far east regions for eef-2017 east russia no. 8 | july ... · as alexander galushka, minister for...

Large grain terminal will be built in Primorsky by ASEZ resident

New Southern Kurils ASEZ Due in Far East

Oil Filters to Be Produced in Khabarovsk ASEZ

Far Eastern Investment Showcase

Support Center for Chinese Investors in FEFD under Construction

1st Coal Batch Shipped for Export in Beringovsky ASEZ

Free Port territory expanded on Sakhalin

LNG Export Terminal under Design in Primorsky Krai

Far East regions preparing for EEF-2017

How a Free Port Resident Entered the Dry Construction Material Market

Tax Concession Law for Tourism Industry Adopted

Russia and China to expand collaboration in the Far East

85 new enterprises to be established in the region by the end of 2017

Mountains of goldGold Miners Establishing New Infrastructure and Growth Points in Macroregion

Maxim Basov, CEO of "RusAgro" on business development in the Far East

Investment passport: Sakhalin Region

EAST RUSSIA ECONOMIC AGENDA

No. 8 | JULY 2017

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EASTERN RUSSIA ECONOMIC AGENDA

6–7 September 20176–7 September 20176–7 September 2017

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EVENTSJULY 2017

Russian President Vladimir Putin and President of the People's Republic of China Xi Jinping signed a joint statement between the Russian Federation and the People's Republic of China on further intensifying their comprehensive partnership and strategic cooperation, which also mentions cooperation in the Russian Far East.

The Russian and Chinese parties will use their cooperation experience under the mech-anism of the Intergovernmental Russian-Chi-nese Commission for Cooperation and Devel-opment of the Far East and the Baikal Region of the Russian Federation and the Northeast of the People's Republic of China. The coun-tries agreed to expand the scope and areas of interregional interaction and facilitate the implementation of major joint projects, in-cluding those under the mechanism of the Russian-Chinese Investment Fund for Region-al Cooperation Development.

Russia and China will facilitate imple-mentation of transport and infrastructure projects. These include construction of the railway bridge Nizhneleninskoe-Tongjiang, the motorway bridge Blagoveshchensk-Hei-he, and the creation of the economic corri-dor Russia-China-Mongolia.

Cross-border freight was a standalone issue. The signed statement expresses the

need to take mutual measures to improve the conditions of shipping goods by the Trans-Siberian Railway to Europe and to boost the international transport corridors (ITC) Primorye–1 and Primorye–2.

During the talks, the parties' attention was drawn to the development of Bolshoy Ussuriysky Island. The two countries will continue establishing the Bolshoy Ussuri-ysky-Heixiazi Island checkpoint. For the is-land's development, a cooperation mecha-nism will be set up to provide for environ-mental actions.

The joint statement also stresses the countries' readiness to strengthen Rus-sian–Chinese cooperation in the Arctic Re-gion. This involves supporting interaction between Russia and China's competent au-thorities, scientific research organizations, and ventures in the Northern Sea Route's development and usage, joint scientific ex-peditions, energy resource exploration and

development, Arctic tourism, and environ-mental protection.

One of the documents signed in the presence of the heads of state was a memo-randum on cooperation in the development of the Primorye–1 and Primorye–2 ITCs. It was signed by Alexander Galushka, Minis-ter for Development of the Russian Far East, and He Lifeng, Chairman of China's Nation-al Development and Reform Commission.

Under the document, the parties plan to help create the necessary infrastructure for ITC development, including roads and rail-ways, ports, airports, checkpoints, and com-munication systems. Measures will also be taken to simplify procedures, reduce the costs and time of the customs clearance of transit cargo. Moreover, the parties intend to increase freight traffic, strengthen cooper-ation between the ports of the Russian Far East and China, support construction of in-ternational logistics parks, and stimulate the development of cross-border e-commerce.

Project implementation will be coordi-nated by an ad hoc interagency task force. It will prepare a project feasibility study, agree on the terms of ITC investment project im-plementation, study freight base formation, and improve ITC regulation mechanisms. The transport corridors will be managed and op-erated by a joint management company.

FAR EAST AS THE PLACE WHERE THE ACTION IS ATRussia and China Agree to Expand Collaboration in the Far East

He Lifeng, Chairman of China's National De-velopment and Reform Commission, and Alex-ander Galushka, Minister for Development of the Russian Far East.

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FAR EASTERN NEWS

TAX CONCESSION LAW FOR TOURISM INDUSTRY ADOPTED

On July 19, Russian President Vladimir Putin signed the law "On Amendments to Chapter 25, Part 2, of the Russian Federation Tax Code Regarding Sponsorship of Develop-ing Tourism and Recreation Activities in the Far Eastern Federal District". Under the new law, from January 1, 2018 until December 31, 2022, organizations engaged in tourism and recreation activities in the Far East will re-ceive a tax concession in the form of a zero income tax rate. The list of activities under the bill will be established by the Russian Federation Government. Tax preferences are expected to affect hotels first.

THE TERRITORY OF THE FREE PORT HAS EXPANDED

Beginning July 1, the territory of the Ug-legorsk District, Sakhalin Region, has been included within the Free Port of Vladivo-stok. 12 new investment projects are due for launch in the district. Specifically, current coal transshipment terminals will be up-graded and new ones built, the capacities of current coal producers will be increased, and new production facilities will be created. All this will foster the Russian coal market and increase its exports to the Asia-Pacific.

As Alexander Galushka, Minister for De-velopment of the Russian Far East, com-

mented, extending the Free Port regime to Uglegorsk District will attract an addition-al RUB 65B in private investment to the region.

NEW SOUTHERN KURILS ASEZ DUE IN FAR EAST

The government subcommittee on in-vestment project implementation in the Far East has approved the establishment of a new Sakhalin Region ASEZ — South-ern Kurils. The relevant documents will be submitted to the Russian Government in the near future.

The decision to create a Kuril ASEZ was based on the initiative of a new investor, the fish works Ostrovnoy, to build a man-ufacturing complex for high-quality frozen and chilled fish products and preserves on Shikotan island. The cumulative project in-vestment would amount to approximately RUB 5B. Produce will be supplied both to the domestic Russian and the Asia-Pacif-ic markets: Japan, China, South Korea, etc. Thanks to the new production launch, a thousand new jobs will be created on the island.

According to the RF Ministry for Devel-opment of the Far East, creating a Kuril ASEZ is envisaged in the federal target program Socio-Economic Development of the Kuril Is-lands in 2016–2025.

Organizations engaged in tourism in the Far East will receive tax benefits

5 billionrubles will be invested in the project on Shikotan by an anchor resident of the

ASEZ Southern Kurils

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EVENTSJULY 2017

THE CENTER FOR ATTRACTING AND SUPPORTING CHINESE INVESTORS IN FEFD IS UNDER CONSTRUCTION

An agreement has been signed between the Far Eastern Agency on Attracting Invest-ment and Supporting Exports and the China Overseas Development Association, which provides for creating a joint Center for At-tracting and Supporting Chinese Investors in the Far East.

The Center will assist in attracting direct investment from China to the Far East and support Chinese entrepreneurs implement-ing projects in the macroregion, by working on a one stop-shop principle. The Center's offices will be opened in Vladivostok and Beijing until October 1 this year.

In addition, under the agreement, the parties agreed to work together in raising the awareness of the Chinese business com-munity of the Far East, including its invest-ment opportunities, and do joint research on new opportunities and growth points in bi-lateral Russian-Chinese investment cooper-ation.

THE FAR EASTERN MINISTRY IS CREATING A PLATFORM FOR DISCUSSING INITIATIVES TO DEVELOP THE FAR EAST

The Ministry for Development of the Rus-sian Far East is organizing a standing colle-gial body — a commission on law enforce-

ment practices and legislation improvement in the field of the Far East advanced devel-opment. This commission will include rep-resentatives of ASEZ residents and the Free Port of Vladivostok, leading experts and rep-resentatives of science and public organiza-tions, the management of Institutes for Far East development. The main goal is to joint-ly and practically look at all issues in order to make it easy and comfortable for investors to work within these regimes, to sectionize law enforcement practices and to receive feed-back from business people.

AN INTERNET SERVICE FOR OBTAINING AN ELECTRONIC VISA FOR ENTRY INTO THE FREE PORT HAS BEEN DEVELOPED

The Ministry of Foreign Affairs of Russia has developed a specialized resource for ob-taining an electronic visa for foreigners en-tering the Free Port of Vladivostok's border checkpoints. To receive e-visa, it is necessary to fill in a special on line application form and attach a photo. No other documents (in-vitations, confirmations, etc.) are required for visa processing. The visa is issued free of charge, a consular fee is not charged. The application form must be filled in no earlier than 20 days and no later than 4 days before entrance to Russia. A response on e-visa issue or refusal will be received within 4 days. The status of application processing can be ob-

served directly on the website in an individ-ual's personal account.

Type of visa — single entry business, tour-ist or humanitarian. The visa is issued for a period of up to 30 calendar days with an al-lowed period of stay no longer than for 8 days.

The service operates in two languages: Russian and English. In the future, develop-ers plan the use of Chinese and Japanese.

Foreigners will be able to use the e-visa for arrival at the Free Port of Vladivostok as early as from August 1. The first two check-points in Vladivostok which will start work-ing according to the new scheme are the seaport and Knevichi airport.

The list of foreign countries whose citi-zens can use the e-visa was approved by the Government of the Russian Federation Exec-utive Order. It includes Algeria, Bahrain, Bru-nei, India, Iran, Qatar, PRC, DPRK, Kuwait, Mo-rocco, Mexico, UAE. Oman, Saudi Arabia, Sin-gapore, Tunisia, Turkey, Japan.

countries can take advantage of the

e-visa

18 Citizens of theEntry with an electronic visa will be possible in Vladivostok International Airport from August 1, 2017.

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The Deputy Prime Minister said that 637 investment projects worth 2.11 trillion ru-bles were declared for implementation in the Far East of the country. "Vladimir Vlad-imirovich, we fully realize that these proj-ects still need to be turned into developed enterprises, but this work is also being car-ried out", the Deputy Prime Minister said. Ac-cording to him, "until the end of the year, 85 enterprises will be put into service". And he added one more figure: by the end of 2017, "the amount of private funds already invest-ed in the economy of the Far East will exceed 115B rubles, and 5.5K jobs will be created".

According to the Ministry for Develop-ment of the Russian Far East, for a year and a half 42 enterprises were put into service in the macroregion, the total volume of in-vestments made up 12B rubles, and 2K jobs were created.

The large-scale projects that have al-ready been put into service within the Ad-vanced Special Economic Zones, the Free

Port of Vladivostok or by subsidized infra-structure construction are, as known, the following:– Inaglinsky surface coal mine of the MPP

of the same name, which is being built by Kolmar in Yakutia and which already produces 2M tons of coal per year. The total investment in the project is 5.95B rub les.

– TechnoNIKOL plant near Khabarovsk which produces rockwool. Investments — 2.8B rubles.

– Commercial pig units of Primorsky Bacon. Investments — 1.8B rubles.

– Feed-milling plant Mercy trade in Pri-morsky Krai. Investments — 815M rubles.

– Industrial park Aviapolis Yankovsky in Pri-morsky Krai. Investments — 590M rubles.

– Greenhouses of JGC Evergreen in Khabarovsk. Investments — 560M rubles.

– Water park in Kamchatka. Investments — 530M rubles.

Among the companies, which are expect-ed to be commissioned in the near future (rather than in the autumn of this year) - the Natalka deposit in Magadan Region (67B ru-bles worth of investments), the dry lumber plant of RFP Group in Amursk (326M rubles). Also, by the autumn, is planned the commis-sion of the lumber plant Asia Les, LLC (in-vestments worth 6.5B rubles), the marble processing plant in Primorye (500M rubles), the diamond cutting plant KGK (530M ru-bles) and a number of smaller objects.

By the end of the year, it is planned to commission "Mercy Trade" commercial pig units in Sakhalin (2.3B rubles), hous-ing blocks for employees of "Zvezda" ship-building yard in Primorye (1.5B rubles) and a number of other projects.

On July 17, Deputy Prime Minister Yuri Trutnev, the presidential en-voy in the Far Eastern Federal Dis-trict, reported to the President of Russia Vladimir Putin on the con-struction progress of new enter-prises in the Far East.

CONSTRUCTION SITEBy the end of 2017, 85 new enterprises will appear in the Far East, established thanks to new measures of state support

TRANSFERRED ENTERPRISES BY TYPE OF ACTIVITY

SHARE OF HIGH-TECHNOLOGY PROJECTS (ACCORDING TO VOLUME OF INVESTMENT)

19% – high-technology

projects (2.75 billion rubles)

BY VOLUME OF INVESTMENT

11% – other

industries (1.9 billion

rubles)

9% – transport

and logistics (1.1 billion

rubles)

35% – manufacturing (5 billion rubles)

45% – agriculture

(6.5 billion rubles)

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CONSTRUCTION OF THE HEAT- AND SOUND-INSULATING MATERIALS PRODUCTION PLANTTECHNONICOL DV, LLCInvestment volume — 2.8B rubles

Enterprises commissioned and under construction in the Far East

ROTARY CUT PRODUCTION PLANTAMURSKAYA LESOPROMISHLENNAYA KOMPANIYA, LLCInvestment volume — 4.7B rubles

ASEZ KHABAROVSK ASEZ KOMSOMOLSK

ASEZ MIKHAILOVSKY

FEED-MILLING PLANTMERCY TRADE, LLCInvestment volume — 815M rubles

PIG-BREEDING COMPLEXPRIMORSKY BACON, LLCInvestment volume — 1.8B rubles

ESTABLISHMENT OF POLY THENE PIPES PRODUCTION PLANTKHABAROVSKY TRUBNY ZAVOD, LLCInvestment volume — 1.5B rubles

GREENHOUSE COMPLEXSOVKHOZ TEPLICHNY, JSCInvestment volume — 637M rubles

GREENHOUSE COMPLEX FOR YEAR-ROUND VEGETABLE PRODUCTIONJGC Evergreen, LLC Investment volume — 500M rubles

PLASTIC PACKAGING INTERMEDIATES MANUFACTURINGPRIMORSKY ZAVOD EUROPLAST, LLC Investment volume — 212M rubles

CONSTRUCTION OF MPP AT INAGLINSKY AND DENISOVSKY COAL DEPOSITSKOLMAR COAL PRODUCERInvestment volume — 28.5B rubles

CONSTRUCTION OF COMMERCIAL PIG UNITS AND FEED-MILLING COMPLEXRUSAGRO-PRIMORYE, LLCInvestment volume — 15,8B rubles

FEED-MILLING COMPLEX CONSTRUCTIONMERCY TRADE, LLCInvestment volume — 7.3B rubles

ESTABLISHMENT OF AN ENTERPRISE FOR CEREALS CULTIVATION, MILK AND CATTLE MEAT PRODUCTIONGREEN AGRO-SAKHALIN, LLCInvestment volume — 4.7B rubles

PRODUCTION OF AUTOMOBILE CABIN AND AIR FILTERSPRADA PROMFILTR, LLCInvestment volume — 55M rubles

CONTINUOUS BURNING BOILERS PRODUCTION FACILITYSAHA LIPSNELE, LLCInvestment volume — 31M rubles

POLYMER INSULATORS MANUFACTURINGEnergo-Impuls+, LLCInvestment volume — 7M rubles

ASEZ IP KANGALASSY ASEZ YUZHNAYA

ASEZ NADEZHDINSKAYA ASEZ SOUTHERN YAKUTIA

GREENHOUSE COMPLEX FOR YEAR-ROUND VEGETABLE PRODUCTIONSAYURI, LLCInvestment volume — 95M rubles

This sign indicates working enterprises

ACRYLIC COLORS PRODUCTIONBIGE, LLCInvestment volume — 32M rubles

WATER RIDES COMPLEX AQUAPARKSOLE PROPRIETOR VETCHINOVAInvestment volume — 525M rubles

CONSTRUCTION OF MPP AT NATALKA GOLD FIELDPOLUS, PJSCInvestment volume — 88B rubles

BAKERY PRODUCTS PRODUCTIONBELKHLEB, LLCInvestment volume — 18M rubles

ASEZ BELOGORSK INFRASTRUCTURE SUBSIDYASEZ KAMCHATKA

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LARGE GRAIN TERMINAL WILL BE BUILT IN PRIMORSKY BY ASEZ RESIDENT

The resident of Mikhailovsky ASEZ, LLC Chernigovsky Agroholding, intends to build a grain terminal as a part of a grain receiving, cleaning and drying complex with a volume of one-time storage of 20K tons. The volume of planned investments is more than 500M rubles.

The company intends to cultivate soy-beans, corn and barley. The size of land planned for cultivation of these crops is 3.4K hectares. Currently, the residents of the Mikhailovsky ASEZ are seven companies that implement projects with investment vol-umes exceeding 45B rubles.

AN IT-ENTERPRISE HAS BECOME A RESIDENT OF KHABAROVSK ASEZ

The IT-company Ipiton, a resident of the Khabarovsk ASEZ, intends to organize the pro-duction of modern software products for auto-mation of warehouses, logistics, trade teams, etc. The volume of investments in the project will amount to around 23.3M rubles. The main ben-efit for the investor from project implementa-tion in the ASEZ system is potential tax benefits. "In an IT company, the majority of costs come from the payroll fund. It is extremely import-ant to obtain the best conditions for tax deduc-tions in the framework of the ASEZ. This allows us to reinvest savings received into the busi-ness, thereby bringing IT products to the market more quickly for our customers", explains Vladi-mir Kontarev, the company's general director.

FREE PORT RESIDENT TO BUILD A NEW MARINA IN VLADIVOSTOK

The AquaStroy company intends to im-plement an investment project to create a pedestrian street and the Aquamarine mod-ern yacht port in Fedorov cove of Amur Bay in Vladivostok. The new marina will accom-modate cruise and sport yachts, and the cre-ated infrastructure will allow for the orga-nization of large-scale sporting events. It is assumed that construction will begin in the third quarter of 2018, and the volume of in-vestment is estimated at RUB 493M.

A COMMERCIAL KINDERGARTEN WILL APPEAR IN THE FREE PORT

The Transformatsiya company has signed an agreement with the Russian Far East Devel-

opment Corporation to implement a project to build a commercial kindergarten in the Nade-zhdinsky district of Primorsky Krai. A kindergar-ten for 120 children will appear as a part of the infrastructure of the housing complex under construction and will accept children between the ages of 1.5 and 7. The opening is scheduled for the fourth quarter of 2020.

A CHINESE MANUFACTURE OF BASIC GOODS WILL OPEN IN USSURIYSK

The SHUO DA company, a resident of the Free Port of Vladivostok, intends to build a factory in Ussuriysk for the production of ba-sic goods under the brand XING TIAN. The area of the factory will be 2,000 square me-ters. The manufacturing of building materi-als, footwear, television and radio equipment will be arranged there as well. The volume of investments in the project will be around RUB 19M. Completion of construction is scheduled for the second quarter of 2018, and at the moment, the investor is designing the facility and registering the trademark.

KORSAKOV WILL HAVE A REAR LOGISTICS CENTER

The resident of the Free Port of Vladivo-stok Eastern Freight Forwarding Company (Vostochnaya Transportno-Ekspeditorskaya Kompaniya) is implementing an investment project in Sakhalin for the organization of a logistics complex for the storage and trans-shipment of containers and general cargo in the city of Korsakov. The logistics complex will be designed for the development of the port, including the turnover of goods aimed at oil and gas projects on the shelf of Sakha-lin Island.

RESIDENTS OF ASEZ KAMCHATKA WILL BE PROVIDED WITH THERMAL WATER

On the site Zelenovskie ozerki (ASEZ Ka-mchatka), the reopening of thermal wells has begun. Thermal water obtained from these wells will be used by residents of the ASEZ — agro-industrial park and tourist facilities.

Wells were laid up more than 20 years ago. In total, eight wells will be developed, and investors expect that at least six of them will give the required result. The largest laid up well produces 12 liters of thermal water per second, which is enough to provide for

NEWS OF ASEZ AND THE FREE PORT OF VLADIVOSTOK RESIDENTS

is today's cumulative investment of

7 residents of the Mikhailovsky ASEZ

45 bln RUB

The volume of planned investments in the grain terminalconstruction is more than 500M rubles.

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EVENTSJULY 2017

the needs of 1–2 tourist bases. And the ther-mal water can be used not only for bathing and balneology, but also for heating the base itself.

THE FIRST COMPOSITE MATERIALS BOAT HAS BEEN PRODUCED BY A RESIDENT OF THE FREE PORT OF VLADIVOSTOK

The resident of the Free Port of Vladi-vostok, the Kompozitnoye Korablestroyeni-ye Company, presented the first boat of the Pacifico Adventure project 72 to the pub-lic. The investor is the only manufacturer of composite vessels in Primorsky Krai.

The company obtained the status of res-ident in May 2016. Investment in the con-struction of a shipyard for the production of civilian vessels will amount to RUB 36M.

A RESIDENT OF THE BERINGOVSKY ASEZ HAS SHIPPED A BATCH OF COAL FOR EXPORTThe Beringopromugol company (a subsidiary of the Australian Tigers Realm Coal) sent 40K tons of high-energy coal mined in Chukotka for export to China. More than one hundred thousand tons of solid fuel is stored up in the transshipment complex in the port. The next shipment is scheduled for early August.

The company conducts coal mining at the Fandyushkinskoye field. Every day, 8 coal cars with a capacity of 40 tons each arrive from the field to the port. The volume of invest-ments in the project amounted to 23.3M Aus-tralian dollars. For 4.5 months, the construc-tion of a winter road with a length of around 40 km was completed, office buildings and profile workshops were built, an analytical laboratory was delivered and installed. Ad-ditional equipment for the extraction and transportation of coal was purchased and de-livered to the site, personnel were recruited from among the local population and other regions of the Russian Far East.

ASEZ RESIDENT MODERNIZES A GREENHOUSE COMPLEX IN ANADYR

The resident of ASEZ Beringovsky, indi-vidual entrepreneur Pavel Makarov, intends to implement an investment project in the agricultural sector in Chukotka. The investor intends to modernize the three-story green-house complex in the region, introducing modern technologies of disinfection, ventila-tion and heating. The volume of the invest-ments will amount to RUB 1M, and the prod-ucts will be sold on the domestic market of the Chukotka Autonomous District.

KOREAN INVESTOR TO BUILD A HOTEL IN BOLSHOY KAMEN AND A GOLF CLUB IN VLADIVOSTOK

The LS Networks Korean company intends to invest more than RUB 596M in the con-struction of a hotel complex in the Bolshoy Kamen ASEZ. The hotel will be focused on the growing demand for hotel services associated with the implementation of the construction project of the largest commercial shipyard in Russia in the region. The project includes the construction of a hotel with 120 rooms, an apartment hotel with 80 rooms, guest houses and the necessary infrastructure: parks, sports grounds, restaurants, conference halls. Cur-rently, the project documentation is under de-velopment. The completion of work is planned for 2019.

Another project of LS Networks is the construction of a golf club in Primorsky Krai. On a plot of 300 hectares, a year-round resort with an 18-hole golf course and the related infrastructure will be created, as well as a ho-tel with 80 rooms and 20 guest houses. The volume of investments in the project will ex-ceed RUB 1.5B, and the investor has already applied for the status of resident of the Free Port of Vladivostok.

A TERMINAL IS BEING DESIGNED FOR THE EXPORT OF LIQUEFIED GASES IN PRIMORSKY KRAI

The resident of the Free Port of Vladivo-stok Vostok LPG, LLC is designing a marine ter-minal and infrastructure for exporting deliv-eries of liquefied hydrocarbon gas. The termi-nal will be located in Perevoznaya Bay of Pri-morsky Krai. The selected terminal construc-tion site already has access to railway sidings, which facilitates project implementation. The investor is going to begin construction already in 2018 and complete it in a year. The enter-prise's designed capacity is 1M tons per year with the potential for expansion.

SALMON FISH HATCHERY IN VANINOThe 50th October Anniversary fishing co-

operative (collective farm), as a resident of the Free Port of Vladivostok, is planning to begin construction of a salmon fish hatch-ery in Vanino (Khabarovsk Krai) in the next 2 months. An enterprise with a capacity of 30–50M tiny fish per year will require a RUB ~200M investment. The project will be im-plemented in 2–3 years.

The construction of a fish hatchery would raise the cooperative's capture levels by around 16K tons per year. The cooperative produces around 20K tons of fish per year.

of high-energy coal

Beringopromugol has exported to China

40thous. tons

The three-story greenhouse complex in Chukotka will supply the region with fresh produce

10


THE STREET FORMAT

Far Eastern Regions Preparing for Eastern Economic Forum

Vladimir Ilyukhin, Kamchatka Krai Governor

Kamchatka has always actively participated in both previous EEFs. The Kamchatka Krai exhibit was recognized as the best in past forums. This year, we are also preparing some surprises for attendees. I think people will like them. We will show Kamchatka in winter and many unusual things. I hope they will be of interest.

As concern projects, the EEF's highlight will be the presenting and signing of an agreement to build a new international airport in Petropavlovsk-Kam-chatsky. The tendering procedures for an investor are currently underway, and we will complete them by late August to select the investor. We will sign an investment agree-ment at the forum. This is a long-awaited event for us, and we hope everything will work out successfully.

On July 18, Yury Trutnev, Deputy PM and Russian Presidential Envoy in the Far Eastern Federal District (FEFD), held a meeting with the Organizing Committee of the 3rd Eastern Economic Forum (EEF). According to him, the upcoming forum will demonstrate the projects already im-plemented by investors and confirm the transition to a new stage in the Far East's development.

"Compared to the first stage, when we were establishing legislative space and tools for the Far East's development, and the second stage when we launched them, now we can talk about the first results; that we are creating the first real enterprises with jobs. We view this forum's aspect as anoth-er tool for disseminating information that it is reliable, safe, and cost-effective to op-erate in the Russian Far East", Yury Trutnev stressed.

The 3rd Eastern Economic Forum will be a momentous event for the whole coun-try and the Asia-Pacific Region. The program includes country-business dialogues: Rus-

sia — ASEAN, Russia — India, Russia — Chi-na, Russia — the Republic of Korea, Russia — Japan. Over 3,700 visitors including 1,200 journalists from Russian and foreign media are expected to attend the event. Represen-tatives from 26 countries have already been registered at the forum. Leaders of Russia's nearest eastern neighbors have confirmed their participation — Japanese Prime Minis-

ter Shinzo Abe and South Korean President Mun Jain.

The business program is based on 4 top-ical units.

The first topic is 'Economic Policy in Eastern Russia. What to Do Next?'. This sec-tion will discuss the results of implement-ing new mechanisms of the Far East's de-velopment, such as advanced special eco-

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EVENTSJULY 2017

nomic zones, the Free Port of Vladivostok, and support for major investment projects. Some discussions will focus on SMB devel-opment in the Far East and the implemen-tation of the Far Eastern Hectare program.

The 2nd section is 'How to Do Business in the Far East'. Its events will unleash the macroregion's investment potential in ar-eas like petrochemistry, gas-to-chemicals, mining, travel, agriculture, fish processing, transport, and logistics.

The 3rd section is 'We are Neighbours Earning in Cooperation'. This section in-volves the discussion of the integration of Russia and the Asia-Pacific region in energy, logistics, finance, and hi-tech.

The 4th topic is 'Far East: A New Quality of Life; Meeting Challenges' with a focus on demographic policy, cross-border coopera-tion, integrated urban/rural development, and job creation in the region.

The EEF program is available on the EEF's official website at www.forumvostok.ru.

Traditionally, the Far Eastern regions will be represented at the Far Eastern Street ex-

hibition due to be held on the Ayaks Bay em-bankment on September 5–10. In their pavil-ions, FEFD constituent entities will present themselves in detail, along with their tourism potential, and key development projects.

At the Amur Region booth, awaiting guests is a rocket symbolizing the Vo-stochny Cosmodrome. The pavilion will detail the investment projects being im-plemented in the region, including gas

processing, agriculture, and cross-bor-der infrastructure. The Jewish Autono-mous Region (JAR) exhibition will focus on environmental projects. The regional Amuro-Khinganskaya ASEZ will also be presented.

Kamchatka Krai will present winter holiday options, including the tradition-al dogsled race Beringia, mountain ski-ing, and ice fishing. The Primorsky Krai pavilion will greet EEF guests with a de-tailed historical exhibit on the 19th-cen-tury free port arrangement. The Republic of Sakha (Yakutia) booth, designed as the traditional Yakut dwelling Urasy, will fea-ture trade showcases with diamond prod-ucts. The Sakhalin Region pavilion will be designed as a giant salmon. The pavilion will feature a 'virtual door to Sakhalin' that enables chatting online with guides and artists in the island region. A giant whale will embody the Chukotka Autono-mous Region's booth. Beside the story of economic projects, guests will enjoy virtu-al northern lights.

The Magadan Region will traditional-ly feature gold mining, so that anyone will be able to independently try washing gold the old-fashioned way in its pavilion. Final-ly, the Khabarovsk Krai pavilion will pres-ent the region's economic projects includ-ing a package development plan for Kom-somolsk-on-Amur and major projects in progress.

Alexander Kozlov, Amur Region Governor

The Far Eastern Street exhibit will be historically themed. The major exhibit is the Albazinsky Ostrog, which was founded by pi-oneer Cossacks and has an heroic background. A nation that re-members its history has a future.

Our exhibit will show the projects that have been implemented in the region. First of all, this is the Vostochny Cosmodrome with its 2nd rocket launch due this year. Energy projects are also important, as we lead in this field in the Far East. The Nizhne-Bureyskaya HPP is due for completion this year. The implementation of a gas-chemical cluster, with Gazprom building 2 plants will be specially presented. No Far Eastern region has such an amount of investment amount. So we will demonstrate all of this in our presentations.

Alexander Levintal, JAR Governor

Our Far Eastern Street pavilion will resemble Noah's Ark in ref-erence to the Year of the Environment. The tiger protection pro-gram implemented in our region and a number of other envi-ronmental programs will be presented. This will be the pavilion's core idea.

Economic development projects are sure to be presented as well. There will be a model of the transborder Nizhneleninskoe-Tongjiang bridge that is un-der construction. Of course, there will be mining projects including, those launched just before the previous forum. They are now operating at 50% capacity and will reach 100% by next year. We will present our major mining facilities and agribusiness projects, in-cluding Russian-Chinese ventures like Spring Park and others with soybean processing and diverse cultivation. There are plans to grow ginseng, etc. As for the Amuro-Khin-ganskaya ASEZ, this year we are launching a facility — а building structure plant to be presented as well.

12


– Mr. Basov, the Rusagro Group has stormed into the Far East, developing 3 ar-eas at once: livestock breeding, foodstuffs, and agribusiness in general. How is your business developing in the region, and are you satisfied with its dynamics?

– I am optimistic. We are growing not as fast as we would like, as there is an under-run in the livestock project. This is primari-ly the result of the underdevelopment of the Far Eastern construction sector and, second-ly, some delays in building infrastructure for us. For various reasons, gas will be piped to us only in Q1 2019, and there's also a year's delay in roads.

Still, these delays have not been crit-ical until recently, because we ourselves lagged behind in project construction. How-ever, Rusagro already has 6 sites under con-struction in the Mikhailovsky ASEZ, and the punctual commissioning of the infrastruc-ture being developed out of public funds is becoming quite an issue. We know that fed-eral funds were allocated a year and a half ago, now we are working closely with con-tractors and the Primorsky Krai Administra-tion. I think we'll solve all these problems to-gether..

– How is crop pro-duction develop-ing? Has this business started successfully?

– We now have ap-proximately 80K hect-ares of land in Pri-morsky Krai, and this year we have sown around 54K ha. They comprise 6K ha of wheat, 13K ha of corn, and 35K ha of soy. All the corn and wheat are likely to be exported somewhere, which we'll decide depending on the market situ-ation. The soy will either go to China or be processed in Russia. In Ussuriysk, we own the plant Primorsky Soy, where it's profitable to process the harvest into butter and oil meal.

– Are there any plans to increase seeds?

– It depends on how much land we'll have and what the price environment will be. Moreover, the bulk of grain production will be con-sumed by our own livestock business here. Pig husband-ry alone will take up to 130K tons of grain.

Of note is that the cur-rently established grain and soy prices make further land purchases unprofitable. We expect growing crop yields thanks to land preparation and staff training. We re-ceived some of the land in a troubled state, as the Chinese worked there using unknown chemicals that caused severe damage to the soil. It'll take a couple of years to clean the soil up and normalize its yielding capacity.

– So after meat production begins, will your crop production be running for the sake of the livestock breeding complex?

– Yes, for the mean time. We plan grain to be supplied to our feed mill in Mikhai-lovsky District, soy-beans to our soybean processing plant in Ussuriysk, oil meal in part to our meat pro-duction and in part to the market, and oil to the market. We will then have vertically

integrated production in this way. So manure will be applied by pig farms to fields as fer-tilizers.

– When will such a configuration be formed? When will the pig breeding com-plex be launched?

– We plan to supply livestock in the first quarter of next year. Our pork will enter Pri-morsky Krai's market late next year already.

– Do these timeframes depend on the timing of gas supply?

– Our primary goal is gas supply to the feed mill. So we're going to launch it in Q1 2019. Gas is likely to be supplied to the pig farms earlier. At the very least, however, we'll launch operations with liquefied gas. Any-way, we've decided to supply livestock with-out fail.

– You first said that the 1st stage would be launched to saturate the Far East with ag-ricultural products.

– Exactly. – For how long can you meet the domes-

tic demand for pork given current needs?– Quite quickly — for 3 years. Our share

in consumption is expected to be 30–35% in the Far East. Meanwhile, production capacity will be around 60–80K tons.

– As for the development and produc-tion of exported goods, will this take place during the 2nd stage?

– We'll proceed to the 2nd stage when export markets open. Otherwise, we won't start the 2nd stage. We can currently sup-ply only heat-treated meat to Japan. This is mainly sausages and other derivative prod-

"If there was no infrastructure, there would be no project" Maxim Basov, Rusagro Group CEO, on how business is developing in the Far East

"There will be vertically integrated

production in the Far East"

FACTS AND OPINIONSJULY 2017

13

ucts and is not our priority market. These are small volumes. Our priority market is fresh meat to China and Japan. China, of course, comes first, because we have very good lo-gistics from Primorsky Krai to China.

– When, in your estimate, will the Chi-nese and Japanese markets open for our meat products?

– You know, some European companies negotiated for 30–40 years to enter the Chi-nese market. Brazilians had been negotiating for 40 years before admittance. The Chinese say right away, 'When we talk to you about 3 years, you should understand it's about noth-ing'. I don't know how much time we'll actu-ally need. All possible resources have been activated on the Russian part, the negotia-tions are being held at the top level, so we can only wait and see.

As for Japan, it's a very closed-off coun-try as well. Some experts though believe that Japan will open its market to Rus-sia sooner than Chi-na will. But whenev-er it happens, the for-eign market needs to be taken very serious-ly. Even if the market is open, one also needs to invest big money, arrange distribution, and hire staff. Any mar-ket (Russian, Japanese, American) is not emp-ty; you have to compete and invest.

– Apart from pork, are you considering other production directions?

– We are considering a chicken produc-tion project; also in the ASEZ. We'll estimate the project and decide by next year whether we'll do it or not. Another area is dairy hus-bandry. It's also under analysis. Overall, we have a huge Far Eastern program with a lot of money being invested. Nearly RUB 20B will be invested in the meat project. We've already invested RUB 4B in agriculture. If we will produce chicken, this will add RUB 15B more, if we will start up milk in two clus-ters, that will be an extra RUB 30–60B. Basi-cally, we have resources for this and we are ready to invest. The main obstacle, as I have already said, is the openness of the export markets.

– What is the main benefit for the com-pany in fulfilling the project in the ASEZ en-vironment?

– Today infrastructure development is es-sential for us. The infrastructure is being built, and it is financed exactly as a part of the ASEZ. If there was no infrastructure, there would be no

project; it just would not pay off in any condi-tions. And furthermore, for us the unified social tax reduction, which the ASEZ provides, is quite significant, as well as the certain reductions of imported equipment customs clearance.

– Does the company use any other Far East development instruments?

– At present we work only with ASEZs. As we are a large company and we have our own manufacturing plant and ground there, we are interested only in ASEZs and infra-structure. We are ready to do all further work ourselves. The only thing I can say is that we use the Far East Human Assets Development Agency's services, and they provide quite substantial support to the staff we transfer from Central Russia. These people receive financial aid for moving which they do not have to return if they work in the region for a specified period.

– How well is the Far-Eastern business of the company equipped with employees?

– Our business is never fully equipped with employees, be-cause we constantly need to change per-sonnel. But on the whole, the situation in the Far East is nor-

mal. We have about one thousand people working in Primorsky Krai at present. 90% of these people are locals.

– Do you bring the other 10% from Cen-tral Russia?

– We send people to Primorsky Krai who are already trained and trusted and who are work-ing at our plants in other regions today. These

are key specialists and managers who know the technologies and who can utilize them.

– From your experience, what is neces-sary to offer to specialists from the Europe-an part of the country to get them to move to the Far East? Money? Career opportunities?

– Of course, the key specialists, as we transfer them, receive a pay raise. Because to motivate people you usually have to of-fer them more. But sometimes if we see pros-pects in our employees, we offer them new career opportunities in the Far East. Then they are not payed more than in the European part, but they receive pretty strong motivation.

– You talked about one thousand people. How many jobs will you create in the near future?

– Jobs for two thousand more people within two years. By the way, we have our job fair open on-line, everyone can see, where and what jobs there are.

– The company operates in Primorsky Krai. What other regions of the Far East are you considering?

– We are consulting the authorities of Khabarovsk Krai regarding dairy farming. The government of the region seems interested, effective. We are holding a constructive dia-log, and I think we will make our decision by the end of the year.

– What plans do you have for the Eastern Economic Forum?

– In September at the EEF we will contin-ue to discuss export issues with our Japanese and Chinese partners, both current and new ones. The entire management of our compa-ny will come, and it will be a good and conve-nient time to discuss all issues regarding grain, oil-bearing crops, meat, and, probably also milk.

"We have about one thousand

people working in Primorsky Krai"

Construction of traffic infrastructure for ASEZ Mikhailovsky

14


Mountains of goldThe exhaustion of the raw materials base of the existing gold fields causes gold miners to widen their exploration horizons, moving farther from well-organized infrastructure and building new kinds. To do this, a company has to bear extra expenses in logistics and power supply. However, new points of growth in the industry are appearing in the Far East as large mining and refining facilities are being opened.

One of the regions of Russia that depos-its the most amount of vein and placer gold is still the Magadan Region. And Kolyma is lead-ing in Russia in silver production (its produc-tion in 2017 according to plan will reach 675 tons). In the first half of the year, local min-ers produced 11.7 tons of gold. This is one third more than a year ago. In the current season, production at placer mines in the region has begun in at end of April and by July, 4.5 ton of precious metal have already been produced (+8.63% of last year's level). In the period under review, the production of ore has grown by half, which is to 7.2 tons.

According to the Magadan Region's Minis-ter of Natural Resources and Ecology Vladimir Mitkin, the peak of precious metals production in the region was reached in the 1930–1940s with the creation of the "Dalstroi' trust. At that time, yearly gold production increased to 80 tons. Subsequently, the amount of production was leaner, although it remained at quite a high level of 30–50 tons per year for quite a long time. In the post-soviet period, the slow-

down was steeper due to the mining out of large fields, among other reasons. The histori-cal minimum was recorded in 2008 when only 14.7 tons of gold were produced.

However, during the last six years the industry is on the rise. In the last industrial sea-son, gold mining companies of the region produced 27.9 tons of the precious metal, which is 3.4 tons more than the pro-duction of the previous sea-son. The five leaders include Polimetall, JSC (its assets in-clude Omolonskaya zolotorud-

naya kompaniya, LLC and Serebro Magadana, JSC, Susumanzoloto, OJSC, ZRK Pavlik, JSC (a part of the ARLAN investment company), Ar-bat group and GDK Berelekh, OJSC. 30.9 tons of gold are planned to be produced by the end of the year 2017.

The growth of production in the region is mainly due to the growth of production at the Pavlik field. As is known, one and a half years ago, a gold processing plant was opened there. And already in 2016 ZRK Pavlik produced 3.8 tons of gold. In the future, yearly production is planned to be increased up to 12 tons.

Great expectations are connected also with the development of the Natalinskoye field, where a MPP of big capacity is being built and which is capable of processing up to 10 mln tons of ore yearly. The company Polus that is implementing the project has postponed facility start-up twice. According to the latest data, as governor of Magadan Region Vladimir Pecheny notes, Natalkinskoe field is planned to be put into operation by the end of the year 2017. Pavel Grachev, the director general of Polus, PJSC, also says that construction works at Natalka are to be fin-ished soon.

The opening of modern production facili-ties has a positive effect on indexes of the in-dustry also in Kamchatka Krai, which neigh-bors Kolyma. This way, in 2016, the industrial complexes of Zoloto Kamchatki, JSC (a part of GC Renova) increased their gold production by 114% to 5.4 tons and silver productions by 309% to 7.7 tons. The main amount of pre-cious metals was provided by MPP Ametisto-voye, which became project of the year for the peninsula in 2016. In 2017, the compa-ny plans to strengthen those gold production volumes already reached, but in the future, it hopes for further growth owing to a new resource base. This summer, the drilling op-eration season began at Kumroch field, one of the most promising fields in Kamchatka. The total investments into geological pros-pecting and exploration in 2017 amounted to about RUB 1B. The construction of a plant that will produce 3.5–4.5 tons of gold a year at the Kumroch field is being planned.

In 2016, 27.9 tons of gold were mined in Magadan

Region

FACTS AND OPINIONSJULY 2017

15

However, positive dynamics in precious metals production is not being seen in all parts of the Far Eastern Federal District. Chu-kotka's mineral developers produced 29.1 tons of gold last year, which is 3 tons less than in 2015. The reduction in production is con-nected with a decrease in mining by 9.1%, due to the fact that ores have been mined out at a number of mines, specify authorities of the Chukotka Autonomous Region.

Indeed, exhaustion of the raw materials base of large existing fields is a serious prob-lem for Far East industry. This causes miner-al developers to widen their exploration hori-zons and move farther from well-organized infrastructure. For example, Polimetall has be-gun production at Svetloye field which is 240 km south-west from Okhotsk. Capital expen-diture for the facility with a yearly capacity of 2.5 tons of gold was $80M.

It is worth mentioning that in 2015–2016, Khabarovsk Krai managed to raise more than RUB 16B of funds for the development of the mining industry, and by doing this, they cre-ated the foundation for the further growth of mineral production. As the head of the region-al Department of Environmental Resources Alexander Ermolin said, the Belaya Gora min-ing and refining facility is effectively operat-ing in Nikolayevsky district. In 2016, gold pro-duction increased at Mnogovershinnoye, OJSC (a part of Rusdragmet) and Resursy Albazino, LLC (a subsidiary of Polymetall). Amur Zoloto, LLC (controlled by GC Russkaya Platina) start-ed up the gold processing plant Yubileinaya at Krasivoye field. The same company began exploration of the Perevelnoye field in the Ayano-Maisky district. In total, the mining fa-cilities plan to produce 19.5 tons of gold and more than 1.5 tons of platinum in 2017.

As the tendency of late is the growth in the share of underground mining, and since the costs of underground works are higher com-pared to strip mining, the current sophisticat-ed problem for the authorities of the region is to make the industry attractive for invest-ments. For instance, in Khabarovsk Krai about 80 km from Komsomolsk-on-Amur the larg-est gold, copper, and porphyry field Malmyzhs-koye has been opened. Metals exploration at this ore field has been performed since 2010, and the results of estimation works confirm the amount of 5.6 tons of copper and 298 tons of gold. The company Amur Minerals, established by the American Khabarovsk Minerals, LLC was allowed to explore the strategic field (the Rus-sian Prime Minister Dmitry Medvedev signed the corresponding decree). At a meeting in the regional administration, the Director General of

Amur Minerals, LLC Thomas Edwards Bowens expressed his intention to continue follow-up exploration of the Malyzhskoye field when its commercial exploitation begins in 2021. By 2025, it is planned to erect an MPP with a production capacity of the first stage of 75K tons of copper and 3.6 tons of gold concen-trate yearly. By that time, Amur Minerals plans to invest more than $1.5B into the project.

It is worth mention-ing that Khabarovsk Krai still does not posses a rich history of fund rais-ing for the commercial exploration of precious metals. At the end of 1990s, beginning of the 2000s, numerous Chinese work associations were present in the Priamurye regions, but as a rule, they were occupied with small placer gold fields. Whereas, for instance, at the same time, international level players were entering large license blocks in Chukotka.

Nowadays, the Canadian company Kinross Gold Corp. is active in the region through Chu-kotskaya gorno-geologicheskaya kompaniya, JSC and Severnoye zoloto, LLC, which are de-veloping Kupol (in 2016 production of gold equaled 10.7 tons) and Dvoinoye (10.5 tons of gold) accordingly. The Karalveem mine (1.3 tons of gold) is being explored by the interna-tional Auramine Resources Ltd., and the Val-unistoye field (approximately 0.9 tons of gold) by Millhouse Group.

China is yet not a very active player, but it is also interested in the Far-eastern deposits

of precious metals. The projects in Magadan Region began with the participation of Chi-nese funds. The specialists of Tonghua Min-

ban are conducting geolog-ical explorations at the Utro antimony and silver field, Senon and Serebryannoye silver and gold field, in the south-eastern part of the Burkhalinskoye orefield, as well as in the Kegali mine. The company Tian He ob-tained a license for the geo-logical exploration and pro-duction of silver, zinc, cop-per, and other metals at the perspective Kunarevskaya area.

It is necessary to note, that currently the costs the infrastructure for several gold pro-ducing projects in the Far East are covered from the budget of the Russian Federation by the Ministry for Development of the Rus-sian Far East. In order to build an access way to Ozersky MPP in Kamchatka that is be-ing developed by Sibirsky gorno-metallur-gichesky alyans, OJSC, the investor will re-ceive RUB 758.4M in aid. For the construc-tion of Fevralskaya–Rudnaya HVTL 220 kV in Amurskaya Oblast for the gold extraction facilities of TEMI, LLC, RUB 5.49B have been set aside. For the construction of Ust-Om-chug–Omchak Novaya HVTL 220 kV for the Natalkinskoye gold ore field, RUB 9.94B have been set aside. An agreement for subsidizing infrastructure projects in the Oimyakon re-gion worth RUB 978M was signed with Vyso-chaishy, PJSC (GV Gold). The group is current-ly building the Taryn MPP.

In 2016, Zoloto Kamchatki, JSC increased gold production by

114% and silver production by 309%

16


No construction will do without dry construction mixtures, but it is the builder who decides what to use: self-made or that prepared by the manufacturer. The Tiger Mix company has created in Primorsky Krai the unique manufacturing of building mixes from local compo-nents. This enterprise began its work in October 2016 and became one of the first success stories on the practical application of the Free Port Vladivostok regime.

Strange as it may seem, the majori-ty of dry mortars in the Far East are im-ported. A business-idea to produce four types of mortars, trowelling and sand-ce-ment, floor foundation and glue for por-celain stoneware, appeared exactly due to the lack of local products on the region-al market. Equipment by a leading Chinese manufacturer, the CNBM company, was custom-produced for the plant. The com-pany is equipped with a triple shaft mixer and an automatic filling machine that fills

25 kg bags with mortars, says the director of the company Valery Rybenkov. Plant ca-pacity is up to 10 t/h.

Making preparations to implement the investment project, the company atten-tively studied the benefits that could be gained from utilizing the Free Port Vlad-ivostok's economic regime for the project. "Free port residency provides serious tax and insurance benefits. It is a big advan-tage for our company that will allow us to lower the cost of our products without loosing quality", — he clarifies.

As a result, RUB 24M were invested into the new plant and 17 jobs were created. Since last year, the company has been reg-ularly providing its products to the market. Tiger Mix products have two advantages compared to imported mortars right away, as their two main components are cement and sand, and the resident company ships

HOW A FREE PORT RESIDENT ENTERED THE DRY CONSTRUCTION MATERIALS MARKET

A RELIABLE MIX

PRACTICEJULY 2017

17

it for production also from the local mar-ket. A raw material partner of the company is the Vostokcement group, that provides Ti-ger Mix not only with high-quality cement, but also with "artificial" sand. For now, this is the only example of its kind in Russia.

The manufacturer pays special atten-tion to the sand used. "Artificial sand" is a product made of solid rock, which means that it has improved damage stability. It is enriched sand, and at the same time it is suitable for several stages of processing — from crushing and cubization using mod-ern Japanese equipment to dedusting by air stream. How good the quality of such a component is in comparison with usu-al sand is clear with a test of the strength of a freshly made brickwork by any met-al object — it is more likely that the object will wear away than the mortar bed of the brickwork.

Sand-cement mix by Tiger Mix is used for making walls and separations of any type of bricks, natural stone, small details and blocks, as well as for leveling flooring underlay, plastering and wall repair. Screed for flooring — for leveling the base of a floor and the arrangement of facial final covering. Stucco mixture — for single and multi-layered manual application on walls and ceilings, and on concrete base and ma-sonry. Glue for ceramic granite — for facing with slabs or tiles of walls and floor cov-erings inside and outside buildings. These four types of dry mixes are the basis of any construction work.

As the company develops, it has tak-en the path of improving its technologies not only in terms of the composition of the mixtures. Thus, a polypropylene packing of box type has been chosen as the packag-ing for the Tiger Mix mixes. A well-known alternative to this package is a paper bag. But a polypropylene bag is not afraid of

rough handling, can withstand a large bulk weight, and is convenient for packing and storing. And the main thing is that it is not afraid of moisture, which is especially im-portant in the damp Far Eastern climate. In addition, the production turned out to be universal: it is possible to make mix-tures according to the recipe of the cus-tomer, for example, by using the torkret method, which involves the application of one or several layers of a mixture under pressure of compressed air to the surface of the structure when repairing a ferrocon-crete or concrete surface. One company re-port in July 2017 on the implementation of one of these individual orders, when the mixture was prepared according to a spe-cial recipe and was sent to the customer in the North of the Far East, for use in diffi-cult climatic conditions.

REFERENCE: TAX RELIEF FOR RESIDENTS OF THE FREE PORT

7,6%Amount of insurance contributions in 10

years(for non-residents — 30%)

0%Income tax for the

first 5 years (the next 5 years — 12%)

(for non-residents — 20%)

0%Property tax for the

first 5 years (the next 5 years — 0.5%)

(for non-residents — 2.2%)

0%Land tax for

the first 5 years (for non-residents —

0.3–1.5%)

• Leasing of land without bidding, based on cadastral value.• Foreign labor permit without quotas: up to 20% for all residents. Over 20% — with

permission of the supervisory board.• Less scheduled audit time.• Less time spent on non-scheduled audits.• Residents of the Free Port of Vladivostok can use the free customs zone regime (FCZ).

The FCZ involves duty-free and tax-free imports, the storage and use of foreign-made goods.

is the starting investment in the enterprise

RUB 24 M

18


Investor plans to invest RUB 100M in new production

The Prada Promfilter company has al-ready been a hero of the news of the last year, being one of the first to launch pro-duction in the Advanced Special Econom-ic Zone of the Far East. Today, the manage-ment of the enterprise, which has set up production of automobile air and cabin fil-ters in Khabarovsk, is planning further de-velopment. The resident company is already cramped in existing workshops, so new lines will be deployed on the adjacent site. The company has still been determining what exactly to produce on them: oil filters or other products. It does however already understand: preferential ASEZ regimes can

significantly reduce the payback period of any project.

Last year, RUB 56M were invested in high-tech production, the director general of the company Artem Lisichonok said. In the shops of the enter-prise, a line of Kore-an-made equipment was installed. Kore-an specialists also conducted personnel training.

"In fact, our project is an import substi-tution," says the head of the enterprise. —

Up to now, we had been supplying import-ed products to the Russian market. But the economic situation is such that it is more appropriate to produce filters in Russia.

The project for manufacturing air and salon filters in Prada Promfilter is considered to be al-ready implemented: the shop is working, sales turnover is es-

timated at millions of rubles. The compa-ny is expanding the line and looking for new sales markets. The plant is working,

Prada Promfilter is preparing to begin the second stage of an investment project in ASEZ

OIL FILTERmade in Khabarovsk

PRACTICEJULY 2017

19

but it sees the prospects in another things. Prada Promfilter has already concluded an agreement with the management compa-ny Corporation of the Development of the Far East, JSC (Korporatsiya Razvitiya Dalne-go Vostoka, JSC) on the implementation of a new investment project worth about RUB 100M up to 2022, but it wants to realize it more quickly, in order to begin the con-struction next year and to finish it within a year and a half.

The production of oil filters in the new workshop is planned to be arranged. An air filter consists of three components: plastic, nonwoven filter material and sealing rub-ber. And an oil filter consists of at least 27 parts and it is "a more responsible product: the fate of an engine is at stake", Artem Lisi-chenok reasons.

Therefore, the second part of the in-vestment project is "much more difficult", he admits. "There is no building yet, and we will have to go to an open field for con-struction: we have purchased an adjacent plot. Now we are at the stage of the fi-nal calculation of production capacity. We are trying to understand whether we can place such a quantity of goods in the cells where we are carrying out the implemen-tation. On the part of the authorities and the management company, all obligations are being fulfilled. Now, for example, re-pairs on Suvorov Street, which leads to the southern industrial zone, are underway. A

separate entrance to our future site is en-visaged, "says a representative of the in-vestor company.

Prada Promfilter has already appreci-ated the advantages of its status of res-ident of the Advanced Special Economic Zone. According to the head of the inves-tor company, the preferential rate of rent-ing a new piece of land "significantly re-duces costs". "The site is big. In the long

term, it is possible to place production buildings there for manufacturing wash-ing fluids, tosols, antifreezes. This is not a part of the agreement, but there are prospects for development in this regard", he says. Prada promfilter also imported equipment for the first stage of the proj-ect without paying a duty tax, and enjoys all the tax benefits provided for residents, Artem Lisichenok says.

REFERENCE: TAX RELIEF FOR RESIDENTS OF THE PRIORITY DEVELOPMENT AREA

7,6%Amount of insurance contributions in 10

years(for non-residents — 30%)

0%Income tax for the

first 5 years (the next 5 years — 10%)

(for non-residents — 20%)

0%Property tax for the

first 5 years (the next 5 years — 0.5%)

(for non-residents — 2.2%)

0,4%Reduced rent rates

(coefficient from the basic rate)

• Application order of VAT refund• Less scheduled audit time• Priority connection of residents to infrastructure• Reduced time for getting approval documentation• Permits to attract foreign employees are not required• Construction of infrastructure is financed at the expense of government budgetary

resources• Free customs zone regime for residents• MET decreasing coefficient (0–0.8) in 10 years, then coefficient of 1 is applied

20


Anadyr

Magadan

Petropavlovsk - Kamchatsky

R U S S I A NF E D E R A T I O N

Yakutsk

KhabarovskBirobidzhan

Vladivostok

Blagoveshchensk

M O N G O L I AC h i n a

JAPAN

Tokyo

Ulaanbaatar

REPUBLIC OF KOREA

DPRK

SeoulPyongyang

Beijing

Yuzhno - Sakhalinsk

Sakhalin Region

INVESTMENT PASSPORT: Sakhalin RegionMain factors

Sakhalin Region area: 87,101 sq kmPopulation: 487 thousand people

Volume of GRP: RUB 786.3BGRP per capita: RUB 2,048K

The volume of investment in fixed assets: RUB 248BAs of 2016.

The number of economically active members of the population: 285.6K peopleAs of March 2017.

Core capabilities:The extraction of oil and natural gas is one of the most important industries.In 2016, 18.1M tons of oil and 28.9B cubic meters of natural gas are set to be mined.A pipeline system is present as well as is an out-let to the ports for the shipment of products.Geographical position: Proximity to the larg-est markets of the APR.

Investment activity: 5 prospective projects with investments ex-ceeding RUB 0.8 trillion.

Main features:• Availability of a cheap source of electricity — natural gas.

Energy surplus region. The installed capacity is more than 700 MW *.• The possibility of implementing joint projects with Japan — the export of electricity, the de-velopment of renewable energy in the Kurils.

Investment activity:2 investment projects with a total invest-ment of around RUB 500B.

Main features:High profitability of the industry.Significant export potential.• Holds first place in Russia in terms of EBE reserves.

• Significant potential for improving catch effi-ciency and expanding the production chain.

• Significant potential for the extraction of FBG facilities, for which the permissible catch (not TAC) is not established.

Investment activity: More than 10 investment projects worth RUB 15B.

Main features:• Availability of entry tourist traf-fic from the PRC, Japan and South Korea — 170M tourists who annual-ly spend $275B.

• The region is developing the Mountain Air (Gorny Vozdukh) sports and tourist com-plex, which will become the core of the tourist cluster

The current tourist infrastructure is much inferior to the tourist potential of the re-gion.

Investment activity:7 investment projects with a total invest-ment of more than RUB 4B.

Main features:• The need for additional production on the market in the region:

– Meat — 31K tons ($153M)– Milk — 128K tons ($162M)– Vegetables — 55K tons ($155M)• The availability of local producers who are in-terested in attracting investors

• The import of food products to the PRC, Ja-pan and South Korea is worth about $192B. Annually, the countries import >5M tons of meat.

Investment activity: 6 investment projects with a total investment of around RUB 9B.

Petrochemicals Power engineering

Tourism Agriculture

Fish industry

PERSPECTIVE BRANCHES OF THE ECONOMY

Main features:The availability of a rich re-source base: stocks in categories A+B+C1+C2 are valued at over $97B: coal — 2,420M tons ($96.8B); gold — 7.3 tons ($267M)Unallocated fund of minerals: Coal — 82%, gold — 10%• Proximity to the largest APR market and interest among local companies in attract-ing strategic investors to projects

Investment activity:3 investment projects with a total invest-ment volume of RUB 68B.

Mining

PROJECTSJULY 2017

21

Core capabilities:• The geographical position of the Sakha-lin Region defines cargo transportation as one of the most important roles in the economy (the volume of cargo transportation equals more than 7M tons)

• 90% of passenger traffic is carried out by air• 70% of the network of public roads does not meet operational requirements.

Investment activity:6 projects with a total value of more than RUB 38B, including the port of Shakhtersk, Korsakovsky port, and Yuzhno-Sakhalinsk airport

Transport

INVESTMENT IN UPCOMING SECTORS

Distance and flight time to the nearest major cities*

Tokyo (Japan) — 1,278 km / 2 hour flightSeoul (South Korea) — 1,659 km / 3 hour flightKhabarovsk — 595 km / 1,5 hour flightVladivostok — 948 km / 2 hour flightBlagoveshchensk — 1,173 km / 2 hour flightNovosibirsk — 4,145 km / 6 hour flightMoscow — 4,885 km / 9 hour flight

*At an aircraft speed of 850 km/h.

Isolation from largest transport nodes

Contacts

Industry Investment, billion rubles Jobs, thousand people Number of projects

Oil-and-gas and chemicalindustry 810 2,0 5

Fish industry (fishing,aquaculture, processing) 30 1,0 60

Extraction of solidminerals 68 1,7 3

Tourism 5 0,5 7

Agroindustrialcomplex 9 0,3 6

Power engineering 500 0,8 2

Transportlogisticcomplex

38 0,6 6

Total 1.46 6,9 89+

The structure of cargo flow in the Sakhalin Region, mln tons

Comparative throughput capa-bility of the Far Eastern Feder-al District ports, mln tons

Railway transportMaritime transportAir transportAutomobile transport

7.3Mtons

21%

34%

45%

Primorsky KraiKhabarovsky KraiSakhalin RegionOther

41

30

169

248Mtons

8

0,2%

Georgy Kolpachev, director of the investment department of the Agency of the Far East for attracting investments and supporting exports, [email protected],+7 985 761 5007

Anton Sheredekin, head of the Sakhalin Investment Agency,[email protected],+7 4242 725 324

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DEVELOPMENT OF GRAPHITE DEPOSIT

REGION: Jewish Autonomous RegionINDUSTRY: MiningINVESTMENT SIZE: RUB 4.3BPI: 1,4IRR: 25–30%PROJECT DESCRIPTION:the development of the Topolikhinsky section of the Soyuzny graphite deposit with balance re-serves of 13M tons of graphite and the construc-tion of a mining and processing enterprise with a production capacity of up to 40,000 tons of graph-ite concentrate per year. The project is planned to be implemented in two stages: the production of concentrate with a maximum carbon content of up to 94%; production of high-tech brands: spherical graphite and ultra-high-purity graphite.

DEVELOPMENT AND EXTRACTION OF COKING COAL

REGION: Chukotka Autonomous RegionINDUSTRY: MiningINVESTMENT SIZE: RUB 6.5BEBITDA: 35–50%IRR: 20.8% PROJECT DESCRIPTION:Beringpromugol, LLC is implementing a project to develop the coal deposit Fandyushkinskoe pole in the Anadyr municipal district of the Chu-kotka Autonomous Region. The project provides the extraction and enrichment of 24.5M tons of raw coal and transportation of 18.9M tons of marketable coal (29% of energy and 71% of cok-ing coal). The term of the quarry development is 20 years with output by 2019 at the designed capacity of 1M tons of commercial coal per year.

OPENING AN INDUSTRIAL LAUNDRY

REGION: Primorsky KraiINDUSTRY: servicesINVESTMENT SIZE: RUB 23M PI: 2.25IRR: 87.07%PROJECT DESCRIPTION:the essence of the project is the opening of an industrial laundry in the city of Vladivo-stok with the newest equipment of increased capacity to service businesses with large volumes of consumption of services and the satisfaction of commercial and government organizations, as well as individuals with quality services.

THE PRODUCTION AND REALIZATION OF UNDER-GROUND FRESH WATER SOURCES IN KAMCHATKA

REGION: Kamchatka KraiINDUSTRY: the production and bottling of waterINVESTMENT SIZE: RUB 2BPI: 1.7IRR: 33.49%PROJECT DESCRIPTION:the production and sale of natural drinking water from the Akhomtenskoye deposit with estimated reserves of about 100K cubic meters per day, in the volume of 3M cubic meters per year, water-filled loans with a carrying capacity of up to 100K tons. The deposit is located near the Russkaya Bay (eastern coast of the Kamchatka peninsula, 90 km to the south of the port of Petropavlovsk-Kamchatsky).

FAR EAST INVESTMENT SHOWCASEIn this section, we publish examples of investment projects implemented in the Far East. Detailed infor-mation on participation in these or other projects in the region can be obtained from the Agency of the Far East for attracting investments and supporting exports.

PROJECTSJULY 2017

23

CONSTRUCTION OF A REFRIGERATION TER-MINAL, A TERMINAL FOR HANDLING BULK CARGO AND A PASSENGER TERMINAL FOR WATER TOURISM

REGION: Kamchatka KraiINDUSTRY: transport and logisticsINVESTMENT SIZE: RUB 4BPI: 2.7IRR: 21.9%PROJECT DESCRIPTION:the creation of a multifunctional transit cargo hub for handling, receiving and trans-porting cargo from the Kamchatka Krai to various regions of Russia, the countries of South-East Asia, Europe along the Northern Sea Route, as well as reducing the delivery time between the Far East and the central regions of Russia.

CONSTRUCTION OF A FOOD WAREHOUSE AS A PART OF THE AVANGARD INDUSTRIAL PARKREGION: KHABAROVSKY KRAIINDUSTRY: logisticsINVESTMENT SIZE: RUB 382.5MNPV: RUB 65.7MIRR: 11%PROJECT DESCRIPTION:This investment project is an integral part of the complex project for the creation and de-velopment of the Avangard private industrial park and belongs to the first of three stages of the integrated project.

PRODUCTION OF TINS AND CANSREGION: Primorsky KraiINDUSTRY: industryINVESTMENT SIZE: RUB 47MNPV: RUB 437.5KPROJECT DESCRIPTION:creation of the production of tin cans. During the first stage, it is planned to ar-range the production of the lid as a mass and in-demand product. During the sec-ond stage, to organize the production of a complete set: a cover and a can. In the future, it is planned to begin production of a completely new type of product: a lam-inated, one-piece can for the seaming of high-protein product, as well as a lid with a key.

ESTABLISHMENT OF A WHOLESALE DISTRIBUTION AGROINDUSTRIAL PARK

REGION: KHABAROVSKY KRAIINDUSTRY: agricultureINVESTMENT SIZE: RUB 3.2BNPV: RUB 295MIRR: 26%PROJECT DESCRIPTION:creation of an effective agroindustrial cluster, which includes: an agroin-dustrial park, a wholesale distribution center, a group of agro-service com-panies.The facilities of the cluster will be linked by technological ties with each other, and will also be included in cooperative chains with other agricul-tural enterprises of the Khabarovsk Krai, the Amur Region and the Jewish Autonomous Region.

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EASTERN RUSSIA ECONOMIC AGENDACONTACTS

Official Bulletin of the Ministry for development of the Russian Far East. This document was prepared by The Far East Investment and Export Agency, an autonomous non-commercial organization. All published information is relevant as of July 24, 2017. Distributed by email subscription. When using materials, reference to the source is required.

Published photos provided by: TASS, ROSCONGRESS, administrations of subjects of the far Eastern Federal district, Kremlin.ru, Shutterstock.

MINISTRY FOR DEVELOPMENT OF THE RUSSIAN FAR EASTМИНИСТЕРСТВО РОССИЙСКОЙ ФЕДЕРАЦИИ ПО РАЗВИТИЮ ДАЛЬНЕГО ВОСТОКА+7 (495) 531-06-45 [email protected] www.minvr.ru

FAR EAST INVESTMENT AND EXPORT AGENCYАГЕНТСТВО ДАЛЬНЕГО ВОСТОКА ПО ПРИВЛЕЧЕНИЮ ИНВЕСТИЦИЙ И ПОДДЕРЖКЕ ЭКСПОРТА+7 (495) 540 41-63 [email protected] www.investvostok.ru

CORPORATION FOR DEVELOPMENT OF THE RUSSIAN FAR EASTКОРПОРАЦИЯ РАЗВИТИЯ ДАЛЬНЕГО ВОСТОКА+7 (800) 707-55-58 [email protected] www.erdc.ru

FAR EAST DEVELOPMENT FUNDФОНД РАЗВИТИЯ ДАЛЬНЕГО ВОСТОКА+7 (495) 540-47-37 [email protected] www.fondvostok.ru

AGENCY FOR THE DEVELOPMENT OF HUMAN CAPITAL IN THE FAR EASTАГЕНТСТВО ПО РАЗВИТИЮ ЧЕЛОВЕЧЕСКОГО КАПИТАЛА НА ДАЛЬНЕМ ВОСТОКЕ+7 (495) 123-47-27 [email protected] www.hcfe.ru

far east regions for eef-2017 east russia no. 8 | july ... · as alexander galushka, minister for...

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