Primorye on the eve of the APEC summit

APEC summit
Москва, 20.08.2012
«Expert: invest in Russia » №2 (2)
Russia’s Far East is the territory currently witnessing development of a new wave of industrialization of a large and very rich area

Photo by ITAR-TASS

The Asia-Pacific Economic Cooperation Forum (APEC) is an international economic organization that was founded to develop integration relations between the Pacific Rim countries. Today, the APEC includes twenty-one countries with different development levels. These are Australia, Brunei, Vietnam, Hong Kong (PRC’s special administrative district), Canada, People’s Republic of China (PRC), Indonesia, Malaysia, Mexico, New Zealand, Papua Guinea, Peru, Russia, Singapore, the USA, Thailand, Chili, the Philippines, South Korea, and Japan. The APEC is the world’s largest economic association, the member states of which account for nearly half the planet’s population, over 57% of the world’s GDP, and 48% of the global trade volume.

Organization for parties concerned

The APEC activities are based primarily on informal mechanisms and develop in various areas. The Organization is not a politically motivated and well-consolidated group of countries, but a free “aggregate of economies”. The Organization discusses economic issues instead of political ones and has no strict organizational structure or a large bureaucratic machine that is typical of political unions. The Organization’s Secretariat located in Singapore employs only twenty-three diplomats representing the APEC member states and twenty local employees.

It is telling that the APEC is not an organization invested with powers of legal enforcement in dispute settlement as is the case with the World Trade Organization (WTO). The decision making process here is based on consultations and consensus achievement only. And the main driving force to develop them is the positive examples of “neighbors”, desire to follow them, develop and improve.

Relations between the APEC member states are based on public exchange of information, primarily information about business projects of partners within the Organization. One could say that the closest target of this economic organization is formation of the single informational rather than economic space. This permits businessmen from each country to participate in business activities on the territory of all of the APEC members. Given the fact that the APEC was founded as a free consulting forum, summits of the leaders of the Organization’s member states have been the main form of its activities since 1993. These meetings adopt declarations summarizing the results of activities for the year and determining the future development outlook.

Meetings of ministers of foreign affairs and ministers of foreign trade of the member states are the most frequent ones. The APEC main working bodies include the Business Advisory Council, three expert committees (committee for trade and investments, economic committee, and administrative and budget committee) and eleven working groups responsible for different economic sectors. The APEC member states officially demonstrate their commitment to the public regionalism principle, which is normally considered as freedom of the Organization’s members in choosing specific trade liberalization mechanisms with no mandatory unification. The issue of creating the Asian Pacific Economic Association as an area of free trade and investments has been raised several times at the APEC conferences. However, a considerable gap at the development level of the member states prevents this idea from being implemented. For this reason, the APEC is rather a discussion forum with certain characteristics of an integration association than a union in the full sense of this word.

The trend to create the APEC was recorded in several official documents of the Organization, but no more than that. In 1995, the date when the free trade area would start to be formed (January 01, 1997) was proposed at the APEC summit in Osaka; however, this decision was never implemented. But the ambition to create the free investment area within the APEC was not given up. The Organization’s member states take measures encouraging capital movement in the area: they reduce the number of sectors closed for direct foreign investments, facilitate the visa regime for businessmen, and provide wide access to economic information.

Russia’s integration into the APEC started in March 1995, when it registered an official request to join the Organization. Three years later, at the Vancouver summit, the Russian Federation became a full member of the APEC. Since then, our country has been steadily increasing its activity within the Organization, and the Russian Federation President has been regularly participating in the APEC summits since 1999. Russia initiatively participates in the process of updating and reforming the Organization, has an important voice in discussions dedicated to issues such as fight against international terrorism and various aspects of security, including in trade and finance, individual security, which constitute the main topics of the Forum.

The first important event in Russia within the framework of the APEC Forum was the meeting of the Business Advisory Council (BAC) that was held in Moscow in May 2011and attended by about 100 business elite representatives of the APEC member states. Today Russia is represented in th e Business Advisory Council by Oleg Deripaska (Bazovy Element Company), Andrey Kostin (Bank VTB OJSC), and Ziyavudin Magomedov (Summa Group). In 2002, Moscow successfully hosted the forum of business cooperation in the area of innovation entrepreneurship and a meeting of the APEC working group for telecommunications; an investment symposium and an investment trade fair were held in Vladivostok at the initiative of the local authorities supported by the Russian Government and the APEC official structures. In 2007, a decision was passed at the Sidney summit that the Russian Federation would chair in the APEC in 2012, and the summit of the Organization’s member states would be held in Vladivostok on September 08 – 09, 2012.

Transformation of Vladivostok

Since it was decided that the APEC summit would be held in Vladivostok, the Primorye capital has been intensively preparing to host this important international event. Declarations of multibillion investments in the economy and infrastructure of the area and preparation of Vladivostok for the APEC summit seemed to be dreams, although unbelievable ones, to many. Today we can really assess the extent to which declarations of heads of the countries and the territory, as well as representatives of the Russian and international business milieu that have regularly discussed the ways of the Far East development at various communication platforms have been implemented.

Certain figures will be helpful in illustrating the scale of work that has been done. According to the Russian Federation Accounts Chamber, the amount of funds allocated over the period from 2008 to 2012 to preparation for the Vladivostok summit alone totaled RUB 679.9 billion. The federal budget (32.2%) and extra budgetary funds (62.6%) have become the main sources of financing the events. The plan of preparation for the event stipulated construction of over fifty social, utilities, transport, and energy infrastructure facilities, which, according to the above Accounts Chamber, have been practically fully completed by now. 

The most important facilities built in Vladivostok in the process of preparation for the APEC summit and that have already practically become the city’s cards, include the unique bridges across the Golden Horn bay (worth approximately RUB 20 billion) and to the Russian Island across the Eastern Bosporus gat (RUB 32 billion). These bridges seem to bring together the past, the present, and the future of the Primorye and prove that people living here can complete any task.

In total, it took less than four years, namely 43.5 months, to build a bridge to the Russian Island. During this globally record short time period, the 1,104 meter span brought together the sides of the Eastern Bosporus gat. The bridge structure includes over 265.5 thousand cubic meters of concrete. The designed 324 meter high towers were erected on both sides of the gat, and the central span between them weighing more than 22 thousand tons is supported by 168 standing guys with the total length of about 55 kilometers.

The cable-stayed bridge across the Golden Horn bay that started to be built in July 2008 has already become one of the modern symbols of today’s Vladivostok. This bridge is one of the world’s five largest cable-stayed bridges. The span is 737 meters long. The height of the towers on which the 24 standing guy pair system supporting the span of the bridge at 70 meters over water is fixed totals 226 meters. Construction of the two bridges has been completed; they have undergone the necessary dynamical tests and will be put into operation within a month.

The complex of the Far East Federal University has become another large project (worth RUB 70 billion) with the surface area of more than 800 thousand square meters. It was built in the Ajax bay on the Russian Island. It is here that the APEC summit main events are planned to be held.

The FEFU complex’ scale corresponds to the project of creating a federal university as a powerful integrator of Russia into the Asian Pacific Rim. It is obvious that implementation of large-scale tasks to develop the Primorye and Russia’s Far East cannot do without the latest knowledge and technologies. They can be purchased; they can be attracted within the framework of joint projects as it happens today, for example, construction of a wind power park on the Popov and Russian Islands by Rushydro OJSC and Japanese Mitsui Corporation. But we can create these knowledge and technologies on our own, in particular, when having at hand the powerful intellectual and educational base of the Far East Department of the Russian Science Academy with its academic research institutes and several high education institutions.

This will be the world’s level research university. It is planned that fifty thousand students will study there under the guidance of about six thousand teachers. Leading researchers and top managers are currently recruited from abroad. The basic universities have been brought together to form the single structure. The university’s founders have the goal of becoming the full-fledged research and educational base, where the latest achievements in various areas of science and technology will be integrated.

One of such areas of the future university has already been determined. A Medicine Department and the Gerontology Center will be created on the FEFY base. Their main objective will be to develop and create various preparations to extend the human lifetime based on what the ocean gives to man: sea hydrobionts. Research and educational programs and achievements in the area of bio and nanotechnology will be implemented here. 

Another important task to be pursued by the Far East Federal University consists in strengthening the Russian language position in Russia’s Far East and the countries of the Asian Pacific Rim as well as training highly qualified professional orientalists. It is impossible to imagine the full-fledged integration into the APR socio-economic processes without that. For this reason, creation of the Far East Federal University is a logical step in the process of building a modern economy relying on knowledge and technologies. This is also a powerful investment in the present and the future of the country.

The APEC participants and guests will see actually the new air gates of the seaside capital and the considerably modernized transport infrastructure. The runway has been reconstructed at the Knevichi airport, which can accept any aircraft types; a new airport terminal has been built. The entire complex is worth almost RUB 12 billion, which investors plan to recover within a decade; it was built by state-owned International Airport Sheremetyevo (IAS) OJSC. The new airport terminal complex can handle 3.8 million passengers annually. The Air express line was built from the Knevichi Airport to the railway station in downtown Vladivostok; its construction is worth more than RUB 8 billion. It takes now forty minutes to get to the airport. It is possible to directly reach the Russian Island from here by using the new Novy – De Frise – Sedanka – Patrocl highway, to construction of which the amount of over RUB 30 billion was allocated.  The third low-level bridge built in the course of preparation for the international forum became the key component of the 42-kilometer long highway. The M-60 Ussuri federal highway was seriously reconstructed; new junctions and flyovers were added to it and its traffic way was considerably expanded.

In addition, a power complex of treatment facilities was built in Vladivostok and its suburbs, which will make it possible to significantly improve the environment of the seaside water bodies. The large domestic waste landfill near the Weasel Bay, which had polluted air and water of the Ussuriysk Gulf for many years and the smoke tail of which could have been seen from the space, was re-cultivated. Modern waste recycling technologies are implemented. Considerable funds and resources were invested to modernize the municipal water supply and sewerage systems. The power infrastructure of both Vladivostok and the entire South Primorye were upgraded. If we add the completing construction of the federal center for traumatology, orthopedics, and prosthetics, a seaquarium, an opera and ballet house, a modern regional library to the above, then the outlook of Vladivostok as a business, cultural, research, and tourism center of Russia in the Asian Pacific Rim becomes clearer. 

Area where large projects are implemented

Russia’s intention to become one of the key political, cultural, and economic centers of the Asian Pacific Rim are supported by implementation of serious economic projects. They are primarily focused on markets of the APEC member states.

The territory is currently covered by construction sites of the newly created hydrocarbon deposit transportation and processing cluster. This includes construction of the Eastern Siberia – Pacific Ocean oil main, commissioning of the second phase of which will increase its capacity to 30 million tons annually; construction of the modern oil and chemical complex near its endpoint: Kozmino oil loading terminal. Construction of the Sakhalin – Khabarovsk – Vladivostok gas pipeline made it possible to both increase the power possibilities of Far East areas and activate business cooperation with partners within the APEC. For example, Gazprom and Japanese corporations will jointly build a natural gas compression plant near Vladivostok worth approximately USD 16 billion. In addition, it is planned to develop a gas and chemical complex and organize production of fertilizers in the Primorye.

No considerable growth of the production facilities of the local economy can be achieved without stable and reliable power supply. For this reason, large-scale works are carried out in the Primorye to strengthen and develop its power base. New Ussuriyskaya and Nakhodkinskaya TPP are being designed to be built. A new turbine at the Partizanskaya SDPP has been reconstructed and installed. The Vladivostok TPP-2 and Artemovsk TPP are currently modernized. New steam generating turbines at TPP-1 were put into operation. Construction of a network of 500 kV high-voltage transmission lines is about to be completed on the basis of modern technologies minimizing loss of energy transmitted at long distances. Main energy sources of the South Primorye start to operate on natural gas: Vladivostok TPP-1 and TPP-2, Severnaya TPP. Wind power plants started to be built on the Popov and Russian Islands. Implementation of all of these projects will make it possible to increase the level and reliability of power supply in the South Primorye and create conditions for further economic growth all over the Primorye Territory.

Equally large projects are carried out to form a modern and powerful shipyard and ship repair base in the Primorye Territory. In late 2009, construction of modern shipyards was launched: Russ-Korean Zvezda-D.S.M.E. on the territory of Bolshoy Kamen CATE and Russo-Singaporean Vostok-Ruffles on the territory of Fokino CATE. The shipyards that are being built are designed to build a large capacity of fleet of tankers (oil, chemical, and gas carriers), and modern maritime gas and oil rigs. The key potential customers of products to be made by the above shipyards include Gazprom, Rosneft NC, Sovkomflot, Novatek, etc. Several agreements for placing orders have already been signed. The scope of contracts for construction various ships on these shipyards currently totals USD 5 billion. Large fishing companies in the Primorye also study the possibility to place orders for construction of fishing fleets on the said shipyards.

The APEC summit has contributed to the Primorye shipbuilding development. Within the framework of preparation for the summit, Vladivostok-based Vostochnaya Verf Company in the Ulysses bay started to build passenger tween-decks for the summit guests. Their bodies are made of modern composite materials and carbon plastics. Tween-decks were designed in Australia, but were completed and equipped with special devices in Russia so as to meet the national passenger sea transport safety requirements. The passenger capacity of each tween-deck is 223 people; its team includes 5 persons; its operational speed is 25 knots; its navigation distance is 400 miles. Two ships have already been put on water and are tested before being officially put into operation scheduled for early August 2012. After the international forum is over, these ships will be used for costal passenger transportation in Vladivostok. It is highly possible that the APEC will become the “godfather” of development of modern shipbuilding in the Primorye by using the state-of-the-art technologies, which Far East inhabitants need so badly. 

At the same time, development and realization of the Primorye industrial potential is not the only priority. The Primorye Territory is a unique area from the perspective of its natural resources and appeal for green tourism supporters, which is becoming more and more popular in the world. For this reason, investment projects implemented in the Primorye Territory include creation of a game zone in the Ant Bay near Vladivostok and a special tourism and recreation economic area on the Russian Island.

Vladivostok

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