4 September 2024

Investment climate of the Far East and new opportunities

Russia is aiming for a sharp rise in investments. Significant modernization of infrastructure and the creation of a favourable investment climate are therefore needed so as to raise capital for unique projects. Establishing a unique institutional context for investments can help provide a fresh impetus for development. Supporting education and training personnel are becoming key aspects of future growth, ensuring as they do sustainable and harmonious development of the Far East. That was the conclusion reached at a session entitled Investment Climate of the Far East and New Opportunities, which took place as part of the Eastern Economic Forum.

 

KEY CONCLUSIONS

 

Russia must achieve a 60% increase in investment by 2030

 

“The main priorities and tasks have been outlined in the presidential decree. In line with the objective set by the head of state, we need to achieve a 60% increase in investment by 2030. Such growth will stimulate the development of a supply-driven economy, and ensure the competitiveness and technological sovereignty of the economy,” Murat Kerefov, Deputy Minister of Economic Development of the Russian Federation.

 

To boost investment, investors require support

 

“We consider private investment to play a key role in achieving this national goal – it should become the main driver of growth. A broad range of measures are in place to support private initiative. We have been working in recent years to roll these out and develop them further. First, we need to build the basic environment for working with investors, where all the necessary infrastructure is in place at the local level. This infrastructure must be uniform across the country,” Murat Kerefov, Deputy Minister of Economic Development of the Russian Federation.

 

“Attracting private investment is a critical priority when it comes to achieving national development goals. <…> Today, the regional investment standard covers nearly half of national rating indicators. That is because it establishes the minimum set of institutions needed, as well as rules for interaction between regional governments and investors. These criteria are not set in stone; they are constantly being reviewed and developed. However, in order to meet these basic standards in terms of relations with investors and readiness to launch new projects on a broad scale, the region and its administration must comply with this minimum set of requirements,” Alexey Repik, Chairman, Delovaya Rossiya (Business Russia).

 

“We are now creating marine safety systems that can detect objects and actions 30 kilometres away, such as submarines, torpedoes, enemy divers, or other dangers. How this information will be used in cooperation with the coast guard, border services, and unmanned aerial systems protecting offshore projects is currently being worked on. We are coming up with proposals, and discussing matters with military officials, and oil and gas companies. This is also about investing in the security sector,” Valery Limarenko, Governor of Sakhalin Region.

 

“In a number of cases, our flagship investment projects are being delayed indefinitely. We recalled that 20 years ago, small aviation, such as the An-24 – which is extremely important for the region – either remained unrealized, or found itself in the realm of ambitious goal-setting,” Yakov Sergienko, General Director, Yakov & Partners.

 

The Far East offers a range of new investment opportunities

 

“In Russia, there has been something of a revolution in recent years in terms of demand. If we look at the period from 2021 to 2023, wages have increased by an average of 50%. Yes, inflation may have eroded about 30% of that. But the remaining 20% has generated the demand that ultimately led to inflation, which the Central Bank is now fighting. But what’s more important is that during this period, almost 10% of Russia’s population has on average doubled their income. If we consider the average figure, a person who earned RUB 40,000 a month three years ago now earns RUB 150,000. And almost 10% of the officially employed population – about 6 million people – now belong to this new middle class, which creates significant demand for goods and services,” Taras Skvortsov, Senior Vice-President, Head of Finance Block, Sberbank.

 

“Today, the state remains the key investor in the Far East, although we are also seeing an increase in private investment, with key logistics projects and port infrastructure along the Northern Sea Route continuing to develop. These represent new opportunities for the Far East and Sakhalin Region,” Svetlana Chupsheva, General Director, Agency for Strategic Initiatives to Promote New Projects.

 

PROBLEMS

 

A lack of scientific research, technology, and logistics

 

“We are beginning to experience insufficiencies with regard to science and its role in supporting the development of offshore projects. <…> Fishermen are saying that there is a lack of scientific research. There is a colossal demand for scientific research in relation to the fishing industry. We need effective research to identify where fish are located, and how to catch them at lower costs,” Valery Limarenko, Governor of Sakhalin Region.

 

A shortage of personnel, outward migration, and high housing costs

 

“Across Russia, the construction boom has led to a situation where, partly due to rising mortgage rates, people can only afford smaller apartments than they could three or four years ago. We regularly calculate how many square metres a person earning the median wage can afford on a 20‑year mortgage, and today it’s only about 26–27 square metres. This figure has decreased because both interest rates and housing prices have risen,” Taras Skvortsov, Senior Vice-President, Head of Finance Block, Sberbank.

 

“There are, of course, several significant areas and challenges that are standing in the way of opportunities to develop the Far East. The main problem is the shortage of qualified personnel. This issue is not unique to Russian Railways and the Eastern Branch – it is, as you are well aware, a problem for the entire Russian economy. To address this challenge, action is needed on multiple fronts,” Alexander Shokhin, President, Russian Union of Industrialists and Entrepreneurs.

 

“We discussed topics that were relevant both today and 12 years ago. We talked about logistics, road networks, and the development of Russian Railways, air transport and airports, cargo transport, and port infrastructure. Then there was access to capital, long-term investment, human capital, outward migration, the shortage of specialists, insufficient educational institutions, affordable housing, and the development of public spaces. These topics remain relevant today,” Alexander Ivlev, Co-Chairman of the Executive Committee, Foreign Investment Advisory Council (FIAC); Advisor, B1 Group.

 

“This year, the issue of personnel has come to the fore,” Yakov Sergienko, General Director, Yakov & Partners.

 

SOLUTIONS

 

Creating and implementing a comprehensive set of measures for infrastructure and logistics development

 

“The logistics sector offers a major opportunity, as well as a significant boost for the development of regions in the Far East, which will begin producing new types of goods and entering a new competitive environment,” Valery Limarenko, Governor of Sakhalin Region.

 

Collaboration between businesses and government bodies

“Sakhalin Region not only continues to be ranked higher and higher in our ratings, but has essentially become a trendsetter, establishing the best rules and practices for working with businesses. It is critically important – I want to emphasize this once again – that business associations work in close cooperation with the government, particularly its economic departments, and the Ministry of Economic Development in particular,” Alexey Repik, Chairman, Delovaya Rossiya (Business Russia).

 

Developing basic conditions in Russia for working with investors

 

“In collaboration with colleagues from the Agency for Strategic Initiatives, we have begun working on a new domestic model of target conditions for doing business. This work marks a logical continuation of efforts made under the regional investment standard and the national rating, where best regional practices will be reflected. We are placing a great emphasis on tools aimed at attracting capital to the economy,” Murat Kerefov, Deputy Minister of Economic Development of the Russian Federation.

 

“Proceeding from best international indicators and practices, we aim to create a national model of target benchmarks for improving the investment climate. These should be benchmarks to which our country and regions aspire, ensuring advanced development and an effective regulatory environment. We plan to carry out this work as part of efforts to transform the business climate – an initiative developed by the Ministry of Economic Development in collaboration with business associations,” Svetlana Chupsheva, General Director, Agency for Strategic Initiatives to Promote New Projects.

 

 

* This is a translation of material that was originally generated in Russian using artificial intelligence.

 

For more information, visit the Roscongress Foundation’s Information and Analytical System at roscongress.org/en

Read more