Policy Matters - Does Russia’s eastern economic forum matter?

VLADIMIR Putin had successfully conducted the first Eastern Economic Forum (EEF) last year. The forum – the second was held at Vladivostok on Sept 2-3 – is leveraged on the Far East which is rich in metals (diamonds, tin, gold, tungsten) and houses industries that are centred around mining and the processing of non-ferrous metals. Aside from this, the major economic activities in this region are fishing, shipbuilding and ship repair. The cultivation of soya beans is another important pre-occupation in the Far East.

Russia is fairly confident of the prospects of the EEF. As they see it, the arrangement is expected to attract interest from Europe, China, Japan and South Korea. Europe is a primary target for the Russians and the EEF will eventually bridge Europe with the Far East, with a maritime passage through the Northern Sea Route that links Europe with Russia through the Russian Arctic.

Given the geography of the region, it is in close proximity with China, Japan and America. Although Russia has had conflicts with Japan in the late 1930s, this is not likely to detain Japan from developing economic ties with Russia in the Far East in current times. Not only can one anticipate interest from these countries in exploring the prospects that this region offers, one can also expect China to be a significant player in the region. Indeed, the Far East offers China yet another node to expand its influence over the region.

Equally significant is that as one takes a broad sweep southwards from this area, one runs into Southeast Asia. This is a much cherished space these days, what with Japan, China, and the US vying for its attention. There may not be many potential businesses from Asean which would like to invest in the Far East, though that cannot be written off. There would be companies in Singapore, Malaysia, Thailand and Indonesia which would be attracted to the opportunities this region offers, although they are more likely to come from the first two of the list.

It is noteworthy that the second EEF comes soon after the Asean-Russia Summit at Sochi. Taken together, this sequence of events indicates Russia’s snowballing interest in the region. Aside from any possible interest in building its presence in what is about to be an extremely important region in the world, there are obvious economic reasons for doing so.

Asean is set to be about the most economically vibrant region in the world. Several major economic players are keen to engage in the region, among them India, China and the US. The EU is negotiating FTAs with some of the states in Asean. Russia cannot afford to be left out from the gains to be reaped by participating in the economic growth of the region. Russia has traditionally had strong ties with Vietnam and Cambodia, for instance. But that is not enough.

For its part, Russia would like to see more economic development in the Russian Far East, leading to the creation of the “Greater Eurasia”. There is much economic potential for trade and investment in the Russian Far East, and it can serve as yet another area where the more developed Asean countries can invest; they can take advantage of the special economic zones in the region. Asean would now be spoilt for opportunity, since there would be overlap of regional agreements that would, in time, include the Regional Comprehensive Economic Partnership, possibly the Trans Pacific Partnership, and, perhaps an economic partnership with the Russian Far East. Distance and the lack of familiarity with business practices in that part of Russia are, however, factors that could act as stumbling blocks to the process.

At any rate, an arrangement between the Russian Far East could tilt the balance in China’s favour. Although Russia and China have different interests they, probably, would be more comfortable with each other, much to the dissatisfaction of the US. However, this is likely to be a long-shot, with much of the potential being slow to be realised.

Obviously it is not only the US that is pivoting towards Asia; it seems that Russia, too, might want to pivot towards Asia, with Asean being a mechanism to accomplish that effort. That will necessarily complicate the dynamics in the region.

Asean has believed in taking a consensual approach to matters, with member states being free to determine how and to whom they wish to align themselves. Applying this strategy to Asean, one can expect that Asean will not react as one monolithic entity, rather there will be a variety of responses that may gradually result in a solution that is satisfactory to the region, one that will emerge after a period of debate and deliberation.

Shankaran Nambiar is a senior research fellow at the Malaysian Institute of Economic Research. The views expressed are his own. Comments: letters@thesundaily.com