Coastal factories – a tempting prospect

Participants in the international forum in St. Petersburg discussed prospects for building fish processing complexes in coastal regions as part of the investment quota programme, risks faced by investors, and aspects of the regulatory framework that require further clarification.

Planning risks

Officially, the theme of the panel session was ‘Coastal Fish Processing Complexes: From Projects to Implementation’. However, the discussion actually focused on factories for which the government is providing incentives to build as part of investment quotas, a Fishnews correspondent reports. The moderator of the session, President of the President of the All-Russian Association of Fish Breeders, Entrepreneurs and Exporters (VARPE) German Zverev, invited business representatives to share their views on the prospects and vulnerabilities of such projects and ask the regulator questions about the regulatory framework that governs the distribution of investment quotas.

South Kuril Fisheries Plant General Director Konstantin Korobkov pointed out that recently there have been a number of meetings that smoothed over many of the points that had previously caused “either discrepancies or the rejection of the fishing community”. He noted that the South Kuril Fisheries Plant chose the path of developing coastal fish processing after consolidating stakes in 2008 and that this is part of the company’s long-term development strategy.

“The prospect of obtaining additional quotas is tempting”, Korobkov admitted. However, the construction of a new plant entails the risk of disrupting the existing production chain. “Or you’re forced to start upgrading the entire chain. And this is a completely different story. Especially in coastal regions with undeveloped infrastructure that generally have no excess electricity”, he said.

In addition to energy to support the plant, it would be necessary to increase the extraction of raw materials, solve the problem of waste, and synchronize the project with the company’s previously adopted investment plans – all under a time crunch. “Six months in our Russian conditions is a very short time to carefully approach the design of such a complex production facility”, Korobkov said. In particular, the fish plant had to postpone plans for the construction of a flour mill in order to participate in the investment programme.

However, Korobkov finished on an optimistic note: “Of course, the project must be implemented. Having received such support measures, the industry will receive incentive to develop. Whoever decides to invest during this period will capitalize their business and become the vanguard of fishery managers in our country”.

Betting on the domestic market

Okeanrybflot General Director Yevgeny Novoselov said the new type of investment quotas is certainly interesting and the enterprise will participate in the bid campaign. “We have already spent about RUB 300 million to purchase a suitable site for the construction of a new plant for investment projects. We have invited consultants to prepare the appropriate package of documents. But there are several issues that we do not understand”, he said in an appeal to representatives of the Ministry of Agriculture and Federal Agency for Fishery.

Novoselov asked whether the company’s own quotas or only investment quotas should be taken into account when calculating the financial model for the investment facility. In addition, he said it is unclear from the text of the resolutions whether a reversed auction is being proposed when allocating investment quotas for coastal facilities. “As regards coastal enterprises – and this is 120,000 tonnes for the Far Eastern basin alone – we don’t see very clear wording”, Novoselov said expressing his concern. Zverev said the economic profitability of the enterprises being built in the long term remains an important issue. Pollock Catchers Association Executive Director Alexey Buglak noted that the situation for pollock products on global markets is not particularly favourable as prices have decreased both for fillets and ungutted fish.

Inside the country, though, there is room for consumption growth, including due to the displacement of imported fish, for example tilapia or pangasius, and, most importantly, the development of the semi-finished fish product segment. Of course, this is under the assumption that the problem of product quality is solved. NOREBO RU Director Vyacheslav Sturzu agreed that quality is a key issue. Even amidst the crisis on the domestic market, there has been a steady increase in the consumption of products with a high degree of processing, he said. “A buyer with an average income or higher increasingly opts for fillets”, he said.

Despite the savings, people have begun paying more attention to the quality of fish. “There is a tendency to perhaps buy a smaller product, but it must be of high quality”, Sturzu said citing analytics. “In this regard, we also see potential for market growth”. As regards the prospects for the construction of coastal plants, he also asked the regulator to clarify what is considered a new facility with respect to investment quotas for processing – a new facility or just new equipment?

Where to get technical staff

Technological Equipment General Director Oleg Komarov raised a problem that concerns all machine builders that manufacture equipment for the fishing industry. The key obstacle that prevents Russian enterprises from fully participating in technical modernization programmes in the fishing industry is a lack of personnel, he said.

“When we talk about engineering, the design of new enterprises, and investment projects, we immediately encounter staff shortages”, Komarov said. At present, there are virtually no equipment designers left, and machine-building production engineers have disappeared as well. Technical specialists are worth their weight in gold in the fishing industry as well – from the chief engineer of a fish processing enterprise to a competent mechanic who services the Baader machine.

“We are facing the same problem. When implementing all these projects, we simply do not have the staff”, Komarov concluded. To this end, equipment manufacturers have put forward two initiatives. The first is to create a coordination centre to set objectives for machine builders – a platform for dialogue with ministries and departments to address issues, including localization when implementing projects, both in shipbuilding and coastal factories.

The second initiative is to open production training centres at leading enterprises in fishery basins. They should provide comprehensive training for engineering personnel on the design, production, and operation of fish processing equipment, while simultaneously addressing the problem of personnel for both machine builders and fishermen.

More questions than answers

In Kamchatka, at least a dozen companies plan to take part in the investment quota programme to develop processing and build factories, Deputy Chairman of the Regional Government Vladimir Galitsyn said. At the same time, fishermen have the same questions on the application of the law and by-laws.

“The document is so voluminous and complex that it is difficult for fishermen to understand it and assess the prospect of access to the resource”, he said. Meanwhile, the regulator is taking its time responding to requests from the regions. The explanations that are posted on the website of the Federal Agency for Fishery are not sufficient and this information needs to be urgently updated and supplemented.

Director of the Fishery and Aquaculture Regulation Department of the Ministry of Agriculture Yevgeny Kats tried to address some of the issues right away. He clarified that support is provided to new plants that are investment targets, so the investment project includes both capital construction as well as new equipment. He said the financial model should reflect both the company’s own resources and the investment quotas. Reversed auctions are envisaged for both fishing vessels and coastal processing complexes.

Summing up the discussion, Zverev pointed out that the theme of the panel session had been intentionally narrowed and “the part concerning fish processing that raises the most questions was selected”. Zverev noted that a large amount of resources is distributed as part of the investment quotas, so it is essential to properly build a regulatory framework and calculate economic risks.

Source: Fishnews