BURMA: JAPANESE UNLIKELY TO PUSH REFORM FINANCING

C O N F I D E N T I A L RANGOON 001366

SIPDIS

STATE FOR EAP, EB
COMMERCE FOR ITA JEAN KELLY
TREASURY FOR OASIA JEFF NEIL
CINCPAC FOR FPA

E.O. 12958: DECL: 10/22/2012
TAGS: ECIN ECON BM
SUBJECT: BURMA: JAPANESE UNLIKELY TO PUSH REFORM FINANCING

REF: A. TOKYO 6905


B. SECSTATE 192276

C. RANGOON 1274

D. RANGOON 1253

Classified By: COM CARMEN MARTINEZ FOR REASONS 1.5 (B,D)


1. (C) Summary: Japanese experts say that Japan plans to
discuss economic reform during Prime Minister Koizumi's
meeting with Senior General Than Shwe at the November ASEAN
3 meeting in Phnom Penh. They have also promised to share
with us a copy of their proposed program for Burmese
structural adjustment. End summary.

Economic Aid Plan? Not Yet.


2. (C) Professor Masahiko Ebashi, one of the leaders of a
Japanese government-sponsored team here to work with the
Burmese government on structural reform, told the Chief of
Mission that the Japanese government is eager to get economic
reform started in Burma, and is willing to pay for it. The
team of Japanese experts will complete its work here soon,
expecting to finalize a report by December for publication
next March.


3. (C) Professor Ebashi was discouraged by the complete
disinterest of the Ministers with whom his team was supposed
to be working. Only Brigadier General David Abel, the
regime's sole competent economic mind, has worked closely
with the group. However, Ebashi was encouraged that
technocrats in the Central Bank and other agencies had shown
a "genuine" interest in reform. He said his group had
concluded that it was essential to build capacity now within
the GOB through engagement and promotion of economic reform.
It will be too late if the international community waits
until the political situation changes. Further sanctions
and/or continued economic isolation, he fears, will destroy
whatever influence these nascent reformers have.


4. (C) The leadership of Burma has made it clear, however,
that they will not implement any reforms unless there is
accompanying finance. Ebashi said that he believed the IMF
had made a mistake by issuing reform instructions with no aid
to back it up (see Ref D). To avoid similar problems, his
team was designing a program of incremental economic
structural adjustment aid, each tranche of which would be
tied to specific economic reforms. This model had worked
before in Vietnam, he said. However, Burma could not be
subjected to the same strict conditionality as Vietnam,
Ebashi argued. Ebashi said that he hopes a reform package
for Burma could be developed in time for the bilateral
meeting scheduled between Japanese Prime Minister Koizumi and
Burma's Senior General Than Shwe at the November ASEAN 3
Summit in Phnom Penh.

Comment


5. (C) Ebashi may be the only one thinking along these lines,
however. Japanese Embassy officials here tell us that while
a bilateral meeting at the ASEAN 3 is in the works, nothing
is finalized yet. If this meeting is arranged, one official
said, economic reform will certainly be a topic for
discussion, but there will not be talk of structural
assistance. The Japanese government, he said, recognizes
that any talk of financial assistance for structural reform
would be premature, pending further motion on political
transition in Burma. He also said that the GOJ would share
with us a copy of its report on structural adjustment here
when it is ready, and would consult with the United States,
the IMF, and the World Bank before taking any significant
steps in Burma. End comment.
Martinez