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First Eastern Economic Forum

September 4, 2015, Vladivostok

Vladimir Putin took part in the first Eastern Economic Forum in Vladivostok. The current situation in the Russian economy and the Far East region’s investment attractiveness were the main subjects of the President’s address.

The first Eastern Economic Forum (EEF) started work on September 3, and presents investment opportunities and projects in the Russian Far East. The forum’s main missions are to strengthen ties between the international investment community, Russian entrepreneurs, federal, regional and local authorities, provide comprehensive expert assessment of the Far East’s economic potential, and present new opportunities and conditions for investing and doing business in the region.

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Speech at the First Eastern Economic Forum

President of Russia Vladimir Putin: Good afternoon friends, ladies and gentlemen.

Let me welcome you to Vladivostok. I met with many of you here three years ago during the APEC summit. Today, it is a pleasure to see you all at the Eastern Economic Forum.

This is the first time we are holding this event. The large number of Russian and international business community representatives taking part reflects the great interest that the Far East region holds. It is only natural that there should be great interest, for the region has great potential. Of course, the very fact that we are holding this forum is a symbol of the radical changes taking place today in the Far East. It is a practical expression of our policy aimed at accelerated, fast-track development in this region.

Russia’s movement towards the Pacific coast was the result of the great labour and courage of many generations of our forebears.

Let me stress that developing the Far East region continues Russia’s historic course. Russia’s movement towards the Pacific coast was the result of the great labour and courage of many generations of our forebears. Outstanding sons of our country – pioneers, industrialists, and statesmen – bound their names to the Far East’s development. Times and political systems have changed, but the course of developing this region remains unchanged.

At the turn of the 20th century, statesmen such as Sergei Witte and Petr Stolypin had big plans for developing the Far East. Later, the Soviet period built further on these plans. Founding Vladivostok and Komsomolsk-on-Amur, building the Trans-Siberian and the Baikal-Amur mainline railways, and developing the Far East’s natural resources were projects of truly national scope that advanced not just the Far East region but practically the entire country.

Today, we see the future of the Far East as a key socioeconomic development centre for Russia, and a region that should be effectively integrated into the developing Asia-Pacific region as a whole. Our main task is to develop the economy and infrastructure, build new production facilities and create new jobs. This is the goal we are working towards.

In just these last years alone, several dozen major projects have begun or already been completed in the Far East region. Many of them really could qualify as national and even global projects in scale and significance. They include the launch of the Eastern Siberia-Pacific Ocean oil pipeline and the opening of a federal university in Vladivostok, which has already become a major scientific and educational centre for the Asia-Pacific region. Then there is the construction of the Power of Siberia gas pipeline, the Vostochny Space Launch Centre, which is nearing completion, modernisation of the Baikal-Amur and the Trans-Siberian mainline railways, which I just mentioned, offshore development of Sakhalin, Magadan and Kamchatka, the Eastern Petrochemicals Complex project, building a modern cluster for shipbuilding and manufacturing equipment for offshore fields, developing companies engaged in mining iron ore, gold and other minerals, and successful agricultural sector projects.

Our main priorities in the Far East are an active social development policy, building a modern transport and education infrastructure, affordable housing, and a healthcare system providing quality services. Naturally, we are also expanding economic freedom and providing better conditions for Russian and foreign investors to do business, so that the Far East can compete successfully with other leading business centres in effectiveness and returns on capital.

We offer our potential partners genuinely exclusive opportunities and incentives in the Far East.

Friends and colleagues, we offer our potential partners genuinely exclusive opportunities and incentives in the Far East. I would like to say a few words about this now. I am sure this subject has already been discussed and will be yet, but I have come here to speak with you and let you hear everything right from the top, as it were.

The law on priority development areas came into force on March 30. We will continue to work together with investors to encourage projects carried out in the Far East. Residents of the priority development areas benefit from special conditions for organising new production, preferential tax regimes, administrative support measures, and help in developing infrastructure. Nine such areas have already been established in the Far East: in the Republic of Sakha (Yakutia), Primorye and Khabarovsk territories, Amur Region, Chukotka and Kamchatka. There are plans to organise more such areas on the Russky Island and Bolshoi Ussuriysky Island, and in other parts of the Far East.

Residents of the Vladivostok Free Port will get an even broader range of incentives. The relevant law will come into force in October, and its provisions will apply to all key ports in the south of Primorye Territory, from Zarubino to Nakhodka, and to 15 municipal areas that are home to nearly 75 percent of Primorye Territory’s population.

Procedures for crossing the border will be substantially simplified. Instead of numerous inspectors on the border, there will be one single agency. The border checkpoints will work round the clock, and it will be possible to make an advance electronic declaration of goods. Foreign citizens arriving in Russia via the Vladivostok Free Port will be able to obtain an eight-day Russian visa at the border. Free port residents will benefit from preferential insurance contribution and tax regimes, and also from the free customs zone regime.

Our hope is that these measures will enable us to develop a big transport and eventually industrial hub oriented to demand not just in the Far East, but in the entire Asia-Pacific region. It should provide the stimulus for developing international trade and open up the great potential concentrated in the southern part of the Russian Far East.

Western European, Japanese, Korean and Chinese partners, particularly in China’s border regions, all show big interest in making use of the Free Port and its opportunities. It offers them the shortest, most direct, and therefore most economically efficient access to international sea routes. I think that we have succeeded in finding a good, competitive formula for a free port, drawing on our own historical experience and on best international practice, and I therefore propose that the Government consider the question of extending the free port regime to other major ports in Far East.

If investors put resources into developing new fields and production facilities in the Far East, we will of course examine the matter of helping them build the needed infrastructure. This will make it possible to bring down costs, shorten the time it takes for projects to pay themselves off, and guarantee their effectiveness. These are also very advantageous investments for the state authorities. To give you one example, for the first six projects already selected, the state authorities are investing 13.8 billion rubles in infrastructure development in the form of direct subsidies to investors. This will enable us to attract private investment totalling 126.5 billion rubles. As you can see, this gives us a ratio of one to nine. I hope that my colleagues in the Government will ensure this instrument’s wide use and will expand the list of projects.

Co-financing of projects will also take place using resources from the Far East Development Fund and the Russian Direct Investment Fund. We have already taken the decision on funding for construction of the Nizhneleninskoye-Tongjiang bridge, which will link Russia and China. The Russian Direct Investment Fund, together with Russian and foreign partners, has invested more than 50 billion rubles in projects in the Far East. The Far East Development Fund will make resources available at preferential conditions, for the long term, and at lowered interest rates.

I remind you that in my Address to the Federal Assembly, I proposed a mechanism for topping up the Fund’s capitalisation. I will not go into the details now, but I ask my Government colleagues to settle on the sources as soon as possible. Discussion continues on this matter. I spoke about it just yesterday with the Finance Minister, but I see that the debates will reach their conclusion soon and I hope that everything will start working very soon.

Let me stress that support measures for projects, the priority development areas, the Vladivostok free port, and help for investors in infrastructure development will produce real results only if we make a general fundamental improvement in the Far East’s business climate. The regions must make active use of successful practice in working with investors, providing state services, supporting small and medium businesses, and ensuring that development projects have the necessary housing and social infrastructure.

In the Far East we are creating additional opportunities for our citizens to set up their own businesses.

Generally, we need to improve the training and raise the qualification of administrative staff. We have the necessary mechanisms. The Agency for Strategic Initiatives together with the country’s leading schools of higher learning have launched a Training Centre to teach the best practices of creating a favourable investment climate. I would like to draw the attention of my colleagues in the Russian regions, the heads of regions to the fact that this is primarily their responsibility. We will be assessing the work of regional teams mainly on the basis of the feedback we receive from the business community. I am referring here to that sphere of your activity that deals with fostering an investment climate.

In this connection, I would like to remind you that here in the Far East we are creating additional opportunities for our citizens to set up their own businesses, I mean farms, various production facilities and industrial companies. I am referring to the Government’s proposal to allocate free of charge up to 1 hectare of land in the Far East to Russian citizens. The implementation of this project is to begin in 2016. I would like to ask the Government to rapidly produce a relevant draft law and submit it to the State Duma. Most importantly, we need to envisage the simplest procedure possible for obtaining land plots, including through the use of information technologies.

I would like to repeat that here in the Far East all the main conditions for doing business should be competitive: access to financial resources, administrative procedures, transport and energy tariffs. Special measures should be worked out within the existing budget to reduce transportation and energy costs for businesses in the Far East. We need to propose and approve electric power tariffs that would be attractive for consumers, investors in every region. I would like to stress here – I looked into what is going on with the tariffs – this is an old problem in the region: they are not competitive everywhere, therefore I would like to ask the Energy Ministry to look into this to make sure we consider each Far Eastern region separately. We will have to use additional sources, if necessary, and additional budget resources to create an infrastructure.

We are interested in investment into all branches of the region’s economy.

I would like to address now all our potential investors, both Russian and international, those already working in the Far East or only planning to. We are interested in investment into all branches of the region’s economy – this includes shipbuilding, the metals industry, timber processing, bio-resources, transport, energy, healthcare and tourism. Your projects will receive full support. You can address all your issues directly to the people responsible, including the Presidential Plenipotentiary Envoy to the Far East, Mr Trutnev; he is also a Deputy Prime Minister and has all the necessary authority.

I would like to stress that the Government should strictly ensure the priority nature of funding the region’s social and economic development. This requires a consolidation of the resources of the federal budget, the state programmes, and development institutes as well as of the infrastructure companies and companies with public ownership. This is a significant reserve, one company alone (Mr Sechin is here) – Rosneft, jointly with its partners – intends to invest over 1.3 trillion rubles into the development of its Far Eastern projects which will produce a multiplier effect of about 6.6 trillion rubles and help create some 100,000 new jobs. This will also lead to the production by related companies of another 6 trillion rubles worth of goods over 20 years. Within the same period, the budget will receive about 4 trillion rubles in taxes.

We will also be developing shipbuilding, as I have already said. I would like to inform you that I have decided to allocate 60 billion rubles from Rosneftegaz resources for the modernisation of the Zvezda Far Eastern shipbuilding complex. Rosneftegaz has sufficient resources; the critical task is to ensure their efficient use. Rosneftegaz resources are an effective mechanism. I proceed from the fact that the funding of the entire modernisation programme at the plant, which amounts to 146 billion rubles, is a joint commitment of Rosneft and Gazprombank. This is a preferential resource that allows for an in-depth restructuring of the plant and the creation on its basis of a modern civilian shipbuilding cluster, the production of marine technology and equipment for the exploration, production and transportation of hydrocarbons. I would like to acknowledge all our foreign partners who made the decision to take part in this project.

With its colossal resources, Russia can ensure the enhanced growth of the economies of the Asia-Pacific states.

Colleagues, ladies and gentlemen,

I am convinced that the Asia-Pacific countries, despite their current problems, will clearly remain the locomotive of the global economy and an important market of goods and services. Strengthening relations with these states is of a strategic importance for Russia. With its colossal resources, Russia can ensure the enhanced growth of the economies of the Asia-Pacific states. I would like to stress that the creation of and energy bridge between Russia and the Asia-Pacific region is our common strategic task. We can see and understand that the region is interested in a strong and successful Russia, open to cooperation and putting forth a positive and result-oriented agenda. Eurasian integration, in turn, opens up new opportunities for mutually beneficial cooperation and trade with the APR states.

The Eurasian Economic Union is a receptive regional market with a free movement of goods, capital, services and workforce, with clear rules and without any unnecessary barriers. I would like to stress that this is a market initially created on WTO principles. This year we signed an agreement on a free trade zone between the EAEC and Vietnam; jointly with our partners we are considering the possibility of having similar agreements with Israel, India and Egypt. On May 8, 2015, in Moscow, together with my colleague Chinese President Xi Jinping we adopted a Joint Declaration on Cooperation in aligning the development of the Eurasian Economic Union and the Silk Route Economic Belt. This document envisages the coordination of efforts, a simplification of mutual investment procedures and the development of a transportation infrastructure.

The advantage of these two projects is that they complement each other, creating greater opportunities for each participant. This in fact creates a new configuration of trade routes and economic cooperation in Eurasia. This is sure to have an impact not only on the development of this continent, but also on the global economy as a whole. Thus, it will significantly simplify cargo shipment between Asia and Europe: cargoes from China will have only two borders to cross on their way to Europe. We are now actively developing transportation routes through Kazakhstan and European part of Russia. At the same time, we are adding to the existing routes; I am referring here to Trans-Siberian and the Baikal-Amur railways that I mentioned earlier. By 2017, we plan to spend about 500 billion rubles on the modernisation and expansion of both.

Moreover, the North Sea Route has a great development potential. Our job is to turn it into a competitive transport corridor of global significance, including for container traffic that dominates in the world cargo turnover. I would like the Government to continue these efforts. We believe new international financial institutions designed to resolve practical cooperation tasks could play a major role in the implementation of our large-scale joint projects. I am primarily referring here to the New Development Bank created by the BRICS countries with a capital of $100 billion. As you may know, Russia is actively involved in it, including in terms of capital – we rank third in volume after China and India.

I would like to reiterate that we will actively strengthen cooperation with the APR countries in the creation of an infrastructure and the development of trade and industrial cooperation. At the same time, the Asia-Pacific is not only a major production centre, an established world ‘workshop’. It is rapidly developing its system of education, its universities, engineering centres and high technology production – what we call the knowledge and intellect economy. In this connection, our cooperation in science and education acquires special importance. All this could become a powerful stimulus for the technological development of all the Asia-Pacific countries. Russia has serious fundamental scientific capacity and we are ready to put forth a series of initiatives in this area.

Thus, we suggest considering the creation of large research platforms, so-called mega science projects that will make true scientific breakthroughs possible. Today laboratories of this kind, like CERN and ITER are mainly located in Europe. I believe it is time to create such an infrastructure, a network of research and educational cooperation centres in the Asia-Pacific region as well. Russia invites all countries that are interested in this work to join us.

The very idea of a modern 21st century Far East has been supported by Russian society, which in itself is a guarantee of success.

The Far Eastern Federal University, where we are meeting today, is becoming one such cooperation centre. We expect it to turn into a platform for generating new ideas, addressing development tasks for Russia and the entire Asia-Pacific region. I would like to note that the university has only existed in its current state for three years. Today, together with our colleagues from China, Japan, India and other APR states and with the involvement of businesses they are actively conducting fundamental and applied research. Young people from all over Russia come to study here. I expect them to link their future with the Far East. The Far East needs qualified experts, scientists, engineers, managers, production organisers and workers with unique skills and qualifications. The Agency for the Development of Human Resources has been created in the Far East with the purpose of finding and attracting such people.

Colleagues, ladies and gentlemen, friends,

We see the scale of the tasks we are facing. I have no doubt that we will be successful. We rely on a realistic, proven strategy and will put all our plans into practice. The very idea of a modern 21st century Far East has been supported by Russian society, which in itself is a guarantee of success. Recent polls show that an absolute majority of Russians believe that this region will become dynamic and flourishing. The Far East is open and welcomes all who are ready for joint work and cooperation, who are ready to implement their ideas and business plans and make use of these unique development opportunities.

I wish you success.

Thank you for your attention.

September 4, 2015, Vladivostok