Transcript:

Dmitry Medvedev: Good afternoon. We have gathered today to discuss the prospects of the domestic fishing industry. I won’t call it a new subject because we keep returning to it and there must be a reason for that.

The importance of this industry is beyond any doubt. Obviously, this country abounds in water resources. We have long-standing traditional fishing centres, some of them in the Far East and the North. Needless to say, we must do all we can for their proper development. The fishing industry influences adjacent spheres, such as the food and processing industries and commercial shipbuilding.

There is also a scientific component here – exploration of the World Ocean. In the last few years, many countries have started paying a great deal of attention to this, even those that had practically no presence there before. It is clear why this is happening. The world’s population is growing and aquatic bioresources are a strategic reserve for ensuring food security. They have all the necessary components for a modern diet.

What has been happeneing over the past five years? The average annual catch growth rate amounted to 4.8%. I’ve recently met with the head of our fishing agency. Last year, Russian fishers caught almost 4.3 million tonnes of aquatic bioresources. No matter what they say, this is the biggest catch in the last 10 years. According to expert estimates, this is practically the best result with the available resource base. Nevertheless, we plan to increase it to 4.5 million tonnes per year until 2020.

Further production growth is largely linked with the development of aquaculture. Russia has enormous potential in this respect – I’m referring to the length of our coasts and areas with internal freshwater reservoirs. That said, we need a modern regulatory base for this. Strictly speaking, I’ve gathered you today to speak about its development because unfortunately it is lagging behind significantly.

We must discuss how to settle ownership rights to aquaculture objects, and how to allot and register fish-breeding places. Let me recall that on March 25, 2011, the State Duma adopted in the first reading a draft law on aquaculture that has been gathering dust there for more than a year now. It seems like we don’t need it. I don’t know the reason for this attitude and I want us to get to the bottom of it today. In any event, I’ve already instructed the Ministry of Agriculture to monitor the introduction of the required amendments into this vital draft so that we can expect its adoption this autumn.

One of the priority tasks for managers of the fishing industry and fish inspectors is to curb illegal fishing and exporting of aquatic bioresources and products from them. I won’t speak at length about this work – it is clear that we have not yet established an effective system for countering poaching, but we are trying to set it up with varying degrees of success.

Our agreements with other states are an important part of our work. At present, we have already signed agreements with several countries of the Asia-Pacific region (I’m referring to the Republic of Korea and the Democratic People’s Republic of Korea). Our anti-poaching agreements with China and Japan are ready for signing. Yesterday, we reviewed one such draft with China.

Yet, the situation remains very complicated. Not so long ago I held a closed meeting on this issue and would like to hear what has been done since then.

Obviously, we must upgrade the logistics system and the processing and marketing infrastructure of the industry and encourage the delivery of catches to domestic production capacities for processing and sale at home.

It is an open secret that part of our fishing fleet consists of vessels that have been purchased and modernised abroad. They are based and served abroad. Renovation of our own fleet is very important in this respect. Regrettably, it is too run-down – in some estimates, its wear and tear is almost 80%. We must create the conditions for encouraging ship owners to replace physically and morally obsolete vessels with new ones. Clearly, domestic producers will be happy to fulfil such orders.

There is one more issue that is included in today’s package because this also concerns the regulatory base. I’m not talking about the fishing industry in the narrow sense of the word but this issue concerns millions of recreational fishers. At one time this issue was the subject of heated debates and I repeatedly took part in them. I attended a meeting in Astrakhan last year, for one. I’d like to hear about the work on this draft law and all others.

This takes care of what I wanted to say for starters. Let’s start the discussion now. I’m giving the floor to Minister of Agriculture Nikolai Fyodorov. Go ahead, please.

Nikolai Fyodorov (Minister of Agriculture): Thank you. Mr Medvedev, ladies and gentlemen. We have already heard that the objective facts point to growth in the fishing industry in several respects – the production of aquatic bioresources, the revenues of fishing organisations, as well as profits and cost-effectiveness. At the same time, the industry is paying back its debts. We won’t talk about this in detail. This is not the main item on our agenda. What matters is that the fishing industry is dominated by the tactics of survival rather than a strategy of development. A positive trend is guaranteed only by one of its segments – fishing. Meanwhile, the industry includes no less important components, such as aquaculture, the fishing fleet, ports, depots, marketing facilities and logistics. Mr Medvedev, today we must intensify and complete the process of forming a modern and effective normative base for this industry. In addition, we must establish a technical regulation system with due account of our membership in the Customs Union and the WTO.

At present, our ministry is actively working on 86 drafts, including 12 draft laws – the rest is delegated legislation. We have analysed them in accordance with your instructions and singled out the priority ones that must be adopted before the end of this year. I’ll name some of them. As you have noted, they concern the development of aquaculture and measures to facilitate access of fishing farms to state property and natural resources, including water and land and aquatic bioresources. This law should give them the right to own what they have grown.

Now a few words about coastal fishing. It is our consolidated position that fishing vessels should be allowed to process and reload water biological resources during coastal fishing operations for reasons of economic expediency and navigation safety. These operations are currently prohibited by the existing legislation, which restricts the companies' operation, in particular with legal trade and job creation.

The struggle against poaching calls for amending the draft law, improving the legislation on fishing and on the preservation of water biological resources, and approving harsher criminal and administrative liability for offenders, and is aimed at hindering illegal fishing and the illegal trade of fish products, and at improving monitoring mechanisms for the protection of water biological resources.

Ensuring the safety of fish products is an important and topical issue, which calls for amending the legislation. We are focused on reducing administrative obstacles for businesses that transport, sell, export and import fish products, on the condition that they ensure the nutritional safety of their products. We believe that we need a simpler system to monitor the movement of goods, which must be accompanied by a copy of the fishing permit. This is the dominant global practice, an important factor. Some agencies and departments resist this proposal, which is an outdated approach that could breed corruption.

As for regulating recreational and sport fishing, which you have mentioned, there should be a civilised method for holding sport fishing competitions, along with enactments to regulate fishing norms for recreational fishermen, and we should also develop an infrastructure for this form of recreation, including fishing areas filled with fish.

It was unpleasant to hear you say this, but it is true that the drafting of many of these documents took unjustifiably long. The most glaring example is the draft law on aquaculture. It took seven years to draft it, and it has been gathering dust for two more years after that. We have the necessary instruction and will submit a consolidated wording of the law to the government within the next few weeks to facilitate discussions of all possible amendments.

The weakest link in our system is the national fish processing sector, including the Russian fishing companies’ financial and economic dependence on foreign firms, in particular fish processing enterprises. Viewed against the backdrop of positive growth in the Russian fishing industry, the fish processing sector is dragging its feet in terms of profitability. For some reason, the sector went off the radar of the government and legal regulators. Because of the incentives offered to fishing companies, such as the transfer of VAT from fishing to processing companies, people can buy very good and expensive fish, which fishing companies provide at very low prices. Given in-process losses due to growing energy prices and other production costs, the fish processing companies are unable to invest in development, which is why their production equipment is, to a large degree, depreciated – experts estimate the figure to be as high as 90%.

Another example of an area of insufficient attention is aquafarming. As I have said, our goals in this field are to establish a civilised procedure and create favourable conditions to pave the way for positive examples. Mr Medvedev, Vietnam had no aquafarming some 10 to 15 years ago. At present, Russian aquafarms grow approximately 152,000 tonnes of fish products. In Vietnam, such farms increased their output to 3 million tonnes over the past 10-15, years while the country’s commercial fishing stands at only 2 million tonnes. These are two very different figures, and I am not going to talk about China with its 40 million tonnes of fish products. In these circumstances we must make a breakthrough in this field, and so we need legislation that will create conditions for such a leap.

We must admit that, there is a very painful issue that has to do with the inefficient use of government allocations. This is an unpleasant issue for me, but I think it is much more unpleasant for Mr Krainy (Andrei Krainy, head of the Federal Agency for Fishery). We have not done well in increasing the efficiency of allocations. For example, the targeted federal programme for 2011 stipulated the allocation of 1.2 billion roubles from the budget for implementing the programme. However, more than 700 million roubles issued for building research vessels and modernising port facilities and fish terminals have not been invested.

We believe that the main reason behind this is inefficient and delayed organising work. As a result, there have been no proper conclusions, and no state examination of project documents for the modernisation of port facilities, and court hearings are dragging on; there are no court decisions. We must take an active position, including on administration issues, to correct the drawbacks that developed due to government agencies’ oversight.

There are some funds that are lying untouched: in 2010, nearly 200 million roubles, or the full 100% of subsidies for loans taken out to create specialised fish markets in the Russian regions, remained unused. The same goes for the contracts to lease processing equipment for fishing vessels. The reason is, again, the inefficiency of the main spending agency. Consequently, the Government did not allocate anything for these purposes in 2011 or 2012 because the previous allocations remained unused.

It is clear that measures of government assistance should be taken systemically, rather than sporadically, and they should be aimed at integrating the agribusiness and fishing sectors. I hope that, in terms of organisation and also because Mr Krainy and I now always sit next to each other, we will be able to resolve these issues more quickly, including social issues, because many fishing companies and aquafarms are the main employers in their towns. This is why the measures that we are taking within the framework of the targeted federal programme of social development of rural areas, which you, Mr Medvedev, recently discussed in the Saratov Region, are so important for them.

The development guidelines for the sector are formulated in the concept and strategy of developing the country’s fishing industry until 2020. They outline the main and very ambitious goal – to achieve a leading position among the world’s fishing powers by converting our fishing industry, which is currently based on the export of raw materials, to innovative development based on the results of the first stage the regulatory base and the economic mechanism for the development of the industry must be created (that’s 2008-2012). But why is this meeting taking place? Because far from everything that was planned for this period has been accomplished. While these documents have provisions on the main areas of development of the industry, including by federal districts, in practice we have found that proper validation of budget spending and its link to the end result is lacking. I don’t like the idea of talking here with the Ministry of the Economy and the Finance Ministry, and of not just presenting my case, but advancing counter-arguments. Why?

The second stage of the strategy envisages a more systemic transition of the industry to innovative development, with large-scale modernisation, retrofitting of the industry, the renewal of the fishing fleet, the creation of a scientific and production basis and building up a personnel pool. But we also have to audit (this work is already being done) the results of the industry in the context of the implementation of the first stage of the industry development strategy. I am not ruling out that in light of the results of the review that we expect, some adjustments will have to be made to the programme measures and their financing as well as of the regulatory framework.

We hope that the state programme of the development of the fisheries industry that is to be launched starting next year will contribute to the fulfillment of the strategy today. The project we have developed is pending before the Finance Ministry and the Ministry of Economic Development. It contains the main measures to stimulate the industry, which you can see in the slide. The total federal budget allocations for the programme amount to almost 90 billion roubles. True, Rosrybolovstvo (the Federal Agency for Fisheries) has requested additional financial resources of around 30 billion roubles, but that will be the subject of further discussion by the Ministry of Economic Development, the Finance Ministry and Rosrybolovstvo (though time is short, we have just a few weeks). Discussion is needed, because the Ministry of Economic Development and the Finance Ministry have set requirements that call for convincing and well-argued answers. I am speaking as the minister in charge of this area. In general, the task of the Agriculture Ministry, jointly with Rosrybolovstvo and other federal agencies concerned, is to organise the effective use of the budget money already disbursed, to ensure project financing of the programme measures, and to settle all the problems in the industry in order to achieve the main goal of switching from the tactics of survival to the strategy of development. Thank you.

Dmitry Medvedev: Thank you. The main purpose of today’s meeting, as I said, is to further advance the creation of the regulatory base, which unfortunately is deficient. What we are not going to do here is divvy up the money and grant specific requests for funding, but rather, to advance law making. You said that a draft law on aquaculture is shortly to be approved. I very much hope that this will happen within the coming month. Mr Dvorkovich, take this under review so that the State Duma can obtain an agreed-upon draft by the time of the autumn session, which begins in the middle of the month.

Arkady Dvorkovich: Yes, we’ll do everything that is necessary. I have issued instructions to submit agreed-upon versions of the three laws before September 20.

Dmitry Medvedev: Very good. I give you one month to do all this. A lot of legislation has yet to be drafted judging from the Minister’s presentation here: 12 laws, 20 government acts, 24 departmental regulatory acts and 30 international conventions. You have your job cut out for you. I would like all those present to get down to business.

Now, Mr Krainy, you have the floor. Don’t make it a full-scale report, you reported to me recently. I suggest that you concentrate on changes to the legislation. You yourself have complained that the draft laws are stalled.

Andrei Krainy: Thank you. Mr Medvedev, colleagues. We are discussing the development of the fisheries industry until 2020. There are three variables: changeable resources (in a biological sense), the change or lack of change of state regulation of the sector and the dynamic of external and internal consumption.

As the Prime Minister said, let us concentrate on what we can do to improve the regulatory base. We have untapped potential to increase catches. We need this, because we have to feed our people, it is a strategic resource involving geopolitics, medicine, pharmaceuticals and so on. But the thing is that we have problems in every basin where we have reserves (in the Far East, in the north and in the west, in the Azov and Black Seas). All of them are connected with outdated infrastructure and a lack or poor state of logistics. We should not be discussing the laws in this case, but rather by-laws and government instructions. Take, for example, the Azov-Black Sea basin – 250,000 tonnes of anchovy and sprat is a huge and very cheap resource (three to seven roubles per kilo). What is the problem? The Azov-Black Sea basin does not have a single fishing port or refrigeration facility: Novorossiisk is a transport port and Sochi is closed. As a result we are leaving these seas for the Georgian and, according to the geography, Ukrainian and Turkish fishermen. We should consider building at least one port in Temryuk, and better still, another port in Utrish.

The Caspian (the Astrakhan Region Governor is present here) has 90,000 tonnes of sprat and 20,000 tonnes of mullet: this means jobs and tasty fish that is healthy for the population. The problem is that there are no ships left to work in the Caspian. It is a cheap resource that fishermen cannot afford to use. Mr Medvedev, we should see what can be done to build ships under leasing schemes and hand over these ships to the fishermen to enable them to use these resources.

And there is another problem: network retailers do not want to work with cheap resources for the simple reason that, given the average profit margin of 30%, whatever they might be telling you, 30% of Norwegian salmon represents a totally different amount of money than 30% of Caspian sprat. As a result, the networks are shutting down. There are two ways out.

One way is to create an alternative retail system, like the Okean chain of stores that existed in the USSR. Of course, it should not be state-owned, it should be privately owned, but business needs help and this is up to the heads of regions and mayors of major cities.

There is also one more problem that the state can solve. I think the state should make it mandatory for the Defence Ministry, the Interior Ministry, the Federal Penitentiary Service, the Education Ministry (schools) and the Ministry of Healthcare (hospitals), when procuring fish with federal budget money, to buy strictly domestic fish from domestic producers. This would expand the market and put an end to the strange situation in which our schoolchildren are fed Chinese tilapia. I don’t quite understand why we should surrender our own market and spend federal budget money to help our neighbours.

Further issues that require legal regulation. Mr Fyodorov has already mentioned the problem of coastal fishing. Today there is a ban on processing and freezing fish caught off the coast. As a result, considering that under the Administrative Code, fishermen are fined millions of roubles, we may lose 500, 000 tonnes of catches – not increase, but lose – and lose the fishing villages, onshore processing, all under the slogan “Russian fish to the Russian shores.” So, this is important.

Next. Amendments must be introduced to Government Resolution 560 to introduce notification-based crossing of the 12-mile zone. That would call for changes to the law on the state border, the law on the procedure of entry and exit, but that rule worked brilliantly in the USSR. Fish do not know borders.

Dmitry Medvedev: Please explain more clearly what you are proposing.

Andrei Krainy: A notification-based procedure of crossing the 12-mile zone. The state border is 12 miles from the shore. This is an invisible line, but all states have it, of course. The 200-mile zone is called “the economic zone of Russia” and it is regulated under the Law of the Sea UN Convention.

Crossing the 12-mile zone involves some border procedures that hinder the work of fishermen. We propose introducing a notification-based (rather than permit-based) procedure for crossing the state border. I think the result will be spectacular.

One more proposal. Incentives for onshore processing and for the industry as a whole should be economic rather than administrative. What is the situation today? There is something called rent pay for the use of water bioresources. Today, enterprises that catch and process fish pay 15% (we cut the rate in its time), but enterprises that supply fish to Russia and those that export fish pay the same rent. We believe that the rate for the enterprises that supply Russian fish to Russian territory should be zero while for the enterprises that supply fish for export, the rate could be, say, 50%. That would give us an extra 5-7 billion roubles, 80% of which, in accordance with the Budget Code, would go to the region and 20% to the federal budget. The 80% should be targeted to subsidise interest rates for onshore processing and perhaps for the issue of interest-free loans for the purchase of Russian fish from Russian fishermen by Russian fish-processing enterprises.

Next, the consolidated agricultural tax. In its time the State Duma adopted the provision proposed by us, but it imposed a limit on the number of employees of fishing companies to 300. As a result enterprises begin to break up de jure, instead of merging, in order to comply with the provisions of the consolidated agricultural tax. Onshore processing is not covered by the consolidated agricultural tax. I think the consolidated agricultural tax should be spread to the fish processing enterprises.

Finally, Mr Medvedev, during the meeting in Murmansk you instructed the Russian regions to take measures to develop onshore processing and finance it out of the regional budget. I think, first, it is time to look at how this programme is being fulfilled. But I can say that in the Primorye Territory that programme is working fairly well and onshore processing is developing.

The next thing to be done in the field of regulation, if we want our fishermen to build ships at Russian shipyards, is to make Russian shipyards competitive. The fleet is old, but it is being renewed. Unfortunately, ships are being built in Singapore, Croatia and are modernised in Lithuania and Germany. We believe a zero VAT rate could be used for ship-building and ship-repair enterprises that modernise and build fishing vessels.

There is another decision. Mr Fyodorov (Nikolai Fyodorov) has noted that the subsidies were not in high demand. But do you know how this works out? We need to introduce amendments to the Government Resolution and to the Law on the Budget. These amendments will make it possible to subsidise loan interest rates for more than five years, that is, for five, seven, ten and 15 years, because we are forced to turn down corporate requests.

For instance, the Vostochny Bereg (Eastern Coast) company in the Kamchatka Territory has taken out a nine-year Sberbank loan to finance construction of a fish-processing enterprise. We are unable to subsidise two-thirds of their interest rates because the relevant Government Resolution limits these subsidies to three years. Consequently, we must solve this problem. In our estimate, this sum is rather small, totaling 0.5 billion roubles. The Federal Agency for Fisheries (Rosrybolovstvo) has received this sum during a three-day tender to sell fishing quotas confiscated from mala fide users this year. The three days of work have yielded these unscheduled budgetary revenues.

There is another problem linked with the renovation of the fishing fleet. You have mentioned this problem in your introductory remarks. We have about 80 revamped or foreign-made vessels, which don’t call at Russian ports. Their owners have to pay 5% duties and 18% value-added tax, while entering Russian ports. But Russian fishermen operate in the national exclusive economic zone and outside that zone in line with the specifics of the fishing sector. As a result, these vessels sail for Norway, rather than Murmansk, and enter Kirkenes, a former village that has now turned into a city and a major seaport. While in Kirkenes, the vessels receive fuel, and their crews are rotated. Actually, Kirkenes and Murmansk are only 200 kilometres apart. Moreover, a ship-repair enterprise is continuing to develop there. For its part, the Russian Federation does not receive these “virtual” customs payments because the fishing vessels don’t enter its seaport. Secondly, we don’t receive catches, which might otherwise be delivered to Russia. We therefore feel it appropriate to declare a customs amnesty for vessels that have been built or modernised before January 1, 2013, so that they can enter Russian ports and be registered there. This will enable us to expand our seaport infrastructure and to receive surplus catches.

I have discussed research allocations with you for a long time, and I will not distract your attention … And our colleagues are familiar with this problem. I would only like to say that Russia spends 20% less on science than Norway, which studies only two seas. Russia also spends two times less on science than Canada and eight times less than the United States. Russia catches approximately the same amount of fish as the United States. I have mentioned the changing seafood potential, another factor of uncertainty. There are reserves, but these reserves will no longer exist unless we conduct research. In addition, Russia has assumed international obligations in line with intergovernment agreements, including those that have been signed with West Africa. I would like to point out the following correlation here. First of all, we have to conduct research. Unlike China, which constructs buildings and presents them to the Government of Guinea-Bissau, this is our trump card. We can and must conduct research there, we can and must train students. In this regard, I would like the Ministry of Education and Science to stipulate several free federal-financed vacancies for students from Senegal, Guinea-Bissau, Morocco and Mauretania. In addition, Kaliningrad, Russia’s western outpost, maintains extremely close ties with West Africa, because Kaliningrad’s entire canned food industry receives fish from the Central and Eastern Atlantic. Kaliningrad used to manufacture 57% of Russia’s canned food, and this share is now 40%. All fish that are processed there, including sardines, white sardinella, horse mackerel, etc., are delivered from Morocco and Mauretania, primarily from northern areas. Consequently, the state must focus on international activity and scientific research. Frankly, this, too, requires funding.

And now I would like to mention the last two aspects, namely, development or the reinstating of infrastructure, and transport-logistics problems. Rolling stock and port access railways have become rundown. Somehow, we need to persuade Russian Railways to finance construction of access railways linking ports with refrigerators under their investment programme and the modernisation of Soviet-era rolling stock. I am talking about the so-called refrigeration cars, or reefers. The United States now manufactures these refrigeration cars, and I am ashamed to say that similar cars are also made in China. Incidentally, these three countries – Russia, China and America – are expanding their railway networks because they are so vast …

And here is another problem, which can be solved with the help of regulatory documents. Last year, fishermen in the Kamchatka Territory tried to deliver fish via the Northern Sea Route. In all, 27,000 tonnes of salmon arrived at the St Petersburg seaport. It took 29 days to deliver this consignment, and the escort icebreakers operated for only 48 hours during the trip, but … The Federal Tariff Service issued an order listing fish under the heading “Other Freight.” It turns out that shippers have to pay 1,048 roubles to deliver one tonne of fish from Petropavlovsk-Kamchatsky to St Petersburg. At the same time, it costs 248 roubles to deliver one tonne of petroleum, oil and lubricants, including petrol and crude oil. Moreover, it costs 148 roubles to deliver one tonne of timber. How can this be explained? It's because no one had any idea that it was possible to deliver fish to Central Russia via the Northern Sea Route. This problem has not yet been resolved. However, the Northern Sea Route makes it possible to save tremendous amounts and provides delivery opportunities …  Because in fact, the Far East is our main fishing area. Consequently, Mr Medvedev, we and the Federal Tariff Service should be instructed to deliver fish in line with timber delivery rates, at the very least, because otherwise it is absolutely pointless.I believe this is all that I wanted to say. We would like to say a few more words about specific measures that you mentioned in your introductory remarks. I believe that our colleagues have some more to add. As I see it, we can reach six million tonnes, rather than 4.5 million tonnes, by 2020, and join other global fishing powers. In 2008, Russia came in ninth in terms of fish catches, and now it is in sixth place. Quite possibly, we can join the Big Three. We have the necessary potential to achieve this. Thank you.

Dmitry Medvedev: Thank you, Mr Krainy. Your speech was a bit chaotic, but heartfelt. I would like to mention an issue that you overlooked. What about the Law on Fishing?

Andrei Krainy: The Law on Fishing has passed public hearings, and you had instructed us to extend the relevant deadlines. The document was submitted to the Government for consideration, but there were some disagreements between the Ministry of Economic Development and the Ministry of Sport and Tourism. The Ministry of Economic Development insisted that in principle, no fishing sectors should be allotted. The Ministry of Sport and Tourism insisted that sport competitions should not be regulated by any documents, including fishing regulations. On May 2, Vasily Kopylov, Deputy Chief of the Government Staff, hosted a meeting, whose participants resolved disagreements with the Ministry of Sport and Tourism. However, it proved impossible to resolve disagreements with the Ministry of Economic Development. The document was returned on May 5 or May 7. Under the May 21 decree, we submitted all these documents to the Ministry of Agriculture. On August 1 or August 2, I may be mistaken here, the Ministry of Agriculture submitted the modified version to ministries and departments for subsequent re-examination.

Dmitry Medvedev: All right, this issue is also very important. I would like to have the document finalised within a month. 

Andrei Krainy: Yes, Sir.

Dmitry Medvedev: This concerns the Law on Fishing, too.

Andrei Krainy: Yes, Sir.

Dmitry Medvedev: And now let’s discuss what we should do. The Minister and the Head of the Agency have listed an entire range of different measures. I have assessed the document containing draft instructions after the meeting, and it sounds absolutely pointless. For instance, it stipulates “more active work to improve legislation together with the concerned executive bodies.” The wording could have been different. As I have already said, the relevant law should be improved in accordance with specific deadlines, and other document should be issued in accordance with preset deadlines. All this should be stipulated by clauses 1, 2, 3, 4, 5. Otherwise this issue will be drowned in a torrent of words. Moreover, all aspects that our colleagues mentioned should be included there. Some of them are rather controversial, such as the notification procedure for crossing the border. I know that the Federal Security Service has its own stance on this issue. Nevertheless, this issue should be re-examined. You should not confine yourselves to vague statements. You should stipulate everything, including the statements of our colleagues who are present here, governors and the heads of the concerned enterprises and associations.

So, I would like the leaders of Russian territories, which either actively catch or breed fish, to say a few more words. Please. I would like the governors to speak, and I will subsequently give the floor to the Association’s leaders.

Ms Kovtun, you have the floor. But please be brief.

Marina Kovtun (Murmansk Region Governor): Thank you, Mr Medvedev. This meeting, as well as many others, has great importance for the Murmansk Region because fishing and the fisheries sector are not just symbols for us. We have always been the country’s fishing capital, and we would like to retain this title in the future. There are a few problems I would like to mention. Mr Krainy has discussed them rather eloquently and honestly, with facts in hand. Mr Fyodorov has also mentioned them in his speech. Although they have been mentioned in one way or another, I would like to pause over them as well.

First, fishing, processing and ship repairs are the three main components of the past, present and, I believe, a brighter future in Murmansk.

First, I would like to mention ships, which don’t call at Russian ports. As fate has it, Russia does not build fishing vessels. Now that Russia has joined the World Trade Organisation, it is more appropriate to purchase top-quality fishing vessels, which can effectively catch fish on the high seas. In all, the port of Murmansk is home to 230 vessels flying the Russian flag. But Mr Krainy has noted that 80 of them don’t call at the port. How can this be explained?

Because neither the captains nor the ship owners want to use our port if these ships have been purchased abroad, or rather built or modernised by Norwegian shipyards.

In these cases they have to pay customs duty and VAT when they enter the Murmansk port and these things add up. An average-priced vessel from a Norwegian shipyard costs $30 million. When it enters our port, the costs rise by 23%-25%, that’s a quarter of its original cost. The additional costs will naturally be added to the cost of the ship’s products. So ship owners resort to the obvious solution – they buy a foreign ship and do their fishing abroad, and as Mr Krainy has correctly pointed out, unload their catch in Norway as well. There, local companies take it for initial processing and packing and subsequently sell it to Russian food manufacturers, while the Russian fish processing facilities remain idle without raw produce, forever complaining that they have nothing to do and nothing to work with.

As a result, we help Norwegian companies make money, while they sell their products to Murmansk fish product manufacturers at a premium. Not only do we end up with a shortfall in profits from port services and port duties, but we are also holding back the development of local manufacturers, and ship repair facilities stand idle as well, for that matter. Incidentally, this concerns the 80 most advanced ships out of 230 – and the most efficient too. Most of the fleet is old because fisheries prefer buying “a hull” as they put it, and then upgrading it abroad by installing modern fishing equipment.

My father served 40 years with the trawling fleet, partially as a trawl master. We had a fishing equipment factory in town which made trawl nets. Where do they make trawl nets now? Not in Russia. There’s not a single facility in Russia making trawl nets or the auxiliary equipment to go with them. I am not talking about the ships but the equipment and we will end up relying exclusively on imported raw produce…

Moving on to the issue of aquafarming now, if you don’t catch any fish, you could at least breed them. Speaking of salmon, I would say that using wild salmon is like satisfying the demand for poultry with grouse instead of broiler chickens. By that I mean that salmon should be grown on farms, as is done elsewhere in the world, and that is what we actually eat. Russian producers meet only 8%-9% of the domestic demand for salmon. Am I right? But don’t we have possibilities to produce more? We have a very convenient coastline. In fact the only salmon farming project, Russian Salmon, is being developed very effectively here in Murmansk, and its goal is to capture a 40% share of the Russian salmon market. This is actually quite an achievable goal. The only thing is the law is being delayed.

We have more sites which could be used as fish farms, ready to begin production, but they cannot be used efficiently yet. Why is the law taking so long? It’s not like building a factory. This is all about people – the people who write it, then the people who approve it and the Duma to pass it… This is simple technical, bureaucratic work, which has not been done in seven years. This is absolutely ridiculous. Fish farms have fantastic prospects in Russia. The only two things that are lacking to get this business up and running are the baby fish and the feed, both of which are purchased abroad (mostly in Norway). But Russian Salmon already has plans to build a local feed plant and breeding farm. This is all doable. Our people do a fantastic job, they are dedicated people. You will see for yourself when you visit: they have recently started breeding trout. They grow faster than wild salmon as it happens!

As to the value added problem, Russian-produced salmon costs 120 roubles a kilo, while the sales price in the shops is up to 290 roubles. This mark-up is due to the high transportation costs involved. Fish brought in from 150 kilometres away carries a mark-up of 150%. Why can’t it be at least 20% lower? Most likely this is due to a lack of competition. If there were a larger supply of fish, grocery chains would be selling it cheaper.

There is something else. I don’t think this is too much of a problem, but there is a way to promote the development of the fishing companies. I am referring to fishing quotas. The fact that quotas are now being allocated for a period of up to 10 years is definitely an improvement. But this is also a very powerful resource, I mean when a company is up for sale, its quotas are usually taken into account. But when a company needs to secure a bank loan, it can only use its assets as collateral, and it does not have any expensive assets – only old vessels which are not valued very highly. If they were allowed to pledge their fishing quotas, they would be entitled to bigger loans, which they could then use for developing their business, for instance by stepping up shipbuilding activities.

Much has been said here about coastal fishing. This is very important for us because it is a social project. It takes up no more than 7% of the overall quota, or maybe even less, 2%-3%, but this still provides an opportunity… Opportunities for coastal fishing are more of a social issue maybe, but it needs to be regulated nonetheless. There is something I need to mention though and that is the problem of processing the fish that are caught in coastal areas. Captains of ships fishing in coastal areas also performed the so-called pre-processing because fish only stay fresh for two hours. After that it is not fresh any more, therefore the distance they have to cover to the nearest port is too long for their catch to remain fresh. So these captains – given that the so-called “violation” has been registered – end up having outstanding fines of 12-13 million roubles each. Will they go fishing again under these circumstances? With all their property pledged to the bailiffs? This is about the problem of processing.

The last point I need to make is the regulatory framework of course, and there are two aspects to it. One of the problems is to harmonise all the acts that regulate fishing in one way or another. These include the Customs Code (for ships that don’t call into port), the wildlife law, the law on fishing and preserving marine bioresources, and the law on recreational and sports fishing. These need to be harmonised to eliminate mutually exclusive provisions. You could also use the term synchronise, but in any case regulatory acts should not get in the way, like they do now: for example, a provision is included in one law for an obvious reason, but it carries a totally different meaning in another law, which further aggravates the situation in the fishing industry.

As for the transfer of certain powers from the federal government to the regions: there are areas that can and must be regulated by the regional government. For example, they decided to issue a salmon fishing quota to small native peoples, while we, so to speak, keep an eye on each species of endangered fish. We have catch and release rules and we have the OMON special police to guard the rivers. But what happens now? They issued quotas to small native peoples who cannot use it because they do not have enough boats. The Barents-White Sea branch of the Federal Fisheries Agency just issues the quotas mechanically to anyone who applies. If 300 people apply, every one of them gets it.

What they do is jointly hire a poacher with a ship which moves into the estuary 100-200 kilometres away from the shore and puts out a 800-metre fishing net, so all the salmon that are going to spawn get caught up in it. The eight tonne quota can easily lead to 80 tonnes being caught, or even 800… Well, 800 is an exaggeration of course but my point is that no one is actually controlling this. This looks like we are preserving the environment with one hand and allowing our main source of riches to be destroyed with the other, breeding lawlessness.

I mean, all right, you proposed this initiative, but now allow us to finalise it, give the regional government the powers to regulate things that we know better, and we will jump at the chance to do this for you. We are willing to join any working group on harmonising the legislation, anything to make life easier for local producers and to promote the development of the fishing industry. Thank you.

Dmitry Medvedev: I don’t get the last point – what do you need to do with that quota for small native peoples?

Marina Kovtun: There need to be clear rules on how they should use the quota, the conditions of fishing, specifying the area and equipment that can be used. Using fishing nets on salmon is barbaric, especially in the spawning areas (river estuaries). There are no explicit restrictions on that and the environmental prosecutor’s office is on their side in this case.

Dmitry Medvedev: But whose sphere of competence is this? Is this part of your authority?

Marina Kovtun: No, these are powers of the federal authorities; they are the ones who issue the quotas. Perhaps Mr Krainy has something to add…

Andrei Krainy: May I?

Dmitry Medvedev: Yes, please go ahead.

Andrei Krainy: About one year ago I think the Government instructed the Ministry of Regional Development to determine the criteria for identifying small indigenous nations. Under the current legislation the issue is an open one. In other words, anyone can step forward and declare that they feel like they are a Koryak, or a Nivkh, or an Evenk. And we have no right to deny their request, no one has the right. There are cases on record where natives of the Caucasus have gone to court in Kamchatka and obtained a ruling declaring they are Koryaks. It is simply laughable. And as soon as they feel they belong to the indigenous nations of the North, Siberia or the Far East they appeal to the law on support for the small indigenous nations of the North: these people are free to fish without paying any fees and using the traditional gear.

Dmitry Medvedev: It appears that you, Mr Krainy, will have to address this problem and develop the criteria, since no one else can do it. It means you will decide who is from the Caucasus and who is from the North.

Andrei Krainy: Okay I will. Incidentally, Sakhalin, which has quite a few Nivkhs, and Kamchatka, don’t have any such problems.

Dmitry Medvedev: All right. These criteria need sorting out. And there is another matter I would like to take up. As a matter of fact, we have already discussed it – about using quotas as collateral. I do not know what my colleagues in the Government have come up with yet, but the issue needs looking into. I will of course instruct the Ministry of Economic Development and the Finance Ministry to study the question and make proposals on how this collateral can be put into effect and how the recovery payment can be applied to the appropriate quota. The basic issue is whether we have here a value which we can use for recovery purposes. If we can pay, then everything is in order. Generally, quotas should be used as collateral. My belief is that they are simply another value like many others in business transactions.

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