Development potential of the Primorsky Krai in conditions of the political and economic cooperation of the Russian Far East with the Asia-Pacific countries

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Far Eastern Federal University

DEVELOPMENT POTENTIAL OF THE PRIMORSKY KRAI IN CONDITIONS OF THE POLITICAL AND ECONOMIC COOPERATION OF THE RUSSIAN FAR EAST WITH THE ASIA-PACIFIC COUNTRIES

Kolomeytseva N.A., Nechay E.E., Vasilyeva T.A.

Vladivostok

Аннотация

Дальневосточный федеральный университет

ПОТЕНЦИАЛ РАЗВИТИЯ ПРИМОРСКОГО КРАЯ В УСЛОВИЯХ ПОЛИТИЧЕСКОГО И ЭКОНОМИЧЕСКОГО СОТРУДНИЧЕСТВА ДАЛЬНЕГО ВОСТОКА РОССИИ СО СТРАНАМИ АТР

Коломейцева Н.А., Нечай Е.Е., Васильева Т.А.

Авторами отмечены основные предпосылки формирования благоприятного инвестиционного климата в Приморском крае. Проведена оценка запущенных механизмов и институтов развития на юге Дальнего Востока. Отражен рост и динамика основных экономических показателей развития Приморья. Предпринята попытка выявить инвестиционные возможности Приморского края в контексте экономического сотрудничества со странами АТР. В заключении работы авторы приходят к выводу, что данный регион обладает достаточно привлекательными условиями для капитальных внутренних вложений и имеет конкурентоспособный трансграничный потенциал для привлечения иностранных инвестиций.

Ключевые слова: Приморский край, международное сотрудничество, инвестиционная политика, инвестиционный климат, инвестиционный потенциал.

Abstract

investment climate region primorye

The authors analyze the main conditions for favorable investment climate in the region. The authors conducted a critical analysis of the Far Eastern mechanisms and development institutions and showed the economic indicators growth and dynamics of the Primorye development. The article identify the investment opportunities of the Primorsky Krai. The authors conclude that this region has rather attractive conditions for foreign investment attraction.

Ключевые слова: Primorsky Krai, international cooperation, investment policy, investment climate, investment potential.

Introduction

The formation of the Far Eastern development vector in the Russian Federation was due to a whole galaxy of objective economic and political factors, which predetermined Russia's desire to ensure the holding of the APEC Summit in Vladivostok in 2012. During preparations for this international forum, many modern infrastructure facilities were built on the territory of Primorsky Krai, ranging from large-scale transport corridors and logistics hubs (including the international airport), to large industrial parks.

The economic and political community of the Asia-Pacific countries appreciated the prospects of Primorsky Krai as an international business, transport and logistics, innovative-educational and tourist center. It was then that a chance appeared to pass from the support by the federal authorities of one local project to the integrated development of the entire territory [3, P. 906].

Against the background of the aggravation of the foreign policy situation, Russia has got new incentives to diversify the balance of foreign trade through the development of economic relations with the Asia-Pacific countries and the transformation of the Far East into a significant integration platform for raising foreign capital and investment.

The main vectors of the investment potential development of the Far East and Primorsky Krai

In 2013, the federal authorities began implementation of the integrated development of the Far Eastern Federal District territories, which have a sufficiently large potential for cross-border trade due to the fact that all its constituent entities have a border position or direct access to international sea trade routes. In subsequent years, a strategy was launched in various entities of the Far Eastern Federal District aimed at forming a network of territories of priority development (TPD). Since October 2015, the Free port of Vladivostok (FPV) has been operating, including the southern coastal and border territories of Primorsky Krai, which now have a preferential taxation procedure coupled with simplified procedures for compiling mandatory documentation.

Comparative characteristics of FPV and TPD are given in table 1.

Table 1

Comparative characteristics of FPV and TPD

Source: compiled on the basis of [2]

In addition, in August 2018, a law was signed on the creation of two special administrative regions (SAR), operating on the principle of offshore zones [7]. One of such zones operates on Russky Island. The creation of offshore zones was one of the support measures that the Russian authorities promised to provide to businessmen who were on the extended US sanctions list.

The Russian government is creating special regions as part of a strategy for deoffshorization of Russian business. The measure is designed to return capital from abroad, protect companies from sanctions by transferring assets to Russian jurisdiction, as well as raise foreign investment.

One more step on the path of investment cooperation between Russia and foremost the PRC is the project “Integrated Entertainment Zone “Primorye” (IEZ “Primorye”), developed by the “Primorsky Krai Development Corporation” together with the Primorsky Krai Administration, where the total capital investment amounts to 55.5 billion rubles. An agreement on investment in the integrated entertainment zone “Primorye” for 700 million US dollars was signed with one of the largest companies (Melco International Development Limited). Another well-known company Naga Corporation Ltd is interested in investing about 350 million US dollars in the entertainment zone. Interest is also shown by Japanese and South Korean investors. On the Russian side, the partner in the creation of the entertainment zone was the “First Gaming Company of the East”, which provides for the construction on the territory of the Primorye entartaiment zone of hotel complexes, a casino, a shopping, entertainment and office center, a yacht club, a golf club, an aqua park, guest villas, restaurants and ski slopes.

The quintessence of investment expectations in the Far Eastern growth points, time and again becomes the Eastern Economic Forum (held for the first time in early September 2015 in Vladivostok and repeated annually). Each year, a record number of agreements are signed at the forum. So, in 2018, 220 agreements were signed for the total amount of 3.1 trillion rubles (only those agreements are taken into account whose sum is not a commercial secret), and in 2019 - 270 for the amount of 3.4 trillion rubles. [6].

It is assumed that the appearance of growth points in the region will be accompanied by the emergence of completely new economic conditions for potential residents. So the investor with the help of special tools can choose locations complete with the necessary infrastructure of transport, engineering, production and other purposes. In addition, it is possible to get simplified access to registration of land plots and connect them to communications, attractive conditions for taxation and the attending quickness of various procedures for investors, as well as targeted support at all stages of the investment project. The responsibility for these characteristics are held by Primorsky Krai Development Corporation, created in accordance with the order of the Department of Land and Property Relations of Primorsky Krai in 2013.

In the period of 2014-2018, both the volume of foreign direct investment doubled, to 831 million US dollars, and the volume of exports from Primorsky Krai doubled to 2.2 billion US dollars.

The key drivers of investment growth are the following sectors of the economy:

· transport and logistics sector (21.1% of GRP - 164.1 billion rubles in 2017);

· manufacturing, including shipbuilding and ship repair (10.1% of GRP - 78.6 billion rubles in 2017);

· agro-industrial and fishery complexes (8.4% of GRP - 65.3 billion rubles in 2017).

The region became one of the Russian leader regions in attracting foreign tourists. Since 2013, foreign tourist flow has grown 4 times and amounted to more than 3 million people in 2019, the flow of Russian tourists has more than doubled, to 3.5 million people [9]. The tourism industry is becoming an image component of the region. Today, projects unprecedented for the Far Eastern recreational industry are being implemented in Primorsky Krai, which include gaming and entertainment zone “Primorye”, scientific and educational complex “Primorsky Oceanarium”, Mariinsky Theater Primorsky stage, sports and technical complex “PrimRing”, landscape and historical park “Emerald Valley”. The plans include the creation of an Ice Sports Center, a museum and exhibition complex, a sports and tourist resort “White Mountain” in Arseniev and many others.

An important tool to increase the investment attractiveness of Primorsky Krai by regional and federal authorities is the digitalization of projects and the presentation of Primorsky Krai as an object of investment. The “Investment Portal of Primorsky Krai” provides up-to-date information on the existing investment climate in the region, the entire regulatory framework, standards and support measures are presented there. The portal also presents projects in need of investment. Along with a description of the projects, a cost estimate with estimated financial indicators is provided. Every year, the portal publishes a message from the Governor of Primorsky Krai to investors, where the Governor reports on the work done. The site is presented in Russian and English and has its own accounts on the social networks Facebook, YouTube and Instagram [1].

At the federal level, the “Invest in Russia” portal operates, which presents reports on special economic zones, large foreign investors, projects and other preferences for investors. The site is presented in Russian, English, Chinese and Arabic [8].

Assessment of the investment climate in Primorsky Krai

To assess the effectiveness of government policy to increase investment attractiveness, the Agency for Strategic Initiatives (ASI) annually presents the results of the National Rating of the Investment Climate in the Russian Federation entities. The ASI rating methodology includes 44 indicators in four areas: “Regulatory environment” - the quality of public services provided, “Institutions for business” - the effectiveness of institutions for business, “Infrastructure and resources” - the availability and quality of infrastructure, “Support for small businesses” - the level of development of small business [4].

According to the results of the ASI Rating, Primorsky Krai is slowly but surely improving its investment attractiveness indicators from year to year. In 2015, Primorsky Krai was included in the III group of constituent entities of the Russian Federation by integrative index, having received unsatisfactory ratings according to the criteria of the regulatory environment, institutions for business and support for small business. In 2018, Primorsky Krai gained 12.5 points in terms of the integrative index (which is not very much, because the average value in the Far Eastern Federal District is +24.3 points). However, according to the ASI rating presented at the St. Petersburg Economic Forum on June 8, 2019, Primorsky Krai is in the lead in the growth of investment attractiveness among the regions of the Russian Federation [5]. Rating experts associate this growth with a clear vision of the current Primorsky Krai administration of the region's development goals.

Of great importance for investors in assessing the investment attractiveness of the region is the presence of authoritative international agencies in the region that provide consulting services in the field of taxation, law and business. In 2018, the office of the company Deloitte - one of the leading international companies providing audit, consulting, financial advice, risk management and tax and legal advice services using professional experience of about 3,700 employees in 20 offices of 11 countries in the region was expanded in Vladivostok.

Also, for seven years, a representative office of the British audit and consulting company, one of the largest in the world, has been opened. According to their estimates, Primorsky Krai as a region has impressive potential, demonstrates economic growth and draws keen interest of both Russian and foreign investors. Due to its favorable location and proximity to dynamically developing countries-leaders of the Asia-Pacific region, Vladivostok is an important transport hub and a connecting point between Russia and its Asian partners.

In the process of analyzing the effectiveness of state policy to increase the investment attractiveness of the region, it was noted that the state uses the full range of available tools to increase the investment attractiveness of Primorsky Krai. This is due to its important geopolitical significance and development potential.

The starting point for the development of investment attractiveness of the Far East was the holding in 2012 of the APEC Summit on Russky Island, to which the necessary investment infrastructure was re-created. The main projects designed to attract investors to the real sector of the economy are the territories of priority development (TPD), the Free port of Vladivostok and other infrastructure projects with preferential concessions. To develop research activities, a modern complex was built, on the basis of which FEFU is located. To increase the tourist flow, one of the three Integrated Game Zones was opened and projects were launched to create premium class hotels.

The Administration of Primorsky Krai, together with the state, has much to do to improve the investment attractiveness of the region, which has all the prerequisites in order to enter the ranks of the best in the country in this direction.

Conclusion

Thus, the main vector of the investment potential development of the Far East these days is aimed at implementing projects of modern transport infrastructure that would organically blend in the system of global logistics flows, which in turn will facilitate the influx of investments to create innovative enterprises and, consequently, the emergence of new high-performance jobs in the regions of the Far Eastern Federal District.

Nevertheless, despite the efforts made to intensify investment activity, the entities of the Far East are currently inferior to the regions of the Asia-Pacific countries in terms of investment attractiveness. It is worth noting that as part of the implementation of the TPD program in the Far Eastern Federal District, new prospects are opening up for productive economic cooperation with such dynamically developing states as Singapore, the Republic of Korea, and India. In the interests of developing cooperation in the field of tourism, transport logistics, petrochemical production and agriculture, it is possible to create open international dialogue platforms for raising foreign investment. It should not go unspoken that the greatest concentration of “growth points” is noticed in the southeast of the Far East - mainly in Primorsky Krai. This region has rather attractive conditions for capital investments and has a competitive cross-border potential for raising foreign capital in the Far Eastern Federal District as part of the export program of the Russian Federation.

References

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