March 1, 2009｜Russia
Researcher, Institute for Russian & NIS Economic Studies, Japan Association for Trade with Russia & NIS
Surveying the emptying car park, I felt keenly that the secondhand car business, which had supported the Russian Far East, had been great. This was Vladivostok at the end of January 2009. While watching the cars within the ten-storey bonded warehouses decreasing daily, I sensed the greatness of the impact of tariff increases.
The Russian government, suffering from the worsening of the global economy, greatly raised the import tariffs on automobiles produced overseas in order to protect domestic automobile production which is facing worsening business conditions. Following the increase, the importation of secondhand cars from Japan to the Russian Far East has almost completely ceased. According to the customs service of the Russian Far East, the cars imported into Vladivostok number approximately 50 daily, and have plummeted to one eighteenth of the number before the increase.
The secondhand car business of the Russian Far East had repeatedly expanded. Last year amid the favorable economic situation, the secondhand cars imported to Russia from Japan, centered on the Russian Far East, in fact reached the 518,000 level (2008) in passenger cars alone. Compared to 2001 they increased approximately 23-fold, and made up as much as approximately 20% of exports to Russia.
The cessation of the secondhand car business is hitting “the foot of the mountain,” said to be as many as approximately 100,000 people in the Russian Far East alone. Although the tariff increases which had been rumored every year were foreseeable, the sharp appreciation of the yen and the rapid worsening of the Russian economy couldn’t have been predicted by anyone. In the second half of this year, while there is a view that imports will recover along with the recovery of the Russian economy, there are also traders who are preparing for the triple whammy (of a strong yen and a weak ruble, a worsening economy, and a raising of tariffs) becoming long term. That all you can do is assume it a case of wait and see, in this sudden state of affairs, is honest.
With support from Moscow coming to an end following the dissolution of the Soviet Union and amid key industries, including lumber and aquatic products, suffering a devastating blow, the secondhand car business was a new industry which the people of the Russian Far East discovered by themselves. This gradually grew big, ending up supporting the regional economy. Moscow went and demolished that. In each part of the Russian Far East, including Vladivostok, protests have occurred demanding the revoking of the tariff increases, and their opposition is understandable.
The year before last (2007) the Russian government formulated a new program for the development of the Russian Far East, and created an emphasis on the Russian Far East. The raising of import tariffs occurred at the start of this. Even though they say wonderful things in terms of words, such as raising the standard of living of the people living in the Russian Far East and putting the Far Eastern region on a par with Europe, at the end of the day they have understood nothing of matters in the Russian Far East. If I were to put the feelings of the people living in the Russian Far East into words, then that would probably sound about right.
I think that the enthusiasm too toward the development of the Russian Far East appears to be waning compared to some time earlier. The Far Eastern program to date has been “pie in the sky,” but this time there was also support in funding, and one got the impression of it being quite in earnest. Prior to the sudden worsening of the economy, however, the development of the Russian Far East apparently could also not remain unharmed. Immediately it was heard that decrees on budget cuts were being issued. The day the Far Eastern program was adopted, (then) Prime Minister Fradkov, in front of the central bureaucracy, directed them to work in that region for several years in order to get to know the Russian Far East for themselves, but now is a time where those words do not hold great significance. Russia’s stance is being questioned.