits and grains increased from less than $6 million in
2005 to more than $14 million in 2006. Burmese products, Mr.
Ichikawa commented, are relatively inexpensive compared to products
from China, Thailand or Vietnam, and the improving quality and low
cost of these products makes them attractive to Japanese consumers.

4. (SBU) The statistics on the Japanese exports to Burma depict a
much different trade relationship. Between 2001-2005, Japanese
exports to Burma decreased by 51 percent, from $187 million to $91
million. Mr. Ichikawa noted that the withdrawal of several large
Japanese trading companies in 2001-2002 and the high cost of
Japanese products relative to Burmese goods explain the drop in
imports. Between 2005-2006, however, Japanese exports to Burma
increased 13 percent. The sale of heavy machinery products and
vehicles account for the majority of this increase, Mr. Igarashi
explained. Due to the construction of the new capital in Naypidaw,
the Burmese government imported more heavy machinery, machine parts,

RANGOON 00000754 002.4 OF 002


and vehicles in 2006. Both Mr. Igarashi and Mr. Ichikawa believe
this trend will continue in 2007, although the increase in Japanese
exports to Burma should not be as dramatic as the increase in
Japan's imports of Burmese products.

Discouraging New Investment
---------------------------

5. (SBU) No new Japanese investment has gone forward in Burma
since 2001. Mr. Igarashi noted that although Japanese companies,
particularly oil and gas and import/export companies, are interested
in establishing operations in Burma, they are unwilling to take the
risk. He explained that Burma's worsening investment climate -- no
rule of law, a poor exchange rate policy, frequently changing
foreign investment regulations, and lack of infrastructure -- deters
foreign investment. Previously, large Japanese trading companies,
such as Mitsubishi, had sizeable offices in Rangoon; these offices
have either closed or have dwindled to one-man shops. Mr. Igarashi
also acknowledged that the Japanese government, which supports the
United States' Burma policy, discourages companies from investing in
Burma. "It is not illegal for them to invest in Burma, but it is
not recommended," he declared. "When and if U.S. sanctions are
lifted, Japanese companies will flood the Burmese market," Mr.
Ichikawa opined, "as they see Burma as the final destination for
investment in the Asian region."

6. (SBU) According to the Myanmar Chamber of Commerce, 22 Japanese
companies operate in Burma in three primary sectors: the garment
industry, oil and gas, and agriculture. Many of these companies,
however, are in Burma in name only -- they no longer do business in
the country. The Myanmar Chamber of Commerce reports that Japanese
investment totals $211 million, which accounts for 1.45 percent of
Burma's total foreign direct investment.

Comment
-------

7. (SBU) Japanese companies have begun to shift operations from
China to other Asian countries, such as Vietnam and Thailand, but
they continue to shy away from Burma. Although the Japanese
officers we met with noted that Japan's support for U.S. economic
sanctions plays a part in this decision, Burma's poor and
ever-worsening investment climate is also a factor. In order to
attract the foreign investment it so desperately needs, the GOB must
establish liberal trade policies; encourage privatization and open
competition; normalize exchange rate policies; and establish the
rule of law. Without these reforms, only those foreign investors
pillaging Burma's lucrative natural resource sectors will continue
to take the risks.


VILLAROSA

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