Business

As Abe hosts Putin, Japanese companies look cautiously to Russia

by Noriyuki Suzuki

Kyodo

The deepening of bilateral ties between Japan and Russia is expected to expand the list of Japanese companies looking for business opportunities in Russia, which despite being a neighbor, has not necessarily been an easy place to do business.

Trading houses have been major players in resource-rich Russia, viewed as a huge and promising market with a population of 140 million. The firms have taken part in energy-related projects involving oil, coal and natural gas.

As Prime Minister Shinzo Abe and Russian President Vladimir Putin aim to deepen economic ties, corporate officials say that stable bilateral relations and an investment-friendly environment are needed to expand their businesses.

“We are looking at developments regarding Russia with great interest,” said an official with JGC Corp., an engineering firm that has strength in resource development.

“If Japan’s relations with Russia improve … we may see more resource development projects in the Far East region,” the official said.

Japan and Russia are focusing on eight areas of cooperation as proposed earlier this year by Abe.

The list goes beyond energy to include health care and small and midsize companies at a time when Japan is promoting exports of medical equipment and services overseas.

Hiroshige Seko, minister of economy, trade and industry, has expressed hope that Japan’s medical services will be of help, noting that Russia faces the challenge of increasing its average life expectancy.

“We hope to move the cooperation plan forward so that it can be win-win for Japan and Russia,” the METI chief said prior to the first day of talks between the leaders on Thursday.

Even before Abe made his economic cooperation proposal, Hokuto Social Medical Corp. in Hokkaido started running a medical image analysis center in Vladivostok in 2013 with the goal of providing medical services overseas.

Hokuto Social Medical is now exploring the possibility of starting a rehabilitation business in Vladivostok with JGC.

Masao Oshima, a section chief overseeing Hokuto’s Russian business, expressed hope for deregulation in Russia so medical equipment and pharmaceutical products approved in Japan can be used there, while acknowledging that there will be a “high hurdle.”

Oshima said the number of visitors to the Vladivostok facility has been on the rise, but more work is required to ensure early detection of disease and treatment in Russia.

In a recent survey of around 80 Japanese companies operating in Russia by the Japan External Trade Organization, more than half said they hope to expand their businesses. Some 62 percent responded that they are “interested” in Abe’s business cooperation plan.

Still, some company officials said they have yet to gain full confidence in the future of Japan-Russia relations, given the ongoing territorial row. They also cited complicated and lengthy procedures to gain approval from Russian authorities and legal issues as difficulties in doing business in Russia.

There are also concerns that economic cooperation will be of secondary importance, as the Japanese government is more focused on the return of the four Russian-held islands claimed by Japan off Hokkaido.

“Russia may be a big market … but U.S. and European sanctions are in place (since Russia’s annexation of Crimea) so we need to keep that in mind when we do business,” an official of a major Japanese company said.

“Political developments in Russia, including its relations with the incoming U.S. administration, and whether there will be any backing from the Japanese government in financing are important factors,” the official added.