Valdai Club Regional Conference in Singapore. Session 4. Russia’s Exports Potential and Enhancing Economic Ties with Asian Countries

13.12.2016

The fourth session, titled "Russia’s Exports Potential and Enhancing Economic Ties with Asian Countries", presented not only the views of experts, but also of business representatives. In addition to Tomoo Kikuchi, Senior Research Fellow, Centre on Asia and Globalisation, Lee Kuan Yew School of Public Policy, National University of Singapore (NUS), the speakers were Konstantin Kuzovkov, Chief Financial Officer (CFO), Summa Group, and Moriyuki Aida, Executive Officer for Europe, the Middle East and Africa, Japan Bank for International Cooperation (JBIC)

Moderator Carolina Hernandez, Founding President and Vice Chair of the Institute for Strategic and Development Studies (ISDS Philippines), Professor Emeritus in Political Science, University of the Philippines (Diliman), highlighted the consolidation of the "Pivot to the East" process by Russia and asked a number of questions about the prospects and challenges of the financial and economic cooperation between Russia and East and Southeast Asian countries.

Moriyuki Aida spoke about huge economic and export potential of Russia. He expressed belief that Russia's potential is a major landmark in bilateral and multilateral economic cooperation. He recalled the construction of a seaport in the Far East, which will open new opportunities to enter the Asia Pacific markets. According to Aida, this will be an important step for the cooperative and effective cooperation between Russia and the countries of the region, and will help  solve a number of internal problems such as raising the living standards in the Far East, health care, economic development of cities, etc.

Moreover, access to the Asian export markets will allow to reach a qualitatively new level of economic integration with the countries of the Pacific region. Aida pointed to the importance of the Northern Sea Route as an alternative to the Suez Canal, especially its economic prospects. Speaking about the industrial diversification, he said that it consists of two interrelated factors: foreign direct investment and infrastructure development. So, investment carry financial flows, and after that are inevitably followed by the technological infrastructure raising. Noting the main aspects of Russia's export potential, Aida highlighted the agricultural sector, processing industry and healthcare. At the end of his speech, he emphasized the principle of investment financing: a project requires assessment and recognition of its viability for the possibility of its full funding.

In his turn, Tomoo Kikuchi started with correlation between international oil prices and the economic and financial welfare of the states. As an example, he referred to the recession in the United States, which led to the decline of the dollar, lower oil prices and, as a consequence, the development of the OPEC countries role. Kikuchi spoke about forecasts. According to them, by 2025 the US will be able to abandon completely the import of energy resources, which will lead to the weakening of relations between the West and the Middle East. In this context, in his view, there is the need to build and strengthen relations between North and South. Turning to relations between Russia and Asia, in particular to the Russian-Japanese economic relations, Kikuchi emphasized the huge volume of imports of liquid natural gas from Russia, which made Russia the fourth country in terms of import to the Japanese economy. He expressed confidence that Russia justifiably claims to play a greater role than to be just a supplier of liquid gas, and the solution to this problem is to implement a number of projects in the framework of bilateral and multilateral relations between the Russian Federation and the countries of the Asian region. Thus, one of the main project is the pipeline to Hokkaido, which, according to Kikuchi, is definitely profitable and promising. In addition, the development of relations can contribute to the creation of LNG-spot markets where the partners could offer each other excessive resources. Japan, having a cash capital, and Russia - energy, will be able to cooperate beneficially. Finally, Kikuchi proposed the creation of a kind of analogue to the national currency peg to the energy resources in comparison to the US dollar binding to oil.

Konstantin Kuzovkov, Chief Financial Officer (CFO), Summa Group began his speech with a statement about the final "Russian pivot to the East", the deterioration of relations with the West, confirmed by statistical data of the last twelve months. China is the largest trading partner of Russia, and the growth of agricultural exports by 7% is an indication of the huge potential of Russia's cooperation with the Asia-Pacific countries. Kuzovkov pointed to the 24%-increase of Russian investments in the Asian market, increase of mutual trade in national currencies - and all this confirms the improvement of Russian financial relations with Asia. He believes that Russia can offer Asian investors not only gas, but also space and territory, i.e., enormous potential for the development of agriculture; geographically advantageous position of the Russian Federation; security in the business environment, highly developed defense technology and defense industry.

The session ended with a number of questions from the audience. Tomoo Kikuchi stressed that the investors should account the full range of opinions and comments from representatives of countries, where investments are planned. Konstantin Kuzovkov raised the issue of the free trade area and the need for lobbying, and Moriyuki Aida said that he saw problems in the low population in the Far East for the development of Russia's export potential.

In general, experts agreed that we need to develop all-round cooperation between Russia and countries of the region, establishing mutually beneficial investment climate.

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