Russia To Focus On Its Far East At APEC 2012 – Analysis

By R. Nastranis

As Russia gets ready for the Asia-Pacific Economic Cooperation (APEC) summit on September 7-8 off the coast of the far eastern city of Vladivostok, on the forgotten Russky Island, it is hoping to align the grouping’s priorities with its development goals, especially in Siberia and the Far East. It is the first time that Russia will chair the annual gathering 21 Pacific Rim countries representing 40 percent of the global population and 54 percent of the world’s Gross Domestic Product (GDP).

In fact part of the motivation, spelt out at the APEC Vietnam 2006 in Hanoi, to host the APEC 2012 summit was to turn Vladivostok into a modern city and gain a firm foothold in the dynamically developing Asia-Pacific Region. The proposal to hold the 2012 summit on Russky Island, which was a closed military zone during the Soviet era that ended in 1991 with the dissolution of the Soviet Union, was confirmed at the end of the APEC Australia 2007 summit in Sydney.

Russia’s priorities were outlined by President Dmitry Medvedev at the APEC meeting in Hawaii in November 2011: the liberalization of trade and investment combined with regional economic integration; the strengthening of food security; the building of reliable transport and logistics chains; and cooperation to boost innovation. At the same time, Moscow perceives its main task in aligning APEC’s priorities with Russia’s development goals, especially in Siberia and the Far East, according to officials responsible for the project.

Whereas the 2011 summit in Honolulu mainly discussed the actual issues of trade liberalization, Russian Council on International Affairs president Igor S. Ivanov believes that the forthcoming summit would do well to focus on the long-term outlook for consolidation of APEC economies, including taking into account Russia’s initiatives for integration of CIS (Commonwealth of Independent States), comprising former Soviet republics, and on preventing financial and economic crises in the region and globally.

“APEC countries, which today account for the bulk of global economic growth, have a special responsibility for optimizing global mechanisms for regulating economic development,” writes Ivanov.

Russia attaches importance to strengthening food security by achieving and maintaining physical and economic access to food products, ensuring international standards of quality and safety, promoting increased food production through the introduction of innovative technologies, and promptly identifying and preventing threats to agriculture, including those related to climate change and emergencies, whether natural or man-made.

Russia also favours cooperation in the protection and rational use of the biological resources of the world oceans.

According to Ivanov, food security “will likely become central to global policy in the 21st century and APEC’s role in this can’t be overestimated.” However, multilateral cooperation among the region’s countries is only just beginning in this area. Russia lacks a coordinated regional approach to food supply security risk management.

“The time has clearly come to deal with matters such as reducing food price volatility, cutting losses resulting from transportation of agricultural products within the region, and coordinating national efforts to improve yields of basic crops. These food issues are closely linked with environmental issues and preserving APEC’s biodiversity,” argues Ivanov.

Russia’s other priority is developing the region’s transportation and logistical capacity. By virtue of its geographic location, Russia is a country of transit between Asia and Europe, but its intercontinental transport corridor capabilities are still far from fully utilized, says Ivanov.

According to Kommersant daily newspaper, at a meeting of APEC transport ministers in St. Petersburg on August 3, Russian Transportation Minister Maxim Sokolov made an ambitious proposal: Moscow suggested redirecting about 10 percent of transit traffic between APEC and the European Union across its territory, offering an alternative to the Suez Canal and lower transport costs.

Despite the positive aspects of this proposal, the APEC ministers agreed that Russia would first have to achieve some serious improvements in its transport infrastructure in the Far East.

While Russia needs to accomplish a great deal domestically in this area, the international dimension is no less important. “Cutting costs and wait times at border crossings is crucial along with implementing major infrastructure projects such as upgrades of ports, airports, and transport corridors through private-public partnerships are all matters we hope will be discussed . . . at the (forthcoming) APEC summit,” comments Ivanov.

The APEC summit also represents an opportunity to promote an innovation agenda for Russia and the entire APEC region. With this in view, some of the questions becoming increasingly important not only for Russia, but also for its neighbours on the Asian continent, according to Ivanov, are:

How can Russia ensure the most effective forms of interaction between science, business, and government to promote new technologies? How can it bring cooperation among innovation centres, universities, research institutions, science towns, and innovative territories to a new level? How can it increase geographic mobility for scientists, educators, and innovators and ensure protection of intellectual property rights in the region and reduce the turnover of counterfeit goods?

European Russia vs. Far East

In a critical assessment of Russia’s keen interest in APEC, Ivanov says: “The Russian government, led from Moscow in the heart of European Russia, has been too slow and inconsistent in rebuilding the economy of its eastern regions, and doesn’t create the required incentives for foreign investment – or even Russian investment for that matter. The Asian part of Russia faces especially acute issues in infrastructure, small business growth and migration. In international affairs involving the region, Russian doesn’t always manage to grasp the logic of its Asian neighbours, which occasionally results in unfortunate miscalculations.”

Against this backdrop, Russia’s chairmanship of APEC 2012 presents a unique opportunity to take a new look at the country’s prospects for integration into the Asian-Pacific community. In fact, the Russian leadership has been treating the upcoming chairmanship with the utmost importance, says Ivanov.

“Recent months have seen meticulous preparatory work to flesh out the agenda for Russia’s chairmanship with real content; considerable funds have been invested in preparing facilities to host events,” he adds.

The venue of APEC 2012, the Russky Island is located in the Peter the Great Gulf and is part of Vladivostok’s Frunzensky district. The island is sometimes called the Far East’s Kronstadt. The Eastern Bosphorus Strait separates it from the Muravyov-Amursky Peninsula where Vladivostok, the capital of Russia’s Primorye Territory, is situated.

As part of the preparations, a complex of buildings had to be built on Russky Island; these buildings will later be given to the local university. The island itself has been linked to the mainland by a giant bridge, while two more bridges link smaller islands with the airport. Additionally, new infrastructure will be built in Vladivostok itself. Russia is expected to have spent USD 22 billion on these projects, of which 40 percent will come from the budget, with the rest provided by businesses, which are mostly state-owned companies.

APEC Business Advisory Council

The outcome of APEC 2012 will very much depend on the APEC Business Advisory Council (ABAC), which plays a key role in translating the general priorities into specific proposals. The most resonant project promoted by ABAC is the idea of a technology transfer fund to engage in the exchange of key technologies, remove administrative barriers to their use, and protect intellectual property.

According to Leila Mamedzade, executive director of ABAC, this would turn the fund into a civilized tool to be used in helping developing nations’ secure non-discriminatory access to technologies, while also encouraging developed nations to support weaker economies and even out regional imbalances.

But the Kommersant reported: “The West is not exactly happy about this idea, which could give Russia access to cutting-edge technologies. At APEC’s February meeting in Hong Kong, this initiative was criticized by the representatives of developed economies, especially the United States.”

However, the members of the Russian delegation still hope to win ABAC’s approval for the proposal, even if in modified form, reported Kommersant. Now Russia is apparently suggesting the construction of a partnership platform to discuss the transfer of technologies in APEC countries, limiting the new centre to a national level and a capital of about USD10 billion.

Yet another initiative is to stimulate environmentally friendly urban construction. In Mamedzade’s opinion, this is a particularly pressing issue for Russia, especially its Far Eastern part. “Unlike the United States and many other countries, we have neither the required technical regulations nor the environmental standards. Most importantly, we lack tax incentives to encourage urban construction using the latest technologies. For example, in the United States, those buying an apartment in an eco-friendly building pay a lower real estate tax, and, while such housing is more expensive, this measure provides incentives for both developers and buyers,” Mamedzade told Kommersant.

Russia’s third ABAC initiative is to create a system for exchanging information on food prices within APEC, which would improve food security and make this market more transparent. According to Mamedzade, these measures could help Russia strengthen its position as one of the leading food exporters to Asian markets.