JAPAN'S ASSISTANCE PROGRAMS
FOR RUSSIA
March 2001
The dissolution of the Soviet Union in December 1991 led to the birth of the Russian Federation and other republics. The direction of democratization and economic reforms that are currently underway in Russia will have a tremendous influence on both the peace and security of the entire international community. Japan takes a great deal of interest in these developments and is actively increasing its assistance to promote Russia's reforms.
The Economic Relationship between Japan and Russia
The trade and economic relationship between Japan and Russia must still be described as being at an insufficient level, considering the potential in both countries' economy. The total value of trade volume between Japan and Russia in 1998 was approximately US$4.2 billion, an amount equivalent to less than 1% of Japan's total trade volume. Investment into Russia from Japan also remains sluggish. In 1998, imports from Russia to Japan fell by 27%, while exports from Japan to Russia declined 4%. One of the principal reasons for this situation is that many Japanese companies could not help reviewing their business with Russia as a result of Russia's economic crisis in August 1998 and deciding to reduce their level of activity. On the other hand, it need not be said that over the medium to long-term Japan's economy remains extremely important for Russia, while at the same time Russia's latent markets, abundant natural resources and strong technological capabilities remain attractive to Japanese companies.
Recognizing the need to improve the current state of economic affairs, the government of Japan is addressing the development of the economic relationship between the two countries by conducting various discussions with the Russian government and working to enhance the trade and investment environment between both nations. One particularly important forum for consultations is the Japan-Russian Federation Intergovernmental Commission on Trade and Economic Issues, which is co-chaired by Japan's Foreign Minister and Russia's First Deputy Prime Minister. The Commission is committed to conducting a comprehensive exchange of opinions addressing all problems concerning the trade and economic relationship between the two countries.
This Commission has held three meetings, most recently in September 1999 when the third meeting of the Intergovernmental Commission took place in Tokyo when Russia's First Deputy Prime Minister Khristenko visited Japan. In addition, in March 1997 in Yuzhno-Sakhalinsk and in March 1999 in Tokyo, meetings of the Commission's Sub-Committee on Russia's Far East Region were held simultaneously with economic conferences between the private sectors of the two countries.
In addition, the Hashimoto-Yeltsin Plan was drafted by Japan's Prime Minister and Russia's President during the summit meeting in Krasnoyarsk in November 1997.
Efforts are being made to steadily implement and broaden the plan based upon the seven pillars of (1) investment cooperation initiatives, (2) promotion of the integration of Russia's economy into the international economic system, (3) broadening support for reforms, (4) cooperation with plans to train business managers and public employees, (5) strengthening dialogues on energy, (6) cooperation for the peaceful use of atomic energy, and (7) cooperation in efforts in space. As one link in this program, the Japan-Russian Federation Agreement Concerning the Promotion and Protection of Investments was signed in October 1998 when Japan's Prime Minister Obuchi made an official visit to Russia, and came into
effect in May 2000.
Also in September 2000, "Programme for deepening the trade and economic relationship between Japan and Russia" was signed as an expanding development of the Hashimoto-Yeltsin Plan between Japan's Prime Minister Mori and Russia's President Putin when he visited Japan from 3-5 September 2000.
Outline of Japan's Assistance for Russia
The government of Japan has consistently supported the effort of the Russian government aimed at (1) democratization of political processes, (2) transition to a free-market economy, and (3) international cooperation in the field of foreign policy, considering that the success of Russia's reforms will not only advance the relationship between Japan and Russia but will foster significant benefits for the stability and prosperity of the international community as a whole. One of the most important tasks for both Japan and Russia in foreign relations with each other are complete normalization of diplomatic relations between the two countries on the basis of resolution of the Northern Territories issue and conclusion of a peace treaty, and support for Russia in its democratization and transition to market oriented economy can also play an important role with this respect by creating our favorable environment toward these ends. Japan's pledges of support for Russia total approximately US$6.3 billion, ranking third in size after Germany and the U.S. The government of Japan has been implementing technical and intellectual cooperation and humanitarian assistance through channels such as the Cooperation Committee (see note).
When providing assistance special attention is paid to the following three points:
| (1) | Develop a stable foundation that will enable Russia to proceed smoothly with democratization and economic reform. |
| (2) | Meet the genuine needs of Russia's ordinary citizens. |
| (3) | Establish close communications between Japan and Russia, ensure adequate coordination, and implement follow-up actions when required in order to give assistance the maximum effectiveness. |
(Note)
The Cooperation Committee was established to provide assistance to the New Independent States based upon "the Agreement on the Establishment of the Cooperation Committee" concluded in January 1993 between the government of Japan and the governments of 12 states of the former USSR. The secretariat of the Cooperation Committee is located in Tokyo.
Immediately following the dissolution of the Soviet Union, Japan's support for Russia centered on emergency humanitarian assistance for socially vulnerable people. This effort included assistance for social welfare facilities through monetization of food (the sale of donated products at below-market prices and use of the sale proceeds to assist social welfare facilities), contributions of basic medical supplies and contributions of medical equipment to infant and maternity hospitals.
More recently, technical cooperation through the dispatch of Japanese experts to Russia and invitation of employees of Russian government institutions or companies for training in Japan, aiming at fostering the personnel for the market economy, are being emphasized as an integral part for the efforts to steadily implement and broaden the Hashimoto-Yeltsin Plan. Japan Centers established through the Cooperation Committee are actively utilized as the focal point for transferring the know-how that will be instrumental in Russia's economic reform. The importance of such technical and intellectual cooperation from the point of promoting economic reform in Russia is particularly well acknowledged. In November 1998 when Japanese Prime Minister Obuchi made an official visit to Russia, he announced a policy of drastic expansion of technical and intellectual cooperation under the name of "the Partnership for Reform between Japan and Russia".
In addition, between 1990 and 1993 Japan earmarked US$1.2 billion in total for loans through the Export-Import Bank of Japan (now the Japan Bank for International Cooperation) with the primary objective of facilitating trade and economic activity between Japan and Russia. These loans are being utilized to develop telecommunications and energy-related projects or for projects related to small and medium-sized enterprises and privatization. Japan also allocated US$2.9 billion for acceptance facilities to provide trade insurance, which is expected to promote modernization of Russia's principal industries and expansion of trade between Japan and Russia.
Furthermore, at the time of Foreign Minister Obuchi's visit to Russia in February 1998, the provision of a US$1.5 billion untied loan from the Export-Import Bank of Japan (now the Japan Bank for International Cooperation) to be co-financed with the World Bank was announced as support for Russia's economic reforms. Although this untied loan was temporarily suspended because of the effect of the economic crisis in Russia during the summer of 1998, the loan was reinstated in September 1999 after the conditions for reinstating loans were met such as formal IMF and World Bank approval of support for Russia, and conclusion of an agreement for rescheduling of Russia's debts with the principal creditors of the Paris Club. The loan has since been steadily funded, with a total of US$1.025 billion having been disbursed to-date (as of May 2000).
Japan is also providing support for the dismantlement of nuclear weapons, through cooperation (approximately US$70.0 million) for purposes such as construction of facilities for the disposal of radioactive liquid waste. During a visit to Russia in May 1999, Foreign Minister Koumura declared to promote "the Japan-Russian Federation Joint Actions for Disarmament and Environmental Protection", which formalized Japan's support for the dismantling and disposition of decommissioned nuclear submarines in the Russian Far East, conversion of Russian military resources to the private sector, and disposition of surplus weapons-grade plutonium removed from dismantled nuclear weapons. In this regard Prime Minister Obuchi pledged at the Cologne Summit in June 1999 that Japan would cooperate in new projects with a total equivalent value of US$200.0 million.
Together with direct assistance to Russia, Japan also actively cooperates through its participation in international organizations and provides capital funding (US$ 30.0 million) to the "Small and Medium-sized Private Enterprise Fund" established at the European Bank for Reconstruction and Development (EBRD), and to the International Science and Technology Center (ISTC), the objective of which is non-proliferation of scientists and engineers related to weapons of mass destruction (US$52.0 million).
Emphasis on Assistance to the Russian Far East Region
The Russian Far East region, which lies near Japan and has considerable human and economic interaction with Japan, possesses immense potential to revitalize future economic exchange with Japan. The government of Japan has taken a clear stance that expressly focuses on the Far East region. While providing support to Russia as a whole, approximately half of all humanitarian assistance is allocated to this region.
Moreover, for the US$500.0 million Export-Import Bank financing announced in 1991, the Japanese government gave priority to the Far East region when funds are appropriated. Japan Centers have been established in three locations in Khabarovsk, Vladivostok and Sakhalin. The Japanese government also established a US$50.0 million Regional Venture Fund (RVF) in collaboration with the EBRD to help develop small and medium-size businesses.
Contents
Ministry of Foreign Affairs
Secretariat of the Cooperation Committee
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