What Will Be the Main Driver of Growth in the Russian Far East?

After infrastructure and big business, medium-sized businesses and foreign companies began to come to Russia's Far East. They understand that the strategic location of the region gives them a unique opportunity to organize export-oriented production. However, for the further successful development of the region it is necessary to get rid of administrative barriers, said Alexander Ivlev, managing partner of Ernst & Young, in an interview with valdaiclub.com

To date, the key investor in the Far East is the state. "Investments in infrastructure and various sectors, such as agriculture and the fishing cluster, all this, from my point of view, is beneficial. Private investors, both foreign and Russian, will come along with state money," Alexander Ivlev said on the sidelines of the Eastern Economic Forum in Vladivostok. 

According to statistics, in 2011 the Far East took in less than 2% of the total volume of foreign direct investment into Russia, which amounted up to $950 million, while the total volume of was $55 billion. But if you look at the share of foreign investment in the Far East in 2016, then it is already 32% of the total direct foreign investments in Russia. 

"That is, the system begins to work, with the appearance of infrastructure and large business in the Far East, the medium businesses begins to come, as well as foreign companies. They understand that the strategic location of the region provides a unique opportunity for the  organization of export-oriented production. If we talk about China, the cost of labor force there is now higher than in Russia. With the right approach, we have very good competitive advantages over our neighbors in many areas," Ivlev said. 

However, for further successful development of the Far East, it is necessary to get rid of administrative barriers, Ivlev believes. 

"Various reforms are already being implemented to reduce pressure on business. In particular, the "Road Map" of the Agency for Strategic Initiatives played its role. The state continues to work in this direction. Of course, one should not expect quick results, but nevertheless we can speak about the progress that has been made. I think, that the burden on business will gradually decrease even more," Ivlev concluded.

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