Thursday, September 6, 2012

PNG to rub shoulders with top economies

APEC will break new ground in Vladivostok when Russia hosts the Asia-Pacific Economic Cooperation (APEC) Leaders' Meeting this weekend.

Mr Barack Obama, the President of the United States, will skip the meeting as he is busy campaigning for re-election.

In his absence, Russian President Vladimir Putin aims to shape the agenda to highlight Russia's role as an Asia-Pacific power.

According to Russian scholar Kirill Muradov who follows these issues, Russia flooded the APEC secretariat with proposals centred on four key priorities: Regional economic integration, food security, transportation and supply chains and innovations for growth.

However, the greatest impact of Russia's chairmanship will not be in the APEC agenda but in the transformation that has occurred in Vladivostok and in Russian perceptions of its future relationship with the Asia-Pacific.



SHAPER OF GLOBAL TRENDS



Russia has taken the initiative to promote itself as the link between the Asia-Pacific and the European Union (EU) by creating a common economic space from the Atlantic to the Pacific.

At the APEC meeting, Russia intends to arrange a meeting between APEC officials and the head of the governing council of the Customs Union between Belarus, Russia and Kazakhstan. With Russia's admission into the World Trade Organization, it is following the fad of negotiating free trade agreements (FTAs), beginning with New Zealand.

Approaches to Vietnam, Singapore, Malaysia and other regional states for bilateral FTAs will probably be made at the APEC meeting. These moves draw attention to Mr Putin's desire that Russia be perceived as an independent actor and shaper of global economic and security trends.

The Russian leadership has used the APEC meeting to upgrade Vladivostok, which had been a naval base during the Soviet era, closed to foreigners.

It also sought to draw attention to the revival of the mineral-rich Russian Far East, which had been neglected and depopulated following the collapse of the Soviet Union as its inhabitants moved to faster-growing areas west of the Urals.

From 2008 to 2012, US$22 billion (S$27.5 billion) was invested in infrastructure development.

Major projects include a new international airport, upgraded port facilities, highways and major bridges linking islands to the mainland, as well as a university with top-class facilities, which is the venue of the APEC meeting. A new Ministry for the Development of the Far East has been established.

There has been talk in Russia of a third capital of federal Russia in Vladivostok, emphasising Russia's role as an Asian as well as European power.



GROWING TRADE TIES



Media attention at the APEC Leaders' Meeting will be on Mr Putin's interactions with Chinese President Hu Jintao and with Japanese Prime Minister Yoshihiko Noda, especially at a time of Sino-Japanese tensions in the East China Sea.

China is now the leading trade partner of Russia, replacing Germany in 2010, and a growing source of foreign investment. A closer Sino-Russian strategic relationship is developing through their participation in the Shanghai Cooperation Organisation (SCO) as the SCO has made tremendous strides in promoting political coordination, military cooperation and economic integration since its establishment in 2001.

These developments are a reminder that the focus of Chinese and Russian leaders is on continental affairs and that a major rapprochement has occurred since armed conflict between them in 1969, although mutual suspicions remain.

On the other hand, Russia's relations with Japan continue to be bedevilled by Japanese claims to four northern islands conquered by the Soviet Union in the closing days of World War II.

As China re-emerges as the leading power in East Asia, both Russia and Japan will have an interest in seeking improved bilateral relations to balance China. Bilateral meetings between these protagonists held at the sidelines of the APEC gathering are likely to attract as much attention as the conference itself.



SOURCE OF CAPITAL



However, there is a tendency to focus only on Russia's security relationships with East Asia. The reality is that Russia's economic ties with East Asia will be equally significant in the years ahead.

The fast growing energy-hungry economies of East Asia are emerging as major trading partners of Russia. Trade with China exceeded US$90 billion in 2010 and is expected to surpass US$200 billion by 2020. Trade with Japan has doubled and it has tripled with South Korea.

The current financial and economic crisis in the euro zone has led to a slump in Russia's trade with the crisis-ridden economies of the EU, leading to Russia's turn to Asia.

Although trade with Germany remains buoyant and is an exception, it is growing more slowly than trade with East Asian economies.

East Asian economies are also seen as a source of capital for the development of the Russian Far East, including the rich hydro-carbon resources of Sakhalin.



ICE-FREE SEA ROUTE BY 2015



The effects of climate change and the melting of the Arctic ice cap has opened the possibility of a viable Northern Sea Route between Russia and North-east Asia.

Passage through the Arctic Ocean will be possible for the four months of summer but coastal routes near the Siberian coast could be traversed for a larger part of the year. It is anticipated that ice-free passage may be possible by 2015.

The effect would be to cut 5,000 nautical miles and reduce sailing times between the North Atlantic and North-east Asia by one week compared to travel through the Suez Canal and Malacca Strait.

New hub ports are likely to emerge in northern China and northern Japan catering primarily to bulk shipping, while the Russian port authorities expect that it will lead to a significant rise in tonnage through Vladivostok.

Russia's hosting of the APEC summit therefore provides an opportunity for Russia to showcase itself as a Pacific power and to highlight the opportunities available in the resource-rich Russian Far East.

Underlying Russian fears that an empty Russian Far East region will attract interest and even migration from the densely populated states of North-east Asia will stimulate the development of the region in the years ahead.



Barry Desker is Dean of the S Rajaratnam School of International Studies, Nanyang Technological University.

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