The locomotive of world growth

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The economies of the APEC countries account for 55% of world GDP, and economists predict that this figure will do nothing but grow in the future. The founding shareholder of the Summa Group, Ziyavudin Magomedov, chaired the APEC Business Advisory Council this year. He spoke about why Russia and the world need this forum in an interview with BRICS Business Magazine.

What is the economic effect, for Russia and for the other APEC countries, of implementing the Russian initiatives that have been announced?

Russia proposed four priorities for its chairmanship: food security, development of transportation and logistics chains, support for growth by innovation, and liberalization of trade and investment. We have successfully created private-public partnerships for food security as well as defined the core principles, a road map and the main goals for the next 3–5 years. We have proposed a number of initiatives as regards regional integration. This includes integrating RFID tags and the “single window” system. We proposed to create a list of projects to improve the transport infrastructure and to harmonize customs processing. The adoption of a single set of rules throughout APEC will significantly reduce the time that we spend moving cargo across borders — something that will be especially advantageous for Russia.

By 2030, the middle class in Asia will reach 3 billion people, or 60% of the world’s middle class responsible for 40% of world consumption

We agreed to set up a private-state partnership in the area of science, technology and innovation, as well as to formulate a set of mechanisms similar to Incoterms, the rules for international trade that were first developed in 1936. Incoterms [International Commercial Terms] regulate the distribution of costs and risks between the purchaser and seller of goods. Our proposal is for similar steps, but in the field of technology. This will be Intechterms: international technological terms, which describe the rules governing the movement of technologies and the protection of intellectual property.

Why can Vladivostok 2012 be considered an important event on the global scale? Is it not of greater importance for participating countries to have events such as G20 summits, or traditional economic fora, such as Davos?

International forums on the scale of APEC offer the chance to develop consensus-based approaches to complex problems. The APEC economies account for 55% of the world GDP, and unlike most other integration formats, this is a structure built on genuine integration. That is to say, decisions are not taken abstractly to cover the entire planet, but very specifically: with respect to APEC members and their subsequent relations with each other. For Russia, chairing APEC was an unheard-of opportunity to demonstrate her engagement in Asia-Pacific affairs and increase our presence in this area, in order to further develop the Russian economy.

Some predictions say that in 2021 the emerging markets will generate 65% of the volume of trade between APEC countries with China as the unchallenged lea­der. What prospects do Russia and other major economies have, what share of the growth can they gene­rate, and what benefits can they derive?

By 2030, the middle class in Asia will reach 3 billion people, or 60% of the world’s middle class responsible for 40% of world consumption, while currently it is just slightly larger than 10%. Consumption growth in Asia will consistently be a driving force behind world development, because the cost of production in these states will rise together with the quality of life. This means that manufacturers in Europe and America — as well as Russia — will be able to compete on these markets. Moreover, the Asia-Pacific region will account for a significant portion of the services on the world market; and the export of services, including logistical support, could become an important factor in the development of our country, too.


For Russia, chairing APEC was an unheard-of opportunity to demonstrate engagement in Asia-Pacific affairs and increase presence in this area, in order to further develop the Russian economy
Less than 1% of Euro-Asian shipments transit through Russia, although this share could be around 5%, and each additional percentage point would give Russia $1BN

An improvement in the Russian transport and logistics system should allow many countries to explore this shortest route from Europe to Asia. How do you assess the interest in this issue on the part of other APEC members?

The volume of trade between Europe and Asia exceeds one trillion dollars per annum. The volume of sea trade is approximately 20 million containers, two thirds of which are currently sent from Asia to Europe. Freight shipments via Russia could be twice as fast as by sea.

Russia is currently ranked 120 in the world by ‘Ease of Doing Business’, and the convenience of international trade (one of the components of that rating) puts the country in 160th position, mainly due to the long list of documents required, and the time it takes to process them. As a result, less than 1% of Euro-Asian shipments transit through Russia, although this share could be around 5%, and each additional percentage point would give Russia $1bn.

The procedure for automatic identification will accelerate cargo processing in ports by a factor of 4 to 6. The integration of such procedures at customs points and for multimodal shipping will facilitate the quality and speed of cargo shipping via Russia. According to the USC Marshall School of Business, similar problems are encountered by many countries in the region, and this has become one of the reasons for the success of Russian proposals to harmonize customs rules: they are beneficial to all.

Russia, the USA and China traditionally disagree on many economic and political issues. How is this soft confrontation reflected within APEC? Is the Asia-Pacific region itself affected by these disagreements?

There are complex political nuances within the region, but over the year during which Russia was the chair we managed to smooth out the disagreements. All APEC decisions are taken by consensus, and this means that they must start with a proposal that is acceptable to all parties. The outcome of the Vladivostok summit spells a success story. American political scientist Joseph Nye called this the “soft power”— the ability to achieve results using the attractiveness of ideas, and one’s authority.

Is this the time to critically assess the outcome of the forum?

The right time to assess the forum will be a few years down the road, when we will see the practical results of the decisions taken. In order for us not to be disappointed, we must continue to invest efforts in working in APEC and other international formats such as the G20, the G8 and BRICS, where Russia will assume the chairmanship in 2013–2014. To succeed, we must ensure the continuity and mutual compatibility of the initiatives that we propose within these structures.

The economies of the APEC countries account for 55% of world GDP, and economists predict that this figure will do nothing but grow in the future. The founding shareholder of the Summa Group, Ziyavudin Magomedov, chaired the APEC Business Advisory Council this year. He spoke about why Russia and the world need this forum in an interview with BRICS Business Magazine.

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