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The Export Potential of the Russian Far East. Growing Demand in the Asia-Pacific Region

September 06, 19:34 UTC+3
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Key conclusions

The Far East is a promising platform for tapping new fast-growing Asian-Pacific markets

“The Far East is some sort of locomotive for cooperation with the countries of the Asian-Pacific Region, particularly this is a highly competitive market,” said Alexey Tyupanov, Chairman of the Management Board, Chief Executive Officer, EXIAR.

“The amount of export is rising each year, and the main part of concentrate will be supplied exactly due to physical proximity, logistics to the countries of the Asian-Pacific Region,” said Anna Tsivileva, Chairman of the Managment Board, Kolmar Sales and Logistics (KSL AG).

Russian exporters should live up to the high competition level on Asian-Pacific markets

“The competition on fast-growing markets of the Asia-Pacific Region is very high. In different commodity groups we compete as a country with coal produced in Australia, petrochemicals from Japan,” said Grigory Berezkin, Chairman of the Board of Directors, ESN Group. 

“The only thing we have to work at is to establish ourselves as reliable responsible contractors who do not violate delivery dates or contractual obligations in terms of quality of goods, and make long-term contracts,” Anna Tsivileva said.

Challenges

Workload of Far Eastern logistics route

“We cannot all the time develop port capacities and increase the railroad capability for goods with such low cost, with this amount at a low price,” Grigory Berezkin said.

Non-conformity of Russian requirements with global standards

“The requirements and standards existing in Russia at the present moment of time are not in line with international ones, and the secondly, measures of veterinary supervision that exist in Russia, while efficient, have certain drawbacks now,” said Maxim Protasov, Head, Russian Quality System. 

“Creating a perception of products made in the country as high-quality goods and of enterprises as ones that are keen to improve quality requirements - this is a fairly serious job that may be done quite easily,” Maxim Protasov said.

High logistics costs

“The logistics component in the goods is fundamental and in order to win this competition we have to sell goods that have hit the maximum overload level and thus, the highest cost per tonne,” Grigory Berezkin said.

“The territorial proximity of the Asian-Pacific countries gives us an opportunity to enter Asian countries with our products. Thus, for example, logistically we can supply our coal by water within 2-3 days – to Japan, South Korea, China and 5-7 days by rail,” Anna Tsivileva said.

Solutions

Creation of production integrated with foreign partners

“We want an integrated production <…> So that we could already compete together with partners on international platforms and on international markets <…> This is going to be a joint integrated model to produce various products, cross-country, where we will essentially turn into partners from competitors,” Grigory Berezkin said.

Fixed export duties for advanced development zones

“Advanced development zones are much more beneficial for investors <…> The advanced development zone model is a mechanism to attract not only Russian, but international investment <…> We will probably apply to the government for considering the possibility of setting fixed export duties for priority development areas for a considerable ten-year period, for example, for goods produced there,” Grigory Berezkin said.

Improvement of product quality

“The revival of the state quality mark in the Russian Federation, now operated by the Russian Quality System (Roskachestvo), is such an instrument. We already see that sales of those products under this mark are rising on the Russian market, and are rising on international markets,” Maxim Protasov said.

“This year 280 enterprises have been inspected by experts of Roskachestvo concerning the introduction of best technologies in the business processing field. As I have already said, 12 enterprises will receive a bonus from the government, and all supervised enterprises will receive audit records with recommendations saying what they have to adjust in their business processes,” Maxim Protasov said.

Development of export support programs

“There are already two programs suggesting how one can save on rates if you want to finance export <…> The first program provides an opportunity for Russian banks to refinance loans in the Central Bank, thus reducing rates <…> The second program that was launched in July has been developed by the Economic Development Ministry to subsidize export,” said Alexander Meshcheryakov, Senior Vice-President, Promsvyazbank.

 Joint projects back-up

“In the Russian Far East region the most prominent project is Sakhalin 2 LNG <…> NEXI supported this project in 2009 to provide insurance on the loan arrangement <…> Our company also purchases crude oil from the ESPO pipeline,” said Masafumi Nakada, President, Nippon Export and Investment Insurance (NEXI).

“In that respect JETRO is working with a number of Russian institutions like the SME corporation of Russia or the Agency of technological development. We even have a memorandum of cooperation with the Far East Investment and Export promotion agency,” said  Koji Yonetani, Executive Vice President, Japan External Trade Organization (JETRO).

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