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Medvedev: Far East ignored too long
Without action, Russia will lose it, he says

Russian President Dmitry Medvedev, currently touring the Far East, made an unprecedented statement yesterday saying Russia could lose the Far East if it did not take a hands-on approach to developing the region. Experts interpreted his remarks as an attempt to shake up officials and businessmen, reminding them that in an era of global competition for resources, Russias territorial integrity was at stake. If Russia fails to develop the Far East, it could turn into a raw material base of Asian countries.

Unless we speed up our efforts, we can lose everything, Medvedev said at a meeting to discuss the socioeconomic development of the Far Eastern Kamchatka region. Even seemingly unshakable things sometimes end in a very dramatic manner, he warned, referring to the collapse of the Soviet Union. Inaction will only bring about dramatic consequences, and they will be fast in coming, the President said, urging officials into action.

During his visit to Chukotka on Tuesday, the President rejected plans to evacuate the local population, pointing out that the regions potential has been forged with the blood and sweat of millions of Russian people. We have no right to throw away what was earned at such a high cost, Medvedev told Nikolai Dudov, Governor of the Magadan region. He also scolded government officials for failing to approve a long-term strategy for the development of the Far East and Trans-Baikal.

Dmitry Kozak, the Minister for Regional Development, promised almost RUB 57 billion (approx. $2.3bn) to be allocated until 2017 for developing Kamchatka. However, politicians and experts are split on the methods of developing the region. Moscow Mayor Yuri Luzhkov told RBC Daily yesterday that Russias current authorities should follow in the footsteps of Sergei Witte, Prime Minister under Nicolas II, who realized the importance of the Far East and went to great lengths to develop the region. The Moscow administration and the Russian state technology corporation, Luzhkov said, were re-equipping the citys air fleet, including Atlant Soyuz company, to cement the countrys domestic transactions system. Moscow is also building residential houses in Vladivostok and plans to increase such aid, Luzhkov stressed.

Emergencies Minister Sergei Shoigu recalled pre-revolutionary measures to revive the Far Easts economy, including providing interest-free loans to the local population and exempting men from military service. Things will stabilize with time, as Deputy Prime Minister Alexander Zhukov assures us.The federal budget has just begun investing in the region, since it was impossible to do so before, he told RBC Daily.

Yet according to Maxim Perov, Deputy Chairman of the North-West Center for Strategic Research, the problems of the Far East have reached a critical point. The Far East is already completely separated from the rest of Russia, he pointed out. This region has to orient towards large Asian growth points such as Beijing, Seoul and Tokyo, he said, adding that Asian imports accounted for 90 percent of the Far Eastern consumer market, while high transportation costs and expensive electricity choked the development of small and mid-sized businesses.

The regions main problem is the outflow of its population, experts say. In fact, the Far East is half of Russia in size. If the expansion of foreign businesses continues, this region may very well remain de jure Russian, but de factor it could become a raw material base for China and Japan, agrees Rostislav Turovsky, General Director of the Regional Studies Agency.

Vladislav Glazychev, Chairman of the Public Chambers commission for regional development, highlighted the importance of fighting corruption in the region. Regional authorities have stifled small and mid-sized businesses, forcing them to flee to China, he said. Given Russias vast size, the No. 1 problem is that of communication transport costs, railways, air flights and highways reckons Alexander Kynev, the head of regional programs at the Foundation for Information Policy Development.

Such problems can only be solved by the government. Huge investment paired with huge risks is not for private businesses, argues Konstantin Simonov, the head of Russias National Security Energy Fund. This requires a kind of mobilization compared with that of the Gulag, but our government is too loose, relaxed and sybaritic, and it also fears the accusation of dirigisme. This is very strange for the biggest country in the world, where 15 percent of the population lives in Moscow alone, he said.

Prime Minister Vladimir Putin announced yesterday that the government would begin to subsidize passenger transportation services in the Far East starting in 2009. RUB 2.5 billion (approx. $100.4m) will be allocated for this purpose.

Analytical department of RIA RosBusinessConsulting

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