News

Sovkomflot Plans $280M Development for Sochi's Port

Thu, 10 Jun 2010 00:00:00 +0400

State-owned shipping company Sovkomflot is getting into the real estate business, investing as much as 9 billion rubles ($280 million) into the construction of a marina and coastal infrastructure in the port of Sochi, the company said Wednesday.
Sovkomflot's project includes a marina for 250 yachts, reconstruction of the historical terminal building, a four-star hotel with a convention center, a shopping center and an office building � a 2 billion ruble investment to be completed by March 2013.
Another five-star hotel, a boardwalk and a luxury apartment hotel is to be added by 2016. Construction on the first stage is expected to start in February.
The shipper is looking for co-investors who can take over the noncore projects while it maintains control over the marina, said Konstantin Sakharov, head of Sochi Grand Marina, a company created by Sovkomflot to develop the project.
"This is not really our line of business," Sovkomflot deputy director Alexander Kurtynin said of the real estate developments.
The future of the marina at the heart of the development would depend on whether the government delivers on its pledge to construct a massive harbor that would protect the marina from Sochi's stormy sea. Construction has not yet begun on the harbor, which has to be completed in 2013.
The project is part of a vast reconstruction of the Port of Sochi that aims to boost passenger volume and add a cruise terminal, said Vladimir Derkunov, director of Port of Sochi, the Sovkomflot subsidiary that operates the port. The port expects to receive 160 to 180 cruise ships a year by 2020, he said.
But before the wealthy rush to moor their own boats in Sochi, the port has some issues to work through. The popularity of the marina among yacht-owning Russians, many of whom keep their yachts in Turkey or Crimea, will depend on whether the rules governing the Abkhaz border are changed, said Artur Grokhovsky, an editor at Boats and Yachts magazine.
"Two weeks ago I went out to sea in Sochi, and it took six hours to get the permit. Border guards came to inspect the yacht," he said.
In addition, the Sochi marina is likely to be comparatively expensive because of the cost of construction.
The Black Sea coast is unique in that there are no natural bays that can be used to moor yachts, and frequent storms make extensive pier and breakwater infrastructure necessary, but since the harbor is so deep, such infrastructure is very expensive, Grokhovsky said.
He estimated that one meter of a breakwater would cost at least 750 million to 800 million rubles.

The Moscow Times.

$100 billion outlay puts economy on road to recovery

Wed, 21 Apr 2010 00:00:00 +0400

Presenting a report to the State Duma, Prime Minister Putin said the country avoided the worst pitfalls of the past and that sustainable growth was returning, after $100 billion in anti-crisis spending.

Yahoo StumbleUpon Google Live Technorati del.icio.us Digg Reddit Mixx Propeller The economy shrank by 8% and industrial production fell 11% but the PM�s analysis of the anti crisis measures not that the 2009 economic trough saw no mass unemployment and that average incomes actually rose. In short � Russia was hit harder than most developed economies in terms of output, but avoided the economic, budgetary and social meltdowns of Russia�s last economic downturns in the 1990s.

Prime Minister Putin was able to point to a disciplined approach to budgeting throughout the early and mid 2000s boom, and preparedness to act as the key difference this time around

�Earlier the external shocks used to throw our country backwards, but this time Russia was better prepared for the crisis. Russia behaved as a strong powerful country, which reacts actively to a situation and does not simply wait until circumstances are changed for the better.�

The government spent more than $100 billion in special measures, but most of this money has now been returned by banks and businesses with interest. Growth is returning, with Finance Minister Kudrin � architect of the financial defences which have stood Russia in better stead than many would have expected over the last two years � has further increased his 2010 GDP to 4%, while Prime Minister Putin predicted a return of pre crisis GDP growth within 2 years with the recession now over.

But the widespread sense of the worst is past should also come with a grain of warning about the risks of going to fast to soon. Roger Munnings, former head of KPMG Russia and the CIS, and now UK special trade representative believes overheating could again become Russia�s economic bane.

�There are problems when a country comes up to full capacity. It needs time to solve those problems. So, you know, my advice would be, don�t go for those growth levels quickly. There is also overheating in a number of other ways. Having said that I think it will return to growth and I think the long term prospect for the country is good.�

The Prime Minister said there would be further draw down of anti-crisis measures, although support would remain in certain sectors of the economy for as long as they're needed. Although, Vladimir Bragin, Analyst at National Bank Trust, believes the withdrawal of government support is nothing to fear as the economy is already standing on its own two feet.

�There is no point to say that government should pull out anti crisis measures, because there is nothing to pull out. Almost everything is not being used or will not be used very soon.�

Despite obvious signs of recovery it�s too early to celebrate. Russia is ranked 120th on the World Bank's list of attractive business climates due to low transparency and bureaucracy. Both the President and Prime Minister have made fighting red tape and graft an urgent priority. But these are old problems for Russia and have always held it back, so doing away with them would open up an entirely new potential for growth.

www.RT.com

Contested Retail Bill Clears Duma Hurdle

Thu, 17 Dec 2009 00:00:00 +0300

The State Duma on Wednesday passed in a key second reading a controversial law on retail trade that caused a rare split between the government and the Kremlin.
Retailers have said the bill, which was proposed by the government, will give unfair advantages to producers and suppliers and cause prices on many goods to rise.
The bill will come into force as early as Feb. 1 and introduce strict regulations on retailers, including a shortened period of payment for delivered goods, possible limits on retail prices and a cap on stores� retail margins.
Under the bill, the government will be allowed to set prices for certain kinds of goods for a period of 90 days if prices have jumped by more than 30 percent within the previous 30 days.
The legislation will also restrict retail chains from acquiring stores if the acquisition would cause their market share in the region to exceed 25 percent. Starting July 1, the limit will be applied to cities and municipal regions.
In addition, retailers will be prohibited from charging suppliers extra fees, except for a premium of 10 percent on food items. Currently, suppliers are often charged extra fees in order to have their goods sold in large retail chains and put in places of high visibility.
But these fees, which retailers call bonuses, are likely to remain and take a different form.
�Even if bonuses are banned, retailers will find a way to replace them with something else in order to boost competition among suppliers,� said Yekaterina Loshchakova, an analyst at Financial Bridge brokerage.
But that something might involve finding new suppliers, Ilya Belonovsky, head of the Association of Retail Trade Companies, told Interfax.
�As a result [of the bill], large, foreign suppliers will be able to get around the limitations. It will be harder for small producers to convince retailers that their goods are better,� he said.
In any event, the legislation presages a dramatic shakeup in relations between retailers and suppliers and the future operations of the market.
�Suppliers will have to come to an agreement with retailers even after the law comes into force,� said �Andrei Kondratyukin, head of �franchising program at Kopeika, one Russia�s largest retail chains.
�The agreements will remain, but the form of the relationships between retailers and suppliers will change in order to be compatible with the new legislation,� Kondratyukin said.
Producers echoed the sentiment. �The relationships between retailers and suppliers will take new forms,� said Marina Kagan, a spokeswoman for Wimm-Bill-Dann, the country�s largest dairy company.
The bill was scheduled to be passed in a third and final reading Wednesday, but the vote had not been held by late evening.
The legislation has become a bone of contention between the government and the administration of President Dmitry Medvedev.
The administration�s State Legal Directorate earlier this month leveled several sharp criticisms against the version of the bill, which was approved by First Deputy Prime Minister Viktor Zubkov. The directorate called several of the bill�s provisions �dubious from a legal point of view� and said it would do nothing for the end consumer, on whose behalf the bill was prepared.
The State Duma�s Economic Policy and Entrepreneurship Committee has made revisions to the law three times this month at the request of the directorate, but the final version of the bill was left largely unchanged from the version approved by Zubkov.
The only concession that the Kremlin was able to achieve was an increase in the period in which retailers would be forced to pay suppliers for certain goods, including milk and frozen meat.
The committee approved the final version of the legislation and sent it to the State Duma late Monday evening after a week of negotiations between Kremlin chief of staff Sergei Naryshkin and Zubkov.
The legislation met with fierce opposition by economists, who said it would hurt consumers and create disincentives for investment.
�We appeal to the State Duma deputies not to support the bill on trade. Its passing will hit the material welfare of common citizens, result in the restriction of competition and decrease the investment attractiveness of the domestic economy,� said an online petition signed by several economists, including Yegor Gaidar, who died Wednesday.

The Moscowtimes.com

John Deere To Pump $125M Into New Plant

Tue, 01 Sep 2009 00:00:00 +0400

U.S. tractor maker John Deere will invest $125 million in a manufacturing and parts center in the Moscow region, the company said Monday.
The factory will begin producing tractors, combines and forestry equipment in the first quarter of 2010, company representative Andrei Rogov said. The facility, to be located 17 kilometers from Domodedovo Airport, is the company�s first step in its Russian expansion plan, which was announced on the sidelines of U.S. President Barack Obama�s visit to Moscow in July. The company then announced its intent to invest $500 million in Russia over the next six years.
�Russia will be a major contributor to meeting the world�s future needs for food and forestry products,� president Samuel Allen said in the statement.
The production center and warehouse will be located in the South Gates industrial park and will require about $125 million of investment, Rogov told Interfax. The company chose the site because of easy access for transportation and its proximity to the M-4 highway, which is southbound and goes through Russia�s main farming regions. Obama and President Dmitry Medvedev discussed the project in July, Rogov said.
The John Deere plant will occupy 42,000 square meters at South Gates, said Chris Van Riet, managing director of Giffels Management Russia, which is developing the industrial park. John Deere is already developing facilities in the Orenburg and Kaluga regions.
The factory�s method of assembly will allow it to import components on favorable terms, the company said.
The Industry and Trade Ministry said last week that combine components can be imported with no import tariff and tractor components require a tariff of less than 5 percent if the importer produces at least 1,000 units in Russia.

Moscow Times.

SNC-Lavalin Buys 48% of Russian Engineer

Mon, 17 Aug 2009 00:00:00 +0400

Canadian SNC-Lavalin Group said Friday that it had bought a 48 percent stake in Russian engineering firm VNIPIneft, a deal the Canadian company hopes will help it become a leader in that country�s oil and gas market.
The financial terms of the investment in VNIPIneft, which specializes in oil refining, gas processing, petrochemicals and chemicals, were not disclosed.
The deal demonstrates a more aggressive approach to mergers and acquisitions, said Genuity Capital Markets analyst Maxim Sytchev. The timing is opportune, he added, because chemical and petroleum sectors are weak this year and relatively affordable due to the economic downturn.
�Expect more acquisitions in this space,� he wrote in a research note that estimated SNC�s share of annual revenue from the Russian firm at about 43 million Canadian dollars ($36 million).
�We believe this is only a beginning of SNC-Lavalin�s M&A program in the oil and gas sector as the company strives to establish a larger footprint in Northern Africa, Russia, Middle East and Venezuela.�
VNIPIneft, with about 900 employees, has designed more than 40 refineries and industrial projects in Russia, Europe and the Middle East.
Jean Beaudoin, the head of SNC�s chemicals and petroleum unit, said the Montreal-based engineering and construction company has been operating in Russia for more than 30 years and considers it a key market.
In June SNC signed an agreement to manage the construction and maintenance of roads and railways for the 2014 Winter Olympics in Sochi, Russia.
REUTERS.