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Russia–Republic of Korea
5 September 2019
09:30—11:00
KEY CONCLUSIONS
Economic cooperation between Russia and Korea has a great potential

Two years ago, here at the EEF the President of Korea proposed a plan called ‘nine bridges of cooperation’ in such areas as electricity, railways, gas, agriculture, fishery, etc. <...> Joint research to connect the electricity and gas railway networks and upgrade Russia's shipyards, to make the agricultural business dialogue permanent, to create an industrial zone, to create a Korean hospital – these cooperation projects will get our support — Hong Nam-ki, Deputy Prime Minister, Republic of Korea.

The Far east has created attractive conditions for investors

The opportunities for cooperation between Korea and the Far East are vast. Today, a competitive investment space has been created in the Far East; investors get incredible tax benefits and preferences; infrastructure is being created at the expense of the state, electricity tariffs are being reduced, and each investment project gets personalized support — Alexander Krutikov, Deputy Minister for the Development of the Russian Far East and Arctic.

A new mechanism of interaction can be an agreement between the Russky Island technoparks and the city of Pohang. <...> Now the administration of the Primorye Territory has launched a project to organize an industrial park in Bolshoi Kamen and allocated 200 hectares next to Zvezda shipyard specifically to site the production facilities. We have two contracts on the way with the enterprises that will become participants of the technology chain to produce the first ships at Zvezda — Konstantin Bogdanenko, Acting Vice Governor of Primorye Territory.

With the support from the government, our colleagues from the Ministry of Economic Development and Trade, we have received all possible preferences within the framework of the advanced development territory regime – tax benefits, per say. In May this year, we approved a subsidy for the engineering and social infrastructure of our project in the amount of USD 80 million — Vadim Medvedev, Managing Director of Investment Department, ESN Group .

Korean investors are very active in these projects, despite the sanctions and despite the previous unpleasant experience, but now the administration of Primorye Territory is taking measures to protect this business. I thank the Korean side for active participation in the establishment of enterprises — Dzhimbulat Tikeev, Chairman, Slavyansky Dockyard.

The Republic of Korea has become an crucial partner for the Far East

Recently, contacts between Korea and Russia's Far East have been developing rapidly. Over the last two years, trade turnover with the Far East has doubled. In the first six months of this year, Korea became number one trade partner for the Russian Far East. Russia's new eastern policy and Korea's new northern policy create a positive synergetic effect — Hong Nam-ki, Deputy Prime Minister, Republic of Korea.

The volumes of bilateral trade show positive trends for three years in a row. In 2018, trade turnover went up 30% and reached USD 25 billion — Vladimir Padalko, Vice President, Chamber of Commerce and Industry of the Russian Federation .

The volume of container traffic between Russia and Korea reached about 220 thousand containers by the end of 2018, with half of imported goods and about 70% of exports going through the Far East. <...> We have a good outlook for participating in two bridges: the development of port and rail transport, attracting the volume of Korean transit to Europe and European transit to Korea. Here we have a huge potential – about 3 million containers. Now there is already a certain political interest in bringing this volume from sea transportation through the Suez Canal to the Trans-Siberian Railway. Economic efficiency of using the Trans-Siberian Railway is achieved through the speed of delivery: together with Russian Railways, we can bring it down and make it 2–2,5 times faster than through the Suez — Alexandrs Isurins, Chairman of the Executive Board, President, Far Eastern Shipping Company (FESCO) .

Both countries expanding areas of cooperation

Innovation and high technology belong to the areas of common interest of Russian and Korean businesses in 2018–2019. A Russian-Korean innovation centre has been established in Korea. The Russian-Korean innovation cooperation centre expanded in Moscow — Vladimir Padalko, Vice President, Chamber of Commerce and Industry of the Russian Federation .

Today, for the first time ever, I propose to create a large-scale investment fund for the development of the materials and equipment parts industry through joint participation of Korea and Russia — Hong Nam-ki, Deputy Prime Minister, Republic of Korea.

Vladivostok is an attractive tourist destination for Koreans, and recently the number of Russian citizens visiting Korea for medical tourism has increased. Not so long ago, a clinic based on the Korean medical system opened in Sakhalin, where Korean and Russian doctors together remotely assess patients' conditions, creating a system of remote medical services — Han Jin Hyun, Executive Vice Chairman, Korea International Trade Association (KITA).

ISSUES
Russia–Korea cooperation potential is underused

Over the last 5 years, 33% of direct investment in Russia has happened to the Far East. <...> There are not too many projects with participation of Korean companies, and our objective is to intensify this cooperation — Alexander Krutikov, Deputy Minister for the Development of the Russian Far East and Arctic.

Lack of understanding. Previous unsuccessful partnership weighs over

When discussing investment projects in Korea and Russia, we face a discrepancy: Russia wants to increase investments of major Korean companies, but the Korean side has a tendency of slowing down decisions. But small and medium-sized Korean companies are taking entering the Far East very seriously. However, Russia's conditions are not enough for these companies to enter the Far East — Weon-yong Sung, Member, Presidential Committee on Northern Economic Cooperation, Republic of Korea.

We are losing the competition for Korean investment. Over the past 25 years, Korean business in the Far East has had a lot of setbacks, which has affected the confidence of Korean business in the local business environment. And trust has not been fully restored. <...> Korea is also losing the competition for the opportunities in the Far East. China, Japan and India have significantly increased their investment portfolio and started implementing major projects — Alexander Krutikov, Deputy Minister for the Development of the Russian Far East and Arctic.

The amendment to the international medical cluster law is among the unresolved issues of the Far East healthcare project, but there are other risks as well — I Hoseok, Vice President, Convergence Medical Institute of Technology, Pusan National University Hospital.

Lack of infrastructure

It is not just the shipbuilding facility that is important, but it is the infrastructure around the dockyards as well. This is something Zvezda does not have yet — Park Seung Yong, Senior Executive Vice President, Hyundai Heavy Industries Co.

According to Russian companies, Korea can be a very attractive market. But there is an issue of infrastructure. As for logistics in the Far East, its main focus is metallurgy or container transportation. There is no grain terminal here, which is an obstacle to the export of agricultural produce, particularly grain — Choi Won Bo, General Director of the Far Eastern Representative Office, Lotte International.

SOLUTIONS
Creating joint projects focused on third country markets

I appeal to the businessmen of the two countries to move to a new level of relations: the creation of joint projects aimed not only at production, but at the national economy and sales on the third country markets — Vladimir Padalko, Vice President, Chamber of Commerce and Industry of the Russian Federation .

Our biggest mistake in localization approaches is trying to limit ourselves to consumption only in local markets for production engineering purposes. <...> We are unlikely to get to the volume that will be cost effective to set advanced production with advanced processing. <...> We have to <...> finally find a sales market outside of our national ones, and then everything should work out — Alexey Rakhmanov, United Shipbuilding Corporation President .

Russia and Korea can result in a new cooperation experience: through uniting efforts they can invest in third countries – in India, per say. Then we will build on successful cooperation — Weon-yong Sung, Member, Presidential Committee on Northern Economic Cooperation, Republic of Korea.

Expanding areas of cooperation

Cooperation between universities (the agreement between the Far Eastern Federal University and the University of Pohang) technology parks (the agreement with the Russky Technopark), creating joint ventures and start-ups will strengthen cooperation. Tourism can have a great effect. In November, we plan to start cruises from Pohang to Russia and we hope it will be a popular destination — Lee Kang-deok, Mayor of Pohang Metropolitan City.

The material was prepared by the Russian news agency TASS