### SOVETSKAYA GAVAN regional update

FEBRUARY 2000

 

Author:Andrei Vasenyov, bisnis Representative in khabarovsk. Approving Officer: 

 

International Copyright, U.S. & ForeignCommercial Service and U.S. Department of State, 2000. All rights reserved outof the United States.

 

SUMMARY

 

SovetskayaGavan (SovGavan) is located in Khabarovsk Krai.  Seaport, timber and fish producing enterprises located inthe SovGavan district play an important role in Khabarovsk’s foreign trade.  The impact of the 1998 economic crisison the leading industries of SovGavan was minimal.  The district’s natural resources and its favorablegeographical location within the Russian Far East create opportunities for U.S.firms.  End Summary.

 

GENERAL INFORMATION

 

In1941, 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 theKhabarovsk Krai.  The currentpopulation of Sovetskaya Gavan is 34,800 or more than half of the district’spopulation of 56,900.  The districtoccupies 5,900 square miles of the eastern part of the Khabarovsk Krai, whichis predominantly mountainous and covered with coniferous forests.  The climate is monsoon with an averageprecipitation of 650-1100 mm.  

 

SovetskayaGavan is an important regional transportation hub providing access to both theBaikal-Amur and Trans-Siberian railroads. In addition, a one-track, 500 kilometer railroad line connectsSovetskaya Gavan to Komsomolsk-on Amur, the major industrial location in theRussian Far East, from which trains have access to all destinations inRussia.  A domestic airport located20 miles from the city provides regular service to the city of Khabarovsk.  Since spring 1999, the Lidoga-Vaninogravel high way has been open connecting Sovetskaya Gavan, Vanino and the majorcities of the Russian Far East.            

 

TheSovetskaya Gavan gulf is 1.4 miles wide and 7.5 miles long. Its depth rangesfrom 22 to 37 feet.  The gulf isfree of ice from late March until January and partly serves as a navalbase.  In January 2000 a borderguard post will be established at the Yakor plant creating additionalopportunities for foreign trade.  Anumber of industrial enterprises in Sovetskaya Gavan have mooring lines thatare used for trans-shipment services. In 1994, the Kiewit Diversified Group prepared a feasibility study ofthe gulf and local enterprises for the possible placement of an integratedseaport but subsequently decided not to pursue the project.

 

BESTSALES PROSPECTS

 

�       Fish processing equipment;

�       Wood processing equipment;

�       Meat processing equipment. 

 

DISTRICTGOVERNMENT

 

Thelocal government consists of people who, on the one hand, practice Soviet-typemethods of management, but on the other, understand that the market economy isthe future.  However, officers incharge of the key industrial sectors lack professional expertise, and do nothave a strategic vision for the district economy.  They spend most of their time calculating average salariesin the key industries and identifying businesses that do not pay taxes infull.   

 

Thelocal government’s major interest seems to be the timely fulfillment ofinstructions and orders coming from the Krai administration rather thandevelopment of the district. 

 

MAJORINDUSTRIES

 

Machinebuilding, fishery, timber production and wood processing are the majorindustries in the district.  Fordecades, two ship repair plants, Yakor and Severny, were the most importantindustrial enterprises of the district and the largest employers in SovetskayaGavan. Today, the profession of a shipbuilder is no longer prestigious and bothshipyards are experiencing a shortage of young qualified workers.  Sovgavan has been counted among thelargest timber and fish producers of the Krai.  Approximately 20 logging enterprises are operating currentlyin district.  Most felling areasare located 60 –100 miles from Sovetskaya Gavan.  About 90 percent of produced lumber is exported to SouthAsia.  For years Japan and Koreahave been the largest markets for the local fir, larch and spruce but over thelast two years, as the prices on the Chinese lumber market have grown,Sovgavan’s exports to China have increased considerably.

 

Boththe Tatarskiy Channel and the Sea of Okhotsk are rich in fish and in such “hardcurrency generators” as crab, shrimps, and octopus.  The fishing vessels of companies registered in SovetskayaGavan usually operate beyond the 12 mile coastal limit. About 85 percent of theoutput is exported.  During thelast seven years dozens of small private fishing companies have been registeredin Sovetskaya Gavan.  Most operatefrom one to three small- or medium-size vessels usually rented fromVostokrybprom, the former state fishing conglomerate.  For several reasons the so-called “butterflies” wentbankrupt or flew off before tax collectors arrived.  Today the number of companies operating in the fishingsector of Sovetskaya Gavan has decreased. Lack of investment and working capital shortage plus transportationdifficulties are hampering the industry development.  Fish processing, represented by only three plants, isunderdeveloped. 

 

Statisticaldata characterizing the operations of the major industries, and of fisheryoperations, in particular, is understated.  During a November 1999 meeting at the Krai Administration,Governor Ishayev claimed that if fishermen did not underreport their fish catchand sales, the Krai could collect enough money to restore the regional fleet,80 percent of which is obsolete.        

 

TheAugust 1998 crisis stimulated the resource sectors of the Krai economy. Sinceforestry and fishery are two major sectors in Sovgavan, the district economyhas actually improved.  Therefore,the consumers’ purchasing power was not as diminished as drastically as in therest of the Krai. 

 

LEADING INDUSTRIAL ENTERPRISES 

 

TheYakor (Anchor) Joint Stock Company isa ship repair plant with annual capacity to serve 100 vessels with displacementof up to 10,000 tons. The company employs 1,300 people and has a portfolio ofcargo and orders for cargo and fishing vessels repair but these orders will useup only 35 percent of the plant capacity. The establishment of a border guardpost will permit Yakor to serve foreign vessels. Though the average monthlywage at the plant exceeds USD 300 and is regarded as quite high, Yakor lacksyoung qualified workers, which is becoming common for machine-buildingenterprises in the Krai. 

 

Inthe middle of the 1990s, ship-repair activities fell dramatically, and Yakordiversified into logging and wood processing.  It established the Sovgavan Lesopromyshlennyi Kombinat todevelop log production and wood processing. In 1999, 

 

Yakorproduced 30,000 m3 of logs and in January 2000, its wood processing linepurchased in Korea will be put into operation. Yakor is seeking foreignpartners to further expand its wood processing facility and to  market its products in Pacific Rimcountries.

 

TheSeverniy (Northern) Joint Stock Shipyard repairs largeships and builds smaller auxiliary ships (hulks and lighters of up to 500 tons)and mechanical equipment for the fishing fleet. Severniy has well-equippedmoorings, depots and warehouses with rail access. Severniy is expanding intocontainer operations, and reloading, storage and shipment services for rolledmetal. Over the last five years, it has been the main gateway forVanino-Tairiku (please see below) wood chip exports to Japan. The plant has acontract with Sakhalinmorneftegaz to serve small boats. Since 1998 the numberof Sakhalin, Magadan and Kamchatka fishing vessels repaired has constantlyincreased. The company is open for cooperation, including the development offurniture production and wood processing facilities.        

 

Oneof 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 approximately20,000 cubic meters of kiln dried pine lumber per year.  The product is shipped to Japan fromthe Port of Vanino. Raw material for the mill is sourced out from the LakeBaikal Region of Russia, and delivered to the mill by rail.  Mill residual waste is used to generatepower for both the mill operation, and nearby villages.

 

Sovgavan-Port, a Russian-American joint venture, began with an investment bythe Global Forestry Management Group in 1994 in the Sovgavan Port region withthe idea of expanding its operations to include timber harvested from its ownconcession area. As no concession arrangements have been made, the jointventure now operates the port and exports logs to Japan and Korea on behalf oflog producing companies such as Flora Group (a Russian harvesting andsaw-milling operation). The port grades and sorts each log, thereby increasinggrading accuracy and quality consistency. Currently there is a dispute between the owners of the company and theKrai administration. 

 

Vostokrybprom is a successor of Morskie Resursy (Marine Resources), a statefishing operation.  The company has10 large vessels, of which seven are processing vessels.  Vostokrybprom annual quotas for pollockand herring exceed 100,000 tons. It owns transport vessels, and sells FOB highseas and at foreign ports. The company is somewhat constrained by a lack ofworking capital.  Due to excessiveport fees, high import duties and taxes, it is difficult to process pollock inRussia and be competitive in the world market.  Therefore, the company is investigating the possibility ofentering into a joint venture with a foreign company to process pollock.   

 

Vostoktorg, Ltd., with its 8 vessels, is the largest private fishing business inthe Krai.  The company was foundedin 1991 and in November 1999 employed over 1,000 people.  The company has both onshore andfloating processing facilities. Oston Shipyard, Khabarovsk, recently built twovessels for Vostoktorg.  A fish andcrab processing plant located in Sovgavan is currently under construction.  The plant will meet the U.S. HazardAnalysis and Critical Point Training Curriculum standards.

  

Thecompany is very adaptive to the rapidly changing market conditions. Accordingto the CARANA expert who visited Vostoktorg in October 1999, the fishingoperation is based on a business model that has been successful in dealing withJapanese and other foreign buyers. Unlike the majority of fishing businesses of the Krai, Vostoktorg doesnot use forward contracts so it usually sells directly to the buyer who offersthe highest price in the market. The company is a part of a holding companyestablished in Khabarovsk Krai by Chernat brothers. In addition to Vostoktorgthe holding encompasses a timber company, a crab and fish processing plant, atrading firm, and a diary factory in Khabarovsk.  

 

Hermes LTD. is known as a reputable company in Sovetskaya Gavan.  It operates six cargo vessels thattransport timber to Japan and Korea. In 1999, the company has produced 15,000 cubic meters of logs.  Its wood processing shop manufacturedwooden construction materials and furniture. Hermes also owns food stores inSovetskaya Gavan, Vanino, and Khabarovsk. The company’s priority is to get access to sophisticated woodworkingtechnologies.  

 

Agora LTD. has for a decade been the largest trading company in SovetskayaGavan.  The company operates ninestores, and large, fully-equipped warehouses.  The company enjoys a 30 percent share of the food market inSovetskaya Gavan and Vanino.  Agorasupplies food for fishing and cargo vessels and timber operations in remoteareas.  The company is seeking aforeign partner to start a bakery and a sausage production line. 

 

BANKS

 

Sberbankand Dalkombank have branches in Sovetskaya Gavan.  Large private companies may also have bank accounts at theVneshtorgbank’s Representative Office in Vanino or major Khabarovsk banks.

 

TRAVELINFORMATION

 

The train ride from Khabarovsk to Sovetskaya Gavan takes 23hours.  A one-way ticket costsapproximately $15.  Cars are notcomfortable and service is poor. There is a regular air service to Khabarovsk.  A forty-minute taxi drive from the airport to SovetskayaGavan costs $8.  Taxi rides withinthe city are relatively cheap, a 25-mile trip to Vanino costs about $15.  The only hotel “Sovetskaya Gavan” islocated in the very center of the town. A suite costs $15 – 25, service ispoor, but the sauna and restaurant are well run.  Currently, part of the hotel is under reconstruction soadvance booking is recommended. All forms of telecommunication services are presently available in thecity, including Internet access and cellular phones.      

 

CONTACTINFORMATION:

 

LOCALGOVERNMENT:

 

YuriGrigoriev, Head of the Sovgavan District

LeonidDavidenko, First Deputy Head

OlgaProkazina, Deputy Head in charge of Economy and Property Committee 

 

25Sovetskaya Street

Sovgavan,Khabarovsk Krai, Russia 682880

Tel: (7-238) 450-45 or 451-12

Fax:(7-238) 451-65

E-mail:  [email protected]

 

## LEADING COMPANIES

 

YakorJoint Stock Company

6Korabelnaya Street 

SovetskayaGavan, Khabarovsk Krai, Russia 682880

# Tel: (7-238) 450-84

# Fax: (7-238) 452-51

Contact:Vladimir Voronin, Director General

 

SeverniyShip-Repair Joint Stock Company

31-ANaberezhnaya Street 

SovetskayaGavan, Khabarovsk Krai, Russia 682880

# Tel: (7-238) 302-62

# Fax: (7-238) 353-68

Contact:Nikolay  Shurpik, Director General

 

Sovgavan-Port,Russian-American Joint Venture

4Morskaya Street 

SovetskayaGavan, Khabarovsk Krai, Russia 682880

# Tel: (7-238) 406-27

# Fax: (7-238) 402-68

e-mail:[email protected]

Contact:Yevgeny Zenin, Director

 

Vostokrybprom (Headquarters in Khabarovsk)

12 Topograficheski Pereulok

Khabarovsk, Russia 680000

Tel/fax: (7-4212) 227-285

Contact:Konstantin Voloshenko, Director

VostoktorgLTD.

12Portovyi Proezd, Lososina Settlement 

SovgavanskiyDistrict, Khabarovsk Krai, Russia 682884 

# Tel: (7-421-38) 456-43

# Fax: (7-421-38) 966-11

E-mail:[email protected]

Contact:Sergei Chernat, Director General

 

Hermes,Ltd.

21Znamenka Street  

SovetskayaGavan, Khabarovsk Krai, Russia 682880

# Tel: (7-238) 3412-82

# Fax: (7-238) 349-91

E-mail:[email protected]

Contact:Alexander Sosnovskiy, Director General

 

AgoraLTD.

22-A Lenin Street

SovetskayaGavan, Khabarovsk Krai, Russia 682880

# Tel: (7-238) 410-29 or 410-80

# Fax: (7-238) 410-29

Contact:Nikolay Tereschenko, Director General

 

SovetskayaGavan Hotel

14Pionerskaya Street

SovetskayaGavan, Khabarovsk Krai, Russia 682880

# Tel: (7-238) 467-83

Contact:Tatyana Shurigina, Director

 

**********Forwarded by: ***************************

TanyaShuster, BISNIS Trade Specialist for the RFE

Tel:202/482-2036, Fax: 202/482-2293

www.bisnis.doc.gov

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