Russia proposed hosting an Asia-Pacific Economic Cooperation (APEC) summit in 2012 last November. The bid will be considered once the 2011 host country has been announced.
"After the APEC summit, the island could be turned into a tourist area," the president said while meeting with Cabinet members.
Putin said a sea research institute, an aquarium, hotels and recreation areas would be built on the mountainous 97.6-square kilometer (37.7-square mile) island in the Sea of Japan, several kilometers off the Pacific port of Vladivostok, for the purpose.
Putin said Saturday in Vladivostok, where he made his stopover en route from India to discuss the preparations, that the APEC summit could spur the development of Russia's Far East - a vast territory rich in natural resources but experiencing major economic difficulties for the lack of investment, labor force and poor management.
"The APEC summit may become an important factor in the development of the Primorye Territory, as well as of the entire [Russian] Far East," he said.
Putin said 100 billion rubles ($3.8 billion) would be spent on the preparations, which also include the construction of roads and the modernization of the airport. The Primorye Territory's budget stands at 32 billion rubles ($1.2 billion) a year.
Foreign Minister Sergei Lavrov earlier said the decision on the venue for the 2012 APEC summit could be made in Australia, which will host the forum this coming fall, adding that Russia was one of the few APEC economies never to have hosted an APEC gathering.
APEC is the world's largest international trade and economic organization, with the population of its member countries exceeding 2.5 billion people, and with a combined GDP of $19 trillion.
Major regional nations include Russia, Australia, Canada, China, the United States, Japan and South Korea.