Foreign direct investment in the forest resource development in the Russian Far East and its implications for Japanese and Korean log markets case study: South Korean-Russian forestry joint venture, Svetlaya

• Main Author: Tak, Kwang-Il
• Language: English
• Published: 2009
• Online Access: http://hdl.handle.net/2429/7171

Located in one of the world’s most resource-rich regions, the Russian Far East suggests major potential interactions with one of the world’s fastest growing economies in Northeast Asia, namely, Japan, Korea and China. Russian economic reform and the allowance of foreign direct investment have increased the chance of realizing such potential. The primary purpose of this dissertation is to investigate the role of South Korean investment in developing the forest resources of the Russian Far East and exporting the raw materials produced to Japan and South Korea. The secondary purpose is to investigate the opportunities for and constraints on the realization of the potential economic complementarity present among the three countries. The Russian Far East could help Japan and South Korea to increase the security of resource supply for the two countries’ economies, whereas the Russian Far East could take advantage of these countries’ capital and technology to speed up regional economic development and the region’s integration into the Asia-Pacific economy. An analytical framework is developed to analyze the foreign direct investment, or transnational corporate activities, in forest development projects in the Russian Far East. This study has used a case study approach for the analysis. The South Korean-Russian forestry joint venture Svetlaya was selected for the purpose. The case study reviewed the joint venture’s three year operation through interviews both on site and in the head office of the Korean investor, and the interviews were further supported by a field visit to the joint venture’s project site in Svetlaya, Primorskiy Kray. This dissertation has demonstrated that foreign direct investment still poses many problems to realize the forest resource potential in the Russian Far East and consequent increase in exports to the Pacific Rim countries. Nevertheless, this dissertation suggests that joint venture as an alternative means to, for example, KS agreements, will be preferably employed to increase exports of forest products from the region. This study also suggests that the future foreign investment should be directed towards more processing-oriented activities than logging which aggravates the region’s negative attitudes towards foreign investment as exhibited in the case study. This study also concludes that a definite interest in forestry investment exists in the Russian Far East, though political and economic instability becomes the largest barrier to attracting foreign investments in the short term and to integrating them into the Asia-Pacific economy in the long term. A longer-term vision, rather than seeking short-term financial gain, is required for future forestry investments in the region. This dissertation attempts to provide implications of the global pattern of the interactions between forest regions and world core markets through an analysis of the same interactions in Northeast Asia.