Is Russia's APEC Summit A $21 Billion Waste?

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Russian Foreign Minister Sergei Lavrov speaks at an APEC news conference on Wednesday in Vladivostok. Photo: Reuters

If the media reports are correct, Russia has spent $21 billion on revitalizing the city of Vladivostok and the areas around it over the past several years, much done in preparation for the Asia-Pacific Economic Cooperation (APEC) Summit which began Sept. 2nd and will last until the 9th.

APEC brings together national leaders, ministers, and business moguls in a forum of 21 different members -- 20 are countries, and the Republic of China-Taiwan is a member, but only recognized as an economy, not a state -- that border the Pacific Ocean.

The APEC host has also used the occasion as a major publicity vehicle to highlight its new stature after joining the World Trade Organization, in late August.

Back in 2008, state-owned news agency Ria Novosti said the amount being spent on the city was only $6 billion.

That massive investment in new infrastructure such as bridges, roads, port facilities, and a campus for a new university, has been criticized by local activists as inadequate for spurring long-term growth and largely landing in the pockets of corrupt officials. The new building work includes a massive $1 billion bridge, the world's longest stayed-cable bridge at over 1.1 kilometers, between Russky Island, where the summit is being held, and the city of Vladivostok. Average citizens are unlikely to get much use from the bridge, since it connects to high-cost conference venues and a largely deserted island.

Indeed, Russia's situation along the Pacific looks rather grim in general. The population there is decreasing; many have left for other portions of the country with better job prospects. Before the recent splurge, much of the region had been (and still remains) neglected since the end of the Soviet Union.

But with Europe in the doldrums, Russia is now seeking to revitalize its Asian hinterlands in order to turn those areas into major hubs for natural resource export. Energy exports, especially of natural gas, which Russia has tied to its economic and strategic well-being, are deeply coveted by urbanizing and industrializing Asia.

Russia's role in the region remains limited, even if there is vast potential for growth.

2012 will mark the first year in 14 that a U.S. president has not attended the APEC Summit. Even so, the numbers reveal a blossoming trade relationship between America and the Asia-Pacific. According to a Congressional Research Service August 2012 report, U.S. trade with APEC surged between 2001 to 2011 from $1.2 trillion to $2.3 trillion. U.S. exports to APEC nations went from $461 billion to $894 billion over the same period, about 60 percent of the country's total exports.

Russia's entire trade with APEC, dominated by its deals with China, only amounts to $100 billion, 23 percent of the country's total. Speaking at the summit, Ambassador Gennady Ovechko, Moscow's senior envoy to APEC, said that Russia's share in total regional trade is around 1 percent. Clearly this neither corresponds to Russia's political profile nor its economic interests.

Even if so much money is being sent into the Russian East, it remains in doubt whether the region even identifies itself as a part of Asia.

In an article printed in the Wall Street Journal on Sept. 5, Russian president Vladimir Putin said that Russia has long been an intrinsic part of the Asian-Pacific region. We view this dynamic region as the most important factor for the successful future of the whole country, as well as development of Siberia and the Far East.

But Vladivostok's (the city's name translates to rule the east) own mayor avidly describes the location as non-Asia. Mayor Igor Pushkaryov told Reuters recently that only now are we starting to live. We are creating a European city. The center of the world is here! [italics added]

The city of around 600,000 barely even registers next to the megalopolises of Asia. Seoul is 9 million, Tokyo more than 13 million (just counting the metropolitan area), the entire municipal area of Shanghai includes some 23 million -- more than ten times the population of the entire province Vladivostok is located in, Primorsky Krai (the Maritime Territory). Even the Canadian city of Vancouver on the other side of the ocean is bigger.

APEC's self-described focus for this year is meant to be on trade and investment liberalization, regional economic integration, strengthening food security and establishing reliable supply chains, as well as cooperation to foster innovative growth.

Experts expect much of the discussions to also center on how to maintain economic growth and stability amid a period of global financial stagnancy.

Russian Economic Development Minister Andrei Belousov said on Wednesday at the forum, I'm one of those who think that there is less than 50 percent chance of a second wave of crisis. A less than one in two chance is not exactly a huge vote of confidence.

President Putin, in the same article noted before, said that an atmosphere of trust was necessary to promote growth and integration in the Asia-Pacific.

Putin warned that The very principle of free trade is undergoing a crisis. We regularly observe recurrences of protectionism and veiled trade wars instead of lifting barriers. In these circumstances, it is imperative that we develop common approaches to clearing the accumulated imbalances.

But even Russia has played at the protectionism game in recent years. In 2009, Moscow called for punitive tariffs on imports of second-hand cars, largely from Japan, into its Far East.

In an article deeply critical of the long-term benefits of new APEC spending, The Moscow Times said that the used cars were favored by locals over alternatives from state automakers AvtoVAZ or Lada.

The government, however, was worried about the competitive pressures on AvtoVAZ, a longtime under-performer and symbol of Cold War manufacturing.

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