Принимаем азиатскую эстафету

In APEC each country advocates its own interests -unlike the World Trade Organization, in which several different customs unions operate.

“Usually when Michelle and I and our daughters come back to visit [Hawaii], it’s just one President, and this time we brought 21,” announced US President Barack Obama at a press conference marking the end of the Asia-Pacific Economic Cooperation (APEC) summit in Honolulu. There were so many presidents on the largest Hawaiian island of Oahu that residents eventually stopped paying attention to the leaders of smaller nations, much less to ordinary mortals. Honolulu, a popular vacation destination, had never seen so many security and military details. The police choked the highways, slowing traffic. Before President Obama gave his speech, the Secret Service closed off the entire second floor of the Sheraton hotel where the CEO forum was being held, which deprived the delegates of their morning coffee and refreshments as the caterers were unable to force their way through the throng of security agents.

These presidents were seen as the heroes of the APEC summit, but in fact they were only finishing up processes that had begun deep within the organization. It is impossible to truly accomplish anything within APEC without a grasp of the organization’s inner workings, which receive far less publicity than the high-profile statements or the group photos in national costumes. But right now it’s a particularly important topic for Russia. For next year Vladivostok will host the APEC summit and Russia must hurry if it is to reap the most benefit from its new position. As President Dmitry Medvedev stated in Honolulu, Russia is hoping that the APEC summit in Vladivostok “will help solidify Russia’s position in Asian markets as well as development in the Russian Far East.” But if this is to happen, these challenges must be shouldered today and not put off until next September.

“APEC’s internal operations work very slowly. It’s sometimes several years before a new idea can be brought to fruition,” Ziyavudin Magomedov explained to Ekspert. Mr. Magomedov is the 2012 chairman of the APEC Business Advisory Council (ABAC) and the Chairman of the Board of Directors of Summa Group. Currently all of Russia’s proposals are still in the early stages of development, so it’s unlikely that they will receive formal approval during the Vladivostok summit. But if enough work is done in 2012, Russia will have an excellent chance of success at the 2013 summit in the Indonesian city of Bandung.

On paper, APEC is one of the most powerful economic organizations in the world. Its 21 member-nations account for 40% of the world’s population and 54% of its GDP. But APEC’s greatest weakness lies in its very strength - all decisions must be made by consensus and it is difficult for powerful, competing members to reach agreement on how to harmonise regional economic rules. Summit attendees interviewed by Ekspert in Honolulu agreed that unlike the World Trade Organization, in which several different customs territories operate, in APEC each member-country pursues its own interests. “There’s the occasional exception of the ASEAN countries, which sometimes come forward with a unified position, but that’s understandable, since they hold many meetings throughout the year and have the chance to come to an agreement,” Michael Michalak explained to Ekspert. Mr. Michalak is the senior advisor to the APEC 2011 USA Host Committee.

ABAC is arguably the most easily overlooked component of APEC. Its sessions are closed to the press, and the participants try not to disclose any information about their discussions so as not to exacerbate any tensions. In the course of these discussions they work out what it is the business community wants, and this is then brought to the attention of the political leaders. In the last year under American leadership, ABAC evolved and refined its abilities, particularly its skill in “merging” business and political agendas.

“The Americans have done a lot to establish an ongoing exchange of views between businessmen and senior officials. We estimate that about eight weeks a year are spent in these types of meetings,” says Mr. Magomedov. “We think this is one of our greatest achievements,” agrees Deb Henretta, the 2011 ABAC chair and one of the US representatives to ABAC. Russia intends to continue the work in this area. “One of our initiatives for the coming year is to change the nature of ABAC’s proposals so that they are less advisory and more binding,” affirms Mr. Magomedov.

Formally, Russia has three representatives on ABAC. In addition to Mr. Magomedov, these are Oleg Deripaska, the general director of Bazovy Element, and Andrei Kostin, the chairman of the board of VTB Bank. However, the bulk of the work on ABAC is done by Summa. “Until recently, ABAC’s agenda was mostly set by the Americans, Australians, and Japanese. The Russian business community had nothing special to offer. But the discussions have lately become more interesting. And the Chinese have also begun to champion their own agenda,” says Mr. Magomedov.

Several foreign attendees were quick to draw Ekspert’s attention to Russia’s increased involvement, which, by the way, is something not everyone is enthusiastic about. In an advisory letter being prepared for the leaders of APEC countries, Russia has managed to effectively block the inclusion of a tariff reduction on products manufactured under environmentally friendly conditions. “That would have been a major blow to Russian manufacturers because we currently produce few goods that fit that description,” one of the members of the Russian delegation explained to Ekspert.

A more positive agenda, from the Russian point of view, is currently in the process of being established for the Vladivostok summit. In his address, Dmitry Medvedev called this agenda “synthetic” because it will include both unresolved issues from the past as well as new topics. At present, Russia is most actively involved in four areas: food and energy security, the creation of new standards for urban life, and technological partnerships. The Russian delegation has its own proposals for each of these sectors.

For example, at the beginning of this year the Russian delegation proposed the formation of a platform called the Technology Transfer Partnership, which would help developed countries provide advanced technology to developing nations, under proper supervision and on a commercial basis. Foreign experts were interested in this idea, but were also somewhat skeptical. “It’s a very interesting initiative, but it’s not yet clear how to incorporate a new platform into already-existing national copyright laws - that won’t be easy,” Tony Nowell explained to Ekspert. Mr. Nowell is from New Zealand and is the chairman of the ABAC Liberalisation Working Group.

“It sounds great as an idea, but I do not believe that it can be put into practice. However, I would be glad if I am wrong”, says Pankaj Ghemawat to Expert. Mr. Ghemawat is one of the key speakers at the CEO summit, and the author of the best-selling “World 3.0”. The main problem is that donor countries and technology recipient countries do not trust each other: Each of the parties suspects that the new platform will not operate to its benefit.

Russia has its own view of the food security issue. “We are proposing tougher regulation of the market speculation that create spikes in food prices. In addition, they are looking at setting up a special-purpose fund for interventions in the grain market by countries which want to restrain food prices”, Magomedov explains. This issue is expected to spark heated debates within the Business Advisory Council (BAC); among major players on the grain market there are a lot of US companies that are expected to disapprove of tightening control over their operations. So far, the delegates of the Business Advisory Council have reached agreement on establishment of an information system to enhance food market transparency.

Russia is also putting an emphasis on improving APEC logistics chains, as our country does not take full advantage of its geographical position. “The volume of merchandise trade between Europe and Asia amounts to nearly 800 billion euros, while the transit through Russia accounts for less than one percent of this trade”, Magomedov says. Based on the research that has been done by the APEC Supply Chain Working Group and presented in Honolulu by the Marshall School of Business at the University of Southern California, Russia lags behind almost all the APEC countries in nearly all logistics indicators. In the Enable Trade Index (ETI) rating, our country ranks last, substantially behind even the Philippines and Vietnam. In the Logistics Performance Index (LPI) Russia is second to last, ahead only of Papua New Guinea. “The developing economies lag noticeably behind the industrialized countries in development of transportation infrastructure, and it is one of the main challenges facing the APEC countries”, the authors of the research point out. In the case of Russia, the problems associated with infrastructure are aggravated by customs hurdles, red tape and a business environment that is not very welcoming. Next year, the Russian Direct Investment Fund will be responsible for attracting investment in infrastructure projects. “We have already signed the agreement with China for establishing a joint investment fund and are conducting negotiations with Japan and South Korea”, Kirill Dmitriev, the General Director of the Fund, informed Expert.

At the same time, Russia hopes that, in return, Asian countries will give Russian companies access to their projects. “We expect that we will be able to reach a reasonable balance of interests to make the transportation infrastructure beneficial to everyone”, Arkady Dvorkovich, an assistant to the Russian Federation’s President, told journalists.

A National Business Center for APEC is being established in Russia to bolster the interest of Russian business. The ambitious name is not underpinned by anything substantial so far; however, it’s expected that it will include up to one hundred companies in future. During the summit in Honolulu, the National Business Center signed an agreement with the National APEC Center based in the USA. Not all APEC member-countries have special-purpose centers; in some countries the functions of such centers are performed by chambers of commerce or other existing organizations. This wouldn’t work in the Russian situation as their is no organization that would adequately represent business interests in the Asia-Pacific Region. “Special-purpose centers have been set up in eight APEC countries, and, in our opinion, this can help start very interesting information networks; it is great that Russia will be integrated into it”, Monica Whaley, the President of the National APEC US center, said to Expert.

The US Center was founded in 1994 through spare funds from the APEC summit held in the USA in 1993. “American business quickly realized the prospects of the Asia-Pacific Region; therefore, there were no difficulties attracting participants”, Mrs. Whaley says. Corporate participation in the center’s activities costs 20 thousand dollars a year and can be terminated at any time. “We started with 12 companies, now their number has reached 45, but generally the number ranges from 30 to 50 depending on the country hosting events”, Monica Whaley explains. Companies can appoint a representative onto the Board of Directors of the Center and also monitor all the policies developing within APEC on a real-time basis. “For example, if a company is interested in customs issues, it can send its representative to the relevant international meeting that we will notify it about in advance”, Monica Whaley says.

In the Asia-Pacific Region (APR), the Americans are keen on the Trans-Pacific Partnership — a free trade zone, which is being shaped in negotiations among nine APEC member-countries. “The Trans-Pacific Partnership (TPP) will change the architecture of world trade and may become an impetus to a new type of liberalization”, Peter Petri, an economist at the American East-West Center said to Expert.

China and Russia are not ready yet to join the Trans-Pacific Partnership; Japan is hesitating — during the summit the Japanese Prime Minister made a statement about entering into negotiations, which caused such severe criticism at home that his press service spent the next days trying to back-pedal on the statement. On the whole, the search for balance between protection of national interests of and the desire for liberalization of trade and investment within APEC will determine the work of this organization over the next few years. “Liberalization is more beneficial for large-scale economies and corporations; someone has to think about those who are on the losing side”, says Lori Wallach, the Director of Global Trade Watch.

“We can light it up” — this song accompanied the vodka-in-plastic-cup event for the participants of the CEO summit after the ceremony when the reins of government passed from the USA to Russia. Taking into account that prior to that, the summit participants had already listened to a song about the balalaika, it must be admitted that the image of Russia being presented to the world was somewhat traditional.

Except for vodka, balalaikas and President Medvedev, Russia was definitely not in the limelight at the CEO summit. The Volga-Dnepr Company became a platinum sponsor of the forum and was given an advertisement stand and a large room. However, that was the most publicity it was able to gain in Honolulu. The Summa Group focused on the work within the Business Advisory Council. The other Russian delegates, together with President Medvedev, turned up at the forum for an hour and then left with the President.

Russian topics were hardly addressed during the forum meetings where, except for the president, there were no speakers from Russia. The agenda of the meetings wrapped around the issues that have become familiar at recent international forums: innovation, “green” growth, dynamics of the relationship between China and the USA - and the looming financial crisis. There were no Russian representatives at the private companies’ press-conferences and briefings that were held in parallel with the plenary sessions, — a presentation by Elvira Nabiullina, the Minster of Economic Development, which was in the preliminary program, was canceled without any explanation.

The next CEO summit will take place in Vladivostok, and let’s hope that the Russian participation will be higher-profile and that Russia will have a speaker able to conduct discussions at the highest level in front of thousands of representatives of the business and political elite of APR countries. We want to believe that among the forum participants there will not only be companies taking part under orders, but also enthusiastic representatives from private business, including small companies. One of the BAC working groups endeavors to make cross-border projects available to medium and small businesses. “This year we have held under the auspices of APEC a lot of forums for small and medium-sized business in different US cities, explaining business issuess to entrepreneurs; this experience may be useful to Russia”, Deb Henretta says.

However, even if the Vladivostok forum appears to be a success it may not bring the sought-after results. The seriousness of Russia’s intentions in the Asia-Pacific Region will be understandable only at Bandung in Indonesia in 2013 when Russian leaders focus on other countries and issues. Will Russian business continue to work vigorously within APEC after the political will, which sent it there, dries up? “Drops of water hollow out a stone: and in APEC everyone needs so many drops of water dribbling onto their brains for acceptable results to be achieved”, commented one of the BAC members in not very diplomatic thoughts. To “light up” has never been a problem with Russia; now, Russian participants in APEC should try not to “burn out” during 2012. Russia should take lessons from the Chinese — in Honolulu they yielded only to the Americans in their zeal and enthusiasm, even though no summits are scheduled to be held in China over the next few years.