Russia is hoping that the APEC summit it is hosting on September 2-9 will boost its economic involvement in the Asian-Pacific region, but experts said an economic overhaul of the country’s far eastern regions is in order to pull off the plan.
“It’s a good agenda, but there’s an open field for work,” said Andrei Ostrovsky, deputy director of the Institute of the Far East at the Russian Academy of Sciences.
The Asia-Pacific Economic Cooperation summit is taking place on the Russky Island in the city of Vladivostok in Russia’s Primorye Region on September 2 to 9.
This is the first time Russia, an APEC member since 1998, is hosting the summit of the group, created in 1989 to promote economic cooperation among the countries and regions – such as Taipei and Hong Kong – of the Pacific Rim.
Russia’s involvement with the group used to be formal: First Deputy Prime Minister Igor Shuvalov admitted at a press conference in Moscow last Tuesday that the country was represented at most previous summits by rank-and-file embassy staff.
But now Moscow wants half of its total trade turnover to come from APEC, Shuvalov said.
Trade turnover with APEC economies stood at $96 billion, or 23 percent of the country’s total, in the first half of 2012, according to Russian State Statistics Service. The European Union is Russia’s biggest trade partner, with a turnover of $200 billion (almost 50 percent of the total) over the same period.
The Global Locomotive
The APEC is indeed a bloc to watch out for, comprising the world’s leading economies such as China, Japan, South Korea and the United States.
The bloc accounts for almost 55 percent of the global GDP, 44 percent of the global trade and 40 percent of the world’s population.
“The APEC is the driving force of the global economy,” Ostrovsky said. “Of course we’ve got to work with them.”
Russia is the sole petroleum exporter among all bloc members, which alone makes it attractive for fast-growing APEC economies such as China. It also boasts unique expertise on nuclear energy, which many bloc members are developing to make up for a shortage of oil and gas, and is exporting metals and cellulose products.
Moreover, the government hopes to turn Vladivostok, a city of 620,000 on the shores of the Sea of Japan, into a major regional container port, said Alexei Titkov, a regional policy analyst.
Revive the ‘Soviet San Francisco’
APEC collaboration is vital for Russia’s far eastern regions, economically depressed and quickly depopulating. The population of the Far Eastern Federal District shrunk six percent over eight years to 6.2 million in 2010, the worst showing among seven federal districts.
The summit is meant to bring about long-awaited change, at least for Vladivostok. The event’s budget stood at 660 billion rubles ($20 billion), most of it spent on construction projects in the city, according to Shuvalov.
The city is getting a new university, complete with arguably the best campus in the country, as well as two bridges, including the world’s largest stayed-cable bridge that leads to Russky Island, a 3,100-meter-long, 70-meter tall structure that cost $1 billion to build.
“Century-old dreams and 50-year-old promises are finally coming true,” said Titkov. The government of the last Russian tsar, Nicholas II, paid much attention to Far East’s development, and Soviet leader Nikita Khrushchev promised in 1959 to turn the city into a “Soviet San Francisco.”
Skeptics, including opposition leaders, say that much of the construction was overpriced, indicating embezzlement, and that the city will have no use for the infrastructure. Indeed, though the bridge to Russky has the capacity to handle 50,000 cars a day, only 5,000 people currently live on the island.
However, Titkov said the authorities anticipated the problem and planned for further use of the facilities built for the summit. Russky is expected to see an increase in inhabitants thanks to a tourist zone that it will house and the new university campus.
The main problem, however, lies beyond Vladivostok, analysts said, pointing out at that the Russian Far East at large is a long-neglected region with a decrepit infrastructure, especially transport.
The government was focusing on what Russia would be selling to its APEC partners, but the main question is how to ship the goods, said Ostrovsky of the Institute of the Far East.
The combined port capacity of all cities in the Russian Far East is less than that of the Chinese port of Dalian. There are no bridges across the Amur and Ussuri rivers that form most of the 4,000-kilometer-long Russian-Chinese border.
The Baikal-Amur Mainline will also need to add more railways to handle the expected increase in container shipments, analysts said. In August, a railway jam made up of some 8,000 empty oil cisterns all but paralyzed Gruzovaya, an important transportation hub in the Primorye Region, with analysts blaming it on the insufficient traffic capacity of Siberian railroads.
Getting Priorities Straight
The government seems to be realizing the need for serious strategic planning, even creating in May a Ministry for the Development of the Russian Far East.
But talks about revitalizing the Russian Far East through increasing its involvement in Asia’s economic life have been going on for decades without yielding visible results, analysts said.
“Recommendations we’ve given in 2000 remain as relevant in 2012,” Ostrovsky said with a tinge of disappointment in his voice.
The infrastructure investment market in the Far East is immense, but the government has not said how much federal money it will invest, nor has it spelled out benefits for private investors, Ostrovsky said.
The Kremlin is serious in its plans, but more pressing domestic matters may prevent it from pursuing APEC collaboration, Titkov said.
The government may soon be forced to drop its current agenda, focusing instead on meeting the public’s demands, especially curbing rampant corruption, he said.
“It’s a question of how much attention the government will be able to pay to the APEC plans in such a situation,” he said.