01.21.2004

The Russian Far East – An Emerging Region for Global Trade

Tony Livoti in front of the FENU Economics Department in Vladivostok.

In October of last year I visited the Russian Far East for the third time in three years. As a Westerner visiting this unique European culture in the middle of Industrial Asia, I have noticed economic growth in every visit. This last visit in October of 2003 truly represented the most noticeable economic growth I noticed in all of my three visits.

I commented on this noticeable difference of growth to my Russian friends as they drove me through the traffic congested streets of Vladivostok. I told them that I saw more smiles on faces, more people busily moving around the city and more new buildings being constructed.

The streets were jammed with Japanese cars, new and attractive apartment buildings were sprouting up throughout the city and a sense of business and optimism was more apparent to me than my two previous visits. It was not as noticeable to my Russian friends who confront the daily challenges of Vladivostok life everyday, but I could not deny my feelings that something powerful was taking place in this intriguing and vibrant city.

I was asked to make a presentation on Global eCommerce at the Khabarovsk Academy of Economics and Law (KAEL) which is located 400+ kilometers north-west of Vladivostok. My presentation took place during a NATO sponsored International Scientific Conference entitled ‘The Development of Economic and Legal Interactions of Pacific Rim Countries’.

L-R: Adrien Kendry of NATO sits with Mr. Livoti at the International Scientific Conference at Khabarovsk Academy of Economics and Law (KAEL)

I took a twelve hour train ride from Vladivostok to Khabarovsk and enjoyed every minute of this evening journey through the sometimes vast wilderness of the Russian Far East. As I contemplated my thoughts in my private train berth for the long journey, I thought about the many Russian travelers during Soviet times that took this 50 year old electric train before me. I felt their presence and energy in the old carpets and worn berths around me and pondered about Russian life during those times.

The conference in Khabarovsk was informing and exciting. I brought the message of the new technologies and global trade in my presentations throughout the three-day conference. It was received with enthusiasm and interest in how these new concepts would soon become a part of Russia’s emerging small to mid-sized business sectors and their interaction in the new Global economy.

The young students at KAEL were drawn to these concepts like fish to water. It was very exciting to think about Russia twenty years from now and how these young people would then be Russia’s business and government leaders. I saw wonder and satisfaction in their eyes as they knew that they would be a part of a very different Russia than that of their grandparents and ancestors.

One of the most enjoyable parts of this visit to Khabarovsk was the formal luncheons and dinners of invited guests that were making presentation at the conference. To say it was a banquet every time we ate was an understatement. Between our Vodka toasts and eight course meal, everyone at the table had the floor at least once to express their feelings through a Vodka toast. Sometimes it was politics, sometimes business, sometimes humorous and sometimes serious, but every toast seemed to have a feeling of sincerity which I truly appreciated. Another guest from NATO who sat next to me at one of the dinners commented that the Russian culture of gathering for food and discussion was totally unique. He said that he had traveled throughout the world and nothing was quite like a Russian meal.

Upon my return to Vladivostok I had the pleasure to lecture on Global eCommerce at Professor’s Abramov’s economics class for one week at the hundred year old Far East National University (FENU). Mr. Abramov is also the director of the Far East Center for Economic Development (FECED), MBITA’s partner in the development of the Global Trade eCommerce Portal (GTEP) for the Russian Far East. Again to see these young Russian students grasp the new technologies of global trade was an exciting experience. Although these students knew that their economic conditions are challenging compared to other countries, they realized their situation is changing fast in Russia and their generation is tabbed as the one that speaks English, has access and an understanding of Western culture through the Internet and Cable television and will inherit a Russian Far East rich in oil, coal and natural gas.

The Russian Far East is now exporting timber, fish, oil, natural gas, minerals and coal to China, Korea, Japan and the U.S. There is more foreign investment being made in the Russian Far East than any other part of Russia because of the Sakhalin Island Oil reserve project, which is heavily invested by Mobile Oil and British Petroleum. These efforts will surely ‘trickle-down’ into the Russian Far East’s emerging small to mid-sized enterprise (SME) community.

The Business Information Service for the Newly Independent States (BISNIS), a division of the Foreign Commercial Service (FCS) of the U.S. Department of Commerce (USDOC) has some great reports on the various industries of the Russian Far East. Go to the BISNIS web site and type in ‘Russian Far East’.

The BISNIS office in Washington D.C. provided MBITA with the Russian Far East’s top industry sectors where import and export opportunities exist.

1. Oil and Gas
2. Building/Construction/Infrastructure
3. Food Processing
4. Wood Processing
5. Mining Industry/IT/Telecom
6. Agriculture
7. Auto
8. Fish Processing
9. Ports/Shipyards
10. Financial Services/Mortgages
11. Tourism
12. Medical
13. Apparel
14. Environmental Industry

When I met with the U.S. Commercial section at the U.S. Embassy in Vladivostok at the end of my journey it was decided that a California trade mission of small to mid-sized enterprises was in order. There is an emerging young generation of Russian Far East people that are employed primarily by Japanese, Chinese and Korean firms. These people have money and a desire to buy Western products because consumer products are now dominated by the Chinese and Koreans in the Russian Far East.

Mr. Livoti in front of the U.S. Embassy in Vladivostok with FAS and BISNIS representatives.

Also, we believe there are some good opportunities for American companies to set up manufacturing facilities in the Russian Far East which is strategically positioned for distribution points in Industrial Asia and has a highly-educated and cost-effective Labor force.

As I took the long plane flight back from Vladivostok I knew that I would return soon to help expand bi-lateral trade into the Russian Far East and also have some of those great meals with my Russian friends and business associates.

Please contact the MBITA office for further details on this trade mission to the Russian Far East which is being planned for early August of 2004.

Tony Livoti
Executive Director
Monterey Bay International Trade Association (MBITA)
Tel. 831-469-0148