**COMMERCIAL UPDATE FROM SAKHALIN****     **

**27 January 2000**

 

AUTHOR:ELENA SABIROVA, BISNIS REPRESENTATIVE INYUZHNO-SAKHALINSK     

 

INTERNATIONALCOPYRIGHT, U.S. & FOREIGN COMMERCIAL SERVICE AND THE U.S. DEPARTMENT OFSTATE, 2000.  ALL RIGHTS RESERVEDOUTSIDE OF THE UNITED STATES.

 

SUMMARY.  This report summarizes businessdevelopments in the Sakhalin region, the Russian Far East, for December-January2000. End summary.

 

FOOD PROCESSINGINDUSTRY DEVELOPS

 

1.  Sakhalin food processing enterprisesare showing improvements from the previous years' results.  According to the SakhalinAdministration Department for Food and Food-Processing, one of the main reasonsfor this improvement is the increased labor productivity of these enterprises.  For instance, productivity in localmeat-processing enterprises increased by 50%.  Liqueur and vodka production facilities, as well as beerbreweries, have also been very successful and expect to experience continuedimprovements as a result of the promising potential in that industry.

 

2.  Several local companies are pursuinginfrastructure improvements.  Thelocal liqueur-vodka plant is hoping to obtain 15 million rubles (about US $550,000) for reconstruction. The reconstruction would make it possible for theplant to utilize new technologies; for example, processing of grain wastes intofood for poultry.  A feasibilitystudy on brewery reconstruction in Yuzhno-Sakhalinsk is also being completed.

 

3.  The Makarov Collective Farm hasobtained a mini-plant module for milk processing.  These facilities will supply the district with pasteurizedmilk, butter, cheese, cottage cheese and cream and will introduce the use ofvacuum sealing. The mini-plant is able to process 1500-2000 liters of milk perday and needs only 4-5 people to operate. The equipment was purchased from aRussian company in Perm.  Suchsmall modules are especially useful for the Sakhalin market with its smalltowns and villages, where badly developed infrastructure makes effectivetransportation of perishable goods difficult.

(Source: localpress)

 

FISHING

 

1.  1999 was a good year for the Sakhalinfishing industry. The total catch was 450,000 tons of fish and seafood, ofwhich 330,000 tons were processed into value-added goods.  The catch of salmon was the largest inthe past decade - more than 111,000 tons.

 

2.  The Governors of Khabarovsk, Kamchatka,Magadan and Sakhalin oppose the fishing quota distribution system, which isdetermined on the federal level. The Governors have sent a letter to ActingPresident Putin requesting changes to the existing system. Currently, quotasare distributed according to the number of vessels in each  region.  The Sea of Okhotsk, where the majority of Russian Far Eastfish are caught, geographically refers to Khabarovsk, Sakhalin, Magadan andKamchatka.  However, since thePrimorye region has the most vessels, funding for the fish catch goes to thebudget of Primorye and not to the budgets of the other regions. (Sources: localpress and www.sakh.com)

 

ENERGY

 

1.  The first stage of the Nogliki GasTurbine Power Station was put into operation, with four turbines of the plantworking at a 40 MW load. The station is the first gas-utilizing power plant onSakhalin, and was designed to alleviate the regional problem of frequent poweroutages due to non-timely coal deliveries to existing coal power plants.

 

The use of gas inthe local energy system is much lower than the average for Russia as awhole  - 20% compared to 63%.  Locally produced gas is three timescheaper to use than local coal, and the increased use of gas will also resultin a saving of about 400 tons of coal daily.

 

Infrastructure isalready available for the construction of the second stage of the gas turbinestation.  The construction of thesecond stage will complete the power system upgrade in the region and gasutilization will reach 40% - 45% of the total fuel balance. (Source: localpress)

 

INFRASTRUCTUREDEVELOPMENTS

 

1.  A two-stage plan for water systemrenovation on Sakhalin will be implemented in 2000-2005 and 2006-2011.  For the last two years, the RegionalAdministration has been working on a program called "Sakhalin DrinkingWater".  Data on local waternetwork conditions, water intakes, and sewage plants was gathered from alldistricts in the Sakhalin Oblast. Plans include not only laying new pipes, but also introducing newtechnologies for water treatment and waste processing.  The cost to implement this program isestimated at 6.5 billion rubles, about 70% of which should be covered by theRegional Budget.  Local and federalbudgets will cover an additional portion, with some non-governmental fundingstill needed to make up the total.