Russia and ASEAN. Key Cooperation Projects
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Apart from political dimension of Russia-ASEAN countries relations, it’s important to have a clear understanding of the economic ties that bring them together. Though these economic projects are not as prominent as Russia-Europe or Russia-China ones, they are still expanding step by step. From joint railways blueprints to information technology exchange, Russia and ASEAN have a clear and long road ahead of them in terms of mutual economic development.
Apart from political dimension of Russia-ASEAN countries relations, it’s important to have a clear understanding of the economic ties that bring them together. Though these economic projects are not as prominent as Russia-Europe or Russia-China ones, they are still expanding step by step. From joint railways blueprints to information technology exchange, Russia and ASEAN have a clear and long road ahead of them in terms of mutual economic development.
Prepared by:
E. Kanaev (leader), A. Pyatachkova, A. Korolev, A. Averina, R. Fainschmidt, E. Prokopchuk, A. Matveeva, M. Rodosskaya
Russian Railways’ Project in Indonesia
Russian Railways’ Project in Indonesia covers several areas: construction of a marine coal terminal and infrastructure; construction of a railway line to transport coal mined in the province of East Kalimantan; and the delivery of 1100 40-tonne rail carriages and 40 twin diesel-powered locomotives.
Russian Railways acts as an anchor investor: funding comes through Gazprombank, with the plan being to increase the authorized capital through a Vnesheconombank loan. The company also plans to attract Indonesian investors and international banks. Russian, Indonesian and regional companies are being considered as potential subcontractors.
Construction of the railway line is planned for 2019. The cost is estimated to be $2.5 billion, with the first phase of the project requiring an outlay of around $1.3 billion. The most recent meetings with regard to the project took place in January 2016 during the visit of the Minister of Trade and Industry of the Russian Federation, Denis Manturov, to Jakarta.
What is more, the project is considered to be economically sound (the Ministry of Trade and Industry estimates that it will recoup the money spent on it within six years), not to mention the fact that its commissioning will contribute to the socio-economic development of Indonesia. For the first time in the country’s history a programme for the environmentally friendly transportation of coal in all weathers will be introduced. This will also be the first such project to be launched in Asia.
The project itself will create around 300,000 jobs, with another 10,000 being created in related industries. Indonesia will receive Russian technologies, and specialists from the country will be trained at Russian universities. It is worth noting that Indonesia plans to expand railway construction, meaning that if the collaboration between the Russian and Indonesian sides proves to be successful, then there is every chance that cooperation in this field could grow.
Ninh Thuận 1 Nuclear Power Plant, Vietnam.
One of the most strategically important areas for Russian companies in Southeast Asia is cooperation in nuclear energy. Among the projects being carried out in ASEAN countries, the construction of the Ninh Thuận 1 Nuclear Power Plant, the first nuclear power plant in Vietnam (Phước Dinh in Thuận Nam District, Ninh Thuận Province), is of particular importance. An inter-governmental agreement was signed in November 2011, with the Russian side allocating a loan in the amount of 8 billion roubles to implement the project. The agreements outline arrangements for the creation of a Vietnamese centre for nuclear science and technology, as well as the training of experts at Russian universities.
The Ninh Thuận 1 Nuclear Power Plant will be built using the latest technology in the nuclear energy sector and in full compliance with the requirements of the International Atomic Energy Agency (IAEA). Preparatory work is currently under way in the Ninh Thuận Province and the necessary infrastructure is being created. Despite the fact that construction of the nuclear power plant was originally set to commence in 2017, the project was postponed until 2020 because the Vietnamese side wanted to carry out a detailed analysis of the environmental risks with IAEA experts.
Gazprom Projects in the South China Sea, Vietnam.
Another promising area of promoting Russia’s strategic interests in Southeast Asia is the cooperation between Russia and Vietnam is the development of the South China Sea continental shelf. The first agreement between Gazprom and the Vietnamese state company PetroVietnam was signed in 2006 and concerned geological exploration, the production, transportation, sale and processing of hydrocarbons, equipment and infrastructure maintenance, and joint participation in the development of oil and gas fields in other countries. An Agreement on Continued Cooperation was signed in 2008, under which parties undertook to carry out joint geological exploration of new areas on the Vietnamese continental shelf. The Vietgazprom Joint Operating Company was set up as a result to monitor the implementation of projects. Similarly, Gazpromviet was established for the joint development hydrocarbons in third countries. Exploration works are currently under way on the Vietnamese continental shelf and are proving to be successful; the area with the greatest concentration of hydrocarbons – and where developing wells will be most profitable – has already been identified. Production at the Moc Tinh, Hai Thach and Kim Cuong Tay oil fields, with total reserves of 55.6 billion cubic metres of gas and 25 million tonnes of natural-gas condensate, started in October 2013.
Rosneft Projects, Vietnam.
Rosneft is another Russia company that is successfully carrying out projects on the South China Sea continental shelf, with two projects currently under way off the coast of Vietnam. The first of these projects (Block 06.01) is on the Nam Con Son basin, where the Lan Tay and Lan Do gas condensate fields are located (with potential gas reserves of 68 billion cubic metres). On the basis of the Production Sharing Agreement, Rosneft Vietnam B.V. has a 35 per cent stake in the Block’s gas production. As of summer 2015, Around 46 billion cubic metres of natural gas had been extracted from the site. Rosneft Vietnam B.V., together with Hakuru 5 (a subsidiary of Japan Drilling Co., Ltd.), signed an agreement on the development of offshore oil and gas deposits in the PLDD sector. The potential of these deposits is estimated at 12.6 billion cubic metres of gas and 0.6 million tonnes of natural-gas condensate. The overall potential of Russian oil and gas companies in Southeast Asia is extremely high.
Petros Projects, Indonesia
Petros is involved in introducing Russian technologies designed to optimize oil recover from wells to the Indonesian market. Despite the favourable local conditions, Russian companies are finding it difficult to get a foothold in the Indonesian market because the country’s oil and gas sector is dominated by U.S. companies, most notably Chevron. Getting the Russian equipment certified to American Petroleum Institute (API) standards is also proving to be a stumbling block. The existing Production Sharing Agreement in Indonesia plays an important role here in that it regulates the distribution of revenues among the government and foreign oil and gas companies.
The Production Sharing Agreement states that all costs associated with the development and further exploitation of deposits are fully covered by the state. In practice, this means that manufacturers are able to use expensive materials that are not always the most effective for the job at hand. As a result, the more expensive, efficient and environmentally friendly Russian technologies do not get a foothold in the market. In spite of this, Petros is gradually expanding its presence in Indonesia. A project to enhance oil recovery at deposits in Sumatra based on environmentally friendly technology of pumping water vapour into the bed has been developed. Petros is involved in various activities to increase awareness of Russian technological developments among professionals in the Indonesian oil and gas sector.
Information Technology
One of the flagships of the Russian IT industry is Kaspersky Lab, the manufacturer of computer security software that provides protection against viruses, hacker attacks and spam. The company has offices in several Asian countries, including Malaysia, Singapore, China, Indonesia, the Philippines and India.
The Asia-Pacific Region currently accounts for 6.2 per cent of Kaspersky’s revenues and is important element of the company’s strategy to expand its client base abroad. Its most promising markets are in Southeast Asia, particularly Malaysia and Singapore.
Kaspersky’s products are in great demand among users in Malaysia. The company’s Southeast Asian regional office was opened there in 2008 in Selangor, one of the country’s most advanced states in terms of its infrastructural development.
The regional office serves as a kind of command centre for coordinating and developing the IT infrastructure in Malaysia, Singapore, Indonesia, Vietnam, Thailand and the Philippines. It provides full support to internet users, as well as operations management. And it is eager to expand the range of services it offers customers. The Malaysia office has a demonstration laboratory that serves as a training centre for IT personnel and the company’s partners.
Kaspersky’s clients include influential small and medium-sized enterprises and government agencies, including the Malaysian Ministry of Education and Ministry of Defence. In addition, the company has worked with the Malaysian government for a number of years now in the field of IT security and is an active member of the International Multilateral Partnership against Cyber Threats (IMPACT) set up by the Malaysian government.
Singapore is one of the most technologically advanced countries in the world. The country is way ahead of its neighbours in terms of access to the internet. In 2014, 88 per cent of the population in Singapore were active online.
Singapore is home to the INTERPOL Global Complex for Innovation (IGCI), with which Kaspersky Lab works in to identify and prevent cyber threats and investigate online crimes. The company also works with the Singapore Economic Development Board.
In April 2015, Kaspersky opened a regional office in Singapore, which will serve as a coordinating centre for the R&D companies’ activities in the Asia-Pacific Region. The company is also looking into the possibility of providing corporate consulting services, developing IT platforms in collaboration with other enterprises and introducing professional development courses at their Moscow headquarters and in other regional offices.
Kaspersky Lab has also launched a dedicated website that will serve Southeast Asian countries, specifically Malaysia, Indonesia, Thailand, Singapore and the Philippines and thus help promote Russian IT products in the Asia-Pacific Region market. Kasperskyasia.com will allow users in the region to obtain information on the company’s products and regional marketing events in the format that is most convenient for them.
Other Russian IT Companies Operating in Southeast Asia
Infowatch – information security software product and solution developer.
Infowatch’s main clients in Southeast Asia are Malaysia, Indonesia and Vietnam, including Bank Persatuan in Malaysia and KSB Group, which manufactures pumps and valves. Infowatch has launched a number of pilot projects with state and private companies in Malaysia for its flagship software product InfoWatch Traffic Monitor Enterprise.
In Indonesia, Infowatch has become a consultant to the government on cyber security issues. The company plans to expand its presence in Vietnam by introducing specialized data loss prevention (DLP) software.
SPB TV is one of the leading global suppliers of turnkey solutions for IPTV, over-the-top (OTT) content and mobile TV technologies for television and video broadcasts on various devices. The company opened an office in Thailand in 2005. In 2013, it registered a representative office in Singapore, transferring operations from its office in Taiwan. SPB TV’s biggest deal in Southeast Asia was the launch of a mobile TV service for the StarHub telecommunications operator.
Skolkovo Innovation Center resident CDNvideo is a leading provider of content delivery network services which distributes internet content from the geographically closest node to the end user. The company has several nodes throughout Singapore. With the help of a Singapore distributor, CDNvideo sells its services to Malaysia and Indonesia.
Parallels is a private company that specializes in the development of virtual applications and automated hosting services. It has regional offices in Singapore and Indonesia.
GS Group manufactures digital television equipment. In 2012, the company launched the first national subscriber service on terrestrial television in Cambodia, One TV. The project was one of the first successful examples of a programme to digitalize national television, and it was carried out under the auspices of the International Telecommunication Union with the direct participation of Russia. In March 2016, GS Group announced that it had sold a 51 per cent stake in One TV Cambodia to the Royal Group of Companies conglomerate, successfully completing the project’s investment cycle. The company is currently considering the possibility of launching similar projects in Indonesia and Myanmar.
FreshOffice is a platform that brings together a set of applications that are essential for business management. In 2014, the company launched its first overseas office in Singapore to promote turnkey solutions for small and medium-sized enterprises. The company plans to launch its products on the Malaysian and Indonesian markets.
LifePay is one of Russia’s largest payment services. The company established itself on Southeast Asian markets after it purchased iBoxPro, which produces and operates mobile card acquiring terminals in Vietnam, Indonesia and Thailand. The company LifePay global was created as a result of the deal, with its headquarters in Singapore.
Ivideon offers cloud video surveillance services. It has data centres in Singapore.
Ruvento is a group of companies that invests in innovative hi-tech projects. Its main partner in Southeast Asia is Singapore, where the i.Jam Program operates. The aim of the programme is to help start-ups that are seeking to expand their presence on the Asian markets.
BaseRide Technologies is a developer of cloud services for vehicle fleets. The company opened an office in Singapore in 2014. It has a partnership with the Institute of High Performance Computing AStar Singapore.
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