Thailand cementing relations with Russia; But a Russian pivot to ASEAN?

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Thailand’s prime minister, Yingluck is planning a visit to Russia, in July of 2013 and have invited the Russian president, to visit Thailand latter in the year. And Thaksin, Yingluck’s brother and former Thai prime minister,  is a close personal friend, of the Russian president, from years of working together, as years earlier, Thaksin proposed to Russia, barter trade in Russian arms for Thai goods.

Clearly, Russia is becoming an important focus for Yingluck.

In the medium to long-term, Russian is a part of a growing list of energy supplier to ASEAN, and the growing Russian economy is seeing trade and investments with ASEAN increase, particularly Russian tourism to the ASEAN region. Russia, is also pushing its armament and rail system to ASEAN, at a time, ASEAN is concerned about security, and infrastructure spending is exploding.

The total trade between ASEAN and Russia has grown from US$9.06 billion in 2010 to US$ 13.97 billion in 2011, an increase of 54.1% . In contrast, the total FDI from Russia flows to ASEAN fell from US$ 60 million to US$ 44 million during the same period. Currently, for ASEAN and Russia business and economics relations, there is the Business Council.

  • The immediate goal of the Russian ASEAN Business Council, is to provide the Russian business people and their colleagues from ASEAN with the most comprehensive data regarding the investment opportunities and demands in the ASEAN and Russian markets, respectively, where already, representative offices of the Council in Jakarta and Singapore, are involved in creating databases of companies from both sides which have indicated their interest in mutual investments.

Culture exchange is also taking place between Russia and ASEAN. Together, Russia and ASEAN are planning to launch  a special media project which will include an Internet TV channel with the primary objective to disseminate credible and unbiased information about ASEAN and Russia, including the potential of the mutual trade and investment.

The First Consultations between ASEAN Economic Ministers and Economic Minister of Russia was held in August 2010 in Da Nang, Viet Nam, which created momentum to bring trade and economic relations to a new stage. The Ministers explored ways to increase trade and investment flows as well as economic cooperation between ASEAN and Russia, including trade facilitation, standards and conformance, energy, SME development, food security, tourism, air transport services and renewable energy. They also agreed to develop a possible roadmap to enhance economic relations between ASEAN and Russia.

  • Russian Pivot?

But as the USA pivots to Asia, particularly, to ASEAN, what of Russia? Would a growing importance of ASEAN, call on Russian leaders to take a more important strategic role with ASEAN? And apart from USA courting ASEAN, there is India and China. All three, USA, India and China, sees ASEAN as critical to their interest, currently, and more so, in the future.

Can Russia afford to stay at arms length?

Would internal Russia and its traditional area of interest, stop Russia, from engaging ASEAN more?

  • Pravda Reports:

Russia is returning to Indochina not as a seller of weapons, but by means of investment in these countries by increasing tourism, developing small and medium business and buying real estate. Growing wealth of the Russians, warm climate, and the decline of interest in the dangerous Middle East sector has led to a reorientation of their interest towards Thailand, Vietnam and Laos.

Thai newspaper Bangkok Post wrote that “the Russians are coming” not with weapons but with pockets full of dollars. According to the paper, it is tourism, and not large business that plays a crucial role in the struggle for geopolitical influence in Indochina today. Indeed, in Vietnam, for example, the income of the entire tourism industry in the past year amounted to $35 billion, and the construction of the first nuclear plant in the country with the help of Russian investments is estimated at $10 billion.

Last year, 175,000 tourists from Russia visited Vietnam, which is 1.7 times more than in 2011. 1.3 million Russians traveled to Thailand, which is 25 percent more than in 2011. In this country the share of Russians is the largest among tourists from Europe. Laos has demonstrated a 30 percent increase – up to 7,000 in 2011, compared with the previous year, Bangkok Post quoted the data from local departments and ministries of Tourism.

Particularly impressive is the development of the Vietnamese direction, especially given that the number of European travelers has been steadily decreasing, for example, last year there were 69 percent fewer tourists from Germany. An important role here was played by a dramatic improvement in the relations between Russia and Vietnam, including in the military-technical aspect of cooperation. The recent visit of Defense Minister Sergei Shoigu began with a visit to the city of Cam Ranh, a former Soviet military base that Vietnam is ready to provide for maintenance of the Russian ships.

Cam Ranh today is a major tourist center. In particular, a new passenger terminal was built in the military airport, which secured it the status of an international airport. This gave an impetus to the socio-economic development of the region, and helped to increase the flow of foreign tourists visiting popular beach resorts of central Vietnam. “Vietnam Airlines” announced that in order to attract a larger number of tourists from Russia, they will start a weekly direct flight to Moscow from Cam Ranh on April 5th. The country is preparing to accept 3.5 million Russian tourists annually by 2020, that is, it is going to surpass the volume of tourists in Thailand.

Given that the average Russian tourist spends about $1,400 in 10 days in Indochina, the income from Russian tourism in Vietnam in 2020 will amount to approximately $5 billion a year. Vietnam is not the only country that can count money. This year, for the first time Laos took part in the International Travel Fair in Moscow to promote its tourist destination and fully involve the Russians. The country has opened a representative tourism office in Moscow and the Russian Federation signed a “Joint Action Program for 2012-2014 in the field of tourism” with the country.

Thailand is preparing for targeted hosting of tourists from Russia. “The flow of tourists from Russia, India and China is growing rapidly, and this is a long-term trend,” Krailuck Asawachatroj, chief financial officer of the hotel chain Erawan, told Bangkok Post. “Economic growth in these countries has increased the purchasing power of their citizens, and to spend the money they began travelling abroad,” said the director. It should be noted that all of these countries abolished visas for Russian tourists.

Tourists often turn into business people and buy real estate. The growth of living standards in China makes Indochina countries attractive to business because labor costs are lower. In early 2011, according to the American Association of Foreign Investors in Real Estate (AFIRE), Vietnam has become the best country in the world for real estate investment. The country allows enterprises with 100 percent foreign capital. The service industry and production of consumer goods are entirely in private hands. According to a study of the international auditing company Grant Thornton, hotel business is one of the most profitable in Vietnam. Russians are treated well in Vietnam, and Russian investors are well loved. Moreover, Vietnamese complain that there are not enough of them.

In Thailand, according to real estate agency Knight Frank, Russian and Chinese “are buying Phuket”, primarily housing of medium and luxury class. According to local experts, each year Thailand receives over $1 billion in Russian private investment, the Russians are a strong competition to local firms in the tourism industry, although it is not welcomed by the local entrepreneurs. Russian immigrants, including those who have expired visas, are accused of taking jobs from local residents. The service sector workers, including guides, masseurs and taxi drivers, are not pleased with the Russians. However, it shows the breadth of the movement called “the Russians are coming,” and that business is much more effective in promoting Russia than weapons.

  • Apart from the business council, officially, between Russia and ASEAN, there is a “Formal Dialog.”

Thailand, while moving closer to Russia currently, typically, is not a major ASEAN Russia player. For ASEAN, Vietnam and Indonesia are the leader in Russian ASEAN relations, for example, in national security, both Vietnam and Indonesia, has bought Russian weapons, while Thailand, resisted Russian arms, from its close relation to USA.

  • Towards the end of 2012, there was a meeting, “ASEAN and Russia: Towards a Progressive and Comprehensive Partnership.” The event was jointly organized by the ASEAN Centre and the Indonesian Embassy.

On the list of participants were three Ambassadors of ASEAN countries in Moscow, namely H.E. Alejandro B. Mosquera of the Philippines who is assuming the chairmanship in the ASEAN Moscow Committee; H.E. Djauhari Oratmangun of Indonesia on whose initiative the seminar was held; and H.E. Dato’ Zainol Abidin Omar of Malaysia, the country which since July 2012 has been the coordinator of ASEAN-Russia dialogue. Among the guests were diplomats from other ASEAN Embassies in Moscow, representatives of Russian Federal Ministries, businessmen and academics, as well as students from Southeast Asia who are studying in Russia.

Participants focused on major developments in ASEAN-Russia relations, pointed to the possibilities for more active cooperation between the partners and to the challenges currently facing them.

The speakers and the guests were greeted by Ambassador Alejandro Mosquera and Professor Andrei Silantiev, MGIMO Vice-Rector for International Cooperation and Public Relations. Among the presenters were H.E. Ngurah Swajaya, Ambassador / Permanent Representative of the Republic of Indonesia to ASEAN; Dr. Victor Sumsky, the ASEAN Centre Director; Mr. Victor Tarusin, Executive Director of the Russia-ASEAN Business Council; Dr. Timur Makhmutov, Deputy Program Director of the Russian International Affairs Council (RIAC); and Dr. Ekaterina Koldunova, a MGIMO Professor and an ASEAN Centre expert.

H.E. Alexander Ivanov, until recently Russia’s Ambassador to Indonesia and now an Ambassador at Large dealing with Asia-Pacific affairs, gave extensive comments on the presentations.

Just like the presentations, the discussion that followed confirmed that Russian experts and their ASEAN colleagues understand each other quite well, think along similar lines and speak a common language. For instance, the notion of connectivity that has become a key element in East Asian regional integration discourse since the Master Plan on ASEAN Connectivity was adopted in 2010 can be quite appropriate in summarizing and justifying the priorities of Russia’s APEC Presidency, such as reliable transportation and logistics chains formation. Similar development priorities create new prospects for cooperation – for example, Russia’s participation in construction and modernization of railways in Southeast Asian countries, or sales of civilian aircrafts. With developments like these, trade and investment cooperation between Russia and ASEAN may acquire a new dimension.

In the political sphere, mutual interests are obvious too. Both Russia and ASEAN are seeking stability in the Asia-Pacific area, not the escalation of existing contradictions. Neither of the partners would like to witness more pronounced US-China differences which can have a negative impact on the regional security.

While the speakers acknowledged that the field for fruitful, mutually advantageous cooperation is obviously there, they emphasized the need to explore more opportunities and implement more projects. This is what the ASEAN Centre in MGIMO is trying to promote in its own way, said Dr. Ekaterina Koldunova as she gave a review of the Centre’s activities in the year 2012.

Among the Centre’s recent projects is a detailed piece of research on the strategy of Russia-ASEAN trade and investment cooperation. The work was carried out by a group of experts under Dr. Victor Sumsky. The fact that this report was commissioned by the Ministry of Economic Development is another indication of the Russian Government’s interest in a more vibrant relationship with the Association and its members.

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