Economy

Putin's Plan To Transform Russia's Forgotten Far East

With billions in investments and a land distribution scheme not unlike the Homestead Act, in the U.S., Moscow is looking to revive a long-neglected region.

Port of Vladivostok
Benjamin Quenelle

VLADIVOSTOK — For Dmitry Igumnov, the Kremlin's conquest of the Russian Far East didn't just impact his career. It changed his life. A businessman who worked in all corners of the country and even spent a few years in California, he decided, in the end, to put down roots and to "start from scratch" in his native region, in the extreme eastern part of Russia.

Here, across 6 million kilometers, live just 6 million inhabitants. Like 100,000 other citizens from other parts of Russia, Dmitry Igumnov, 52, volunteered to take part in an unprecedented government program: to freely obtain a plot in the middle of the taiga, an area of boreal forest that had been neglected by the authorities since the fall of the USSR and forgotten by investors for more than two decades. In just over one year, some 30,000 pieces of land have been distributed. The chosen ones have five years to fulfill their mission: to develop and to create. Otherwise, the government can take back what it gave.

Together with his brother and the rest of his family, Igumnov was given a total of 10 hectares less than a two-hour drive from Vladivostok, the vibrant Far Eastern capital. In the city, the former marketer still manages his ice factory. But now, at the same time, he is also developing a new business on his new estate: Over the past year, he's invested 500,000 rubles ($8,000) in flower fields and beehives to produce honey.

"The business plan is ready. We need to grow to 100 beehives, then to 500, produce 10 tons annually, and start exporting," Igumnov enthusiastically explains.

By 2025, 110,000 jobs will be created in these regions where, after development under the USSR, nothing more happened.

The entrepreneur thinks big. As he walks us across his land in the middle of nowhere — a former potato kolkhoz (collective farm) that hadn't been plowed in almost 30 years — Igumnov recalls his long learning process regarding bees and beehives. He consulted specialists, read books. But even so, there were some rookie mistakes, like when his first beehives, placed too close to the edge of the forest, were taken away one night by a bear. Russia's Far East is a wild place.

Top-down approach

"The United States did the same in their time with Abraham Lincoln's Homestead Act," says Valentin Timakov, who heads one of the government agencies in charge of developing the Far East. That piece of legislation, a key factor in America's conquest of the West, is a reference for the authorities in Moscow who are trying to orchestrate the revival of the Russian Far East.

"This free land plan has already led to the creation of new businesses, from food production to tourism and, of course, industry," Timakov explains. "But it's only one of our many projects. By 2025, 110,000 jobs will be created in these regions where, after development under the USSR, nothing more happened."

His agency, created just two years ago, has launched numerous initiatives to attract skilled workers from the western regions and bring back the eastern locals who left during the crisis years. In Vladivostok, business is booming, with 7,000 senior management vacancies still waiting to be filled.

Vladivostok's waterfront — Photo: Watchsmart

As it often happens in Russia, the program comes from the very top. With barely veiled references to the enthusiasm of the forced developments that took place during the Soviet era, the Kremlin hopes to trigger the same sort of dynamics, "from top to bottom."

In 2012, when Vladivostok hosted an Asia-Pacific Economic Cooperation (APEC) summit, Vladimir Putin spent an estimated $12 billion on huge construction projects in and around the city: bridges, an airport, roads, even a new university. On Russky Island, located opposite the city and former location of a military base, brand new buildings have been erected to accommodate up to 50,000 students. A magnificent (but costly) cable-stayed bridge was built over the Eastern Bosphorus to connect the island to the city. And to encourage the mobility of investors and senior managers, the state-owned company Aeroflot sells reduced price tickets between Moscow and Vladivostok. The eight-hour flight costs the same as a flight to the European capitals.

"When the Kremlin started this conquest of the Far East, many in Moscow as well as in Vladivostok were skeptical. But five years later, the results are plain to see," says Maxim Shereykin, who heads a high-tech development agency. "Renewable energies, energy efficiency, microgenerators … Here too new technologies are emerging," he adds. "It takes time. The government is pushing for it and that's good. But the political pressure to show better results quickly at all costs can also turn out to be counter-productive."

Entrepreneurial spirit

Vladivostok has also become one of the platforms for Moscow's new diplomacy. In September, far away from the increased tensions with Europe and the U.S. resulting from the 2014 annexation of Crimea, Vladimir Putin chose Vladivostok to receive Japanese Prime Minister Shinzo Abe and South Korean President Moon Jae-in. Behind the knowing smiles and the calls for investments, Putin was showcasing the Kremlin's shift to the east.

Still, many obstacles remain on the path to economic recovery. Though it's surrounded by Southeast Asian poles where activity is booming, Russia's Far East remains an isolated and inward-looking market. What's missing in these regions where political and economic authorities are omnipresent is real competition.

Here too new technologies are emerging.

Beyond the arteries built in Vladivostok, transport infrastructure is aging, even if new harbors and roads have been built. As for investments, national financing sources are limited and calls made to the powerful neighboring nations China and Japan haven't yet led to substantial changes. And yet, the Far East is also serving as a model of what's lacking the most to modernize the Russian economy as a whole: an entrepreneurial spirit. Small and medium-size businesses account for just 20% of the activity nationwide and just 2% of Russians say they would like to start their own business.

Not so in Vladivostok, which is becoming a hive of activity. Alexander Chumatov is a case in point. After studying and working for years in Moscow, he returned to Vladivostok, his birth city, and, together with a partner, has invested $5 million (half of the sum came from the state-owned bank Sberbank) to develop a new network of private health clinics — in a region where health-related infrastructure is in desperate need of renovation.

"My friends back in Moscow think I'm a bit strange, but I believe in this project," he says. "Back there, I was an employee as a fusion and take-over consultant. Here, I've been trying my hand at entrepreneurship. And it works! There are real opportunities to be seized."

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A tribute to the 30,000 Iranian political prisoners murdered in Iran in 1988

Anne-Sophie Goninet, Hannah Steinkopf-Frank and Bertrand Hauger

👋 Laba diena!*

Welcome to Wednesday, where Afghanistan's Taliban demand to speak at the United Nations, China takes a bold ecological stand and we find out why monkeys kept their tails and humans didn't. Business magazine America Economia also looks at how Latin American countries are looking to attract a new generation of freelancers known as "digital nomads" in the wake of the COVID-19 pandemic.

[*Lithuanian]

🌎  7 THINGS TO KNOW RIGHT NOW

• Taliban ask to speak at UN: With global leaders gathered in New York for the 76th meeting of the UN General Assembly, Afghanistan's new rulers say their country's previously accredited United Nations ambassador no longer represents the country, and have demanded a new Taliban envoy speak instead. Afghanistan is scheduled to give the final intervention next Monday to the General Assembly, and a UN committee must now rule who can speak.

• Four corpses found on Belarus border with Poland: The discovery of bodies of four people on Belarus-Poland border who appear to have died from hypothermia are raising new accusations that Belarus is pushing migrants to the eastern border of the European Union, possibly in retaliation over Western sanctions following the contested reelection of the country's strongman Alexander Lukashenko. The discovery comes amid a surge of largely Afghani and Iraqi migrants attempting to enter Poland in recent weeks.

• China to stop building coal-burning power plants abroad: Under pressure to limit emissions to meet Paris climate agreement goals, China announces an end to funding future projects in Indonesia, Vietnam and other countries through its Belt and Road initiative.

• Turkey ratifies Paris climate agreement: Following a year of wildfires and flash floods, President Recep Tayyip Erdogan announced at the UN that Turkey will become the last G-20 country to ratify the emissions-limiting accords. Turkey already signed the agreement in 2016, but has yet to hold a vote in parliament.

• Mass evacuations following Canary Islands volcano: More than 6,000 people have fled the Spanish archipelago as heavy flows of lava have buried hundreds of homes. Four earthquakes have also hit the Canaries since the Sunday eruption, which could also cause other explosions and the release of toxic gas.

• Rare earthquake hits Melbourne: The 5.9 magnitude quake struck near Melbourne in southern Australia, with aftershocks going as far Adelaide, Canberra and Launceston. Videos shared on social media show at least one damaged building, with power lines disrupted in Australia's second largest city. No injuries have been reported.

• The evolutionary tale of tails: Charles Darwin first discovered that humans evolved to lose this biological trait. But only now are New York scientists showing that it was a single genetic tweak that could have caused this shift, while our monkey relatives kept their backside appendages.

🗞️  FRONT PAGE

"The roof of Barcelona" — El Periodico daily reports on the latest delay from what may be the longest-running construction project in the world. Work on the iconic Barcelona church La Sagrada Familia, which began all the way back in 1882 as the vision of master architect Antoni Gaudí, was slated to be completed in 2026. The Barcelona-based daily reports that a press conference Tuesday confirmed that the deadline won't be met, in part because of delays related to COVID-19. Officials also provided new details about the impending completion of the Mare de Déu tower (tower of the Virgin), the first tower of the temple to be completed in 44 years. Although it is currently the second tallest spire of the complex, it will become the highest point of the Sagrada Familia, reaching 172.5 meters thanks to an illuminated "great cross."

📰  STORY OF THE DAY

Latin America, the next mecca for digital nomads

Latin American countries want to cash in on the post-pandemic changes to the fundamental ways we work and live, in particular by capitalizing on a growing demand from the new wave of remote workers and "youngish" professional freelancers with money to spend, reports Natalia Vera Ramírez in business magazine America Economia.

💻🏖️ Niels Olson, Ecuador's tourism minister, is working hard to bring "digital nomads" to his country. He believes that attracting this new generation of freelancers who can work from anywhere for extended visits is a unique opportunity for all. Living in a town like Puerto López, he wrote on Twitter, the expat freelancer could "work by the sea, live with a mostly vaccinated population, in the same time zone, (enjoy) an excellent climate, and eat fresh seafood." For Ecuador, the new influx of visitors with money to spend would help boost the country's economy.

🧳 While online-based freelancers already hopped from country to country before COVID-19, the pandemic has boosted their current numbers to around 100 million worldwide. The Inter-American Development Bank estimates there could be a billion roaming, digital workers by 2050. Some European countries already issue visas for digital nomads. They include Germany, Portugal, Iceland, Croatia, Estonia and the Czech Republic, but in the Americas, only four countries make the list, namely Antigua and Barbuda, Barbados, Panama and Costa Rica.

💰 In August 2021, Costa Rica approved a law for remote workers and international service providers, intended to attract digital nomads and make its travel sector more competitive. The law provides legal guarantees and specific tax exemptions for remote workers choosing to make the country their place of work. It allows foreign nationals earning more than $3,000 a month to stay for up to a year in the country, with the ability to renew their visa for an additional year. If applicants are a family, the income requisite rises to $5,000.


➡️ Read more on Worldcrunch.com

#️⃣  BY THE NUMBERS

$2.1 billion

Google announced yesterday it will spend $2.1 billion to buy a sprawling Manhattan office building, in one of the largest sales of a building in U.S. history. The tech giant plans on growing its New York workforce to more than 14,000 people.

📣 VERBATIM

It is sickening and shameful to see this kind of president give such a lie-filled speech on the international stage.

— Opposition Brazilian congresswoman Vivi Reis in response to President Jair Bolsonaro's inflammatory 12-minute speech at the UN General Assembly. The unvaccinated head of state touted untested COVID-19 cures, criticized public health measures and boasted that the South American country's environmental protections were the best in the world.

✍️ Newsletter by Anne-Sophie Goninet, Hannah Steinkopf-Frank & Bertrand Hauger

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