Intro
With its geographical location North West Russia is often called the “gateway” to Europe or the “pilot region” for cooperation between Europe and Russia. In fact, under the wings of the Northern Dimension EU policy program, many regional challenges are addressed through partnerships in economic as well as social areas between Europe and North West Russia. Along with the enormous potential of the region many obstacles remain hindering faster development. The main theme of the plenary session was to highlight challenges and find solutions on how to improve cooperation and regional initiatives between Europe and North West Russia.
Main Messages
• Practicalities of doing business in the Russian business environment must be improved and the cost of starting a business must be reduced, if Europe is to reap the full benefits of North West Russia’s economic and commercial potential. – Paula Lehtomäki
• One very important step to improve the Russian business environment would be Russia’s accession to the WTO, which would solve some of the unpredictability in Russian markets. If Russia wants to join a global organization with binding rules, it must give up some of its sovereignty, to which it has been holding on so tightly. - Paula Lehtomäki
• A new Northern Dimension transport and logistics partnership would contribute to the competitiveness and economic potential of the BSR as a whole, by enhancing the integration of the transport and logistics networks in the Region. - Paula Lehtomäki
• Improvements in terms of investment attraction and tourism infrastructure in North West Russia are necessary in the near future. – Igor Yurgens
• Baltic Development Forum can play an important role in facilitating dialogue with the governors of the North West, initiating further cooperation and integration into the BSR. – Igor Yurgens and Arne Grove
Themes
Northern Dimension and Russia
Finnish Minister for Foreign Trade and Development, Paula Lehtomäki, focused her speech on the political significance of the development of cooperative relationship between EU and North West Russia as a “springboard for growth and prosperity in this region”. Sustainable development, stability, welfare and security in the Northern part of Europe are in the interest of the EU as a whole and the BSR, she said. This was the main idea behind the Northern Dimension policy program, which she called a “true example of EU’s regional cooperation”. Lehtomäki stated that the existing Northern Dimension partnerships on environment and social well-being have been important in their own right in addressing acute challenges in the region. She stressed that the instrumental value of these partnerships in laying the grounds for sustainable growth and a favorable business environment in Northern Europe are even more pronounced. The work in the areas of environment, diseases, narcotics and alcohol abuse through the Northern Dimension partnership in public health and social well-being has far-reaching impacts on the well-functioning of the society and the stability of the business environment. Head of office, Nordic Council of Ministers, Arne Grove, pointed out that the Nordic Council of Ministers is working with concrete projects within the social sector under the same partnership.
Lehtomäki suggested that a new Northern Dimension transport and logistics partnership would contribute to the competitiveness and economic potential of the BSR as a whole, by enhancing the integration of the transport and logistics networks in the Region. She also stated that with the successful Northern Dimension partnerships and hopefully Russia’s accession to WTO in the near future, all actors now should be able to use the enormous potential of Russia. Arne Grove agreed with Minister Lehtomäki and spoke of the enormous developments and opportunities of Kaliningrad. He underlined that the Nordic Council of Ministers focuses on knowledge-building, environmental issues and the development of small and medium size industries as well as cultural policies in the Kaliningrad area.
Potentials of the North West
North West Russia was the historical, industrial, cultural and political centre of Russia for many years. The current administration of Russia, with President Putin in front, has done a lot for the success of this Region, Group Vice President of Renaissance Capital, Igor Yurgens said. Yurgens spoke of the economic performance of the North Western region and gave a snapshot of the region’s current economic state. The figures show that North West Russia has been growing rapidly in recent years. The development of domestic and foreign trade, as well as the recent construction boom, allows the regional economy to prosper, he said. In fact, the region beats the rest of the country by wide margin in developing its industries. Yurgens pointed out that future growth is most likely to continue, especially in industrial sectors. He stressed that the North West Russia is the oldest industrial area of Russia with well-established machine-building companies. Moreover, the region is the key transit artery with a well-developed infrastructure. Very importantly, Yurgens urged the region to be conscious of being ecological, safe and sufficient in the further development of the infrastructural platform. In terms of tourism, he stated there is a lot to be done in the Kaliningrad area. The tourism infrastructure, in particular, requires substantial investments. While St. Petersburg has an amazing cultural and architectural scene, the rest of the region is underdeveloped in terms of tourism.
All panelists agreed that there is an enormous potential in North West Russia. Yurgens believes that the region will benefit from public infrastructural projects and new Public Private Partnerships.
Remaining challenges
Among the remaining main challenges Lehtomäki highlighted custom procedures and other lengthy bureaucratic problems related to border crossing for companies towards Russia. She also emphasised that establishing and conducting foreign business in Russia is still highly bureaucratic and costly, which does not only decline the profit margins of foreign companies but also reduces employment opportunities for local people. She stressed that practicalities of doing business in the Russian business environment must be improved, if we want to reap the full benefits of North West Russia’s economic and commercial potential. Lehtomäki argued that even though the EU stands as a willing partner in this work, it is, in the end, the responsibility of local leadership to secure more favourable environment for both local and foreign businesses. Arne Grove added to the list of challenges the special location and the small size of Kaliningrad, which makes it difficult to attract investments. Lehtomäki drew the attention to the fact that even though the St. Petersburg area is well-developed, the rest of North West Russia has not got enough attention from Moscow in terms of development efforts. Yurgens identified some barriers in terms of financial infrastructure, which needs further development. Currently, banks have special focus on getting project financing in tourism, real estate, ports and pipelines, he said. Strategic partnerships and direct investments in ports and tourism projects are especially needed.
How to improve the current situation
Lehtomäki believes that one very important step to improve the Russian business environment would be Russia’s accession to the WTO, which would solve some of the unpredictability in Russian markets. Yurgens added that the whole business community in the region fights against corruption, bureaucratic abuse and administrative barriers, which he called the “curse of Soviet Russia”. He described the results insignificant in terms of administrative reform and stressed that the only hope is the self resistance of the growing entrepreneurial class which fights for its rights together with foreign colleagues for de-bureaucratization. The new generation shows a lot of flexibility, openness and transparency, he said, which will hopefully win this battle. As to how to solve some of the regional challenges, Yurgens and Grove agreed that Baltic Development Forum can play an important role in trying to develop a dialogue with the region, especially with the new governor of Kaliningrad, Mr. Boos. Platforms and forums such as the BDF Summit are extremely important in achieving higher involvement and deeper integration from the Russian side, Yurgens pointed out
