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Develop.FE: How Can the Far East Attract Investment?

2 September 2021
Развиваем ДВ: как привлечь инвестиции на Дальний Восток?

CONCLUSIONS


The Far Eastern Federal District has significant economic potential and is of interest to business, but there is an imbalance between investment and economic potential in the region


“The Far East is a very interesting region and of particular importance to the government. This is why the Russian President Vladimir Putin has declared that the Far East will be a priority region for Russia in the 21st century. From the perspective of investors, the region is of serious interest. It benefits from vast resources, proximity to the Asia-Pacific region, and diverse scientific and technological potential," Deputy Chairman and Member of the Management Board of VEB.RF and General Director of VEB.DV Artem Dovlatov.


“To put it simply, there aren’t enough people in the Far East. The region accounts for 40% of the country’s land mass but only 5.5% of its inhabitants. How can we solve the central challenge, which is to say the imbalance of economic and investment potential? The first and most obvious solution relates to rotation work. Modern workers’ settlements are in no way inferior to cities in terms of comfort. The second option is to attract residents to cities in order to create new jobs. The issue of the urban environment and quality of life is relevant here. According to all polls, quality of life is the key factor behind outward migration,” architect and Partner at KB Strelka Alexey Muratov.


PROBLEMS


Barriers for investors, including high costs for construction materials, staff shortages and increased risk


“There are certain barriers, of course, and investors still approach investing in the region with a degree of caution, since the barriers are objective. They are associated with the population [a lack of staff] and there are costs related to construction… The Far East is a highly urbanized region. This presents a huge challenge because we need to increase quality of life in the cities in order to prevent outward migration or attract new residents. Strategic planning in cities is needed here,” Deputy Chairman and Member of the Management Board of VEB.RF and General Director of VEB.DV Artem Dovlatov.


“Everyone is well aware that seasonality is a major restriction in the new territories and especially in the far north. The summer navigation window is around 100 days, and then there is the possibility of delivery with Rosatomflot. You can only build in the far north in winter. It’s impossible to cross the tundra in summer, and completion times and capital costs on all infrastructure projects are higher. The risks are higher: there is higher risk when evaluating projects, higher rates and costs for borrowing, and more stringent requirements for borrowers in terms of collateral. The conditions are far worse compared with implementing similar projects in more developed regions like Central Siberia,” CEO of Northern Star Stalbek Mishakov.


Far Eastern cities need to be improved and transformed in order to increase tourist attractiveness and improve quality of life in cities


“Tourist projects are important for the residents of Kamchatka themselves, because they improve quality of life… But from another perspective, a city’s quality has an impact on tourist flows and how tourists feel when visiting the region. I will not hide that fact that the appearance of Petropavlovsk-Kamchatsky, its urban environment, public spaces, and the urban atmosphere itself are not attractive to tourists… We must change this, starting with the city centre,” Governor of Kamchatka Territory Vladimir Solodov.



SOLUTIONS


Creating advanced special economic zones (ASEZs) and other preferential regimes for investors 


“Many measures [to attract investors] have been taken, a lot of events have already taken place. One of the key measures in terms of the decision [taken by Vasta Discovery – which is helping to implement the Three Volcanoes Park tourism project in Kamchatka Territory – to come to the Far East] was the system of advanced special economic zones (ASEZs) in the Far East. This is a really excellent preferential system from a taxation, organizational and infrastructure perspective, and it allows us to consider large projects that we would never have looked at in any other circumstances… There is however still a need to fine-tune the preferential regimes,” General Director of Vasta Discovery Sergey Bachin.


Developing transport infrastructure and master planning as a tool in the integrated development of the region


“One of the tools supporting the integrated development of the region is the master plan. We are currently working on three projects: the Greater Golden Ring, Crimea and three territories in the Far East: Primorye Territory, Kamchatka and Sakhalin. A master plan is a tool that allows you to make changes quickly and flexibly on the fly. It concerns the socioeconomic development of the city, the synergy of a city's development and efforts to attract investors," CEO of Progorod Alexander Chebotarev.


“The project to build a new international airport will be implemented in 18 months, with around RUB 5 billion of investments coming from self-funding and partners at VEB.DV and VEB.RF. It will operate out of a single location, and will be the most technologically advanced airport in the Far East. We live in the Far East, our partners are in Southeast Asia, and it’s impossible to develop either tourism or investment projects without high-quality infrastructure. An airport is always a showpiece, and an international one. The pandemic will end soon, and the infrastructure we are building is not for the next year or two, but for the decades to come,” Chairman of the Board of Directors of Khabarovsk Airport Konstantin Basyuk.


“The average Far Eastern city fares about 10% worse than the Russian average in terms of housing provision and quality of medical services. We need intensive breakthrough development. Master plans involving the integrated development of the region could provide the key to this development… What is required is a resource centre for urban development covering the Far Eastern Federal District. Secondly, the region is facing a severe shortage of highly skilled workers, especially in architecture and urban planning. We need to launch an Architects.FE programme along the lines of Architects.RF to improve the talent pool in the region,” architect and Partner at KB Strelka Alexey Muratov.



Supporting major transport and logistical projects, exporting fish products directly to Europe


“The Ryba.RF Corporation was created by major fish producers in order to overcome this challenge [the ban on exports of fish from Russia into China under the pretext of COVID restrictions, – Ed.] and create a single logistics chain that will allow [supplies of fish from the Far Eastern Federal District] to central Russia and directly into Europe without the involvement of third parties. There is a project to build a network of advanced new fishing ports in Murmansk, Vladivostok, Korsakov in Sakhalin and Petropavlovsk-Kamchatsky… The second project is a fish exchange that will be set up in Vladivostok, allowing the diversification of markets supplying fish products… In addition to infrastructure, competitive service is important, and this cannot be done without improving the quality of customs and border controls. It is important to create a new regulatory environment and deliver high-quality service that can support the export of fish to anywhere in the world," Chairman of the Supervisory Board of Ryba.RF Corporation Alexander Krutikov.




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