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The agrarian side of the Silk Road
What opportunities does the Chinese initiative open for the development of the bioresource sector in the Far East?
The Institute of Economics and Industrial Engineering of the Siberian Branch of the Russian Academy of Sciences published the "ECO" magazine, known and recognized in the scientific world, from the year 1970. Several issues of this journal in recent years have been devoted entirely to the development of the Far East. On the eve of the Eastern Economic Forum, the IEIOPE SB RAS decided to compile the best publications on these topics in the book. Readers of IA Eastrussia have a unique opportunity to get acquainted with some of the texts of the publication in the framework of the joint project "ECO - Far East". The author of the article is Natalia Antonova, Doctor of Economics, Institute of Economic Research, FEB RAS, Khabarovsk
Consider two segments of the bioresource sector of the Far East - agriculture and forestry, in terms of seeking answers to the following questions: have there been any changes in regional economic cooperation between China and Russia in connection with the implementation of the Silk Road Economic Belt initiative and what is their focus? Is there a basis for a new impulse in the development of these industry segments? How do new instruments for the development of the Far East contribute to such cooperation?
A LITTLE ABOUT POLICY
The goal of the Silk Road Economic Belt initiative, as part of the One Belt, One Road system project, is to promote the free movement of economic factors, the efficient allocation of resources and the deeper integration of markets, and the development of wider regional cooperation. This should help develop the potential of regional markets, boost investment, create jobs, and demand for goods and services. Among economic instruments, we can emphasize the strengthening of customs cooperation, the development of new forms of trade, the creation of new models for attracting investments, etc.
Although in many ways the Chinese initiative has a "bias" to the south and west of the Eurasian continent to enter the markets of Western Europe and also to Africa, the northern (Russian) direction remains in the zone of Chinese geopolitical and economic interests that are aimed at "creating an important window of openness to the North. " The basis of these interests are natural resources, which, in the opinion of the Chinese leadership, will determine the economic prospects of Russia. These interests are reflected in the strategic task set in the report on the work of the PRC government in 2015: to increase the import of scarce energy resources and raw materials.
The same report outlines the implementation of a new stage in the strategy of reviving the northeast and other old industrial bases in China, facilitating the transformation and modernization of the economy in resource-type areas. To do this, the initiative "Economic belt of the Silk Road" is actively promoted (in modern Chinese documents the name "One belt, one way" is used, therefore we will use it in the future), harmonizing the planning of internal regional development, expansion of internal regional openness and international economic cooperation. The initiative "One belt, one way" can be called a driver of activation of cooperation between Russia and China, intensification of partnership relations at the highest level in various forms. This is confirmed by the joint documents signed at the end of 2015 at the 20 regular meeting of the heads of government of Russia and the People's Republic of China 35, creating an institutional framework for bilateral cooperation in various fields.
PRICE OF THE QUESTION
What could be the price of the issue for the bioresource sector from the intensification of Russian-Chinese relations? In its essence, this is a one-way movement in the geographical sense: Chinese investors create production in the Russian territory. For more than one year, with every large-scale entry of Chinese business in the industry related to the use of natural resources, there is concern (sometimes justified) among the population and the scientific community of the eastern regions about the consequences of the activity of our neighbors.
Especially often, disturbances arise when information appears on the possible transfer of land to Chinese agricultural producers, an example of which may be a wave of protests among the population and the deputy corps against the transfer to the Chinese investor for rent for 49 years 115 thousand hectares of fallow lands and pastures for the APK project in the Trans-Baikal Territory . The investment project for the production and processing of agricultural products is tentatively estimated at 2 billion yuan, which is potentially attractive for the region's economy. Fears are caused by a possible violation by Chinese producers of agrotechnical norms adopted in Russia, which can lead to the depletion of land. Therefore, the public insisted on conducting public hearings involving professional experts, public organizations, local people and administrations of municipalities in the zone of influence of the proposed project in order to assess all the risks for the parties concerned. The activity of the public involved the intervention of the Ministry of Economic Development of the Russian Federation, which came up with a refutation of information about the existence of any agreements with the authorities of the eastern regions with Chinese entrepreneurs.
As you know, smoke without fire does not happen. According to Chinese statistics, more than 150 agricultural enterprises of Heilongjiang Province are operating in Russia, accounting for 82% of all agricultural land leased by Chinese entrepreneurs (500 thousand hectares). Basically they operate in the Far East. In some eastern border regions there is a dominance of Chinese tenants. For example, in the agriculture of the Jewish Autonomous Region, according to official figures, 38 Chinese enterprises operate. The total area of land leased by them was 2015 thousand hectares (36,6% of all areas under cultivation) in 29,2, compared to 2014, it grew by 35,1%. Almost 100% of the area (36 thousand hectares) is occupied by soybean crops, the yield of which was 2015 thousand tons (47,7% of the total volume of soybean collected in the EAO) in 40. Soy is the only highly profitable crop (profitability reaches 40%), grown in the southern part of the Far East. But without proper crop rotation, its constant production at one place leads to the depletion of the soil. Therefore, local farmers fear that after the departure of the Chinese tenants arable land will be unsuitable for use.
The threat may also be in the potential contamination of agricultural land with chemicals in the Far East. In China, about 1% of land is highly polluted. As acknowledged by the governor of the Jewish Autonomous Region, Chinese entrepreneurs in various ways control up to 80% of the agricultural land of the region. Therefore, for Russian investors who are ready to develop agriculture here, it is impossible to find land.
This situation is largely due to the imperfection of land relations in the agrarian sphere. To effectively manage your own agricultural lands, including monitoring their use, you need full information about them: who owns, who the tenants are and who actually processes them, the structure of farmland (arable land, deposits, fodder land, etc.). ), the number of lands in circulation, the state of soil fertility. So far, issues of ownership of state lands remain acute. The undistribution of state ownership of agricultural land between levels of government is a common problem for Russia, since no one wants to take responsibility for the efficient disposal of land. The result is an unsystematic distribution of land between tenants, which creates conditions for the adoption of corruption decisions by the authorities at the regional or local levels.
In general, only 11% of state agricultural land is distributed across the country between the federal, regional and local levels (the best indicators for Russia are the Belgorod region - 61%, the Republic of Khakassia - 60%). In the Far East, only 2% (See table).
The share of state agricultural land, distributed in ownership on 1 January 2015 year, %
|Far Eastern Federal District||2,3|
|Rep. Sakha (Yakutia)||0,5|
|Jewish Autonomous Region.||17,8|
The most favorable situation in the Khabarovsk Territory and the Amur Region, where about half of the agricultural land is distributed. But the other main agricultural region of the Far East - Primorsky Krai - has a very low index, while the most valuable land in it - arable land - is 46% of agricultural land (See Figure). The highest indicator of arable land in the Amur Region. Naturally, these are very attractive territories for Chinese farmers. But, unlike the Jewish Autonomous Region, in the Amur Region for the last 6-7 years the number of Chinese enterprises in the economy (they make up 75% of all foreign ones) has sharply decreased (from 83 in 2009 to 51 in 2014), which is connected with the policy of regional authorities, focusing on domestic producers.
The share of arable land in agricultural lands of the Far East, 2014 year,%
Agriculture and forestry complex can not be attributed to the most attractive industries for Chinese entrepreneurs, nevertheless they are mostly present, but the turnover of enterprises with participation of foreign capital working in agriculture and forestry declined in 2010-2014. from 1,2 billion to 4,5 million rubles, foreign investment - from 45 million rubles to zero. Less was used by Chinese labor and in Russian agricultural enterprises, which is associated with a policy of reducing quotas, as well as rising labor costs in China. The number of Chinese foreign workers employed in agriculture declined by 2008-2013 almost 17 times, in forestry - fourfold. In connection with the new stage in the development of Russian-Chinese relations, Chinese farmers have recently begun to show interest in leasing land in the region.
Unlike the Amur Region, Primorsky Krai actively cooperates with Chinese agricultural producers engaged in the cultivation of rice, vegetables, soybeans, corn, dairy and meat cattle, poultry. One of the most successful projects is the activity of the Dunnin Huaxin Commercial and Industrial Corporation, whose founder has been working in the Primorye Territory since 2004, when he received a lease for a farm plot for 49 years. On the Russian side, Armada Company LLC is a partner. The company's land assets are located in three districts of Primorsky Krai, the sown area is 47 thousand hectares], the number of employed is 300 local residents. The main activities: growing soybeans, sunflower, barley, corn, feed wheat, meat and dairy cattle, production of mixed fodder, processing of soy.
The activities of Chinese tenants in Russia are under strict control of the Chinese government. In 2012, the Heilongjiang Provincial Government established the Heilongjiang Agricultural Industry Association in Russia to regulate the activities of agricultural enterprises in Russia. More than 100 companies have joined the association, operating mainly in the Russian Far East and engaged in livestock raising, soybean, corn, rice cultivation. The Association's mission is to ensure compliance of Russian and Chinese legislation with its members, exchange of information, effective cooperation.
PROSPECTS OF COOPERATION IN AGRICULTURE
As indicated above, the protocols signed in December 2015 between the Rosselkhoznadzor of Russia and the Main State Administration for Quality Control, Inspection and Quarantine of the People's Republic of China on the requirements for grain and oilseeds exported from Russia signify significant progress in the development of cooperation in the field of agriculture. First of all, we are talking about the admission of Russian grain to the Chinese market, which was previously closed to them, only soybean deliveries were made. As for the expected export of grain, there are good prospects for the eastern regions, as they are in a limited range of areas where the China Food Security Bureau conducted its inspections and allowed the supply of wheat from the Altai and Krasnoyarsk Territories, the Novosibirsk and Omsk Regions; corn, soybeans and rice, rape from Khabarovsk, Primorsky and Transbaikalian territories, the Amur Region and the EAO.
In fact, the Far Eastern regions are already supplying agricultural products to China, mainly soybeans. (...) As for cereals, the Rosselkhoznadzor announced in March 2016 that their deliveries under the signed protocols have already begun.
Another form of Russian-Chinese cooperation is the creation of economic parks, in particular the Park of Modern Agriculture and Economy of Heilongjiang Province in Primorsky Krai. His main enterprise was the already mentioned Huaxin Corporation, whose success in Russia was supported by the Chinese government: the Ministry of Trade and the Ministry of Finance assigned it the status of the first Chinese foreign agricultural cluster of the state category. This is the largest project of Russian-Chinese cooperation in the field of agriculture, in which two livestock complexes for the cultivation of cattle and pigs are being established in two municipal districts of the Primorye Territory. In 2015, he entered the strategic initiative of China "One belt, one way" and is included in the list of priority projects. At present, OOO Armada Company (read - the Huaxin Corporation) seeks to get into the residents of the territory of the advanced social and economic development (TOP) "Mikhailovskaya" with the project of creating a flour mill at 50 thousand tons a year in order to take advantage of the benefits provided to residents .
Summing up, it can be concluded that although the Chinese direction has been developing actively in recent years in institutional terms, its practical economic results are not yet obvious, with the exception of the project in Primorsky Krai. Therefore, the Ministry of Regional Development of the Russian Federation seeks to attract investors from other countries, in particular Japan and the Republic of Korea. The joint Russian-Japanese company JGC Evergreen (a resident of TOR Khabarovsk), investing an amount of 556 million rubles, built the first stage of a greenhouse complex for growing vegetables, which are already supplied to the markets of the Khabarovsk Territory and further to other markets in the Far East. Minvostokrazvitiya suggested that the Korean business consider the possibility of participating in investment projects in the agro-industrial complex of the Far East, including the creation of a Russian-Korean agro-industrial investment fund that could invest in agro-industrial projects in the Far East.
FORESTRY COMPLEX: IS THE MOBILITY IN INVESTMENT COOPERATION?
In recent years, the forest complex of the Far East was closely linked to the Chinese market, when the strengthening of China's positions in Russian timber trade in the east of the country began. And China not only did not weaken its influence, but also strengthened it, dictating the conditions on the timber market for Far Eastern suppliers. But as China cuts logging in its forests, continuing the policy of increasing the wooded area, it is possible to increase China's imports of timber. Over the past five years, the level of forest cover in China (the coefficient of forest cover, in Chinese terms) has increased to 21,7%, the timber stock has increased to 15,1 billion cubic meters, the country has become the world leader in forest resource growth rates. By 2020, the Chinese authorities plan to increase the forest cover to 23,04%, and the timber stock - up to 16,5 billion cubic meters.
In the long term, there are two possible ways: either by increasing China's imports of wood (coniferous sawlogs), or by moving enterprises to Russia, where production costs have decreased due to the ruble devaluation. For the Far East, the establishment of such enterprises is institutionally supported by the Memorandum of Understanding between the Ministry for the Development of the Far East of the Russian Federation and the State Committee of China on Development and Reform for Strengthening Russian-Chinese Regional, Industrial and Investment Cooperation in the Far East.
Recently, there has been some activity of China in investment activity, though, while at the "verbal" level. For example, in the Sakhalin region, since 2012, they are trying to attract an investor to implement the regional priority investment project "Integrated woodworking production". Several potential investors have already changed, mostly Chinese, but the matter has not moved further than intentions. In South Yakutia (Aldan District) in March 2016, negotiations were held between Heilongjiang Joint Chief Company for Economic and Technological Development and OAO Corporation for Development of Southern Yakutia on the possible establishment of a complex wood processing, wood waste, and bioadditives production. But the main interest is related to the possibilities of timber harvesting, since the Aldan district is located relatively close to the border, and in Yakutia is concentrated 50% of all forest resources of the Far East.
It is planned to create a large Russian-Chinese holding in the Khabarovsk Territory. The company from Guo Tai LLC (Heilongjiang Province, China) intends to invest in the normalization of work and development of the Arkaim JV LLC. It is expected that the founder of Arkaim, in addition to Guo Tai, will include the Chinese company China National Forest Products Corporation, but the controlling stake will remain with Arkaim. The creation of the holding will allow us to master new forms of deep processing of wood - the release of probiotics and antioxidants. Involvement of third-party investors is due to the fact that the modern woodworking complex for the production of chipboards and sawn timber created in 2010 JV Arkaim can not function properly due to the difficult financial situation associated with the difficulties of paying loans. The state support provided by the federal and regional authorities for the Arkaim enterprise in the form of a search for creditors, assistance in restructuring the debt, was supplemented by assistance in the search for investors.
Perhaps this example will have a more realistic basis, since it is based on intergovernmental agreements: this project is included in the list of priority joint projects of the Russian-Chinese Intergovernmental Commission on Investment Cooperation, the second meeting of which took place on June 18 of 2015. The commission also approved 28 new joint projects with a total investment of more than 20 billion dollars, and the total number of projects accompanied by the commission reached 58 (chemical industry, metallurgy, agriculture, forestry, construction materials production, etc.).
The real project of the Russian-Chinese cooperation in the forest complex of the Far East is the incorporation of the Russian-Chinese Investment Fund (RKIF) into the share capital of the RFP Group, the largest timber industry company in the Far East. This fund was created by the Russian Direct Investment Fund and China Investment Corporation (CIC). In 2013, a share in the RFP Group was acquired for 110 million within RCFR.
If to compare with what was 4-5 years ago, there was an activation in Russian-Chinese cooperation in the bioresource sector of the Far East. It gained a more "legitimate" character due to the strengthening of patronage on the part of the governments of both countries. Framework documents have been developed, one of which is the strategic initiative of China "One belt, one way". For all its "pro-Western" orientation, it seems that it is not just a polite nod towards the Far East, if only because the planned revival of the old industrial base in the Northeast of China is connected not least with the Far East. But if we compare agriculture and forestry complex, then investment innovations are more present in the first, since the probability of obtaining a potential profit from investments is higher.
Although, judging by the real results, one can see only one real innovative project in agriculture, implemented in Primorsky Krai. However, like one project in the forestry complex (Khabarovsk Territory). The difference is that in agriculture this project was originally created by a Chinese entrepreneur, who then picked up on the "institutional banners" of the Chinese leadership. In the forest complex, the investor came to the largest Russian company already present in all state development documents.
As it is written in the basic document "Vision and action aimed at promoting joint construction of the" Economic belt of the Silk Road "and the" Silk Road of the XXI century "" it is necessary to search for new models of investment cooperation. Tools of Russian-Chinese cooperation, created over the past two or three years, can be attributed to such models. Perhaps, the created instruments will bear fruit of their activity in the bioresource sector of the Far East in a few years. I would like to hope that there will be more acquisitions than losses.
(magazine "ECO", No. 7 for 2016; abridged version)