MDRC

Russia and China

STUDY TOUR TO RUSSIA AND CHINA ORGANIZED BY THE MDRC
(1-8 November 2003)
Composition of Study Tour Team

  1. Ms.V.Ulziibayar, Executive Director, Mongolian Research Development Center
  2. Mr.L.Davaatsedev, Member of the Mongolian Parliament and Member of the Economic Standing Committee
  3. Ms.G.Ichinhorloo, Manager, Administration of ALTANBULAG Free Trade Zone (currently based in the Ministry of Trade and Industry, Ulaanbaatar)
  4. Mr.D.Khosbayar, Manager, Administration of ALTANBULAG Free Trade Zone (currently based in the Ministry of Trade and Industry, Ulaanbaatar)


List of People Met during Study Tour

 

RUSSIA

 

  1. Mr.S.BANZRAGCH, Mongolian Consul to Irkutsk
  2. Mr.D.HANOI, Trade attaché of Mongolia to Irkutsk
  3. Dr.Pavel A.MINAKIR, Institute of Economic Research, Russian Academy of Sciences, Far Eastern Branch, Khabarovsk, Russia
  4. Dr.Andrey ADMIDIN, Senior Researcher, Specialist on Foreign Invesments, Russian Academy of Sciences, Far Eastern Branch, Khabarovsk, Russia
  5. Ms.Valentina G.BULDAKOVA, Head of International Department, , Institute of Economic Research, Russian Academy of Sciences, Far Eastern Branch, Khabarovsk, Russia
  6. Dr.Elizaveta N.TELYUSHKINA, Director, Department of Enterpreneurship and Population Living Standards, Ministry of Economic Development and Foreign Relations of Khabarovsk Territory, Russia
  7. Ms.Irina A.BESEDINA, Chief of Foreign Economic Policy Division, Department of Foreign Economic Relation and Tourism, Ministry of Economic Development and Foreign Relations of Khabarovsk Territory, Russia
  8. Mr.Vitalii E.SELYUKOV, Vice Director, Department of Foreign Economic Relation and Tourism, Ministry of Economic Development and Foreign Relations of Khabarovsk Territory, Russia


CHINA

9. Dr.Bing Zheng, President of Jilin Academy of Social Sciences, Professor of Jilin University, Member of Standing Committee of Jilin Political Consultative Conference, Vice-Director of the Council of Economy, Science and Technology, Vice President of Jilin Union of Social Sciences, Member of Committee of Expert Policymaking and Advisory Committee of Jilin Government
10. Prof.Chen Longshan, President of the Center for Northeast Asian Studies and Chief Editor of the Northeast Asian Studies Journal
11. Mr.Yuan Cheng Jun, Associate Section Chief, Foreign Affairs Division, Jilin Academy of Social Sciences
12. Ms.Li Xue, Assistant Research Fellow, Foreign Affairs Division, Jilin Academy of Social Sciences
13. Mr.Gu Hong Ming, Deputy Section Chief, Foreign Economic Cooperation Division, Jilin Province Foreign Trade and Economic Cooperation Department
14. Mr.Guo Yi Jun, Director, Changchun Economic and Teanchological Development Zone

 

VISIT OF RUSSIA

Although we spent almost 3 days in Russia, we had only one full day for business meetings due to flight connections and delays caused by bad weather.

On November 3, we had two meetings in Khabarovsk.

The first meeting at the Institute of Economic Research (IER), Russian Academy of Sciences (RAS), Far Eastern Branch with the participation of Dr. Pavel A. MINAKIR, President of the Institute, Dr. Andrey ADMIDIN, Senior Researcher, Specialist on Foreign Investment, IER, and Ms. Valentina G. BULDAKOVA, Head of International Department, IER consisted of three parts.

1) At the beginning of the meeting Professor Minakir introduced his institute. IER was setup in 1976 and over a short period of time it has taken leading positions in the field of research and forecasting economic development of the Russian Far East region. Major research areas of the IER with more than fifty researchers are:
• Working out programs for economic and social development
• Research into branch problems
• The Russian Far East economic cooperation with countries in Northeast Asia and the Asia Pacific region
• Working out integration projects
• Analyzing and forecasting foreign trade and foreign investment
• Studying conditions of foreign markets
• Providing cartographic support for research projects.

2) Then he briefed us about the latest economic situation of the Russian Far Eastern region including Khabarovskii krai. As professor Minakir's briefing described both achievements and failures of the region, it was extremely interesting for us.
We found out that the economic regress of this region is caused not only by its isolated location from the center but also by inadequate foreign trade and investment policy of the State. He thinks Russian laws regulating economic cooperation are too general offering very minor opportunities for the business world.

The Russian Far East lost some of its traditional trade partners to China. An example is wood trade. Previously, Russia had a big import to Japan, but now China became a leading customer and is re-selling processed construction materials to Japan. So Russians want to take back their advantage back, process trees at home and sell to China and Japan.
Some of their problems seemed extremely similar to ours. For example, Professor Minakir said that in Russia a great amount of money was at the disposition of private companies and people but they were not investing back their profits and savings into production and manufacturing. He listed reasons for it including inability to find a niche, corrupted public service etc. An unusual for us reason was Russian mafia collecting unofficial taxes from businessmen and traders.

3) Then Professors Minakir and Admidin talked us about free economic zones in Russia and China. According to them, in Russia there is no successful story yet of building a free economic zone in Russia (except the one in Kaliningrad) and informed us about failures of Nahodka in Vladivostok. According to Professor Minakir, Russia has few competitive advantages than China in terms of attracting foreign investment. The main advantages of China are cheap labor, big market, and relationship with potential investors such as Hongkong, Taiwan and Macau. However, professors think in the future Russia can advance China because it has an educated and qualified workforce.

4) At the end of the meeting, we had a free discussion and advice exchanging minutes. The Mongolian delegation had lots of questions from policy making level to gas price in Khabarovsk.

The second meeting at the Ministry of Economic Development and Foreign Relations of Khabarovsk Territory was held as a free discussion and exchange of views. Participants were Dr. Elizaveta N. TELYUSHKINA, Director, Department of Enterpreneurship and Population Living Standards, Ms. Irina A. BESEDINA, Chief of Foreign Economic Policy Division, and Mr. Vitalii E. SELYUKOV, Department of Foreign Economic Relation and Tourism, Ministry of Economic Development and Foreign Relations of Khabarovsk Territory, Russia. According to them, Khabarovskii Krai borders with China 300 kilometers and the administration has been talking to establish a free economic zone since 1993. Currently, Khabarovsk is ready to open a border point of auto road with Jahe, China and the ministry has chosen 26 business plans to be implemented in Habarovsk-Jahe border village. But first of all they need to incorporate business plans and make a master plan then they do not have a legal regulation from the top. The latter seemed to be the biggest barrier for the local government. Also, they were complaining about a bad level of tourism and low interest of foreign investors to invest in Khabarovsk. We talked them about our plan to establish Altanbulag free trade zone, its legal regulations and attempts of attracting foreign investors. Russian friends appreciated our experience and legislation on free trade and economic zones.

Some Conclusions and Lessons for Us:

* The Russian economy is still too much regulated restricted. It was evident from market prices, choice of products, service level and infrastructure development in Irkutsk and Khabarovsk.
* Conflicts between the federal and local governments are blocking the not only development of peripheral provinces but also establishment of Free Trade or Economic Zones. Also, the State Duma is too slow approving specific economic regulations.
* The Russian Government is attaching too much importance to national security issues. Therefore, the country cannot cooperate effectively with China on its far eastern border.
* We have been kindly advised to carefully study Chinese experience of restructuring its economy and building free trade and economic zones.

VISIT OF CHINA

1. Workshop at the Jilin Academy of Social Sciences
   
The workshop which took place on 5 November in a friendly atmosphere was an efficient discussion. Its topic was Development of Economic Cooperation between China and Mongolia. On the Chinese side, participants were Prof. Chen Longshan, President of the Center for Northeast Asian Studies and Chief Editor of the Northeast Asian Studies Journal, Mr. Yuan Cheng Jun, Associate Section Chief, Foreign Affairs Division, Jilin Academy of Social Sciences, Mr. Gu Hong Ming, Deputy Section Chief,

Foreign Economic Cooperation Division, Jilin Province Foreign Trade and Economic Cooperation Department, a representative from Tourism Division, Jilin Province Foreign Trade and Economic Cooperation Department and Ms. Li Xue, Assistant Research Fellow, Foreign Affairs Division, Jilin Academy of Social Sciences.
At the workshop, first, Mr. Yuan Cheng welcomed the Mongolian delegation and talked about their cooperation with Mongolia and Mongolian Research Development Center. Then, Prof. Chen Longshan briefed us about his research and findings. Also, Mr. Gu Hong Ming made a brief presentation on economic cooperation overview of Jilin Province and the representative from the Tourism Division talked about the tourism in Jilin province.
At its turn, the Mongolian delegation made presentations about the foreign economic relations of Mongolia and yet-to-be established free trade zone Altanbulag.
As both sides were highly interested in each other's presentations, we discussed the possibilities of economic cooperation and tourism between Mongolia and Jilin province. In this regard, the ideas of Prof. Chen Longshan were highly interesting as his ideas were based on his long-term research. Possible areas of cooperation (in addition to the joint economic research) were concluded as trade, processing of livestock raw materials, mining industry, education and tourism.

2. Visit of the Changchun Economic & Technology Development Zone (CETDZ)
   
Established in April 1993, Changchun Economic & Technology Development Zone (CETDZ) is a national economic and technology development zone approved by the State Council of China, and enjoys all the preferential policies stipulated for economic and technology development zones of coastal open cities, the planned area of the CETDZ is 51 square kilometers. In the year 2001 the CETDZ named as 'one of top ten development zones' in China.

The CETDZ is richly endowed with physical advantages, as the beautiful forest park-Jingyuetan Forest Park, the largest forest park in Asia is in the east of it and the rippling Yitong River is in the west of it. It functions well as a part of the city Changchun. The distinguishing four seasons, comfortable weather, a large number of colleges and universities as well as abundant research force are the features of the city, so it is the best place for every enterprise to invest.
After 10 years of development and construction, the CETDZ has invested 6.7 billion RMB yuan totally for the construction of infrastructures, such as the construc¬tion of road, water supply system, drainage system, power supply system, heating system and communication system.
At the same time many facilities for production and life-service have been set up, such as office buildings, the customhouse, schools, hospitals, hotels, shopping departments and tennis court, International Conference Exhibition Center and residential area with excellent surroundings to meet the demand of the investors. Well-known transnational corporations have come one after another to the CETDZ to invest.
There are:
• Pepsi Corporation' Coca Cola and Delph. Pike Corporation from America;
• Erling Company, Rella Company and Koutex Company from Germany;
• Bundy Corporation and Pilkinton Corporation from U.K.;
• Chia Tai Group from Thailand,
• Gold Lion Group from Malaysia,
• Merloni Corporation from Italy,
• SK Group from Korea.
• About 53 groups from 26 countries and 19 out of Top 500 Companies have invested here.
By the end of 2002, the approved and established domestic and foreign enterprises in the CETDZ are totally calculated as 3216, among which 426 foreign invested enterprises have invested 2.9 billion US dollars totally. The CETDZ has realized domestic production of 52.46 billion yuan totally, the realized financial income is 6.663 billion yuan.
Up to now, the CETDZ has established five leading industries, which are
1. Automobile Spare Parts Manu¬facturing Industry,
2. Optic-electron Industry,
3. Food Deep-processing Industry,
4. Bio-pharmaceutical Industry and
5. New Construction-material Development Industry.
Ten industry parks have been scheduled and partly set up. Establishing enterprises in the above ten 'small special parks' will enjoy more than 40% discount of the land renting price, and 50% discount of the earlier stage payment and necessary accessories payment.

Some Conclusions and Lessons for Us:

* An economic zone must be established in an advantageous location. For example, Jilin province is well-known by its land, forest, mineral, grassland and animal resources in China.
* An economic zone must have research institutions which are important for the further development of the zone.
* Formulate the most advantageous preferential policy or offer chances to investors to get the largest profits. (The Jilin province people's government encourage foreign investment by 28 stipulations each of which offer an opportunity for foreigners.)
* Build perfect infrastructure prior to attracting foreign investment by their own resources
* Offer the most advanced management methods and services (more hospitality and less bureaucracy)
* Economic zone can be a part of city not isolated from already established cities or villages.
* Be flexible to international and domestic environment. For example, CETDZ management says CETDZ has already been ready for the challenge of the new international economic structure i.e., joining of China the WTO.

In addition to the above official meetings, it should be noted that we also had informal meetings with some reps of the Mongolian Diplomatic Missions to Irkutsk and China and their information about the latest economic progresses and trends of their respective countries/cities were highly interesting and useful.

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