SkÃrslan Kynnt Victor Hjort

Survey of the Fish Industry in Russia: 

Survey of the Fish Industry in Russia Presentation 02 June 2006 Reykjavík, Iceland Victor Hjort

Terms of Reference: 

Terms of Reference Harvesting Farming Imports Raw materials Production/Processing Fleet On-shore plants Exports Markets I n v e s t m e n t s Equipment Distribution Quality The legal framework Insights Consumption Retail/Catering/ restaurants

Slide3: 

The Team + IFC

Slide4: 

Statistics & Data Sources Accuracy and relevance Annexes

FISH HARVESTINGOne of the world’s 10 top producers: 

FISH HARVESTING One of the world’s 10 top producers

Slide6: 

Fish and seafood harvest in 1999-2004 ( million tonnes) Source: Rosstat

Slide7: 

Source: FAO *Mackerel catches: Atka mackerel included The main species (in 2003, '000 tonnes)

Slide8: 

Fish and seafood harvest by zones in 2003, % Source: VNIERKH

Slide9: 

Primary fish production (in ‘000 tonnes) * Estimate 5 MAIN FISHING ZONES/ BASINS

Slide10: 

Total Allowable Catch (TAC) – Utilisation of resources (2003) Source: VNIERKH

Poaching: 

Poaching “Over 75% of Russian Far East seafood smuggled” Intrafish, 22.09.05 “Russia, South Korea mull co-operation to fight illegal fish trade” Intrafish, 28.09.05 “Russians admit grand-scale fishery fraud –Groups of fishermen in north- west Russia admitted they fish much more cod than their quota allow” Intrafish, 19.08.05 “Illegal cod fishing a growing problem in Barents Sea” Intrafish, 12.08.05

THE NEW QUOTA SYSTEM: 

THE NEW QUOTA SYSTEM The Federal Law “on Fishery and Conservation of Aquatic Biological Resources” No.166-FZ of 20 December 2004 (the law on fisheries) Quota auctions (2003) - Allocations based on 5 year track record Quotas used less than 50% over 2 years are withdrawn and reallocated through auctions Auctions for new fisheries Resource fees introduced Multiannual quotas of at least 5 years (2004)

Developments: 

Developments Simplification of quota procedures - less species under TAC (in the pipeline) Amendment to the law on Fisheries allowing quota transfers (in the pipeline Quotas follow companies being bought up - number of company mergers on the increase New legislation to remove tax barriers between 12 mile zone and EEZ Future quota allocations for more than 5 years?

Key issues : 

Key issues Quota Transfers Illegal fisheries (poaching) Better use and better management of fish stocks in the Russian EEZ? Better fleet management? Consolidation of the fishing industry? Degree of foreign ownership?

FISH FARMING Strong potential?: 

FISH FARMING Strong potential?

Dynamics of Russian fish farming (1991-2003, ‘000 tonnes) : 

Dynamics of Russian fish farming (1991-2003, ‘000 tonnes) Source:Victor V. Ivin, Institute of Marine Biology,Vladivostok

Species: 

Species Freshwater culture Carp, rainbow trout, whitefish, sturgeon. Mariculture Molluscs, seaweeds and other organisms. Main species: mussels, oysters, scallops and kelp. Marine farming of finfish is not widely developed but can become more important.

Fish feed imports (tonnes): 

Fish feed imports (tonnes) Source: GTK

Fish farming equipment: 

Fish farming equipment Today: out-dated and non-specialised equipment The need /demand for foreign equipment is there. Price? Second-hand equipment from abroad. (2004:4.3 million USD) Demand for: equipment for aeration isothermal tanks for live transportation feeding equipment basins

Key issues : 

Key issues Production target 2006: 600 000 tonnes? Legislation - Draft law on aquaculture in the pipeline New equipment? Financing and foreign investors? Competition from other fish farming countries? Market demand?

THE FISHING FLEETOld and outdated or dynamic? : 

THE FISHING FLEET Old and outdated or dynamic?

Key figures: 

Key figures Beginning of 2005: 5 531 units with a total capacity of 4 939 600 hp Structure of the larger fleet by type of vessel Source: Russian maritime register 70 % of total processing capacity is on-board

Old and Outdated?: 

Old and Outdated? Table 9: Age of fishing vessels, year end Age of fishing vessels, year end (number of large vessels over 55 kW) Source: VNIRO

Equipment & Manufacture: 

Equipment & Manufacture Processing technology 70% share of capacity declining, partly due to age – 25% domestic origin Imports 2004: 4.3 million USD (Germany, Korea, Japan, DK, N, ISL) Fishing gear – Competitive domestic net industry Asian and European suppliers Coastal vessels Potential developments

Key issues : 

Key issues Ship-owners confident in future? Potential for modernisation/renewal? Demand for new processing technology Distant fisheries costly to operate Financing and foreign investors?

TRADEA Big Player: 

TRADE A Big Player

Slide27: 

Seafood exports from the Russian Federation ( '000 tonnes ) Source: Vnierkh

Transhipments(fish exports, ‘000 tonnes): 

Transhipments (fish exports, ‘000 tonnes) Source: GTK and Rosstat

Major export markets (%): 

Major export markets (%) Source: Rosstat

Booming Imports: 

Booming Imports Source: State Customs Committee (GTK) * Preliminary data

The major import sources: 

The major import sources Norway - 36.0% Great Britain - 7.1% Mauritania - 5.6% Iceland - 4.8%

The Trade Regime: 

The Trade Regime Import regulations - Import requirements - Practical aspects - Current tariffs/future tariffs following WTO accession - ”Imports” of fish caught by Russian vessels - Import measures - The case of Kaliningrad - FEZ

Slide33: 

Import duties

The Trade Regime cont.: 

The Trade Regime cont. Export regulations - Export tariffs Declared aim: More of the Russian seafood harvest to be processed in Russia! Higher degree of processing of Russian seafood exports!

Future developments in trade flows: 

Future developments in trade flows Exports Asia? EU? Norway? The domestic market? Processed seafood? Imports The example of herring? New species and new suppliers? Retail sector? Globalisation!

Key issues: 

Key issues More Russian seafood processed by Russian on-shore plants? Influence on the trade regime? WTO-membership? More stable trade regime Free Trade Agreements ?

BOOMING MARKET: 

BOOMING MARKET

Slide39: 

Auchan, Moscow, March 2005

Slide40: 

Source: RetailPlanet

Slide41: 

Source: RetailPlanet

Slide42: 

Source: Rosstat Annual per capita consumption of seafood Kilo Year

Consumption of seafood in Russia per capita in 2002 (round weight, kg): 

Consumption of seafood in Russia per capita in 2002 (round weight, kg) Source: FAO Nutrition Database

Slide46: 

Key issues Continued economic growth? Continued growth in retail? Better distribution? Regionalism? More variety? New products, new suppliers?

PROCESSINGSMEs show the way: 

PROCESSING SMEs show the way

Total production(source Rosstat): 

Total production(source Rosstat)

Structure of production capacities 2004: 

Structure of production capacities 2004 Source: Rosstat

SMEs-Rapid growth: 

SMEs-Rapid growth 4 113 small-scale enterprises in the fisheries sector in 2004 30% growth since 2003 Small-scale operators >70% of the total companies registered

Key issues: 

Key issues Increased processing at SMEs Retail chains change the parameters –raw material sourcing, deliveries to retailers, the regional focus of the retailers On-board versus on-shore production Closer co-operation with foreign partners Foreign investment?

FOREIGN INVESTMENTSTake off?: 

FOREIGN INVESTMENTS Take off?

Access to quotas and the fleet: 

Access to quotas and the fleet Pacific Andes/Tralflot Archangelsk Trawler Fleet Other companies for sale (www.dalryba.ru) Quota transfers Distant waters

On-shore Processing and Distribution : 

On-shore Processing and Distribution Demand for technology by Russian investors (ROK1, Ledovo, Viciunai) Processing partnerships Foreign investments – existing plants and greenfield

Investment drivers in the processing industry in Russia: 

Investment drivers in the processing industry in Russia Avoiding high customs duties and other trade barriers Positioning the production close to the growing consumer markets Ability to react quickly to clients’ demands Reducing transport logistics and costs Saving on energy and other infrastructure costs Access to distribution throughout Russia Lower (but rising) labour costs

Slide56: 

Starfrost Director Dave Pearson says: "The frozen food market in Russia has changed dramatically over the past decade. We believe there is tremendous potential to work with Russian food manufacturers to meet the growing demand for value-added frozen products and convenience foods."

FLEET: 

FLEET New coastal vessels On-board processing – more potential? Modernisation (equipment, Fishing gear)

FISH FARMING: 

FISH FARMING Potential: inland/marine Trout farming Karelia, Moscow, St. Petersburg Salmon hatcheries Equipment Feed

Facilitating Private Investment: 

Facilitating Private Investment Transparency of the fish industry Special Economic Zones, government and regional programmes Russian banks more open to SMEs Financial institutions Direct investments Venture capital

Thank you for your attention: 

Thank you for your attention