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The agenda covered issues related to the functioning of priority development areas, the free port of Vladivostok and the activities of the Far East Development Fund.

Taking part in the discussion were heads of major Russian companies and business executives from Japan, China, and the United Arab Emirates.

They covered a range of issues, including cross-border logistics, improvement of border and customs services, development of the Vladivostok sea fishing port and development of the social infrastructure, air transport, and power and gas supply.

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President of Russia Vladimir Putin: Good afternoon, friends, it is a pleasure to see you.

Actually, we met with some of you yesterday, at the booths where you told me about your plans and achievements in the Russian Far East. So, I would like to begin this meeting by expressing my gratitude for your contribution to Russia’s efforts to develop the Far East, including Primorye Territory and also Khabarovsk Territory, Amur Region and all the way to Kamchatka and Chukotka.

You can see that we have been working energetically in the past few years to create favourable conditions for doing business in these regions. We have created a system of business support measures and instruments in the Russian Far East, such as priority development areas and the Vladivostok Free Port. As you know, there are now five free ports in eastern Russia that offer very good business terms and a minimum of administrative encumbrances. At the very least, we are trying to ensure that our administrative efforts help businesses rather than hinder their initiative with restrictions.

You may also know that we have created 13 priority development areas and free ports in five regions, as I have said. The priority development areas and the free ports have approximately the same benefits and preferences.

Our meeting has been held at your request, but my colleagues and I are happy to be at this meeting. We consider it very important, because we want to hear your opinions on our achievements in creating conditions for economic development in the Far East and what else we should do towards this end. Of course, the most critical and objective parties to this process are those who bear the brunt of project implementation, that is, you. Therefore, we will be glad to hear your opinions and to adjust our work accordingly.

I will end my monologue here to listen to what you have to say.

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Tadashi Maeda, CEO/Executive Managing Director of the Japan Bank for International Cooperation: Thank you, Mr President. This is my second opportunity to meet you in person after St Petersburg. I would like to address two issues, Mr. President. One is the importance of market integration, not just only the Russian Far East, but neighboring countries, including Japan. So for those purposes, we signed an MOU with RusHydro on the equity participation, and beyond that, we are going to make them strategic projects in the region. We are going to supply and provide financial support for the supply of cutting-edge equipment to the partner nation in the Russian Far East, and then, eventually, we hope that some of the transmission connectivity between Sakhalin Island and Hokkaido, a Japanese northern island. This is paving the way for more market integration between Russia and Japan.

The second thing that we are doing is that we are signing a memorandum of understanding with the Far East Development fund on bettering the performance of the advanced Special Economic Zone, because of the European and American sanctions, Japanese potential investors are scared. Because investment is a long-term commitment, so we need some confidence-building for them. And we have experience in doing similar things in other countries, for example, in India, the Dehli Mumbai Industrial Corridor, and also in Myanmar, the Dawei Special Economic Zone. The key thing is to gather all pieces of information to sort out the necessary information for potential investors, and to give them good guidance for better investment. So we are going to create a joint entity with the Russian Far Eastern Development Fund for advisory services to give them more good management skills. That's what we are going to do right now.

And thirdly, lastly, we are going to make some additional demands, for example, that we signed an MOU of strategic alliance with Novatek on Yamal LNG, so that it will pave the way for the Arctic delivery route of liquefied natural gas from Yamal to the Russian Far East. And if you have some idea to create some facility, a port facility, of an LNG terminal in the Russian Far East, we are more than happy to make some necessary support for this. Thank you, Mr President.

Vladimir Putin: As for the capabilities of our ports in the Russian Far East, as you are aware, 70 percent of liquefied gas from the Sakhalin-1 and −2 projects go to Japan. We are aware of Japan’s requirements and the nuclear energy issue. We are ready to cooperate with Japan in this area, including in developing port infrastructure, if necessary, because additional investment will be needed considering the nature of liquefied gas transportation.

However, everything we are doing on Sakhalin is to everyone’s liking and is working effectively. The projects are running like clockwork without any trouble.

We also have some ideas on Sakhalin-3, which we support, in general. It is only a matter of an agreement between the economic partners.

As for Yamal LNG, this major project is proceeding successfully, surprising as this may seem. I say it is surprising because of the harsh Arctic conditions, yet the project has been going on as planned and without any trouble. If our Japanese partners are interested in this project, we should get together to discuss logistics. We understand that if we opt for the Northern sea Route, we should discuss the delivery timeframe and season.

Or we could decide on a swap. There are several options here. Our transportation routes mostly lead to Europe and other parts of the world, but swap transactions are a distinct possibility. We can come to an agreement on this issue with anyone. For example, Gazprom can dispatch gas along one route, while you can receive comparable amounts of gas via a different route. We can discuss such swap transactions with other producers, for example, Qatar. This is a matter for serious negotiations and assessments, but we are willing to do this, and we see no problem here.

Regarding RusHydro: we are working actively and we think we know what should be done to settle financial issues concerned with RusHydro. If our Japanese partners and friends decide to buy into RusHydro, we will be glad. There are no political obstacles to this, none at all on our part. You mentioned US sanctions, but we have not imposed, and do not intend to impose, any sanctions on Japan. Therefore, we need only to work on this and agree with our partners on the terms for acquiring a stake in this Russian company.

RusHydro is one of the world’s largest companies in this sphere. It will work independently, as an independent company. We do not plan any merger or takeover for it, absolutely not. It will work as an independent company. As for your future relations with it, I believe there are several alternatives.

You mentioned an energy bridge between Sakhalin and Hokkaido. We have been considering this possibility for a long time. We support this idea, but we still need to find a way to make this project economically expedient. In any case, I believe that this could be a very useful project and a real step towards regional integration.

JGC Corporation Chairman and Representative Director Masayuki Sato (retranslated): I head the JGC company. My name is Sato. I am engaged in a project on the Yamal Peninsula. We also grow greenhouse vegetables in Khabarovsk. We focus on different businesses.

There are three reasons behind our success. Firstly, it is commitment, speed and transparency. Of course, we feel that the federal Government and the local authorities are committed to cooperate with us. To succeed in Khabarovsk, we have established cooperation with our Russian counterparts.

As for transparency, it is about licensing and going through all the procedures. It is about an open approach on the part of the Government. We are very grateful for that. This is very good. The Khabarovsk authorities also support us in every way. I believe this is important.

With regard to speed, what do investors need? To be able to go through various procedures quickly. It is necessary to speed this up – that is the key to success. We need to be able to complete all the procedures quickly. It opens up big opportunities for us. Thank you.

President of Russia Vladimir Putin: What issues are you referring to? What specific issues, do you think, need special attention in order to speed up the decision-making process?

Masayuki Sato: For example, building permits. Of course, it is better now, but we would like things to be even faster. This is just a request, of course.

To work in this region, we need highly qualified staff. We would like for such people to stay in the region, rather than leave it for other regions. That would help.

My other point is that I believe that our goal is export. Naturally, we need better logistics. This is probably a proposal. We have good ties with our Russian partners. We are increasing our investment in partnerships with small- and medium-sized enterprises. Of course, this also opens doors to future success. Thank you.

Vladimir Putin: With regard to building permits, the Governor of Khabarovsk Territory is based in Vladivostok (I am not sure if he is here now, probably not, but we will find him). I will ask him to meet with you, so that you can talk with him directly. I am sure he will be responsive. This is my first point.

With regard to logistics and exports, do you want to export your produce grown in Khabarovsk Territory and Amur Region to the Chinese or the Japanese market?

Masayuki Sato: Mainly Russia now.

Vladimir Putin: You said your goal is export. Are you referring to the Chinese or the Japanese market?

Masayuki Sato: Chinese.

Vladimir Putin: I believe that is the right thing to do, because Chinese people have improved their living standards, and about 200 million customers will soon be shopping for organic agricultural products. It is definitely a promising area of business. However, we are not only considering it. We are implementing several projects in the border areas. We are building roads and bridges, and will continue to do so. we will continue this work, have no doubt about it.

Mr Minister of Transport, what is the situation with the construction of the bridge in Amur Region?

Minister of Transport Maxim Sokolov: In the Amur Region, we are building a bridge between Blagoveshchensk and Heihe in accordance with the intergovernmental agreement signed in 2015. In conjunction with the Far East Development Fund, we are looking for investors, including in China.

With regard to the Nizhneleninskoye-Tongjiang railway bridge in the Jewish Autonomous Region, we started the project this year. We hope to keep it on schedule and open it to traffic in 2018.

Vladimir Putin: So, we are working on it, and will continue to do so.

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Chairman of the Board of Directors of Sirius Holding Zhang Tao: I also represent China. A year ago, I took part in the first forum, and I can see positive changes across the board. This is encouraging, including for those of us who work here.

Our company, Sirius, has invested $200 million in a cement plant, which is already up and running.

We would like to thank Your Excellency, Mr President, for your support, because many questions were resolved after you intervened.

Today I would like to make two points.

My first point is that while the ruble today is still cheap, Russian exporters have good chances to boost their exports. This may attract many Chinese businessmen interested in Russia as well.

In May, we created an e-commerce website in such cities as Heihe and Beijing; 300 manufacturers are already using it to market their products. This website allows producers in China to reach consumers in Russia, so the volume of transactions was quite high.

What is the upside? We can reduce production cost by half. Our calculations show that this website can help cut these costs by 20–25 percent. We believe that this is a positive development, and it got the attention of many people in Russia. I hope we can count on the support of the Russian authorities to ensure that Russian products will also go to the Chinese market, among other things.

My second point is that I think it is imperative to raise awareness of the opportunities available in Russia among Chinese entrepreneurs. For example, our company engages in cement production and oil refining. We have invested a lot in Russia, and many private entrepreneurs, the private ones specifically, are still unaware of it, but they could also benefit from these opportunities, including the low ruble exchange rate.

Is it possible to take any special measures to encourage private Chinese entrepreneurs? This is my question.

We can create cross-border zones in priority development areas, such as Heihe and Blagoveshchensk, or on Bolshoy Ussuriysky Island outside Khabarovsk where we could bring these people, their capital and projects.

Take ice cream, for example. We love Russian ice cream in China, but it is illegal to export it. The only way to enjoy it is to go to Russia and get some here. Something could be done to make it easier for Chinese people to buy ice cream here and sell it in China. I should probably stop here. Thank you.

Vladimir Putin: You surprised me with regard to the export of ice cream, as though this were a national asset, some cultural heritage. This is the first time I have heard this. Now whenever I go to China, I will bring Chairman Xi some ice cream as a special treat, given it is so difficult to get.

Regarding cross-border zones, this is an interesting idea and it certainly merits consideration.

Now about measures to attract entrepreneurs in general and Chinese entrepreneurs in particular. We act on the assumption that by creating, for example, priority development territories, by creating free ports, we are in fact creating conditions to attract our friends, our partners, to work in Russia.

Now regarding the weak ruble, of course, we should take advantage of that. We operate on the premise that Russian manufacturers and foreign manufacturers who have come to work here are availing themselves of this. We also regard you as our manufacturers, and this is exactly how we will treat you.

However, we should not go by the current disparity in exchange rates. We should be guided by the basic foundations of Russian economic development.

Today, as you know, we have a floating currency rate. So there are some big pluses here. You have just identified one of these pluses. There are also certain difficulties that come up. However, we have made this decision. You should simply know that these decisions are here to stay. This is my first point.

Secondly, we have never deviated from the principles of liberalising the movement of capital that were once adopted. And this is also something that you should know. Even in the most difficult circumstances of 2008–2009, I did not restrict the export of capital. Such proposals were heard both last year and the year before last. We are not doing this, nor are we going to. Yes, we know there is this administrative method of limiting the export of capital, including the limitation of its movement, but in the medium term, let alone the more distant term, we believe this would be harmful and so we are not doing this. I should say that our policy is producing results. What results? If we look at the figures year on year we will see that the export of capital has fallen by a factor of five compared to last year. We take note of this and this is a very good indicator of trust in the Russian Government’s economic policy.

Regarding the main question, online trade, we will develop it. At the same time, we should be very careful to make sure that modern methods of trade do not damage the state’s fiscal interests. However, I agree with you that online trade debureaucratises very many things, reduces production costs and ultimately can help and actually does help reduce prices for the end consumer. Naturally, the state is interested in this. We will keep working.