Mr Alexei Chekunkov, the CEO of the Russian Far East Development Fund reveals some of the secrets of the area.
Alexei starts off the program by setting the scene. "The region is vast, we are talking about one third of Russia, it is very sparsely populated, the average population density is only one person per square kilometer. It is very rich in natural resources, it has half the Russian gold reserves, 90% of our diamonds, with one third of all global diamonds, 70% of the Russian fish catch, 25% of Russian forestry, 25% of Russian hydro-carbon deposits, and so forth… this is also the Pacific gateway to Russia. We have more than a dozen large ocean ports in the Far East, such as Vladivostok… over the past 30 years, the key factor is the exposure of the Far East to Asia. We have a 4000-kilometre-long land border with China, and we are really close to Japan. When you are in Vladivostok you realize how close the port is to major capitals. It's just a one and half hour flight to Tokyo, two hours to Seoul, two hours to Beijing. It's twice as near to these capitals as Moscow is to any European capitals. It is Asian Russia. The Far East of Russia is Asia.
"Recently, electronic visas have been introduced. For the first time in the history of Russia, foreign visitors can go to Vladivostok without visiting their consulates. You merely fill in a form on a website, you get an email, you print it out and you arrive, and you can stay for 8 days this way…
"One of the important global developments which have changed everything is the development of the Northern Sea Route. For instance, the giant liquefied natural gas projects that are being developed in the Yamal Peninsular with major European companies such as Total of France, with Chinese capital, is being transported by the Northern Sea Route in specially reinforced ice proof vessels,…we will have a very efficient route for this energy to reach Asian clients."
The new Chinese ‘One Belt One Road' strategy, and new transportation links to Japan are discussed, in the context of what can only be called a major tectonic shift which is occurring in the region. That is, the opening up of major new consumer markets in Asian countries for Russian goods and vice versa. A booming development area is that of tourism. The climate in Southern Siberia, near to China is actually very pleasant. "In South Siberia we have on average 280 sunny days a year, something that any resident of Moscow would really appreciate. We have very clean air and very clean water."
These sorts of conditions are very much appreciated by Chinese companies who are engaging in construction of large health care resorts, rehabilitation centers and care homes for senior citizens; catering for Asians. "For most Chinese, ecology is something very much on their minds. If within two hours' travelling time you have this beautiful paradise, actually an Asian landscape; quite hilly, very clean blue skies, fresh seafood and not much industry, if you build tourist centers, resorts, health care complexes of sufficient quality, people will come. People fly to Ireland, to Bali, to Thailand, and people will be flying to these pearls of the Russian Far East, big time. I think this is the key aspect, this consumer tourist market that will be the hallmark of Russian Far East development in the next decade… For now, transit and resource projects are there and for now they are the largest investments being made, and they include the giant Gazprom ‘Power of Siberia' pipeline; a $50 billion project that will carry gas from Eastern Siberia through China. The Far East will benefit tremendously from this…"
"We also have a lot of demand for opportunities in agriculture. China has been developing their land pretty aggressively using a lot of chemicals. Water has been polluted by industry in many places, but our land is in really good condition, and our water is pure. We do not use GMO, we do not use heavy fertilizers, and I think going forward, the value of this resource is going to be increasing. The curse of the Far East has always been that not enough people live there; but now that we live in a time of major automation, you can build giants plants, giant farms and you do not need tens of thousands of people. You have a billion-dollar investment and you only need a thousand people or less to operate…"
On the One Belt One strategy, Alexei says: "I have been working with China for over 10 years, and I have never seen so much resolve, so much determination to do overseas projects, to learn, to open up. Of course, there and bumps on this road but overall, given the scale of things — we are talking about trillions of dollars, millions of people, dozens of companies, actively seeking opportunities abroad, starting with the close abroad, with their neighbors, things are going very well." Alexei sees the One Belt One Road program starting to have an impact on the Far East as of now.
Alexei explains how it is possible for investors to participate. "You have several entities which are engaged in supporting foreign investment in the region. Our Fund has a large portfolio and we are actively co-investing with national and international investors, so you may want to give us a call, and look at one of a few dozen projects that we are currently developing. Secondly, there is an agency for the Far East; they do not develop projects themselves, but they have a lot of information. You also have the Federal Ministry for the Development of the Far East that formulates policies and also is very actively working with foreign investors…"
Alexei feels that this is the Far East's time has come. "We just had a historic, record-breaking agricultural harvest; we are fully self-sufficient in so many goods that we never produced before, including a lot of high tech products. I think that Russia is economically really coming of age, with this giant Asian tsunami of economic development now entering the Russian Far East…"
Investment needs to be done in Russia, Alexei says: "We still do not have too many companies listed on foreign exchanges that investors can buy and get exposure to this amazing economic growth… We do want to have more companies available for international investors, so that a broader universe of investors could participate in this growth story…." Alexei envisages that every project that his fund is involved with will be listed on international exchanges within three or four years.
Alexei provides a wealth of information in his interview, so if you are interested in this subject please do listen to it.
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