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Rebuilding Russia

21 Feb 2013
The Russian government is placing the development of its fishing industry high on the agenda

The Russian government is placing the development of its fishing industry high on the agenda

The Russian government is placing the development of its fishing industry high on the parliamentary agenda this year as it faces the massive task of turning record catches into record profits as part of a major rebuilding process. Adrian Tatum reports.

The last decade has been all about reform in the Russian fishing industry in a bid to improve transparency and effectivness in sector that has always been a challenge to manage and legislate.

But now there appears to be real progress on the horizon. Last year, for example, saw the Russian government launch a new programme, The Concept of Fisheries 2012, which is set to significantly change the country’s fishing industry, by reducing state control and increasing finance available to fish farms to produce higher value products.

The new system will see plans abolishing the VAT refund exporters recieve when exporting fish, as well as eliminate privileges on payment of the fee for the use of aquatic resources for companies that export raw materials abroad.

Another major development is to create fish stock exchanges, which will allow the state to control the price of fishery products and to fight the export-commodity nature of the fishing industry in Russia.

“In the current situation Russia is importing fish products of high added value, and exports from Russia are only fresh or chilled fish, that is actually raw, losing significant amounts of value,” the Chairman of the State Duma Committee on Natural Resources, Environment and Ecology, Vladimir Kashin said last December.

Coastal regions
There are also plans to support the coastal regions of the Russian Federation for the development of fisheries. The first such programme was adopted in the Sakhalin region and provides assistance to fishermen of $10.4 billion for the year. Similar programmes will soon be adopted in all the coastal regions of the country.

Russian Sea, Russia’s largest fish producer and processor, is planning a significant increase in volumes of fish hatchery in Russia in the coming years

But these are only a few examples of change in a whole host of reforms and developments which comes as no surprise considering the country’s size and task in terms of managing the fishing industry. Last year, Russian companies caught almost 4.3 million tonnes of fish, which was the biggest catch in the last 10 years. This is expected to increase to 4.5 million tonnes per year until 2020. The coastline of Russia is the forth largest in the world with an EEZ of 7.6 million km2 which includes 12 seas in three different oceans and over two million different rivers.

But the size of the country’s waters also attracts much illegal fishing which has proven extremely diificult to police. In 2011, Russian government figures said that losses to the Russian fisheries industry reached about $700 million because of poaching in its seas. For example, about 70% of the crab and urchin roe imported to Japan came from Russia. However, Russian government officials estimate that one-fifth of the crab and one-sixth of the urchin roe sold to Japan was caught by poachers. Although Russia is now strengthening efforts at resources management, poaching remains rampant and Russia has asked relevant nations to sign agreements to prevent poaching and smuggling of illegal catch. While such an agreement has already been signed with South Korea, negotiations are continuing with China. Japan signed an agreement in September at the Asia-Pacific Economic Cooperation forum meeting held in Vladivostok that says that only crab that has passed through proper procedures can be imported to Japan. Andrey Krainy, the head of Russia’s federal fisheries agency, says, “Seafood caught by poachers will have nowhere to go.”

Russian Prime Minister Dmitry Medvedev says, “One of the priority tasks for managers of the fishing industry and fish inspectors is to curb illegal fishing and exporting of aquatic bio-resources and products from them. It is clear that we have not yet established an effective system for countering poaching, but we are trying to set it up with varying degrees of success.

“Our agreements with other states are an important part of our work. At present, we have already signed agreements with several countries of the Asia-Pacific region (the Republic of Korea and the Democratic People’s Republic of Korea). Our anti-poaching agreements with China and Japan are ready for signing. Last year, we reviewed one such draft with China.”

Export
A large percentage of Russian catches ends up destined for export, so much so that this has attracted criticism in some parts as only limited amounts of Russian fish finished up in Russian households.

Konstantin Zgurovsky, coordinator of the WWF Russian Marine Programme says, “The Far East is the core fishing area in Russia. Over 60% of the total national harvest comes from there. However the national customers seldom see the Far Eastern fish.Only the catch that cannot be sold abroad is transported then to the Russian ports. This is far more simple and far more profitable, as it helps to avoid taxes and all the bureaucratic hustle with paperwork at the entrance to the port, to accumulate some of the profits ‘outside the borders’.”

Russia is now pursuing a policy of comprehensively rebuilding its fisheries industry by reviewing every step, from resources management to processing and distribution. Late last year the sector was the subject of a parliamentary discussion which included Dmitry Medvedev.

“The importance of this industry is beyond any doubt. Obviously, this country abounds in water resources. We have long-standing traditional fishing centres, some of them in the Far East and the North. Needless to say, we must do all we can for their proper development. The fishing industry influences adjacent spheres, such as the food and processing industries and commercial shipbuilding,” he told Parliament.

The government sees huge potential in aquaculture, but development has been limited.

“Further production growth is largely linked with the development of aquaculture. Russia has enormous potential in this respect – I’m referring to the length of our coasts and areas with internal freshwater reservoirs. That said, we need a modern regulatory base for this. We must discuss how to settle ownership rights to aquaculture objects, and how to allot and register fish-breeding places.”

Survival vs development
Minister of Agriculture, Nikolai Fyodorov says a focus is needed on the root of the problems in the industry before improvements can be made, “What matters is that the fishing industry is dominated by the tactics of survival rather than a strategy of development. A positive trend is guaranteed only by one of its segments – fishing. Meanwhile, the industry includes no less important components, such as aquaculture, the fishing fleet, ports, depots, marketing facilities and logistics. We must intensify and complete the process of forming a modern and effective normative base for this industry.

“It is our consolidated position that fishing vessels should be allowed to process and reload water biological resources during coastal fishing operations for reasons of economic expediency and navigation safety. These operations are currently prohibited by the existing legislation, which restricts the companies operation, in particular with legal trade and job creation.”

He continued, “The struggle against poaching calls for amending the draft law, improving the legislation on fishing and on the preservation of water biological resources, and approving harsher criminal and administrative liability for offenders, and is aimed at hindering illegal fishing and the illegal trade of fish products, and at improving monitoring mechanisms for the protection of water biological resources.

Ensuring the safety of fish products is an important and topical issue, which calls for amending the legislation. We are focused on reducing administrative obstacles for businesses that transport, sell, export and import fish products, on the condition that they ensure the nutritional safety of their products. We believe that we need a simpler system to monitor the movement of goods, which must be accompanied by a copy of the fishing permit. This is the dominant global practice, an important factor. Some agencies and departments resist this proposal, which is an outdated approach that could breed corruption.”

He went on to say: “The ‘weakest link’ in our system is the national fish processing sector, including the Russian fishing companies’ financial and economic dependence on foreign firms, in particular fish processing enterprises. Viewed against the backdrop of positive growth in the Russian fishing industry, the fish processing sector is dragging its feet in terms of profitability. For some reason, the sector went off the radar of the government and legal regulators. Because of the incentives offered to fishing companies, such as the transfer of VAT from fishing to processing companies, people can buy very good and expensive fish, which fishing companies provide at very low prices. Given in-process losses due to growing energy prices and other production costs, the fish processing companies are unable to invest in development, which is why their production equipment is, to a large degree, depreciated – experts estimate the figure to be as high as 90%.”

Andrei Krainy, head of the Federal Agency for Fishery believes success lies with improving the regulatory base. “We have untapped potential to increase catches. We need this, because we have to feed our people, it is a strategic resource involving geopolitics, medicine, pharmaceuticals and so on. But the thing is that we have problems in every basin where we have reserves (in the Far East, in the north and in the west, in the Azov and Black Seas). All of them are connected with outdated infrastructure and a lack or poor state of logistics. We should not be discussing the laws in this case, but rather by-laws and government instructions. Take, for example, the Azov-Black Sea basin – 250,000 tonnes of anchovy and sprat is a huge and very cheap resource (three to seven roubles per kilo). What is the problem? The Azov-Black Sea basin does not have a single fishing port or refrigeration facility: Novorossiisk is a transport port and Sochi is closed. As a result we are leaving these seas for the Georgian and, according to the geography, Ukrainian and Turkish fishermen. We should consider building at least one port in Temryuk, and better still, another port in Utrish.

“The Caspian [the Astrakhan Region Governor is present here] has 90,000 tonnes of sprat and 20,000 tonnes of mullet: this means jobs and tasty fish that is healthy for the population. The problem is that there are no ships left to work in the Caspian. It is a cheap resource that fishermen cannot afford to use. We should see what can be done to build ships under leasing schemes and hand over these ships to the fishermen to enable them to use these resources.”

Problems
He went on to talk about another major issue halting progress. “And there is another problem: network retailers do not want to work with cheap resources for the simple reason that, given the average profit margin of 30%, whatever they might be telling you, 30% of Norwegian salmon represents a totally different amount of money than 30% of Caspian sprat. As a result, the networks are shutting down.”

He believes, there are two solutions:

“One way is to create an alternative retail system, like the Okean chain of stores that existed in the USSR. Of course, it should not be state-owned, it should be privately owned, but business needs help and this is up to the heads of regions and mayors of major cities. Today there is a ban on processing and freezing fish caught off the coast. As a result, considering that under the Administrative Code, fishermen are fined millions of roubles, we may lose 500, 000 tonnes of catches – not increase, but lose – and lose the fishing villages, onshore processing, all under the slogan ‘Russian fish to the Russian shores.’ So, this is important. Next, amendments must be introduced to Government Resolution 560 to introduce notification-based crossing of the 12-mile zone. That would call for changes to the law on the state border, the law on the procedure of entry and exit, but that rule worked brilliantly in the USSR. Fish do not know borders.”

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The Russian government is placing the development of its fishing industry high on the agenda A large percentage of Russian catches ends up destined for export

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