ISSN 2330-717X

Asian And Pacific Countries Preparing For Far East Forum – Analysis

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China, India, Vietnam and a number of  Asian and Pacific countries are already gearing up for the 7th Eastern Economic Forum scheduled to take place on 5–8 September in Vladivostok, Far East. With the emerging new economic order and the United States and European Union’s sanctions on Russia for its “special military operation” in the former Soviet republic of Ukriane, the Asian and Pacific countries are stepping up efforts in collaborating in economic sectors in the Russian Federation.

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As part of the preliminary preparations, the Ministry for the Development of the Russian Far East and the Russian Far East and Arctic Development Corporation (FEDC) have organized a roundtable on the development of industry in the Far Eastern Federal District.

Anatoly Bobrakov, Deputy Minister of the Russian Federation for the Development of the Far East and the Arctic and moderator of the roundtable noted that the main economic sectors of the Far East (mining, manufacturing, transport, and logistics) account for 43% of the gross regional product.

“More than 2,700 projects are currently being implemented in the Far East with state support. Amid unprecedented sanctions, it is important to note that investors are not ready to give up on the declared projects. That, however, they face multiple risks caused by companies from unfriendly countries, when those refuse to supply equipment and components necessary for the implementation of projects or refuse to install and maintain the equipment,” he explained. 

Bobrakov believes that it is necessary to create conditions so that the equipment and components would be produced locally in the Russian Federation, including through joint ventures with companies from friendly countries that own technology and know-how. “I am confident that we can ensure the technological sovereignty of the Russian Federation, provide both our traditional and new industries with technology,” said Bobrakov.

While inviting the participants to the discussion, Darya Kiryanova, Deputy General Director for Economic Development of FEDC also noted: “What is happening in Russia right now is perceived as a stress on the one hand, but on the other hand is viewed as an opportunity. Domestic industry is facing a challenge to localize production within the country. It is necessary to understand what needs to be reinvented and what can be reused by changing supply chains.

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She would, therefore, like to collect the main issues and problems faced by industrial companies and form a package of proposals and necessary changes in the state policy for further integration into the sessions at the Eastern Economic Forum.”

Mikhail Kuznetsov, Director of the Eastern State Planning Centre (Vostokgosplan), described the current situation in the industrial sectors of the Far East and the Arctic: From 2017 to 2021, the growth rate of the manufacturing industry in the Far East outpaced the national average. Metallurgy, transport engineering, and the chemical industries were among the leaders. 

In 2022, amid growing sanctions pressure, many Russian enterprises faced a shortage of spare parts, chemical components, as well as disrupted supplies channels for finished products. At the same time, the Far Eastern Federal District has the potential of untapped natural resources, growth in transport engineering and cargo transit. This can become the basis for the development of import substitution in the country. However, the product transformation of enterprises requires all available funding, as well as time for technical re-equipment and personnel training.

According to Vostokgosplan’s Kuznetsov, the most promising enterprises that potentially can help overcome the problem of import substitution are operating in the chemical and machine-building industries. According to the forecasts of the development institution, industrial production in the Far East will grow at a faster pace than the Russian average, and by 2025 this indicator may exceed 15%.

Alexander Didenko, General Director of Metallenergo, and Nikolay Radko, Acting General Director of Rusolovo, and Alexander Patlach, Design Director of Bystrinsk Ore Mining Company, all shared their views on what needs to be improved to strengthen support measures for manufacturing enterprises in the Far East. The speakers noted the importance of creating a tin cluster in the Far East and including it in the list of industrial priorities. 

Additionally, they spoke about revising the terms for transferring land from one category to another for the implementation of industrial projects within an ASEZ. For example, the Bystrinsky Mining Company (the subsoil user and operator of the Kumroch project) plans to create a modern high-tech gold mining and processing plant from scratch in Kamchatka Territory by 2026. The project worth RUB 20 billion will be implemented as an ASEZ resident.

“Not a single Russian territory can boast such diverse and effective measures to support investors as those in place in the Far East. This is very important when implementing a project,” says Alexander Patlach.

The company is currently preparing the relevant documentation and expects to start the advanced development of the Kumroch deposit by the end of the year. The necessary machinery and equipment in the amount of more than 50 units has already been purchased, the investor has prioritized Russian producers, Chinese equipment has been purchased to cover some required positions.

Alexander Didenko, General Director of Metallenergo touched upon the programmes of preferential leasing and Industrial Mortgage. The latter is being launched by the Ministry of Industry and Trade, Ministry of Finance, and Ministry of Economic Development together with heads of several regions. 

Didenko said: “We are waiting, because we have both capacities and resources, which we would like to purchase, but there is not enough working capital. Therefore, we would like to get additional support measures to minimize the regulatory time for consideration of applications.”

More detailed information about the relevant support measures for entrepreneurs who want to quickly organize a manufacturing business, was delivered by Nikolai Elantsev, Head of Monitoring and Coordination of Regional Industrial Infrastructure Development of the Department of Regional Industrial Policy and Project Management of the Ministry of Industry and Trade of the Russian Federation.

Maxim Nikiforov, Deputy General Director of Baikalengineering shared the peculiarities of localization of engine and propeller production at Komsomolsk ASEZ and raised the issue of the state commission.

Issues of financing and obtaining bank guarantees were also touched upon by other speakers. Thus, Alexander Korneichuk, General Director of NSRZ proposed to consider the possibility of 0% VAT for the shipbuilding industry. 

President of the Union of Industrialists and Entrepreneurs of the Republic of Buryatia, General Director of Ulan-Ude Instrument-Making Production Association Vladimir Luchnikov noted the importance of subsidizing interest rates and financial support measures, plus suggested to consider the possibility of establishing a guarantee fund for Far Eastern industrial enterprises. The company is reinvigorating an innovation cluster in Buryatia, including all industrial enterprises of the region, and is focused on the production of import-substituting goods in medicine, aviation, instrument manufacturing, and railway trains.

Sergey Yarutin, General Director of the Association of Import Substituting Enterprises, focused on possible directions of import substitution and ways of parallel imports.

At the end of the discussion, Denis Nevzorov, Director of the Department for International Cooperation and Technological Development of the Far East and the Arctic at the Ministry for the Development of the Russian Far East, informed the audience about the current mechanisms for supporting both existing and planned enterprises. For example, the speaker called the territories of advanced social and economic development the most interesting for the implementation of industrial projects. 

Among the successful examples were the projects of the Zvezda Shipbuilding Complex and Arnika in the Primorye Territory, Sibur, as well as the gas processing and gas chemical plants in the Amur Region. Baikal aircraft production in the Republic of Buryatia is being prepared for implementation. Industrial parks and technoparks are being created in Khabarovsk, Primorye Territory, Yakutia, and Chukotka Autonomous District.

An investor in an ASEZ is granted tax, infrastructure, land, and construction preferences. Moreover, this regime allows for different mechanisms of state support not only from the Ministry for the Development of the Russian Far East, but also from the Ministry of Industry and Trade, the Ministry of Construction, and the Ministry of Economic Development.

Since May 2022 the Ministry of Economic Development launched subsidies from the federal budget to Russian credit organizations for reimbursement of soft loans. In addition, anti-crisis measures were taken to replenish working capital. Besides, 124 enterprises are included into the list of backbone enterprises, including those in the areas of aviation and shipbuilding. At the same time, since this year the mechanism of the industry development fund has been functioning. If earlier industry subsidies from the budget of the regions was 30 to 70, now it is 10 to 90, according to Denis Nevzorov.

In addition to the existing ASEZs, Free Port of Vladivostok, Arctic Zone, and Kuril Islands preferential regimes, there is also the current SITC on Russky Island, with tax preferences, labour quotas, and the competition-free provision of land plots.

Daria Kiryanova, Deputy Director General for Economic Development of FEDC, emphasized: “Whatever the status of your company, whether you use the existing preferential regimes or not, the Ministry for the Development of the Far East and the Arctic together with FEDC are ready to help you implement projects, as we are extremely interested in ensuring that companies and their capacities work effectively.”

The Indian pharmaceutical business community supported by the Indian Business Alliance discussed new opportunities and cooperation as well as opportunities for Indian pharmaceutical business by presenting their projects and participating in international economic forums taking place both in Russia and around the world.

“The Republic of India is a strategic partner of Russia. I am confident that the new partners in the pharmaceutical industry will successfully continue the partnership between the two countries in this area. Moreover, our specialized Healthy Life division will provide communication and consulting assistance for the development of business projects,” said Alexander Stuglev, Chairman and CEO of the Roscongress Foundation. 

It was during the meeting of 20 representatives of Indian pharmaceutical companies which focused on the need for support and assistance in expediting product registration time in Russia, as well as assistance from the Roscongress Foundation. All of them expressed an interest in participating as partners in the Eastern Economic Forum in Vladivostok (5–8 September 2022) and the Russian Investment Forum in Sochi in February 2023. 

The heads of the companies stressed that the transition from simple commodity supplies to more complex cooperation and localization of production, which in turn will help the emergence of new points of growth, is an extremely important area of cooperation between the two countries. In addition, the parties noted that this process should be launched bilaterally, exclusively in competitive industries.

“I see a good basis here for deepening bilateral investment ties. And I am convinced that by working together, our entrepreneurs will be able to create new products with high added value, build production chains, and subsequently promote their goods and services in the markets of third countries,” stressed Sammy (Manoj) Kotwani, head of the Indian Business Alliance.

In the month of July, similar roundtable brought together about 50 representatives of industrial enterprises, business associations, regional authorities and development institutions, experts, as well as residents of the Far Eastern preferential regime territories. They voiced the most important proposals for further elaboration and inclusion in the industry session of the EEF 2022.

A delegation of the Russian-Chinese Business Council and Chinese partners has already visited the capital of the Russian Far East. The visit was arranged by Gennady Timchenko, Chairman of the Business Council, and Oleg Kozhemyako, Governor of Primorye Territory, with the support of Zhang Hanhui, Ambassador Extraordinary and Plenipotentiary of the People’s Republic of China to the Russian Federation, the Russian Presidential Administration, the Russian Chamber of Commerce and Industry, and the Roscongress Foundation.

The Chinese businessmen held discussions with the Governor of Primorye Territory Oleg Kozhemyako during the RCBC’s working visit to Vladivostok. The key issue on the meeting agenda was the development of bilateral cooperation between Russia and China in the face of sanctions imposed by unfriendly countries.

They expressed confidence that the meeting would help to strengthen the good relations and fruitful cooperation between the business communities of the Russian Far East and China. The Governor of Primorye spoke about the investment potential of the region and invited representatives of Chinese business to take part in the Eastern Economic Forum 2022. 

The Chinese are engaged in the transport infrastructure of Primorye. On the other hand, increasing the supply of high-quality goods to the PRC, and implementing new investment projects. “We are counting on the help and assistance of the Russian-Chinese Business Council in cooperation with our Chinese colleagues. We aim to expand the turnover and develop border-related ties. I hope this visit is a platform for establishing strong partnership ties,” said Governor of Primorye Territory Kozhemyako.

In his welcoming speech, CRBC Executive Director Evgeny Markin noted the importance of developing cooperation between China and the Russian Far East in the current difficult geopolitical situation. “Russia and China are key partners and reliable allies. I am confident that the delegation’s visit will benefit the development of bilateral ties between the business communities of the two countries. For its part, the Russian-Chinese Business Council will make every effort to develop a long-term and fruitful partnership between the Russian Federation and the People’s Republic of China,” he said.

“Russia and China are key partners and reliable allies. I am confident that the delegation’s visit will benefit the development of bilateral ties between the business communities of the two countries. For its part, the Russian-Chinese Business Council will make every effort to develop a long-term and fruitful partnership between the Russian Federation and the People’s Republic of China,” he said.

“China’s economy is developing ahead of the curve, it is stable and sustainable. Our country is now more able and willing than ever to be a reliable partner for Russian business. In the context of sanctions pressure and a difficult political situation, the role of the Far East is becoming extremely important in building profitable cooperation between China and Russia. We hope that the visit of the Business Council delegation will strengthen cooperation between our countries and become a powerful incentive for developing new projects,” said Piao Yangfan, Consul General of the PRC in Vladivostok.

“The Eastern Economic Forum is the key business event in the Far East. Every year it brings together a large number of participants that include official delegations, entrepreneurs and members of the expert community. I am confident that this year will be no exception. We expect a high interest from our Chinese partners as well. We are always happy to see them at our events,” noted Anton Kobyakov, Advisor to the President of the Russian Federation and Executive Secretary of the EEF 2022 Organizing Committee.  

The 7th Eastern Economic Forum will be held from 5 to 8 September 2022 in Vladivostok on the campus of Far Eastern Federal University (FEFU). It is organized by the Roscongress Foundation.

Kester Kenn Klomegah

Kester Kenn Klomegah is an independent researcher and a policy consultant on African affairs in the Russian Federation and Eurasian Union. He has won media awards for highlighting economic diplomacy in the region with Africa. Currently, Klomegah is a Special Representative for Africa on the Board of the Russian Trade and Economic Development Council. He enjoys travelling and visiting historical places in Eastern and Central Europe. Klomegah is a frequent and passionate contributor to Eurasia Review.

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