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‘Russia’s Gateway to Asia’: Russian Far East in Asia-Pacific Integration Initiatives

September 06, 17:58 UTC+3
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Key conclusions

Russia is going to develop trade eastwards and the Far East boasts tremendous opportunities to do so

“I would like to comment on the session name, ‘Russia’s Gateway to Asia’. There are no gates at all. Russia is Eurasia itself. <…> I have also heard several times today that Russia is turning to the East <…> President Putin has not announced a turn to the East but has given clear-cut instructions to us, the Government of the Russian Federation, to develop trade eastwards. <…> Certainly, we are not going to make any turns also. Turning means we will turn our back on someone, sorry, or turn a blind eye,” said Igor Shuvalov, First Deputy Prime Minister of the Russian Federation.

“Nevertheless, opportunities are great and the market situation is also good, as I have already said. Despite many talks that the Asian growth is slowing down, consumption is growing and it is growing at a stable and even at an outpacing rate <…> Opportunities for the Far East are tremendous exactly in this aspect,” said Igor Makarov, Senior Research Fellow, Centre for Comprehensive European and International Studies (CCEIS), Faculty of World Economy and International Affairs, National Research University – Higher School of Economics.

Investment platforms are developed for cooperation of Russian and Asian investors

“The RDIF has already invested over 100 bln rubles together with our partners, including 30 bln [rubles] being funds of the RDIF and over 70 bln [rubles] largely being money of Chinese and certain other Asian investors. <…> It is critical for us that we have set up a series of platforms. A Russia-China fund is in place, which has made over 15 deals. Tomorrow we will announce finalizing of a paper on the establishment of a Russia-Japan fund,” said Kirill Dmitriev, Chief Executive Officer, JSC Managing Company Russian Direct Investment Fund (RDIF).

Challenges

Continuing investment decline in relations with Asia-Pacific Region

“Trade with the European Union is growing slowly. Trade with many nations of the Asia-Pacific Regions is meager and it is not rising, so to say. <…> Some new approaches are probably needed,” said Alexander Shokhin, President, Russian Union of Industrialists and Entrepreneurs (RSPP).

Shortage of population

“A single barrier is left and it remains insurmountable. It will remain so in the future. The population is too small, just 6 million. This accordingly means a domestic market with a very low capacity. This is a naturally dispersed population, which does not make possible to provide the concentration effect,” Igor Makarov said.

Unequal conditions of trade for Russian participants in the Asia-Pacific Region

“80% of import in Vietnam, with which we have recently made an agreement, are coming from countries having a free trade agreement with Vietnam. Clearly when we face such unequal conditions, absence of agreements and absence of a dialog on such agreements means a direct export barrier for us,” said Pavel Kadochnikov, President, Center for Strategic Research Foundation.

Solutions

Developing cooperation with foreign partners

“In particular, for example, our partner CP Group. This is a Thai company with a turnover of $65 bln, having distribution chains on all Asian markets and being actually the Number One in that. Projects we are implementing with them almost immediately get distribution on Asian markets and it is critical to attract such partners,” Kirill Dmitriev said.

Developing transport communications

“The Far East and Tottori Prefecture and other regions of Japan’s sea coast should be linked by ferries and other marine traffic. We will be able to make a gate to Asia from that. <…> If we succeed in linking these areas and adjacent regions of China, this will create new conditions for our projects on the Far East and we will be able to more actively cooperate,” said Shinji Hirai, Governor of Tottori Prefecture.

Optimizing tariff policy

“About 350 thousand tonnes of Russian import from Asia are arriving in Russia at present via the Northeast ports, which are known to be heavily loaded. <…> Such freight should obviously go directly via the Far East to Central Russia. We can attract these goods to the Russian Far East already now, at present, by changing the tariff policy of Russian railways,” noted Leyla Mammadzada, Chief Executive Officer, Summa Group.

Developing Vladivostok Free Port regime

“We are already speaking for a long period of time about the port of Zarubino, which can obviously act as a major hub for China goods, for goods from Japan and from the Republic of Korea in part. Nevertheless, these Free Port projects require further elaboration of the legislative and related regulatory base in order to go live,” Leyla Mammadzada added.

Integrating trade regulation of the EAEU with Asia-Pacific economies

“We have launched seven negotiation tracks and we have no model agreement. <…> We exactly are the supporters of absence of competition, supporting the synergy of our various and diverse competencies and tasks we can solve in agreements,” said Veronika Nikishina, Member of the Board, Minister in Charge of Trade, Eurasian Economic Commission.

Mandatory involvement of business in negotiating processes

“Business is working proactively. We have a working consultative council of the Eurasian Commission. <…> For example, we interacted very closely with the Eurasian Commission on the preparation of the list of problems the business sees in case of making an agreement in respect of the non-preferential agreement with the People’s Republic of China,” Alexander Shokhin noted. 

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