Nobel Laureate Gurudev Rabindranath Tagore, while penning his experience of travelling to Russia in 1930, observed: "Had I not come to Russia, my life's pilgrimage would have remained incomplete". Many centuries down, in 2017, and in a more modern economic sense, it would be no exaggeration to state that India's invigorated script of economic diplomacy would be incomplete without a sustained engagement with Russia's Far East, an economic powerhouse in the making.
Indeed, this large swathe of the Far East landmass constituting over one-third of Russia's territory and home to an amazing range of natural treasures — from oil and natural gas, iron ore, copper, diamonds, gold to pristine fresh water – is a strategic asset and a massive untapped potential. The Russian Far East's proximity to the largest and fastest growing market of Asia-Pacific and key enablers like the advanced development territories and free port of Vladivostok, opens up infinite possibilities of trade and investments. Foreign moolah is lining up for the Far East. More importantly, the Russian Far East is inviting Indian investments with incentives to invest and offering ease of travel in the region with e-Visa free access to select Russian cities including Vladivostok.
It is therefore only appropriate -- both in terms of time and circumstances -- that the Eastern Economic Forum (EEF) has taken up the mandate of accelerating the development of the economy of Eastern Russia and expansion of international cooperation in the Asia-Pacific region. The EEF will serve as a vibrant platform for improving relations between the international investment community, Russian businesses and the Federal and local governments, and for presentation of new conditions for investments by means of exclusive procedures created for East Russia – the Territory of Priority Development and the Free Port of Vladivostok.
This makes the EEF extremely significant in the context of the India-Russia bilateral economic relationship which is looking at deeper engagement. That a "Russia-India Business Dialogue" is part of the programme of the EEF for the first time, suggests how both India and Russia are taking this partnership very seriously. Russia is also keen for India to explore this region in terms of harnessing the untapped potential in the Indo-Russian economic partnership. India too would do well to leverage on its resurgent economy, reforms in ease of doing business, launch of the Goods and Services Tax and further liberalisation of foreign investment norms, to help develop the Russian Far East.
In this respect, the initiative by FICCI to mount the first business delegation to the EEF with participants cutting across all potential sectors that can enhance our bilateral economic cooperation, is a major step towards establishing industry footprints in the region.
One big opportunity is connectivity. Major cross-border transport infrastructure will be completed in 2018–2019 and the Russian Government has approved the development of international transport corridors Primorye-1 and Primorye-2 which will link the Far East to domestic and external markets. This will be a major boost to the region's investment case. A full range of projects to modernise airports and build new passenger and cargo terminals for international airports are being implemented in the Russian Far East with new regulations on long-term tariffs on airport terminal services being set to facilitate investments in aviation.
A lot of collaboration can happen in urban development. The Ministry for the Development of the Russian Far East estimates that, by 2025, some 6.5 million people (vs the current 6.2 million) will reside in the Far Eastern Federal District which will open up opportunities in improvement of regional infrastructure, logistics and cargo clearance processes, addressing labour shortages and high energy costs.
There are good prospects of investment in manufacturing and the Indian industry would do well to explore the Irkutsk region where there is a lot of scope for investments in metallurgy, woodworking and pulp and paper and production of machines and equipment.
The other hot spot in the Russian Far East is agriculture. This is witnessing a strong interest post the launch of a land allocation programme which is aimed at stimulating entrepreneurial activity in the macro-region through convenient access to land resources, free-of-charge usage of the land for a period of five years and transfer of the resource to their ownership after this period.
Then there is hydrocarbons and energy. The Russian Far East houses 27 per cent of gas reserves and 17 per cent of oil reserves in the Asia-Pacific region but the level of development of the deposits is extremely low. India can partner with Russian companies which have announced the launch of major projects in gas processing and petrochemical plants.
The Russian Far East has a clear agenda of attracting and adapting new technological solutions and developing digital skills for business and government. Indian industry can deploy its IT strength to make the work of governmental bodies more effective and boost digital and offline retail – from innovative distribution centres to the last mile consumer.
So as we look forward to a blueprint for Indian involvement in a very vibrant Russian Far East, FICCI proposes three approaches:
Firstly, Investments by Indian companies in the territories of Accelerated Development, special economic zones in the Russian Far East would be a great proposition. These projects attract private investment and offer great tax incentives. What FICCI proposes is "Reverse SEZs" whereby Indian companies do local value addition on the rich resources in the region and ship the products back for the Indian market as well as for exports to other parts of the world.
Secondly, we should explore public-private-partnership projects funded by the BRICS New Development Bank involving stakeholders in India and the Russian Far East in potentially rich areas like infrastructure and energy.
The third suggestion is that the EXIM Bank of India could consider Lines of Credit protecting the interests of Indian companies and their investments. I would urge both the Indian Government and the Government of Russian Far East regions to explore such an arrangement for promoting Indian investments.
Looking into the future, Russia has a significant stake in India's economic transformation while India can be a strong partner in Russia's agenda of inclusive economic development and here the development of the Russian Far East can be a focal point.
(The author is President, FICCI. Views are personal.)