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In his speech at the event, the President set out his vision of the future for Russia’s economic cooperation with countries in the Asia-Pacific region, in particular South Korea.

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President of Russia Vladimir Putin: Friends,

It gives me great pleasure to greet the participants in the sixth meeting of the Russian-Korean Business Dialogue. It is excellent to see such interest in cooperation between Russia and Korea, and to see so many business community leaders here today.

Developing trade and economic relations between our countries is one of the traditional priorities on our intergovernmental agenda, including at the highest level. I am sure that today, my colleagues and I will discuss all of this with the President of the Republic of Korea. This is one of the key areas of our cooperation in general. 

The Republic of Korea is one of the world’s 20 biggest economies and has impressive industrial, technological and scientific capability. This does much to explain why it is that over a little more than 20 years since we began developing our bilateral relations the Republic of Korea is now in third place among Russia’s foreign trade partners in Asia. Our trade turnover has increased 13-fold over the last decade alone. Last year, it reached a figure of $25 billion, and over the first 9 months of this year has already reached $18 billion, which represents an increase of more than 2 percent. Given the difficult situation in the global economy, this is a positive dynamic overall. Our investment cooperation development also gives us reason to be optimistic. Total accumulated Korean investment in Russia already comes to more than $2.5 billion.

There are around 600 Korean companies doing successful business in Russia in various sectors, from energy to instrument making and the service sector. Some of the most successful examples include the Hyundai Motor assembly plant in St Petersburg, LG Electronics’ and Samsung Electronics’ plants in Moscow and Kaluga regions respectively, and the KIA car assembly venture at the Avtodor plant in Kaliningrad Region.

But we (by ‘we’ I mean both Korean and Russian partners) are still lagging behind the kind of trade volumes that South Korea has with countries such as the USA, Japan, and China. Those economies are bigger than Russia’s, but at the same time, we can confidently say that there is still much we can do in our bilateral trade to increase its volume many-fold. There are opportunities for expanding our cooperation in many sectors.

The top priority is to harmonise our bilateral trade structure. It is conservative and archaic in many respects. Russia exports mostly petroleum products and mineral raw materials to South Korea, and South Korea exports machine-building sector goods, electronics, and mass consumer goods to Russia. As a result, any price fluctuations for these goods on world markets have an overall effect on our trade.

We need to diversify our foreign trade and at the same time also start building solid technological and industrial alliances and carrying out big infrastructure projects at the global and regional levels, especially in the Russian Far East of course.

We have given the Far East Development Ministry substantially greater powers. Alexander Galushka [Minister for Far East Development] and Deputy Prime Minister and Plenipotentiary Presidential Envoy to the Far Eastern Federal District Yury Trutnev are here today. They will both be concentrating exclusively on developing the Far East. We have established a separate ministry specifically for this purpose and appointed a deputy prime minister. So you see, there are people whom you can get in contact with directly if need be in order to get official support for your projects. 

Mr Galushka and Mr Trutnev have already drafted updated proposals on a strategy for developing the Far East and East Siberia. The main focus is on economic integration with the Asia-Pacific region, attracting direct foreign investment, and offering competitive conditions for establishing production facilities geared to export markets, especially markets in the Asia-Pacific region. We hope that Korean business will play a big part in these plans, and we want to see this happen. 

We have come up with reciprocal initiatives to encourage investment. Acting on our Korean friends’ proposal, the Russian Direct Investment Fund and the Korean Investment Corporation will establish an investment platform worth $1 billion, and following Russia’s proposal, Vnesheconombank and Korea’s Eximbank will set up a targeted financing mechanism with the same amount of money.

Alongside our traditional exports of oil (Rosneft exports 1.3 million tons each year) and gas (Gazprom exports 1.5 million tons of LNG), we are studying opportunities for production cooperation in the oil and gas sector. In particular, we are looking at joint construction of large liquefied natural gas production plants on the Yamal Peninsula and in the Russian Far East.

Developing the Northern Sea Route is a promising area in terms of developing hydrocarbon supplies. It would also bring in new orders for the shipbuilding sector and create opportunities for working together on modernising port infrastructure and ports in general.

In the shipbuilding sector we need to move away from the simple ‘customer-supplier’ model and develop close production cooperation. Russia wants to develop the needed industrial capability in these areas in the Far East.

In the mid-1990s, I visited Pusan and saw how shipbuilding is organised in South Korea. It is a good example. Back in 1962, our Korean friends passed a law establishing special conditions for the shipbuilding industry. Strictly speaking, this seems to be completely the wrong approach if you look at the economic theories, which warn against giving preferential conditions to particular sectors, but in practice it turned out to be the right step. They created these preferential conditions, developed the industry, including building large ships of the kind that no one else builds. Later, they ended the preferences, and the industry was able to continue on its own. 

We now have a unique opportunity to develop our shipbuilding sector in the Far East, and on a completely new platform what’s more. We hope to do this together with Korean partners.

Korean companies could also have investment interest in taking part in joint use of the transport corridor linking the Asia-Pacific region, Central Asia, and Europe. We have decided to modernise the Baikal-Amur and Trans-Siberian railways and are putting considerable money into these projects, including from our reserve funds.

Russian Railways has already completed reconstruction of the Khasan-Rajin railway section, and a freight-handling port is now under construction in the North Korean port of Rajin. This marks the first practical steps towards carrying out the possible trilateral project of joining the Trans-Korean Railway to the Trans-Siberian Railway. We hope that South Korean investors will get actively involved in this big project.

Of course we are aware of the political limitations here, but we hope that they will be lifted, given that this project is of interest to all three parties: South Korea, North Korea, and Russia. Furthermore, I think that carrying out this kind of project will help to create the conditions for resolving political problems too.

We are already moving in this direction with the signing today of a memorandum on cooperation between Russian Railways and South Korea’s company POSCO. Carrying out these plans will bring visible economic benefits, as I said, and will also make a big contribution towards guaranteeing peace and stability on the Korean Peninsula and in northeast Asia in general.

Of course, another of our cooperation priorities is to develop our work together in high-tech sectors. We want to establish mutually advantageous alliances between our leading companies, exchange experience and technology, and develop applied science. Today, in particular, we are launching a joint project of the Skolkovo Foundation, (Mr Vekselberg is busy working on developing Skolkovo). The Skolkovo Foundation and Korea Research Council for Industrial Science and Technology will sign a document today on joint work.

At the same time, we also need to put the potential of our small and medium-sized business to best possible use too. We have so far greatly underestimated the part that SMEs can play in developing the whole range of Russian-Korean business ties.

Friends,

The Russian-Korean Business Dialogue is developing new ideas and promising projects that could become growth spots in our relations. You are looking for new areas of work and new cooperation mechanisms. We will continue to provide real support to all of your efforts and initiatives.

I wish you success and want to thank you for your patience and attention. Thank you very much.