Russia's whitefish giant estimating current risks in fishery industry
Industrial risks
According to the analysts, main problems for the Russian fish processing sector are connected with exhaustion of potential capacities of the material and technical basis and absence of sufficient volume of raw material for value-added production. Recent institutional reforms have actually failed to form efficient market mechanism for sales of value-added seafood.
Government program for fishery industry development from 2009 to 2013 provides for establishment of modern production and technical basis, refurbishment of the fish processing sector, bringing Russian seafood in compliance with the international quality standards and for improvement of legislative basis for the fishery industry.
In other words, the program should encourage gradual improvement of fishing ships maintenance at marine ports as well as better exploitation of aquatic biological resources.
General condition of the world economy can be characterized as fragile, though it has been gradually moving upwards. Prospects for recovery of the Russian economy from crisis and its further growth have been so far mixed. At the same time, against the background of stagnating world situation Russia's economy may find stimuli for recovery as the state power in Russia is characterized by stability.
Risks due to changes in customs regulations and duties
According to the report, Russia's customs legislation has been showing positive dynamics, however analysts of Murmansk Trawl Fleet cannot exclude risks connected with possible changes in customs regulations and duties in the future. As the strategy of the customs control is defined by the federal executive body in charge of customs activities, there is a risk of unfavourable decision-making complicating customs clearance procedure.
The forms of customs control have been expanded thus creating a risk of their longer execution and unfavourable for MTF decisions (up to arrest of transported goods) made by the customs control bodies.
According to the Customs Code, calculation and payment of customs duties are laid on a declarant or a broker, nevertheless there is a risk of instituting proceedings against the company due to outstanding or incomplete customs payments caused by the above mentioned people, the report says.
The Federal Law "On Fundamentals in State Regulation of Foreign Trade" No.164-FZ dated 8 December 2003 rules that foreign trade should be regulated via customs tariffs, non-tariff rules, bans and limitations of external trade to services and intellectual property as well as via economical and administrative measures. Such methods of foreign trade regulation may result into a risk of high import/export customs fees and duties, special, antidumping and compensation duties, temporary restrictions and export/import bans in exceptional cases as well as volume restrictions for exports and/or imports, all of them potentially complicating activities of Murmansk Trawl Fleet.
Economic risks
Potentially efficient implementation of measures aimed at recovery from crisis and modernization of the economy along with the growth of the gross domestic product may encourage improvement of MTF's capacities in the sphere of fisheries.
In 2009 the inflation amounted to 8.8%, much below on 13.3% in 2008. The inflation for the year 2010 was officially forecasted at 7-7.5%.
As the company's profit is given both in RUR and in foreign currencies, large fluctuations of RUR to foreign currencies may adversely affect MTF's expenses for import-export operations and influence on the financial situation of the company.
Risks due to changes in forex regulation
According to the Federal Law "On Currency Regulation and Currency Control" No.173-FZ dated 10 December 2003 (as amended on 22 July 2008), Russian residents have to reserve cash assets in the Russian national currency on a separate account in an authorized bank before performing a number of currency operations (the list of which is specified by the above law). The procedure actually results into a flight of capital and its temporary exclusion from the current payments of the emitter thus impeding discharge of the latter's contract commitments.
Along with the above, the Law also contains a number of rules (currently fixed in normative acts) which may cause discrepancies due to mixed wording and uncertainty as to the use of standards under this or that legislative act.
Political risks
Political situation in Russia is fairly predictable. The government policy in the sphere of legislation along with the state trade and currency regulation, quota system, licensing and change of customs duties may considerably influence on the economic results of Murmansk Trawl Fleet, the report says. There is a possibility of negative changes in legislation, including tax legislation aimed at maximizing the inflow to the budget.