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East of Eden: The RFE and the Asian Economic Miracle

19 February 2015
Peter Gordon

Peter GordonHong Kong-based entrepreneur

 

Seen at least from the perspective of East Asia, the Russian Far East (RFE) is very much the odd man out when it comes to the regional economic miracle of the last generation. There are multiple reasons for the RFE having largely missed this boat, but it cannot be put down merely to the legacy of Socialism, for Heilongjiang across the border has managed to enrich itself greatly. Deficiencies in institutions — such as the rule of law — are hindrances, but again, China has managed.

Nor can the situation be blamed, at least not entirely, on demographics — a lack of population — because some pretty small places, such as Singapore, have also managed to become world-class economic operations. And while politics roils Russian relations with Japan, this also cannot be the sole determining factor since other places — Taiwan and China come to mind — manage to cooperate commercially and develop economically even when political differences are even more profound.

One can of course identify reasons. Russia left the USSR a developed country; post-Soviet development issues are more those of transformation that economic development per se. A Russian economic policy that has focussed almost entirely on the energy sector hasn’t helped nor have, more recently, Western economic sanctions. Nevertheless, the sine qua non for the Russian Far East to participate in the East Asian economic miracle is that it must be Asian. In some strictly geographical sense, it is of course entirely so, but it is not yet Asian in the ways that matter: political and psychological.

Once many years ago, more than I now care to count, I met with the then head of the Vladivostok Stock Exchange not long after it opened. He bemoaned the lack of Asian activity on his bourse. I don’t think we need reprise here the issues of more than two decades ago, but the key to this anecdote is that this was the time of “Asia Funds”: managed investment funds that allocated a certain portion of their holdings to each Asian market. I asked whether or not he had ever presented the Vladivostok market as being an “Asian” stock market. I pointed out that if the Asia funds allocated even a fraction of 1% of their holdings to Vladivostok, the inflow would, relative the market’s capitalization, be very large.

The response was a bemused “Russia is a European country”.

This might have been true in a political sense, but — geography aside — RFE companies, the companies on the exchange, had almost entirely Asia-Pacific sourced business. The fishing fleets sold their catch to Asia, the shipping companies were shipping in and around Asia and the Pacific, the ports serviced Asia-Pacific vessels. Chinese was commonly picked up on the radio.

Russia may sport a double-headed eagle, but the eagle looking east seems to have had its eyes closed.

This attitude was mirrored in Asia. I then went to one of the leading Hong Kong managers of so-called “Asia funds” at the time, and — after I discussed the possibility of considering the Russian Far East as an Asian market — was told that “Asia stops at the Amur River”.

These conversations took place 20 years ago, but it does not appear to me that much has fundamentally changed. Nakhodka is still not a major Pacific port, the Trans-Siberian is still not a major freight highway to Europe (and the Chinese intend to build a competitor through Central Asia), Vladivostok is still not a major tourist destination.

Much of this is hostage to larger issues: Russia’s overall economic performance, the slow development of international energy relations, etc. But there is one factor — let’s call it “asymmetrical representation” — about which something might possibly be done.

The Russian Far East is represented in Asia via agencies that represent the entire Russia; this “entire Russia” is, by demographic, political and economic weight, primarily the Russia of Moscow and St. Petersburg, not the Russia of the Pacific coast. Russia, as Russia, is for Asians very much a European country.

Or more subtly, Russia from the Asian perspective looks like two countries: a large one west of the Urals that is part of Europe and then another one along the Pacific Coast that actually lies east of much of East Asia. This latter Asian Russia — whose interests, objectives and perspectives are in a practical sense really very different from those of European Russia — has little direct representation in the rest of Asia and must rely on representation from those for whom the Russian Far East does not necessarily figure highly on the priority list.

I am not suggesting that the situation is “unfair”: Russia’s public- and private-sector representatives have their jobs to do, and these jobs will in general be weighted to correspond with economic and political realities. “God,” as they say, “helps those that help themselves.” If the Russian Far East wants to be part of the East Asian miracle, it must become part of Asia, first psychologically and second by reaching out concretely and directly.

It is not unusual for American states or Canadian or European provinces or regions to have direct representation in Asia: vast countries have numerous regions whose potential and priorities do not track their countries’ averages.

Nor does this direct outreach make sense for every region. I have been studiously vague in the foregoing about Siberia — a region which for non-Russians probably includes the Russian Far East. But the RFE is more clearly East Asian than is Siberia: it sits on the coast and thus borders not just China and Mongolia, but also Korea and Japan and has direct communications with all points south as well as North America. Siberia, as a region, is (pace some future Northern shipping route) largely landlocked and in that sense bears more similarity to Central Asia than to, say, Korea.

Some direct relations indoubtedly exist, of course, but mostly in the directly neighbouring countries and regions. In Hong Kong, for example, such relations as do exist are ad hoc. Relations do not necessarily mean establishing a sort of regional representational office, although that might be a good thing: relations might also consist of active university student exchange programmes, cooperative academic research, cultural, arts and other campaigns targeted at these markets farther south.

From such seeds, harvests might come. East Asians often need encouragement to look at Russia at all; and they certainly need reminding the Russia can be found to the region’s northeast as well as its north and northwest.

 

Peter Gordon is a Hong Kong-based entrepreneur. He was one of the pioneers in developing trade and investment relations between Hong Kong and the USSR, Russia and neighbouring countries from the late 1980s through 2000. He established and ran the first HK-Russian trade association and worked closely with public and private sector organizations in Primorsky Krai as well as other regions of Russia and Central Asia. He is now engaged in writing and publishing and runs the Asian Review of Books.