Russia building up its eastern regions

In an effort to take advantage of the opening up of the northern sea route linking the Atlantic and Pacific Oceans as a result of global warming, Russia has adopted a go-east strategy. It is focusing on two relatively backward eastern districts - the federal districts of Siberia and the Far East.

There are three reasons Russia is adopting this approach. First, as the global economic and political gravity shifts to the Asia-Pacific, Moscow's impulse to go east becomes stronger.

Second, the lingering crises in the United States and the European Union have provided Moscow with the opportunity to develop its backward regions.

Third, President Vladimir Putin and other leaders have realised the need to restructure Russia's solely energy-based economy to help jump-start the "new economy".

These points were made at a conference entitled "Developing Asia-Pacific's Last Frontier: Fostering International Cooperation in the Development of Russia's Siberia and Far East", organised by the Centre on Asia and Globalisation at the Lee Kuan Yew School of Public Policy at the National University of Singapore.

The Far Eastern Federal District has huge oil reserves, minerals, forestry and fishery resources, while the Siberian Federal District has oil and natural gas, coal reserves, minerals and virgin forests.

International cooperation

But developing this vast region requires international partners like Singapore as stakeholders. As scholars and experts at the Dec 16-18 conference noted, this was because of the sheer size of the territory and the exorbitant costs involved.

Indeed, Singapore is not the only country to be responding to the new challenges and opportunities.

Oil-rich Norway has adopted the "North Strategy" designed to expand the nation's involvement in the Asia-Pacific by taking full advantage of the emerging northern sea route from Europe to Asia as a result of the melting of the Arctic ice.

Meanwhile, traditional labour export countries in South- east Asia and South Asia are looking for new destinations for their labour force in the East. This is particularly so now that there are fewer opportunities in the EU and the Middle East due to the economic stagnation there.

The energy sector, however, is the low-hanging fruit. The Russian Far East and the East Asian economies should find it easy to take advantage of this in the early stages of the development.

New oil routes would certainly interest economic powerhouses China, Japan and South Korea, which are high energy consumers. They have been relying heavily on the Middle East for their supplies and may now turn to Russia's eastern region.

Although the supply of oil and gas will be an important means to connect with the Asia-Pacific, Russia is keen to encourage broader economic integration by developing sectors such as manufacturing and services in its eastern territories. After all, the northern sea route is expected to be open for only four to five months a year.

Russia and Singapore

Opportunities for cooperation between Russia and Singapore are manifold. For example, Russia can draw lessons from Singapore's experience as a research base for alternative fuels and the next generation of biofuels and developing high-value products such as lubricants.

Singapore can share its knowledge in managing crude oil condensates and naphtha storage facilities. Moscow can tap the highly skilled Singapore workforce in managing high- end complex manufacturing and research projects.

Since adopting its go-east strategy last May, Moscow has taken several initiatives. These include drafting a Far East development strategy, setting up the Far East Regional Development Ministry and working on some infrastructure projects and special investment funds.

Challenges ahead

Professor Huang Jing, director of the Centre on Asia and Globalisation, told the conference that there are four bottlenecks that must be overcome - capital, labour, market and technical know-how - in the development of the region.

Conference papers and discussions also pointed to the lack of capital due to the poor investment climate. Capital is necessary to pay for the high development costs of large-scale projects and the wages to attract a new labour force and retain the existing one. Due to the harsh climate and lack of basic materials, the population in the Far East district has fallen from a high of eight million in 1991 to 6.4 million in 2011.

One solution to the problem is to import labour from neighbouring Chinese provinces.

However, Russia expert Victor Larin of the Russian Academy of Sciences cautioned that there were states opposed to "Chinese dominance in the territory".

Another Russia expert, associate professor Yang Cheng of East China Normal University, said there was a lack of mutual understanding between the two countries to the extent that placing Chinese labour in the eastern region could be misunderstood as "a sign of Chinese people occupying Russia".

Technical know-how is also scarce in Russia's backward eastern regions.

Better planning needed

There is no comprehensive national plan to promote investment. Nor is there any major treaty between Russia and interested foreign countries. Instead, bilateral agreements have been merely ad hoc.

Other problems that need to be thrashed out include the North Korean issue and the territorial dispute between Russia and Japan over the Kuril islands, which hampers Japanese investment.

These challenges are to be expected as the eastern region has long been neglected in favour of development in Russia's European regions. The pledge by President Putin, in his state of the nation address on Dec 12, to give priority to the development of the east, is certainly welcome as it indicates his political commitment. It is also something Singapore can hope to benefit from.

However, Russia still has a long way to go to revitalise its eastern territories and to enhance its status and influence in the Asia-Pacific.

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