Identifier
Created
Classification
Origin
09VLADIVOSTOK48
2009-04-13 07:34:00
UNCLASSIFIED
Consulate Vladivostok
Cable title:  

OVERVIEW OF JAPANESE BUSINESS ON SAKHALIN

Tags:  ECON RS 
pdf how-to read a cable
VZCZCXRO8149
RR RUEHCHI RUEHDBU RUEHFK RUEHHM RUEHKSO RUEHLN RUEHNAG RUEHPB RUEHPOD
RUEHYG
DE RUEHVK #0048 1030734
ZNR UUUUU ZZH
R 130734Z APR 09
FM AMCONSUL VLADIVOSTOK
TO RUEHC/SECSTATE WASHDC 1121
INFO RUEHXD/MOSCOW POLITICAL COLLECTIVE
RUEHZU/ASIAN PACIFIC ECONOMIC COOPERATION COLLECTIVE
RUEHKSO/AMCONSUL SAPPORO 0063
RUEHVK/AMCONSUL VLADIVOSTOK 1224
UNCLAS VLADIVOSTOK 000048 

SIPDIS

E.O. 12958: N/A
TAGS: ECON RS
SUBJECT: OVERVIEW OF JAPANESE BUSINESS ON SAKHALIN

UNCLAS VLADIVOSTOK 000048

SIPDIS

E.O. 12958: N/A
TAGS: ECON RS
SUBJECT: OVERVIEW OF JAPANESE BUSINESS ON SAKHALIN


1. Summary. Vladivostok Political Officer met with members of
the Japanese community on Sakhalin to discuss the region from
the Japanese perspective. Though the number of Japanese
citizens living on the island has dwindled in recent years, many
remain as part of the Sakhalin II oil and gas project. The
presence of a Japanese Broadcasting Corporation bureau in the
city shows that there is a certain level of interest in the
region, and Hokkaido-based businesses are involved in some local
construction projects.


2. During his recent trip to Sakhalin, Vladivostok Political
Officer met with Mr. Kobayashi, Consul for Political and
Economic Affairs at the Japanese Consulate in Yuzhno-Sakhalinsk
to discuss Japanese economic activity on the island. He said
that the number of Japanese citizens on the island has decreased
from over 300 two years ago to 173 today. Most of those
remaining are related to the oil and gas industry. There are
still about 100 ethnic Japanese who continued to live on the
island after the end of World War II.


3. Kobayashi acknowledged that apart from Mitsui and
Mitsubishi, which are partners in the Sakhalin II project, there
is very little Japanese investment on the island. He mentioned
that Korean investors are significantly more active there.
Kobayashi suggested that the "incident with the Santa Resort
Hotel" is the likely reason for this. That hotel is considered
the first world-class hotel on Sakhalin, and was constructed
about ten years ago by a group of Japanese investors. The
original owners were eventually pressured -- both through the
courts and "face to face" -- to sell the hotel to a
locally-owned holding company. The hostile takeover made a
strong impression on Japanese investors who, according to
Kobayashi, have been left with a negative impression of property
rights for foreign investors in the region.


4. Though there has been little Japanese direct investment in
recent years, there are some Russo-Japanese partnerships. Two
Japanese companies have signed deals with local companies to
license specialized cold-weather equipment and materials for use
in residential and road construction. Many new high-end
apartments and houses built in the region now use insulation and
other materials from a Hokkaido-based company. Another Hokkaido
company is involved with weather-proofing roads and parking
lots. A lumber company was also reportedly looking into
harvesting spruce trees -- a material used in residential
construction on that island -- but the project was deemed
unprofitable because of the high cost of accessing the remote
spruce forests.


5. At least one local business is counting on Japanese oil
workers and visitors to make up a large part of its clientele.
Poloff talked to the Russian manager of a newly-opened indoor
golf driving range who said the investors had opened the
facility specifically with Asian businessmen in mind.


6. Poloff also met with a reporter with the Japan Broadcasting
Corporation (NHK) whose office is situated above the Japanese
Consulate. He stated that there is significant demand for news
about Sakhalin in Hokkaido, where his stories are broadcast. He
attributes this not only to geographical proximity and
historical ties, but also to interest in the Ainu people of
Sakhalin, an indigenous ethnic group that also populates
Hokkaido and the Kuril Islands.

Comment


7. The Sakhalin II oil and gas project remains the focal point
for Japanese business on Sakhalin. There is very little other
direct investment from Japan, as Japanese investors may still
view the hostile takeover of a Japanese-owned hotel as an
indication of insufficient legal protection. The presence of
the NHK bureau on Sakhalin may indicate general historical and
cultural interest in the island, though it may also serve as a
way to remind Japanese constituents about the Kuril Islands
issue.

KOVACSICS