5. Opinions and Policy Suggestions
5.2. Short-term development strategy suggestions
5.2.1. Focus on development of an export port for bulk cargo
Although the Vanino-Sovetskaya Gavan PSEZ plans to develop a bulk cargo export port and a container export port at the same time, the overall progress of the plan is slow. In particular, very few projects are now in progress in the case of Sovetskaya Gavan Port.
Of course, trade volume in the Far Eastern Russian port has been on the rise (an annual average of 4.7%) since 2010, led by the Primorsky Territory and Khabarovsk Territory, and trade volume in the Vanino-Sovetskaya Gavan Port is also rising. However, the increasing trade volume is mostly attributed to coal and coke, bulky cargo mainly traded in the Vanino port. In the 2013 “Russian port infrastructure development strategy 2030”, the Far Eastern port development plans mostly mention development of export ports dealing with resources such as oil and coal.
[Table 2-2] Russian Far East Regional Trade Volume Status
Thousand tons, % Region 2011 2012 2013 Average annual growth rate
Primorsky Territory 72,281 80,049 88,206 6.9
Khabarovsk Territory 28,068 28,656 31,772 4.2
Sakhalin Region 21,737 21,645 21,645 -0.1
Magadan Region 1,226 1,350 1,520 7.4
Kamchatskiy Krai 2,057 2,042 1,632 -7.4
Chukotka Autonomous
District 752 912 -
-Far East(Total) 126,122 134,654 144,775 4.7
Source : FEMRI, Kim, Chan-Ho(2014) was referred to.
Container cargo is not likely to increase considering trade volume growth of each item, Russia Port Infrastructure Development Strategy 2030, and the conditions of the industrial and economic development in Khabarovsk and the regions near BAM railway.
Therefore, the early connection of the BAM railway to the Vanino-Sovetskaya Gavan Port and the development of a terminal focusing on the bulk cargo export are necessary in the short term.
[Table 2-3] Russian Far East Trade Volume by Item
Thousand tons, % Region 2011 2012 2013 Average annual growth rate
Total 126,122 134,654 144,775 4.7
Coal, Coke 42,349 48,671 54,436 8.7
Timber 3,559 3,203 2,635 -9.5
General Cargo
(Except for large containers) 7,758 11,151 9,923 8.5
Large container 9,901 10,001 11,805 6.0
Liquid bulk, LNG 55,143 55,661 61,405 3.7
other Logistics 7,411 5,967 4,570 -14.9
Source : FEMRI, Kim, Chan-Ho(2014) was referred to.
Chapter 02_ Khabarovsk Territory Investment Promotion Plan ∙089
[Table 2-4] Development Plan in the Far East Port
Port Project Investor Type of cargo
Posyet Refunishment Trade Port
Posyet Ldt. Trade port posyet Ltd. Coal
Nakhodka Facility maintenance of pier #8 Nakhodka ICC Ltd. Coal
Vostochny
Petrochemical Complex
Construction NK Rosneft Ltd. Liquid bulk
Coal Pier Construction for Vostochny-Nakhodka marine transportation center development
Rostransmodernizatsiya Coal
Oil wharf facilities development for Kozmino
Specialized sea oil kozmino
Ltd. petroleum
Improving access routes for
pier #31~35 “SK” Small port Coal
Vanino
Coal transshipment facilities
of OAO <Daltransugol> Daltransugol Ltd. Coal Coal transshipment terminal
construction in Muchka Bay Mechel-port Vanino Llc. Coal Freight vehicles Terminal
construction in Muchka Bay Sahatrans Llc. Coal, timber Vladivostok Container Terminal
Construction Russia Troika Ltd. Container
Source : Russian port infrastructure development strategy 2030. 2013, Kim, Chan-Ho(2014) was referred to.
5.2.2. Port infrastructure expansion by non-administrative agency port development scheme
With the aim of developing itself as a logistics cluster, the Vanino-Sovetskaya Gavan PSEZ is planning port infrastructure expansion which is necessary to foster port logistics and industries, but the actual progress of the plan is not satisfactory. The plan includes the expansion of port infrastructures, such as building various port transshipment termi-nals (coal, grain, iron ore, fisheries, etc.), cold storage and storage warehouses.
Therefore, the Vanino-Sovetskaya Gavan PSEZ is required to attract private and foreign investment by adopting non-administrative agency port development scheme.
Korea also adopted non-administrative agency port development scheme to improve the operational efficiency of port facilities by helping actual demanders (ship owner, owner of goods, shippers, etc.) promptly obtain facilities. This is a way to activate the operation while ensuring the construction of private pier or small port facilities through an institution of port law.
[Table 2-5] Korea non-Administrative Agency Port Construction Status
① By year
Total Before 90s 91 - 00 01 - 08
number of case 2,554 463 956 1,135
Amount
(100 million won) 118,734 4,233 41,216 73,285
② By Facility
of case 2,554 104 318 482 86 554 107 490 413
Amount (100 million
won)
118,734 979 80,571 11,396 659 11,451 507 3,391 9,600
Source : Ministry of Land, Transport and Maritime Affairs and Port Construction Policy Bureau
Port facilities which are created by the non-administrative agency port development scheme should be a national belonging upon completion, but some facilities are not vested. The non-administrative agency port development scheme is BTL (Build Transfer Lease) development approach. The BTL scheme is a construction method which uses funds from the private sector to complete public facilities, and the government pays the rent to use the facilities. In this case, the government just pays an annual rent to use facilities without massive budget spending, and relatively stable and high profits are guaranteed for the private enterprise by investing in public facilities. The non-admin-istrative agency port development scheme implementation status in Korea is as follows:
11.8734 trillion won has been invested until 2008 for 2,555 cases including the outer harbor facilities, mooring facilities, handling facilities and other various facilities (See [Table 2-5]).
5.2.3. Early attraction of repair shipyard anchor companies by consignment management
Russia has state-of-the-art military vessel technologies, but marketability of commer-cial vessel has been rated as unsatisfactory due to lack of construction experiences and repair skills. The repair and shipbuilding industry in the Russian Far East region targeting fishing vessels in the Northern Pacific ocean can have market potential if developed with the fishery processing industry, and the Vanino-Sovetskaya Gavan PSEZ is located in a favorable area.
Chapter 02_ Khabarovsk Territory Investment Promotion Plan ∙091
Therefore, it is essential to attract anchor companies which are in charge of establishing and managing the base shipyard for early vitalization of shipbuilding-repairing cluster in the Vanino-Sovetskaya Gavan PSEZ which has a location advantage and potential for development. To this end, it is strongly suggested to consider establishment of shipyards with consignment management by companies in other countries such as Korea which have the technology and management know-how. A successful case of shipyard consignment management can be found in the Oman shipyard which is established and operated by Korea’s Daewoo Shipbuilding & Marine Engineering Co., Ltd.
Daewoo Shipbuilding & Marine Engineering Co., Ltd. and the Oman government have signed a consignment management (Operation & Management) agreement in 2006 for constructing and operating the Oman shipyard (ODC, Oman Drydock Company).
The main content of this agreement is that Daewoo Shipbuilding provides consultation for design, construction of shipyard and equipment purchase for 10 years, and after the completion, Daewoo Shipbuilding appoints a chief executive officer (CEO) and performs consignment management. ODC currently holds some facilities including a dry dock which can perform 2 VLCC work at the same time, 5 piers with a total length of up to 2.8km, 14 zip cranes with 40t capacity, etc. OCD also achieved the 200th delivery of repaired ship in March 2014 after the April 2011 launch (http://www.
geojeoneul.com/news/).
5.2.4. Attracting fishery processing companies by guaranteeing investment stability
The situation in the Russian Far East and the North Pacific region is experiencing clash of interests between the fisheries resources right of Russia and fishing right of foreign countries including Korea. Particularly in December 2014, the amended Fisheries Act of Russia included mandatory investment in the fishery products processing facility in the Russian territory to ensure stable fishery quota and stable operation of the joint venture which is invested by foreigners12). As a result, foreign companies' difficulties are escalating because Russia is linking fishery quota and fishery product processing facility investment in the North-pacific region. Korean companies are watching invest-ment in the fishery products processing industries in Russia because of uncertainty of short-term investment. Of course, investors still maintain the intent of fishing and investing in fishery product processing facilities in Russia due to factors such as medium and long-term stabilization of price in Korean market, securing stable fishery resources, potential profits by making use of fishery processing technology.
Accordingly, the requirements of fishery products processing companies in Korea can be summarized as follows. First, the Russian government should eliminate uncertainty
12) In the ‘Legislative Measure of Procedures of Foreign Investment in Strategic Base Company (for consideration of Russian defense and national security)’ which come into effect on December 6, 2012, FDI Procedure Act and Regulations on the Fisheries Act are amended.
through the institutionalization of a foreign private company's availability of sole long-term lease for port land or land purchase. Unstable situations frequently occur following a position change of partner companies in Korea-Russia joint venture due to the nature of private land near port area. Second, due to the lack of skilled manpower in the Russian Far East, institutionalization of measures to ensure hiring third country's labor force until they acquire necessary skills is required. Third, Korean companies want incentives such as tax or export tax, to be competitive in price compared with China and EU imports processed products. Finally, Korean fishery processing companies are demanding the Korean government's effort to ensure stability of investment in Russia. This means the Korean government needs to consider that investing in Russian fishery processing industry will have effects of stabilizing fishery product price in Korea and enhancing added value by overseas expansion.
5.2.5. Improvement of Russian customs clearance system
Russia’s complicated import and export customs clearance and arbitrariness of customs workers in charge have been pointed out as the biggest barrier to attracting foreign investment. The inspection rate is excessively high at 44% (about 20 times higher than Korea), and after import declaration is received, goods cannot be exported until copies of all relevant documents are sent to the Russian Federal Customs Committee and it confirms the final clearance decision. In addition, the following factors are pointed out as difficulties with the customs sector for Korean enterprises: arbitrary customs system which operates differently depending on the person in charge, the fact that documents have to be written only in Russian, and a practice that clearance fee needs to be paid in a deposit beforehand and is deducted afterwards (Korean clearance fee is postpaid).
[Table 2-6] Rankings of Major Countries and Russia Trade Clearance
Индикатор Росси
я
Европа и Центральна
я Азия ОЭСР Китай Индия Корея Документы для экспорта
(количество) 9 7 4 8 9 3
Время на экспорт
(в днях) 22 25 11 21 16 8
Стоимость экспорта
(US$ за контейнер) 2,615 2,109 1,070 620 1,170 670
Документы на импорт
(количество) 10 8 4 5 11 3
Время на импорт
(в днях) 21 26 10 24 20 7
Стоимость импорта
(US$ за контейнер) 2,810 2,339 1,090 615 1,250 695
DB 2014 Рейтинг 157 - - 74 132 3
Source : The World Bank(2013).
Chapter 02_ Khabarovsk Territory Investment Promotion Plan ∙093
In “Doing Business 2014”, overall ranking of Russian customs system is 157th out of 189 countries, 5 notches up from 162th in 2013. This means maritime import and export costs in Russia are higher than Eastern European and Central Asian countries’
average costs and significantly higher compared to the average cost of OECD countries which is $1,070/$1,090. The number of documents required for export and import in Russia is 13 and 12 each, and it takes a total of 22 and 21 days to export going through processes including document preparation, export clearance, domestic transportation, and required work at the port.
Korea has been operating an electronic clearance system called UNI-PASS. This is an electronically processed system such as on-line or the internet, which allows companies and individuals to handle custom declaration, import and export declaration, online tax payment procedures, etc. This electronic clearance system offers One-Stop service covering various requirements confirmation such as import and export customs declara-tion and inspecdeclara-tion. Accordingly, the service features of the customs system in Korea can be evaluated as follows. First, it is the world's first 100% electronic clearance system.
Second, it is the fastest system in 179 World Customs Organization (WCO) member countries. Third, the system performs a role of a trade and logistics information hub, which connects industry and government.
[Figure 2-12] Electronic Customs Clearance Services Map
Import customs system
Customs dearance single window
Single window System Administration
Thus, this study proposes that Russia improve its customs clearance system by referring to international practices like Korea and adopting advanced customs clearance system in the following two directions. One is improving the overall clearance system of some specific areas such as the Vanino-Sovetskaya Gavan PSEZ on a trial basis. The other is improving the most troublesome feature of the clearance system for foreign companies (e.g., tariff on import and export).
Geojeoneul, “Oman Shipyard of Daewoo Shipbuilding & Marine Engineering Co., Ltd, Repair performance achieved 200 vessels” (http://www.geojeoneul.com/news), 2014.8.
Government of Khabarovsk Territory(2014), Vanino-Sovetskaya Gavan PSEZ initiative and development, introduction data..
Government of Khabarovsk Territory(2014), Vanino-Sovetskaya Gavan PSEZ initiative and development.
Gwangyang Bay Free Economic Zone (http://www.gfez.go.kr/).
Jeong, Jun-Ho, Sunbae Kim, Changuk Byeon, 2004, “Spatial Structure of Industrial Cluster and Regional Innovation Governance”, KIET.
Kim, Chan-Ho, 2014, “Port Development and Investment Status in Russian Far East”, KIET investment climate in The Far East seminar internal material.
Kim, Sun-Bae, 2001, “Industrial Policy Issues for Building a Regional Innovation System in Korea,” Regional Studies (지역연구), Vol. 17, No. 2, Korean Regional Science Association, pp. 79-97.
Kim, Sun-Bae, 2003, “Innovation system building measures towards innovation-driven economy,” Science and Technology Policy, STEPI.
Lee, Sung-woo(2014), “Port Development Plan in Russian Far East,” KIET investment climate in The Far East seminar internal material.
Nomura Research Institute(2011), Concept of Formation and Development of the Port Special Economic Zone in Sovetskaya Gavan, Nomura Research Institute Project Paper.
Russian Federal Government, 2013, 「Russian port infrastructure development strat-egy 2030」.
Sovetskaya Gavan Autonomous District Executive Office, 2014, “Sovetskaya Gavan PSEZ)”, Seoul Investment Seminar presentation.
The Ministry of Land, Transport and Maritime Affairs and Port Construction Policy,
“Korea non-administrative Agency Port construction Status “, internal data.
World Bank(2013), Doing Business 2014.
Yang, Dong-Seok, 2015 “Improvement of Russian customs clearance system,” KIET investment climate in The Far East seminar internal material.
Yonhap News Agency, “Oman Shipyard of Daewoo Shipbuilding & Marine Engineering Co., Ltd, Performance in the Middle East showed”, 2014. 3. 6
References
2014 Knowledge Sharing Program II with Russia (Khabarovsk Territory)
www.ksp.go.kr
Improvement on the Investment Environment of Khabarovsk Territory
Ministry of Strategy and Finance
Government Complex-Sejong, 477, Galmae-ro, Sejong-si, Korea 30109 Tel. 82-44-215-7732 www.mosf.go.kr
Korea Institute for Industrial Economics & Trade 370, Sicheong-daero, Sejong-si, Korea 30147 Tel. 82-44-287-3114 www.kiet.re.kr
Korea Trade-Investment Promotion Agency 13, Heolleung-ro, Seocho-gu, Seoul, Korea 06792 Tel. 82-1600-7119 www.kotra.or.kr
ISBN 978-89-5992-805-7 ISBN 978-89-5992-803-3 (set)
2014 Knowledge Sharing Program II with Russia (Khabarovsk Territory)