Odious Debts: A case study of Japan's waiver of Myanmar loan
29 May 2012
The Japanese government's "waiving off" of ¥303.5 million loan to Myanmar during the recent summit meeting marking Myanmar President Thein Sein's visit to Japan has triggered a fresh debate on the Burmese debts being odious.
This waiver is intended to help Myanmar's transition towards democratisation and national reconciliation in this nascent democracy. However, it is to be noted that this waiver is not entirely unconditional - it is not free from Japanese scrutiny and is contingent on Japan's monitoring of the process of democratisation. This implies that if Japan is not satisfied with the commitment of Myanmar government's democratisation efforts, it can decide to review its decision to grant the waiver to Myanmar.
The relationship between Japan and Myanmar was historically marked by cordiality and mutual support. In fact, Myanmar was one of the first nations to normalise its relations with Japan in 1955 after the second world war -- a period when Japan had been shunned by most Southeast Asian nations as a consequence of its occupation of their territories during the second world war.
However, Japan-Myanmar relations became cordial following Japan's making of reparation to the people of Myanmar from the period between 1955 -1965. This cemented the nascent relationship and soon after, Japan became Myanmar's closest friend, facilitating its development through its Official Development Assistance (ODA) and was the largest donor to the underdeveloped nation for several years.
Relations went on smoothly until 1988, when the birth of a military government in Myanmar and Japan's aversion to it marked an all time low in the Japan-Myanmar relationship leading to an abrupt and indefinite suspension of all Japanese aid to Myanmar. The suspension of the ODA by the Japanese was on account of the poor human rights record of the Junta government and the lack of Burmese political will to democratise their country.
Although Japan resumed small scale humanitarian and basic needs assistance, it did not provide any Yen loans to Myanmar between 1989-2005. The reason for such a paradigm shift in the assistance provided by Japan can also be attributed to many developments in Japan; for instance the adoption of the Japanese ODA Charter in June 1992 as a cabinet decision. The Charter embodies fundamental Japanese policies on aid and underscores several philosophical underpinnings such as humanitarian considerations, respect for the environment and the necessity to facilitate self-help efforts of developing countries.
The Charter and its underlying principles prevented Myanmar from falling within the ambit of the countries that were eligible to receive any aid because of its abysmal human rights record as a state as well as the lack of any self -help initiative by the Burmese government in the direction of democracy. So, Myanmar was left largely alone between 1998-2008 in terms of getting any financial aid. This too in many ways fuelled the despotic Junta regime.
In 2008, however, Myanmar took its critics by surprise by shifting gears from the military rule to civilian administration. The parliamentary by-elections in April 2012 saw the candidates of the main opposition National League for Democracy (NLD) emerging electorally victorious and the release of Aung San Suu Kyi, the NLD leader who had been under house arrest for a long time. The Japanese government, in a bid to push for reforms towards democracy, has decided to resume extending yen loans to the country. However, two key conditions should be met for Japan's supply of aid to the country.
One, Japan's aid should not be abetting the maintenance of the dictatorial regime in Myanmar lest the debt shall become 'Odious' and not liable to be repaid. Considering that 80 per cent of the country's legislators are either serving or have served the military and the Constitution allows for the military to assume the full power of government during emergencies, this condition remains, in effect, immutable.
Given the complexity of the situation and the risks involved in giving financial aid sans any strings attached, the Japanese government has postponed the final decision on forgiving 170 billion yen of the 300 billion yen until after watching the Myanmar government's reform efforts for a year.
This arrangement, however, comes with its own problems. There is a gaping lack of any kind of mechanism to evaluate Myanmar's democratisation process. The only solution in mind is the evaluation based on a general judgment to be made with the help of the Japanese Embassy. However that seems to be inadequate and a fair and transparent evaluation cannot be secured unless the situation is assessed according to specific criteria through a process involving independent investigative bodies. A special committee, whose members include impartial observers like representatives of nongovernmental organizations or a research team comprising Diet members, should be set up for the monitoring of the same.
The other condition is a rigorous investigation into Japan's past lending patterns to Myanmar and its impact on the fate of Myanmar, since the amount promised to be waived off is more than half of the Japanese ODA budget.
Since the waiver involves the transactions between two sovereign and independent nations, one needs to delve into the legal tenability of the same. This leads us to the Public International Law doctrine of Odious Debts.
This doctrine provides a moral as well as legal foundation to sever -- either wholly or partially -- the continuity of legal obligations where the debt in question was contracted by a prior 'odious' regime and was used in ways that were not in the interest of the population.
The concept of Odious Debt in its current form was first propounded by Alexander N Sack in 1927 in his book Effects of State Transformations on Their Public Debts and Other Financial Obligations.
Hence, Odious Debt, from the standpoint of the successor state, implies the debt contracted by the predecessor state to serve purposes contrary to the major interests of either the successor state. From the standpoint of the international community, Odious Debt refers to any debt that is contracted for purposes that do not conform to contemporary international law principles.
This implies that if a dictatorial government borrows money from any other state or international organization for its personal expenditure - and the financial aid is not employed in the development of the population's interests -- then the subsequent government cannot be bound in the clutches of the same.
The case in point is the loans extended to the dictatorial Junta government in Myanmar. Although it should be duly acknowledged that Japan drastically restricted its lending to the military government in Myanmar, it is also worth noting that a part of this lending was done in furtherance of the cause of the Junta government on several occasions. For example, Japan played a pivotal role in deferring for over a year the adoption of a 1990 UN Committee Resolution by the UN General Assembly. The Resolution, sponsored by Sweden, had called for holding of fresh, free and fair elections in Myanmar and the release of Burmese political prisoners. In October 1992, the Japanese Ambassador to Myanmar expressed Japan's satisfaction with the Burmese political situation despite the military government's sustained refusal to release Aung San Suu Kyi and honour the results of the 1990 elections.
Although there is no denying the fact that Japan, for a variety of reasons, provided only a very minimal amount of aid to the dictatorial regime and the financial aid by Japan was to some extent used for 'odious' purposes that were not used to serve the interests of the people of Myanmar, the debt to that tune should be considered odious, and consequently waived off so as to free the common people from the woes of the debt incurred to aid their repression.
(Pankhuri Mehndiratta is a Research Intern at Observer Research Foundation)