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  • Good news and bad news: The Sakhalin Project in Action and the Economy of Hokkaido (Last time)

Good news and bad news: The Sakhalin Project in Action and the Economy of Hokkaido (Last time)

|Russia

A conversation between two astronauts:

Astronaut: “Sir, I have some good news and I have some bad news.”
Aircraft commander: “Right, tell me the good news first.”
Astronaut: “The rocket has finished refueling and we just need to wait for the countdown from the control tower.”
Aircraft commander: “That is good news. All those years of hardship haven’t been wasted. And the bad news?”
Astronaut: “It looks like our taxi isn’t going to make lift-off in time.”

This classic anecdote came to mind recently. The “rocket” represents the “Sakhalin Project,” said to be a several trillion yen investment, and the two people in the taxi symbolize Japanese businesses. On May 15th the start of the Sakhalin II Project was formally announced. On June 2nd, newspapers reported the signing of a three-hundred-billion-yen contract between the implementing body of the project, Sakhalin Energy Investment, and the Chiyoda Corporation and the Toyo Engineering Corporation, for the construction of a liquefied natural gas (LNG) production base. At the same time, on June 2nd, an article entitled “Sakhalin II: economic effects flash past” was published in the Nikkei Industry Newspaper. The following is an extract from the article:

“Construction of the LNG plant will commence in July. At the height of construction, 6,000 workers will be employed. It is expected to generate jobs for hundreds of kilometers around the construction site in Hokkaido. However, there are in fact no real plans to use costly Japanese labor and machinery.” (Nikkei Industry Newspaper)

I myself also believe that there is little possibility that local people in Hokkaido will fill the 6,000 positions as workers in the construction of the LNG plant. Furthermore, it is going to be difficult to export materials through Japanese general distribution channels. It is needless to say that local rules not only in Hokkaido, but also all over Japan are becoming less adaptable to international competition. As long as they continue to conform to these rules, not only as regards to the Sakhalin Project, there is little possibility that businesses on Hokkaido will survive. The Nikkei Industry Newspaper went on to say: “Sakhalin II is perhaps the mirror that reflects the Japanese economy as it continues to hollow out”. One could add that this is a prelude to Hokkaido businesses coming face to face with a harsh reality.

Business with Sakhalin as the mirror reflecting the future of the economy in Hokkaido

Perhaps this seems pessimistic, but it is in fact reality. Even I, by nature an optimistic, cannot deny this fact. However, in the above section there is one condition provided: “through Japanese general distribution channels.” Conversely, there are businesses appearing that are deviating away from this trend. The effectiveness of this deviation as a foundation for business and the extent to which it will expand will determine the fate of Hokkaido’s business in Sakhalin. To use the words of the Nikkei Industry Newspaper: “the outcome will be the mirror that reflects the future of the economy in Hokkaido.”

The other day, a certain company based in Hokkaido, accompanying a major trading company, gave a tour of the businesses related to the Sakhalin Project. This major company received the same deal through the Hokkaido-based company as its parent company. However they were surprised that the nominal price was so different. The company in Hokkaido takes orders directly from major oil companies, rather then going through several companies. It is needless to say which is the more advantageous. A new kind of sales negotiation style has emerged, whereby European and American companies come from Sakhalin to Hokkaido and negotiate directly on the purchase. They are fully exploiting the geographical proximity of Hokkaido.

A Critical Stage in the Economy of Hokkaido

“They are completely dependent on us.” These are the words of the president of a small company in a provincial town. This company does business with a large firm in Honshu, and recently they are advising the Honshu firm on information relating to Sakhalin. This is the result of a business connection cultivated several years earlier with companies in Sakhalin. Furthermore, at the end of May, a small company in Hokkaido carried out the construction of a stagnant water works plant. Although it is not a large construction job, small companies in Hokkaido seized upon the opportunity and it attracted a lot of publicity. Consequently the company in question received many enquiries from major companies. In addition, businesses wishing to take advantage of the technology of the northern district, and Australian businessmen exploiting their position as foreigners living in Hokkaido, are both frantically setting their sights on getting involved in the project.

Fortunately, there are at present many similarly robust companies. I have addressed this topic on numerous occasions in Opinion, namely that companies are all covertly keeping a keen eye on the progress of the Sakhalin Project, in order to keep their head above water. Bad news is prevalent concerning the economy in Hokkaido. However, on the other hand, the seeds planted by small companies are germinating. To reiterate again, the activity spurred on by the Sakhalin Project over the next few years will be an indication of Hokkaido’s future. This is a critical stage for the economy of Hokkaido.

[Translated by ERINA]