Proposals Regarding the Japan-Russia Trade and Investment Promotion Organization

|China

Prime Minister Koizumi visited Russia on 10th January and signed a joint statement with President Putin, concerning the adoption of a Japan-Russia action plan. During the visit, the territorial issue, which has been a thorn in the side of the relationship between Japan and Russia, was not discussed to any great extent; instead, both sides expressed concerns over the DPRK’s renegade behavior in declaring its withdrawal from the NPT. Of course, it was not terribly surprising that the DPRK was the topic of conversation.

To be honest, I have been keeping my eye on developments regarding the establishment of an organization to promote trade and investment between Japan and Russia, rather than issues relating to the DPRK and territorial matters, although I am interested in these as well. This is because I supported Japanese enterprises in China for six years from March 1995 to the end of March 2001, in my capacity as chief delegate to the Beijing office of the Japan-China Investment Promotion Organization, a semiofficial economic group with similar characteristics to those proposed for the Japan-Russia Trade and Investment Promotion Organization. When I returned to Japan, I also spoke to a group with an interest in the Japanese and Russian economies about the functions of the Japan-China Investment Promotion Organization.

Regarding the economic relationship between Japan and China, the value of trade has increased eighty-fold in the thirty years since the normalization of diplomatic relations between the two nations and cumulative investment by Japanese companies totals almost $50 billion. Many Japanese companies are well aware that they have the Japan-China Investment Promotion Organization to thank in part for such development.

At the beginning of the fourth clause, “Cooperation in Trade and Economic Areas: Trust and Actions of Mutual Benefit”, the Japan-Russia action plan advocates that both sides intensify studies work regarding the prompt establishment of a Japan-Russia Trade and Investment Promotion Organization. This declaration was based on the proposal made at the sixth meeting of the Japan-Russian Federation Joint Economic Committee, held in Tokyo last October.

The idea of establishing an organization to promote trade and investment first became a topic of conversation when it was proposed during a visit to Russia by an economic mission led by Mr. Takashi Imai, then chairman of Keidanren. One and a half years have passed since then and studies regarding the proposal are about to be intensified, but it is difficult to conclude whether progress up to this point has been fast or slow.

Following a visit to China by a sizeable delegation of government and private sector representatives in October 1988, the Japan-China Investment Promotion Organization was established in March 1990 (with the Chinese counterpart organization being established in June 1990), despite having suffered a setback due to the Tiananmen Square incident. The reasons why the situation differed somewhat compared with the Japan-Russia relationship are that the Japanese economy was still strong at that time and both the government and enterprises were enthusiastic about the potential benefits, while China’s central and local governments were very active in working to attract investment. The Investment Promotion Organization was born as the result of a situation in which, objectively speaking, there was great interest in investing in China. In the case of Japan and Russia, the Promotion Organization should, as the main player, take the initiative in creating the objective circumstances for a boom in investment in Russia.

I would like to make some proposals for the establishment of the Japan-Russia Trade and Investment Promotion Organization, based on my own experience in the front line of business between Japan and China. The primary focus should be the promotion of direct investment in Russia by Japanese companies, as well as the revitalization of trade linked with investment. Once this process gets off the ground, investment in Japan by Russian enterprises should become an objective. It is not wise to aim to kill two birds with one stone from the beginning. Above all else, understanding and enthusiasm on the part of the Russian government is essential. In this case, cooperation, not only from the central government but also local governments, will be more necessary than in China and preferential foreign investment treatment should be clarified. Taking effectiveness and range into consideration, the target area should be limited to Far Eastern Russia and part of West Siberia, since the power of these efforts would become diffuse if the whole of Russia were targeted. Areas such as Moscow should be covered by enterprises in Europe.

Secondly, as with the Japan-China Investment Promotion Organization, it is necessary to take into consideration such matters as financial cooperation and the utilization of foreign workers (mainly Chinese) in Far Eastern Russia, in addition to investment consultation services, problem management, the collection of data and other information, and proposals for policies and legislation.

Thirdly, long-term low-interest special loans and guarantees on the part of both national governments should be secured for investment in mineral resources (mainly oil and natural gas), forestry and fisheries in Far Eastern Russia.

Fourthly, the organization should be a nonprofit organization and tax measures should be considered for corporate membership fees. It would be convenient to establish the organization’s secretariat in Khabarovsk, which has an air link with Harbin.

[Translated by ERINA]