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  • EXPERTS DISCUSS THE DEVELOPMENT OF RUSSIA’S FAR EAST AND ITS INTEGRATION INTO THE ASIA-PACIFIC REGION

    01 August 2016

    On 1 August 2016, experts discussed the implementation of new development tools in Russia’s Far East and the region’s integration into the Asia-Pacific economy at a round table which took place in Moscow as part of preparations for the second Eastern Economic Forum. Participants at the discussion included Aleksandr Galushka, Russia’s Minister for the Development of the Russian Far East, Sergey Karaganov, Dean of the Faculty of World Economy and International Affairs at the National Research University Higher School of Economics, and representatives of the Russian economic and expert communities.

    “The new Russian Far East development tools have already helped to bring in RUB 1,137 billion in investment. Up to 20 new enterprises will be launched in the Russian Far East by the end of 2016, and in 2017 the number is projected to rise to 60. A system for attracting new investments has been established, with the accompanying legislative framework now in place. We have approved a development plan for the border regions of the Russian Far East. One of its key clauses is that living conditions in these regions should be higher than in neighbouring countries. Economic development and integration into the economy of the Asia-Pacific countries are factors of the economic security of the Russian Far East,” said Galushka.

    So far, 12 advanced special economic zones have been established in the Russian Far East. Another 13 ASEZs are being created in the Jewish Autonomous Oblast.

    As part of the Vladivostok Free Port, plans are being developed for the Primorye-1 and Primorye-2 international transport corridors, which will help to bring around RUB 300 billion in investments into the Russian Far East. A great deal of interest in the projects has come from Chinese investors. In addition, a further four strategic harbours in the Russian Far East have been granted free port status.

    By the end of the year, a financial instrument allowing investors who put their own funds into the creation of project infrastructure to receive the equivalent amount back in tax breaks are due to be incorporated into federal law.

    A Far East Development Fund has been set up and will provide investment project financing at an annual interest rate of 5%. It has already been decided that small businesses will be able to borrow at favourable rates from the Fund.

    Mr Galushka promised that the results of efforts to implement the Russian Far East development tools, as well as new instruments, will be presented at the Eastern Economic Forum. In particular, two federal laws aimed at encouraging new investment flows into the Russian Far East have been passed. The first law provides that any investor who puts at least RUB 50 million into the region’s development over three years will enjoy ten years of income tax breaks and mineral extraction tax breaks. The second states that investors applying for fishing quotas will have to either purchase Russian vessels or set up fish processing plants.

    At the Forum, investors will learn about the new development measures for the Russian Far East: increasing the Russian Far East Development Fund, the establishment of the new Voskhod investment platform; and the first projects of the Russia–China Agricultural Fund. The Fund’s initial capitalisation will be RUB 13 billion, rising to up to USD 10 billion in future. Furthermore, Chinese investors will supply 90% of the capital, while Russian investors will provide the remaining 10%.

    Experts from the National Research University Higher School of Economics were able to ask the Minister questions and proposed a number of suggestions, currently under review by the Ministry for the Development of the Russian Far East. In particular, the issue of setting up a joint strategic development platform between Russia and the countries of the Asia-Pacific region was raised.

    “We are willing to participate in a joint strategic planning project with the Asia-Pacific countries. In fact, a consortium of institutions from Russia, China, Japan, South Korea, Singapore, and Norway is working on projects like this,” Karaganov stated.

    In addition, the experts put forward ideas on refining international transport projects, on demographic policies for the Far East, and on the development of small business and the urban environment.

    The second Eastern Economic Forum will take place in Vladivostok on 2–3 September 2016.