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explained | Eastern Economic Forum and India’s Balancing Act

What are the benefits of investing in the Russian Far East? Which countries are currently investing in this sector?

What are the benefits of investing in the Russian Far East? Which countries are currently investing in this sector?

the story So Far: Russia hosted the Seventh Eastern Economic Forum (EEF) Vladivostok from 5 to 8 September. The four-day forum is a platform for entrepreneurs to expand their business in the Russian Far East (RFE).

What is Eastern Economic Forum?

EEF was established in 2015 to encourage foreign investment in RFE. The EEF reflects the economic potential, suitable business conditions and investment opportunities in the region. The agreements signed on the EEF increased from 217 in 2017 to 380 agreements in 2021, worth 3.6 trillion rubles. By 2022, about 2,729 investment projects are being planned in the region. The agreements focus on infrastructure, transportation projects, mineral exploration, construction, industry and agriculture.

Who are the lead actors in the forum? What are their interests?

This year the forum aims to connect the Far East with the Asia Pacific region. China is the largest investor in the region as it sees the potential in RFE to promote the Chinese Belt and Road Initiative and the Polar Sea Route. China’s investment in this sector accounts for 90% of the total investment. Russia has been welcoming Chinese investment since 2015; Now more than ever because of the economic pressures caused by the invasion in Ukraine. The Trans-Siberian Railway has helped Russia and China advance trade ties. The countries share a 4000 km long border, which enables them to exploit each other’s resources with some infrastructural support. China also wants to develop its Heilongjiang province which connects to the RFE. China and Russia have invested in a fund to develop Northeast China and the RFE, connecting the cities of Blagoveshchensk and Hehe via a 1,080-metre bridge, supplying natural gas and a rail bridge connecting the cities of Nizhnelinskoye and Tongjiang. invested through collaboration.

Apart from China, South Korea is also gradually increasing its investment in this area. South Korea has invested in shipbuilding projects, manufacturing of electrical equipment, gas-liquefaction plants, agricultural production and fisheries. In 2017, the Export-Import Bank of Korea and the Far East Development Fund announced their intention to invest $2 billion in RFE over a period of three years.

Japan is another major trading partner in the Far East. In 2017, Japanese investments amounted to $16 billion through 21 projects. Under Shinzo Abe’s leadership, Japan identified eight areas of economic cooperation and encouraged private businesses to invest in the development of RFE. Japan wants to depend on Russian oil and gas resources after the 2011 meltdown at Fukushima, which forced the government to pull out of nuclear power. Japan also sees a market for its agro-technologies that have the potential to flourish in RFE given similar climatic conditions. However, the momentum of trade that existed with Shinzo Abe was lost with the leadership of Yoshihide Suga and Fumio Kishida. Trade relations between Japan and Russia are hampered by the Kuril Islands dispute as they are claimed by both countries.

India is looking to expand its influence in the RFE. During the forum, Prime Minister Narendra Modi expressed the country’s readiness in expanding trade, connectivity and investment in Russia. India is keen to deepen its cooperation in energy, pharmaceuticals, maritime connectivity, healthcare, tourism, diamond industry and the Arctic. In 2019, India also offered a $1 billion line of credit to develop infrastructure in the region. Through EEF, India aims to establish a strong inter-state connectivity with Russia. The trade representatives of Gujarat and the Republic of Sakha have initiated agreements in the diamond and pharmaceuticals industry.

What is the goal of EEF?

The primary objective of EEF is to increase foreign direct investment in RFE. The region covers a third of Russia’s territory and is rich in natural resources such as fish, oil, natural gas, timber, diamonds and other minerals. The sparse population living in the region is another factor encouraging people to move and work in the Far East. The wealth and resources of the region contribute five percent of Russia’s GDP. But in spite of abundance and availability of materials, their procurement and supply remains a problem due to non-availability of personnel.

The RFE is geographically placed at a strategic location; Acting as a gateway into Asia. The Russian government has strategically developed the region with the aim of connecting Russia to Asian trading routes. With the rapid modernization of cities such as Vladivostok, Khabarovsk, Ulan-Ude, Chita and more, the government aims to attract more investments in the region. Russia is trying to attract Asian economies into investment and development in the Far East. The invasion of Ukraine is a worrying issue as it affects the economic development of the country. However, Russia believes it can avoid economic crisis and sanctions with the help of China and other Asian powers.

Although the EEF is an annual gathering, the forum comes at an opportune time for Russia which is dealing with the impact of sanctions. Furthermore, the coming together of countries such as Myanmar, Armenia, Russia and China seems like the formation of an anti-sanctions group in the international system.

Will India be able to achieve a balance between the EEF and the Indo-Pacific Economic Framework for Prosperity (IPEF)?

The US-led Indo-Pacific Economic Framework for Prosperity (IPEF) and the EEF are incomparable in terms of their geographic coverage and partnerships with host countries. India has vested interests in both fora and has worked towards balancing its participation. India does not shy away from investing in the EEF launched by Russia, despite the prevailing international conditions.

At the same time, India has given its ratification and acceptance to three of the four pillars of IPEF. The country understands the benefits of engaging in development in the RFE but also sees the IPEF as an important platform to strengthen its presence in the Indo-Pacific region. The IPEF presents an ideal opportunity for India to work in the region, without being part of other regional groupings such as the China-led Regional Comprehensive Economic Partnership or the Comprehensive and Progressive Agreement for the Trans-Pacific Partnership.

IPEF will also play an important role in building a resilient supply chain. India’s participation in the forum will help it break away from the supply chains dependent on China and also make it a part of the global supply chain network. Additionally, IPEF partners will act as new sources of raw materials and other essential products, further reducing India’s dependence on China for raw materials. While Mr. Modi has avoided full participation in the IPEF’s trade pillar, this does not signal the end of India’s role in the forum.

Avishka Ashok is Research Associate at National Institute of Advanced Studies, Bangalore

essence

The Eastern Economic Forum was established in 2015 to encourage foreign investment in the Russian Far East. By 2022, about 2,729 investment projects are being planned in the region.

During the forum, Prime Minister Narendra Modi expressed the country’s readiness in expanding trade, connectivity and investment in Russia. India is keen to deepen its cooperation in energy, pharmaceuticals, maritime connectivity, healthcare, tourism, diamond industry and the Arctic.

India has a vested interest in both the EEF and the Indo-Pacific Economic Framework and has worked towards balancing its participation. IPEF is an important platform for India to strengthen its presence in the Indo-Pacific region.

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