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Eastern Economic Forum Prioritizes Discussions on Agricultural Development in the Far East

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Russia has been showing serious concern about the development of its Far East region. It is a huge underdeveloped region and despite the harsh climate conditions, the Russian government consistently expresses the desire to turn it into agricultural field and is determined to support both local and foreign investors interested in developing agriculture.

The 7th Eastern Economic Forum, which organizers expect visitors from over 60 countries and scheduled in Vladivostok on September 5-8, prioritizes the region’s agriculture for further exhaustive discussions based on the previous sessions. With the support of the Ministry of Development of the Russian Far East, the panelists will again review the recognition given to and significance of the sector especially large-scale production for internal consumption and for exports to foreign countries.

The session on agriculture has interconnection with the future of certain industries such as the efficient development of the industrial sector, food security, the climate and environmental issues, and of course the development of domestic and inbound tourism. In relation to the construction sector as well as many others, the panelists’ might further focus talk about the lives (including feeding) of indigenous peoples in the Far East.

It brings to the fore the significant question of agricultural self-sufficiency in the Russian Far East in today’s realities. The prerequisites for increasing production of all types of products exist, including the potential for putting agricultural land into maximum utilization and review the raw material base for processing, which is the basis for the sustainable development of grains, dairy and cattle breeding as well as poultry farming.

Our discussions with experts show that the natural and climatic conditions of this region allows to produce almost all types of crops and agricultural products generally. Agricultural experts say mechanizing production and planning within the dictates of the climate and natural conditions, there is possibility of meeting agricultural production targets. For this, only state support is needed.

On the other hand, experts here believe that given the fundamental transformation of the geopolitical and economic landscape, the Russian economy is facing an unprecedented task in its complexity and scale – to create a fundamentally new economic development model for the country aimed at achieving its technological sovereignty, reducing dependence on imports of critical foreign products, restoring and reformatting value chains in key sectors of the national economy.

Some suggested that there are various ways to build an effective incentive system for large-scale import substitution and the ways to achieve integration between fundamental science of agriculture and the related sectors of the economy. Russia has significant resource, technical and scientific potential, but one other surest way is attracting private investment in the development of this remote Far East region of Russia.

At present, Russia has all the necessary prerequisites in place for the transition to a new bottom-up phase. Obviously, it is not possible to achieve this goal from the state budget alone; the Russian business community must be actively involved in this process. Overcoming imbalances in the development of remote territories – Siberia, the Arctic, and the Far East – and creating new enclaves of integrated economic development are essential to achieving sustainable economic growth.

Therefore, participants in the sessions of the forthcoming forum will determine whether the existing support measures for the industry allow for a multiple increase in production volumes, identify priority areas of the industry for each region of the Far Eastern Federal District, and discuss how to ensure the transfer of products between regions of the district and bring unused land into use at an accelerated rate. Special attention will be paid during the session to support measures to increase the level of agricultural self-sufficiency of the Far East.

The are obvious problems to overcome. Agricultural facilities are very costly undertaking. For investment projects related to processing, it is crucial that feedstock is better protected, it has shown that existing 20% currently available is insufficient in the region. The development of infrastructure is probably the most critical element in terms of enabling the agricultural sector to fully capitalize on the potential afforded by its climate and increase production.

The key issue is investment – long term investment in storage facilities and logistics. We need 10 to 15-year investments, and Sber bank is in a position to offer these. This is also vital for unlocking export potential, according to Vladimir Sitnov, Senior Vice President of Sberbank. These are investments related to processing, including the processing of products which are in demand in key markets. A crucial element which is still not being properly discussed – although the ministry is already giving thought to it – is putting logistics in place in target sales markets. 

Last year, the Asia-Pacific region imported food and agricultural products worth a total of almost $700 billion. That in effect represents 45% of global imports. It can be difficult for producers of goods in the Far East to find new sales channels in the Asia-Pacific region. But the outlook is that it sets out a great many measures and its agricultural sector can capitalize on in the Far East.

“We can see a fundamental approach for the Far East’s agricultural industry to substantially increase both production volumes and added value. By this we can capitalize on exports to the Asia-Pacific region. The potential in this area will bring about an increase in agricultural production that will be measured not as a percentage, but as a multi-fold increase,” stressed Sergey Levin, Deputy Minister of Agriculture of the Russian Federation.

President Vladimir Putin, in an early September message to participants, expressed Russia ‘s readiness to continue, along with all interested partners especially those from the Asia-Pacific countries, to make efforts to improve regional cooperation and in various sectors in the Far East. 

The Far East is sparsely populated and government’s efforts to repopulate this region has been unsuccessful till now. Far back in 2016, a programme was approved which hoped to resettle at least 500,000 Ukrainians in the Far East. This included giving free land to attract voluntary immigrants from Ukraine and the settlement of refugees from East Ukraine. 

The region’s 6.3 million people translates to slightly less than one person per square kilometer, making the Russia’s Far East one of the most sparsely populated areas in the world. According to geographical records, by description and depending on the context, it has over one-third of total land area and located in the easternmost part of Russia.

MD Africa Editor Kester Kenn Klomegah is an independent researcher and writer on African affairs in the EurAsian region and former Soviet republics. He wrote previously for African Press Agency, African Executive and Inter Press Service. Earlier, he had worked for The Moscow Times, a reputable English newspaper. Klomegah taught part-time at the Moscow Institute of Modern Journalism. He studied international journalism and mass communication, and later spent a year at the Moscow State Institute of International Relations. He co-authored a book “AIDS/HIV and Men: Taking Risk or Taking Responsibility” published by the London-based Panos Institute. In 2004 and again in 2009, he won the Golden Word Prize for a series of analytical articles on Russia's economic cooperation with African countries.

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Baltic reality: High inflation and declining of living standards

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The Baltic States’ economy is in bad condition. The latest estimate from the EU’s statistics body shows that Eurozone inflation is continuing to soar to record highs.

The Baltic countries continue to be the hardest hit. These states in particular are experiencing the highest levels of inflation in the Eurozone. Thus, inflation in Latvia and Lithuania hit 22.4 per cent and 22.5 per cent respectively. Estonia also has seen inflation rise year on year from 6.4 per cent in September 2021 to 24.2 per cent in September 2022. The more so, the Baltic States continue to see soaring energy and food prices which lead to declining standard of living.

The Bank of Lithuania has published its latest economic forecast and revised gross domestic product (GDP) growth projections for 2023 from 3.4% to 0.9%.

Statistics Lithuania also reports that in September 2022, the consumer confidence indicator stood at minus 16 and, compared to August, decreased by 5 percentage points. The decrease in the consumer confidence indicator in September was determined by negative changes in all of its components.

According to SEB bank economist Tadas Povilauskas, the number of poor people in Lithuania will increase. Living standards will be affected by rising food and energy prices. The current price of natural gas is too high and the economy cannot “go” with it. It is evidently that energy prices shocks have far-reaching effects on Lithuanian economy and population.

The main cause of such state of affairs is deteriorated relations with Russia. Russia has lately been the EU’s top supplier of oil, natural gas, and coal, accounting for around a quarter of its energy.

The conflict in Ukraine and political confrontation between Russia and the West has exacerbated the energy crisis by fuelling global worries it may lead to an interruption of oil or natural gas supplies from Russia. Moscow said in September it would not fully resume its gas supplies to Europe until the West lifts its sanctions.

It is obviously that the conflict in Ukraine dramatically worsened the situation on the markets, as Russia and Ukraine account for nearly a third of global wheat and barley, and two-thirds of the world’s exports of sunflower oil used for cooking. Ukraine is also the world’s fourth-biggest exporter of corn.

According to Euronews, the prices of many commodities – crucially including food – strained global supply chains, leaving crops to rot, caused panic in many European countries, including the Baltic States.

High inflation has become the direct consequence of sanctions imposed on Russia. As for the Baltic States, the lack of wisdom to find compromises and blindly following the European Union’s decisions have lead to declining standards of living. The desire to punish such huge state as Russia played a cruel joke on the Baltic States. It will be difficult to explain the population why they should turn down the heating in homes, schools and hospitals over the winter.

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Policy mistakes could trigger worse recession than 2007 crisis

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The world is headed towards a global recession and prolonged stagnation unless fiscal and monetary policies holding sway in some advanced economies are quickly changed, according to a new report released on Monday by the UN Conference on Trade and Development (UNCTAD).“There is still time to step back from the edge of recession,” said UNCTAD chief Rebeca Grynspan.

‘Political will’

“This is a matter of policy choices and political will,” she added, noting that the current course of action is hurting the most vulnerable.

UNCTAD is warning that the policy-induced global recession could be worse than the global financial crisis of 2007 to 2009.

Excessive monetary tightening and inadequate financial support could expose developing world economies further to cascading crises, the agency said.

The Development prospects in a fractured world report points out that supply-side shocks, waning consumer and investor confidence, and the war in Ukraine have provoked a global slowdown and triggered inflationary pressures.

And while all regions will be affected, alarm bells are ringing most for developing countries, many of which are edging closer to debt default.

As climate stress intensifies, so do losses and damage inside vulnerable economies that lack the fiscal space to deal with disasters.

Grim outlook

The report projects that world economic growth will slow to 2.5 per cent in 2022 and drop to 2.2 per cent in 2023 – a global slowdown that would leave GDP below its pre-COVID pandemic trend and cost the world more than $17 trillion in lost productivity.

Despite this, leading central banks are sharply raising interest rates, threatening to cut off growth and making life much harder for the heavily indebted.

The global slowdown will further expose developing countries to a cascade of debt, health, and climate crises.

Middle-income countries in Latin America and low-income countries in Africa could suffer some of the sharpest slowdowns this year, according to the report.

Debt crisis

With 60 per cent of low-income countries and 30 per cent of emerging market economies in or near debt distress, UNCTAD warns of a possible global debt crisis.

Countries that were showing signs of debt distress before the pandemic are being hit especially hard by the global slowdown.

And climate shocks are heightening the risk of economic instability in indebted developing countries, seemingly under-appreciated by the G20 major economies and other international financial bodies.

“Developing countries have already spent an estimated $379 billion of reserves to defend their currencies this year,” almost double the amount of the International Monetary Fund’s (IMF) recently allocated Special Drawing Rights to supplement their official reserves. 

The UN body is requesting that international financial institutions urgently provide increased liquidity and extend debt relief for developing countries. It’s calling on the IMF to allow fairer use of Special Drawing Rights; and for countries to prioritize a multilateral legal framework on debt restructuring.

Hiking interest rates

Meanwhile, interest rate hikes in advanced economies are hitting the most vulnerable hardest

Some 90 developing countries have seen their currencies weaken against the dollar this year – over a third of them by more than 10 per cent.

And as the prices of necessities like food and energy have soared in the wake of the Ukraine war, a stronger dollar worsens the situation by raising import prices in developing countries.

Moving forward, UNCTAD is calling for advanced economies to avoid austerity measures and international organizations to reform the multilateral architecture to give developing countries a fairer say.

Calm markets, dampen speculation

For much of the last two years, rising commodity prices – particularly food and energy – have posed significant challenges for households everywhere.

And while upward pressure on fertilizer prices threatens lasting damage to many small farmers around the world, commodity markets have been in a turbulent state for a decade.

Although the UN-brokered Black Sea Grain Initiative has significantly helped to lower global food prices, insufficient attention has been paid to the role of speculators and betting frenzies in futures contracts, commodity swaps and exchange traded funds (ETFs) the report said.

Also, large multinational corporations with considerable market power appear to have taken undue advantage of the current context to boost profits on the backs of some of the world’s poorest.

UNCTAD has asked governments to increase public spending and use price controls on energy, food and other vital areas; investors to channel more money into renewables; and called on the international community to extend more support to the UN-brokered Grain Initiative.

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‘Sanctions Storm’: Recovery After the Disaster

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After the start of the special operation in Ukraine, a “sanctions storm” hit Russia; more sanctions were imposed against Russia in a few months than against Iran in decades. But a catastrophe did not take place, and the stage of stabilization came.

Indeed, almost all the weapons in the sanctions arsenal were used one after another: commodities exchange was suspended in some sectors, export and import controls were put in place, restrictions on air and sea transportation were introduced. The sanctions have spread to the investment and financial sectors, paralyzing many transactions with the West and complicating them with the East. An image impact came from the mass withdrawal of foreign business from the Russian market—not directly caused by the sanctions, but demonstrating “over-compliance,” excessive submission to them.

In the public mind, the destabilizing wave created the impression of the end of the story of the market economy in Russia, an impending catastrophe. But the catastrophe did not happen. The stage of stabilization has come, and it is important to use it correctly.

What to do?

In the near future, the Russian authorities and business will have to solve three groups of interrelated tasks. First, they must provide the domestic market with necessary goods, and restore value chains by the use of alternative partners. Second, they need to establish reliable financial mechanisms for working with these partners. Third, it is necessary to look for new growth points for the future, industries in which dependence on the West was critical. It is important to work out the possibilities: for new partners entering the markets and for attracting investors from friendly countries, as well as trying to integrate into new value chains.

Partners, first of all, include China and India. The southern direction is also not unpromising—to begin with, this includes Iran and Turkey, as well as a search for investors in the Arab world and the development of logistics routes through the Middle East. Nevertheless, in all areas, the key obstacle is the threat of secondary sanctions by the United States and the EU—which means that the second task becomes the main one: building a safe infrastructure for financial cooperation.

China remains Russia’s first trading partner—but despite the strategic partnership on the political level, large Chinese companies and banks that are active in the international market are suspending cooperation with Russia, fearing secondary US sanctions. In these conditions, it is important to work on explaining the nuances of the sanctions policy for Chinese business, creating secure payment channels that do not depend on foreign banks or on the dollar and the euro, and developing profitable package offers. Beijing seeks to use the opportunities opening up in the Russian market to occupy the vacant niches and strengthen the yuan in international payments, which means that its interest in finding a common solution is high.

A similar situation is developing in the Indian market, with the difference that Indian business is more connected than Chinese business with America, and its awareness of doing business in Russia is lower. As a consequence, Indian companies and banks integrated into the global economy will comply even more closely with sanctions restrictions, despite their interest in developing ties with Russia. Accordingly, even more active informational work is needed to establish Russian-Indian business ties, as well as the creation of a secure settlement mechanism. India already has similar experience, from doing business with Iran. In particular, UCOBank was formed to trade with it in rupees. Similar structures can be created in the Russian direction.

If the necessary channels are laid, both China and India can not only replace some Western goods in Russian markets, and ensure purchases from the Russian energy, agricultural, and military-industrial sectors—preserving their prospects for business—but also become zones of qualitative economic growth. Chinese partners can become a support in the development of bilateral cooperation in the fields of electronics and digital technologies (including 5G), and Indian, in pharmacology and high-tech agriculture. It also makes sense for business to look at these countries from the point of view of the development of green technologies in energy and agriculture, and the introduction of ESG practices, since these countries are also interested in this.

From our partner RIAC

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