Russia's officials, investors discuss ways to fund development in Far East

Officials of the Russian government and representatives from the business community as well as international financial bodies gathered here for a brainstorming session to discuss how investments could be attracted for this region in Russias Far East, which requires huge funds for rapid development.

At the event, organised in the run up to the 5th Eastern Economic Forum (EEF) to be held in Vladivostok on September 4-6, participants discussed existing mechanisms and problematic issues related to the implementation of investment projects in Far Eastern regions with the involvement of International Financial Institutions (IFIs).

They also deliberated on the ways to enhance the efficiency of interaction between the regions and IFI representatives through the Russian Ministry of Finance.

The EEF is held annually with the objective of facilitating the accelerated development of the Russian Far East's economy and expanding international cooperation in the Asia-Pacific region. Prime Minister Narendra Modi will be the Chief Guest at this year's EEF meet, where will be a media partner.

During the session, the participants discussed feasibility of development banks providing lending to the regions of the Russian Far East and prospects for the implementation of investment projects with the involvement of IFIs, according to a press statement issued after the session.

They cited the experience of Yakutia region as a positive example of cooperation between the Far East and IFIs. Of particular note was the experience the region gained from the construction of water intake and water treatment facilities in the city of Yakutsk, which was financed by the European Bank for Reconstruction and Development, VTB Bank, and the Eurasian Development Bank.

Head of Yakutia Aisen Nikolayev noted that the rapid development of the Far East requires huge investments that cannot be provided from federal and regional budgets alone.

"Developing the Russian Far East has been identified as a priority for the country throughout the entire 21st century. A rather large amount of financial resources is needed to achieve the objectives we have set. Financial resources need to start being raised today for the construction of infrastructural, social, transport, and energy facilities. And we should attract funds from international financial organizations specifically to meet these objectives. The cost of debt capital will be much lower if the funds of IFI are used," Nikolayev said.

In order to meet the strategic challenges facing the Far East, Nikolayev said improvements need to be made to federal budget legislation, which is currently hampering the implementation of investment projects that use the funds of IFIs.

"At the same time, we understand that IFIs should only provide lending for projects which have undergone regional and federal expert evaluations and in which federal development institutions – the Far East Development Corporation, the Far East and Baikal Region Development Fund, and others – have announced they will participate. I am certain that today's discussions on this issue will contribute to the development of the economy of the republic and the entire Far East," Nikolayev said.

Deputy Director of the Primorsky Territory's Department of Economics and Business Development Victoria Ivacheva said the regions of the Far East should work constructively when finding solutions to the most important issues that directly affect the development of the regional economy.

"Uniform conditions should be created for the entire Far East to attract foreign investment and cooperate with IFIs. Only then will we be able to achieve noticeable results," Ivacheva said.

Manabu Homma, Special Advisor of Japan Bank of International Cooperation (JBIC) for Small and Medium Enterprises said his institute is unable to directly fund a number of infrastructure projects in Yakutia due to shortcomings in federal budget legislation.

"There is enormous potential for cooperation with Yakutia, but in order to implement investment projects we have to finance these projects through other banking structures, and this increases the cost of the project itself," Manabu said.

( With inputs from IANS )