Tatsuhiko Kasai, Consul General of Japan in Vladivostok: “Importing to Russia via Russia is not profitable”

Trade and transport relations between the Far East of Russia and Japan are among the key factors of the regional economy development. The process, as it is seen from the other side, is described by Tatsuhiko Kasai, Consul General of Japan in Vladivostok, diplomat with a long experience in Russia and economist specializing in studying the markets of Russia and Eastern Europe.

- Mr. Kasai, official data says that Russia-Japan trade turnover reached a historic high result of over $33 bln in 2013. RF Government has set itself a task to boost it to $50 bln by 2017. However, the year of 2014 saw a decline (for example, Far East Customs says export of passenger cars from Japan has reduced by a third). What are the key factors to facilitate positive trends?

— Do you ask me as a diplomat or an economist?

— Pretty much as an economist.

— I am all in favor as economists call it the way they see it. According to the statistics of Japan Ministry of Finance, trade turnover between our countries surged six times in 2001-2008 from $4.6 bln to $29.8 bln. Then it plunged to $12.1 bln in 2009 and jumped again to $34.8 bln in 2013. The decline of 2014 to $34.1 bln is quite understandable, I think. There are many factors related to global and local economics: fluctuation of energy prices, weakening rouble, business climate amid tough economic situation in Europe, primarily the crisis in Greece. Of course, both Japan and Russia are very interested in facilitation of our trade turnover. The other question is how to facilitate it. As you know, trade turnover is formed by both sides and the statistics shows that the 14-year period saw an increase of Japanese import from Russia from $3.9 bln to $24.9 bln. In 2008, export and import were almost equal but starting from 2009 Russian import from Japan has been seeing a decline and today it is about 1:3. We hope that trade turnover will grow in the future due to increasing imports from Japan.   

— Russia is in crisis. The purchasing power is not likely to recover soon.

— I would not call it a severe crisis. First of all, you are rich in natural resources and I think you are very rich people. Let’s take Vladivostok. I think many families here have a flat, several summer cottages and several cars, quite often it is a Land Cruiser. Thanks for the support of Japanese economy. Plain living is more common in Japan, indeed. And the prices are higher. For example, petrol prices are twice as high as in Russia.  

— What are your expectations about our trade relations in 2015?

— It depends on your purchasing of our goods. If I new exactly I would play the market.

— Which transport chains in Russia are the most promising for cargo transit from Japan to Europe: via the ports of Primorje by railway and highways or along the Northern Sea Route?

— Japanese cargoes go to Europe by three major routes: the first and the main one – across the Indian Ocean and by the Suez Canal or around Africa, the second one – by sea via the ports of Primorje and then by railway, the third one – across the Arctic, which is an experimental route as far as I know. The question is about the partnership with the Russian fleet on icebreaking support. As for the potential of the Russian logistics at the second route, let’s just count and compare it with the other routes like a standard route from Japan to the German port of Bremerhaven, the forth busiest port in Europe. For example, the delivery of one automobile by sea from Japan to Bremerhaven via the Suez Canal costs $500, by Transsib - $2,000, by the Northern Sea Route - is forecasted at the level of $400. We would be happy to further use the services of Russian railways as before when the rates were reasonable. This route is the shortest 17-20 days against 33 days by southern seas. But the price is the crucial factor. Fairness requires me to say that the costs I have mentioned were in November of the previous year so the changes are possible amid the weakening rouble. By the way, the Northern Sea Route can be used only in summer and the icebreaking costs are not clear so far. The same reasons are taken into consideration when it comes to chains of goods delivery to Russia. First they come to Moscow or Saint-Petersburg and then to the inlands. Japanese companies would prefer direct work with the Far East region but the consumer market is not large enough here. It is a poorly populated region.

— Does the technological level of the Far East ports comply with the requirements of Japanese transport companies?

— The level of infrastructure and port operation is improving. It is not only about the port equipment which is being renovated, in particular with the participation of Japanese companies. It is also about the service system and costs. I would like to give a recent example from my personal experience. It is quite illustrative. To move to Vladivostok for a new job I had to move some property from my house in Chiba near Tokyo. Packaging and delivery of it to the port of Yokohama and then by sea to quite a remote port of Vladivostok cost $3,500 including all the dues. As for the 20 km way from Vladivostok to a new house in its suburb, I had to pay $2,000. It shows how pricy it is here. Time is the other challenge. I used to talk to some ship owners. Vessels are often remain off the harbour waiting for their turn. One more problem is in documentation. It is a common complaint that they are to be filled in Russian. The documents in generally used English are not accepted. Nevertheless, maritime transport authorities of both sides meet regularly to find solutions.

— Are Japanese investors interested to participate in modernization of Russia’s Far East ports? Which ports in particular?

— Japan has always featured a high interest to the region’s port infrastructure. As it is known, it was Japan that started building port Vostochny which later turned into one of Russia’s largest ports. Cooperation with port Vostochny is going on today. Besides, many Japanese companies take different parts in modernization of other Far East ports.

— What changes are expected in the relations between Japan and Russia when port Vladivostok obtains a ‘free port’ status? What is of the highest interest for Japanese business in the new model?  

— I welcome and support such an initiative. But it is not clear for me how it will be implemented. Porto-franco brings positive results for the economy of the region where it is introduced but also means some challenges like a threat of illegal traffic. According to Russiam media reports, the free zone is to include quite a large area. Current situation is not the same as it was in end of the nineteenth century when porto-franco was introduced here. Today we have a network of railways, highways, etc. If we take it seriously, the entire free zone should be fenced and equipped with customs points. How realistic is it? Another issue is a tax regime. Are only duties to be abolished or also charges and taxes in general? Which exactly? What types of goods are to be covered? I am uncertain of all these so far.

Interviewed by Evgeny Pankratyev.

Photo by Margarita Kuznetsova.

Reference:

Mr. Tatsuhiko Kasai was born on March 15, 1956. He graduated from the Faculty of Economics of Nagasaki University and the Centre for Russian and East European Studies at University of Birmingham. His diplomatic career started in 1978 at the Ministry of Foreign Affairs of Japan. He was appointed Consul General of Japan in Vladivostok in October 2014.