US embassy cable - 03RANGOON45

C O N F I D E N T I A L SECTION 01 OF 02 RANGOON 000045 
 
SIPDIS 
 
STATE FOR EAP AND EB 
TREASURY FOR OASIA 
CDR USPACOM FOR FPA 
 
E.O. 12958: DECL: 01/09/2013 
TAGS: PREL, EFIN, EAID, BM, JP 
SUBJECT: JAPAN EXPANDS DEBT RELIEF; AGREES TO HOST 
CONSULTATIVE GROUP ON BURMA 
 
 
Classified By: COM Carmen Martinez.  Reason: 1.5 (d). 
 
1. (C) Summary: Japan has agreed to host a consultative group 
meeting on Burma in mid-February.  It is also edging towards 
support for economic reform in Burma.  How far it can or 
should go in that regard, absent real political reform, will 
likely be one of the prime topics at the February meeting. 
End Summary. 
 
Consultative Group Meeting 
 
2. (C)  The Japanese Government has agreed to host a 
consultative group meeting on Burma in mid-February. 
According to Japanese Embassy sources, the agenda will 
include political transition, economic reform and human 
rights issues.  The Japanese may also take advantage of the 
meeting to present a summary of the economic reform 
recommendations that have emerged from their Structural 
Adjustment Project.  The Thai and Indian Embassies have both 
told us that their governments plan to attend. 
 
Structural Adjustment Program 
 
3. (C) The latest workshop on the Japanese Structural 
Adjustment Program was held December 21 and 22.  David Abel 
headed the Burmese side; a Japanese academic (Professor 
Odaka) headed the Japanese.  The Burmese accepted the 
Japanese recommendations, including currency unification, but 
argued as usual that they needed time and financing support 
for major adjustments.  The Japanese also pushed the idea of 
"special zones" for industry and agriculture within which 
some of the GOB's regulations might be lifted.  Again, the 
Burmese accepted the idea, but made no commitments on 
implementation. 
 
4. (C) The next step will be a government-to-government 
meeting (as opposed to the latest workshop, which was billed 
as an academic exchange) probably in early March to work on 
an implementation plan for the proposed reforms. At that 
point, Japanese Embassy sources indicated, they will have to 
talk about programs of financial support. 
 
Debt Relief 
 
5. (C) The Japanese government will provide Burma with debt 
relief equivalent to about 150 billion yen ($1.3 billion) 
under a program that will be implemented starting in February 
2004 and which will cover all maturities coming due after 
April 2003.  According to the Embassy, the program will not 
cover arrears to Japan, which, in Burma's case, are now 
equivalent to about $2 billion.  Those arrears will still be 
available for use as leverage in encouraging economic reform. 
 
6. (C) The program is not specific to Burma, although Burma 
is easily the largest beneficiary.  The debts of a whole 
variety of heavily-indebted states, totaling about 900 
billion yen, will be forgiven under the program.  There is 
also no connection to political developments in Burma. 
According to Japanese Embassy sources, the new debt relief 
initiative was the product of a general review of Japanese 
debt relief practices.  Previously, the Japanese had forgiven 
debt on an annual basis by providing matching grants for any 
debt service paid by heavily-indebted countries.  However, 
asking countries to come up with the debt payments before 
relief could be granted made the whole program dependent on 
recipient nations' cash flow.  Whenever recipient nations had 
cash flow problems; i.e., whenever they needed the relief 
most, the whole program broke down.  The new approach will 
avoid those problems. 
 
Comment 
 
7.  The Japanese are obviously edging towards support for 
economic reform in Burma.  They will want to talk about this 
at the Consultative Group meeting in February and will likely 
argue that it is time to move beyond humanitarian assistance 
and the treatment of symptoms in Burma to the treatment of 
root causes.  That in turn could set the stage for a debate 
as to whether anything can or should be done to treat these 
problems absent real political reform. End Comment. 
Martinez