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Can the Far East like Perth?

Alexander Ivashkin about how the Australian provincial city became the investment center of the Asia-Pacific Region

The role of Australia, also called Down Under in the past century, is growing in the Asia-Pacific region. Chairman of the NP "League of Financial Institutions" (Vladivostok) Alexander Ivashkin, who visited the Green Continent international delegation in February-March this year, told EastRussia how Down Under feels and why the analogies between the Far East and the Australian province, whose capital is Perth, you can spend a lot, and so far there are few similarities in economic development.

Can the Far East like Perth?

- The Down Under Region, of which Australia is the “heart”, is usually associated with agriculture and resource extraction. Is the situation changing somehow?

- If we right now mark existing and perspective points of growth of the world economy on the map, then besides the traditional “Asian tigers” of the last decade (Japan, China, Korea, Singapore, Vietnam, Malaysia, Indonesia, the Philippines, etc.), new players are emerging gradually gained intellectual and economic power, thereby claiming leadership among regional powers. 

These countries, of course, include Australia, which, along with its neighboring countries, expanded the zone of economic growth from the APR to the vast and heterogeneous area of ​​the Pacific and Indian coasts. The main populations in Australia are in its largest 8 cities and suburbs, that is, almost 80% of 25 million people. This Australian demography has created a kind of economic "constructor", which sometimes consists of parts that even the most advanced countries in the world do not possess. 

- In 2018, Australia set an informal world record for continuous economic growth. From your point of view, what contributed to this?

- I note that the former "record" belonged to the Netherlands, whose economy did not experience a technical recession during 103 quarters (from 1982 to 2008). Before the Dutch, this kind of GDP record belonged to Japan. All this happened until last year the “artificial intelligence” from the world's largest IT company Statistical Analysis System (SAS) did not name a new favorite. The neural network compared 148233 districts and cities from 193 countries on a database of 1194 sources, on the basis of which formed 69 criteria ideal for a city to live, work and play. Perth, the capital of the largest state of Western Australia, was named the best city in the world. By the way, more than 2 million people live there. 

Perth came in first place thanks to a developed and partially free urban transport system, a large number of recreational areas (beaches, batsadas), a significant number of hours of sunshine throughout the year (3200 hours), a wide choice of restaurants (390 pieces) and extensive culinary and cultural events, as well as good career opportunities and startup startups. At the same time, SAS stated that it was rather difficult to choose the best city in the world, since the existing studies, polls and international ratings reflect only the individual opinion of their authors. An objective answer can be found only by looking at a huge amount of data that neither a person, nor even a huge army of analysts can do. 

If we take into account that a decade ago, Perth was the worst economic capital of all six states in Australia, this result is evidence of this “breakthrough” of the largest and most backward and forgotten region of Australia. 

- How would you explain this phenomenon?

- The main reason for Perth’s phenomenal success is in creating a very good investment climate that brought this provincial state closer to an investment boom and, as a result, to a change in the labor market and a qualitative redistribution (change) of consumer preferences of the state’s population in goods, services and housing. Therefore, there was a steady steady growth in such sectors as finance, insurance, real estate and construction. 

During my current visit, I had the opportunity to participate in an open public event from the Western state of Australia, where they discussed the prospects for a new wave of investment projects to maintain the existing potential for the coming years. One of the leaders of the Angel Investors Association (Perth Angels) at the event said the key phrase: "The money of any investor in Perth" rest ", that is, they work in complete safety from legal troubles ...". I note that the said organization consists of a network of private investors and provides an opportunity for businesses of any size and size to receive investment opportunities in Western Australia. 

It is therefore not surprising that this state has become the most successful mixed mining and energy province in the world. And due to its flexibility, scale and the solution of investors' problems, it attracts constant investments from the world's largest producers of minerals and energy, many of which have their regional headquarters in Perth. 

- Has capital become the impetus for the growth of the state economy?

- And not only capital, because the daily agenda of “everything for the investor”, cultivated by administrators and managers of this process, led to the fact that for the first time the mayor election of 2007 was won by the woman-Lord Mayor Lisa Michelle Scaffidi. It was during its management Perth (2007- 2018) that the city immediately got everything its citizens dreamed of - new jobs, a new look of the city, free city buses and a reserve for future development. 

As a result, for some ten years, the economy in the past of the “modest” Perth and the whole region as a whole was reformatted, having an average annual economic growth of 5,3% (in Australia itself - 3,3%). It was truly a period of unprecedented economic expansion of the state and architectural reconstruction of its capital, Perth. Indeed, in the very recent past, the entire economy of Western Australia depended on the extraction and processing of a certain type of minerals and oil. 

In a more detailed analysis of the composition of industry, finance and economics, one can see a peculiar resemblance of the state of Western Australia and the Russian Far East, as there are here and there with non-ferrous metallurgy, mining of precious metals and stones, mining, fish, forestry and woodworking, oil - and gas production, engineering. 

- And if more precisely? 

- The recent differentiation (expansion of the range of mineral resources) of Western Australia provided a different, more balanced production base and less dependence not only on several major export markets, but also protected the economy from fluctuations in world prices for certain types of minerals to certain limits. . 

My Australian colleagues gave examples of successful investments in the extraction and processing of rare minerals, including graphite and rare earth elements such as yttrium and thorium. These rare minerals are used to produce capacitors in fast-charging electric vehicles, for lithium-ion batteries in smart devices, and also in the production of graphene (a material hundreds of times stronger than steel), which began to be used in the creation of flexible products and flexible electronics screens. 

- In your opinion, what is the current investment climate in the Far East? 

- Of course, the Far Eastern economy has become much more stable than in 90. But at what cost? At the cost of a high percentage of business lending and a contracted money supply, at the price of the same production that does not grow in the Far Eastern Federal District, except for the DSSS project in the village of Bolshoy Kamen, at the price of high taxes, unreasonable fiscal Far Eastern policies (tariffs, excise taxes, duties, etc.), at the cost of reducing real incomes of citizens and their literally fleeing from the region. 

In some cases, the role of foreign investment for the economic growth of a region is overestimated. An example of this is the two unfinished Hyatt hotels in the capital of the Far Eastern Federal District Vladivostok, which have been standing for many years. But what is most surprising is that the third head of the region is constantly looking for foreign investors for their completion! Does the domestic business really have no money to complete their construction? Of course, there are, but the reasons are different, and this kind of "turbulent" period of the region must be experienced. 

Here, perhaps, the Hyatt syndrome is most puzzling why traditionally the largest (in the recent past) investors (such as Cyprus, Luxembourg and other offshore jurisdictions), who are formally foreign companies (and in fact, in most cases, “Russian capital”) Do not rush to the offshore on the island of Russian, or in the TOR, or in the Free Port of Vladivostok, and do not buy those notorious hotels? But after all business in other countries is well informed about these hotels. On the other hand, foreign investors do not see an example from the Far Eastern business, obvious success stories. They, undoubtedly, need to be formed, then something, perhaps, will work out. 

- But a lot of laws have already been passed, really not enough? 

- In fact, just a month ago, in February, the Russian government approved the next "Spatial Development Strategy of Russia before 2025 of the Year." This document identifies "promising centers of economic growth", which, by 2025, should ensure GDP growth of about 4%. Of these, 20 centers, including Moscow and St. Petersburg, as well as other major cities, which includes the capital of the Far East Federal District, Vladivostok, should ensure a one percent increase in GDP. 

Entering the FEFD into the list of four priority "geostrategic" regions according to the strategy implies the development and approval of a set of measures to attract specialists to our large region by stimulating internal and external migration. On the example of our Australian neighbors, we see the opposite - the retention of our own population through successful transformation, the driving and hidden springs of transformations in the so-called "provincial territories". I hope that the proposed examples of economic development and the subsequent transformations for citizens living in the provinces, selected taking into account the interests of the development of the local economy, can be interesting and useful for our Far Eastern region.

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