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Eastern Economic Forum

September 3, 2016, Russky Island

Vladimir Putin took part in the plenary session of the Eastern Economic Forum. This year, representatives of 35 countries applied to attend the forum. In total, delegations from 56 countries are taking part.

The Eastern Economic Forum (EEF) was established by a Presidential Executive Order in 2015 to promote the accelerated economic development of the Russian Far East and the expansion of international cooperation in the Asia-Pacific region.

The EEF focuses on enhancing the investment appeal of the Russian Far East and offers broad opportunities for cooperation between Russian and foreign business partners.

* * *

Moderator of discussion at the plenary session of the Eastern Economic Forum, former Australian Prime Minister Kevin Rudd: President Putin, Prime Minister Abe, President Park, and to our distinguished guests here at Vladivostok and to you, the delegates at the Eastern Economic Forum. My name is Kevin Rudd, and I am President of the Asia Society Policy Institute in New York. It is good for me to be back in Russia, it is good to be here in Vladivostok, Russia’s Pacific capital, but as well, it is good to be here, at this Eastern Economic Forum.

I am told, Presidents and Prime Minister, that we have one and a half thousand delegates here from many countries across the region, and we have most of those delegates from the business community. And so therefore, we are here to discuss the central theme of the future economic development of the Russian Far East.

We are also here at a time of great global challenges. We are here at a time when we have tensions in geopolitics, new tensions, we have changes in global geoeconomics, we have the continuing global challenge and rising challenge of global terrorism, we have of course a slow and sluggish global economy, which has not fully recovered from the crisis of nearly ten years ago. We have a global problem of unemployment, and in particular global youth unemployment, before we even encounter the impact of the new technologies on employment in the future.

So we are particularly privileged at this time when we see great global challenges requiring strong global leadership and strong global institutions to have these political leaders with us today. And we are doubly privileged to have them with us today because each of them is now in the next 24 hours heading to Hangzhou in China for the G20. And the eyes of the world will be on the G20 in China to see what contribution that gathering can make to rejuvenating the global economy, which affects each and every one of us here.

So, thank you, Prime Minister Abe, thank you, President Park, and thank you to our host, President Putin, for having us here in the great city of Vladivostok.

We are going to begin with addresses by the three political leaders and then we will move to an open forum. And if we could begin by inviting the President of the Russian Federation, His Excellency Vladimir Putin, to deliver his formal remarks to this, the second, Eastern Economic Forum. Mr President.

President of Russia Vladimir Putin: Ms Park Geun-hye, Mr Shinzo Abe, friends, ladies and gentlemen. Welcome to Vladivostok, to the second Eastern Economic Forum, which brings together over 3,000 participants from 35 countries this year.

For us this means a growing interest to Russia in the political and business circles of the Asia-Pacific and other regions; an interest in our Far Eastern agenda in general, our steps and initiatives that open up new possibilities for cooperation and the implementation of lucrative projects in the Far East.

We have set ourselves a big goal, ambitious in every sense, a huge-scale task: to make the Far East one of the centres of Russia’s social and economic development – a powerful, dynamic and advanced region. As I said, this is one of our most important national priorities.

We can already see real change here – only the first, but nevertheless significant and encouraging results. For example, industrial production in the Far East grows at a more than 5 percent rate; growth has been modest across Russia at 0.3 per cent, but in the Far East we had 5 percent.

Over the past year, the region has additionally attracted more than 1 trillion rubles of investments – about $15 billion, and more than 300 investment projects were launched here. This means that the business support policies we proposed enjoy demand.

Finally, there is the main consolidated and most valuable indicator of ongoing changes in the Far East – the emerging positive demographics. For the first time in a quarter century, Khabarovsk Territory, Sakhalin, Yakutia and Chukotka have seen an increase in population. For the third year in a row, the birth rate in the Far Eastern Federal District exceeds the death rate, and fewer people are leaving the Far East.

There is population outflow, regrettably. However, it went down 3.5-fold for the Far East Federal District as a whole over the first half of this year. It is true that the demographic results are still modest, but they do demonstrate an emerging trend and we must now build on this trend and make it irreversible.

Over the next three years, we must achieve a sustained growth of population in the Far East. I remind the Government and all ministries and agencies that our state programmes must also focus on this task, especially economic, social and demographic programmes, our housing policy, healthcare and education.

Ladies and gentlemen, the strategy for developing the Far East is based on openness to cooperation on a broad international level, all the more so as the Far East is literally at the epicentre of dynamic integration processes.

We are working consistently to develop the Eurasian Economic Union and expand its international ties. In October this year, Moscow will host the second round of talks on a trade and economic cooperation agreement between the EAEU and the People’s Republic of China. This will lay the foundations for a comprehensive Eurasian partnership in the 5 plus 1 format.

The trade and economic agenda within the Shanghai Cooperation Organisation is also becoming more substantial and promising all the time. The upcoming accession of India and Pakistan as full members of the organisation, and, I hope, Iran in the future as well, will add to these opportunities.

In short, several integration tracks are taking shape in the Eurasian region today. They flexibly complement each other and enable us to carry out projects on a mutually advantageous basis.

We believe that this integration network and the system of multilateral and bilateral agreements, including those on free trade zones, could become the foundation for developing a big Eurasian partnership. We discussed this very idea at the St Petersburg International Economic Forum this summer.

Now, together with our EAEU colleagues, we are drafting consolidated, practical proposals on developing broad Eurasian integration. These proposals concern such matters as regulation, unification of administrative procedures, removing trade barriers, supporting trade and investment, technological and production cooperation, intellectual property protection, and infrastructure construction.

We believe that effective integration is possible only on the basis of equal rights of all participants and respect and consideration for each other’s interests without any political or economic pressure or attempts to impose unilateral decisions. As we understand it, integration is about predictable, long-term rules and openness to cooperation with other countries both in the East and the West. We are ready to study counterproposals attentively and look for the best possible solutions with anyone who is interested in such cooperation.

We realise that these are big, ambitious, complex and long-term tasks. The project I refer to can be carried out only within the framework of a flexible multi-level model using innovative solutions and working in the interests of economic growth and greater prosperity for people throughout this vast region.

The driving force behind this integration will be business energy and initiative and its obvious and ever-growing demand to remove barriers and create big markets with a business-friendly environment.

This integration must also be based on serious joint projects, which will sew the seams of our economic space and create new development resources. I would like to mention a number of these projects and opportunities now.

First is a reliable energy infrastructure. We support the initiative of Russian, Japanese, South Korean and Chinese companies to create a super energy ring linking our countries as one. We propose setting up an intergovernmental working group in order to move ahead more rapidly and dynamically on this project. Let me note that Russia is ready to offer its Asia-Pacific region partners competitive energy rates and long-term fixed price contracts.

Second is transport infrastructure and the formation of new, competitive trans-Eurasian and regional transport routes. Examples here are the Primorye 1 and Primorye 2 transport corridors, which lay the shortest route for moving goods from China’s northeast provinces to the ports in southern Primorye Territory, and the construction of the Russian section of the Europe-Western China route. I will be discussing the development of this and other transport infrastructure routes with my colleagues at an upcoming State Council Presidium meeting very soon.

Third. We are living in an age of information and rapid development of digital, telecom and Internet technologies. We have to seize the opportunities they offer to promote cooperation, so that our countries’ governments and companies could do business and interact in a convenient electronic form.

Therefore, we suggest creating a common digital economic space. We are talking about the creation of legal and technological conditions for electronic interaction. I would also like to ask the Russian Government to submit a detailed plan of this work.

In fact, some good things have already been done here. The Eurasian Economic Commission is supervising the development of an integrated information system – a system of cooperation in transport, trade, customs, veterinary, tax and other procedures.

Fourth. We need human resources and technological groundwork for the future. In this regard, we invite partners to join the project to build an international science, education and technology cluster on Russky Island.

We plan to put together a support system for start-ups here, including venture capital financing, to organise a network of laboratories for collaborative research, and to create a modern business infrastructure, including business and exhibition centres.

We would like professors and students from other countries to come to Russia, as well as research, creative and project teams from other countries. As far as I know, 2,500 international students are already studying at the Far Eastern Federal University, and dozens of faculty members from other countries teach here.

A few hours ago, my colleagues and I attended the opening ceremony of the Far Eastern Oceanarium. This is not just a commercial centre, but a science, education and information centre, and we hope it will also serve as a good base for the study of marine biology at the level of leading scientists in the region and around the world. And I ask the Government to speed up the development of a comprehensive development programme for Russky Island.

Ladies and gentlemen, the projects I have just mentioned reflect the full diversity of opportunities for joint work in the Far East. We are creating the best possible conditions to make this region a centre of investment appeal and a platform for cooperation.

Starting October 1, a one-step system will start operating in the Vladivostok free port for all border-crossing procedures. The checkpoints and electronic declaration of goods systems will be working round the clock.

I met yesterday with business representatives. I know that not everything here is working exactly as we want it, but we took in your comments and will make the necessary improvements to our work.

The Government is already at work on plans to simplify visa procedures for foreign citizens arriving at the free port. The plan is for people to complete all the formalities via the Russian Foreign Ministry’s internet service and obtain an electronic visa.

In addition to Vladivostok, we recently decided to extend the free port regime to another four Far East ports – Vanino in Khabarovsk Territory, Korsakov on Sakhalin, Petropavlovsk-Kamchatsky in Kamchatka Territory, and Pevek in Chukotka. We will add more if necessary.

At the meeting with business representatives I just mentioned, we heard that this is not enough and that some business representatives have not received the breaks they were expecting. We will certainly examine further all of these issues.

Yesterday we also discussed work in the priority development areas and raised a number of issues concerning procedures for obtaining profit tax breaks.

I do agree that we should take into account each project’s specific nature, scale, and implementation timetable. I think that the tax holidays should be extended for big long-term projects. I discussed this matter yesterday with the Finance Minister, and the Finance Ministry agrees in general to this idea. I ask them to draft the relevant amendments to the law as soon as possible.

We are sure that there will be many big and significant projects. The Far East offers an excellent location and natural resources with direct access to the most promising global markets. This offers inexhaustible opportunities for business initiative.

At the same time, we should give companies the opportunity to attract affordable financial resources. This is the task that the Far East Development Fund is currently addressing. The Fund issues loans at five percent annual interest in rubles. The demand is high, with businesses literally queuing up. To avoid holding back the launch of new projects and provide them with sources of financing, we have to constantly focus on the Fund’s capitalisation support.

Of course, we are facing the overall task of developing an extensive financial and investment infrastructure in the Far East. Such projects are already underway. At this forum, you can see the presentation of a new investment system, Voskhod. It opens direct access to Far Eastern companies’ shares and bonds for Russian and foreign investors.

An agreement has been signed on the forum sidelines between Russia’s Far East Agency for Investment Promotion and Export Support and one of the world’s largest banks, the Japan Bank for International Cooperation. A joint platform will be created to attract Japanese investors to the priority development areas and the Vladivostok Free Port.

The Russian-Chinese Fund for Agro-Industrial Development, which has started its work this year, is a good example of mutually beneficial investment cooperation. The fund supports export-oriented projects in agriculture and the food industry.

I am confident that the Russian Far East, with its land and marine resources, can become one of the major suppliers of quality and eco-friendly foods in the Asia-Pacific Region, an area that is home to almost 60 percent of the world’s population.

To our partners from Japan, the Republic of Korea and other countries, I propose establishing similar joint investment platforms. They could focus on financing projects not only in agriculture but also in industry, high technologies and natural recourses development – in short, in the sectors that have a vast potential.

At the same time, we must combine access to our natural resources with investment in their processing. I ask the Government to develop and implement such a mechanism for the Russian Far East. The approach should be simple: if a company wants to receive a priority right to the use of raw materials, aquaculture or forest plots, or to develop mineral deposits, it has to put effort into building plants, contribute technology, and create new jobs and higher added value.

Friends, the future of the Russian Far East is inseparable from the future of Russia. This is what our ancestors believed, and they explored Far Eastern lands and brought glory to the Fatherland. We have begun a new historic period of developing the eastern territories, and it is planned for decades ahead.

The tasks to be resolved in the Far East are unprecedented in scale and importance. We are fully aware of our tremendous responsibility to our citizens and future generations. I am absolutely certain that we will carry out the plans I have outlined here. I believe in the Far East’s success.

Thank you for your attention. Thank you.

President of the Republic of Korea Park Geun-hye (retranslated): President of the Russian Federation Vladimir Putin, Prime Minister of Japan Shinzo Abe, members of government delegations and business communities, allow me to begin by congratulating you all on the opening of the second Eastern Economic Forum in Vladivostok, the centre of the Russian Far East.

The Far East is a treasure trove of diverse energy resources, including oil and natural gas. Asia and Europe meet here and the region is the starting point for transport routes and freight arteries across the Eurasian continent. It would be no exaggeration to call this region Russia’s new heart.

The great writer Dostoyevsky said that Asia would play a big part in Russia’s future and this showed his foresight with regard to the Far East. Currently, North Korea leaves us with a break in the chain that makes it hard to realise in full the Far East’s tremendous potential, but in the future, when these links are joined together once more, the Far East will become a bridge of peace and prosperity linking Eurasia and the Asia-Pacific region.

I hope that the Eastern Economic Forum will become a good platform for comprehensive dialogue and for concentrating knowledge on the task of making this idea reality. The leaders of three countries, the Republic of Korea, Russia, and Japan, are taking part in this forum, as are high-level officials from other countries, and this offers good opportunities for strengthening political will and cooperation in this region.

Ladies and gentlemen, we see today a slowdown in global economic growth and a trend towards protectionism and new isolation, and this creates added uncertainty. At the same time, two opposing forces, integration and separation, intersect, and this creates chaos.

The European Union achieved the highest level of political and economic integration, but it now faces challenges following Britain’s decision to withdraw. At the same time, in the Asia-Pacific region, integration gathers pace and countries are building stronger ties with each other. The international community has come to a crossroads: to take the road of separation and isolation, or to choose the path of openness, integration and ties. The shape of our future depends on the choice we make.

A policy of separation and isolation would be the wrong choice. History has taught us this. During the Great Depression, countries raised customs duties and the result was that trade fell by more than 40 percent in just four years. After protectionist measures were introduced in the 1980s, trade that had been growing at an average rate of 20 percent fell to just 5 percent.

We cannot achieve sustainable global economic growth if we raise barriers and choose separation and isolation. On the contrary, we must raise the level of integration, link our networks together and create a platform for global economic cooperation. On this basis, through ongoing innovation and opening our markets, we must create a new driving force for building the future.

Ladies and gentlemen,

The Far East offers opportunities for economic ties and human contacts as well as good industrial organisation. This potential makes the region a promising new place for carrying out integration and growth initiatives. President Vladimir Putin is carrying out a new eastern policy that is injecting new life into the region and developing its potential in a vision that can become reality.

The Republic of Korea is also paying great attention to the Far East. Above all, I note that trade between South Korea and the Far East accounts for 40 percent of our overall bilateral trade. Sixty-percent of Russian tourists visiting South Korea come via Vladivostok. The Far East is thus a bridge linking the Republic of Korea and Russia.

The ASEAN countries, including Japan and China are also making efforts to develop this region through various development and cooperation projects. There has been progress, but we still have work to do together to fully develop the Far East’s potential and ensure sustainable growth. In his speech at the first Eastern Economic Forum, President Vladimir Putin stressed the importance of social and economic development in the Far East and Russia’s effective integration into the Asia-Pacific region. Keeping this view in mind, we need to concentrate on three main cooperation areas.

First, to activate Far East development, we must put in place an environment that will ensure the region’s sustainable development, in particular by strengthening cooperation in foodstuffs, housing construction, healthcare and medical services. We need to get more players involved. In this context, we are ready to work with Russia to come up with specific measures for carrying out joint projects in agriculture based on modern technology in Primorye Territory, including projects to build agroindustrial facilities.

In the fisheries sector, the Republic of Korea could take part in a project to build refrigerated warehouses and fish processing facilities and make a contribution to developing the Far East’s fisheries industry. Korean companies also have great experience in housing construction and by getting involved in big housing construction projects, Korea could help to improve the region’s housing situation. Korean medical facilities use advanced technologies based on ICT (information and communications technologies) and could provide quality medical services, which would of course boost the level of healthcare and medical services in the region.

Secondly, to diversify the Far East’s industrial structure, we need to build an infrastructure and make sure that all projects develop naturally and independently in accordance with economic principles. The Far East’s economic structure is currently centred around energy resources development, but given the region’s geographical location favourable for logistics development, it has great potential for growth through industrial diversification, as the Far East is located so close to the Northeast Asia economy.

If we marry South Korean capital and processing technology to Russian fundamental science and resources, this would enable us to create a competitive industrial base. Furthermore, cooperation between Korean and Russian businesspeople on infrastructure development, including transport and port infrastructure, we can develop a new multimodal logistics route that will unite the Eurasian continent.

In particular, the Northern Sea Route opens up new opportunities for cooperation in sustainable resource development. The project to build rapid intercity transit routes in the Far East and projects to improve city infrastructure also offer good opportunities for cooperation because South Korea has the needed experience and technology for carrying out environmental projects, including technology for processing the waste generated in the process of developing city infrastructure.

At the Korean-Russian summit in November 2013, President Putin and I agreed to develop joint investment platforms with the aim of stimulating bilateral investment in the Far East. Korean and Russian companies can work together in promising areas and use the investment platform to carry out favourable projects.

Thirdly, we can accelerate the Far East’s development and maximise the results if we broaden the cooperation spectrum by linking the Far East to the neighbouring countries’ economies. We can use the Northeast Asia countries’ different Eurasian concepts and initiatives as a basis for spreading the energy of advantageous cooperation in the Far East across the entire Eurasian continent.

The Korean government wants to turn Eurasia into a continent of unity, creativity and peace. This is how we see promotion of cooperation with the Eurasian continent. At the St Petersburg Economic Forum in June, President Putin proposed establishing a big Eurasian partnership. This is a vision for integration across the entire continent and it fits with our own Eurasian initiative too.

 The Republic of Korea is a country that has signed free trade agreements with the United States, China and the EU, so if we are able to enter into a similar agreement with the Eurasian Economic Union, in which Russia plays a key role, it will lead to increased economic integration in Eurasia, revive the development of the Far East, and will also promote the benefits of the region’s advancement across the continent of Eurasia.

At the same time, we need to get some practical results of cooperation on a mutually beneficial basis. We must make efforts to develop multilateral cooperation in the region through building trust. Right now, North Korea’s frequent provocations hamper trilateral projects, including the Rajin-Khasan logistics project.

However, if these barriers are eliminated it would be possible to resume these projects on an even more ambitious scale, between three parties: Korea, Russia and Japan, or Korea, Russia and China. This will create an environment where all networks are interconnected – electricity, railways and energy, and in the long run, this will contribute to the effective integration of the Far East and to the region’s prosperity.

Ladies and gentlemen, peace and stability in the region is an absolute prerequisite for the sustainable development of the Far East and the regions’ integration. In this context, I cannot ignore the issue of North Korea, which is a key node in Eurasia and the most serious threat in the region.

Despite the repeated warnings of the international community, North Korea has conducted four nuclear tests since the beginning of this year and launched ballistic missiles. Pyongyang does not recognise the UN resolution, calling itself a nuclear power in the East, threatening nuclear strikes and continuously improving its nuclear and missile capabilities. After the nuclear test, North Korea has already launched 19 ballistic missiles, which means it has launched a rocket every two weeks, which exceeds the number of rocket launches over 18 years under Kim Jong-il's government.

The ballistic missiles that fall in the eastern sea are a threat to ships navigating there, including Vladivostok. North Korea’s regime ignores human rights and its people’s right to quality life, focusing all resources on the development of nuclear weapons and ballistic missiles. If we fail to prevent the development of nuclear weapons in the near future, the North Korean nuclear threat will become a reality.

I am confident that this forum will become a significant platform for dialogue aimed at joining forces to open a new page for an integrated Eurasia, for prosperity and peace in the region. I hope that in the future, this forum and our dialogue will emanate the energy of openness, change and innovation throughout North-East Asia.

Thank you.

Prime Minister of Japan Shinzo Abe (retranslated): Ms Park, it is a great honour for me to meet with you again. And of course, thanks to your invitation, Mr President Putin, I have come to the Russian Far East for the first time, and I am very excited about it.

This time, of course, I flew in, but the true gate to this city is certainly its port. If you look at the city from the sea, it is especially beautiful, and so one should probably arrive in Vladivostok by ship. About a hundred years ago, one man wrote, admiring Vladivostok from the bay, that “Vladivostok is hardly to be second to any city” in its beauty. This was the famous polar explorer Fridtjof Nansen.

There are places in the city that I would love to visit, such as the house and monument to Yul Brynner, Oscar winner for his leading role in The King and I, on Aleutskaya Street. I must certainly see this.

Mr Putin certainly knows that Vasily Oshchepkov, the founder of Kodokan judo in Russia, opened Russia's first Dojo gym here, at 21 Korabelnaya Embankment, and I wonder if the building is still there. I would love to take a walk around these places when I come here next time. And I would really like it to happen in the very near future. Why? This is something I will talk about later.

Every time President Putin addresses the Federal Assembly, he notes that the most important thing for Russia's state development is the development of its Far Eastern region. The President declared Vladivostok a free port and intends to expand this example to other port cities. Probably, the President wants to bring back the former international glory of Vladivostok.

This is President Putin's dream and my dream as well. Mr President, let's turn Vladivostok into a gateway that connects Eurasia and the Pacific Ocean. Today the Pacific region is actively evolving, transforming into a free, fair and open economic zone, and the vast continent behind it – Eurasia – must certainly lend an even greater impetus to this dynamic process. I am sure that the bright light coming from Vladivostok will generate a huge ripple effect that will illuminate every corner of the Pacific.

Mr Putin, during our recent meeting in Sochi, I chose and proposed eight areas for Russian-Japanese cooperation. One of them is urban planning and creating a convenient and clean city environment for a comfortable and active life. Don’t you think that Vladivostok is an ideal model for implementing this concept through the efforts of our two countries?

This city still has nostalgic pre-revolutionary buildings, side by side with distinctive Soviet era and modern design, which offset the natural beauty of the sea and the hills. Please allow Japan to participate in the work, which will make the city of Vladivostok comfortable for its residents and attractive for tourists, while maintaining its beauty. This is a serious proposal. Let’s do this together.

While preparing for this trip, I came across Russia’s demographic statistics, and I was surprised to learn that from 1976 to 1986, almost 23 million people were born in the country, yet today the population aged 10–20 is less than 14 million – these are people born in the decade following 1996. These statistics seem to reflect the difficulties Russia had to go through in the late 1990s.

Today, Russia has reached a stable increase in average life expectancy and population growth, which is rare in today’s world. Due to a great number of school-aged children, there are not enough schools in your country, and for us in Japan this is something to envy. However, in the future the number of the working-age population will significantly decrease, and this will result in today’s teenagers taking on most of the burden.

By the time they reach their most active age, they will be carrying the heavy burden of providing medical care for the elderly. Foreseeing this, as the first point in our cooperation plan we proposed increasing the productive years for Russian citizens through establishing advanced healthcare and recreational institutions.

Japan is facing similar problems. With its low birth rate and a fast aging population, much burden falls on the medical and pension systems. We must make every effort for the elderly to be able to support their health, and President Putin’s concerns about the demographic situation in Russia are my concerns as well. I think that President Putin urges Russian teenagers not to be upset about a great number of elderly people, but young people in Japan need this encouragement as well.

However, there is no fast solution to this issue. The thing that political leaders can do is plan for the future of their state based on the long-term prospects for the next 20 or 30 years. We must have the courage to acknowledge the seriousness of this issue and develop constructive responses, and make every effort to consistently implement them. I think that Ms Park Geun-hye will agree. The future may not change for the better all at once, but we must make our young people realise that they need to make every effort to succeed. I think this is our common goal and concern.

Ladies and gentlemen,

There are only three ways to ensure economic growth – a renewal of capital assets, augmenting the workforce, and increasing productivity. My economic policy, the so-called ”Abenomics“ is about stimulating Japan's economic growth through its impact on these three elements. However, economists agree that the most important factor for economic growth is people's expectations.

It is all based on people's confidence that tomorrow will certainly be better than today. To do this, Mr Putin, we need first of all to share a strong belief in future opportunities that may arise due to closer cooperation between Japan and Russia. The relations between our economies are not competitive, but they ideally complement each other, I'm sure. Let's think about this future development, stimulate the other’s economy on the demand side and on the supply side.

Let’s do all we can to help the peoples of our countries believe in a brighter future. One promising area is cooperation between our small and medium-sized businesses. The development of energy resources, the expansion of production capacity, the capacity of these businesses, is perhaps the most vivid example of mutually beneficial cooperation between the two countries. Let’s diversify Russian industry, raise its productivity and thereby make the Russian Far East an export base for the entire Asia-Pacific region. Let's invest in the future together, encourage cooperation in high-technologies, and cultural exchanges.

I have a proposal to make to Mr Putin. Let's meet once a year, here in Vladivostok, to review how our eight areas of cooperation are faring. We could walk in the virgin woods of the taiga, with the sun penetrating through the leaves – where Akira Kurosawa filmed his Dersu Uzala – and talk about what Russian-Japanese relations should be like over the next 20–30 years.

I would like to propose that every year, we have this opportunity to move away from the ordinary and discuss these things most thoroughly. I think the audience’s support of my proposal speaks for itself. It certainly seems a good idea, right? And for me it would be a great opportunity to visit Vladivostok every year.

I would like to remind the Russian business leaders present here: Japanese equipment for piling was used in the construction of the bridge you crossed to get here. The electricity in this room is produced by gas turbines made in Japan. I ask all of you to start gaining experience by cooperating with Japanese companies as soon as possible. Japanese companies have workers who have already improved the efficiency of production at their own plants.

Everything is done so that voices from the workers who see the needed improvements can be properly heard by the managers and engineers. So, the system of kaizen, or improvement, which takes place gradually, step-by-step, reducing the number of low quality pieces, can be maintained. Ideas expressed by each employee in his or her area increase the levels of safety and efficiency. This is an original system for production specifically in Japan where there is no fixed hierarchy and where there are no class differences.

In a competitive market, pricing is determined by the market rather than the company. What has to be done to hold profits and increase market share without damaging quality? By concentrating on the gross profit by reducing expenses and using the kaizen method, it was Japanese companies that managed to remove excess from the production process.

Please, don’t argue saying that there is nothing unusual about this. Because until Japanese companies proved otherwise, the world believed that affordable and, at the same time, high-quality production was not possible. This is the opinion of Harvard Business School researcher Michael Porter. Many countries quickly mastered the techniques I described, but they have yet to reach Russia. Russia has not yet experienced the revolution in production that can be gained through close contact with Japanese companies.

Mr Putin, there is already a tried and tested, and short road to becoming a great industrial power. It is safe to say, from my side, that this course is the partnership with Japanese business. Vladimir, you are facing a very important task. The fact that a peace treaty has not been signed between Japan and Russia, neighbours that are very important to each other with unlimited potential, cannot be called anything but an abnormal situation.

We stand here, each with his own position in history, public opinion, and people’s patriotism. As a Japanese leader, I am convinced in the correctness of Japan’s position, like you Vladimir, as the Russian leader, are convinced about the correctness of Russia’s position. But if we continue in the same vein, then we will have the same debate for decades. If we leave everything as it is, without change, then neither you, nor me will be able to provide future generations with better opportunities.

Vladimir, you and I belong to the same generation. Let’s show courage and take responsibility, let’s overcome all difficulties and leave the young people of the next generation in an environment where our two countries, Japan and Russia, can reach their powerful potential.

Let’s draw a line in this abnormal situation which has lasted for 70 years and start building together a new era in Russian-Japanese relations which will last for the next 70 years. Together with you, Vladimir, I am firmly determined to undertake any effort to develop Japanese-Russian relations and to give momentum to the relations between our two countries which have unlimited opportunities.

Thank you very much!

Kevin Rudd: Arigato gozaimasu, Abe-san. If I got the message right, I think you want to see a peace treaty between Japan and Russia. I think that was a subtle message at the end of your speech. Also, Abe-san, congratulations on your Mario performance at the closing of the Rio de Janeiro Olympics. This was worthy of an Oscar. And it’s good to see that Mario from Nintendo has made his way from Rio de Janeiro all the way here to Vladivostok.

The questions that you raised, both President Park and Prime Minister Abe, about Vladivostok and the future I think are interesting to all of us. This audience is made up of businesspeople – investors, traders, people who want to see future economic opportunities become a reality. So, let me turn my initial questions to our host, President Putin, and it begins about this city, Vladivostok. I share the enthusiasm of Prime Minister Abe from my first visit here. In Australia, we have a place called Sydney Harbour. It is quite spectacular. It is one of the most spectacular natural harbours in the world. But in my 36 hours here in Vladivostok – here in Vladivostok you have a genuinely spectacular natural harbour as well. And so the challenge lies with its future economic development.

Mr President, as a kid growing up in rural Australia I lived on a farm, and in Australia we are used to vast distances, vast expanses, and vastness. But when I look at the map of Russia, and as a kid I used to look at the map of the old Soviet Union, this vast expanse east of the Urals and here in the Russian Far East. If we think Australia is vast, this is mega vast. In fact, I looked at the numbers just before we came on stage: we can fit two entire continents of Australia into Russia east of the Urals. And in the Russian Far East we’ve almost got one continent of Australia in terms of size.

Yet here in the Russian Far East you still, as you have indicated, got a population about the size of Singapore. So therein lies the challenge that you have pointed to. In my country, we call this the tyranny of distance, which is small population, huge territory, vast distances between people and markets. You obviously share a common challenge here. So, Mr President, I’ve listened very carefully to your strategy for developing the Russian Far East. On the core question of population and getting people to come here, to stay here and to prosper, could you expand further on the challenge of population growth here. I listened very much to what Prime Minister Abe had to say about helping through cooperative projects to build, rebuild and expand the city of Vladivostok itself, but if I could ask you further to expand on that most basic of challenges. Over to you, sir.

Vladimir Putin: First of all I would like to thank the President of the Republic of Korea and the Japanese Prime Minister for their emphatic and informative presentations. I enjoyed listening to you, and was both pleased and interested to hear your proposals. It is good that you have not only heard us, but also proposed your own versions of cooperation. Without a doubt, we will respond to them, we will make every effort to bring to life everything you and we speak about.

Now, regarding the potential of the Russian Far East and the problems that exist here. Indeed, one cannot disagree with the pioneers who discovered these places – these are truly amazing, beautiful, unique places. I would like to note that we are certainly grateful to our ancestors for the discovery and development of these areas.

However, I must say that for many decades, if not centuries, these areas have not been given enough attention. Attempts have been made in the past century, even during the development of the Western, partly Eastern Siberia; yet, we never got around to developing the Far East. Strange as it may sound, we hardly even had a good motorway linking the European and Far Eastern parts of our country. We never had one. A project was started in the 1960s, but was abandoned later. Only recently did we complete this project. For the first time these territories were linked to the European part of the Russian Federation by a motorway. This is my first point.

Second. Actually, the city of Vladivostok was founded and developed… if I may even use the world “developed.” I would rather say it merely existed here as a military base and a closed city. Hence all the problems that have been accumulating here for decades: an undeveloped infrastructure, a lack of primary energy sources and a lack of transport infrastructure in general.

All this, of course, is in stark contrast with this region’s potential. Huge mineral reserves are concentrated here. Well, for instance, it accounts for 20 percent of our oil reserves, about the same amount of natural gas; 70 percent of Russian fish is caught in these waters, and 75 percent of Russia’s forest resources are concentrated here as well. Eastern Siberia produces 75 percent of Russian diamonds and 30 percent of gold. This volume is hard to imagine.

I know that this is not enough. The region does need a new infrastructure, which I mentioned, it needs energy, finance, technology and a highly skilled workforce.

What are we doing to let this region truly breathe free, gain new vigour and make the most of its development prospects? We have taken a whole package of measures over these past years to implement our plans. What are these measures and what do they involve? First, we have introduced an entire system of preferences and exemptions for business in the region. This is primarily the case of what we have dubbed priority development areas.

We analysed the experience of countries such as China, South Korea and Singapore, and we now offer those looking to work in the Far East a range of preferences, starting with tax holidays. For example, businesses are exempt from federal profit tax during the first five years of work. There are also regional tax breaks (on payments to the social funds, for example, accelerated return of value-added tax, and simplified administrative and customs procedures).

Secondly, as you have already heard here, we established a free port regime, first in Vladivostok and then in five other Far Eastern ports. The free ports also offer a big range of benefits similar to those in the priority development areas. They also offer more effective work with the customs service and border guards.

As I have said, I met yesterday with my colleagues and with members of the business community. We heard their comments and concerns and will make the necessary adjustments. In any case, we are creating the conditions they need at the ports and improving port facilities.

Finally, we established a fund specifically for Far East development. It provides quite long-term and relatively cheap financial resources at a 5-percent interest rate. Of course, we must add more and top up the fund’s capital, but we have taken the first steps and the work has begun.

Another of our substantial measures concerns infrastructure. We decided and have already begun to subsidise businesses that build infrastructure facilities independently. I think that this package of measures should make it possible to work effectively in the Far East for those wishing to do so.

I mentioned the free hectare of Far East land at the start of my speech. Under this programme, we make a hectare of land available free (as you can see, the region is not at all lacking in land) to people wishing to start their own business or develop the territory.

There are many areas for cooperation and projects to build on. It would be wrong to say that the region is starting from scratch. If you look, you will see that back in the Soviet times, we already developed aircraft manufacturing in the city of Komsomolsk-on-Amur, for example. True, this is military aircraft manufacturing, but the general skills are there, and they produce the Su fighter planes known all around the world.

We are well aware that we should not and cannot limit ourselves to selling arms alone, and this is why we are working, chiefly with our Italian and French partners, on developing of civil aircraft manufacturing. Thus, the promising medium-haul Superjet-100 is produced here.

We have already started developing a shipbuilding cluster in the region. Two years ago, I was here for the launch of operations of what is to be an enormous shipbuilding enterprise that will produce civilian vessels in specialised areas in which we really do have the skills, skills that we must continue to develop, of course. These areas include civil vessels with icebreaking capability, and specialised vessels for serving offshore drilling platforms, and for working on the Northern Sea Route, which President Park spoke about. We will develop this most economic route for shipping goods between Asia and Europe.

We are also developing our space sector here. We recently inaugurated Russia’s new space launch centre, Vostochny, in Amur Region, one of the Far East regions. The first launch has taken place and we will expand it to handle light, medium and heavy rockets. This is also a platform for joint international activity to develop outer space and it offers excellent prospects.

 We are not only developing the space launch centre (the first part of which is already complete), but are building a whole cluster and a town with the necessary social infrastructure for those who wish to work here.

Of course, the region also offers the resources I already mentioned, hydrocarbons, oil and gas, and traditional resources such as timber and fish. These are all areas in which the region has longstanding experience and we just need to take them to a higher level. We need to work not only on production and export, but also on adding value to our products – this is clear. It is for this reason that we are creating the priority development areas, the Vladivostok free port and other measures to attract Russian and foreign businesses.

However, to make it all work efficiently, we definitely need highly qualified personnel. Our event is taking place at Far East Federal University, which was established only two years ago. We are planning ahead – as I mentioned, 2,500 foreign students study at this university as well as dozens of foreign faculty members. Last year, I was told there was a waiting list of foreigners wishing to work here, and I am very happy about this. Of course, constructing such beautiful university buildings was not enough; we have to provide highly qualified personnel and talented young people to meet the demands of the growing labour market.

There is another side of this that we should remember. To do all of this and to make people want to live here, raise children and feel that their children have a future here, another goal has to be met – creating not only a modern living environment but also a cultural environment. There is a very good musical theatre here. I am grateful to the Mariinsky Theatre, which has opened a branch here. The first festival has recently debuted with great success, with a great number of people interested in attending these concerts arriving from Primorye and Vladivostok, as well as from other countries – primarily Japan, the Republic of Korea and the People’s Republic of China.

We intend to open branches here of St Petersburg’s Hermitage Museum, the State Russian Museum, and the State Tretyakov Gallery. I believe that a local museum dedicated not only to Primorye but to the entire region, and the neighbouring countries, should also be considered.

Science and education should be developed. My colleagues and I have just visited the newly opened scientific centre for marine biology studies. This has traditionally been developed since Soviet times. I believe we have made a major step forward by creating a very good base and physical infrastructure. This will be a scientific and education centre. We will certainly succeed if we follow through in all these areas.

Thank you.

Kevin Rudd: Thank you, Mr President. In fact, I had the opportunity yesterday to walk around this campus. It is pretty impressive. I think a lot of university presidents around the world will be envious of the infrastructure that’s been put here very recently. And to confirm, the teachers here told me that you are getting faculty from around the world, you’ve got a couple of Australians arriving I think next year. They will be interested in the beer supply as well.

I am also interested, Mr President, in the other aspects of what you have talked about. You have mentioned the fact that you received expressions of concern from a number of businesspeople about the difficulty in getting visas, and visa access etc. And I certainly recall the experience of a friend of mine from Hong Kong. We were all APEC members here but the use of the APEC business card has not been as effectively recognised at Russian border posts as it could be. And I think that would be a huge thing to help for the future as well.

On the plan that you have outlined – it’s an impressive plan. The study that has gone into, for example, the Chinese special economic zone experience. It is solid study. Free ports? The Chinese experimented with those successfully. Special economic regions you were talking about, the areas, all thirteen of them. And having lived in China when they first did those things back in the 80s, it really was a twenty year period before you saw the product of the initial investment. And then — history speaks for itself.

Let me put you another observation, Mr President, for your further reflection, and something which comes from a number of the businessmen here. They’ve looked at the plans, they’ve looked at the tax concessions being offered in the free ports and in the special economic areas, but they also ask this question about long-term investor confidence, i.e. that the rules won’t change here in Russia for the future, they ask questions about the consistency of the implementation of regulations, and about bureaucracy. So, given these concerns raised by businesspeople from around the region, around the world, again if I could invite your comments specifically on this question, of if you’re speaking to a group of investors, and their baseline concern is confidence and long-term policy and regulatory consistency, here in the Russian Far East, what would your response be?

Vladimir Putin: This is precisely what we discussed yesterday. We spoke of these plans, which have been thought through carefully and are long-term. I think you can all rest assured that we fully intend to make every effort to carry out these plans.

We realise there are some things that are quite fundamental for business development. Tax breaks, of course, which we have introduced. We would, of course, like for the entire Russian Federation to offer equal conditions for all businesses and become a most attractive place for business development, but we realise that this region has some particular circumstances that require special attention from the authorities, and this is why we have decided to introduce such significant benefits here.

We also see that this is far from enough. The authorities must make an effort to resolve such fundamental issues as infrastructure and energy supply, communications and human resources. We have long-term plans for each of these areas.

Our company heads are sitting just over there. There is the head of Gazprom, for example. If need be, he can tell our partners about Gazprom’s plans and our other oil and gas companies’ plans to develop the energy infrastructure.

Yesterday, the businesspeople talked about how tariff differences can be fatal for business and stifle their development here. It is not good for the people and it is not good for business either, and this is why we have come up with these long-term plans for years ahead, not only in gas production on Sakhalin, for example, but also in developing pipeline routes in the Far East regions and distributing energy resources among the economic actors and the region’s households. Gazprom’s subsidiary has already submitted to the Primorye Territory authorities a plan for connecting people to the gas network and will do the same in the other Far East regions. We will certainly carry out these plans.

We will carry out projects for developing communications infrastructure in several areas, given the region’s vast size. The first area is satellite communication. Khabarovsk, which is the Far East official administrative centre, already has a satellite communication centre offering access to broadband internet and so on.

The second area is fibre optics. We have already carried out a project to link Sakhalin, Magadan and Primorye Territory with fibre optic cables. I do not recall exactly if the cable has been laid to Magadan or not, but I believe it has. In any case, work on the coastal facilities is already complete, the stations and coastal infrastructure are in place and a cable reaching 1,800 kilometres has been laid. This will all start operation and will give people the basic conditions they need not just for daily life but also for business development. These are long-term undertakings that have been worked into our plans and our budget planning.

Kevin Rudd: Thank you very much, Mr President. Prime Minister Abe, I listened very carefully to your remarks just before, and you are a genuine enthusiast for the development of the Russia-Japan relationship. Those of us who follow these things internationally read very carefully your eight bullet-points at Sochi, and those of us who follow international relations would have observed carefully your cry from the heart today about developing a peace treaty, and agreeing one, between Japan and Russia after all these years, and despite what was almost achieved in 1956. But it’s time to get on with it.

So you, in the framework of what you want to see in the future of the Russia-Japan relationship overall, could you give me a sense therefore of the role of economic engagement within that framework of trade, and investment between Russia and Japan, and the particular role which can be played by, frankly, forums such as this, the Eastern Economic Forum. Prime minister…

Shinzo Abe: The Russian Far East is developing intensively and I think that this development will have a very positive effect on the region as a whole. As for the Eastern Economic Forum, this is a very important platform for bringing together all with an interest in developing the Russian Far East. President Park Geun-hye is here beside me today, and so are senior officials from many countries’ governments, economic organisations and academic institutions.

Over these past years, Russia has established a number of new organisations and institutions, such as the Ministry for Far East Development, the new special economic zones, and the free ports. The things that Mr Putin noted in particular in his outline of the work currently underway in Russia are, I think, the fruitful results of the initiatives he is taking, and these new organisations and institutions are among these results.

For my part, I would propose making Vladivostok and the entire Russian Far East a reliable export base for the Asia-Pacific region. Japanese companies work actively in this area and I hope this forum will further strengthen the cooperation between Japan and Russia. This will enable us to improve the lives of the region’s people, and I am sure that this will become a new driving force for Japanese-Russian relations.

Kevin Rudd: Thank you very much, Prime Minister. I noticed in your government you have a minister with specific responsibility for Japan-Russia economic relations. And on this trade and investment relationship between the two countries – if you could again outline to me how you see this deepening in sectors in the years which lie ahead. This is obviously a huge priority for you: you’ve proposed meeting the President of Russia here on an annual basis. I understand that after Sochi you’ve invited President Putin to visit your own home prefecture of Yamaguchi towards the end of this year, which is a beautiful part of Japan, in my recollection. So again, looking to the future and the deepening of Japan-Russia trade and investment relations and integration – how do you see this evolving?

Shinzo Abe: As for our bilateral relations, specifically in the economic area, we have great potential that we could develop and we must now identify, realise and make use of this potential. This will benefit people in both countries and will allow us to start a new chapter together. I believe that this is work to open new horizons.

I would like to propose eight areas as a start for joint work between our countries. They cover a broad range of economic activities in both countries, industry, human resources training, industrialisation and raising the level in all spheres of our life.

This is why I appointed a new minister who will be responsible for Russian-Japanese economic cooperation on the Japanese side. He will work for Russia and for developing economic cooperation with Russia. I took this step in the aim of achieving bigger and clearer results. The cooperation and partnership between our countries must produce clear results that our peoples will see and welcome. I think this should be our goal.

The Asia-Pacific region is home to nearly 60 percent of the Earth’s population, around 4 billion people. We must promote the ideas of free trade and economic integration in this region. This could become an impetus for further growth in Russia and Japan.

Japan’s post-war growth was driven by the export of automobiles and electronic goods through free trade regimes. Three-and-a-half years ago, I decided to take part in talks on the Trans-Pacific Partnership, and we find this very important.

In 2012, Russia hosted the APEC summit in Vladivostok, right here in this hall. This was the moment when Russia showed the entire world not just the Russian Far East’s attractiveness, but also its determination to integrate into the Asia-Pacific economy.

I look forward very much to wide-ranging cooperation between Russia and South Korea as well, so that we can all work together to become part of the Asia-Pacific Region free trade zone. Thank you.

Kevin Rudd: Thank you very much, Prime Minister. President Putin, you’ve heard Prime Minister Abe speak about his passion for developing the Russia-Japan economic relationship. Seeing from Moscow, seeing from the Russian national perspective – give me a sense of its strategic importance. I saw your interview just in last 48 hours where you’ve said on geopolitical questions Russia does not trade territory for economic cooperation. I’ve seen you said it very plainly in terms of the ongoing discussions between the two countries on the southern Kurils and northern territories. If you had a crystal ball and you were looking ahead five years, what is the shape of the Japan-Russia relationship that you would like to see in reality, in practice?

Vladimir Putin: The magic crystal comes under our national interests. Shinzo [Abe], with whom I established excellent and trusting relations, said that we have our vision and Japan has its vision, and each of us looks at the issue from the perspective of our own national interests. But we do all agree on one thing, namely, that we need to resolve this issue.

The search for a solution is certainly not easy. It was not us who created this problem. In 1956, the Soviet Union and Japan signed an agreement that completely settled the problem. The agreement was signed and was ratified by the USSR Supreme Soviet and the Japanese parliament. But our Japanese partners later decided not to implement this agreement and then the Soviet Union froze its decision too.

Not so long ago, at our Japanese friends’ request, we returned to this issue and are ready to examine it. Of course, settling this issue requires a high level of trust. As I said in the interview I gave to Bloomberg, we need to find a formula that would enable both sides to feel they have not lost out in any way. This is not easy, but we can find such a solution.

The Japanese Prime Minister proposed eight areas for cooperation between Russia and Japan, and I think that this is the only right road to take. Russia and Japan are natural partners in developing trade and economic ties and resolving regional security issues, and we are both very much aware of this. But as I said, we need to find solutions that would not undermine our relations but would create a solid base for building up our ties over the long-term perspective. As I said, this requires finding a solution that would ensure neither side feels it has lost out.

History shows us plenty of successful examples of this kind of approach, and I hope very much that we too will provide just such an example. We want this, Japan wants this, and our foreign ministers are working hard on this. We will support them at the political level, and of course, as Mr Abe said, we are ready to take decisive steps. But all decisive steps must be thoroughly prepared.

It is already clear today that we cannot let slip the opportunities we have today. Two big projects are underway on Sakhalin, for example, Sakhalin-1 and Sakhalin-2. Seventy percent of the energy resources produced there go to Japan. We are studying the possibilities for building an energy bridge now. Of course the Japanese economy has an interest in this project, and so do we. The Japanese have already decided to produce car engines in Vladivostok. A Japanese company would not take this step to its own detriment. We have an interest in developing our automotive industry too. Our Japanese friends and colleagues are willing to accept a high degree of localisation. This has benefits for them and for us and fits completely with our plans.

We visited the new marine biology research centre today. Japanese scientists took part in the discussions there, and from South Korea, and more people will come, scientists, students, people from research centres and universities.

Of course this is in our interests. Our past should not stop us from moving forward. But we do need to reflect on how to settle the problems that are preventing us from moving forward as fast as we would like. I hope that we will settle these problems.

Kevin Rudd: President Park, thank you for your strong leadership of the Republic of Korea in recent years when you have experienced many quite direct external challenges. In your speech before, you made reference to the particular problems represented by the North Korean nuclear programme, and on those questions you have I think much sympathy and support from around the region and the world. You’ve reminded us also of the importance of geopolitical stability and security underpinning economic growth in the wider region. I very much value your views on what you see as being the major challenges to regional security across North East Asia and outlined the efforts that you have made and are making to respond to those challenges within the framework of Korean foreign policy. President Park.

President of the Republic of Korea Park Geun-hye: I have always regretted that a region with such great potential for development fails to realise it for various reasons and obstacles. Considering the population and area of the region (it accounts for 25 percent of the world, and more than 20 percent in terms of the economy), it has much potential. Given this potential, and the high interdependence of the countries, I think that in order to realise the development potential, we need to increase our economic cooperation.

And, of course, to revive economic cooperation, peace and stability in the region are a prerequisite. Yet, now, there are two major barriers that are obstacles to realising the potential in Northeast Asia. The first is the threat to security from the development of North Korea’s nuclear and missile capabilities. This poses a dilemma, as it can be a threat to the neighbouring countries and lead to military and defensive instability and confrontation.

The second barrier is the growing mutual dependence of the economies in the region. Historical and territorial disputes exacerbate conflicts in politics and security. On the one hand, economic dependence is increasing, but this increase, and conflicts due to the above factors, leads to what we call the Asian paradox.

First of all, to resolve the North Korean nuclear issue and other issues, we think it’s very important to cooperate and consolidate the influence of the international community.

Sanctions are currently being imposed by the UN. Plus, the Korean government in close cooperation with the interested countries in the six-party talks on the nuclear issue, is stepping up pressure, trying to convince Pyongyang to return to dialogue, and make an effort to resolve this long-standing nuclear issue.

But, even with the insistent attempts to restart a dialogue, North Korea continues to develop its nuclear potential and declares itself a nuclear power. Thus, the North Korean nuclear issue has become a real threat. Therefore, it requires the clear implementation of UN Security Council resolution 2270, which would leave North Korea with no alternative other than to give up its nuclear programme. We need to make sure that North Korea agrees to return to the negotiating table for the sake of our country’s future development.

There is another issue related to the Asian paradox. To resolve it, it is important to overcome mistrust, to establish communication and build trust. In this context, the Government of the Republic of Korea is promoting a framework for peace and cooperation in Northeast Asia. This framework is not progressing rapidly enough because of North Korea, but it can still be promoted, and North Korea can be added to this framework in the future.

If we start with complicated issues, it will be difficult to build trust. Therefore, we can start with areas such as emergency response, environmental protection and others, to establish cooperation and dialogue between the two countries, and later, having built up trust through these areas, we can lay the foundations for prosperity and eventually create a platform for dialogue at the highest level, to promote and give substance to our cooperation so as to strengthen mutual trust and create conditions for peace in Northeast Asia, to eliminate the factors that produce anxiety over security in Northeast Asia, to manage bilateral and multilateral conflicts. Therefore, the Republic of South Korea, along with Russia, Japan, the USA, China and other neighbouring countries made efforts to strengthen the multilateral cooperation model, including the Korea-Japan-China trilateral format. We are making such efforts and we hope that we will continue to work together in the Korea-China-Russia format.

Korea-Russia-Japan is another possible model for the format of our cooperation. Korean’s Eurasian initiative, along with the grand Eurasian partnership President Putin proposed are aimed at creating a peaceful and prosperous Eurasian continent. That is the common purpose of these initiatives, so that we can achieve synergy. This should start with increased cooperation in the areas where we could relatively easily achieve tangible results, not only to ensure peace and stability in the region, but also to revive the economy in general. Therefore, I hope that the current Eastern Economic Forum will become an important platform for joint efforts to realise such visions.

Therefore, to achieve these goals we must first resolve the problem with North Korea. Only when this issue is resolved will it be possible to speak of a new era – an era of peace and shared prosperity in Eurasia, so we have to stick to a strict principle of not allowing North Korea to possess nuclear weapons and make more efforts toward this end on the Korean peninsula.

I appeal to Russia, to all the participants of the forum, and look forward to your cooperation and support.

Kevin Rudd: Thank you very much, Madam President. I think all members of the international community would commend the efforts of Russia, China, the United States, and other members of the Security Council on the passage of the Security Council resolutions on the imposition of relevant sanctions. We’ll come back to that point in a minute.

President Putin, if I could follow one from the observations from President Park. Russia is a global power, Russia is an Asia-Pacific power, we are here in Russia’s Pacific capital Vladivostok, and crossing the bridge you referred to before, or Prime Minister Abe referred to before, I see elements of the Russian Pacific Fleet, and my driver, probably not revealing a national secret, said most elements of the fleet are out at the moment on deployment, and naval exercises I think are underway with China at present.

We are a region where we have a very long list of bilateral security tensions, and we are in a region here, in East Asia and the Pacific, the Western Pacific, where we have many-many unresolved territorial disputes. And so your thoughts, Mr President, on the question of the North Korean nuclear weapons programme, and how do we bring about any form of compliance with the resolution, on the part of the government of Pyongyang, and more broadly, your thoughts on the question of, given the state of our region, is it possible for us to develop more cooperative security arrangements in East Asia and the West Pacific, involving the United States, involving China, involving Russia, involving other parties? For example, all these countries, here on the stage, including the Americans and the Indians and others, and the Chinese, are members of the East Asian Summit. It has a soft security mandate, in terms of enhancing security cooperation. Can we build that over time to be more comprehensive in order to begin to encourage the concept of common security in this part of the world? Mr President, I would appreciate your thoughts.

Vladimir Putin: Of course, from the human values point of view, and from the business point of view, security issues have always and will always be key issues. As for the region we are located in, it is no exception, and for this region which was severely affected by global military disasters over decades. This is very important and relevant.

We are also deeply concerned about what Madame President talked about. Russia has a principled position regarding the matter. We are completely against the distribution of weapons of mass destruction all over the planet and we urge North Korea to comply with the decisions taken by the international community and the United Nations. At the same time, we believe that one should act very carefully to not provoke North Korean leaders to any action to protect their national security.

We need to return the situation back to talks and we will be doing what we can to convince our North Korean partners of this approach. Madame President knows that we have preserved some communication channels with North Korea (DPRK) and we will be using them to reverse the situation from the state of confrontation that it’s in right now. I believe that any action that provokes any further escalation is counterproductive.

But definitely, I would like to end this part of my answer with what I started: we are categorically against any expansion of nuclear weapon activity and distribution of nuclear weapons. In this regard, we share a common position with the United States, the People’s Republic of China, Japan and the Republic of Korea. We must understand that the demand for peaceful coexistence, the demand from people who live in this region for a peaceful life and expanding horizons of cooperation is strong. This is an issue for us, like the problems of the past.

You have spoken about the problem of the islands, about the peace treaty with Japan, but we’ve had this request to restore relations, friendship, trust, cooperation in the past. You know, I remembered one thing. I was saying that, we, recently, several years ago, resumed talks with Japan on the peace treaty. The resumption of these talks was initiated by former Japanese Prime Minister Mori.

There is an interesting story here. His father was fighting in World War II and eventually he was captured by Russians, and after coming back from captivity he became the mayor of a small city and headed the society of Japanese-Soviet friendship. And before his death he wrote in his will that he wanted to be buried in Russia. And we, along with Japanese Prime Minister Mori, when he was in office, went to the cemetery his father was buried in, in a Siberian Region of the Russian Federation.

What does this show? It shows that people who have been through the severe tests of war, bequeathed friendship to us, cooperation and openness with each other. In this, as they suffered during severe military challenges, they saw prerequisites to success in the future, both for their children and for their grandchildren, for future generations. Of course we cannot ignore what we know about the past, but we cannot ignore that positive message, the lessons given to us by our fathers, grandfathers who went through severest tests of war.

As for the Korean peninsula – it’s the same. The Korean people have been through extremely difficult tests. We certainly do not need an inter-Korean crisis that could end in a global disaster. We must do everything we can to prevent such a scenario.

But we need to undertake efforts to develop cooperation where it is possible as well. Madame President spoke about our trilateral plans; they are quite large for this region. It includes the development of transport (railway) infrastructure, and the development of joint projects in energy engineering. I believe we must do everything we can to get back to these cooperative projects.

Kevin Rudd: Thank you very much, Mr President. You have reminded us all of the lessons of the last world war, and the impact that it had on the families who have direct connection experience of that devastation. And certainly here in Russia we are conscious of the scale of the human loss which is the largest in the world, the people of China, the largest in the world, huge, huge human cost.

But again, turning to the future, as Russia is a global power and we look to how the future global relations of Russia will proceed, of course, we come to the question of the United States as well. The US was a strong Soviet ally during the war, and we have been through a rollercoaster relation ever since between the Soviet Union and the Russian Federation, and the United States.

Turning to the future, we look at this thing, the US presidential election year, and I now live in New York and I watch this thing happen every day in all of its colour and movement: candidate Trump, candidate Clinton. And by Australian political standards, it’s even fairly wild by those standards.

But when we look at the outcome of the election, let me take out that crystal ball again. Let’s just assume for a moment, if Hillary Clinton becomes the next President of the United States. We have our crystal ball here based on the robust principles of national interests, which you reminded me of before, how do you believe, what do you believe can be the future strategic relationship between the two countries if Hillary was to become the President? And what do you think is achievable?

Mr President, I would appreciate your thoughts.

 Vladimir Putin: Unfortunately, our relations are in a rather frozen state, and I believe, through no fault of ours. I have spoken many times on this, and I don’t want to bore our large and dignified audience with all the details and the background. But anyway, after the well-known events of the early 1990s, after the emergence of a modern, future-oriented Russia seeking to build a democratic society and market economy… Mr Chubais is here today, he was one of the people behind the events at the time, and they received a lot of criticism, on the one hand.

On the other hand, everyone has to admit that during that period, the foundation was laid for developing democracy and a market economy. I think that even with all the difficulties, problems and drawbacks, that generation of politicians still solved the task they set for themselves. Of course, we expected that such openness would be met with a similar response from our partners. But this never happened. Instead, they looked through the prism of their national interests and interpreted it their own way.

And how exactly did they interpret it?

The Soviet Union collapsed, so it was time to put the squeeze on Russia. Providing humanitarian aid was fine, but supporting separatists in North Caucasus was also okay because it made Russia’s leadership more amenable to solving other issues – the global ones that probably were more important for our partners. Solving the Yugoslavia crisis without the involvement of Boris Yeltsin, then president of Russia, whom everyone considered their close partner, was fine with them because it met their interests, and they couldn’t care less about the interests of the Russian Federation. And so on.

They can expand NATO eastwards in several waves, despite Russia’s clear objection, under the well-known populist slogan that each country has the right to determine its own security system. That’s true. But security has to be global. Only then can it be reliable.

A country can withdraw from the anti-ballistic missile treaty unilaterally and develop this system under the pretence of addressing the Iranian nuclear threat; and when the Iranian nuclear threat ceased to exist, it was okay to pretend we forgot about everything and continue developing this system. If this kind of thinking persists, I do not think any thaw in relations is possible.

If our partners come around to a different way of thinking, based on mutual consideration of interests, respect for one another’s interests, then our attitude will change completely. We did not initiate the chill in relations, and we are ready at a moment’s notice to fully restore cooperation. But this doesn’t depend solely on us; it depends on how the future leaders of the US administration want to build relations with Russia.

Kevin Rudd Thank you, Mr President. We have from the organisers about ten or fifteen minutes to go, so let me just follow on quickly to the point you have just made. I heard you speak at length at the St. Petersburg Forum earlier this year on a range of subjects, and one of which of course touched on the question of continued American and western sanctions.

Now we are two and a half years down that track. Do you see the possibility of political or diplomatic breakthrough with the US and the European Union on this question? Your thoughts also on the implementation of the Minsk Agreement. We would appreciate your thoughts on that because you are in the hot seat on that, and Russia as a global power is highly relevant to the future of those two questions.

Vladimir Putin: I presumed we would be discussing economic problems of the Asia-Pacific region, but it seems there’s no avoiding this. So let’s say a few words about it. We are not responsible for the Ukraine’s crisis. We did not support the unconstitutional coup in Ukraine, and we did not provoke the reaction of part of the country’s population to these actions.

And this is what led to Crimea’s desire to be part of the Russian Federation, and Donbass – that is, Donetsk and Lugansk – started resisting the regime, which, right after the coup, wanted to establish its authority in these areas. The situation gradually deteriorated. I can tell you only one thing: as for Crimea, the Crimean people made a decision, voted. The question is closed as a matter of history, there is no going back to the previous system, absolutely not.

As for the settlement in south-eastern Ukraine, I am in total agreement with the participants of the process, first of all the participants of the Normandy process, and with the position of the United States: there is no alternative to implementing the Minsk agreements. Everything is written in black and white. By late 2015 amendments were to be made to the Ukrainian constitution. They were not. A law on the special administrative status of these areas was to be enacted. It has not been. A law on amnesty was to be passed and signed by the president. It has been passed by the Rada, but not signed by the president. A law on municipal elections has to be passed. It has not been.

I don’t intend to dwell on this and aggravate things, but I would like to say one thing: we believe that the Minsk agreements have to be executed in full without any restrictions, limitations or reinterpretation. We are not capable of doing it on our own, the Normandy format’s participants have to do this with us, as well as the United States, because only they have real influence with the current government in Kiev. But, of course, without the political will of the Ukrainian leadership it is impossible, and ultimately everything depends on them.

Kevin Rudd This will draw our discussion to a close, Mr President and Madam President and Prime Minister Abe. You have quickly reminded us, President Putin, that in this gathering of international business we are fundamentally about the economy and business and trade and investment, and geopolitics is always there playing some role.

But all three of you are now heading off to Hangzhou in China; you are about to go to the G20 meeting. And the G20 meeting occurs at a time when we have had nearly a decade of low economic growth globally. A very slow recovery from the events of the financial crisis of ’08 and ’09.

The Chinese have put forward their agenda for the conference: they talk about four I-s, they talk about innovation, invigoration of the global economy through productivity, they talk about a new generation of interconnectedness, the physicality of connectedness through transport hubs and also telecommunications. And they speak also of inclusion, the fourth I, which is how you bring about the inclusive pro-poor agenda which matches Agenda 2030 of the United Nations to lift the remaining billion plus people around the world out of poverty. But if you are looking at this conference and the need to kick start again global growth, Mr President, can I conclude with a question to yourself: So what are your aspirations for Hangzhou? What views would you wish to see expressed around the table with your colleagues from the G20, and what outcomes would you like to see in order to kick the global economy into a more rapid speed? Mr President.

Vladimir Putin: I would like to draw your attention to two points that are of interest to us and perfectly complement Russia’s agenda (and, incidentally, the agenda for the Far East). They were, in fact, formulated appropriately by our Chinese friends.

The first point is innovative development. We talk about it all the time, we discussed it at the G20 Summit held in Russia, and we still believe it is extremely important. We are in a region that is extremely rich in mineral resources, but the future of our economy in general and this region in particular depends on high technology. A modern digital economy is our future. I made a point of bringing up the work that has been done already in the aircraft industry, the shipbuilding industry; the achievements we are building on now in aviation, space, science and innovation. This is the first thing we are interested in.

The second is the international financial architecture. True, we recently saw IMF quota increases for emerging markets, but this is not enough, considering the growing weight of the emerging economies, so additional steps will be needed. We will certainly discuss what the Prime Minister and Madame President of the Republic of Korea have said – the lifting of barriers to trade.

In recent years, trade barriers in developed economies have increased by 10 percent – that is a fact, while these barriers actually need to be reduced. We discuss this constantly in APEC, and we are taking steps to change the situation. I fully agree with Madame President: we must certainly seek to expand the space where there is economic freedom, to consider free economic zones, and other forms of cooperation. All this is certainly of great interest to us.

Kevin Rudd Well, thank you very much, president Putin, our host here at Vladivostok, thank you very much for having those of us from around the rest of the region here at the Eastern Economic Forum; President Park for your contribution both in your formal remarks and your comments on regional security; and Prime Minister Abe with his detailed knowledge of the streetscape and the local geography of Vladivostok. When we come back here again to Vladivostok, I am sure that Prime Minister Abe will be conducting a tour of the city for all those who wish to contribute. Those who wish sign up to the Abe tour of Vladivostok can line up over there. And the tour will be led by the world’s most famous Italian-American Nintendo plumber whose name is Mario.

Ladies and gentlemen, as these three leaders now make their way to Hangzhou, could we wish them well in terms of our common interest in strong, sustainable and balanced global growth? But also join them in their collective efforts to build the economy of this important region of the world, the Russian Far East. Thank you so much.

Vladimir Putin: Mr Rudd, thank you very much for participating in our work, and in such a thoughtful and professional manner. Thank you.

September 3, 2016, Russky Island