Friday, March 28, 2014

Russian Far East : Still an Outsider?

           In this week i discuss the economic developments in the Russia's Far Eastern region.Russia's Far Eastern region consists of ten sub-regions : Sakha Republic, Jewish Autonomous Oblast, Primorskii Krai, Khabarovsk Krai, Amur Oblast, Kamchatka Oblast, Koryak Autonomous Okrug, Magadan Oblast, Sakhalin Oblast and Chukhotka Autonomous Okrug. During the Soviet period, the Russian Far East's economy was based on the defense industry and central planning. The Russian Far East also provided raw materials for Russia and other CIS countries. But after the disintegration  of the Soviet Union, Soviet economic system collapsed without a proper replacement. At the same time, federal subsidy reduced considerably and transportation cost and energy prices increased beyond control.The lack of experience with the new market realities which were based on free market and Russian leaders inexperience with it increased the difficulties of the people of the Russian Far East.

           The Russian Far East includes a major chunk of Russian Federation's geographical territory. Far East comprises  36% of Russia's territory but only 4.6% of its population. Again Far East's contribution to  the Russian Federation's GDP (only 5.2% in 2005) was lower and industrial production was insignificant compared to the regions such as central Russia and Ural. Russian Far East is considered as one of the most potential (i mean economic) region of the Russian Federation. Then why so it remains as one of the most stagnant regions of the Russian Federation? Who is responsible for this handicap? And what is contributing to it? It is quite difficult to give  simple answers for these questions. Both federal and regional authorities are equally responsible for these developments.The harsh climate and lack of infrastructure precipitate these issues.From the federal governments' side it still likes to treat Far East region as a colony for raw materials and does not want to entertain Far East's economic independence.The Kremlin fears the economic prosperity of the region may encourage secession from the center.The distance from Moscow is so far and it also increases the fear of Moscow .So federal government only concerns about the collection of tax and provides financial subsidy to the region.Or, in other words, federal government does not concern with the improvement of the infrastructure or the development of the manufacturing sector.

         From the side of the regional authorities, the regional leaders such as governors engage in their own private businesses. Regional lobby is quite strong that it neglects most of the suggestions of the federal government which regional leaders fears negatively affects their economic interests. The regional lobby was not very willing to open their region for either bigger Russian firms or foreign companies for long time.Still both Russian giants and multinational companies penetrate to this region slowly and steadily. Foreign Direct Investment (FDI) is still smaller but steadier and increasing. Moreover extreme cold of  Russian Far East make it difficult for large scale  human settlement without any massive financial investment from the center. At present the income from the sale of raw materials go to the hands of the private companies and  not properly utilizes for the development of the region. Besides, the economic uncertainty and closure of mines caused for the mass scale immigration of people from regions such as Magadan and Chukhotka. Other regions also found population losses to an extant.The rapid population decline also raises the question of  invasion of the region by 'Chinese.'

     The Russian President Vladimir Putin accepted the importance of Asia - Pacific region over the developments of the Russian Far East. Putin wanted to increase Russia's share in energy market of the Asia from 3 to 30% in coming two decades. According to the analysis of Far Eastern branch of the Russian Academy of Science, 80% of the Russian Far Eastern economy is integrated to Asia-Pacific region. But big problem with this economic relationship is that the economic incompatibility between the Russian Far East and the neighboring Asian countries. Asian markets are more developed and modernized than Russian Far East.This mismatch can resolve only through the open competition and free market.The protectionist policies of the regional authorities should change and different regions of the Far East must co-operate with the federal government to ease its affect on the common people. Some of the scholars such as Hong suggested that the developments of the more advanced regions such as Khabarovsk and Primorskii may bring developments to other parts of the region. But it is impossible without considerable fiscal investment from Moscow. For that regional leaders should work together and force Moscow to think in the same manner.Will it happen in the near future?


1) Devaeva, Elena (2005), "The Foreign Trade of Russia's Far East," Far Eastern Affairs, Vol.33, No.4.

2) Hong, Sungwon (2007), "Economic Transformation in the Russian Far East," International Area Studies Review, Vol.10, No.193.

3)  Motrich, Ekaterina (2002), "Demographic Potential and Chinese Presence in the Russian Far East," Far Eastern Affairs, Vol.30, No.1.

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