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For the last seven years, the Russian government has been vainly trying to find an optimum strategy for the management of marine bio-resources and to determine the basic rules for the fishing industry. The never-ending reshuffles in the Fisheries Committee, with no evident signs of improvement, offer a weighty proof of the state’s inefficiency.
Every newly arrived chief is ready to present his own “brand-new” vision of the ways to resolve the crisis, which actually turns out to be another hackneyed conclusion about the lack of necessary market institutions “that would provide the Russian fishery sector with essential methods of management applied in developed countries with market economy.” Introduction of such institutions is perceived as the major key to success in reforming the industry, making the government pressing towards their creation.
So far, however, the reforms in the fishery sector in Russia take place spontaneously and are not submitted to a clearly defined objective. In other words, the state policy in fisheries is completely lacking, providing the term “state policy” is used to define the certain priorities of the state in developing its fishing sector.
Now the Fisheries Committee, whose great plans may collapse in the near future upon its being attached as a department to one of the ministries – either to the Ministry of Food and Agriculture, or the Ministry of Economic Development or maybe the Ministry of Natural Resources – has started in earnest to work on the regulatory framework based on a newly established management scheme. As for the regulatory framework, things are not quite clear yet, but the management scheme seems to be determined: the industry will develop on the basis of fishing and processing corporations that must become “the pivot of the sector management”. This scheme is aimed at increasing volumes of fish and seafood catches, boosting the export potential for products and services, development of new fishery objects and their promotion at the market, expanding the sales markets.
In financial terms, the situation of fishing and fish-processing enterprises in Russia is not the same as it is in other industries such as metallurgy or even the timber industry, officials in the State Fisheries Committee believe. This fact may play a determining role when the fishing quotas are allocated to Russian companies by means of auctions. The industry today belongs to those holding grasp of resources, and selling theses resources through auctions does not necessarily contribute to its development. Quotas are usually obtained by the enterprises having a sufficient financial inflow from the outside, and these are mainly the ones that are capable to pay the given credits with fish deliveries. Alternatively, these may be companies that operate bareboat-charter vessels. The latter are a more complicated case.
The interest of foreign companies, such as Norwegian ones, in bareboat-charter schemes is understandable. Bareboat-charter provides an easy access to Russian aquatic resources. According to such type of agreement, payments for chartering a vessel are extended for a period of several years, while the value-added tax has to be paid only upon completing the settlements. The Russian company obtains fishing quotas for the chartered vessel, hires the crew and pays their wages.
The Norwegian side, having guarantees of returning their credits by fish deliveries, undertakes to arrange the supplies of machinery, fishing tackle and fuel. As the termination period approaches, when final payments must be effectuated and the Russian company is to get the shipowner’s rights for the vessel, the agreement is usually cancelled, and a new one is signed afterwards. It should be noted that the history of fishing in the Russian north has never seen a case when a Russian company, having received quotas for a vessel operated on bareboat-charter terms, has accomplished the agreement with the foreign partner and bought the vessel out.
As a matter of fact, this example can be regarded as setting up by Norwegians an own business in Russia, where they get fish resources and a cheap labour force, apart from the guaranteed profits made by using free quotas. (In 1999, cod quotas in Norway cost $570 per tonne, in 2000 the price was $ 800). The profit could reach $4.788.000 in case of getting the so-called scientific quotas share (700 tonnes * 12 months* USD 570).
As a result, the structure of the Russian export shifts still further towards the raw materials supply, excluding costs for deep processing.
Such a scenario is predetermined by the unwillingness of Russian fish-catchers to develop cooperation with the local fish processors that are largely focused on the less attractive domestic market. Today the state is evidently incapable of smoothing out these market differences, but it is certainly in a position to create a harmonious system of resource distribution. And it is utterly important to take efforts to create this system, especially because the solutions to all other problems of the fish industry are directly dependent upon this vital issue.
According to the State Fisheries Committee, the state policy in fisheries should be formed upon the already existent positive tendencies. Moreover, this policy must anticipate the new tendencies, and the fishing reform is therefore should be gradual and evolutional.
Basing on the assumption that the state must ensure the right to work of those employed in fish industry, allocation of quotas to fishing enterprises is seen as a tool to its realization. Therefore, distribution of quotas for marine biological resources has to be implemented under a system of clearly defined principles. The basic principle is that a fishing enterprise, regardless of its form of ownership, is legally entitled to perform its relevant activities and consequently may claim the right for obtaining fishing quotas from the state. The enterprise must provide guarantees of the exploitation of the given quota, with the estimated profitability declared. Naturally, confirming these guarantees for liquidity by a financial institution may be required.
It is hard to predict, however, whether the fishery officials will be able to defend these ideas in their battle with the Ministry of Economic Development. With the federal treasury heavily depleted by paying off the country's external debt, the economic ministry is pretty unlikely to lose the cash cow of quota auctions. But the question is actually how long it will be able to generate this steady flow of money.
All the analytical information is prepared by
"Association of Independent Journalists of the North"
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