Can Spring Be Far Behind for Business with Russia?

|Russia

Decline in the Urban Power Base

For the past few years, economic decline in Sapporo has been accelerating. Sapporo is experiencing similar troubles to those that have affected other provincial cities, such as the closure of branches of major companies and a decrease in the number of offices and employees as a result of the merger of major financial institutions and construction companies on Japan’s main island. Furthermore, I am afraid to say that the regional economic decline has been accompanied in Sapporo by a weakening of the position of branch offices, as well as a significant diminution in terms of their power and the content of their work.

For instance, the number of major trading houses that have turned their Hokkaido branches into local companies has been increasing. The catchphrase of those major companies is “this transition makes it possible to have closer contact with region, in addition to providing more finely tuned services”; however, no one expects such a role of general trading companies, and this can be left to local wholesale dealers. General merchants are expected to be in possession of a global perspective and information about the central business climate, in addition to ensuring a distribution system that takes advantage of economies of scale. Although trading companies are also expected to function as financial institutions, local affiliated companies have no ability to provide credit and can only carry out a major project under the wing of a parent company.

Not to be Taken at Face Value

Even among those companies that still have branch offices in Sapporo, there are many examples of the branch manager’s status having been lowered, resulting in him/her losing influence within the company. The position of branch manager used to be a stepping-stone en route to becoming a board member; however, in major companies it is now rare for a branch manager to become a board member while he/she is working at the Sapporo branch. Accordingly, a situation arises in which there are no directors at the company’s head office who know the actual situation in Sapporo or Hokkaido as a whole.

The nature of employees has changed as well. I was dumbfounded at a so-called major trading company when I heard that, “nobody understands the trading business in this branch office”. In addition, I have seen this in other big companies, including a bank which does not know about foreign exchange and travel agency in which nobody understands English. How could it be possible to call Sapporo an international city? My intention in mentioning these is to say that the pyramidal structure of the economic system, with Tokyo as its apex, has been disintegrating noticeably and development of local economies, which are based upon the premise of this system, has not taken place. In particular, the reality is that Hokkaido is not even considered to be an option in international strategy.

Changes in Russian Business

Exchange between Russia and Japan is one of the themes of this opinion section. Let me go back to the subject. With regard to Russian business in Hokkaido, the market has typically consisted of timber, marine produce and coal being imported, and used cars being exported. Although the basic trend has not changed, we can see transition both in terms of content and people. In this, we cannot ignore the influence of the continental shelf resource development project taking place in Sakhalinskaya oblast.

First of all, there has been a change in items for export. There has been a gradual shift towards the handling of higher class used cars, while new cars have also begun to be exported. In particular, the companies handling these projects buy several four-wheel drive off-road cars at once. Used heavy machinery has gradually grown in size and enquiries by factories have been increasing. For good or bad, there seems to be no end to the number of companies in Hokkaido hoping to sell their construction machinery and equipment. As for vehicles, there has been a shift away from used car dealers around port areas in favor of car dealers who can respond to various needs, in addition to some makers who have started customizing cars themselves, preparing them for the harsh road conditions in Sakhalinskaya oblast. The language used for business has been changing from Russian to English and the horizons of the companies pursuing Russian business have broadened. By virtue of the spread of electronic media, including email and digital cameras, a change has also been seen in the trading system for heavy machinery, plant and machine parts. In addition, due to a history of multi-trillion yen projects, financial backing for Russian business has been able to be secured.

Leading a New Way

Amongst all this, we can see the prospects for international business in a new age. Local companies, which considered international business to be the exclusive preserve of trading houses and major banks, began drawing up bills of lading and contract documents by themselves out of necessity, as well as beginning to learn about transaction procedures. One company began doing this, having been asked by a European counterpart why “trading firms” should mediate in trading, after the company suggested using a trading firm as an intermediary. Furthermore, another local company was asked to undertake a transaction directly by a project-related company, on the grounds that the major firm acting as an intermediary had problems in terms of credit. A further example is a company which began doing business directly with foreign companies when it ceased to be able to obtain goods under the umbrella of a major import company.

In many cases, when people and companies take a new step forward, they decide to do so from necessity, rather than as a result of an idea. Local companies, which were not spurred to action by such slogans as “international city” and “globalization”, have now been forced to change. As a result of being blown off the economic hierarchy which places Tokyo at its center, Hokkaido seems to have made an important new start. Given that we have not had much encouraging news of late, I would like to treat this trend as a welcome change.

[Translated by ERINA]