Russia Attempts to Transform Vladivostok into a North Asian Trading Hub

Sources:

Monocle Magazine: Dark Horse in the East – Vladivostok

The Telegraph: Toyota in Deal to Make Cars in Vladivostok

BBC: Davos 2011: Medvedev Opens World Economic Forum with Call to Action

World Security Network: Russia’s Far East and Japan: Obstacles to Cooperation

Vladivostok is Russia's largest port city and is strategically located near Japan, the Koreas, and China. During the era of the Soviet Union, Vladivostok was home to many large defense manufacturers, but in the 1990s, the city became known for corruption and trade in mining resources. Recently, Russia has attempted to develop its Far Eastern territories to improve the country's political and economic status in the Asia-Pacific region. Key to this plan is transforming Vladivostok from a commercial backwater into one of North Asia’s leading trade centers.

In 2012, Vladivostok will host the Asia-Pacific Economic Cooperation (APEC) summit. To prepare for the summit, the Russian government is making vast investments in construction and infrastructure projects in the city. The central government is building a presidential palace in Vladivostok as a symbol of Moscow’s renewed interest in the region. The central government is also building new roads and bridges that will reduce the city’s traffic congestion and make it easier for businesses to access ports and railways. Once the APEC summit is finished, the hotels and conference halls that were built for the event will be converted into a new Far Eastern State University with an enrollment of up to 50,000 students.

Vladivostok is still primarily attractive to investors because of its easy access to mineral resources from Siberia. However, Vladivostok’s auto industry has boomed as foreign automakers attempt to bypass Russia’s recent increase in import tariffs. This month, Toyota announced that it will build a plant in Vladivostok as part of a joint venture with local automaker Sollers. This announcement follows the recent opening of an assembly plant for SsangYong jeeps from South Korea.

Shipbuilding, ports, and agriculture have also seen a recent flood of foreign investment near Vladivostok, primarily from South Korea. Daewoo is currently building a new shipyard to take advantage of Vladivostok’s many decades of shipbuilding expertise. Foreign companies are also finding success in building yachts and catamarans for export to Europe. Korea’s Busan Port Authority is building a new container port a short distance from Vladivostok. And in the area surrounding the city, Korean companies now farm more than 150,000 hectares of rice, beans, and corn that are then sold throughout Asia.

With all of the state and foreign investment though, Vladivostok still faces many obstacles to becoming Asia’s newest economic success story. First, Russia’s high import tariffs prevent Vladivostok from reaching its full potential in cross-border trade. Second, the abundance of state-led investment projects has led to a resurgence in corruption. For example, locals now refer to one of the new bridges under construction as Kickback Bridge. Third, Vladivostok is still littered with empty shipyards and military supply factories from the Soviet years. Finally, travel to Vladivostok remains prohibitively expensive and troublesome even though the city is just a short trip from Japan, the Koreas, and China.