TOP INTERVIEWS Interview with MR VIKTOR I. ISHAEV The Governor of Khabarovsk Region February 15th'2003 Current economic and financial situation in Khabarovsk region is stable, you have also been nominated for the Golden Ruble award. Could you indicate to our readers how stable is the economic situation in Khabarovsk region? Firstly, we should look at the economic structure of Khabarovsk region. It is more industrial than in Russia and than in the Far East as a whole. If we look at it today, we will see that about 40% is mechanical industry, a powerful block of natural resources goes second, then small and middle-sized enterprises, then transport, communications and other sectors of the economy. Taking into account this structure, we prioritize our factors of influence on the economy in a specific manner. It was clear and understandable for us already in 1991 that with such a "heavy" structure we would not survive the competition, the defense complex was dominating, we had about 60% of the defense complex of the Far East. So, we started to work out regional programs of restructuring, we passed 19 programs in different sectors. We also realized that the economy of the region would not be able to function by itself. We started to work intensely and created a program called "the Far East and Baikal region", I was one of the co-authors of the program, it was approved in 1996, and acquired a status of presidential program. Realizing that regional policy very much depends on the policy towards the regions pursued by the center, we also worked on the strategy of the development of Russia. You know that I was within the original board of the State Council. I was assigned by the president to form a working group, it was created, and it consisted of the leading economists, scientists, and academicians of Russian Federation. We worked out the strategy of the development of Russia until 2010. The destiny of this document is controversial; there were also other drafts… At least, our strategy was approved by the State Council, we reported about it in the State Duma and Federation Council, it was mostly accepted and passed, and certain elements are already being implemented. I am talking about it in order to demonstrate that the economy of Khabarovsk region was developing in a systemized and programmed way. We clearly understood that we would not be able to get a lot of funds from Russian government, our main task was to attract investment. If we take current statistical data, which we have been collecting since 1998, when Russian economy collapsed; by the way, there was no crisis in Khabarovsk region similar to Russian one. If we look at growth rates of investment, they are about 3 times higher that in Russia in average, although the economy is still functioning in very difficult conditions. There are some factors, which are influencing negatively, for example, the cost of electricity is 1.5 times higher than in Russia; the cost of energy 2.2 times higher, the cost of steam-and-stove heating is 1.8 times higher. You attracted 25.7 million dollars of investments in 2002, which is 96.3% more than in the previous year, if my information is correct. This is quite impressive. What sectors are the most interesting for investment? We attract about 16-17 billion rubles per year totally, if we transfer it at the exchange rate of 32, this figure would be even higher, you obviously mean foreign investment. We attracted more than 30 million dollars of foreign investment. As for the sectors, which attract investment, this is mining sector, timber complex, fishing sector, and construction. If we take a closer look at mining complex, extraction of precious metals in particular, during best "stagnation" times we extracted about 6 tons of metals, currently we are extracting about 20 million tons. 90% of the sector is totally private. As for timber, we are the third in Russia in this field. We produce about 8 million cubic meters of timber. Malaysian company Rimbunan Hidzhau Group is actively working here, also Chinese, Japanese and Russian companies are present. How important are these companies for the future of Khabarovsk region from the point of view of investments? We are building a certain model, a model of open economy. The fact that foreign investors are coming and work here is a matter of trust, and it is very important. I think the same model should be built in Russia as a whole. Transport is very important for the development of Khabarovsk region, could you speak on the transport potential of your region? Khabarovsk is peculiar center for transport arteries. Khabarovsk has more capacity for air routes than the whole Far East. Khabarovsk airport has two lanes, with the capacity of 1900 passengers per hour, and it can accept planes of any type. There are four air companies in Khabarovsk. The geography of flights spreads over more than 15 countries. Our aviators actively work in other countries, they fulfil tasks of the Ministry of Emergency Situations, they win tenders in Sakhalin, they work in Malaysia in logging industry and in other countries as well. Our foreign routes have the history of more than 3 decades. Secondly, we have two transport railroads: Trans-Siberian and Baikal-Amur railroads, which lead to our ports: Vanino, Sovgavan', and also to the ports of Primorie. Naval communications both cargo and passenger are quite well developed in our region. From Khabarovsk we go to Harbin, China; to Japan: we transport cargoes, timber and all the rest. We have the coastline of about 2000 kilometers. The construction of auto roads has been developing a lot lately. Russia is actively involved in the construction of road Tchita-Nachodka, all the elements on the territory of Khabarovsk region, including the bridge over Amur River, are already completed. We built an auto exit to the port of Vanino by ourselves, we built the auto road to the city of Komsomolsk, we built more than 1700 km of roads in total. I would like to touch upon another transport scheme - supply of resources through pipelines. We are actively building gas pipelines, we are building a pipeline from Sakhalin to Khabarovsk. The pipelines are completed in Komsomolsk, the Northern district has all the infrastructure there. The distance between Komsomolsk and Khabarovsk is 375 km, and we already completed 100 km last year, and we plan to finish the whole pipeline in 2006. I would like to stress it once again, Khabarovsk today is the center of transport, administration and telecommunications. No doubt, the future looks bright for Khabarovsk. Could tell us a little bit about yourself, and what is your biggest achievement so far, that you are most proud of? Our readers would be interested to learn about yourself, and the way you see the future of Khabarovsk region? As for the future of the region, its development, it is a very interesting issue. The first and the main thing is that Russian Far East is a very specific territory. I would like to mention that during the times of active economic reforms we found ourselves in a very difficult situation: during last 10 years 12% of population or 1 million 227 thousand people left the Far East. There is tendency of isolation of the region from Russian economy. We used to supply 75% of the entire product to the internal Russian market, now we supply only 6.3%. Currently we are actively working to integrate into Asia Pacific region because transport distances are smaller, and transport expenses are lower. We are working to participate in global processes, this one of the directions of our work - regional economy in the processes of globalization. The attitude towards globalization is rather controversial, but the future lies behind it. If we take oil and gas projects as an example, if we take Exxon, it is actively working in Sakhalin; we are building an oil tanker on our territory, we are looking for buyers in China, Japan and USA are also potential buyers. So, globalization processes connect a whole range of states, and not only at inter-state level. For further development we need closer integration with surrounding states. We have a unique opportunity in the region to carry out those integration processes. There are three groups of countries: capital and technology saturated and labor saturated. There is extra and quite cheap labor force in China, North Korea, and there are regions rich in natural resources, such as Russian Far East, Australia, and Mongolia to some extent. So, we are considering all necessary, basic conditions for economic integration. I see future development of Khabarovsk and the Far East through the participation in global integration processes, through the economy of an open model, and the change of economic structure in the Far East. I think it should provide healthy economic development. What would be your final message to our readers, who are potential investors, and who are interested in the economy of Russian Far East and Khabarovsk region? The first and main thing is that we can understand investors when they are interested in some details before investing their funds, for example, how stable is the region in the economical and political way, it is according to investors themselves, we studied their opinion. Economic and political situation in the region is stable, and this is the foundation for attraction of investments. Secondly, we can be trusted upon. We are very carefully observing all the projects, where foreign investment is involved, and we are trying to do our best to avoid pitfalls. If we have reputation, and are trusted upon, investor will come. 300 million dollars of accumulated investment is a certain warrant of stability in the long term. This situation should encourage investors, and prove that it is possible to work in Khabarovsk region. I am sure that Khabarovsk today is living, developing, changing for the better. Khabarovsk is also a cultural center: we actively build cultural and social objects, and those, who come, notice positive dynamics in this field. We try to do everything so that our people would feel safe, comfortable and pleasant. Note: WINNE cannot be held responsible for the content of unedited transcriptions.