Time to invest in Russia

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Time to invest in Russia

The six-day Peace Odyssey tracing back the memories of our ancestors who fought for harmony and liberation was a valuable time that helped me think about peace and reunification on the Korean Peninsula.

Just like China, Russia was also a scene of struggle during the 36 years of Japanese occupation. However, Koreans feel Russia is much more distant than China. It is not well known that independence fighters like An Jung-geun and Lee Jun lived in Russia while working for the liberation of Korea.

Russia is geographically very important to inter-Korean relations. Economically, Russia has abundant resources that Korea needs, such as petroleum, gas, coal and minerals, and is a lucrative blue-ocean market with growth potential.

While European, Chinese and Japanese companies are working hard to penetrate the Russian market, Korean businessmen have ignored the potential. Rather than making efforts to understand Russia’s politics, economy, society, culture and language, many Korean businessmen resort to sales gimmicks and expediency to make money, only exploiting the benefits that Russia offers. Is there any way to do away with outdated stereotypes and cooperate together? Let’s find solutions from experiences of doing business with Russia.

The key to success in doing business with Russia is choosing good partners. Russians value relationships more than the Chinese; 99 percent of the business outcome depends on whom you enter a partnership with and who is referring the partner. We all know that doing business with a key man gets you to your goal faster.

Until now, many Koreans have experienced failure by doing business with marginal people. They mistakenly assume their bad experiences are examples of common business practices in Russia and label Russians as untrustworthy. But know thyself, know thy enemy, then a thousand battles and a thousand victories.

First, Korean companies must participate in infrastructure development in Russia’s Far East region. The population decrease there, by two million in 10 years, has been serious, and Vladimir Putin’s administration selected regional development as one of its priorities.

Vladivostok has been designated a free port, offering various administrative and tax benefits. Distrust due to lack of law and order has considerably decreased, and the system is improving. Korean and Japanese leaders and economic delegations were invited to the second Eastern Economic Forum from Sept. 2 to 3 to discuss mutual economic cooperation.

Russia won’t be waiting for Korea’s approach forever. Chinese, Japanese, Southeast Asian and European companies are negotiating investment deals despite economic sanctions. We need to realize that we may even miss the Russian market entirely by roaming about the perimeter. We need to enter the market and take advantage of Russia’s system, where it takes time to give shape to a plan.

Second, Korea needs to participate in the agricultural development of the province of Primorsky Krai. Hyundai Heavy Industries grows beans, corn and oats on a 24,500-acre farm there. Primorsky Krai is considered the most suitable site because of its affordability, prepared environment for farming and geographical proximity.

We also need to pay attention to agricultural development in areas near Moscow, where there is greater added value. However, Korea does not have a good financial assistance program for overseas agricultural development by small and midsize businesses and individuals. The government and state-funded agencies should create financial programs focusing on loans rather than aid by investing in the beginning and sharing in profits.

Third, Korea has to participate in investment in fishing clusters. According to statistics from 2015, Korea imports 18.9 percent of fish products, about $750 million, from Russia. In order to boost development of the Far East region, Russia offers drastic policies, allocating 20 percent of the fisheries quota to foreign companies that invest in building and buying vessels, processing plants, refrigeration warehouses and fish farms. If this program is well utilized, Korean companies can not only secure fisheries but also provide quality goods to Korean tables at affordable prices.

Finally, Korea must participate in an industrial complex that can replace the Kaesong Industrial Complex, where operations have been suspended due to political tensions. We may want to consider participating in the industrial complex encompassing Rajin in North Korea, Khasan in Russia and Hunchun in China. The plan is to build a special economic zone by bringing in North Korean labor and South Korean capital and facilities.

Since South Korea’s intention to participate in the project was unclear, Russia included Hunchun despite the risk of China expanding to the East Sea. While it is rather late, if Korea makes good use of the project, we can move into Russian and Chinese markets without trade barriers.

If Korea approaches Russia more actively, we can not only find a breakthrough for the Korean economy but also contribute to improved relations with North Korea, China and Russia. While attaining reunification of the Korean Peninsula on our own is a top priority, if it is not possible, we need to use our neighbors wisely. That is why we need to pay attention to Russia.

Translation by the Korea JoongAng Daily staff.

*The author is CEO of Shinjung Global.

Yoo Jin-tae
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