Key conclusions
Cargo turnover via Far Eastern ports shows outstanding growth
“In the past eight months we have obviously seen an increase in cargo turnover. Comparing the results of 2017 and 2016, the growth has totaled 30-35% in the sector in the Far East,” said Alexander Dudko, Managing Director, Vostochnaya Stevedoring Company.
“The development of the country depends on how efficient its ports are <…> When you look at Russia there is enough capacity in container traffic, roughly about 60% is utilized and about 40% is available. There is no shortage of ports for containers. When you talk about trade, we noticed growth of container [shipping] in Russia, for example, there is growth in containers of about 70% so far this year in Russia, and only 5% worldwide,” said Sultan Ahmed Bin Sulayem, Chief Executive Officer, DP World.
Challenges
Development of ports hindered by uncertainty over law enforcement practice and terms
“Investors are afraid of taking investment decisions when the terms of decision-making are unclear due to various factors, which is why we are always lagging in making decisions and in port construction,” said Nadezhda Zhikhareva, Deputy Head of the Federal Agency of Sea and River Transport.
“Clear terms for functioning of investors and federal regulators are an essential factor. A separate issue is the compliance of the state with its commitments. Against the background of taking decisions and various federal targeted programs, signing investment agreements, taking out respective funds and failing to implement respective deals due to budget decisions or other priorities is a disastrous policy for the Far East,” saidAlexander Osipov, First Deputy Minister for the Development of the Russian Far East.
Tough competition among Russian ports
“Everything would be good if there weren’t that great deal of supply, the competition is very tough in our ports. In Soviet times there used to be two ports here and two ports there, nowadays there are tens of operators of sea terminals, 23 in Vladivostok, around 20 in Nakhodka,” said Denis Sarana, Member of the Board of Directors, JSC “Vladivostok Sea Fishing Port”.
“The port of Nakhodka is very much underloaded, we have a 2-fold reserve, even 3-fold <…> In terms of capacity our utilization rate only accounts for one third,” Denis Sarana said.
Additional investment required
“There is a lack of investment in terms of finding ways to construct quicker than is constructed now, but obviously sea ports will rise in the next several years,” said Leyla Mammadzada, Chief Executive Officer, Summa Group.
Lack of a clear state support program
“There is no system and no criteria for attracting state investment, I mean financing sources. There are socially significant ports where investments are needed, and there are highly-profitable ports where investment will always flow. But there are no criteria, though we as investors need to be aware of them,” said Vasily Vareniya, Chief Executive Officer, ‘Sukhodol’ Sea Port LLC.
Solutions
Technical modernization of ports’ infrastructure
“When we speak about operating facilities we understand when they were built, they do not always meet the current needs regarding depth and characteristics of vessels they accommodate, which is why it is obviously necessary to construct new facilities,” Nadezhda Zhikhareva said.
“What the government needs in our opinion is to upgrade the rail <…> We need to talk about software development, you need to be able to clear cargo online, there should be laws to allow to accept electronic signatures, to accept the clearing of cargo,” Sultan Ahmed Bin Sulayem said.
Provision of subsidies
“We also need regulations regarding free zones. Free zones are very important because the government cannot change rules for the whole country. But countries have realized that maybe in certain economic areas they can put a certain rule that will be clear to people,” Sultan Ahmed Bin Sulayem said.
Industrial development in the region
“Russia exports a lot of raw materials. Why are there no projects in manufacturing in Russia? When you talk about coal, there is a high value of coal – green coal, green coal is liquefied, so why do you ship it as raw material when you realize that you could invest and add value to green coal,” Sultan Ahmed Bin Sulayem added.
Use of the mechanism of infrastructure mortgage
“The mechanism of infrastructure mortgage is being developed now, we are on it with the Ministry of the Economic Development, when investors pay their borrowed funds now, while the state is considered as a public guarantor with deferred payment and covers investor’s costs on facilities that should be entirely in the federal ownership,” Nadezhda Zhikhareva said.