The Far East Development Fund tries to attract Chinese funds for Russian agricultural projects

Far East -Transbaikalia Development Fund (FETDF) is negotiating the issue of creation of a Russian-Chinese agricultural and industrial investment fund for $ 2-3 billion with Asia Pacific Food Foundation Limited and China International Economic Cooperation and Investment Inc, one of the transaction participants shared to "Vedomosti". It is planned that the FETDF will manage the investment fund, and if the idea will be successful, the investment volume will grow to $10 billion, says a person close to one of the parties of the negotiations.

A FETDF representative confirmed the fact of negotiations, but refused to comment on it. Asia Pacific Food Foundation Limited and China International Economic Cooperation and Investment Inc did not answer questions from Vedomosti.

The new fund should attract investment from Asia in crop production, development of processing facilities and infrastructure, says a person close to one of the parties of the negotiations: Chinese investors should finance 90% of the projects, and Russian companies that are ready to invest, in turn, up to 10% of the necessary funds, can count on their money. Funds can be provided in the form of direct capital investments or loans, the "Vedomosti" interlocutor clarifies. FETDF expects that the growth of agricultural exports to the countries of the Asia-Pacific region will reach up to 8-10 million tons per year.
*Soybean market

In 2014–2015 China imported about 78 million tons of soybeans (+10% compared to the previous year). China is developing animal husbandry, especially pork production, therefore it is actively purchasing soybeans as one of the main components of animal feed, Zalutskaya explains.
Far Eastern Federal District, already includes two priority development areas (offering tax incentives and business preferences) that attract agricultural investors: Mikhailovsky and Belogorsk, reminds Vitaly Sheremet, head of the practice for cooperation with KPMG agricultural companies in Russia and the CIS. The meat projects like "Rusagro" and "Mercy Trade" have already been announced there. Also, projects for the deep processing of soybeans are planned by "South of Russia", "Amuragrotsentr", "Agrotechnologies" feed mill.

The most interesting product for crop production in the Far East is soybean, says Anastasia Zalutskaya, head of the practice of the AIC, NEO Center, , it is in demand both on the domestic market (where the share of imports reaches 50%) and on foreign markets neighboring the Far Eastern Federal District, such as China (see inset).

Spring wheat and rice are grown in the Far Eastern Federal District in addition to soybeans, as well as potatoes and vegetables (to a lesser extent). Up to 50% of arable land is used in the region, Mr. Sheremet notes. Russia's trade with China is going through difficult times, and any attempt to increase exports at someone's expense is a good idea today, says an employee of a large agricultural holding. But problems are not caused by the lack of land, they are associated with the insufficient development of port infrastructure, he adds.

The creation of the fund will make it possible to attract additional investments in agricultural and industrial projects, the representative of the United Grain Company (UGC) hopes. And in order to solve the transshipment problem, UGC itself is considering the possibility of building a Far Eastern grain terminal in the port of Zarubino. The construction of grain terminals in the region, focused on exports to South East Asia, has been discussed for several years, Zalutskaya notes. GC "Summa" planned to build a large-scale enterprise for transshipment of up to 10 million tons of grain per year.

The FRTDV projects itself, approved on Tuesday at the meeting with Deputy Prime Minister Yury Trutnev, can also help to manage transshipment, Fund representative notes. Three regular investment directions of the fund were approved: modernization of the port of Shakhtersk and coal mining by the Eastern Mining Company (project price - 45.1 billion rubles, the fund's share - 2.8 billion, see details on the page 12), the Union Group container terminal in Vladivostok (price - 1.5 billion rubles, share of the fund - 700 million) and the project of a refrigeration and storage complex for storage and transshipment of fish products of the Vladivostok Sea Fishing Port (with price of 3.6 billion rubles, the fund's share is 1.2 billion).

Source: vedomosti.ru