From Crisis to a New Starting Point Of Reconstruction: A Perspective on the Far East and Siberia

28.11.2017

The past decade saw Russia’s strategic arrangement rid itself of its crisis, restructure the domestic economy and recover the international environment for its development. Such an approach probably reflects the path of growth of many other countries since the dawn of the 21st century.

Russia’s choice has ignited controversy. Given its status quo, the prospect of its socio-economic development leads to various extrapolations. In a world of diverse interests and values, such a contradiction is almost certain for such a major power as Russia. Nevertheless, the significant progress Russians have achieved through relentless endeavor under the challenging, if not critically harsh, circumstances over the past few years is indisputable.

The World Bank’s Doing Business Report on November 1 moved Russia up to the 35th position in the ranking. During his 2012 presidential campaign, Vladimir Putin set the ambitious goal of raising Russia from the 120th place to top 20 in the ranking of Doing Business by 2018, which received much doubt, but is now closing in.

Meanwhile, it is noteworthy that the ranking is not the only testament to Russia’s socio-economic amelioration. Despite its decline from the 51st position in 2008 through 61st in 2012 to 64th a year later in the Global Competitiveness Index of the World Economic Forum, Russia bounced back to the 53rd place in 2014, then 45th and 43rd in 2015 and 2016 respectively. This year, it was ranked 38th among the 138 countries.

Russia is yet to perform well in other rankings, including the financial ones. However, according to the Bloomberg Innovation Index, US claimed the 8th place and China the 21st, while Russia was number 12.

In the 2017 World Bank Report, Russia was also among the 34 most promising economies in the sense that it has been implementing regulatory reforms unwaveringly in more than 3 of the 10 parameters for the ease of doing business over the past decade.

Obviously, the new priorities for developing Russia’s Far East and Siberia are boiled down to further improving these indicators. This includes the establishment of the Free Port in the Far East and Territories of Accelerated Development (TADs) in Siberia, the breakthroughs in agriculture, the pipeline construction in full swing, the creation of the Eastern Economic Forum and the Far East Federal University, the influx of foreign investment, and so on. According to President Putin, in the past 2 years, 80% of the $9 billion investment in Far East and Siberia came from China.

The development plan with Far East and Siberia as its pivot is demonstrating broad prospects and, more importantly, embodies a new concept for development.

Quality-oriented intensive growth instead of the extensive paradigm is seeing results. In his public speeches, Putin noted that the oil and gas sector that contributed to 51.3% of fiscal revenue in 2014 now makes up for around 39% of income in 2017 and that the share would diminish to around a third by 2020. It is true that energy production and export will remain an irreplaceable priority for development, but structural optimization is an irreversible tendency. In this process, China and Russia can find new fronts for cooperation, such as joint manufacturing, new types of agriculture, finance, science and technology, as well as joint efforts to improve the quality and standards of tourist industry.

Nonetheless, the development and opening-up of Far East and Siberia is by no means a simple task. Similar academic debates vis-à-vis the development of China’s Northeastern areas show that regional reconstruction in the less-developed non-Western world involves not only a tradeoff between a market approach and government-led plan. Rather, it concerns the complicated legacy of traditional institutions, the awareness of and preparedness for development and reform, the cooperation and competition between different interest groups (the preferences of decision-making bureaucratic bodies) and the opportunities and impacts brought by the turbulences in the global context.

In light of this, the development and opening up of Far East and Siberia rotates around the strategic choice of a sovereign country, first and foremost. At the same time, it is inevitably an international political and economic process. In other words, the domestic development of this region is closely related to the global configuration. Therefore, we should look at the significance and key elements of this issue with a series of international transformations in mind.

Firstly, the revision over the pros and cons of globalization leads to a new focus on sovereignty of a state. Sovereignty and territorial integrity are the pretext to any development and cooperation arrangement. The development and opening up of Far East and Siberia will also meet this prerequisite.

Secondly, the Russia’s economic accomplishments, including those that occurred thanks to the development and opening-up of Far East and Siberia, speak of the poignant necessity of participating in global cooperation and competition in all of domestic reform.

Thirdly, though crucial, the economic complementarity is far from the only factor to be taken into account when it comes to the pronounced nature of Far East and Siberia. From here, there are a number of bilateral, multilateral, regional and even global common interest and goals to be fulfilled.

On the one hand, the Far East and Siberia are probably the vastest region in Northeast Asia and even in the world with the richest resources, a relatively high level of public education and thereby the greatest prospects for development and opening up.

On the other hand, it is adjacent to the location of DPRK’s nuclear program, Far East and Siberia is rendered the geopolitical hub of Northeast Asia. The potential and leverages possessed by this region can be turned into precious instruments in facilitating the talks and reconciliation and resolving the nuclear issue ultimately.

Apart from that, as a member of APEC and the East Asia Summit, Russia needs some time before its volume of trade with ASEAN reaches 15 billion dollars, even the turnover between China and Russia is way below the target of 100 billion dollars. This situation does not live up to the potential of Russia and its partners. In the meantime, we are seeing tremendous changes in the geo-economic landscape of East Asia and the entire Asia-Pacific region. The Trans-Pacific Partnership (TPP) is still moving forward without US’s presence. The Regional Comprehensive Economic Partnership (RCEP) may realize substantial development towards the end of this year. Even though APEC did not form the single regional market as it had planned, there is much room for coordination.

What part will Russia play in this scenario? The question shall entail other, grander research. But as the pro-establishment camp in the US sticks to ideological exclusion and insists on strategic alliances, as it has recently revealed the intention to forge the new strategic alliance with Japan, Australia and India under the banner of Indo-Pacific region, Russia’s essential role and position in Asia-Pacific geo-economics and geo-politics should be emphasized, suffice it to say.

Against this backdrop, the development and opening-up of Far East and Siberia is more than a starting point of restructuring in Russia. It is a trigger of reconstruction for the crisis-hit Northeast Asia and Asia-Pacific region.

Views expressed are of individual Members and Contributors, rather than the Club's, unless explicitly stated otherwise.

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