PSEZ residents’ future

The projects on creation of special economic zones in the ports of Murmansk region and Khabarovsk territory have “stumbled” over the “frozen” Shtokman project in the first case and over insufficient capacity of Baikal-Amur Mainline (BAM) in the latter one. The stevedoring companies themselves feel no excitement over the PSEZ idea – the market participants believe special economic zones should be created not in ports but around them and they should be managed by the regions rather than by the federal center.

Is there future without Shtokman?

The project on creation of port special economic zone (PSEZ) in the Murmansk region was initially associated with residents focused on the development of Shtokman gas condensate field, said Dmitry Sosnin, Murmansk Region Minister of Economic Development, at the Expert Council meeting of Rosmorrechflot Board. According to Sosnin, uncertain situation with Shtokman keeps large investors from PSEZ. There are only three applications from fish processing enterprises. However, with the total staff of about 150 persons and the volume of goods to be produced they will not cover the costs for creation of PSEZ.

Meanwhile, SEZ concept has been developed and approved by the Economic Development Ministry. The site design, space planning and material & technical development plan have been elaborated and submitted for approval. PSEZ managing company is being established with the resources provided for the company’s capital.

Sosnin explains the lack of interest to PSEZ from large investors by the fact that PSEZ residency does not mean any significant economic preferences for stevedoring companies engaged in cargo transshipment rather then processing while property and income tax privileges can be provided for non-residents. As an example the official mentioned the project on construction of a coal terminal at port Lavna. If this terminal applies for PSEZ residency it will not get any advantages as it will be engaged exclusively in cargo transshipment. However, it will have to renter its plot for the operational management of the zone’s managing company. “There is no any sense in it,” – Dmitry Sosnin believes.

Besides, he considers it to be strange when PSEZ residents are provided with preferences at the cost of the regional part of property and income taxes with the decisions on granting residency status are made at the federal level. “If we undertake that preferences are granted by a constituent entity of the Federation and it bears financial responsibility, the decisions on residency and zone management should be also made by the entity, not by the federal authorities, Sosnin says. 

Sovetskaya Gavan got stuck on BAM

The second PSEZ in Russia is supposed to be created in Sovetskaya Gavan (Khabarovsk territory). As Valentina Grigorjeva, Deputy Minister of Economic Development and Foreign Relations of the Khabarovsk territory, head of the authority on coordination of SEZ and complex projects, said at the Expert Council meeting of Rosmorrechflot Board, the creation of SEZ in the Khabarovsk territory has been delayed for over 1.5 year because of the economic crisis of 2008 and lack of experience in PSEZ establishment in Russia, as well as because of deficient legislation in the sphere of PSEZ creation and functioning.    

Meanwhile, in 2010-2012, the government of Khabarovsk territory in conjunction with the RF Ministry of Economic Development carried out the entire preparatory works on PSEZ creation.

The development of PSEZ is supposed to be started with the Cape of Mary, the most developed site in terms of infrastructure, the next will be the Cape of Muravjov with a possibility of expansion till Vanino. 

The potential investor for the Cape of Mary is Sovetsko-Gavansky commercial seaport LLC (Petropavlovsk-Chernaya Metallurgija LLC, Moscow), that plans to build an iron ore terminal with annual capacity of 7.1 mln t. To ensure the depth needed for the terminal it plans to build a 216-meter long offshore mooring. 

The other potential investor is Seaport New Sovetskaya Gavan LLC (Rosagrosnab OJCS, Moscow), that plans to build a grain terminal with annual capacity of 2.5 mln t and a 3.36-mln t container terminal as well as fish processing complex. The company is going to create an artificial ground for the expansion of the effective area of the Cape of Mary and efficient location of terminal facilities. The minimal area of the expected artificial ground is to exceed 2 hectares. 

With the completion of a railway line to the Cape of Muravjov having deep water area and direct entry to the sea, the second phase of Sovetskaya Gavan PSEZ is supposed to be implemented.

The interest to building terminals at the Cape of Muravjov was expressed by Far East Production Stevedoring Company LLC (subsidiary of Transhimexport LLC, Moscow) with a plan to build a 3-mln t\y grain terminal and an oil-extracting factory, as well as by Terminal OJSC planning to have a 10-mln t\y coal terminal.

A curving coastline of the Cape of Muravjov will probably have to be straightened though land reclamation.

The total expenses (including activities on the development of aids to navigation, hydrographic and hydrogeologic surveys) is estimated at RUB 1 bln. Total area of Sovetskaya Gavan PSEZ can be expanded to 450 hectares.

Besides, in February 2013, by the initiative of large Russian companies (SUEK OJSC, Mechel OJSC, Sakhtrans OJSC, Basic Element Group and Tuva Energy Industrial Corporation LLC), the territorial government applied for the expansion of Sovetskaya Gavan PSEZ area through inclusion of the territory of Vanino seaport.  The entire area to be occupied by Vanino-Sovgavanskaya PSEZ is to make about 2,000 hectares. 

Nevertheless, all these plans are hindered with insufficient capacity of the Baikal-Amur Mainline (BAM) which is not to satisfy the requirements of potential resident even with the implementation of the investment programme on its expansion till 2020 (some 125 mln t per year are required). In this context, the regional ministry considers the budgetary allocations for the development of railway infrastructure to be a priority.

Who needs it?

Actually, we think that the investors’ interest to stevedoring projects in the Far East is driven by a promising export of raw materials to the Asia-Pacific markets rather than by the fact of PSEZ creation. These stevedoring projects will be implemented despite the existence of PSEZ, which seems to become just an additional instrument to fight for the access to the sea and attraction of state finances for the development of infrastructure required by the projects.

According to Aleksandr Shimansky, Director of Moscow-based representative office of the Association of Commercial Sea Ports, Russian stevedoring companies are not in critical need of port-based special economic zones. He thinks, stevedoring companies are already provided with necessary privileges while PSEZ residency would mean additional bureaucratic procedures for them. 

In the opinion of Serik Zhusupov, Executive Director General of the Association of Commercial Sea Ports, the major problem of PSEZ is excessive centralization of their management. Zhusupov thinks, basic powers on managing PSEZ should be delegated to the local level.

The Association believes it is reasonable to create SEZ not in seaports for the sake of stevedoring companies which do not actually need them but around ports for the development of processing enterprises and services. And they are not necessarily to be port-type zones.

Vitaly Chernov