The Competitiveness of Local Companies

|Russia

Half a year has passed since the “Hokkaido Business Center”, which has received attention as a continental shelf resource development project and which focuses primarily on local companies in Hokkaido, was established in Yuzhno-Sakhalinsk with the aim of supporting business exchanges with Sakhalinskaya oblast. I took up the post of deputy president when the center was first established, and currently run the secretariat of the Committee for Business Exchange between Hokkaido and Sakhalin, which is currently the main body involved in the center’s administration. The thing that has struck me recently is the competitiveness of local companies.

Russia is one of the few countries whose economic indicators are positive during this international economic slowdown. Within Russia, Sakhalinskaya oblast seems to be experiencing a kind of gold rush, with a resource development project in the region of one trillion yen around the corner. For instance, major bidding for both the Sakhalin 1 and 2 projects will be completed by the latter half of this year or the first half of the next, so the projects are about to enter the stage of adjusting concrete infrastructure; as a result, businesspeople from all over the world who have spotted business opportunities here visit the city and run about like headless chickens, trying to find a place to stay. Since the latter half of September, special issues of Center News, published weekly by the Hokkaido Business Center, have appeared one after another, including a “Bidding Guide”. So, what business chances are available to local companies in Hokkaido and is there a secret to finding them?

My conclusion is that there is no short-cut, but I do feel that there are considerable chances for local companies. On the other hand, there are many companies in foreign countries which are interested in Hokkaido, including in Russia, Europe, the USA, India and China. However, I am most disquieted when I consider the degree of Hokkaido’s response. Many companies point to doubts about Russia and a lack of experience in international business as the reasons for this, but ultimately it transpires that it is a matter of whether or not there is competition. In a word, it is a matter of price competitiveness; the simple labor force cannot compete with China and Vietnam, but the wage level of local companies is not that much higher than that in Europe, Canada and the U.S. Even if the worst comes to the worst, it would only be about the same as hiring a Russian manager level hired in Sakhalin. In fact, it is thought that competitiveness is lost in terms of total cost, including planning and operations. Fundamentally, these should be covered as personnel costs, however, it saddens me to have to say that, against the long history of the policy of grouping businesses and a tendency towards dependence on the government, not only planning and operations, but also management is subject to “out-sourcing”, with the costs taking the form of trading company margins or hiring retired persons from government offices; as a result, many companies in Hokkaido have lost their “competitiveness”. By “losing competitiveness”, I mean not only the strength of the company in the form of costs, but also instantaneous power, i.e. the ability to make judgments and act instantly. As a result, they have lost credibility as far as foreign companies are concerned. It is to my great chagrin that I have recently heard of many such examples.

I chose as my theme this time ” the competitiveness of local companies”, however, this idea itself might be overly optimistic. It may be the power to survive, rather than “competitiveness” that is questioned in Hokkaido. In other words, it is necessary to understand that we are standing on the very brink that decides whether we can survive as organizations or individuals.

[Translated by ERINA]