Vasily Mikheev
Deputy director, Institute of the Far East, Russian Academy of Sciences
When considering scenarios of Russia’s economic development, analysts quite often forget that this is a vast country located in two parts of the world. Its European and Asian parts clearly differ from each other by such strategic factors as population, resources, extent of territories, regional neighbors. And if Russian Europe can be figuratively compared with Poland, which is being integrated in the European Union, then, for the sake of comparison Mongolia matches Russian Asia the best. All this points to the necessity and ”naturalness” of working out a two-vector model of Russia’s economic strategy. It also necessitates raising the question of special strategy to develop Russian Asia in today’s world that is being globalized.
he premise for understanding the role of Russian Asia comes to the following. Today there are intensive globalization processes underway in the world, the economic and financial integration on the regional level is increasing and not a single country can remain aloof from these processes. Either negative or indifferent attitude towards them is fraught with a loss of time and risk of missing one’s chances. Even such closed regimes as North Korean make plans to survive by taking into account external factors. The only alternative can be a complete isolationism. For Russia it means that sooner or later, one way or another it will get involved in integration processes in the Asia-Pacific region (APR).
Thus, the problem at issue is what strategy and tactics of embedding Russia in the Asia-Pacific economy should be pursued. Also, there is a question of principles and mechanisms for adjusting this policy direction to tasks of creating a common free market zone of Russia and the European Union (EU).
CORE OF INTEGRATION
The peculiarity of the integration situation in APR is that there is no intergovernmental structure of the EU type there. The interaction of Asian countries is carried out on three levels:
– Forum of Asia-Pacific Economic Cooperation (APEC);
– Subregional integration groups, including both the existing (ASEAN) and planned ones (the East Asian Forum with participation of China, Japan and South Korea, ASEAN plus China, ASEAN plus Japan, ASEAN plus Three, i.e. Japan, China and South Korea);
– Bilateral relations (for example, the advancement of Japan and South Korea toward an agreement on free trade).
There seems to be enough arguments for a thesis that APEC will not become an institutionalized base for a deep Asia-Pacific integration and will hardly be transformed into an agreement on free trade with the prospect of creating a common market like EU or NAFTA. Probably, APEC will remain an elite club for important negotiations and discussions but with no authority to make binding decisions. The reasons for that are too cumbersome a nature of this organization, the adopted principle of consensus as well as contradictions between the Asian and American components of APEC.
 | Russia’s President Vladimir Putin (left) meets with the General Secretary of the Chinese Communist Party Central Committee Hu Jintao during the official visit to People’s Republic of China.
(ITAR-TASS). |
In these conditions the subregional integration will enjoy all the advantages. The interaction of states is developing in three directions. It will build up around ASEAN in Southeast Asia (SEA) and around the Japanese-Korean-Chinese axis in Northeast Asia (NEA). China’s coastal economy, which accounts for over half of the Chinese GDP, serves as a connecting link between SEA and NEA.
When considering subregional economic potentials, advantages of NEA look overwhelming. Aggregate GDP of Japan, China and South Korea (plus Taiwan and Hong Kong) amounts to almost $7B. Just for comparison: GDP of EU equals $9B and GDP of the U.S. amounts to $10B. It is apparent that the indicators are quite commensurate. At the same time aggregate GDP of ASEAN countries is less than $1B and of countries of South Asia is less than $0.5B.
The first step toward integration in NEA has already been made. The tripartite analytical group has been established so as to work out concerted recommendations for governments of Japan, China and South Korea to coordinate economic and financial policies, develop trade and investment cooperation between them. All countries, including China, are actively pondering over such issues as creating a common energy loop for NEA and transport corridors to Europe (in some cases across Russia’s territory), establishing a tripartite free trade zone, forming a currency union and introducing a single currency in NEA, etc.
It may be expected that in the future the world stagnation will push Tokyo, Beijing and Seoul to a closer interaction. Most likely, a basis for a future single economy in East Asia will be exactly the integration space of NEA embracing Japan, South Korea, China and, maybe, Russia, if it does not miss its chance.
The interaction of Russia and NEA can develop by the well-known scheme of complimentary principles: Russian energy resources, scientific technologies and transit territory in exchange for Japanese and South Korean capital and investment equipment, Chinese food, textile and labor.
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Vasily Mikheev
Deputy director of the Institute of the Far East with the Russian Academy of Sciences, coordinator of Russia’s centers of APEC studies. In 1976 graduated from the Moscow State Institute of International Relations. In 1978 received master’s degree in economics and in 1996 became doctor of economics. From 1981 to 1984 and from 1993 to 1996 was on diplomatic assignments in North Korea and Lithuania. Author of 5 personal and co-author of 20 collective monographs as well as of over 250 articles published in Russia, the U.S., China, Japan, South Korea, India, Pakistan, countries of EU and other states. Among his latest scientific works are the monographs "Homo International. Theory of social development and international security in light of person’s needs and interests" (Moscow, 1999), "Globalization and Asian regionalism. Challenges to Russia" (Moscow, 2001), "PRC and Asia-Pacific Region" (Taiwan, 2001), "Globalization. Geoeconomic World Order" (Islamabad, 2000).
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CONTROL CENTERS REQUIRED
Cooperating in multilateral integration requires formation of a common legal space so as to secure free movement of goods, financial flows, manpower, scientific knowledge and achievements. But the process of institutionalizing the cooperation in NEA has not yet reached the intergovernmental level. The major role still belongs to nongovernmental institutions: the NEA Economic Forum, Gas Forum and NEA Economic Conference.
The key problem of integration in NEA is a lack of sources to finance costly regional projects. By estimates, creation of infrastructure for cooperating in integration will require annual investments of about $7.5B. Thanks to funds from member states and already existing international financial institutions approximately $2.5B is expected to be available. The idea of setting up the NEA Development Bank to attract financial resources from world markets is under active discussion now. It is assumed that governments of the U.S., Japan, South Korea, Russia, China and other interested countries will become its shareholders.
The necessity to coordinate activities in other spheres also compels to think of forming appropriate bodies. The Council on developing transport and natural resources may become a subregional institution for creating a resource and transportation infrastructure of integration that would operate in coordination with the NEA Development Bank. Subregional scientific and engineering policy could be coordinated the same way. The NEA Council on managing labor resources is intended to work out rules and quotas of manpower migration. There is a need for one more subregional body to coordinate macroeconomic and financial policy of countries in the region. By developing a mutual exchange of deposits in national currencies so as to ensure financial stability in case of currency markets’ collapse Central banks of NEA countries (except Russia) have already started gaining experience of positive cooperation.
Institutionalization of the multilateral cooperation in NEA brings to mind the idea of forming an East Asian Union similar to EU. Its activity can be based on the principle of open regionalism that implies mobilization of global resources for solving regional problems. The very idea of mobilizing global resources for this purpose rules out a possibility of this group’s conversion in a closed union.
EVER-ATTRACTIVE ENERGY RESOURCES
Today’s situation in NEA provides ample reasons for insisting that Russia is "has not missed the train" yet. What is more, it seems that Russia’s participation in regional integration is of primary importance for developing the economy of Russian Asia, i.e. regions of Siberia and the Far East.
As far as the most luring opportunities for the Russian business in NEA and APR as a whole are concerned, the following directions of cooperation can be singled out:
– developing oil and natural gas resources of Russia’s Far East and Siberia, constructing an oil-and-gas supply network in NEA as well as electric power transmission lines, which would provide a basis for a future Russian economic integration in APR;
– using the "geotransit" location of Russia as a bridge between Europe and East Asia;
– drawing foreign labor to develop sparsely populated areas of Russia’s eastern territories on the basis of strict control over immigration laws and in cooperation with manpower-exporting countries, above all, China;
– setting up a strategic oil reserve fund with participation of Russia, China, Japan and South Korea so as to provide energy security for NEA countries;
– participating in integration on the basis of the information and technological revolution taking into account the fact that NEA countries are either recognized world leaders (Japan) or seek to attain such a status (South Korea).
The summit diplomacy might give a push to Russia’s new strategy in APR. The initiative to hold NEA energy summit could be a first practical step in this respect.
Russia’s solid positions in the emerging economic space of NEA will become a base for its connection to the future integration mechanisms ASEAN plus China, ASEAN plus Japan or ASEAN plus Three (Japan, China and South Korea), if they are formed by then.
TO GET AHEAD, ONE NEEDS TO GO IN OPPOSITE DIRECTIONS
It is important to work out a strategy of adapting Russia’s economy to the task of integration in NEA by taking into account peculiarities of this process as compared with the Russian integration in EU. What is more, there is a possibility of collisions between both processes in such areas as economic and legal. When settling these collisions, it is important not to reject straight off the idea of Russia’s "two-vector" economic strategy. Among other things this strategy implies creation of a "special customs territory" in the Russian Far East, if this contributes to accelerating Russia’s integration in NEA.
What is more, it is important to realize the following. With the current strategy of Russia’s economic development the socioeconomic well-being and development of Russian Asia are derivations from successes of the country’s European part. It depends on them and lags behind by time. Sometimes the Far East and Eastern Siberia are regarded as a burden. But with the integration scenario of developing Russia’s eastern territories the now-backward economy of the Far East and other integral parts of this vast region can become an equal fulcrum of the Russian economic upturn. 
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