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The 2016 Eastern economic forum produces significant results

Approximately 3,500 delegates from 56 countries attended the second Eastern Economic Forum (EEF 2016) in Vladivostok on September 2-3, 2016. The largest delegations were from Japan (246), China (246), and South Korea (128). The business programs included 44 keynote sessions, 6 strategic sessions, and 5 business dialogues.

The forum participants discussed the development prospects for the Russian Far East, the problems of attracting investments and developing the local infrastructure, and the establishment of closer economic ties with Asian countries.

This annual event especially aims at developing promising areas for cooperation between Russia and South Korea. These efforts already have produced a significant increase in trade between the two countries. For example, the export of Russian food to the Republic of Korea increased by 242% during the first six months after the last Forum. According to Alexander Galushka, the Minister of the Russian Federation on the Development of the Far East. in only the first four weeks after EEF 2016, a RUB 100 billion investment was raised. The total investment so far has amounted to more than RUB 1.232 trillion.

Many Korean businessmen are actively expanding business activities in the Far East in the field of agriculture, fisheries, and infrastructure development. The work of the Hyundai Motor Company in Russia is such an example, as is the construction of vessels in Korea for Russian customers.
The first Forum, in September 2015, produced contracts worth RUB 1.7 trillion. This year’s Forum generated 214 contracts totaling RUB 1.85 trillion. Most of these agreements concerned the creation of new enterprises and industries, while the remainder will support plants already in operation and will develop small and medium-sized businesses.

The central event of EEF 2016 was a session with the participation of Russian President Vladimir Putin, Japanese Prime Minister Shinzo Abe, and President of the Republic of Korea Park Geun-hye.

President Putin also met separately with President Park about the current and future bilateral relations, and they signed a package of documents on cooperation in a number of areas. Most of these agreements addressed the creation of new enterprises and industries in the region, as well as the support of existing ones, and the introduction of additional tools for small and medium-sized businesses. Korean partners have confirmed their interest in the creation of a free trade zone with the Eurasian Economic Union. The leaders of two countries agreed to conduct feasibility studies for an agreement to create such a zone, for which President Park expressed her strong hopes. The two presidents also reached an agreement about the North Korean nuclear problem.

Major agreements between Russian and Korean companies

In addition to discussions and agreements between the Russian Federation and the Republic of Korea, EEF 2016 produced some significant new business deals between Russian and Korean companies.

The Far Eastern Shipbuilding and Repair Center (FESRC) and Hyundai Heavy Industries agreed in principle to create a joint venture in engineering and project management. The partnership opens up broad opportunities to develop the shipbuilding cluster in the Far East, providing the Russian company with access to unique technologies for the production of advanced marine technology, and, in particular, clean modern tankers operating on natural gas.

The Far Eastern Design Institute (Vostokproektverf), which is an FESRC subsidiary, and DSEC, a subsidiary of Daewoo Shipbuilding & Marine Engineering. signed a memorandum of understanding to create a joint venture to support the design, engineering, supply, and construction of shipbuilding facilities and shipyard management.

Hyundai Motor Company will create a platform to assemble special models of trucks in the Primorsky Territory beginning in the village of Trudovoy in 2017. The deal provides a $ 97 million investment in the project. Russian-built equipment will be installed on small-tonnage commercial vehicles built on a Hyundai chassis.

Rosneft and General Electric signed a cooperation agreement on marine dynamic positioning systems. These provide ships with high accuracy in position retention, maneuverability, and operational efficiency, regardless of weather and sea conditions. Rosneft, with the participation of Korean companies, also plans to modernize the capacities of the Zvezda Shipbuilding Complex.

The Sakhalin delegation held a series of negotiations with foreign partners. For example, at a meeting with the Japanese company Chiyoda Corporation, they discussed the prospects for creating LNG mini-plants in the Aniva gas fields. Another Japanese firm, Mitsui & Co., intends to invest more than $ 1 billion to expand the Sakhalin-2 project. Other opportunities and issues were discussed with representatives of the Chinese Association for the Development of Enterprises Abroad.

Presidential orders to support the initiatives from EEF 2016

President Putin has instructed the Government of Russia to support the agreements and initiatives from EEF 2016. These orders include:

  • consideration of the establishment of an intergovernmental working group to assist in the development and implementation of the project for the organization of the electricity supply in the Asia-Pacific region, including the construction of energy bridges, if necessary;
  • approval of a package of measures aimed at establishing a legal basis and technological conditions for electronic interaction between state bodies and commercial organizations in the framework of the Eurasian Economic Union by 2018;
  • development and implementation in the Far Eastern Federal District of a mechanism for preferential access to mineral deposits, areas with mineral resources, and fish and forest areas, for investors implementing projects to establish enterprises there for high-tech production and processing of the relevant raw materials;
  • a joint study by the Ministry for the Development of the Russian Far East, the Ministry of Transport, and the Ministry of Finance about the possible extension of the regime of the Free Port of Vladivostok to new areas;
  • consideration of the recapitalization of the Far East Development Fund (FEDF), which directly funds significant socio-economic projects and supports system initiatives in the region;
  • elaboration of issues about strengthening areas of advanced development in the free port of Vladivostok, as well as legislative changes to extend the period of corporate profit tax benefits for investors and residents in the Vladivostok Free Port who make a minimum amount of capital investment in large projects;
  • preparation and approval of development concepts for an international research, education, and technology cluster on Russky Island; and
  • further consideration of the possibility to give the JSC Development Corporation of the Far East the authority to grant its land to residents of the Vladivostok Free Port land in order to implement investment projects there.

The implementation of the Presidential orders related to access to natural resources in the Far East will be of special importance to foreign investors. By July 2017, there will be a fundamentally new mechanism for investors' access to mineral deposits and wood resources. Investors will be required to invest in the processing of these resources within the territory of the Russian Federation. The purpose of such mechanisms, according to Alexander Galushka, the Minister of the Russian Federation on the Development of the Far East, is to attract larger investments and to create added value and jobs in the Far East.

On September 26, 2016, pursuant to the list of Presidential orders № Pr-1827 of September 21, 2016, Yuriy Trutnev, Deputy Prime Minister and Plenipotentiary Representative of the President in the Far Eastern Federal District, approved interim deadlines for action on President Putin’s instructions.

About South Korea Desk at the ART DE LEX law firm

The ART DE LEX Law Firm is a national law firm providing legal consulting services to Russian and foreign companies in Russia and abroad. ART DE LEX successfully helps its clients achieve their goals, promoting projects that are crucial to their industries or have an impact in the public sphere. The firm provides services in the following areas:

  • real estate and construction
  • antitrust regulation
  • dispute resolution and mediation
  • international arbitration
  • public-private partnership (PPP)
  • M&A and corporate law
  • energy

As part of its international development initiative in 2013, ART DE LEX opened the South Korea Desk, which delivers legal services to South Korean companies investing in Russia, and advises Russian companies operating in the Republic of Korea.