Japanese take jaundiced view of investing in Soviet economy

February 17, 1991|By John E. Woodruff | John E. Woodruff,Tokyo Bureau of The Sun

TOKYO — Tokyo

For more than three decades, Soviet planners have visualized huge Japanese investments to unlock the coal, iron, oil and forest riches of Siberia. Japanese capitalists have longed for that difficult region's immense resources.

For most of that time, visionaries on both sides have been thwarted by an intractable dispute over four islands the Red Army seized from Japan as the Imperial Army collapsed at the end of World War II.

Now, with political relations thawing, President Mikhail S. Gorbachev is scheduled to come to Tokyo in April, which will make him the first top Soviet leader to visit Japan.

Both sides are expressing new hope that the territorial dispute can be resolved during his visit.

Mr. Gorbachev has spoken of "a new era" in Japanese-Soviet relations centered on mushrooming Japanese investment in the Soviet economy. Lower-level Soviet officials go further, saying that a new relationship with Japan might provide a badly needed counterbalance to growing European and U.S. political and economic influence.

But just as compromise seems within reach on the territorial issue, political and economic reversals in Moscow have added to deeply ingrained Japanese doubts about the Soviet Union as a potential partner.

With armed interventions in the Baltic states, the economy immobilized and soldiers patrolling cities of the Russian heartland, the Soviet Union "could not easily go ahead with projects on a scale that would attract Japanese financing," the head of Japan's most powerful business lobby said last week.

By last week, officials in both governments still encouraged speculation about a Japan Sea strategic and economic region -- the two Koreas, China's northeast and east coast, Japan and the Soviet Union.

But most Japanese commentators are skeptical about such speculation and point to harsher realities.

Many of Japan's usually export-driven trading companies have cut back drastically on shipments to the Soviet Union after being burned by non-payment because of Moscow's deepening shortage of foreign currency. Japanese companies reported nearly $400 million in overdue bills for goods already delivered as of the end of 1990.

Japan's exports to the Soviet Union declined by 20 percent last year, to $2.5 billion, even as imports from the Soviet Union set a record of $3.4 billion, creating Japan's first trade deficit with the Soviet Union in 16 years.

When Soviet and Japanese business delegations sat down last week to try to work out deals that could be announced to add gloss to the Gorbachev visit, the Japanese spent much of their time lecturing the Soviet officials on how hard it is to do business with them.

The question, said Gaishi Hiraiwa, head of the powerful Keidanren corporate federation, is "whether Japanese businesses can make a profit in joint ventures while dealing with the inefficient Soviet bureaucratic management system, the ruble's inconvertibility and the country's ban on taking out foreign currency."

Other speakers pointed out problems ranging from the Soviet Union's lack of a legal system defining rights of private and foreign investors to the resurgence of the KGB, the military and the orthodox Communists and the failure to set up long-promised economic zones imitating those China has had for a decade.

Columnist Koji Takada wrote in the newspaper Yomiuri Shimbun that the prospect of rapidly developing relations is further clouded by the Soviet Union's still-unresolved "question of authority -- whether the central government or a local government has jurisdiction over any specific matter."

By the meeting's end, agreement in principle had been reached on a single project -- a barter deal in which Japan would receive 6 million cubic meters of timber over five years in exchange for logging and sawing equipment worth an equal amount in the first year.

That project, though big, is the remaining realistic fragment left over from a 10-year-old dream of huge Japanese commitments to logging operations throughout Siberia and the Soviet Far East.

A second equally old idea, Japanese development of 75 million tons of known oil reserves and 225 billion cubic meters of gas off Sakhalin Island, again went unfulfilled when Soviet delegates did not produce an expected final proposal.

A third idea -- a measure of the grandeur of the visions engendered by the dream of Japan in Siberia -- calls for laying 6,000 miles of pipeline to link Japan, northeastern China and North and South Korea with Yakut, the site of a vast gas reservoir in the Soviet Far East that, it is estimated, could supply much of the region with gas at prices 30 percent under the world price.

That idea, involving the Soviet government, Korea's Hyundai industrial conglomerate, Tokyo Boeki trading company and an unnamed U.S. oil company, faces years of political negotiations before it can become a business deal.

Even if the prickly northern-islands issue is resolved and Tokyo begins to encourage investment, most Japanese businessmen say, they will get involved mainly -- perhaps only -- in deals that involve large-scale Japanese government financing, which would guarantee profits on at least some of the work.

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