TOP INTERVIEWS Interview with MR. SERGEY M. DARKIN Governor of Primorsky Krai Vladivostok, September 19th, 2002 Read our exclusive Interview in Russian The regional gross product growth rate is 3 to 5% nowadays. Yet we understand that you are planning to increase growth up to 8%. How are you planning to accomplish this? Accelerated depreciation, fixed assets renewal and the increase in population of the Primorsky Krai. Transport infrastructure is extremely important for the region. What are the most important projects your Administration is working on? In connection with a new world strategy I should say that transport and power projects are the most significant ones for us. First, the construction of oil pipeline to Primorye's port and - in the same ecological passage - the gas pipeline construction. Our geopolitical location encourages us to seriously consider the construction of the TransKorean railroad, and we are leading this project since it is essential that our ports increase their turnovers. How are you planning to use the Administration budget to develop the construction projects and improve the infrastructure? We suggest spending a quarter of the regional budget on new economic projects, which translates to approximately $150 or $200 Million this year. This is the first time we do this for the last 10 years. I believe business should work on its own without the regional budget support. The budget is primarily meant to support social expenditures, so we have adopted a strategy that is carefully considering co-financing of different projects. That is, if we invest $200 Million each year, other financing sources must provide about $700 Million - the budget may provide only a third of the funds. We have finished preparing analytical research on Primorsky Krai's competitive advantages in the Asian-Pacific region, and today we know that there are some economy sectors where we can actively compete both on Asian Pacific and Russian markets. I must note that we have greatly studied these questions using the latest technologies and marketing research methods. Is the future of the Primorsky region to develop finished products destined for Asian markets? For example, "Primorye Diamonds" will bring in diamonds from northern Russia, process them here and then export them to Asian countries at higher profit margins. Is this a model for regional business? This is one of the ways of using Primorsky Krai's potential. Evidently it is profitable for Indian investors to use the territory of Primorsky Krai for this project at the moment, and I fully support this project. I can give you another example. There is one more project that is mentioned in the analytical research and is under feasibility study: it is the construction of an aluminium plant in Primorsky Krai. One can easily see the competitive advantages of this plant. This is very important and demonstrates a striking change that has occurred for the last two years. The Primorsky region was lacking power, and there was a crisis in the regional power sector. Yet now we are discussing the construction of a plant the main objective of which is export of power through aluminium. It is a huge gap and an example of what has happened in Primorye over the last two years. You are a businessman by profession, so you are perfectly aware that business management needs to be smart and efficient. What are you doing to encourage "smart" management practices? Management is one of the most crucial points of Russian economy. I am deeply convinced that only a combination of Russian and foreign managers working together may lead to good results. Unfortunately, when foreign managers work alone, it does not always turn out well in Russia in the long run. Therefore a combination of Russian experience and foreign management knowledge will ensure excellent results for our economy. Recently you were awarded the Order of Merits for the improvement in the economic and social situation of the region. In light of this, what would you say is one of your greatest successes after over one year in office? Decreasing social tension in Primorsky Krai was my greatest achievement, and today Primorsky Krai has been recognized as one of the successful regions in Russia. Do you think Primorsky Krai will become a Russian version of Hong Kong - the centre of Asia? I think so. There are certain preliminary outlines on this point, and I believe that Vladivostok will become the capital of Russia in the Russian Far East. You have been described as a "workaholic", working 12 to 14 hours a day and finishing at 8 or 9 in the evening. what drives you to get up in every morning and go to work? Actually I do not get up early in the morning. I am "a night owl" by nature. I do not come to work by 6 o'clock in the morning, but my working day is long. This is a usual working rhythm for me which I was accustomed to in my family when I was a child. All Russians work this way. STRATEGIC PRINCIPLES OF ESTABLISHING FAVOURABLE INVESTMENT CLIMATE ON THE TERRITORY OF PRIMORSKY KRAI Active investment process is known to be a basis and at the same time an indicator of the economic growth. The budget funding being limited, the Primorsky Krai administration pays a special attention to attracting resources as a whole and first of all - foreign investments (aimed at making up for funding shortages, modernization of production facilities and services sector, modernizing methods of production organization and management, and as a result, increasing the competitiveness of the Primorye export). All that will be the basis for consequent integration of Primorye as an equal partner into the economy of the Asian-Pacific Region for mutually advantageous economic relations. Proceeding from all the above-mentioned, the Krai administration has made its aim to form the most favorable investment climate to attract foreign investments into Primorye. The major strategic factors of establishing favorable investment climate in Primorye are the following priorities: Region with the economy being open to the regional and international cooperation. The Asian-Pacific gates of Russia and European countries, where the advanced transport, informational and communication networks are rapidly created and developed. Far Eastern center of innovations and advanced technologies The territory of education, culture and art to foster creative and dynamic people. The center of business activity and attractive environment for businessmen - that will construct a stable and dynamically developing society. The world recreation center where people and nature live in harmony. The environment of competition is being formed at commodity, financial and labor markets in Primorye - that can make the region one of the most attractive ones to make investment into and to handle entrepreneur and economic activities. It is essential to make our economy healthy, to promote competition, market regulation, to support new and small business, to make entrepreneur activities safe. In connection with all the above-said, the establishing of favorable investment climate is understood as liberalization of the economic activity - not only increasing the liberty of economic activity but also the establishing of proper management control. Liberalization of Russian economy will allow to use the advantages of Primorye at the global market. Primorye will benefit more from the open economy, than from federal authorities protectionism. That's why the comprehensive support of the measures promoting expanding and liberalizing of foreign relations is the high priority policy of the Krai authorities. Currently we have good grounds to say that there is an awareness to make necessary changes in economic activities for the most effective and complex use of the classic production factors such as: labor, land and capital. That's why the process of establishing a favorable investment climate includes practical activities to improve the following: Political conditions for business activities; Control over the real estate market Labor relations and decreasing the level of social tension Motives, stimuli and mechanisms of investing into real sectors of economy Two principles form the basis of establishing favorable economic climate in Primorye: Supporting producers by decreasing political and economic risks, liquidating administrative obstacles for business activity Establishing equal conditions and protection of all enterprises' interests In conclusion it is worth mentioning that the last years the trend of foreign investments has increased; Krai authorities, businessmen and population have been making mutual efforts to establish favorable investment climate in the region. All these facts allow us to face the future with optimism. 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