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FM AMCONSUL VLADIVOSTOK
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INFO RUEHZL/EUROPEAN POLITICAL COLLECTIVE
RUEHZU/ASIAN PACIFIC ECONOMIC COOPERATION COLLECTIVE
RUEHVK/AMCONSUL VLADIVOSTOK 1116

UNCLAS SECTION 01 OF 02 VLADIVOSTOK 000111 
 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: ECON ETRD PGOV RS
SUBJECT: ECONOMIC FORUM: RFE'S PROBLEM? DEMOGRAPHICS, TRANSPORTATION, 
AND CHINA 
 
VLADIVOSTO 00000111  001.2 OF 002 
 
 
¶1.  Summary.  Participants gathered at the third annual Far 
Eastern International Economic Forum in Khabarovsk to discuss 
economic development in the Russian Far East.  The most widely 
discussed topics were the region's ever-decreasing population 
and the high cost and inefficiency of transportation in the 
area.  Interestingly, China was often mentioned -- as part of 
the problem, not the solution. 
 
A Well-Choreographed Show 
------------------------- 
 
¶2.  Over 800 participants from Russia and 18 countries gathered 
in Khabarovsk September 30 to October 1 for the third annual Far 
Eastern International Economic Forum.  Speakers at the plenary 
sessions included Polpred Oleg Safonov, State Duma Chairman 
Boris Grizlov, and Khabarovskiy Kray Governor Viktor Ishayev. 
Though the plenary sessions were sometimes short on debate and 
concrete suggestions, the five breakout roundtable discussions 
included a more vigorous exchange of opinions. 
 
¶3.  The well-organized and obviously well-funded event included 
a lavish banquet attended by the Governor, several impressive 
luncheons, and a twenty-minute fireworks display.  Several forum 
participants during informal discussions with POLOFF questioned 
the need for such lavish spending, and wondered what results 
governor Ishayev is hoping to see in return. 
 
Demographics: No "Russian Cross," but Most Would Leave 
--------------------------------------------- --------- 
 
¶4.  As with last year's forum, the decrease in population was 
the main topic of discussion.  Governor Ishayev himself in his 
plenary speech candidly summed up the problems that the region 
faces.  Average income growth in the Far East is lagging behind 
other regions of Russia.  Families are having difficulty dealing 
with the high price of energy and food, and real estate costs 
have increased faster salaries. 
 
¶5.  Though the "Russian Cross" of an increasing death rate 
coupled with a decreasing birthrate is no longer an issue the 
Far East, the population continues to shrink.  Vadim Zausaev, 
the Director of the Far Eastern Market Research Institute, 
quoted a survey his organization conducted showing that almost 
70 per cent of RFE inhabitants would leave immediately if a 
better economic possibility arose elsewhere.  In general, most 
speakers highlighted the need to improve education, vocational 
training, medical care, and the job market in the RFE in order 
to retain population and attract new residents. 
 
Transportation: If Canada Can Do It, so Can the RFE 
--------------------------------------------- ------ 
 
¶6.  Most speakers at some point alluded to transportation 
problems as part of the roadblock to economic development in the 
area.  Not only is the infrastructure generally inadequate for 
land travel throughout the area, but air travel is prohibitively 
expensive.  Most of the solutions offered by government 
representatives seemed unrealistic and required significant 
funding from Moscow.  Suggestions for projects like high-speed 
rail lines, a Yakutsk-Magadan highway, and various bridges and 
tunnels were numerous, but unlikely to receive the necessary 
support from Moscow.  World Bank representative Shigeo Katsu 
suggested that if Canada, with a very similar climatic, 
geographic, and demographic profile can provide a sufficient 
infrastructure for its inhabitants, so can Russia. 
 
¶7.  The most realistic and feasible suggestions came from Vice 
Minister of Transport Andrey Nedosekov, who proposed a series of 
relatively easy to implement financial incentives to improve air 
transport.  These included nationalization of certain airports, 
subsidizing landing fees, providing fuel tax cuts for more 
efficient, non-Soviet-era planes, and cutting property taxes for 
airports. 
 
The China Problem: "Remember Tibet!" 
------------------------------------ 
 
¶8.  Interestingly, at a conference geared towards improving the 
economy of the Russian Far East, very few speakers addressed 
possible benefits of increasing trade with China.  Though brief 
mention was made for the need to establish a coal-shipping rail 
link with China, there were few proposals encouraging links 
between the countries.  Aleksander Shokhin, the President of the 
Russian Union of Industrialists and Entrepreneurs warned of a 
"new Chinese Silk Road" that will divert transit of Europe-bound 
goods away from a Russian route.  State Duma Deputy Ruslan 
Kondratov expressed fears of increased Chinese immigration, 
urging listeners to "remember Tibet, and how Chinese immigration 
destroyed the local culture." 
 
¶9.  Only Mikail Titarenko, the Director of the Russian Science 
 
VLADIVOSTO 00000111  002.2 OF 002 
 
 
Academy's Institute of the Far East admitted that closer 
partnership with China, including increased immigration, may be 
a part of the solution for the Far East.  "Who is going to 
implement our plans?" he asked, pointing out that there is not 
even enough manpower to implement APEC-related construction 
plans.  He also expressed annoyance that the State Duma failed 
to respond to a Chinese cross-border investment and development 
proposal. 
 
What Does 'WTO' Stand For, Again? 
--------------------------------- 
 
¶10.  Also noticeably absent from most discussions was the topic 
of accession to the World Trade Organization.  Most speakers 
focused on how the region can work with Moscow to improve its 
economic system, and rarely mentioned ways to better integrate 
within the regional trade system.  Only the foreign World Bank 
speaker mentioned the benefit of joining the WTO, noting that 
accession would increase trade in the RFE by 10 percent and 
raise economic growth by three percentage points. 
 
The Far East, European Russia's "Resource Appendage" 
--------------------------------------------- ------- 
 
¶11.  Though regional development has been discussed in Moscow 
for several years, and financing for the RFE and Trans-Baikal 
Development Program will rise from 40 billion rubles to over 100 
billion rubles annually in the coming years, many wonder how 
serious Moscow really is.  Consulate contact and historian at 
the Russian Academy of Sciences Viktor Larin questioned the 
national government's resolve.  "Moscow sees the region as a 
resource-producing appendage, he said."  As long as the 
resources are flowing, there is no need to seriously tackle the 
problems inhabitants face." 
 
Comment 
------- 
 
¶12.  Speakers at the conference mostly looked to Moscow to help 
solve the region's problems.  International solutions to 
problems in the Russian Far East such as accession to the WTO, 
and investment from abroad were hardly discussed, and China was 
mentioned more as a competitor than a potential partner. 
Participants brought an abundance of suggestions for how Moscow 
can help improve the economic situation in the RFE, most of 
which are unlikely to be funded.  Though some spoke of the need 
for closer integration with China, for most it appears that fear 
of competition from the south hinders development in that 
direction. 
BENJAMIN