The implications of the Japanese resource procurement strategy for staple resource regions : an examination of coal mining in Southeastern B.C.

The study begins by noting the importance of the Pacific Rim as a trading area within the world economy and examines growing economic ties between Japan and B.C. Japan is becoming increasingly significant as a market for B.C.'s raw materials and a source of investment capital for resource development. In consequence we need to examine the strategy followed by Japanese industrial interests in procuring raw materials. It is noted that this strategy differs in significant respects from the American strategy of direct foreign investment which has been so dominant in Canadian resource development and thus may have different implications for a staple region. The Japanese resource procurement strategy is described focusing on Japanese aversion for investing equity capital, long-term contracts, multiple-sourcing of resources, and consortium resource purchasing. A set of hypotheses are developed concerning the implications of this strategy and are tested in the context of the coal industry in southeastern B.C. This involved interviews with spokesmen from the four coal companies in the region and reliance upon a number of primary and secondary sources. The study concludes that the Japanese strategy gives rise to a set of new problems which increases the costs and risks associated with staple development. For example, their preference for not investing equity shifts the risks of resource development onto the owners of the venture and means that it is easier for the Japanese to wind down contracts or terminate a trading relationship than under the American strategy of direct foreign investment. Consortium resource purchasing inhibits sellers from receiving adequate returns for their resource. The Japanese attempt to encourage over-supply by letting out contracts for more resources than they require. This results in resource developers bearing the costs of unused capacity when contract cut backs occur. Finally, some policy suggestions are offered regarding the problems posed for staple economies by the Japanese resource procurement strategy.Arts, Faculty ofGeography, Department ofGraduat