 THE FACE
FOR FUTURE INVESTMENT |
The climate for foreign investment and activities
has changed dramatically over the last few years.
While the current Governor
Sergei M. Darkin has made positive statements
welcoming international investment, the previous
Governor Yevgeny Nazdratenko in 1999 held an open
campaign against foreign ownership of Primorsky
Krai's shipping and fishing industries, and allegedly
threatened to jail British Honorary Consul Andrew
Fox, director of Tiger Securities investment company
if Fox didn't hand over 7 percent of stock of
the Far Eastern Shipping Company and elect a chairman
chosen by the governor. Mr. Nazdratenko denied
making the threat, but demanded that the Federal
Security Service, the main successor agency to
the KGB, investigate Fox, who then left the country.
In recent years the regions image has been tarnished
by the frequently reported contract killings among
the local business community, with those gunned
down in 2002 including the director of a local
computer company, a Nakhodka oil supplier, a television
magnate and a businessman working to develop cross-border
trade between Russia and China, while the former
director of Vostochny Port was assassinated in
2001. In summer 2002 the co-owner of one of Vladivostok's
most up-market cafes, Studio Coffee, featured
in the New York Times in an article praising the
former scrap metal dealer for turning towards
less murky business activities triumphed briefly
in his success only for him to be shot soon afterwards.
Times are now changing and Governor Darkin believes
that Vladivostok has the potential to become the
business capital of the Russian Far East, a Russian
Hong Kong. In a recent press statement issued
by the administration the Governor claimed. "I
would like to say that Russian Far Easterners
are courageous and ambitious people. Our slogan
is "Today must be better than yesterday,
and tomorrow must be better than today".
We were and have been open for cooperation and
fair partnership."
Yet to attract investment, the region needs many
things least of all a stable workforce, saving
the current outflow of population to western Russia,
where salaries are higher and the cost of living
lower. In the Soviet era, the state attracted
workers to the Far East with salary top-ups and
family apartments. With that safety net now gone,
the population of Primorsky Krai is in decline,
although Vladivostok remains a magnet to people
from outlying towns in order to improve opportunities
the present conditions still need to be adapted.
"We must create favorable conditions for
the people living here, make living standards
and opportunities better than the average in Russia
as a whole. These are the basic conditions for
the development of our region," says first
vice-governor Alexander Kostenko.
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The face of investment
in Primorsky Krai is undoubtedly still in need of
positive change. The APEC Investment forum was an
ambitious project and the first of its kind to be
held in Vladivostok. What is encouraging is the
fact that one can now acknowledge the serious effort
being made on behalf of members of the regional
administration. Their efforts are focused on changing
the attitudes of local businessmen towards foreign
activities and investment and to highlight the previously
ignored potential for business projects in the region
and attempt to discard the unflattering image of
the past.
Many consider the region to remain an insecure investment
environment, struggling to throw off its post-Soviet
reputation for crime and corruption, and some foreign
businessmen have had their fingers burnt. "Despite
western investments, numerous enterprises were in
a disastrous situation due to the dishonesty of
the managers," says Gorchakov,
former Chief of the Department of International
Cooperation, Regional Development and Investments
of Primorsky Krai Administration, and now the
vice governor responsible for foreign-economic activity
and investments. He sees the APEC Forum as a signal
to international investors that things have changed.
"The main task of the forum was to show the
world that we understand the rules of the international
business market and that we are now ready to work
to those standards," says Gorchakov.
Investors signed letters of intent worth $185 million
for seven projects in the Primorye region, which
includes Vladivostok, said Primorye
Governor Sergei Darkin. He said foreign investors
pledged $110 million in new projects, while Russian
companies made up the rest. Darkin declined to name
the investors or the projects, saying only that
the deals concern such sectors as mining, energy
and seafood farming.
Speaking about future hopes for investment in
the region Mr Gorchakov further added. "It
is very good that investments projects were attracted.
We hope and know that we shall have more investment
in the region because there are negotiations currently
underway."
Future ambitions and desires are all very well but
what is also recognized as a basic principal for
the success of investment plans in Primorsky Krai
is the need to change previous Soviet business attitudes
and behavior. This Mr
Gorchakov claims is of fundamental importance
for the future of successful projects. "In
order to change philosophy and mentality of our
entrepreneurs it is important for us that the people
stop claiming a special style of doing business
in Russia, which presents them in a disadvantaged
light." Formerly in charge of the Department
for International Co-operation, Regional Development
and Investments of Primorsky Krai, Mr
Gorchakov is confident that positive progress
has been made in this sphere and that the business
community of Primorye are now fit to accept western
business standards. "I believe our Department
achieved certain results in this work as most of
entrepreneurs began perceiving today's situation
adequately. Our task is to understand the rules
and adapt to this world, no matter whether we like
its rules or not, unfortunately, we cannot change
it."
In addition to a guarantee of above board business
practices, legislature also needs to be improved,
and land reform needs to allow for the ownership
of land. "We have to develop investment or
foreign-economic activity laws, which can always
be improved," says Gorchakov,
naming the top priority as, "land property
issues, since investors need security when buying
or renting land in order to build their enterprises."
Evidently foreign investors need strong support
from the local administration and a good and trustworthy
partner in order to succeed. "I'm deeply convinced
that only a combination of Russian and foreign managers
working together may lead to good results,"
says Primorsky Krai governor Darkin.
However, the governor's opening speech at APEC underscored
that, "high profits can't be reached without
a risk."
Russian President Vladimir Putin's representative
in the country's Far East, Konstantin Pulikovsky,
said in a statement on the APEC meeting that, "Foreign
partners must be confident that they will be able
to recoup their money." This is a notion that
is reiterated by Mr. Gorchakov
who concludes, "We are waiting for them. We
will do our best within the limits of our authorities
for those who will need our help. We will do our
best to assist their business to develop successfully.
We have a good example: a diamond-processing plant
"Primorsky Diamonds" that opened in March
as a result of our successful and mutual work."
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