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Eastern Economic Forum to attract foreign investment and strengthen Russia’s ties with Asia-Pacific region

23:47 | 24.08.2016 | Analytic

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24 August 2016. PenzaNews. Just over a week remains before the second Eastern Economic Forum (EEF) that will take place in Vladivostok on September 2–3. According to the organizers, the event will have at least 2,400 visitors, including representative delegations from China, Japan, South Korea, India, Vietnam, Australia, the USA, and Singapore.

Eastern Economic Forum to attract foreign investment and strengthen Russia’s ties with Asia-Pacific region

Photo: Yuriy Smityuk, TASS

“Preparations for investment agreements to be signed at the Forum have entered their final stages. We already have 130 agreements ready to be signed worth a total of almost 1 trillion rubles. We have every reason to assume that this number will go up even further,” the Minister for the Development of the Russian Far East Alexander Galushka announced at a press-conference.

The main thematic block of the Forum’s business program will cover the investment potential and business conditions of Russia’s Far East. The participants will discuss prospects for the development of transit and logistics infrastructure in the region, including building of the new facilities.

Particular attention will be paid to competitiveness of Russia’s Far East, attracting foreign investments, international cooperation in the field of energy and transport. The following business roundtables are planned as part of the Forum: Russia – China, Russia – Republic of Korea, Russia – ASEAN and Russian–Japanese Forum.

The participants will discuss joint investment projects that can be delivered in Russia’s Far East. It is planned to present the most beneficial terms for investing in special economic zones and Free Port of Vladivostok, tax breaks and infrastructural support, says the official website of the Eastern Economic Forum.

Analyzing the potential of the upcoming event, Bunn Nagara, Senior Fellow, Foreign Policy and Security Studies, Institute of Strategic and International Studies (ISIS) in Malaysia, stressed the special importance of the Forum, both for Russia and for its partners, despite the fact that the EEF is a completely new event.

“This should have been done long ago, but previous Russian governments did not understand its importance. It is promising now because the present government appreciates the importance of Russia’s Far East,” the expert told PenzaNews.

If the project is handled well, it will integrate very productively with not just the Asia-Pacific region but Europe as well, he believes.

“Then Russia, like China, can act as a vital bridge between both continents. This will be of major historic significance in making Russia much more strategically important globally,” the analyst explained.

In his opinion, the Forum’s impact on the economic environment depends on the policies adopted in Vladivostok.

“The key will be how well the Russian Far East can serve the needs of the Asia-Pacific, and vice-versa. The Russian Far East has long been underdeveloped, which in turn is a factor keeping Russia as a whole less developed than it can be. This region of Russia is rich in natural resources but they are under-exploited. The local communities have also not been sufficiently developed in terms of education, professional skills and job opportunities. But this is changing. With improved human resources added to its rich natural resources, the Russian Far East can contribute much to Russia as a whole and to trade and diplomatic relations between Russia and other Asia-Pacific countries,” Bunn Nagara said.

Meanwhile, from his point of view, development must be balanced and comprehensive, without producing additional problems.

“For example, it would be unwise to embark on short-term wealth creation while destroying the environment and health of the people, creating long-term problems,” the expert explained.

“I expect some important issues to be discussed at the Forum and significant decisions to be made after that. These would mostly concern development: development of resources, infrastructure, education, training and industrial output. Revenue generation would also be a major issue, such as inflows of foreign investment for enlarging productive capacities,” the analyst added.

In turn, Xu Jin, Research Fellow at Institute of World Economics and Politics of Chinese Academy of Social Sciences, also noted that Russia’s Far East region has great economic potential.

“This is because of its vast land and rich natural resources. But the way how to transform the potentiality into reality has been the Russian government’s difficult problem. Due to the worse bilateral relationship between Russia and EU, Russia and USA, Russia’s government seems to have the political will to develop its far east region finally,” the Chinese expert said.

At the same time, he stressed that the Far East region needs investment.

“The lack of money from Russian central government provides China with a good opportunity to invest in this region which in turn will help China’s enterprises to go abroad,” Xu Jin said.

In his opinion, a lot in this issue will depend on the activities of the Russian side.

“What the people and local government of the Far East region need to do is to open their mind and improve the law and investment framework to meet the foreign investors,” the analyst explained.

Meanwhile, Shankaran Nambiar, Senior Research Fellow at Malaysian Institute of Economic Research in Kuala Lumpur, reminded that Russia has hosted the ASEAN Summit in Sochi in May this year.

“Taken together this sequence of events indicates Russia’s interest in the region. Aside from any possible interest in building its presence in what is about to be an extremely important region in the world, there are obvious economic reasons for doing so. ASEAN is set to be about the most economically vibrant region in the world. Several major economic players are keen to engage in the region, among them India, China and the US. The EU is in the process of negotiating FTAs with some of the states in ASEAN. Russia cannot afford to be left out from the gains to be reaped by participating in the economic growth of the region. Russia has traditionally had strong ties with Vietnam and Cambodia, for instance,” the expert noted.

According to him, Russia would like to see more economic development in the Russian Far East, leading to the creation of the Greater Eurasia.

“There is much economic potential for trade and investment in the Russian Far East, and it can serve as yet another area where the more developed ASEAN countries can invest; they can take advantage of the special economic zones in the region. Distance and the lack of familiarity with business practices in that part of Russia are, however, factors that could act as stumbling blocks to the process,” Shankaran Nambiar said.

In his opinion, agreements reached with the Far Eastern region of Russia, can be beneficial, in particular, for China.

Although Russia and China have different interests they, probably, would be more comfortable with each other, to the dissatisfaction of the US,” the Malaysian expert said adding, however, that this is likely to be a long-shot.

In turn, Douglas Paal, Vice President for Studies at Carnegie Endowment for International Peace, suggested that Russia is not fully using its Far East’s resources.

“The investment potential in primary is vast and underexploited. Unfortunately, the business climate is viewed as unfriendly and corrupt. The latter prevents the former from occurring,” the expert said.

If the EEF addresses the doubts investors have effectively, then the Forum can be a step forward, he said.

“It’s hard to believe that the abundant resources and opportunities of the Russian Far East have been so under managed and misused for decades. Just opening trade route infrastructure to Northeast China could work miracles of development,” the analyst said.

“Moreover, if Russia really agrees to discuss the disputed territories with Japan, the potential for investment will greatly increase, but there is intense scepticism about Russian willingness to compromise,” Douglas Paal stressed.

Meanwhile, Hironori Fushita, Research Fellow at Japan Institute of International Relations, noted that wide geography of the EEF participants demonstrates foreign investors’ interest.

“The Eastern Economic Forum is an important event for Russia and its foreign partners. On the one hand, during the Forum Moscow will be able to demonstrate the regional system of preferences for investors and show the achievements of Far East projects. On the other hand, foreign partners will be offered new opportunities to explore the niche market of the Far East, to strengthen cooperation with local authorities and enterprises,” the expert said.

He also reminded that the basic decisions on attracting investments to the Far East were taken no more than three years ago.

“Nevertheless, some projects are already yielding good results. For example, the Japanese company JGC together with its Russian partners is successfully implementing the project on construction of the greenhouse complex in Khabarovsk. The EEF will be a good place to voice such results,” Hironori Fushita said.

In addition, according to him, the Forum will play an important role in the development of Russian-Japanese bilateral relations and will promote cooperation in the whole region.

“The next meeting of Japanese and Russian leaders will play important role for the bilateral political and economic cooperation. Moreover, the EEF will enhance multinational cooperation with Northeast Asian countries. I hope that the meeting of the states’ leaders participating in the upcoming Forum will be a catalyst for the strengthening of relations between the neighborly and friendly countries,” the expert concluded.

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