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Agricultural Logistics in the Russian Far East: A Driver of Agroindustrial Growth
11 September 2018
10:00—11:30
KEY CONCLUSIONS
Agriculture exports from Russia should more than double

We face an ambitious task assigned by the President’s decree of more than doubling exports to USD 45 billion. If we more than double exports and the price per tonne of exports increases, total exports will grow by 70%. And if we take the conservative scenario, and the cost of products does not increase and the depth of processing does not expand, then […] our logistics capacity should expand by 120%. And this is a significant challenge — Dmitry Krasnov, Director of the Department of Information Policy and Special Projects at the Ministry of Agriculture of the Russian Federation.

At present, exports from the regions of the Far East to the market of Japan, China, and Korea are [worth] roughly USD 3 billion and do not consist of raw commodities or energy. Meanwhile, imports by the agro-industrial complex of these countries amount to more than USD 200 billion — Andrey Slepnev, Deputy Chief of Government Staff; Director, Project Management Department, Government of the Russian Federation.

State support expanding for agro-industrial exports from the Far East

The government is allocating unprecedented funds – more than RUB 9 billion for Rosselkhoznadzor over six years, and another RUB 6 billion for epizootic well-being — Andrey Slepnev, Deputy Chief of Government Staff; Director, Project Management Department, Government of the Russian Federation.

We have roughly RUB 30 billion in additional funds earmarked under the national project for the modernization of checkpoints, and the schedule currently includes 24 priority checkpoints […] We are already implementing a major trade finance programme, […] and have launched a good programme for pre-export financing — Andrey Slepnev, Deputy Chief of Government Staff; Director, Project Management Department, Government of the Russian Federation.

ISSUES
The high cost of delivering export goods

For a Russian manufacturer, costs associated with the delivery of export goods are significantly higher than for exporters of rival countries. For example, tariffs on the cost of grain transhipment at Russian ports are among the highest in the world — Dmitry Krasnov, Director of the Department of Information Policy and Special Projects at the Ministry of Agriculture of the Russian Federation.

Almost 40% of our fruits and vegetables spoil. […] In this regard, the question is how can we be competitive with such expenses on foreign markets — Alexey Vanchugov, Chairman of the Executive Board, RosAgroMarket.

Underdevelopment of transport infrastructure

Total investments in Russia’s infrastructure needs are significantly lower than the similar indicators of a number of competing countries. The average annual growth rate of investment in the transport sector is lower than in other industries […] We have to admit that the current state of Russia’s transport infrastructure is a significant deterrent — Dmitry Krasnov, Director of the Department of Information Policy and Special Projects at the Ministry of Agriculture of the Russian Federation.

For example, in terms of grain there isn’t a single specialized grain terminal in the Far East through which Russian grain products could be supplied to any countries of Southeast Asia in bulk [container-less cargo transportation onboard a ship] — Viacheslav Bakaev, Summa Group Vice President for Government Relations.

SOLUTIONS
The state’s active participation in developing agricultural exports

There are a number of things […] that require total state participation, where a private participant would not trust another private participant — Sergey Levin, Deputy Minister of Agriculture of the Russian Federation .

Effective use of transport capacity

It's no secret that a rather large volume of empty containers is coming back through the Far East […] This is essentially free or very cheap transportation — Vitaly Sheremet, A partner and Head of Agribusiness at KPMG in Russia and the CIS.

The empty containers that are going back to China under the Belt and Road Initiative […] can be used — Viacheslav Bakaev, Summa Group Vice President for Government Relations.

Construction of wholesale distribution centres

We are now considering a rather large project […] wholesale distribution centres, which could become a sort of backbone of the distribution system for fresh products above all else. Most of the fresh products today involve grey, shadow processes with goods that spoil quickly and are redistributed quite chaotically. This is a very big problem — Nikolay Tsekhomskiy, First Deputy Chairman of the Management Board, Bank for Development and Foreign Economic Affairs (Vnesheconombank).

Change in tariff policy

We won’t survive without efficient and cheap refrigeration transportation over long distances by rail […] With railway tariffs for refrigeration transportation that are twice as high as those through […] the ports of Baltic States, we will never transport agricultural products […] through the Far East — Viacheslav Bakaev, Summa Group Vice President for Government Relations.

Development of transport infrastructure

We need to develop containers and vessels that will allow us to transport refrigerated products to other countries — Maxim Basov, Rusagro Group of Companies CEO .

Enhancing the degree of agriculture processing

Right now, the Far Eastern Federal District is above all else a resource centre whose potential can be realized through enhancing the degree of processing of agricultural products […] We conducted a survey […] and, according to the regions, we can expect growth of up to USD 4.4 billion compared with the current USD 2.8 billion — Dmitry Krasnov, Director of the Department of Information Policy and Special Projects at the Ministry of Agriculture of the Russian Federation.

Engaging private investors

It is very important for us that commercial banks become interested in these projects […] Our participation will be a maximum of roughly 40%. We will definitely attract partners […] There is a separate IT-platform that unites all these centres — Nikolay Tsekhomskiy, First Deputy Chairman of the Management Board, Bank for Development and Foreign Economic Affairs (Vnesheconombank).

Creating information and service platforms

Without an information and service platform that will verify all the data on localization, temperature, and shelf life, our products with a high degree of processing will not have export potential […] This should be a state system because everyone should trust this information […] The state platform should really not be interested in selling a rate and not be interested in buying and selling goods — Andrey Gollandtsev, Chairman of the Board of Directors, Slavtrans-Service.

The material was prepared by the Russian news agency TASS