vlad.tribnet.com / Issue #165 / Business / Reading article...

Primorye’s nascent economic growth is in real danger of succumbing to the economic woes of the Asian Pacific Rim countries, according to several analysts.

Most acute, however, is the effect that the developing economic crisis in Japan is having on Primorsky and Khabarovsky krais, slowing exports, increasing inventories, and lowering prices. And this does not bode well for the coming year, said Irina Boiko, director of the Far Eastern Center for Economic Development at Far Eastern State University.

“It’s obvious that the problem is quite keen for the region’s exporters,” said Boiko. “Traditional exporters to Japan — timber, fish, coal exporters — they are already in a state of shock.”

Two weeks ago, as Japanese Prime Minister Ryutaro Hashimoto warned his parliament of a serious economic downturn, Sony Corporation’s Norio Ohga predicted “a long spiral of deflation [that would] have a damaging effect on the world economy.”

That week the widely watched Tankan Report, published by the Bank of Japan, noted that business confidence for March was at its lowest level since mid-1994, unemployment in Japan had reached a 45-year high, and spending was at a 28-year low. Industrial production is sliding, and corporate profits are expected to fall this year, the report stated.

Primorye and Russia as a whole have weathered the shocks that battered Asian Pacific Rim economies last year. But Japan could have a stronger impact. It is the largest importer of Primorsky timber, seafood, and for the past two years, of coal.

“Primorye will indeed experience an economic slowdown as a result of the Japanese crisis,” predicted Osamu Suzuki, director of the Japan Center in Vladivostok.

“Because our economy is more oriented toward these sectors, this should result in a gross decline in other regional goods,” added Boiko. “Regarding the drop in export revenues, we certainly can expect to see a serious impact on budget revenues on the krai level — and even on wages.”

Vladimir Silivonchik, first deputy general director of Primorye’s largest timber exporter, Primorsklesprom, said the weakened Japanese economy is already hurting timber exports.

Silivonchik said that per unit prices for Primorye logs, as well as overall exports to Japan, had fallen by half. Inventories there had backed up to levels unseen in a long time.

Japan’s economic slowdown is certain to further the woes of Russian timber exporters, who flooded the Japanese market last year, sharply depressing prices.

Fish exporters are also feeling the pinch. Dalmoreprodukt’s director of foreign economic ties, Victor Matveyev, acknowledged that depressed currencies throughout Asia had adversely affected the company’s revenues already. He expected decreased Japanese consumer confidence to affect the company’s exports to the country.

Officials at the Vladivostok Trade Port refused to comment on how the crisis was affecting cargo shipment to Japan via the port. But at Vostochny in Nakhodka, Primorye’s most active port, deputy general director Leonid Bochkov said the problem is most clearly felt at the Far Eastern ports, by which most raw materials exports travel to Japan.

“I can see the timber piling before my very eyes,” he said.

Regardless of the effects a $120 billion government stimulus package may have on the Japanese economy in the coming year, Irina Boiko cautioned Russian exporters and prospective Russian-Japanese partnerships to scale back their forecasts.

“There isn’t any point in expecting a return to previous levels of exports, such as timber; exports which could provide a solid base for economic growth,” said Boiko. “At the very least, people are going to have to wait until the time when we can talk about a return to traditional levels of exports to Japan.”