Government announcing stick and carrot plan for foreign investors

February 27, 2008 12:28

Shares of Russian fishing companies belonging to foreign investors will either be bought back by Russian holders or by the state, according to head of Russia's State Fisheries Committee Andrey Krainy as quoted by Kommersant.

The leader of the nation's fishery industry thinks that the foreign interests will be motivated to sell their shares by restricted access to the aquatic biological stocks (according to the new legislation, capture quotas will be given to 100%-Russian-owned companies only).

According to Andrey Krainy speaking at the meeting with the fishermen in Khabarovsk, the Chinese giant Pacific Andes has received 700 million USD as a government loan aimed at buying up of shares of Russian fishing companies. As a result, the Chinese company has been purchasing shares only of those Russian companies who hold Alaska pollock capture quotas. Simultaneously, they are building an APO processing plant to give jobs to 30,000 people. Krainy astonished the audience with the figure equal to population of a small town in the Russian Far East. Every year the Russian fishermen harvest ca.3.3 million metric tons of all fish species, including ca.1 million tonnes of Alaska pollock. Andrey Krainy has noted that now the Chinese businesses control 50% or 500,000 tonnes of Russia's Alaska pollock harvest and Moscow retailers have been increasingly offering APO fillets labeled as "made in China". In the meantime, Alaska pollock in that region is harvested only in the Sea of Okhotsk and in the Bering Sea and the fish which is most probably of Russian origin has been exported to China for processing and then reexported back to Russia.

In order to regain control of the fishery, participation of foreign companies in authorized capital of Russian fishing companies should be limited, head of the nation's fishery industry thinks. According to the new fishery legislation, as of 1 January 2009 companies' capture quota shares will be approved for ten years subject to no foreign stake in the holder's authorized capital. In other words, foreign companies will have no access to capture quotas and therefore no right to fish in the Russian waters. Shares of existing Russian fishing companies belonging to foreign investors will either be bought back by Russian holders or by the state. Through the year 2008 the Government of the Russian Federation will approve a number of specific legislative acts enforcing the above condition.

On the carrot side, the Committee is going to encourage foreign investments into onshore fish processing. The Russian authorities think it could be a profitable business both for the foreign operators and for the Russian economy.

Industry feedback

At the same time, some insiders of the Russian fishery industry are skeptical about the Committee's idea to dismiss foreigners from the Russian waters because foreigners often own Russian companies via third parties or man of straw companies. Thus, officially those Russian companies have no foreign co-founders, but they are actually owned by foreigners.

According to Commercial Manager of OOO Interrybflot (ltd) Timur Kirillov, establishment of fish processing plants backed with foreign capital will also bring a number of problems. One of them will be connected with the labour costs which are considerably higher in Russia, than in China, for instance. Therefore, although the quality of fish products processed in Russia can be much higher than in China, the Chinese plants can offer more competitive prices on the market.

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