Chinese to invest in industrial park in Yakutia

Construction just begun at the Kangalassy industrial park near Yakutsk, capital of the Sakha Republic, also known as Yakutia, in far eastern Russia. Out of ten projects scheduled to begin this year, one is a joint venture with a Chinese partner, a company alternatively called (a Cyrillisation of) ‘Songyang’ or ‘Hongyang’ and said to be from Liaoning. Whatever the name, the Chinese partner will use local raw materials (including refuse from a nearby coal mine) to make ceramic blocks and bricks.

Kangalassy recently gained recognition as one of the federal-designated ‘areas of priority socio-economic development’ (территории опережающего социально-экономического развития, ТОР) in the Far East. So far there are nine of them, meant to transform crumbling Soviet ‘monotowns’ (моногорода) into ‘locomotives‘ of local development, through federal government investment and tax benefits. That’s likely to make the priority areas more attractive to foreign investors, and they are receiving increasing attention from China. One consequence would be a certain influx of foreign workers. In the specific case of the Chinese brick factory in Kangalassy, the park’s director promises those would’t outnumber the local workforce (“for each Chinese worker, [there will be] one of our locals”).

There’s also been talk of investment in Kangalassy by a larger player, Baoli Bitumina, a Singapore-based joint venture of Bitumina Group and the Shenzhen-listed Baoli International (宝利国际), until recently called Baoli Asphalt (宝利沥青), whose chairman and biggest shareholder is Zhou Dehong 周得洪. I haven’t seen Chinese reports on their involvement in Kangalassy (Russian media say they would build two factories there), but at any rate Baoli are going big into Russia, looking towards building an integrated asphalt production chain for federal road infrastructure in the nortwest and the Far East with up to $2bn investment. Baoli are also expected to become the first foreign investor in another ‘priority development area’ in Khabarovsk.

Chinese potential investors keep showing up to Kangalassy, with two visits in the last two months, so you wouldn’t be surprised to see more Chinese companies as denizens of Kangalassy in the near future. Yakutia isn’t historically a focus of Chinese investment, that has tended to concentrate on border regions, but contacts have dramatically increased after the Ukraine crisis, especially at the Russian federal subject-Chinese province level. Over the last half a year or so there have been multiple contacts and events between Yakutian officials and potential investors in Heilongjiang, Jilin and Jiangxi (not to mention Japan and South Korea, which I wrote about some time ago).

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