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Agricultural Investment. Feeding the Asia-Pacific Region

September 07, 14:54 UTC+3
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Key challenges

The Asia-Pacific Region has huge potential when it comes to agricultural demand

“Food Russia's three largest neighbors in the Far East import (China, Japan, and South Korea)  is 70% higher than the amount of food exported from the Far East <...> Of course, there is enormous potential here,” said Alexander Tkachev, Minister of Agriculture of the Russian Federation.

“5 years ago, the Asian middle class was about 500 million people. In 2030, the projection is for the Asian middle class to be 3 billion people. That's a 6-fold increase in the potential demand,” said Anton Roux, Chief Executive Officer of the Australia Davos Connection Forum.

The Far East can become a locomotive for trade growth, agriculture, and the economy of the entire country

“I am certain that the Far East will become a locomotive, first and foremost, of trade and economic growth.  And not just for this region, but for the entire country <...> The Far East will always be a place, above all, for fish trade and aquatic bioresources. Last year, 65% of fish caught in Russia was caught here and amounted to more than 3 million tonnes <...> But even if we don't take into account the fishing industry, the Far East is a rich region with enormous potential <...> Taking into account development of unused arable land alone (there is about 600,000 hectares of it), we are able to increase agriculture production by a third,” said Alexander Tkachev.

“The Russian Far East has real logistic advantages when it comes to supplying food to the largest countries in the Asia-Pacific Region. Delivery time from Vladivostok to Shanghai is 5 days. To Busan (Korea) - 3 days,” Alexander Tkachev indicated.

“An animal husbandry facility for 1,000 cows is being built in Sakhalin with the aid of Belorussian technology <...> Three dry potato powder and potato starch production plants will be built in the Jewish Autonomous Oblast, the Zabaykalsky District, and in Western Siberia <...> Another deal to be implemented in the Zabaykalsky District is production and processing of annual and perennial fodder grass,” said Nikolay Kharitonov, Chairman of the State Duma Committee for Regional Policy and Issues of the North and Far East.

“On the territory of where early development of "Habarovsk" is taking place, we are now creating a wholesale agriculture distribution park called Agrohab.  The main purpose is to create storage capacity and processing for agricultural products,” said Ludmila Kuznetsova, General Director of "Agrohab" LLC.

“In Primorsky Kray we are beginning the first stage of investment. We plan to build three farming complexes and a milk processing plant here. Investment totals $270 million (approximately 16 billion rubles),” said Ngo Tkhan Hoan, General Director of TH-Rus Milk Food LLC.

The government provides significant support to business in the Far East

“There are currently 643 investment projects worth a total of 47 billion rubles that are being subsidized in the Far East Federal Region <…> This year, regional agricultural producers received subsidized investment loans with interest of no more than 5% annually; this amounted to 24 billion [rubles].  Weighted factors of state support for the reimbursement of direct costs incurred have been introduced.  25% is compensated,” Alexander Tkachev said.

Challenges

The region cannot even provide enough food for itself at the moment

“The Russian Far East is still not able to supply itself with food.  The breakdown of its own goods are: milk - 44%, meat - 25%, vegetables - 30%, fruits - 20%,” Alexander Tkachev pointed out.

“Agricultural production in the Far East is, unfortunately, the lowest in the country - 3.2%.  But this also speaks of colossal opportunities for the Far East,” Nikolay Kharitonov stressed.

Solutions

Implementing the project to create an agrohub in Primorye

“We are talking about an agrohub in the Far East.  This will allow us to redistribute flows, first and foremost, of fish production <...> This is a very serious strategic project that we need to implement in the next 3-5 years,” Alexander Tkachev pointed out.

Developing grain infrastructure in the long term

“Of course, it is very important for us to talk about export and creating grain infrastructure <...> In 10 to 15 to 20 years, this figure of 120 million tonnes that we have achieved today can increase to 130-150 million <...> We need transshipping capacity that is clearly not sufficient now <...> We need to build the Zabaikalsky grain terminal and the Zarubinsky terminal <...> I hope that by 2020 we will increase grain transshipment by 5 million tonnes, first and foremost to Asia-Pacific Region countries,” Alexander Tkachev said.

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