FEBRUARY 2000
Author: Andrei Vasenyov, bisnis Representative in khabarovsk. Approving Officer:
International Copyright, U.S. & Foreign Commercial Service and U.S. Department of State, 2000. All rights reserved out of the United States.
SUMMARY
Sovetskaya Gavan (SovGavan) is located in Khabarovsk Krai. Seaport, timber and fish producing enterprises located in the SovGavan district play an important role in Khabarovsk’s foreign trade. The impact of the 1998 economic crisis on the leading industries of SovGavan was minimal. The district’s natural resources and its favorable geographical location within the Russian Far East create opportunities for U.S. firms. End Summary.
GENERAL INFORMATION
In 1941, Sovetskaya Gavan was founded on the west coast of the Tatarskiy Channel, the eastern slope of the Sikhote-Alin Ridge. For 50 years the city was the center of ship repair for the Khabarovsk Krai. The current population of Sovetskaya Gavan is 34,800 or more than half of the district’s population of 56,900. The district occupies 5,900 square miles of the eastern part of the Khabarovsk Krai, which is predominantly mountainous and covered with coniferous forests. The climate is monsoon with an average precipitation of 650-1100 mm.
Sovetskaya Gavan is an important regional transportation hub providing access to both the Baikal-Amur and Trans-Siberian railroads. In addition, a one-track, 500 kilometer railroad line connects Sovetskaya Gavan to Komsomolsk-on Amur, the major industrial location in the Russian Far East, from which trains have access to all destinations in Russia. A domestic airport located 20 miles from the city provides regular service to the city of Khabarovsk. Since spring 1999, the Lidoga-Vanino gravel high way has been open connecting Sovetskaya Gavan, Vanino and the major cities of the Russian Far East.
The Sovetskaya Gavan gulf is 1.4 miles wide and 7.5 miles long. Its depth ranges from 22 to 37 feet. The gulf is free of ice from late March until January and partly serves as a naval base. In January 2000 a border guard post will be established at the Yakor plant creating additional opportunities for foreign trade. A number of industrial enterprises in Sovetskaya Gavan have mooring lines that are used for trans-shipment services. In 1994, the Kiewit Diversified Group prepared a feasibility study of the gulf and local enterprises for the possible placement of an integrated seaport but subsequently decided not to pursue the project.
BEST SALES PROSPECTS
ú Fish processing equipment;
ú Wood processing equipment;
ú Meat processing equipment.
DISTRICT GOVERNMENT
The local government consists of people who, on the one hand, practice Soviet-type methods of management, but on the other, understand that the market economy is the future. However, officers in charge of the key industrial sectors lack professional expertise, and do not have a strategic vision for the district economy. They spend most of their time calculating average salaries in the key industries and identifying businesses that do not pay taxes in full.
The local government’s major interest seems to be the timely fulfillment of instructions and orders coming from the Krai administration rather than development of the district.
MAJOR INDUSTRIES
Machine building, fishery, timber production and wood processing are the major industries in the district. For decades, two ship repair plants, Yakor and Severny, were the most important industrial enterprises of the district and the largest employers in Sovetskaya Gavan. Today, the profession of a shipbuilder is no longer prestigious and both shipyards are experiencing a shortage of young qualified workers. Sovgavan has been counted among the largest timber and fish producers of the Krai. Approximately 20 logging enterprises are operating currently in district. Most felling areas are located 60 –100 miles from Sovetskaya Gavan. About 90 percent of produced lumber is exported to South Asia. For years Japan and Korea have been the largest markets for the local fir, larch and spruce but over the last two years, as the prices on the Chinese lumber market have grown, Sovgavan’s exports to China have increased considerably.
Both the Tatarskiy Channel and the Sea of Okhotsk are rich in fish and in such “hard currency generators” as crab, shrimps, and octopus. The fishing vessels of companies registered in Sovetskaya Gavan usually operate beyond the 12 mile coastal limit. About 85 percent of the output is exported. During the last seven years dozens of small private fishing companies have been registered in Sovetskaya Gavan. Most operate from one to three small- or medium-size vessels usually rented from Vostokrybprom, the former state fishing conglomerate. For several reasons the so-called “butterflies” went bankrupt or flew off before tax collectors arrived. Today the number of companies operating in the fishing sector of Sovetskaya Gavan has decreased. Lack of investment and working capital shortage plus transportation difficulties are hampering the industry development. Fish processing, represented by only three plants, is underdeveloped.
Statistical data characterizing the operations of the major industries, and of fishery operations, in particular, is understated. During a November 1999 meeting at the Krai Administration, Governor Ishayev claimed that if fishermen did not underreport their fish catch and sales, the Krai could collect enough money to restore the regional fleet, 80 percent of which is obsolete.
The August 1998 crisis stimulated the resource sectors of the Krai economy. Since forestry and fishery are two major sectors in Sovgavan, the district economy has actually improved. Therefore, the consumers’ purchasing power was not as diminished as drastically as in the rest of the Krai.
LEADING INDUSTRIAL ENTERPRISES
The Yakor (Anchor) Joint Stock Company is a ship repair plant with annual capacity to serve 100 vessels with displacement of up to 10,000 tons. The company employs 1,300 people and has a portfolio of cargo and orders for cargo and fishing vessels repair but these orders will use up only 35 percent of the plant capacity. The establishment of a border guard post will permit Yakor to serve foreign vessels. Though the average monthly wage at the plant exceeds USD 300 and is regarded as quite high, Yakor lacks young qualified workers, which is becoming common for machine-building enterprises in the Krai.
In the middle of the 1990s, ship-repair activities fell dramatically, and Yakor diversified into logging and wood processing. It established the Sovgavan Lesopromyshlennyi Kombinat to develop log production and wood processing. In 1999,
Yakor produced 30,000 m3 of logs and in January 2000, its wood processing line purchased in Korea will be put into operation. Yakor is seeking foreign partners to further expand its wood processing facility and to market its products in Pacific Rim countries.
The Severniy (Northern) Joint Stock Shipyard repairs large ships and builds smaller auxiliary ships (hulks and lighters of up to 500 tons) and mechanical equipment for the fishing fleet. Severniy has well-equipped moorings, depots and warehouses with rail access. Severniy is expanding into container operations, and reloading, storage and shipment services for rolled metal. Over the last five years, it has been the main gateway for Vanino-Tairiku (please see below) wood chip exports to Japan. The plant has a contract with Sakhalinmorneftegaz to serve small boats. Since 1998 the number of Sakhalin, Magadan and Kamchatka fishing vessels repaired has constantly increased. The company is open for cooperation, including the development of furniture production and wood processing facilities.
One of the most sophisticated manufacturing operations in the Krai is the Tairiku Sawmill near Sovetskaya Gavan. The plant is a Russian-Japanese joint venture which produces approximately 20,000 cubic meters of kiln dried pine lumber per year. The product is shipped to Japan from the Port of Vanino. Raw material for the mill is sourced out from the Lake Baikal Region of Russia, and delivered to the mill by rail. Mill residual waste is used to generate power for both the mill operation, and nearby villages.
Sovgavan-Port, a Russian-American joint venture, began with an investment by the Global Forestry Management Group in 1994 in the Sovgavan Port region with the idea of expanding its operations to include timber harvested from its own concession area. As no concession arrangements have been made, the joint venture now operates the port and exports logs to Japan and Korea on behalf of log producing companies such as Flora Group (a Russian harvesting and saw-milling operation). The port grades and sorts each log, thereby increasing grading accuracy and quality consistency. Currently there is a dispute between the owners of the company and the Krai administration.
Vostokrybprom is a successor of Morskie Resursy (Marine Resources), a state fishing operation. The company has 10 large vessels, of which seven are processing vessels. Vostokrybprom annual quotas for pollock and herring exceed 100,000 tons. It owns transport vessels, and sells FOB high seas and at foreign ports. The company is somewhat constrained by a lack of working capital. Due to excessive port fees, high import duties and taxes, it is difficult to process pollock in Russia and be competitive in the world market. Therefore, the company is investigating the possibility of entering into a joint venture with a foreign company to process pollock.
Vostoktorg, Ltd., with its 8 vessels, is the largest private fishing business in the Krai. The company was founded in 1991 and in November 1999 employed over 1,000 people. The company has both onshore and floating processing facilities. Oston Shipyard, Khabarovsk, recently built two vessels for Vostoktorg. A fish and crab processing plant located in Sovgavan is currently under construction. The plant will meet the U.S. Hazard Analysis and Critical Point Training Curriculum standards.
The company is very adaptive to the rapidly changing market conditions. According to the CARANA expert who visited Vostoktorg in October 1999, the fishing operation is based on a business model that has been successful in dealing with Japanese and other foreign buyers. Unlike the majority of fishing businesses of the Krai, Vostoktorg does not use forward contracts so it usually sells directly to the buyer who offers the highest price in the market. The company is a part of a holding company established in Khabarovsk Krai by Chernat brothers. In addition to Vostoktorg the holding encompasses a timber company, a crab and fish processing plant, a trading firm, and a diary factory in Khabarovsk.
Hermes LTD. is known as a reputable company in Sovetskaya Gavan. It operates six cargo vessels that transport timber to Japan and Korea. In 1999, the company has produced 15,000 cubic meters of logs. Its wood processing shop manufactured wooden construction materials and furniture. Hermes also owns food stores in Sovetskaya Gavan, Vanino, and Khabarovsk. The company’s priority is to get access to sophisticated woodworking technologies.
Agora LTD. has for a decade been the largest trading company in Sovetskaya Gavan. The company operates nine stores, and large, fully-equipped warehouses. The company enjoys a 30 percent share of the food market in Sovetskaya Gavan and Vanino. Agora supplies food for fishing and cargo vessels and timber operations in remote areas. The company is seeking a foreign partner to start a bakery and a sausage production line.
BANKS
Sberbank and Dalkombank have branches in Sovetskaya Gavan. Large private companies may also have bank accounts at the Vneshtorgbank’s Representative Office in Vanino or major Khabarovsk banks.
TRAVEL INFORMATION
The train ride from Khabarovsk to Sovetskaya Gavan takes 23 hours. A one-way ticket costs approximately $15. Cars are not comfortable and service is poor. There is a regular air service to Khabarovsk. A forty-minute taxi drive from the airport to Sovetskaya Gavan costs $8. Taxi rides within the city are relatively cheap, a 25-mile trip to Vanino costs about $15. The only hotel “Sovetskaya Gavan” is located in the very center of the town. A suite costs $15 – 25, service is poor, but the sauna and restaurant are well run. Currently, part of the hotel is under reconstruction so advance booking is recommended. All forms of telecommunication services are presently available in the city, including Internet access and cellular phones.
CONTACT INFORMATION:
LOCAL GOVERNMENT:
Yuri Grigoriev, Head of the Sovgavan District
Leonid Davidenko, First Deputy Head
Olga Prokazina, Deputy Head in charge of Economy and Property Committee
25 Sovetskaya Street
Sovgavan, Khabarovsk Krai, Russia 682880
Tel: (7-238) 450-45 or 451-12
Fax: (7-238) 451-65
E-mail: 27T01502@s27.hbr.ru
Yakor Joint Stock Company
6 Korabelnaya Street
Sovetskaya Gavan, Khabarovsk Krai, Russia 682880
Contact: Vladimir Voronin, Director General
Severniy Ship-Repair Joint Stock Company
31-A Naberezhnaya Street
Sovetskaya Gavan, Khabarovsk Krai, Russia 682880
Contact: Nikolay Shurpik, Director General
Sovgavan-Port, Russian-American Joint Venture
4 Morskaya Street
Sovetskaya Gavan, Khabarovsk Krai, Russia 682880
e-mail: terminal@port.sovgav.ru
Contact: Yevgeny Zenin, Director
Vostokrybprom (Headquarters in Khabarovsk)
12 Topograficheski Pereulok
Khabarovsk, Russia 680000
Tel/fax: (7-4212) 227-285
Contact: Konstantin Voloshenko, Director
Vostoktorg LTD.
12 Portovyi Proezd, Lososina Settlement
Sovgavanskiy District, Khabarovsk Krai, Russia 682884
E-mail: chv@vmp.sovgav.ru
Contact: Sergei Chernat, Director General
Hermes, Ltd.
21 Znamenka Street
Sovetskaya Gavan, Khabarovsk Krai, Russia 682880
E-mail: sown@germes.sovgav.ru
Contact: Alexander Sosnovskiy, Director General
Agora LTD.
22- A Lenin Street
Sovetskaya Gavan, Khabarovsk Krai, Russia 682880
Contact: Nikolay Tereschenko, Director General
Sovetskaya Gavan Hotel
14 Pionerskaya Street
Sovetskaya Gavan, Khabarovsk Krai, Russia 682880
Contact: Tatyana Shurigina, Director
********** Forwarded by: ***************************
Tanya Shuster, BISNIS Trade Specialist for the RFE
Tel: 202/482-2036, Fax: 202/482-2293
www.bisnis.doc.gov
***************************************************
Additional information on Russia and the NIS is available via
BISNIS Online, at www.bisnis.doc.gov. If you do not wish
to receive for the Russian Far East, Russia,
send a message to tanya_shuster@ita.doc.gov.
*******************************************