Cablegate: Economic Forum: Rfe's Problem? Demographics, Transportation,

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SIPDIS

E.O. 12958: N/A
TAGS: ECON ETRD PGOV RS
SUBJECT: ECONOMIC FORUM: RFE'S PROBLEM? DEMOGRAPHICS, TRANSPORTATION,
AND CHINA

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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

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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

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