The Asian Mirror: The Pivot East through the Eyes of Asian Partners

4 September 2019

The Asian Mirror: The Pivot East through the Eyes of Asian Partners

KEY CONCLUSIONS

Russian government is striving to create a comfortable environment for life and business in the Far East

“Our five-year work resulted in over 240 operations up and running and over 600 billion roubles of private investment attracted. I must say that our multiplier exceeds 10, which means we attract 10 roubles of private investment per one rouble from the budget. We have created 39 thousand jobs. Over the last years, our growth rate is almost twice as high as average in Russia. In 2014–2018, 33% of the country’s direct foreign investment was in the Far East. We started with 2%, and now we are at 33%. It is a growth of 16%,” Yury Trutnev, Deputy Prime Minister of the Russian Federation and Presidential Plenipotentiary Envoy to the Far Eastern Federal District.

“When we say ‘pivot East’, the most important part for us is that it is about Russia. It is the country’s development, the development of Russia’s most important region – the Far East, attracting foreign partners to the region that are the most important objectives. This pivot East is not happening for geopolitical, but for practical reasons,” Timofei Bordachev, Director, Centre for Comprehensive European and International Studies, National Research University Higher School of Economics; Programme Director, The Valdai Discussion Club.

“Compared to five years ago, the Far East is actively developing through the efforts of the Russian government. However, this region needs even more attention,” Michael Tay, Ambassador Extraordinary and Plenipotentiary of the Republic of Singapore to the Russian Federation (2002–2008); Founder, Director, Foundation for the Arts and Social Enterprise.

Russia’s cooperation with APR countries has great potential

“The objective of Russia’s policy in the East is helping regional development and enhancing diplomatic and economic ties in the Asia Pacific. Russia has done a lot for it and achieved significant progress and success,” Lee Jae-Young, President, Korea Institute for International Economic Policy (KIEP).

“The growth rates of export from China to Russia are staggering. In certain regions they have shown an increment of 3–4 times. <…> For many years, China has been the main trade partner of the Russian Far East and the largest source of foreign investment in the region. In the first six months of 2019, the trade volume between the Far Eastern Federal District and China approached USD 5 billion, which means a growth of 16% year-over-year. Russian export to China reached almost USD 4 billion, and this number is on the rise,” Fan Weiguo, Director, Asia-Europe Bureau at the Xinhua News Agency.

“Our analysis has shown that the trade and economic ties between India, Russia and China have a great unused potential. According to our calculations, Russia could have increased its trade volumes with China by at least 25% and by 17% with India. Therefore, we can sum it up by saying that Russia’s pivot towards India and China is an absolutely realistic step that we are witnessing now. But its outlook is hindered by the unused potential and the fact that possible trade volumes are not achieved,” Apurva Sanghi, Acting Country Director for the Russian Federation, The World Bank Group.

The global role of Asia Pacific is growing

“Asia Pacific keeps enforcing its role in the world. The GDP of this region is 42.6% of the global GDP and its share of the global trade is 53%. We should mention a strong economic and trade alignment, a change in the economic structure, development of new technologies – all of it offers Asian countries new cooperation opportunities for their prosperity,” To Anh Dung, Deputy Minister of Foreign Affairs of the Socialist Republic of Vietnam.

PROBLEMS

Cooperation faces political and economic constraints

“They have been persuading us that we need to be friends with everybody, work with everybody and trade with everybody. We have taken into this paradigm, but it seems like our western partners do not believe in it anymore. We need to understand that cooperation faces constraints both in the West and in the East. Of course, we need to strive to make them go away and we are doing it, but the Far East has robust resources that will keep it going,” Yury Trutnev, Deputy Prime Minister of the Russian Federation and Presidential Plenipotentiary Envoy to the Far Eastern Federal District.

“Our session had many discussions about ways to improve the investment climate in the Far East. As for disadvantages, previously I have seen a significant foreign presence, and now it is smaller. I think we need to focus on attracting them to the next Forum,” Michael Tay, Ambassador Extraordinary and Plenipotentiary of the Republic of Singapore to the Russian Federation (2002–2008); Founder, Director, Foundation for the Arts and Social Enterprise.

“Main indices of the region’s economic development do not yet reflect its stability and sustainability driven by strengthened internal potential. The constraint lies in the main economic indices of the Far East development to a large degree depending on external factors. Some of them are exaggerated if we take into account the basic weaknesses of the Far East. <…> The Far East as a market is not attractive yet if we take into account its size, demographic trends and global interdependence with neighbouring economies. It means we need to change our cooperation profoundly,” Lee Jae-Young, President, Korea Institute for International Economic Policy (KIEP).

Lack of information to develop an optimal development strategy for the region

“We lack knowledge, because we may be getting it the wrong way. At the same time, we lack fundamental understanding of what is happening,” Andrei Bystritsky, Chairman of the Board, Foundation for Development and Support of the Valdai Discussion Club; Professor, National Research University Higher School of Economics.

SOLUTIONS

Developing social infrastructure in the region

“When improving conditions for attracting investment, we must tackle social issues. At first, we did not pay much attention to it, as we counted on Russia having ministries of health, education, culture, sport, etc. – it is their area of responsibility. But fast growth requires support in all departments,” Yury Trutnev, Deputy Prime Minister of the Russian Federation and Presidential Plenipotentiary Envoy to the Far Eastern Federal District.

Focusing on cutting-edge technologies and introducing innovation

“We started introducing new tools – first of all, it is digital electronic services for the most complicated management areas,” Yury Trutnev, Deputy Prime Minister of the Russian Federation and Presidential Plenipotentiary Envoy to the Far Eastern Federal District.

Creating a favourable image of the Far East in the media

“If you look at the general trend, 80% of all investment coming to the region is Russian. It is neither good nor bad – it is natural. How can you persuade anyone to work in the Far East, if the country’s residents do not believe in it? Over the last years, we have seen fundamental change: we have absolutely new economic regimes, the investment environment has changed. But we are facing an objective to enter the media space to tell about what is happening in the Far East. But we are not too successful so far,” Yury Trutnev, Deputy Prime Minister of the Russian Federation and Presidential Plenipotentiary Envoy to the Far Eastern Federal District.

The Asian Mirror: The Pivot East through the Eyes of Asian Partners

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