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By late 2008, the Russian economy had received over $4 billion
By late 2008, the Russian economy had received over $4 billion worth of Japanese investment, having soared seven times from a modest $567 million in 2006.

Up to 90% of Japanese investment is channeled into the natural resources sector. Although direct investment accounts for just 10% of the grand total, it provides access to much-needed innovative technology and advanced managerial methods. The automotive industry makes up for over 40% of direct Japanese investment in Russia.

In the mid-2000s, Japanese investors, including a number of automotive giants, began venturing into Russian markets. This trend was facilitated by skyrocketing oil prices and the influx of petrodollars into Russia. With the lack of imported vehicles on the booming Russian car market, foreign automakers found it profitable to set up production facilities in Russia itself.

In 2005, Toyota, the world's largest carmaker, became the first Japanese automotive giant to enter the Russian market. Toyota's top managers decided to build a corporate plant in St Petersburg, whose authorities started creating a cluster of car production facilities.

In June 2005, the then Russian President Vladimir Putin attended the groundbreaking ceremony at Toyota's plant in St Petersburg. In December 2007, President Putin watched the first Toyota Camry vehicle roll off the assembly line. He also attended the official ceremony of putting the plant into operation.

The agreement on building the Toyota plant in St Petersburg stipulates the relevant terms for inviting other foreign carmakers to Russia.

The Toyota plant will also comprise affiliated car component production and car body welding and painting facilities. Die cast plastic parts will also be manufactured in St Petersburg.

Consequently, Toyota will import fewer car components each year.

Toyota paved the way for other Japanese automotive giants, helping Japan to rediscover Russia.

Nissan and Suzuki also decided to build their plants in St Petersburg, while Mitsubishi Motors and French automobile and motorcycle manufacturer PSA Peugeot Citroen are planning to build a plant in Kaluga, a city in Central Russia 190 km southwest of Moscow.

However, the global economic crisis caused car sales to plunge worldwide, including in Russia. Starting with late 2008, many Japanese automakers were forced to mothball their Russian projects.

Isuzu, a major truck manufacturer, and its Russian partner Sollers have decided to postpone their plans for the launch of joint assembly of heavy-duty trucks in Russia.

A stronger yen stifles Japanese car exports to Russia, while companies operating their own plants in Russia have better chances of selling their vehicles.

From January to March 2009, 24,755 new Japanese cars were exported to Russia, marking a fivefold decline on the January-March 2008 period (123,400 vehicles).

The Japanese automotive industry quickly decreased exports to Russia. As of late 2008, Russia made up for over 8% of new Japanese car exports, accounting for less than 4% in January-March 2009. Last year, Russia ranked second after the United States in terms of Japanese car imports - now it has dropped to seventh place.

In this situation those Japanese companies that started implementing projects in Russia do not plan to quit because a global economic recovery will begin either in 2009 or next year, and the Russian car market will gradually retain its high potential.

The Russian automotive sector is to receive additional Japanese direct investment following the crisis. Japanese car component producers could also relocate to Russia, thereby supporting Japanese car plants here.

Additional investment in Russia's automotive industry will make it possible to increase the share of innovative and competitive economic sectors. The aforesaid Japanese investment will also provide Russia with up-to-date management concepts, as well as a skilled workforce.

The opinions expressed in this article are the author's and do not necessarily represent those of RIA Novosti.

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