Focus on South Korea (Issue 1, 2019)

2019 EASTERN ECONOMIC FORUM NOW ACCEPTING PROGRAM PROPOSALS

The Fifth Eastern Economic Forum (EEF-2019) will take place on 4-6 September 2019 on Russky Island, Vladivostok. The central focus will be the national development programs for the Russian Far East through 2025.
At the APEC Summit in November 2018, Russian Prime Minister Dmitry Medvedev invited business people from the Asia-Pacific region to present their projects in the Russian Far East at the Forum.
The EEF-2019 Organizing Committee is now accepting proposals for the business program until 30 April 2019. According to Yury Trutnev, the Presidential Plenipotentiary to the Far Eastern Federal District, the moderators of EEF-2019 will report the results of their respective sessions to the President of the Russian Federation. This will allow EEF-2019 participants to move quickly from discussions to decisions at the state level. The prospective EEF-2019 format will prepare instructions arising from the discussions of key areas for the development of the Far East. This will help to improve the efficiency of all the participants and organizers of the sessions.
The heads of four countries – Russia, China, Mongolia, and Japan – attended the 2018 Eastern Economic Forum, along with the Prime Minister of the Republic of Korea, Li Na. At the end of EEF-2018, 220 agreements were signed amounting to 3.185 trillion rubles, which was 30% higher than at EEF-2017. The organizers expect to keep the bar at or above that level at EEF-2019.
Proposals for the content of the EEF-2019 program and the lists of proposed speakers and moderators will be presented by the Ministry for the Development of the Russian Far East, the Far East Investment and Export Agency, the Far East Development Corporation, and the Agency for Human Capital Development Agency in the Russian Far East. At the same time, the organizing committee is open to proposals from other federal ministries and departments, business associations, and the expert community.

INTERNATIONAL ARCTIC FORUM TO BE HELD IN ST. PETERSBURG IN APRIL

On 9-10 April 2019, the Fifth International Arctic Forum will be held at the Expoforum CEC in St. Petersburg. The theme will be Arctic: Territory of Dialogue.
On 17 January 2019, Yury Trutnev, the Presidential Plenipotentiary to the Far Eastern Federal District, held a meeting of the Arctic Forum’s Organizing Committee, at which a change of the venue, from Arkhangelsk to St. Petersburg, was announced, because of the higher number of participants expected at the 2019 event.
Currently, representatives of 12 major countries have announced that they will attend the Arctic Forum, as well as leaders of major international companies, scientists and experts, and prominent public figures from different countries. In 2019, an Icebreaking Expedition will be organized by the state company Rosatom for the participants.
According to the Special Representative of the President of the Russian Federation for International Cooperation in the Arctic and Antarctic, the Government of the Russian Federation is financing a number of major development projects in the the Arctic, which will lead to the strengthening of the country's economy, the creation of a powerful icebreaking fleet, and other new developments. In accordance with the Presidential instructions, by 2024 transportation along the Northern Sea Route will need to reach a level of 80 million tons. Currently, major investment projects are being implemented, such as the construction of a liquefied natural gas transshipment complex in the Kamchatka Territory and the development of the Baim ore zone in the Chukotka Autonomous Region.
The Chukotka Autonomous Region plans to present investment projects at the Fifth International Arctic Forum, involving subsoil use, infrastructure, and the development of the Baim ore zone areas, as well as environmental projects and initiatives to preserve the traditional way of life of indigenous peoples.

SERVICE OFFICES FOR INVESTORS TO BE OPENED IN BURYATIA AND THE TRANS-BAIKAL REGION

The head of the Far East Investment and Export Agency, Leonid Petukhov, announced the creation of branch offices in Buryatia and the Trans-Baikal Territory, which were recently included in the Far Eastern Federal District. Their goal will be to search for and attract investors to the two regions.
The offices will be open for at least six months until the end of 2019. At the end of 2018, the Presidential Plenipotentiary to the Far Eastern Federal District, Yury Trutnev, visited the Trans-Baikal Territory and Buryatia, during which possible locations for advanced development territories were considered. As a result, work began on a study of the investment potential of the regions, including the question of which specialists are necessary for their development.
Leonid Petukhov noted that the experience gained in other regions of the FEFD allows the work of the Investment and Export Agency to progress faster. When the offices are in operation, they will attract and support entrepreneurs in the areas that are the highest priorities for development in Buryatia and Trans-Baikal.

RUSSIAN FEDERATION COUNCIL DISCUSSES THE FAR EASTERN STATE PROGRAMS FOR 2025

On 24 January 2019, Anatoly Shirokov, the authorized representative of the Russian Federation Council to state bodies concerned about the development of the Far East, Eastern Siberia, and the Arctic, held a roundtable meeting to discuss implementation of the state program “The Social and Economic Development of the Far East and the Baikal Region until 2025,” as well as the importance of the rapid integration of the Republic of Buryatia and the Trans-Baikal Territory into the economic space of the Far East. The Federation Council is the upper house of the Federal Assembly of Russia.
Currently, the Russian government pays a lot of attention to the region. Financial support has been allocated to solve the problems of the accelerated development of the FEFD regions, involving the attraction of public investment. In addition, 14 federal executive authorities also participate in the Far Eastern state program.
The program already is showing good results: special regimes of priority development areas and the Free Port of Vladivostok have been launched; and a large number of investment projects are already receiving infrastructure support from the government. At the roundtable, the need to include additional capital construction projects in the state financing program in the federal budget was outlined.
Marina Dedyushko, Deputy Minister for the Development of the Russian Far East, highlighted, as the most important projects, the development of social infrastructure in 41 centers of economic growth in Yakutia, Kamchatka Krai, Primorsky Krai, Khabarovsk Krai, the Amur Region, the Magadan Region, the Sakhalin Region, the Jewish Autonomous Region, and the Chukotka Autonomous Region. The 2019 federal budget will allocate 16.7 billion rubles to fund the implementation of 200 development activities.
On 25 January 2019, Russian senators met with Hon Yong Pyo, who leads the ruling Democratic Party in the Korean National Assembly, and a delegation of South Korean parliamentarians. The Russian side expects an increase in the number of Korean investors in the FEFD as a result of these talks. The First Deputy Chairman of the Committee on Foreign Affairs of the Federation Council, Vladimir Jabarov, argued for the integration of the transport structures of the Russian Far East and the entire Korean peninsula and expressed a commitment to following up the work to unite the energy structures of Russia and South Korea, with the participation of North Korea.

RUSSIAN GOVERNMENT PROVIDES SUBSIDIES TO THE FAR EASTERN REGIONS

On 30 January 2019, the Government of the Russian Federation signed Resolution, No. 61, On Amendments to the Annex No. 20 to the State Program of the Russian Federation Development of Culture and Tourism for 2013–2020, according to which 3.696 billion rubles will be allocated in 2019-2021 to the Far East region. The funds will be used to finance the construction of hotels and campgrounds, as well as the creation of a rental vehicle service in 24 clusters.
To create a tourism cluster in the Republic of Buryatia, 650 million rubles will be allocated, with 1.537 billion rubles allocated to the Khabarovsk Territory, and 1.515 billion rubles for the construction of the Primorye complex.
In all, the resolution distributes funds to 24 investment projects for the creation of tourist clusters in 22 regions of Russia. For 2019, 5.426 billion rubles are allocated for these purposes. This amount will decrease to 4.982 billion rubles in 2020 and will then increase to 10.572 billion rubles in 2021.

AUTHORIZED CAPITAL OF THE FAR EAST DEVELOPMENT FUND INCREASED BY 10.6 BILLION RUBLES

The Government of the Russian Federation has increased the Far East Development Fund (FEDF) by 10.6 billion rubles as the result of a subsidy from the federal budget for the implementation of priority investment projects in the Far Eastern Federal District. This increase was carried out on the instructions of the President of the Russian Federation announced at the 2018 Eastern Economic Forum.
The Far East Development Fund was used to finance 16 investment projects in the Far East with a total cost of about 170 billion rubles, with the FEDF participation exceeding 40 billion rubles.
More than 20% of the Fund’s investments are channeled to support small and medium-sized businesses. The FEDF also participates in a joint program with banks, through which concessional loans totaling 14 billion rubles were provided at discounted rates to 642 Far Eastern enterprises. The “Available Loans for Small and Medium Enterprises” program will continue in 2019.

KOREAN HOTEL OPERATOR PLANS TO START WORK ON THE RUSSKY ISLAND

The President of Ramid Hotels & Resorts, Moon Byong-Wook, announced that a memorandum of understanding on the construction of two projects has been already prepared. The Korean company plans to build a casino and a golf course in the Primorye integrated entertainment resort zone and a hotel on Russky Island in Vladivostok. The Korean participants are ready to take part in the development of legislative conditions for the development of tourism business in Primorye at a world-class level.
The Russian side intends to provide land for the implementation of these projects on Russky Island. The regional authorities also proposed using preferential treatment of the priority development area and the Free Port of Vladivostok for a Korean company.
Other South Korean companies have also expressed a desire to invest in projects of the Far Eastern Federal District. Thus, K International Inc. is ready to build in Primorye a new gambling and entertainment complex with a total investment of 300 million dollars. Dongnam Industry Co. Ltd. plans to create a golf course in the resort. The total investment will be more than 30 million dollars. Oleg Kozhemyako, Governor of Primorsky Krai, noted that the discussions would continue after the investment volume is known and the technical requirements have been determined.

DONGNAM INDUSTRY CO. LTD PLANS TO INVEST IN THE DEVELOPMENT A GOLF RESORT IN THE PRIMORSKY TERRITORY

On 6 January 2019, the Development Corporation of Primorsky Krai and Dongnam Industry Co. Ltd. from South Korea signed an agreement for the creation of a golf course in the integrated entertainment resort at Primorye, located in Muravyinaya Bay near Vladivostok. The planned investments will total more than 30 million dollars. The parties intend to build the resort on 80 hectares of land.
The creation of an entertainment complex will take place in two stages. The first stage will create a nine-hole course and build a clubhouse and the necessary infrastructure facilities. The second phase will construct a 4-star hotel and a nine-hole expansion to the golf course.
In total, more than 12 complexes are planned for Primorye: a hotel, a casino, restaurants, shopping areas, and related tourist services. Completion is expected in 2019, after which the regional authorities want to focus on the development of the non-gaming sector and the transport and engineering infrastructures. The total investment in the Primorye resort is 107 billion rubles. The opening of two new facilities, Naga Vladivostok and Shambala, is scheduled for 2020. Tourist traffic is expected to increase to 1.2 million people per year.

SOUTH KOREAN COMPANIES INTEND LARGE INVESTMENT PROJECTS IN THE TYUMEN REGION

In Seoul on 22 January 2019, in representatives of the Tyumen Region and Junglim Architecture Co. Ltd. signed a memorandum of cooperation for an investment project to construct an exhibition center in Tyumen. In addition, following a discussion on the construction of a pharmaceutical plant, a protocol was signed with Chong Kun Dang.
Junglim Architecture Co. Ltd was established in 1962 and is the largest South Korean company engaged in the design of buildings and structures. The company works in many countries of the world, but not yet in Russia. Igor Samkaev, Honorary Consul of the Republic of Korea in Tyumen, spoke at the meeting about the need for the construction a modern exhibition center and offered his support.
Chong Kun Dang is Korea's largest pharmaceutical company. Following the negotiations between representatives of the Tyumen Region and Chong Kun Dang, the parties agreed on the need for a phased implementation of the project, as agreed during a visit of company representatives to Tyumen to explore sites and discuss the details of the plan. The Tyumen side is ready to provide investors with three sites: under a lease in an industrial park; in an area with an operating medical equipment plant; or at another place that meets the requirements of the South Korean company.

KOREAN INVESTORS’ DAY HELD IN SEOUL

On 13 February 2019, the third Korean Investors’ Day was held in Seoul, under the leadership of Yury Trutnev, who is the Russian Deputy Prime Minister and Presidential Plenipotentiary in the Far Eastern Federal District.
The event was attended by 22 major organizations from South Korea, whose work is related to investment and business support in the Russian Far East. The companies represented different areas, such as energy, agriculture, medicine, logistics, ecology, finance, light industry, shipbuilding, and the fishing industry. Representatives from Lotte International, Sewon Mars, GEO Group, Hyundai Merchant Marine, Kyundong Navien, HK, and LH Corporation participated.
Yury Trutnev pointed out that the two countries are currently working together on promising investment projects worth over 1 billion dollars. He emphasized that the Government of Russia and the development institutions established under the Ministry for the Development of the Russian Far East will assist each investment project with the participation of Korean capital.
According to Far East Investment and Export Agency, investment capacity in industries in the FEFD such as logistics and ports, forestry, mining, agriculture, oil and gas processing, tourism and real estate, engineering, fishing and aquaculture, and high-tech industries, are more than 30 billion dollars. The average rate of return is 10 to 15 percent higher than from similar projects in other regions of Russia.