Irkutsk
Ulan-Ude

Blagoveshchensk
Chita
Yakutsk

Birobidzhan
Vladivostok
Khabarovsk

Magadan
Yuzhno-Sakhalinsk

Anadyr
Petropavlovsk-
Kamchatsky
Moscow

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Propaganda or agitation?

Why do negative factors often outweigh the benefits of FEFD?

Propaganda or agitation?

Alexei Erokhin, Head of the EY (Ernst & Young) Far Eastern Representative Office, on whether citizens and investors in the Far East have reasons for optimism.

The development of the Russian Far East has been declared one of the priorities in the country's economic strategy. The state is ready to accept benefits for businesses operating in the east of the country. However, the further from Moscow, the weaker the optimism and the greater the skepticism. Asked by EastRussia.ru about what prospects the most distant of the Russian federal districts now has, Alexei Erokhin, the head of the Far Eastern branch of the international audit and consulting firm EY (formerly known as Ernst & Young), answered. The company opened its office in the capital of Primorye on the eve of the APEC-2012 summit.

- Alexey Vladimirovich, to what extent do the plans for the development of the Far East correlate with the real state of affairs in the district, are they justified or the "propaganda component" prevails in them?

- At the international economic forum in Davos, the agenda of Russia's regional development was discussed as one of the main drivers of economic growth. It is the regions that can become the most important component in improving the work of government institutions. Moreover, as the ratings show, many of them are already well ahead of the average indicators for doing business in the country. The main conclusions of the analysis of the scenarios for the development of Russia, carried out in the framework of the Forum, were just improvements in the work of institutions, reforms affecting the business environment, the complexity of these reforms. All these improvements can be achieved by combating corruption, improving access to finance, reducing bureaucratic costs, and bringing the education system in line with business needs.

We are sure that the Far East has very good prospects due to a number of competitive advantages. For example, such as a large amount of natural resources, opportunities for tourism development, a successful geographical location. We can note a high level of interest in the region on the part of investors - a large number of our partners representing large international companies are already operating in the region or are showing interest in the Far East. But to attract investment, the region needs to solve the problems that hamper business development. Underdeveloped infrastructure, a shortage of qualified personnel and other unfavorable factors worsen its investment attractiveness.

Unfortunately, due to the unresolved issues, the number of investors is not growing as fast as we would like. According to investors, negative factors often outweigh the benefits of the region.

- What can these factors level out? Is there similar experience in other countries?

- We have many successful examples of effective cooperation between the state and business, which laid the foundation for the successful development of regions and entire countries. The example of the United Arab Emirates, where business has developed thanks to not only private capital, but also active state support, confirms that such cooperation can be very successful. Also interesting is the experience of developing a scientific cluster in the United States with the support of the state. We are confident, for example, that the development of a scientific cluster based on the Far Eastern Federal University can contribute to attracting investment to the region.

- How does EY assess the investment potential of the subjects of the Russian Federation and the FEFD in particular? What can boost the level of investment?

- The Russian regions have good potential for economic growth. In one of our recent studies, which we prepared for the World Economic Forum in Davos, it is said that the regions will become the development driver for Russia. There are many territories in our country that are interesting for investors, but in order to create a favorable investment climate, it is necessary to solve a number of problems. First of all, we need to modernize the infrastructure and invest resources in human development. We believe that this work will contribute to the growth of investment.

Also, a significant contribution to the development of regions can bring the use of an export-oriented model and the creation of free economic zones. The Far East is a good place to create such zones, since it has an important strategic advantage - it has ice-free sea ports. By the way, it should be noted that the attractiveness of our region for investors is due not only to its successful geographic location, but also to the work on the development of the Far East's economy that has been carried out over the past twenty years.

- The government approved the basic principles for the creation and management of the territories of the advanced social and economic development of the Far East. What is important here?

- The answer lies in the title itself - the territory of advanced development (TOR). That is the place where all the conditions for a new and promising business are created. First of all, this is a sufficient level of infrastructure development. In the second - a system of benefits for new companies and established industries. The third is the most simplified procedures for opening a company and connecting the necessary capacities. Naturally, for the Far East, issues related to customs clearance will be relevant, and for TOR, it is necessary to optimize all related processes. It is no secret that the problem of shortage of qualified personnel is typical for the Far East. So, TOR is also an opportunity to solve social problems in an integrated way: creating comfortable living conditions and a system of professional and academic education. The example of our APR neighbors suggests that these solutions are very effective, but only under the condition of synergy of support for the development of local entrepreneurship and federal state support.

- Is the opening of Ernst & Young's branch in Vladivostok a good signal for foreign investors?

- Of course, yes. Especially for companies with which we cooperate and can potentially do it. For quite a long time we worked remotely with the help of our partners in Vladivostok, who helped us carry out a number of projects in the region. Then we decided to open an office in Vladivostok for consulting and transaction support. The APEC summit was an excellent occasion for this - it was better not to think of it.

- Is it easy or difficult for your specialists to work with local authorities? Sometimes, with all the desire to get an investor, the authorities do not have enough authority to do so ...

- We never had problems in such interaction. In addition, we have been fruitfully cooperating with the federal government for a long time and know from our own experience that the authorities are supporting the business and are trying to contribute to its development. The state and business (in particular, the ASI) actively cooperate in the creation of a favorable business climate - one of the directions is the implementation of road maps developed, including those with the help of EY specialists. In 2013, 9 road maps were adopted as part of the National Entrepreneurship Initiative. The business community regularly consults with government bodies on a regular basis. We hope to transfer the success achieved at the federal level and to the regional dimension - where, naturally, much remains to be developed.

- Can you name examples of investments in the Far Eastern Federal District, made with the participation of EY?

- I can tell only about those projects where information can be publicly available. The other is a trade secret. For example, in Khabarovsk Krai, we developed a concept for the development of the Lenin Stadium. It was owned by the Ministry of Defense of the Russian Federation, and then it was transferred to local authorities. It was necessary to modernize the facility, for which we developed the concept of its development, taking into account recreational and sporting tasks and attracting an independent operator. I hope we will soon see the result of our work. In the same Khabarovsk Territory, we also presented the concept of the development of agro-parks. Its task is the effective use by the business of agricultural land.

- One of the stimuli for the development of the Russian Far East was the APEC summit, which was held in Vladivostok in September 2012. What processes can be considered a direct consequence of its conduct?

- The APEC summit contributed to the growth of foreign business interest in the Far East and especially in Vladivostok. I think this is a good example of how positive private investment in its economy can affect the development of a region. Often we perceive the meaning of the word “investor” in a rather narrow sense - as a kind of “money bag”, nothing more. However, it is important to understand that the arrival of investors not only means an influx of money into the region, but also contributes to the development of new technologies, professional training of specialists, introduces business leaders to advanced management practices and, ultimately, creates a qualitatively new level of business culture in the region.

- Alexey Vladimirovich, the Far East has experienced, for the last twenty years, if I have not lost count, the fourth program of long-term development of the region. Do you think the recent initiatives will be a positive signal for business?

- We are confident that the recent initiatives related to the appointments you mentioned will contribute to the growth of investor confidence in the region. In addition, it is important that the new management team, which has extensive experience in regional development, enjoys the confidence of both the government and the business community.

According to the Russia Attractiveness Survey 2013 survey (conducted by EY), among the industries that were most interesting for investment last year were energy, high technology and the consumer sector. Every year, investors open up new business areas where they can successfully invest. For example, according to a recent study by EY and RVC, the Russian venture capital market has grown 10 times over the past seven years. In the near future, we expect not so rapid growth, but investors will definitely be strongly interested in all the segments of the economy I have listed.

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