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An Exchange Got a Fresh Look

Oleg SOSKOVETS, President of the Russian Union of Commodity Manufacturers

Today an issue of trade at a “fish exchange” has entered a list of topical ones for the fishing community again. But as distinct from the previous years, the discussions now are related to bidding that have already taken place at the real trading floor, which appeared and started working without governmental participation.

To learn which doubts "fish Exchange" causes in business and whether it has perspectives for the industry and the Far East in general, Fishnews spoke with Oleg Soskovets - statesman and political figure, who now heads the Russian Union of Commodity Producers, the Association's financial industrial groups in Russia and the Coordinating Council of the Eurasian business Council.

- Oleg Nikolaevich, today we are witnessing not just the development of Russia's stock market from scratch and auctioning fish products, but also the transformation of the concept into the public consciousness. Russian Union of Commodity Producers has not stood aside and takes an active part in this process – so what perspectives has your association seen?

- The first single stock exchange and the auction platform for e-trading of aquatic bioresources and their products was opened in May 2014 with the initiative of the Far Eastern fish Exchange (later - JSC "Far Eastern auction Fish House" (DARD) based on the "the Exchange "Saint Petersburg" (ESP) and with the assistance of the Russian Union of Manufacturers (RUM). It is based on the principle of working through remote terminals.

What is important - the goods here is a product that the produces only by the companies of Russian Federation. For the RUM - one of the largest in our country civil society organizations, whose members are united by the desire to consolidate efforts for recovery and development of the national economy and food security of the country - it was a determining condition.

Since last July there has been organized several test trades, on the new platform, and the issue of selling fish on the stock exchange was raised at the IX International Congress of fishermen. But the very concept of "fish market", for obvious reasons, is still perceived by the industry with hostility. Some still continue to draw parallels with the five-years-ago policy of the state, when they wanted all production of fishermen to be sent to the commodity exchanges. Although today it's a different story, which was initiated by the business itself, and there is not (and even can’t be) a question about the legislative "coercion".

Nevertheless, in September 2014 the head of Federal Fisheries Agency Ilya Shestakov, being in Vladivostok, got acquainted with the first principles of fish stock and the auction platform, attended the demonstration of online-auctions and endorsed the idea. Most importantly - he approved it as the head of the industry, ie, understanding the responsibility for everything that happens, and recognizing that the further development of this area is able to reform the fisheries business. This gave an important impetus to our work.

And now, a year later, at the Xth International Congress of fishermen in August 2015 the idea of ​​fish exchange sounds from bleachers and, what is important, is perceived by the audience in a positive way. Because today Exchange started to be positioned as a platform which can be attractive for business and for entire regions. Confirmation of this we have seen on the East Economic Forum September 3-5, where, in particular, the Far Eastern fish auction house has signed a number of agreements, including the administration of Primorsky region and Kamchatka Territory Development Corporation.

- However, even today there are some doubts about whether all the fish is stock commodity.

- In this line, quite a serious discussion took place. This question arose in front of initiators of the creation of the first platform. So before we tried to examine in depth the very mechanism of fish trade on the stock exchange and auction, in order to understand whether the fish generally can be a stock commodity.

Since the first testing trades, DARD experts came to the conclusion, that at this stage it is more interesting for the participants of the fish market is may be just an auction sale. Its specificity is different from exchange trading, but in fact the transactions carried out on the same platform. Yes, the auction for the seller raises the question of insurance against changes in prices at the time of delivery of the goods to the buyer (although this aspect is currently being worked by insurance companies). But fishermen receives cash from the results of the auction, you can send, for example, to prepare for the fishing season. What is more important - this is not the borrowings and you shouldn’t pay interest of them in the future.

Experts Exchange concluded about what products are appropriated to sell through the stock exchange, as it will be linked to the seasonal factor, etc. The first real trades were carried out with the future (!) catches of salmon of fishing season in 2015 – it is Kamchatka pink salmon, chum, sockeye salmon (gutted with head, headless, not cleaned) and salmon caviar, cod liver oil, fish steaks. All the products were delivered to customers in compliance with the terms of stipulated agreements.

So actually, in practice, we have seen the reality of the use of exchange mechanisms in the fishing trade and received confirmation that the fish products can be a stock commodity.

Exchange "Saint Petersburg" today is recognized as a leader of the exchange business and the oldest stock exchanges in Russia, which has a license to conduct this type of trading. I note, incidentally, that today not all platforms that organize electronic auctions, has license for exchange trading.

For the year of the fish market leadership of ESP assess the prospects of its development high enough and today it is an active supporter and participant of the direct creation of Russia's fish market.

In general, the number of supporters of stock trading fish products is growing, tht trend gradually changing to a positive in the fishing community and fish processing. I think that at a meeting of the State Council this issue should sound one way or another, it will give it an additional boost.

- But now the question arises, who will continue to do it: In your opinion, should the market focus on one large platform or there should be such platforms as much as possible across the country?

- It's always difficult to be the first to start something from scratch - at this stage everyone just eyeing. But when the decision is made, and what is more, recognized by the supreme political authority, many are trying to join the trend.

So, of course, many will try to master the ground of fish market today. Especially since the Russian President gave a very clear target in the domestic market for domestic production. Yes, and the fishing industry, I believe - is the future of the Russian economy, so it will always attract interest.

It is also obvious that it can not be all concentrated in the same hands, besides, it contradicts anti-monopoly laws. But I believe that it would be better to accumulate some experience in the field of exchange trading of fish products, and then to project it to other platforms.

Also I want to note that we are talking about electronic technologies that do not actually have a geographical reference. Infrastructure: refrigerators, possibly certain processing facilities, logistics centers - all of which can be created gradually. And at this stage, by the way, it's probably for the state - to solve the problem, how to make the resources, especially renewable energy, such as fish, timber, more accessible to business and to the public (in the form of goods). Today there is a lot of questions about the delivery to the central Russia, storage, processing - unfortunately, the consequences that these raw materials had, remote from the Russian market been for two decades, continue to affect.

- What tasks should be put in front of a fish market?

- Initial conditions, which have been designated initiate actions based on the ESP and DARD fish stock and the auction platform, have a clear focus - to create conditions for the development of the fishing business in the country. Perhaps, on the one side, someone thinks this is a disadvantage, especially as at the moment the foreign market more attractive to business. But on the other side, the market does not put a ban on the participation of foreign buyers in the auction: yes, it involves a more complicated scheme of documents and settlements, but these issues will work out in the near future. Especially, that there are no, prohibitive restrictions for foreign participants in the Russian legislation, regulating exchange trading.

In general, market participants of electronic trading (exchange and auction) – is a simplified system of relations between producers and buyers that is unacceptably bureaucratized in Russian reality. The great mass of the various inspection agencies, courts, of course, create a great disturbance and confusion and discourage producers from the Russian market, including those engaged in the extraction of fish.

Exchange trading is designed to help overcome these barriers - is another challenge. Firstly, the stakeholders get more access to the domestic market with high quality fish products. Second, the reduced level of corruption, which today we rolls in all spheres of economy and business, and hampers their development.

- Do you think it is right that the first exchange trading fish products started to take place in the Far East, but not in the central regions of the country, where the bulk of the consumers is?

- Now we have to deal with the fact that our key renewable resources, such as fish and timber, used for most of the economy, at least in the regions where they are produced. Far East – is the most fish place. Like Siberia, with its forests. I see in the Exchange filter that will help slow down the export of raw materials. Today, we produce products only for 70 mln. of the population, instead for 140 million-plus. Meanwhile, according to the World Food Organization, the territory of Russia is able to feed more than a billion people.

The potential of the Far Eastern region is obvious for all. The day before the Eastern Economic Forum in Vladivostok, we met Chinese partners; we presented them the draft stock and fish auction trading platform, conducted preliminary consultations. They expressed great interest not only in this project but also in investing in the Far East as a whole.

Incidentally, I remain a supporter of those who say that here, in the East, people are not only the first to greet the dawn, but also the firs who begin to work - and it is their additional advantage. In addition, the Russian Far East adjacent side by side with the countries that are leaders in technological and economic development. Moreover, we have created a separate Ministry of the Russian Federation on the development of the Far East, which is designed to attract investment in these areas and contribute to the implementation of new projects.

I want to underline, that the Far Eastern business today – is a special formation of people, there are just unique examples. The current visit to Vladivostok, I personally met one of our colleague - head of the company of the production of process equipment for fish processing. Their system of organization of work was a revelation for me: they build relationships with partners throughout Russia and abroad by themselves, work closely with the consumer of the equipment and are constantly in development, generate new ideas and projects, including the environmental field, the organization of non-waste production that is almost unreal for our country. While the market in this area is very specific and difficult. I am confident that the future for such people, is a new generation of people, which will demonstrate in the business the breakthrough nature of the interaction between the market, consumption and production.

Therefore, returning to the possibilities of exchange, once again, I note that this is a direct access to the product, to the resources which are now mined by domestic producers. And in the Far East in the first place it is necessary to create conditions for life, provide workplaces, infrastructure - all this requires investments. We hope that this exchange will also become a tool for building a decent environment in the Far East.

But there are important conditions. There should be no pressure on the business of the state. Neither the federal nor the regional level. Therefore, Exchange should not be limited by the territorial principle - this is the first.

And second, we must find those points, after which the interest in the Russian market will not increase the administrative and declarative - it is quite impossible - but economic approaches and methods. No other way.

Natalia Sychev, Fishnews

October 2015.

Date: 13.10.2015 All news