A Chinese-Russian Regional Program Ends With a Whimper

A Chinese-Russian Regional Program Ends With a Whimper


This September marks the end of the nine-year Program of Cooperation between Northeast China and Russia’s Far East and Eastern Siberia (2009–2018). When the document was signed by then Chinese president Hu Jintao and then Russian president Dmitry Medvedev, the hope was that the program would boost Russian-Chinese cooperation in the provinces and jump-start development of the Russian Far East. 

In reality, the Program of Cooperation accomplished little and is barely mentioned today. Nonetheless, with Sino-Russian relations at an all-time historic high, Moscow and Beijing have declared the years 2018–2019 the “bilateral years of regional cooperation.” The two sides have already begun development of a new document on regional cooperation in Northeast Asia. This month, Chinese President Xi Jinping made his inaugural appearance at the Eastern Economic Forum in Vladivostok.

Why did the Program of Cooperation deliver such lackluster results? 

Hastily crafted over the summer, during the vacation season, the plan lacked analysis and detail. Because the provinces had only a vague understanding of the program’s goals, regional governments responded to Moscow’s requests for projects with generic suggestions for investors. Thus, rather than establishing a multifaceted, complementary game plan for regional development, the Program of Cooperation included a random assortment of disconnected projects. 

More importantly, the plan did not include implementation mechanisms for specific cooperative initiatives. Planning for a direct flight between Petropavlovsk and Dalian, the document specified that Russia’s Ministry of Economic Development and China’s National Development and Reforms Commission would be in charge of overseeing the project, but the plan did not delegate specific responsibilities for each side.

That the document was constructed by bureaucrats for bureaucrats is clear from many of its meaningless, vague action points. Most of the proposed projects, however, relied on the competency of businesses, over which the government had very limited leverage. Even when projects were formulated more precisely, they were not achieved or will take more time to accomplish. For instance, the flight between Petropavlovsk and Dalian never took off.

The Program of Cooperation outlined projects in four areas: cross-border transportation infrastructure; border management, including border crossings; investment projects; and social and humanitarian cooperation.

Implementing projects in the first three categories proved nearly impossible. The projects faced financial challenges, and there was no public and government consensus on their economic benefits.

As a result, the program led to many stillborn projects—as of 2015, only fifteen of the 91 Russian projects were in the implementation phase. Many of these had been launched prior to the program. Even the completed projects are underwhelming: the Changji commercial zone near Ussuriysk consists only of a small cardboard box factory. 

At the border, nothing happens quickly. Implementing projects has often taken more than a decade because of financing difficulties and bureaucratic foot-dragging. Construction of the Blagoveshchensk-Heihe bridge began only in March 2016, although the first transnational agreement on the bridge was signed in 1995. Plans for the Nizhneleninskoye-Tongjiang railway bridge were initiated in 2007, and a construction agreement was signed six years later. China completed its section of the bridge in 2016, and Russia began construction only in 2017 due to financing delays.

The program also called for modernizing Russian border crossings by the 2012 APEC summit in Vladivostok, but when that deadline passed, the upgrades simply did not happen. They are now scheduled for 2019–2021. Russia’s border crossings remain in a dismal state. Crossing the Russian border can take up to six hours. That not only contrasts sharply with the Chinese border, but also hinders cross-border trade and humanitarian contacts.

Although more projects came to fruition on the Chinese side, Beijing faced similar challenges. When projects were undertaken not by major government corporations—which had access to unlimited loan forgiveness from state-owned banks—but by local companies, projects were often left incomplete.

Just as in Russia, the most successful projects in China were those that had already been launched before the program started, especially those of national significance. The Changchun-Hunchun expressway, part of China’s national G12 highway, is one such project. China also has little to show for investment projects outlined in the program—northeast China continues to suffer from a dearth of investments and economic recession.

The failure of the Program of Cooperation cannot be blamed entirely on the inertia of Russian bureaucrats or the paucity of local budgets. The program was underdeveloped from the start. Its individual successes should therefore come as more of a surprise than the program’s overall failure.

The program also elevated the topic of cooperation between regions to discussion at the highest levels. Under the guidance of the Ministry of Development of the Far East, Russia created institutions for regional cooperation with China. Government banks and organizations have created new financial instruments to support economic integration, and major Sino-Russian projects in the region are now closely monitored by the central governments. 

The program has also yielded some concrete results on the ground, such as the construction of the bridges from the mainland to Bolshoi Ussuriysky Island near Khabarovsk. Investors for the Primorye 1 and 2 transportation corridors are currently being sought at the highest levels. 

Economic cooperation between the peripheral regions of Russia and China is critical for both countries, but any new program should address the mistakes of its predecessor.

First, both governments should avoid cramming the new program with small investment projects. These projects create the illusion of a comprehensive program, but in practice they are meaningless and difficult to accomplish. Instead, the program should prioritize groundbreaking infrastructure projects. The experience of the last nine years shows that central and local bureaucrats are more motivated to see through landmark projects.

The new program should also be integrated with the Russian Far East’s development vehicles—the territories for priority development and the free port of Vladivostok—to increase its viability.

Finally, the program should not include half-baked ideas that have no guarantee of success, especially those that require extensive negotiations with regulatory departments or would not withstand expert criticism. This approach would prevent the program from becoming yet another compendium of unfeasible projects. Avoiding project failures should be a priority of the new development program. Every disappointing project gives rise to skepticism not only toward the entire program, but toward Russian-Chinese regional coordination as a whole.

 

08.10.2018

carnegie.ru

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