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Second of two parts

Staff writer

When Prime Minister Ryutaro Hashimoto and Russian President Boris Yeltsin meet this weekend, the two leaders will be able to rejoice in the series of positive developments made on the “Hashimoto-Yeltsin Plan” of economic cooperation initiatives.

The plan, adopted at their last meeting, in November in Krasnoyarsk, eastern Siberia, aims to reinvigorate hitherto feeble bilateral economic relations through cooperation in six priority fields. Specifically, it calls for promoting investment, smoothing the way for Russia’s integration into the international economic system, supporting Russia in its ongoing economic reform, training Russian business executives and government officials, enhancing dialogue in the energy field and promoting cooperation on the peaceful use of nuclear energy.

In the past several months, there has been visible — if not very substantive — progress made in virtually all of these fronts. In a display of willingness to promote bilateral cooperation, Japan in February pledged $1.5 billion worth of untied loans to Russia over the next two years.

Starting with the late January visit here of Irina Hakamada, chairwoman of the Russian State Committee for Support of Small Business, the two governments have been working on a framework for bilateral policy dialogue to help nurture small businesses in Russia. The scheme is expected to be officially launched at the upcoming summit.

In human resources training, Japan has to date accepted more than 200 Russian trainees for short-term programs. Under a separate program, the government also plans to invite 100 Russians every year for a long-term stay involving on-site training at Japanese companies. To help integrate Russia into the global economic system, the first round of bilateral negotiations was held last month in Moscow over Russia’s bid to enter the World Trade Organization.

With Hashimoto taking the initiative, the leaders of the Asia-Pacific Economic Cooperation forum decided in their meeting in Vancouver, British Columbia, last November to accept Russia, Vietnam and Peru as new members starting from this year. The move came a few weeks after the informal summit at Krasnoyarsk, in which Hashimoto officially announced Japan’s support for Russia’s entry into APEC.

To boost Japanese investment in Russia, discussions are now under way on terms of a bilateral accord on investment protection. Talks on the pact were held in Moscow in February and in Tokyo last month, and another round is set for Moscow later this month. The countries held their first round of high-level energy talks in Moscow in January, and then-Energy Minister Sergei Kiriyenko visited here in March.

The two nations to date have agreed to explore the idea of joint projects to modernize the Russian energy supply system, thus making it more efficient. Japan, which has a strong interest in bilateral cooperation in this particular field, has been calling for consistent ministerial-level dialogue on the subject, and these numerous developments in the past few months indicate how much importance both Hashimoto and Yeltsin attach to the economic cooperation package crowned with their names.

Indeed, both leaders have good reasons for this. Russia hopes the package serves as a ready tool to draw out much-needed financial and other economic assistance, thereby luring large-scale Japanese private-sector investment.

Although its economy posted its first positive growth — a 0.4 percent rise in gross domestic product — in 1997, Russia has yet to undergo the painful process of adapting to a market economy. Given its extremely stringent fiscal situation, the nation counts on foreign capital to get its economy moving. In particular, Moscow is pinning its hopes on Japanese private-sector investment to help redevelop the Far East and Siberia, where the economy remains devastated after the shutdown of a number of munitions factories following the end of the Cold War.

Japan, meanwhile, has its own economic interests in promoting the package. Russia’s population of 150 million has huge potential as a lucrative market, and the abundant energy resources in Siberia are extremely attractive to resource-scarce Japan. Also, given its low energy efficiency, Russia still has ample room for reducing greenhouse gas emissions, and it is virtually the only industrialized nation that can give emission credits and help Japan achieve its otherwise difficult reduction target — a 6 percent cut from its 1990 level by 2012.

Most importantly, Japan counts on the success of the package to pave the way for the return of Russian-held islands — Etorofu, Kunashiri, Shikotan and the Habomai group of islets — off Hokkaido.

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