How I want the Russian Government to act in promoting direct investment into Russia


The Russian economy has changed favorably this year. It accomplished positive growth successively for the past two years and finances have gone into the black. It is predicted that the foreign exchange reserve will be nearly 30 billion before the end of the year for the first time in its history. Positive growth is expected to continue in 2001 as well, unless international oil prices drop sharply. The international credit rating agency, Moody’s Investors Service, upgraded Russia’s country ceiling for foreign currency bonds, which corresponds to the sovereign rating of the country, to B2 from B3 in November. Against the background of this situation, arguments such as “Don’t miss the bus” have arisen and people in charge of direct investment have begun to complain again about the lack of direct investment from Japan.

When I resided in Moscow from 1997 to 2000, I exchanged opinions directly with people in influential positions. Most of them didn’t know what kind of problems the Japanese companies dealing with or operating in Russia were facing, and naturally, they didn’t make any efforts to improve the situation. However, once I explained to them with concrete examples, they understood how poor the situation was. Therefore, people on the Japanese side should not merely parry the question of why Japan doesn’t invest, but by all means explain the situation with concrete examples to make the Russian government understand the present condition of the Japanese companies, so that the situation can be improved.

Whenever I hear people, including those in charge of government policy, demonstrate such ignorance of the Japanese companies’ difficulties, I feel that the Russian government doesn’t fully understand the fact that the fundamentals of the market economy are “credit” or “trust”. Direct investment from Japan to Russia will not simply increase as the Russian economy progresses. The biggest reason why the Japanese act with discretion in direct investment to Russia is that Russians haven’t worked seriously on the problems that Japanese companies have faced in dealing with Russia, i.e. they have neglected efforts to establish credibility with Japanese companies. In the meantime, Western companies have dealt with problems through governments and acquired various benefits.

Since its economy has improved, the Russian government has preached to the nation that they should invest or lose out. However, it doesn’t understand the Japanese companies’ stance on the country at present. They have kept observing how Putin’s new administration would solve the difficulties they have with Japanese companies in Russia. For instance, a Japanese joint corporation related to timber processing has accused the Russian government on the issue of the refund of value-added tax on exports. The government originally is duty-bound to refund the value-added tax to the company on export. However, a rumor has spread that since the finances of the Russian government have been somewhat straitened, it secretly instructed to the tax offices in the regions not to refund unless they were accused. Thus, the government doesn’t pay what it originally has to pay and throws its chest out, explaining that the finances for this year will be in the black. I would like the government to execute the refund of the value-added tax on exports immediately if the new administration professes its obedience of the law.

Although I would like to positively evaluate the new administration which attempts to regulate the investment environment and various laws, it is crucial for the administration to solve the existing problems one by one and restore the trust in Russia in order to bear fruit.

[Translated by ERINA]