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Important » August 2, 2006

Monographs "Evaluation of Loss caused by Illegal Catching Living Marine Resources in the Far East Fishing Industrial Basin: Economic Measures to Fight Poaching"

Authors:

Glotov D.B., President of Association of Primorye Fish Industry Companies

Blinov A.Yu., Consultant, Bachelor in Technical Sciences

Project Manager: Tkachenko I.V., APFIC President Adviser

Consultant: Slyusarev V.A., APFIC President Adviser

Reviewers:

Bocharov L.N., Doctor of Sciences,

Director of Pacific research fisheries centre (TINRO-CENTRE)

Baklanov P.Y., Academician,

Director of the Pacific Institute of geography

(Far-Eastern Branch of Russian Academy of Science)

Fig.2. Correlation of the TAC volume and the scale of TAC exceeding for king and blue crab in 1993-2005

VLADIVOSTOK 2005


CONTENT

  • PREFACE
  • INTRODUCTION
  • Chapter I. EVALUATION OF ECONOMIC LOSS FROM ILLEGAL CATCHING OF LIVING MARINE RESOURCES IN THE FAR EASTERN BASIN
  • Chapter II. EVALUATION OF REAL AND POTENTIAL CAPABILITIES OF THE FAR EASTERN PORTS TO PROCESS FISH PRODUCTS
  • Chapter III. EVALUATION OF ECONOMIC LOSS FROM INRTODUCTION OF THE MANDATORY DECLARATION OF THE FISH PRODUCTS ON THE Russian Federation TERRITORY
  • Chapter IV. EVALUATION OF ECONOMIC EFFECTIVENESS OF SECONDARY PROCESSING THE LIVING MARINE RESOURCES IN THE Russian Federation TERRITORY
  • CONCLUSION
  • REFERENCES
  • APPENDIX

P R E F A C E

«The fishing business in

Russia must be construed in the new way – without hypocrisy,

 either from the side of the State, or from the side of the fishermen themselves».

Russian Federation Minister of Agriculture, Alexey Gordeyev.

What is the real situation in the fishing industry? What should be done first? What are the consequences of those decisions? The answers to these questions require a complex and systematic analysis. The authors used this approach to conduct this survey. Certainly, the Minister of Agriculture, Alexey Gordeyev is correct in stating, “The peak of the crisis, noted in the industry some 2-3 years ago, was dependent on the weakness of the legal system”. The elimination of auctions, attribution of commercial shares for a 5-year term, adoption of the Federal Law “On Fishing and Preservation of the Living Marine resources”, amendments to Law, along with the Government’s decrees – these are the most important milestones in changing State policy in the industry.The industry did not have to wait long to see results – in 2005, the growth in total catch volume was forecasted at 15% above that of 2004. By maintaining and increasing such a rate of growth, the production output of the industry will double within 6-7 years. Clear, comprehensive options to solve the crisis facing the industry relate to the transition from the Administrative approach to economic methods that combat poaching. Specifically, this is the essence of adopting the step-by-step introduction of all fish products declaration in the Russian territory. This is the only way we can break the vicious circle, where ports and enterprises are underutilized and preconditions is not being developed because of the lack of the raw materials; while raw materials cannot be delivered because of lack of sufficient preconditions. For the fishing-industrial complex to realize its full potential, by becoming a competitive and effective industry of  Russia’s economy, we must unite the efforts of the State and the industry.

Authors


INTRODUCTION

The fishing industry of the Far East continues to remain an extremely complicated situation. In spite of the increased catch and rising profitability of many fishing enterprises in 2005, there are unresolved problems that significantly slow down the development of the fishing-industrial complex.

The main problem is the illegal catching of living marine resources in the Far East basin, which at present is inflicting a tremendous harm to the state, industry and private interests.

It is obvious, that the State regulation and control system now in force does not permit effective measures to combat illegal catching of the living marine resources. In that context, practically the only possibility to make any significant progress in resolving this problem is to adopt a decision on the mandatory declaration of fish products caught within the 200-mile economic zone of the Russian Federation, within the territory of Russia.

Realization of this decision will solve two of the main problems: One is mainly a tactical meaning, while the other is of strategic significance.

Task 1 . Struggle with the illegal catching of the living marine resources.

Task 2. Establishment of preconditions for secondary processing of living marine resources and product production with a higher percentage of added value in the territory of Russia

Additionally, at the same time of adopting a decision to introduce mandatory declaration of fish products in Russia, the industry could address a number of additional tasks. These should put forward:

- Modernization of the working mechanism of the State regulations on catching, protection and reproduction of the living marine resources;

- Increasing the turnover of Russian ports;

- Simplification and unification of the permit and notification systems of commercial fishing activity.

As a whole, the solution of these problems completely corresponds to, and is partially incorporated in, the formally declared social-economic policy on Russian Federation development and may receive the support of the Federal bodies of the legislative and executive powers.

However, one cannot help but notice that there are certain limitations, economic and technical, involved in adopting the decision on the mandatory declaration of fish products in the territory of the Russian Federation.

The first one relates to the problem of the fishing enterprises increased operating expenses and the reduced effectiveness of the entire Russian Far East fishing industry’s effectiveness. Quite obviously, adopting the decision on mandatory declaration of all fish products produced from of the living marine resources caught in the 200-mile Russian Federation economic zone, within the territory of Russia, would cause economic loss to many fishing enterprises of the Far East.

Technical limitations in this case relate to the fact that there are not enough production facilities to process all the products, produced from the living marine resources caught in the 200-mile Russian Federation economic zone within the Russian territory. During the last 15 years, due to the orientation of the Far East fishing industry to export their catch with little or no added processing, the capabilities of the Far East basin ports as for the processing the fish cargoes have been significantly reduced.

To account for all these factors mentioned it was decided that a survey should be conducted. The survey would encompass a comprehensive evaluation of the consequences of adopting the decision on mandatory declaration of all products produced from of the living marine resources caught in the 200-mile economic zone, within the territory of Russia.

In order to reach this target it was decided to divide the work into four main blocks.

Block 1. Evaluation of the economic loss resulting from of the illegal catching of living marine resources in the Far Eastern basin.

Block 2. Evaluation of real and potential capabilities of the Far East seaports for processing fish cargoes.

Block 3. Evaluation of the Far East fishing enterprises loss from the introduction of mandatory declaration of fish products within the territory of the Russian Federation.

Block 4. Economic effectiveness of the living marine resources secondary (added value) processing in the Russian Federation territory.


Chapter I. EVALUATION OF THE ECONOMIC LOSS RESULTING FROM ILLEGAL CATCHING OF LIVING MARINE RESOURCES IN THE FAR EASTERN BASIN

Illegal catching of living marine resources has traditionally been considered the most serious problem facing the Far East fishing-industrial complex development. For more than a decade its solution has been considered to be the top issue of State importance. Thus, it is found referenced in many standard legal acts of the Federal and Regional powers. Unfortunately, significant practical results were not achieved.

Meanwhile, within the last years the scale of illegal catching of certain species of the living marine resources has reached the most threatening extent not only to the State and industry interests, but to the interests of the sole enterprises of the fishing-industrial complex as well. For this reason, one of the main elements of this survey is the seriousness of the evaluation of illegal catching scale from both the side of the State’s interests and the interests of the industrial enterprises.

Today, one can speak about the existence of two principal forms of illegal catching of the living marine resources in the Far Eastern basin:

- catching the living marine resources in excess of the limits established, allocated in accordance with the laws in force, either catching without necessary permit documents;

- catching within the limits established; however, in violation of the fishing rules.

These forms of illegal catching of the living marine resources differ from each other not only by their content (it is important to note that catching the living marine resources in excess of the limits established and the catching without permits as a rule are accompanied with many violations of the fishing rules), but, most importantly, by the level of harm and the amount of loss inflicted to the ecosystems, to the state, industry and private interests.

The most dangerous and potentially of the most significant loss is considered the first form of the illegal catching – catching the living marine resources in excess of the limits established and catching without permit documents.

Presently, the biggest extent of this form of illegal catching of the living marine resources in the Far East basin has been recorded in the following species:

- king crab

- blue crab

- Snow crab

- Hairy crab

- Other species of crab

- Sea urchin

- Sea cucumber

- Scallops

Maybe less dangerous, from the point of view of the loss inflicted to the ecosystems, is the second form of the illegal catching of the living marine resources ─ catching within the limits established, but in violation of the fishing rules.

Now, we can say that violations of the fishing rules to some extent can be seen in the catching of most species of the living marine resources in the Far Eastern district; however, the largest extent was seen in the catching of Alaska pollock.

Within the framework of this survey an evaluation was made on the extent and volume of loss from illegal catching for the principal from the point of view of harm and level of loss to the species illegally caught. These evaluations were attributed to the catching of king and blue crab, and Alaska pollock.

1.1 Economic loss from of the illegal catching of king and blue crab in the Far East basin Within the last ten years, regardless of the sharp decrease of the resources base, king and blue crab remain the main objects of the illegal catching of living marine resources in the Far East basin.

Traditionally, the main importer of the crab illegally caught within the 200-mile economic zone of Russia is Japan. This is mainly contributed to the convenient geographic location and creating favorable conditions for vessels in Japanese ports by not requiring the vessels to possess the documents confirming the legality of the living marine resources caught.

As of April 1, 2002, Japanese authorities declared the necessity of presenting Customs cargo declarations to pass port formalities in the ports of

Japan. This forced the re-orientation of part of the deliveries of illegally caught crab to South Korea.

In the long run, the extent of Japan’s efforts turned out to be not so significant. The decision to make tougher controls over the importation of fish products from the Russian Federation used to be, for the most part, a formality and has not lead to any real curb in deliveries of illegally caught crab in the exclusive economic zone of Russia to the territory of Japan.

Within the last ten years, another large importer of Russian crab turned out to be the USA, where mainly king crab is being delivered.

As a whole the total share of Japan and the USA amounts to not less than 90% of all the deliveries of live and frozen crab caught in the exclusive economic zone of the Russian Federation. For the evaluation of the extent of illegal crab catching in the Far East basin the data of the Customs Statistics of the Ministry of Finances of Japan and the US Customs Service were used.

It is worth mentioning, that the customs statistics of Japan possess a number of specific peculiarities. Thus, when using the term “king” (Kamchatka) crab two species of crab are mentioned: king and blue, which differ slightly in the price ranges (the price of blue crab is 5-7% lower than the price of king crab).

As mentioned, the mass deliveries of the Russian crab to the markets of Japan and the USA have been ongoing for more than ten years and all of a sudden, their combined deliveries exceed the amount of the officially established level of total allowable catch (TAC). According to the data from the Customs statistics of Japan and the USA in 1994 these countries 40.1 thousand MT of king and blue crab from the Russian Federation [1] were delivered to these countries, while the TAC level at that time amounted to only 38.7 thousand MT (fig.1).

The mid-90s of the 20th century are considered the boom time for illegal catching king and blue crab within the 200-mile economic zone of the Russian Federation. In 1995, the volumes delivered to Japan and the USA increased up to 54.9 thousand tons, exceeding 40% of the TAC level. One year later, the deliveries reached their highest level, which remained within the limits of 72.5–76.0 thousand MT in 1996—1999.

The growth of the catch of king and blue crab within the 200-mile economic zone of the Russian Federation took place at the same there was significant fluctuation of the TAC level. Previously, for four years the TAC level had remained stable – from 38.7 to 39.1 thousand MT. In 1997, the TAC for king and blue crab decreased to 26.3 thousand MT. Then again, in 1999, it increased to the highest level within the last decade–42.1 thousand MT. Regardless of this short span of increase, the volume of king and blue crab deliveries, caught within the 200-mile economic zone of the Russian Federation, to Japan and to the USA in 1996-1999, on the average exceeded the TAC by twofold: in 1996 – 1.92 times, in 1997 – 2.78 times, in 1998 – 2.26 times, in 1999 – 1.8 times.


Source: “king crab – 2005 (catching season forecast)”. – Vladivostok: TINRO-Center, 2005.

Fig. 1. Exceeding the total allowable catch (TAC) levels of king and blue crab in 1993-2005

Large scale illegal catching has negatively influenced the amount of resources of king and blue crab in the Far East basin. As a result in 2000-2002, a clear tendency to reduce both the TAC and exports was started. The TAC was reduced from 42.1 thousand MT in 1999 to 18.76 thousand MT in 2002. The amount of crab deliveries to Japan and the

USA decreased from 75.87 in 1999 to 44.97 thousand MT in 2002. Even when considering these preservation measures, the illegal catching king and blue crab within the 200-mile economic zone of the Russian Federation has been remained at a very high level. In 2000, the amount of deliveries to the markets of Japan and the USA exceeded the TAC volume 1.77 times, in the 2001 – 2.57 times, and in the 2002 – 2.40 times.

Beginning in 2003 the illegal catching of king and blue crab in the Far East basin entered a new phase. The TAC volume began to decrease rapidly; by 2005, it was just 7.16 thousand MT, while the amount of the crab deliveries to Japan and the USA in 2003-2004 remained at a high level, annually exceeding 48 thousand MT. The analysis of crab deliveries data to Japan and the USA within the first five months of 2005 show that the total volume of crab delivered to the markets of these countries amounted to 48 thousand MT of king and blue crab.

All this shows the rapid acceleration of the situation within the last three years and the increased scale of illegal catching. Thus, by 2003 the volumes of king and blue crab deliveries to Japan and the USA exceeded the TAC by 2.95 times, in the 2004 – 4.76 times and in the 2005, based on preliminary figures – 6.64 times. Moreover, it should be noted, that in fact the extent of illegal catching within these last years has been even higher. This is because the calculations used did not take into account the data of king and blue crab deliveries to countries other than Japan and the USA.

Such an obvious quantitative imbalance became possible, first of all, because of the changing the qualitative character of deliveries of king crab and blue crab to the markets of other countries. In order to maximize the volumes of the catch alongside with the sharp decrease of the resources, the enterprises, engaged in the illegal catching have started to violate the fishing rules in mass.

In mid-90s of the 20th century most of the king crab deliveries to the Japanese market consisted of the male species, which are traditionally larger than the female species. However, now the largest sized king crab,[“ Kamchatka” or as it is named in Japan «hor-taraba»], is practically absent from the Japanese market. More than 80% of all the catch consists of female and juvenile species.

Another factor testifying to the change in the qualitative character of king crab deliveries to the Japanese market is the decreased amount of crab with a high year-round flesh content, without taking into account the period when the catch is banned in Russian waters [2].

The catching of king and blue crab in the Far East basin now is the most representative example of illegal catching of the living marine resources’ negative influence on the most unique incidents and factors.

The biggest influence is traditionally executed at the status of the ecological systems. Exceeding the catching limits established is one of the main reasons for reduced populations and inevitably leads to the reduction of the total resource. Thus, within the last ten years the summary TAC volumes of king and blue crabs have been reduced more than five times – from 38.71 thousand MT in 1995 to 7.16 thousand MT in 2005. Alongside that there is a clear interrelation between the scale of the illegal catching of the living marine resources and TAC volume (fig.2).

It’s worth mentioning, that in fact the pace of decreasing stock of king crab in the Far East basin within the last ten years turned out to be even more significant. The decrease was partly compensated by the increase in the scale of catching blue crab; the TAC volumes of which in 1994-2005 have remained at quite the same level.

Fig. 2. Correlation of the TAC volume and the scale of TAC exceeding for king and blue crab in 1993-2005.

Fig. 3. The volumes of the Total Allowable Catch of king and blue crab in 1993-2005, MT

Within the last ten years, the king crab TAC volume in the Far East has declined more than 15 times – from 32.79 thousand MT in 1996 to 2.16 thousand MT in 2005 (fig. 3). All this indicates that the resources of king crab in the Far East basin are undermined and their restoration in this situation is only slightly possible.

Except for the impact upon the status of the ecosystem, the illegal catching of king and blue crab within the 200-mile economic zone of the Russian Federation has inflicted serious loss to the State.

The research shows that starting in 2001 at least 60% of all the deliveries of Russian crab to Japan and the USA are attributed to illegal catching, while in 2004-2005 this figure increased to 80%.

Thus, one may say, that the annual volume of the non-declared hard currency income, received from the export of king and blue crab caught within the 200-mile economic zone of the Russian Federation for the last several years exceeds $245 million (Fig.4). Totally, within the last five years, the whole amount of the non-declared hard currency income makes up not less than $1.25 billion.

Based on data on the amount of non-declared income received from king and blue crab catching within the Russian Federation 200-mile economic zone it is possible to estimate the direct economic loss to the state from illegal catching.

In the narrow sense, the economic loss inflicted to the State is the loss to the budgets of various levels and to the extra-budget funds from not receiving taxes, fees and other due payments paid by the fishing enterprises. The procedure used for determining such loss is quite simple. Taking as a base the average statistics data on the share of taxes and other due payments within the trade income of the Far East fishing enterprises (as for the 2004 results this amounted to 23%) we may find the sum of the direct tax loss due to the illegal catching of king and blue crab.

Alongside with that it is necessary to understand that in reality the loss to the State from illegal catching is much higher than purely the loss of tax revenue. In a broad sense of the word the loss can be identified by the total amount of the income not returned to the territory of the Russian Federation. According to the experts evaluation its size exceeds the 30% barrier, because unlike the legal suppliers of the fish products abroad, the main part of the current and long-term expenditures of the enterprises, engaged in the illegal catching the crab, falls to the share of the foreign counter-agents.

To the territory of the Russian Federation there constantly returns only the part of the income necessary for covering the expenses related to the salaries and administrative-production activity, as well as a part of profit from the illegal catching the living marine resources.

Besides that, the calculations on the income not returned to the territory of the Russian Federation (Fig.40) only partially reflect the loss to the State from illegal catching king and blue crab within the Russian Federation 200-mile economic zone. In fact, the real figure is much higher because the calculations do not take into account a number of additional factors.

First, the domestic consumption on the Russian market and the export of king crab to South Korea and other countries, the share of which as evaluated by the specialists, amounts to 10% of the total catch.

Second, when determining the amount of income received from selling the king and blue crab were taken into account the customs value not the market price was used.

Moreover, besides the non-declaration of hard currency income received from the export of non-declared fish products, the illegal catching of the living marine resources is inflicting indirect loss to the State and the industry’s interests, and to the interests of the lone producing subjects.

Fig. 4. Minimum extent of the direct economic loss from illegal catching of king and blue crab in the

Far East basin in 1995-2005

The indirect loss, inflicted by illegal catching and export of living resources embraces several trade-market aspects. First it is related to purely price factors. The demand for crab and other high valued products on the Japanese market is characterized by its high elasticity – when the supply is increased, the result will be a decrease in the price level (Fig.5).

Fig. 5. The volume of import and the medium customs cost of king and blue crab from the USA and the Russian Federation to Japan (in the raw form)

The customs cost of 1 kilo of the raw crab, imported to the territory of Japan from the Russian Federation and to the USA used to be the maximum cost in 1993-1994 and 2002, when the delivery volumes were the lowest. However, in case of increasing the volume of imports, like was the case in 1995-1999, the decrease in price was inevitable. Within the last ten years, the extent of the range in fluctuation of annual average prices, depending on the volume of deliveries, amounted to 34% and the range of the monthly average prices within a calendar year reached 40%.

In the meantime, such a significant price fluctuation has influenced not only the pure market factors related to the correlation of demand and supply, but a whole number of additional factors reflecting the distinctiveness of illegal catching and export of the living marine resources.

The significant influence on the export cost of king and blue crab caught within the Russian Federation 200-mile economic zone is that it is being done without even any primary processing of the living marine resources.

The enterprises engaged in illegal deliveries of king and blue crab, to a greater extent are interested in maximizing the catch, but not in increasing the added value and selling a product unit at a higher price. In this regard, these enterprises are mainly engaged in delivering live and fresh crab to the Japanese market, while the enterprises doing legitimate business are producing boiled and frozen products.

As the practice shows, the more the illegal crab suppliers are forced to sell their product at lower prices to the Japanese market, the more they dump on the market, sometimes plummeting prices. Not having the documents that confirm the legal status of their products, and mainly dealing with products of a limited storage term, the enterprises turn out to be directly dependent on their Japanese partners.

More visually the influence of illegal catching on the cost of king and blue crab within the Russian Federation 200-mile economic zone can be tracked by the correlation of frozen crab; i.e., product that have received some type of primary processing and fresh crab deliveries (Fig.6,7).

In the beginning of large deliveries of king and blue crab caught within the Russian Federation 200-mile economic zone to Japan, the share of live and fresh crab amounted to only 13% of the total volume. Of that the customs cost of a kilo of live and fresh crab used to be a bit higher than the cost of primarily processed crab (in the raw form), that corresponds, primarily, to the unusual nature of the product.

In general, the mentioned deviation was insignificant and up until 1995 the customs cost of a kilo of crab, both processed and non-processed, in the raw form used to be practically the same.

Fig. 6. Correlation of king crab and blue crab deliveries – live and frozen (in the raw form), imported from the Russian Federation to Japan in 1993-2004, %

Fig. 7. Dynamics of the customs cost of the frozen and the live king crab and blue crab, imported from the Russian Federation to Japan in 1993-2004, Yen per Kilo (in the raw form)

Beginning in 1996, when the volume of king and blue crab exports to Japan and the USA for the first time has exceeded the TAC volume by more than 50%. The share of live and fresh crab in the total deliveries to the Japanese market started to grow rapidly. In 1995 ã. the share was 16.85%, in 1996 ã. – 24.84%, within the period 1997 to 1999 it was oscillating between 35-36%, in 2000-2002 it exceeded 40%, in 2003 it reached 56.57%, and in 2004 – 64.7%.

Alongside with the growth of the live and fresh crab share within the total deliveries there occur a sharp decrease of its customs cost – from 870Yen per kilo in 1994 to 517 Yen per kilo in 2004. Meanwhile the customs cost of a kilo of the frozen crab (in the raw form) still remained at a rather high level.

As a result, the difference between the cost of frozen and live crab, practically unseen until 1996, started to rise, having reached an abnormal scale from the market point of view. Thus, in the 2003 the customs cost of the frozen crab (in the raw form) was twice as much as the fresh one, and in 2004 – by more than 70%.

From this one can conclude that within the last years all the deliveries of live and fresh crab to the Japanese market have been accomplished illegally. This, on its own, allows one to calculate the main component of the indirect loss from illegal catching king and blue crab within the Russian Federation 200-mile economic zone.

This component also permits one to take into account several factors at once that influence the reduced cost of king and blue crab caught within the Russian Federation 200-mile economic zone. It also completely accounts for the loss arising from the lack of primary processing and, in part, the loss from selling the live and the crab at prices lower than those market prices.

Although the indirect loss from illegal catching king and blue crab are not limited by those factors. The situation that formed within the last few years on the Japanese market is that the activity of the enterprises engaged in the illegal catching is dependent upon the profit of the legal suppliers. The dumping influence of the illegal suppliers forces them to sell their products at a lower price also.

It is necessary to mention that besides the deliveries of king and blue crab caught within the Russian Federation 200-mile economic zone there are also deliveries of Kamchatka crab, also named as a king crab, from the USA to the Japanese market. Though the technologies of processing the crab used in the USA slightly differ from those used by Russian fishermen, in general, one can see that the prices for the US king (Kamchatka) crab on the Japanese market are much higher than the prices of Russian crab (Fig.8).

Fig. 8. Dynamics of the customs cost of king and blue crab from the Russian Federation and king (Kamchatka) crab from the USA (in the raw form), imported by Japan in 1995-2004

The analysis of the customs statistics data of the Japanese Ministry of Finances for 1995-2004 show, with a rather high degree of evaluating precision, the influence of illegal catching of king and blue crab caught within the Russian Federation 200-mile economic zone on the general market situation.

As previously noted, the Japanese market for high-valued products is characterized by high elasticity; when the volumes of deliveries from the Russian Federation and the USA increased there occurred a decrease in the price, and vice versa – decreased volumes increased the price. However, one must note that the dynamics of the cost of the Russian and US products significantly differed.

The general trend is that in the case of increasing the scale of illegal catching of crab within the Russian Federation 200-mile economic zone, the products delivered from the Russian Federation became cheaper much faster than the US products (Fig.9). This is because, aside from the pure market factors, a significant impact on the cost resulted from the dumping influence of illegal suppliers.

Fig. 9. Dependence of the customs cost of the Russian and US crab (in raw form) on the amounts of illegal catching in Russian waters in 1995-2004

Thus, having construed the necessary grade trends and making the calculations, there appeared a possibility to evaluate qualitatively one more component of the loss from illegal catching king and blue crab – the dumping influence of the enterprises engaged in illegal catching on all the participants of the market.

Correlation of all the calculations made permits one to make the conclusion that beginning in 1995 illegal catching started to inflict not only direct, but indirect as well, economic loss, revealing the decrease general cost of the product that came about from selling a significant share at dumping prices and lacking any primary processing (Fig.10).

The main peculiarity of the indirect loss is that the main loss in this case is not inflicted on the State, but rather the fishing-industrial complex as a whole and certain fishing enterprises engaged in legal business. Specifically, that is the net short-received profit, made by certain concrete production units, has the biggest advantage is the fact they are ahead of the enterprises involved in processing and reselling the crab on the territory of Japan and the final customers of the products.

It is worth mentioning that according to the methodology chosen it is possible to calculate another component of the loss, which is only partially related to illegal catching. We are speaking about the loss relating to the lower cost of the Russian crab on the Japanese market in comparison with the crab from the USA.

It should be noted that the cost of the whole fish production, exported from the USA to the markets of Japan and South Korea has always been much higher than the cost of a similar product delivered from Russia. This has a rather substantial economic corroboration (detailed in the p.1.2.). However, the difference in the cost between the products does not exceed 15-20%. Although, in case with king and blue crab deliveries, customs statistics data show they reach abnormally high indices.

Fig. 10. Minimum volume of the indirect economic loss from illegal catching king and blue crab in 1995-2005

Thus, in 2002 the customs cost of a kilo of crab imported by Japan from Russia used to be 3.24 times lower than crab imported from the USA (in the raw form), in the 2003 – 2.79 times, in 2004 – 3.01 times (Fig. 9).

To arrive at such a significant quantitative unbalance there are several factors, considerably differing from each other in their content, that figure into the impact. These factors can be related to the conclusive results:

1) Downgrading the real cost declared upon entry of the fish products to the territory of Japan;

2) Existing market differences on the cost of fish products from the USA and Russia;

3) Practicing less sophisticated technologies by the Russian fishing enterprises then the US enterprises’ crab processing techniques.

Of these three main factors, only the one (the derived difference in price for fish products from the USA and Russia) is directly related to the current market situation and has an objective character, while the other two factors are related, more or less, with illegal catching and illegal deliveries of crab to the Japanese market. Particularly, the overwhelming of illegal deliveries and sharp decline in the crab resources has made it impractical to implement in mass the new, more sophisticated crab processing technologies used in the USA [3].

Thus, if taking as a base the cost of king (Kamchatka) crab delivered from the USA to Japan and using the real existing market difference in the cost of the fish products of 20%, then it is possible to calculate one more component of the Russian Federation loss from illegal catching of king and blue crab.

However, it is necessary to realize that this category of loss is only somewhat related to the problem of illegal catching of living marine resources and is predetermined by a number of other factors. Among those, specifically, it is possibly to show an ineffective policy of the State in the area of the regulation of catching living marine resources. In relation to that, this kind of loss should be logically called the conditional economic loss.

Fig. 11. The extent of the Russian Federation relative loss from catching king and blue crab in 1995-2004, $ million

Considering all the above mentioned, it is possible to draw a number of conclusions. First, it is necessary to point out the extent of direct and indirect economic loss from illegal catching within the last five years has visually grown (Table 1). This is despite the decrease in the TAC volume and the deliveries volumes of king and blue crab caught within the Russian Federation 200-mile economic zone to Japan and the USA, as compared to the mid-90s of the last century

If during 1995-1999, the minimum extent of the economic loss to the Russian Federation from illegal catching of king and blue crab amounted to $1,127.6 million ($828.79 million, direct economic loss and $298.82 million, indirect loss), and then during 2000-2004 its extent increased 12.28% to $1,266.05 million ($901.44 million, direct economic loss and $364.60 million, indirect loss).

The main reasoning these factors were used was the increased scale of illegal catching of king and blue crab within the Russian Federation 200-mile economic zone. If, during 1995-1999 the share of illegal catching declined to some 49% of all deliveries to the markets of Japan and the USA, then in 2000-2004 its share would be not less than 60%.

Fig.12. Economic loss and relative economic loss to the Russian Federation from illegal catching and the lack of deep processing of king and blue crab in 1995-2004, $million

Now, the illegal catching of king and blue crab within the Russian Federation 200-mile economic zone is inflicting the biggest loss, not to budgets of various levels and extra-budgets of the Russian Federation, but to the interests of the Russian economy, and most importantly, to the interests of the fishing-industrial complex as a whole and to private fishing enterprises, as well.

Particular attention in this case should be paid to the accelerated growth of the indirect loss from illegal catching of king and blue crab. During 2000-2004, the extent of indirect loss increased 11.01%, as compared to the period of 1996-1999. During the same time, the increment of direct loss amounted to 8.77%.

Fig. 13 Structure of economic loss inflicted to the Russian Federation by illegal catching king and blue crab, $ million

As just noted, the difference between the indirect loss and the illegal catching lies in the fact that the indirect loss may be identified as the loss of the fishing industry as a whole and certain fishing enterprise as well. Namely, indirect loss means the net loss of profit suffered by the enterprises engaged in the catching king and blue crab.

In general, based on the calculations made, it is possible to say that the structure of total loss (without conditional loss) from illegal catching of king and blue crab is a rather comparative.

Slightly more than 30% of the total loss falls to the share of tax loss of the various levels budgets and extra-budget funds: some 31% to the share of the fishing industry and some 39% to the share of other sectors of the Russian economy, excluding the fish catching and other industries making part of the fishing-industrial complex (Fig.13).

As for the conditional economic loss emerging from not utilizing modern technologies of crab processing – it is quite impossible to give this component a more or less detailed structure. In this case, it is quite possible to identify the theoretical amount of tax loss (Table 1).


Table 1

Economic loss and conditional economic loss of the

Russian Federation from illegal catching and lack of deep processing of

king and blue crab in 1995-2004, $ million

name of indices

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

Direct economic loss to the

Russian Federation from illegal catching king and blue crab

85,62

180,71

231,77

173,23

157,46

158,28

177,65

171,20

186,30

181,08

Including:

- tax loss

28,46

60,07

77,05

57,59

52,34

52,62

59,06

56,91

61,93

60,20

- loss of the fishing industry

10,27

21,69

27,81

20,79

18,89

18,99

21,32

20,54

22,36

21,73

-other economic loss (including those of other sectors of the fishing-industrial complex)

46,88

98,95

126,91

94,86

86,22

86,67

97,27

93,75

102,01

99,16

Indirect economic loss to the

Russian Federation from illegal catching king and blue crab

Including:

30,52

64,02

73,53

57,48

73,26

96,31

79,39

53,03

118,20

84,83

- tax loss

7,10

14,90

17,11

13,38

17,05

22,41

18,47

12,34

27,51

19,74

- loss of the fishing industry

23,42

49,12

56,42

44,11

56,21

73,90

60,92

40,69

90,70

65,09

name of indices

1995 ã.

1996 ã.

1997 ã.

1998 ã.

1999 ã.

2000 ã.

2001 ã.

2002 ã.

2003 ã.

2004 ã.

Extent of the direct and indirect economic loss from illegal catching king and blue crab

116,14

244,73

305,30

230,71

230,72

254,58

257,04

224,23

304,51

265,91

Including:

- tax loss

35,56

74,97

4,16

70,96

69,39

75,03

77,53

69,25

89,44

79,94

- loss of the fishing industry

33,69

70,81

84,23

64,90

75,11

92,89

82,24

61,23

113,05

86,82

- other economic loss (including those of other sectors of the fishing-industrial complex)

46,88

98,95

126,91

94,86

86,22

86,67

97,27

93,75

102,01

99,16

Conditional economic loss of the

Russian Federation from illegal catching king and blue crab

318,08

529,67

488,51

402,74

819,95

600,53

685,39

593,70

421,99

388,46

Extent of the economic loss and the conditional loss of the Russian Federation

434,22

774,40

793,82

633,45

1 050,67

855,11

942,43

817,93

726,49

654,37

Including:

- tax loss

109,58

198,22

207,84

164,68

260,19

214,77

237,02

207,41

187,63

170,33



1.2. Economic loss from illegal catching Alaska pollock in the
Far East basin

It is very difficult to evaluate the extent of loss from illegal catching Alaska pollock within the Russian Federation 200-mile economic zone right for several reasons.

First, the deliveries of Alaska pollock (and the derived products) are characterized by a higher level of market diversification, rather than king and blue crab. Within the last ten years significant volumes of Alaska pollock caught within the Russian Federation 200-mile economic zone have been delivered to several countries’ markets simultaneously: Japan, Korea, China, USA, European Community countries as well as to the Russian domestic market. For this reason the generalization and correlation of the data is extremely difficult.

Second, the illegal catching of Alaska pollock differs significantly from the illegal catching of crab. As noted before, Alaska pollock catching is characterized by the second form of the illegal catching the living marine resources – violation of the fishing rules while actually exceeding the established volumes of catching is of a concealed character.

In the Far East basin Alaska pollock with roe was traditionally considered to be the most precious specie (its catching takes place in the Okhotsk Sea during February-April). The main aim of the enterprises engaged in the illegal catching of the living marine resources, in this case is to maximize the volumes of the catch; however, not of Alaska pollock itself, bat rather its roe. To conceal the data about the actual exceeding the volumes of the catch, the enterprises engaged in the illegal catching Alaska pollock in the Okhotsk

Sea are getting rid of the juvenile species, small-size and even large-size males.

To establish the actual amount of the catch under these conditions it is possible only by using indirect data. The main component used is the amount of Alaska pollock roe that Russian enterprises produced and delivered by to the markets of other countries. Within the last five years one of the main peculiarity of Alaska pollock catching in the Okhotsk

Sea is the constant growth of the production output of Alaska pollock roe (Fig.13). If in 2001, based on the reporting data, it amounted to 2.29%, then for the first 5 months of 2005 it would be 5.33%.

Fig. 14. Minimal output and the volumes of the prepared Alaska pollock roe during the Okhotsk Sea seasons during 2001-2005

Analysis of the auctions, where the trade of Alaska pollock roe took place during March-June 2005, shows that Russian fishery businessmen received not less than 25 thousand MT of roe [4]. To ensure the production of this quantity, with regard to the official data on the total catch of Alaska pollock, the production output of the roe taken during 2005 Alaska pollock Okhotsk Sea season was less than 5.65%.

Thus, both the unofficial and official data on Alaska pollock roe output confirm the magnitude of the violations against the fishing rules and actual amounts that exceeded the limits established for the catch during Alaska pollock Okhotsk Sea season.

According to the “Norms of recovery, loss, production output of ready products and nature of the raw product when producing frozen products from the Far East fishes” (Moscow, 2003), the production output of roe from the raw Alaska pollock caught during the 2005 season should not exceed 4.5%.

One can say there are several legitimate reasons to justify the emergence of such obvious quantitative disproportions and an extremely high production output of Alaska pollock roe. Thus, according to the specialists’ evaluations of the Federal State Enterprise (FGU) “TINRO-Center”, part of the catch used to consist of large-size Alaska pollock, representing the generation of the abundant 1997 season, thereby ensuring a higher production output of the roe than in previous years. However, generally, according to the scientists’ opinion, this factor could not produce a decisive influence on the increased production output of Alaska pollock roe [5].

Based on this, the conclusion can be made that the main reason for the increase in the production output of Alaska pollock roe during the 2005

Okhotsk Sea season was the violation of the fishing rules and surpassing the established volumes of catching. Thus, as to the evaluations of the Federal State Enterprise (FGU) “TINRO-Center” specialists, based on observations in Kamchatka-Kurilskiy and in the southern part of the West-Kamchatka subzones, the total quantity of discarded juvenile Alaska pollock in the Okhotsk Sea amounted to 120 thousand MT [6].

Besides, using the standard average roe output of 4.5%, the real catch of Alaska pollock during the Okhotsk Sea season should amount to not less than 567.7 thousand MT. This exceeds the official data on the catch by 116.6 thousand MT and the TAC by 58.9 thousand MT (based on the results of the catching season, the level of the TAC used amounted to 88.6%).

A number of additional factors and, most importantly, the analysis of Alaska pollock roe production structure, characterized by a high grade of non-homogeneity (Table 2), testify to the actual amount that surpasses the catch volumes and the violations of the fishing rules. Thus, during January-March 2005 the total output of Alaska pollock roe in the Far East basin did not exceed 5%, but in April its level amounted to 7.49%. As for the various Russian Federation subjects this disproportion reached an even higher grade.

Production output of Alaska pollock roe produced by the enterprises of the Chukotka Autonomous District in February 2005 amounted to 10.6%, in April – 9.98%; by enterprises of Kamchatka region – 9.4% in April 2005, significantly exceeding both the determined standard production output and the average indices in the basin.

Table 2

Alaska pollock roe production structure within the Okhotsk Sea season 2005

Russian Federation subject

Indices

January

February

March

April

Total:

Jan - Apr

Primorye territory

Volume of the roe prepared, MT

349,19

2 109,35

3 794,32

2 784,03

9 036,89

Roe output, %

3,53

3,94

5,02

6,88

5,05

Sakhalin region

Volume of the roe prepared, MT

127,25

755,73

1 410,29

909,98

3 203,20

Roe output, %

2,12

3,25

3,47

6,45

4,11

Kamchatka regionà

Volume of the roe prepared, MT

342,32

3 204,27

3 164,80

1 675,39

8 386,78

Roe output, %

4,88

7,20

6,20

9,40

6,96

Magadan region

Volume of the roe prepared, MT

36,36

228,16

340,04

214,77

819,32

Roe output, %

2,39

3,42

4,10

7,21

4,21

Khabarovsk territory

Volume of the roe prepared, MT

82,43

424,36

503,81

501,48

1 512,09

Roe output, %

3,65

3,68

3,03

7,95

4,12

Koryak Autonomous District

Volume of the roe prepared, MT

61,73

173,69

352,38

241,92

829,71

Roe output, %

0,05

0,07

0,06

0,08

0,06

Chukotka Autonomous District

Volume of the roe prepared, MT

3,69

64,85

60,48

69,80

198,82

Roe output, %

1,61

10,60

4,09

9,98

6,56

TOTAL:

Volume of the roe prepared, MT

1 002,97

6 960,41

9 626,12

6 397,36

23 986,80

Roe output, %

3,57%

4,88%

4,83%

7,49%

5,34%

Source: M.V.Stratovich «About the results of Alaska pollock

Okhotsk Sea season, 2005».

Based on the facts noted, it is possible to say, that as to the results of the Okhotsk Sea expedition, the volume of Alaska pollock TAC has exceeded by at least 180 thousand MT (as for the evaluation of the FGU TINRO-Center specialists - 175 òûñ. òîíí [7] ), and the official figure of Alaska pollock catch – by 238 thousand MT. With that, as it was just noted, by the evaluation of the FGUP KamchatNIRO specialists, some 120 thousand MT of the undeclared fishing output were Alaska pollock juvenile fishes that were discarded.

One of the most unusual circumstances of the 2005 Alaska pollock

Okhotsk Sea season turned out to be a rather ironic situation from the industry point of view. According to official data, the established TAC volume used was less than 90%, while in reality (even not taking into account the juvenile fish thrown overboard) it exceeded the TAC by at least 11.55%. The resulting deviation in the amount of at least 21.55% of the TAC or some 115 thousand MT of Alaska pollock is the consequence of the frenzied activity of the enterprises, engaged in the illegal catching of the living marine resources.

Thus, using the method of calculation chosen (see p.1.1), one may evaluate the minimal extent of the direct economic loss that can be attributed to illegal catching Alaska pollock in the Okhotsk Sea as for the first 5 months of 2005. According to the calculations, using the price of $1,180 for one ton of Alaska pollock H/G and the output coefficient 1.742, it amounted to $72.62 million (which includes the tax loss of $12.54 million).

However, the direct economic loss from illegal Alaska pollock catching in the Okhotsk Sea for the first 5 months of 2005 is not limited to the calculation. Using the data on the discarded Alaska pollock juvenile fish, it is possible to calculate one more component – potential economic loss that characterizes the extent of the short-received income of the fishing enterprises in the future.

To calculate the extent of the loss methodically it is extremely difficult. In this case, it is necessary to consider many factors and to make all the calculations in the conditions based on high degree of uncertainty.

Additionally, using 2005 data as a basis it is possible to say that the extent of the potential economic loss amounted to not less than $340 million that includes $78 million are the direct loss to the budgets and extra-budget funds because of nonpayment of the taxes, fees and other due payments.

In addition to the direct economic loss, illegal catching of Alaska pollock in the Far East basin is inflicting indirect economic loss, which can be seen in the loss of the trade income from price changes for the products on the market (see in details p.1.1.)

Lately, the world Alaska pollock market price has been rather controversial, from the point of view of Russian fishermen’s activities. From one side, the price for one of the main processes products, traditionally supplied by Russian fishing enterprises to the foreign markets,

Alaska pollock H/G, reached a maximum level within the last few years – $1,150-1,180 per ton. However, from the other side, there has been a quite visible trend of decreasing

Alaska pollock roe cost, produced by the Russian fishing enterprises to the record lower level. As for the results of May 2005, the average price of one kilo of the Russian produced

Alaska pollock roe was established at the level of $9 (Fig. 14).

Through analysis of the situation on can conclude that the main reason this happened is the significant increase of Alaska pollock roe proposed by the Russian fishing enterprises, making 33% as compared to the 2004. Generally speaking, the influence of using this factor has a fragmented characteristic; it produces a significant impact not upon the market as a whole, but on Alaska pollock roe of Russian production only.

Fig. 15. Dynamics of the average prices for Alaska pollock H/G and Alaska pollock roe, exported by Russian fishing enterprises to foreign markets in 2001-2005

Today, Japan and South Korea remain the main world importers of Alaska pollock roe and the USA and Russia are the main exporters. Since 2001, the aggregate production of Alaska pollock has been roughly from 40—43 thousand MT. Of that production, the USA’s share is 55—66% and

Russia’s share is 35—44% (Fig.15).

In 2005, the situation drastically changed. For the first time within the last five years Russian fishermen produced more Alaska pollock roe than their Americans counterparts – 24 thousand MT compared to US production of 22.1 thousand MT, and the combined total production reached a record of more than 46 thousand MT, an increase of 5.63% over 2004, and 14.40% over 2003.

However, the increase of the production output has produced a significant influence only upon the price of the Russian produced roe, which as compare to the level of the 2004 has become cheaper by more than 20%, while the price of Alaska pollock roe produced in the USA, as for the results of the 5 months of the 2005, has remained at the level of the 2004.

Fig. 16. Production and average price of Alaska pollock roe made in the USA and

Russia in 2001-2005

As mentioned in p.1.1, the situation on the markets of Japan and the South Korea, for quite some time, has been that when the cost of fish products exported from the USA were generally 15-20% higher than the cost of the similar products from Russia. This situation is subject to a number of objective and subjective factors.

Of those, the first factor to consider is the generally higher reputation of the US fishing enterprises and the established stable relationships between sellers and buyers; thereby, resulting in a much higher cost value of the US products.

Along with that, analysis of the price formation peculiarities for Alaska pollock roe, - allows one to draw the conclusion that during 2001-2004 a certain parity in the market price for US and Russian production formed. The difference in an average price for 1 kilo of Alaska pollock roe produced in the USA and in Russia during these years stabilized at the level of 13-17%, (the only exception was in 2002).

For the first 5 months of 2005, the situation changed drastically. At the first auctions, the price of the Russian-made roe was fluctuating between $15-19 a kilo. Later on, the end of March the price dropped to $8-11, due to the growing proposal and dumping influence of the enterprises not participating to the auctions and selling their production at much lower prices.

A great influence upon the cost of products produced is the mass deliveries of roe at the end of April-May, which was sold at $4-6 per one kilo.

The analysis of the prices changes for Alaska pollock roe of Russian production allows one to draw the conclusion that the main influence on the decreased average cost, as compared to the previous year, was produced not by market factors but by the dumping influence of enterprises engaged in the illegal catching of living marine resources. In this case, the influence of these enterprises can be divided in two categories.

First, one must look at the influence of the enterprises that did not have the legitimate right to be engaged in Alaska pollock catching in the Okhotsk Sea. Most of these enterprises produced smaller production units (200-300 tons) and could not participate in the auctions; thereby, delivering products at much lower prices and thus applying pressure on the market situation.

Second, the influence of the enterprises having legitimate permit documents, but for whatever reason exceeded the established catch limits. Their impact upon the market is also apparent. Quite visibly, this impact can be tracked by correlating the monthly data on the actual output of Alaska pollock roe and the prices dynamics.

As was previously noted, the average output of Alaska pollock roe during the Okhotsk Sea season significantly exceeded the normal level: 5.34% as compared to 4.5%. Additionally, one cannot help but notice that generally in the Far East basin the most significant portion of the catch that exceeded the normal overage occurred during the final phase of the Okhotsk Sea expedition. If, in January 2005, this portion of the Alaska pollock output amounted to 3.57%, during February-March it was 4.88% and 4.83%, however, in April it reached 7.49%. This actually coincided with the beginning of the sharp price decrease.

With regard to the practice formed during the previous years, it is possible to say that in the end of April and in May 2005 more than 3 thousand MT of additional Alaska pollock roe, produced during the final stage of the catching season, was delivered to the market, thus it was not corresponding to many qualitative parameters. In other words, the market situation was undermined by not only the unpredictable increased supply, by more than 40%, but also by the selling the product of lower demand and quality at dumping prices.

Regarding the market practice of price setting, formed in past years, and the correlation between the price dynamics and the production volumes of Alaska pollock roe in Russia and the USA, it is possible to identify a rough deviation of the price of one kilo of Alaska pollock roe that occurred from the amount of catch that exceeded the limits and the dumping impact of the enterprises engaged in the illegal catching. Such an amount, found by calculating the results for the first 5 months of [8], amounts to $2.66 lower than the average price for Alaska pollock roe of the Russian production.

All this allows one to evaluate the extent of the indirect economic loss contributed to illegal catching Alaska pollock in Okhotsk Sea for the first 5 months results of 2005. From this point of view, calculations amounted to $53.86 million (that includes $12.39 million in tax loss).

Thus, to summarize, economic loss that can be attributed to the illegal catching of Alaska pollock to the 2005

Okhotsk Sea expedition, amounted to not less than $466.5 million. Of that, according to the calculations made, the share of the tax loss to the budgets and the extra-budget funds amounts to $107.3 million; the loss to the fishing industry – $130.4 million; other loss inflicted on the Russian Federation economy (including the loss of other sectors of the fishing-industrial complex) – $228.8 million (Fig.16).

Fig.17 Economic loss structure from the illegal catching of Alaska pollock in the Okhotsk Sea in 2005, $ million

Chapter II . EVALUATION OF REAL AND POTENTIAL CAPABILITIES OF THE FAR EASTERN PORTS TO PROCESS FISH PRODUCTS

Regarding adopting the decision on the introduction of mandatory declaration of fish production produced from the living marine resources, caught within the Russian Federation 200-mile economic zone, inevitably the problem of availability of sufficient processing production capabilities arises.

The reality of this problem relates to the fact that within the last five years not more than 30% of all the fish products caught in the Far East basin within the 200-mile economic zone of the Russian Federation (Fig. 18) were processed in the Far East ports.

Fig. 18. Share of the fish products, produced in the Far East basin and processed on the territory of the Russian Federation, 2000-2004

In 2000, 542.45 thousand MT of fish products were processed through the seaports of the Far East. At that time, the total catch of the living marine resources in the Far East basin amounted to 2.3 million tons; in 2001, production was 620.19 thousand MT, from a catch of 2.1 million tons; in 2002, production was 488.39 thousand MT, from a catch of 1.7 million tons; in 2003, production was 466.8 thousand MT, from a catch of 1.97 million tons; and, in 2004, production was 421 thousand MT, from a catch of 1.72 million tons.

When evaluating the relationship of the production capabilities to the potential requirements of the fishing enterprises (in case of adoption the decision on mandatory declaration of all the fish production within the territory of the Russian Federation), it is necessary to take into account the possibility of an increase in the total catch of the Far East basin living marine resources of up to 2.2 million tons. This is notwithstanding the significant decrease of the catch volumes of the living marine resources, which within the last three years amounted to not less than 2 million tons,

Presently, along the Russian Far East shore there are 10 specialized fishing ports, 22 commercial ports and some 300 harbors possessing of piers and anchors. Officially, 270 business enterprises are registered in the region as being engaged in port functions activities [9].

Within the past years, the main feature that stands out in the Far East fishing ports’ operations has been the reduced share of fish products produced in their turnover. Because of the sharp decrease in the catch of the Far East living marine resources and the trend that the majority of fishing enterprises are now taking their fish to foreign markets, the ports that were mainly engaged in processing fish products had to look for additional possibilities to increase their turnover.

All this leads to changing the orientation of a part of the production capabilities, initially meant for fish products processing, to the processing of other types of cargo.

For example, in the largest Far East fishing ports, “ Vladivostok Sea fishing port” and “ Nakhodka Sea fishing port”, the share of fish products in the 2004 was only 17.69% and 6.34% of the turnover.

However, despite the orientation of these ports to the processing of other types of cargoes, today, a significant part of their production capabilities still is not being utilized. Thus, according to the latest data, the utilization coefficient of the “ Vladivostok Sea fishing port” makes some 65.8%, and the “ Nakhodka Sea fishing port” – 26.8% [10].

Totally, the existing production capabilities of these two ports permit them to process, without obstacles, some 1 million MT of fish products: “ Vladivostok Sea fishing port” - 500 thousand MT, “ Nakhodka Sea fishing port” - 450 thousand MT. Additionally, according to the information of the ports’ authorities, their production capabilities to process fish products can be increased, without obstacles, by more than 20%. Moreover, in the case of arising needs and development of the related investment programs, the production capabilities of “Nakhodka Sea fishing port” could process some 1 million tons of fish products a year. Besides “ Vladivostok Sea fishing port” and “Nakhodka fishing port”, three other ports in the Far East have significant capabilities to process fish products: « Vanino Port» , «DMP Portò» and «Seaport in the Troitsa Bay». For quite some time, « Vanino Port» has been the third largest processor, by volume, of fish products in the Far East region. In 2001, the Port’s services processed 99.2 thousand MT of fish products, after that its volume started to sharply decrease, amounting to 35.5 thousand MT in 2003 [11]. Although the Port’s production capabilities still permit processing of more than 100 thousand MT a year.

Actually, today, « DMP Port» is considered a unique large port in the Russian Far East having purely fishing specialization. In 2000-2002, because of the financial problems of the head company, the Joint Stock company “Holding company Dalmoreproduct”, the Port has not been actually functioning and restarted its activities only in the 2003, having processed some 23 thousand MT of the fish products. In 2004, the turnover of the Port significantly increased, making its year-end results 55.6 thousand MT of fish products. Existing production capabilities, the modernization of which is underway in accordance with the prospective development plan for 2005-2006, permit the port to process more than 100 thousand tons of fish products a year.

The transshipment of fish products through the “Seaport in the Troitsa Bay” is not being conducted because of nonfunctioning refrigeration machinery and the lack of stable demand for the fish products’ processing. Along with that, according to the authorities of the “seaport in the

Troitsa Bay” information, the production capabilities of the Port make it possible to process up to 300 thousand MT, and in the case of conducting crucial renovation – up to 600 thousand MT a year.

The share of other ports, engaged in processing the fish products in the Far East of Russia today, makes some 7% of the total turnover. By preference, they serve the local interests, usually oriented to the activity of a one company, in particular. According to calculations, in 2004 these ports have transshipped some more than 30 thousand MT of fish products. However, their real production capabilities permit handling a turnover of more than 100 thousand MT, and after a small amount of reconstruction – more than 160 thousand MT.

In general, on the basis of the production capabilities analysis of the Far East Seaports, it is possible to draw the conclusion that now they can ensure the processing, without impediments, of not less than 1,510 thousand MT of fish products. This makes up some 72% of the possible requirements (with regard to the growth of the total volume of the living marine resources catch in the

Far East basin up to more than 2.2 million tons).

In case of completing the primary reconstruction, not requiring the significant time and material expenditures, the handling capacity of the Far East ports used for fish products processing would amount to not less than 2,160 thousand MT.

All that permits one to say that the Far East Seaports situated along the seashore possess enough production potential to be engaged in processing all fish products produced from the raw fish caught within the

Russian Federation 200-mile economic zone.

Fig. 19. Actual and potential production capabilities of the Far East ports as for processing fish products, thousand MT

Table 3

Actual and potential production capabilities of the

Far East ports for processing fish products

Name

Fish products turnover, thousand MT

Production capabilities, thousand MT

2000

2001

2002

2003

2004

Actual

Potential

«Vladivostok Sea fishing port»

287.5

328.7

273.5

297.3

252.4

500

600

«Nakhodka Fishing port»

124.8

130.2

112.3

88.8

55.8

450

600

«Vanino Port»

86.8

99.2

68.4

35.5

No info

More than 100

No info

«DMP-port»

-

-

-

23.0

55.6

áîëåå 60

100

«Seaport in the

Troitsa

Bay»

-

-

-

-

-

300

600

Other ports

43.4

62.0

34.2

22.2

More than 30

More than 100

More than 160

TOTAL:

542.5

620.2

488.4

466.8

421.8

Not less than

1,510

Not less than

2,160

Chapter III. EVALUATION OF ECONOMIC LOSS OF THE FAR EAST FISHING ENTERPRISES FROM THE INTRODUCTION OF MANDATORY DECLARATION OF FISH PRODUCTS ON THE

RUSSIAN FEDERATION

TERRITORY

The adoption of the decision on mandatory declaration of fish products, caught within the Russian Federation 200-mile economic zone, on the Russian Federation territory would inevitably lead to the growth of the costs of production and to the reduction of the Far East fishing enterprise profitability.

The analysis of the Far East fishing enterprise production activity and the Russian legislation in force made permits to say, that the necessity to transport the fish products to the

Russian Federation territory would influence two articles of expenditures:

- Expenditures for the customs fees payment;

- Fish products transportation costs (freight).

Thus, according to “TURNIF” fishing company data, in case of adopting the decision on mandatory declaration of fish products on the Russian Federation territory, - the expenditures for the customs fees payment, as per one ton of Alaska pollock caught during the 2005 Okhotsk Sea season would have grown by 66.78%, fish products transportation costs (freight)– by 25.02% (Table 4).

However, in general the influence of these changes to the fish products unit cost turns out to be insignificant. In the case of the necessity to declare all fishing products in the territory of Russia, the total costs to produce 1 ton of Alaska pollock during the 2005 Okhotsk Sea season would have grown by 5.48%, then about the price, would amount to 1,043 Rubles or $26.


Table 4

Calculation of the unit cost of catching 1 ton of Alaska pollock in the Okhotsk Sea in case of introducing the 100% declaration of the product on the Russian Federation territory on example of the “TURNIF” Joint stock company

¹

Articles of expenditures

Existing order

100% declaring

Growth rate of expenditures, %

Expenditures per 1 MT of quota, Rubles

Expenditures per 1 MT of quota, $$

Expenditures structure, %

Expenditures per 1 MT of quota, Rubles

Expenditures per 1 MT of quota, $$

Expenditure

structure, %

1

Wages

2 ,424

84

12.7%

2,424

84

12.1%

0,00%

2

Deductions from wages

624

22

3.3%

624

22

3.1%

0,00%

3

Fishing gears

507

17

2.7%

507

17

2.5%

0,00%

4

Fuel and oils

5,246

181

27.6%

5,246

181

26.1%

0,00%

5

Quotas cost

2 750

95

14.4%

2,750

95

1.7%

0,00%

6

Foodstuff

308

11

1.6%

308

11

1.5%

0,00%

7

Tara cost

262

9

1.4%

262

9

1.3%

0,00%

8

Repair

995

34

5.2%

995

34

5.0%

0,00%

9

Spare parts

669

23

3.5%

669

23

3.3%

0,00%

10

Radio equipment

63

2

0.3%

63

2

0.3%

0,00%

11

Supplies

561

19

2.9%

561

19

2.8%

0,00%

12

Port charges

58

2

0.3%

58

2

0.3%

0,00%

13

Insurance

154

5

0.8%

154

5

0.8%

0,00%

14

Communication

127

4

0.7%

127

4

0.6%

0,00%

Indirect costs

Indirect costs

2,153

74

11.3%

2,153

74

10.7%

0,00%

Transportation costs (freight)

Tax fees

359

12

1.9%

959

33

4.8%

166,78%

17

Transportation costs (freight))

1,776

61

9.3%

2,221

77

11.1%

25,02%

TOTAL expenditures:

19,035

656

100.0%

20,078

692

100.0%

5,48%



The data, presented by other Far East fishing enterprises and detailed surveys, made by the authors, permit the conclusion that the increase in expenditures related to the necessity of declaring all fish products within the Russian Federation territory would be of homogenous character. In other words, the growth of the unit cost for the products, produced by different fishing enterprises would insignificantly vary from each other, is related to objective factors.

The reality is that the expenditures to pay the customs fee and fish products transportation costs (freight) do not depend on the business activity of certain fishing enterprises and remain constant at the industry’s level. The exclusions are only those fishing enterprises that are autonomously engaged in fish products transportation – the unit cost of their products would increase an average or 1% less than of other fishing enterprises.

In general, according to the calculations made, in the case of adopting the decision on mandatory declaration of all fish products on the Russian Federation territory, the unit cost of the products produced by different Far East enterprises, would increase by 4-7%, while industry-wide would amount to not more than 5.9%.

On the basis of this data, it is possible to evaluate both the extent of the possible loss to be suffered by all the Far East fishing enterprises during the 2005 Alaska pollock Okhotsk Sea expedition and the total amount of the economic loss to the Far Easy fishing industry caused by introducing the mandatory declaration of fish products on the territory of Russia.

The total amount of possible loss of the Far East fishing enterprises during the Okhotsk Sea season could be calculated by the following formula: where Ï îìý 2005 – total sum of possible loss of the Far East fishing industry during the 2005 Alaska pollock Okhotsk Sea expedition;

Ä – production output of catching during Alaska pollock Okhotsk Sea expedition;

D Ñ – change of the unit cost of the fish products per 1 ton of Alaska pollock.

Thus, taking as a base the total production output during the Okhotsk Sea

Alaska pollock expedition, which, according to the National Center of Fishing and Communication Monitoring System [12] amounted to some 450 thousand MT in 2005, and the calculated norm of the production unit cost increase – 1,043 Rubles. This was calculated to the extent of the potential loss.

In the case of the necessity to declare all fishing products on the Russian Federation territory, the loss to the Far East fishing enterprises, for the results of the 2005 Alaska pollock

Okhotsk Sea season would amount to 470 million of Rubles or $16.18 million.

The total extent of the economic loss to the Far East fishing industry from introducing the mandatory declaration of fish products on the territory of the Russian Federation can be calculated on the basis of the ROSSTAT Russian Federation (Russian Federation Statistics Department) on the volume of production output and the volume of profit and loss of the Far East enterprises of the fishing industry.

However, the mechanism of the possible economic loss extent calculation, in this case, would have a different shape and would be based on the following formula:

where

ÝÓ – extent of economic loss to the Far East fishing industry;

Îïð – fishing industry production output;

W ý – share of direct export (without entering the Russian ports) in the total catch by the Russian enterprises in the

Far East basin;

I c / c – normative of the product unit cost growth for the products produced in average in the

Far East fishing industry.

Thus, taking as a base the norm of the product unit cost growth (5.9%), obtained by calculations of official data by the ROSSTAT Russian Federation on the production output and the balance of profits and loss of the Far East fishing industry enterprises and the data on the share of fish products declared on the Russian Federation territory during 1999-2004, it is possible to calculate the amount of conditional loss from introducing the mandatory declaration of fish products on the territory of the Russian Federation (Table 5)

Table 5

Amount of the Far East fishing industry conditional loss because of introducing the mandatory declaration of the fish products on the territory of the

Russian Federation in 1999-2004

1999

2000

2001

2002

2003

2004

Production output volume, million of Rubles

30,209.4

36,347.0

40,384.0

38,161.2

47,555.2

43,016.2

Balance of profit (+) / loss (-), million of Rubles

-28.8

-49.0

-3.8

-142.1

-139.2

No info

Production costs, million of Rubles

30,238.2

36,396.0

40,387.8

38,303.3

47,694.4

43,016.2

Expenditures growth normative, %

6.0%

6.0%

6.0%

6.0%

6.0%

6.0%

Share of fish products, declared on the

Russian Federation territory [13], %

24.50%

23.58%

29.53%

28.73%

23.67%

24.47%

Fishing industry loss, million of Rubles

1,369.8

1,668.7

1,707.6

1,637.9

2,184.3

1,949.5

Fishing industry loss, $million

47,2

57,5

58,9

56,5

75,3

67,2

It is also necessary to mention, that the total loss of the Far East fishing industry, presented in the Table 5, largely are exaggerated.

When calculating these production costs expenditures of not only the catching enterprises, but of the entire Far East fishing industry were taken into account. The reality is that the statistics system in

Russia used for 1999-2004 counted the data on the fishing industry in general that does not permit exact division of the catching and processing segments of the fishing industry.

Meanwhile, in various Russian Federation Far East subjects the share of the catching segment in the fishing industry production output is not similar. For example, the Primorye territory its share is some 80-85%, while in Chukotka autonomous district it is quite 100%.

Totally, for the six Far East subjects of the Russian Federation (Primorye territory, Kamchatka region, Sakhalin region,

Khabarovsk territory, Koryak autonomous district and Chukotka autonomous district) the share of the catching segment of the fishing industry produces some 85-90% of the total fishing industry production output.

In this relation, it is possible to conclude that in fact the amount of conditional loss to the fishing enterprises from introducing the mandatory declaration of fish products on the territory of the Russian Federation should be at least 10% lower than the calculated meanings presented in the Table 5.

Chapter IV . EVALUATION OF THE ECONOMIC EFFECTIVENESS OF THE DEEP PROCESSING THE LIVING MARINE RESOURCES ON THE

RUSSIAN FEDERATION TERRITORY

Adopting the decision on introducing the mandatory declaration of fish products, produced from the living marine resources caught within the Russian Federation 200-mile economic zone, on the territory of Russia would permit more effectively combative measures against illegal catching and, in the long run, create conditions for deep processing of the living marine resources on Russian Federation territory.

Presently, the development of deep processing of living marine resources is the main direction for the Far East fishing industry development. This is directly related to the current situation of the fishing-industrial complex and is predetermined by a number of objective reasons.

The main reason, in this case, is the catch reduction of traditional species for the Far East fishing industry-targeted species. Most importantly, Alaska pollock, where the TAC volume has been reduced more than three times within the last eight years (Fig.19).

Under these conditions the possibilities to increase the production output, which is one of the key conditions for stability and increased profitability of the Far East fishing industry enterprises, on the account of extensive development are limited; i.e., increasing the production output. Within the framework of a separate business subjects, a significant increase in the production output (in terms of value) is possible only at the intensive course of development – through production and sale of products with much higher added value [14].

However, the commercial effectiveness of deep (secondary) processing of the living marine resources from the Russian Federation territory presently has not been proved; neither have significant surveys in this direction been conducted.

Fig. 20

Far East basin living marine resources TAC volume in 1997-2005

Evaluation of the economic effectiveness of the deep processing of the living marine resources requires a multi-criteria approach. The methodology uses different indices of effectiveness and simultaneously takes into account the interests of different interested groups, producing their impact on the functioning of the fishing industry as a whole and on certain fishing subjects in particular.

For these groups, they should represent the business subjects themselves (fishing enterprises) and the State.

It is important to point out that there are a number of other groups interested in the operations of the Far East fishing industry. However, for some reasons these other groups cannot produce any significant influence on the industry’s development.

Thus, it is possible to say that from the position of the two main interested groups, the evaluation of the effectiveness of deep processing development on the Russian Federation territory would be beneficial to both parties.

The interests of the fishing enterprises in a broad sense, as well as of their shareowners in a narrow sense are quite obvious—maximizing profits. To determine the State’s interests in the operations of the fishing industry is a bit more difficult. However, generally speaking, it is possible to say that the main task of the Far East fishing industry (as well as of other industries of the Russian economy) is to produce added value products; i.e., increase its input (value) into the gross domestic product (VVP) and the gross regional product (VRP) [15]. This is based on the official declarations of representatives of Federal and regional power bodies, and existing legislative and acts of general law.

Considering all this, one can state that in this case the interests of the State and the business subjects are in partial agreement that profit, most of the taxes paid and the labor cost are the most significant components of the added value product.

Maximizing the profit and production of added value is abstract in nature. In order to evaluate the economic effectiveness of deep (secondary) processing development and to compare different scenarios of the Far East fishing industry development it is necessary to use concrete indices of effectiveness.

Traditionally there are two main indices used for evaluating economic effectiveness.

First, is the extent of the economic effect, characterizing the enterprise, industry, region or country functioning yield in terms of value.

The second is the economic effectiveness, which characterizes the correlation of the economic effect to the expenditures.

Moreover, the specifics of the present day condition of the Far East fishing industry, which within the last years has been operating in the environment of reducing the traditional raw base, requires the analysis of one more key indices of effectiveness – the yield per unit of raw materials. The meaning of this indices is a rather simple, it means the yield received per one ton of the living marine resources caught [16].

The necessity to evaluate the economic effectiveness of the living marine resources deep processing from the point of view of the yield per unit of raw materials, is substantiated both by the purely business and the legal-organization reasons.

From the business point of view, the necessity is directly related to the reduction of the traditional for the Far East fishing industry enterprises raw materials base and inadequate employment in the processing area.

Under these conditions, the possibilities for growth in production output, based on increasing the catch, are limited. The biggest influence on the level of the business subject’s activity is access to the raw materials, which becomes the most precious resource.

From the legal-organization point of view, the necessity of evaluating the yield per unit of raw materials is related to state regulation of the catching of living marine resources that is in force in Russia and, most importantly, the distribution of catching quotas, where the base is a unit of measurement – a ton.

This is why in the foundation used for the evaluation and control system interrelation with distributive functions is one of the main conditions for management effectiveness. It is practical to use similar units of measurement.

These three groups of indices mentioned (economic effect, economic effectiveness and the yield per unit of raw materials) permit the evaluation of the development of deeper processing of living marine resources from all sides impacted.

From the point of view of evaluating the interests of the fishing enterprises and the State these indices have the following assumptions:

For the fishing enterprises—this is the total sum of profit earned, profitability of business operations and the sum of the profit earned per one ton of live resources caught.

For the State— this is the sum of added value, the share of added value in the trade profit and added value portion per one ton of live resources caught.

It is important to mention that in this case there are possibly different interpretations of these indices.

Thus, the majority of the profit and profitability of the fishing enterprises can be evaluated using various indices, among them the most popular are:

- profit on sales (profitability on sales, size of profit on sales received per one ton of the live marine resources);

- balance profit (general profitability, amount of the balance profit received per one ton of the live marine resources);

- net profit (net profitability, amount of the net profit received per one ton of the live marine resources);

The choice of indices that permit optimal evaluation of the economic effectiveness of development of deeper processing of the living marine resources in this case is dependent directly on one regards the interests of the fishing industry enterprises.

The profit on sales, for the most part, characterizes the interests as business complexes, whose purpose is not only to generate the profit but also to ensure the survival, longevity and further development of the business itself, while the net profit represents the interests of the shareholders.

Table 6

System of indices, characterizing the effectiveness of the fishing industry enterprises operations

Interests of business subjects

Interests of the State

Economic effect

1. Total sum of the profit earned:

1.1 Profit on sales

1.2 Balance profit

1.3 Net profit

1.1 Total sum of the added value generated

1.2 Sum of the taxes and dues paid

1.3 Sum of the profit reinvested

Economic effectiveness

2. Profitability of business activity:

2.1 Profitability on sales

2.2 General profitability

2.3 Net profitability

2.1 Share of the added value in the profit

2.2 Share of taxes and dues in the profit (added value)

2.3 Share of the expenses for salaries in the profit (added value)

2.4 Share of reinvested profit i the sales proceed (added value)

Yield per unit of raw material

3. Amount of profit received per 1 ton of bio-resources caught:

3.1 Profit on sales

3.2 Balance profit

3.3 Net profit

3.1 Amount of added value per 1 ton of bio-resources caught

3.2 Sum of taxes and dues per 1 ton of living marine resources caught

When evaluating the effectiveness of the deep processing development from the position of the State a certain variation of the indices is possible.

With the exception of evaluating the amount of added value and the share of added value in the sales proceeds, the analysis of the added value structure has great significance. The most important components of the structure that from the side of the State interests, are the taxes and dues paid, salary costs as well as the profit re-invested into the development of the enterprise (Table 6).

Although, in this case, the main indices used for the economic effectiveness analysis of the living marine resources deep processing development should be the overall indicators of effectiveness. The partial indices should not be considered because the last ones, to a greater extent, characterize the distributive and re-distributive processes but not the economic effectiveness.

Thus, the greatest importance has been set on the following overall indices, characterizing the economic effectiveness from the position of the State interests:

- total sum of the added value generated;

- share of added value in the profit on sales;

- amount of added value per one ton of the living resources caught.

For an objective evaluation of the economic effectiveness of the living marine resources deep processing development, the Authors have chosen Alaska pollock as the principal object for the

Far East fishing industry. The deliveries of Alaska pollock are mainly to foreign markets and its processing in Russia is only at the beginning stage of development. The data of enterprises, engaged in catching and processing Alaska pollock, “TURNIF”, that exports the fish products, and the “Fish processing factory TURNIF”, engaged in primary processing Alaska pollock in Russia.

The data about the structure of the unit cost (Addendum 1), income from selling and the profit (Table 7), were presented by the fishing company “TURNIF” based on their results of Alaska pollock Okhotsk Sea season.

Thus, the company gained a portion of the profit from selling the production from selling

Alaska pollock roe [17].

Based on the results of Alaska pollock Okhotsk Sea expedition, the added value share of the product’s unit cost structure is 32.3%, and 28.6% of profitability on sales. Therefore, the share of the added value in the sales proceeds amounted to 51.7%.

Table 7

The share of the added value in the sales proceeds per a ton of Alaska pollock with roe, not subjected to deep processing, on example of the “TURNIF” Joint stock company

¹

Indices

Per 1 MT of living marine resources caught, Rubles

Share in the sales proceeds, %

1

Sales proceeds:

26,651

100.0%

1.1

-

Alaska pollock

18,821

70.6%

1.2

-

Alaska pollock roe

7,830

29.4%

2

Unit cost

19,035

71.4%

3

Added value size in the unit cost

6,157

32.3%

4

Amount of the profit earned on sales

7,616

28.6%

5

Size of the added value in the profit

13 773

51,7%

The final product of

Alaska pollock deep processing are the fillets. If minced pollock is produced as an additional product, this raises the effectiveness of the use of the raw material. The data on the unit cost structure of a 1 kilo of ready product, produced from Alaska pollock, are quoted in the Addendum 2. The information on the sales proceeds, profit and the amount of the added value are quoted in the Table 8.

Table 8

The share of the added value in the profit on sales of 1 kilo of a ready product,

on example of the “Fish processing factory of TURNIF”

¹

Indices

Per 1 kilo of the ready product, Rubles

Share in the sales proceeds, %

1

Sales proceeds

118.5

100.0%

1.1

Alaska pollock fillets

93.5

78.1%

1.2

Alaska pollock mince

25.0

21.9%

2

Product unit cost

98.0

82.7%

2.1

Alaska pollock fillets

76.5

64.6%

2.2

Alaska pollock mince

21.5

18.1%

3

Amount of added value in the unit cost

38.9

32.7%

4

Amount of profit on sales

20.5

17.3%

5

Amount of added value in the sales proceeds

59.4

50.1%

The calculations show that the share of added value in the unit cost of producing Alaska pollock fillets and minced makes 32.7%, and the share of added value in the sales proceeds, with the profitability on sales at 17.3%, amounts to 50.1%.

It is important to mention that the unit cost structure of the fish processing enterprises differs significantly from the costs structure of the fish catching enterprises. More than 50% of all the expenses of the production of Alaska pollock fillets and minced is the purchase of the raw material, while the main expenses components of the fish catching enterprise are the payment for the use of living marine resources and the purchase of fuel and oil materials (some 40%).

Besides, the fish catching and fish processing enterprises are differing much from each other as for the profitability. In our case, the profitability on sales of Alaska pollock catch makes 28.6%, while Alaska pollock processing amounts to 17.3%.

The survey of fish catching and fish processing enterprises financial-business operations permitted an analysis of the issue of deep processing development effectiveness from three different sides.

First, the survey was used to evaluate the effectiveness of the fish catching enterprises; second, the effectiveness of the fish processing enterprises activity; third, to give a generalized evaluation of the effectiveness of fish catching and fish processing, as a unique complex.

Final indices of effectiveness of a fish catching and a fish processing production facilities are presented in the Table 9.

Based on the results, the analysis drew the conclusion that, in the case of Alaska pollock deep processing development, an overall decrease of business activity profitability–from 28.58% to 22.54%—could occur.

Additionally, the yield of profit per 1 ton of the resources caught increases significantly – by more than 16.18% and the total gross profit, received from the 500 tons of Alaska Pollock, increases from 3,808 thousand to 4,424 thousand of Rubles.

In the case of processing the fish products, the share of value added in the structure of the sales proceeds decreases, however, insignificantly–from 51.68% to 51.06%.

Meanwhile, the amount of the value added, generated per 1 ton of living marine resources caught, is increased by more than 45% and the total sum of the value added received from 500 tons of Alaska Pollock is increased from 6,887 thousand Rubles to 10,021 thousand Rubles.

Table 9

Main indices of effectiveness of fish catching and fish processing Alaska pollock (with roe) on the sample of the JSC “TURNIF” and the JSC “Fish-processing factory TURNIF”

Fish catching

Fish processing

Joint complex

Profit on sales of 500 tons of

Alaska pollock, thnd. MT

3,808

2,703

4,424

Added value for 500 tons of

Alaska pollock, thnd. MT

6,887

7,830

10,021

Profitability on sales, %

28.58%

17.30%

22.54%

Share of the added valueÄîëÿ äîáàâëåííîé ñòîèìîñòè â âûðó÷êå îò ðåàëèçàöèè, %

51.68%

50.10%

51.06%

Profit on sales, as per 1 ton of bio-resources caught, Rubles

7,616

5,408

8,849

Added value, as per 1 ton of the living marine resources caught, Rubles

13,773

15,660

20,042

The survey allowed a number of key conclusions to be drawn. First, it is important to note that the development of fish products processing brings the largest profit to the State interests, while the profit of the business subjects is less significant.

An indisputable advantage of deep processing development of living marine resources, from the State’s point of view, in this case, is the fact that the total increase in the production output occurs behind the scene by preserving a high share of the added value in the sales proceeds structure. As noted, the amount of these effectiveness indices is decreased by less than 1%.

In other words, the raising of results capacity in the fishing industry does not produce negative impact upon its effectiveness from the positions of the State interests. All this is the main reason for a sharp increase in the yield that the State receives from a unit of raw materials.

At first glance, the fishing enterprises profit from development of deep processing of living marine resources is not as visible. An initially lower profitability of the fish processing enterprise leads to a notable reduction of total profitability. That is, from the point of view of the financial analysis, the deep processing of living marine resources development on the Russian Federation territory leads to a decrease of the Far East fishing industry effectiveness.

However at present this allegation isn’t a substantiated one, as, in this case, its necessary to take into account a number of additional factors and, first of all, the current status of the Far East fishing industry.

In the conditions of the traditional raw base limitation, the concentration on the fish catching only doesn’t permit for the business subjects to increase their production output, preserving at the same time a high production activity’s profitability. The possibilities for maximizing the profit by the way of increasing its mass are significantly limited, because, and that is the most important, they aren’t actually related to the activity of this enterprise, depending completely upon the natural factors and the specifics of the State regulation.

In the meantime, as it was just noted, the detailed survey of the financial-business activity of the fishing enterprises, executed by the Authors, shows, that it’s impossible to ensure the stable functioning and high profitability of the fishing enterprises without raising the production output volumes [18].

High profitability of the production, which can be seen in the process of Alaska pollock catching doesn’t permit to ensure the high profitability of the business subject in general, because it doesn’t permit to ensure the full loading of the main production funds and, as a consequence, leads to raising the needs in capitals and making difficult the process renovation the basic production assets.

Namely the low effectiveness of the use of the main production capabilities has become one of the main reasons for emerging the chief paradox of the Far East fishing industry – the profitability of the fish catching is still high, while the effectiveness of the industry and the profitability of the business subjects still remain at a low level.

The only possibility to get a change in the situation is to ensure the growth of production output, which at present, in the conditions of lack of the traditional for the Far East fishing industry raw base, is possible at the extent of the development of the deeper processing the fish products.

The main result of the deep processing development would be the growth of not only the State, but the commercial effectiveness of the

Far East fishing industry functioning at the account of growing the yield per unit of the living marine resources caught and the growth of the total profit mass.

CONCLUSION

Notwithstanding a significant reduction of the most precious catching species resources, taken place within the last years, the illegal catching of the living marine resources in the Far East basin still is inflicting a heavy economic loss, the scale of which isn’t far from decreasing, but as for certain catching species is even growing.

Thus, according to the surveys made, based on the official data of the customs statistics of the Ministry of finance of Japan and the US Customs service, the economic loss because of illegal catching of just three species: Alaska pollock, king and blue crabs, - at present amounts to not less than $700 million a year.

Also in the course of the survey there was established, that within the last five years there has been started to change the structure of the economic loss because of illegal catching the Far East living marine resources.

In spite of the existing opinion, the illegal catching of the bio-resources at present is inflicting the greater loss not upon the State interests, but the interests of the fishing industry and the fishing-industrial complex as a whole.

The loss is revealed in direct and indirect loss of the profit on sales, short received by specific fishing enterprises, as well as in overall industry loss – funds, which on various channels are evading from the fishing industry thereby reducing its investment potential and the possibilities for development.

Within the framework of the quotas distribution system in force to catch the living marine, foreseeing the allocation of shares to fishing enterprises for a five-year term, such a situation is of key significance. Shares distribution, itself, is abstract in character and directly depends on the status of the living marine resources and the amount of the total allowable catch, both of which are determined every year based on scientific surveys.

All this permits one to say that from the beginning a strong hostility between poachers that have no legal access to the living marine resources and the enterprises engaged in legal catching depending directly upon the status of the living marine resources and interested in their rational use.

One of the main reasons for the existence of the illegal catching of the living marine resources in the Far East basin is the inefficiency of the protection system in force in the Russian Federation. Presently, the authorized control bodies lack sufficient capabilities to reduce the illegal catching intensity.

To reach significant progress in this problem, a solution is possible now by only one method – by essentially changing the existing system of control. The most logical move in this case is the adoption of the decision on mandatory declaration of all fish products on the territory of Russia.

However, such a decision is quite controversial. Right away, two significant limitations require overwhelming evaluation and analysis before adoption.

The first being the availability of enough production capabilities in Russia to process all the fish products produced from the living marine resources caught within the Russian Federation 200-mile economic zone.

The second is an inevitable increase in expenses and a reduction in profitability of the Far East fishing enterprises.

Existing production capabilities of the Far East basin seaports processing, without obstacles, of more than 1,510 thousand MT of fish product. This amounts to 72% of the possible requirements, with regard to a possible increase in catching of up to more than 2.2 million tons.

Although, in case of renovating present construction, that would not require significant time and material expenses, the handling capacity of the Far East ports to process the fish products would amount to not less than 2,160 thousand MT. For the present stage of the Far East fishing industry development, this would be quite sufficient.

The survey also shows that in case of adopting the decision on mandatory declaration of all fish products, the increase in the unit price of the products produced by the Far East fishing enterprises would amount to 5-6% and the potential loss of all the Far East fishing industry would not exceed $70 million a year.

The increase in the unit price mentioned would not lead to a significant decline in the financial-economic situation for the majority of Far East fishing enterprises; however, for some it would have critical meaning.

In this regard, the adoption of the decision on mandatory declaration of all fish products, produced out of the living marine resources, caught within the Russian Federation 200-mile economic zone, should be accompanied by the development and adoption of a whole complex of additional measures aimed at minimizing the Far East fishing industry loss.

To those measures, the first attributed should be:

- Decrease either completely lifting or lowering the customs fees for entering fish products;

- Reduction of bureaucratic procedures required by customs for entering vessels;

- Introduction of a special preparation period that permits fishing enterprises to prepare the work under the new conditions.

The loss to the State from the decrease in either completely lifting or lowering the customs fees for entering fish products would be completely compensated to the extent of decreasing the amount of economic loss from illegal catching the living marine resources. According to the calculations, the tax loss to the budgets at all levels and extra-budget funds from illegal catching of Alaska pollock, king and blue crab in the Far East basin amounts to $170-190 million annually.

Except for reducing the intensity of illegal catching, the adoption of such measures would create favorable conditions for the development of deeper processing of the living marine resources on the territory of Russia. Presently, this is one of the most prospective directions for the Far East fishing industry development.

The survey has shown that production of the products with a higher share of added value is now an effective option, both from the point of view of the State interests and the interests of the business subjects.

A detailed analysis of the Far East basin’s main catching specie’s, Alaska pollock, deep processing effectiveness, whose deliveries now are mainly made to foreign market, shows that when the profitability on sales generated per 1 ton of the living resources caught is preserved by more than 20% a significant increase on the profit on sales and the added value occurs.

Thus, in case of the deep processing, the profit on sales of 500 tons of Alaska pollock caught during the 2005

Okhotsk Sea expedition would increase by 16.18% - from 3.808 million of Rubles to 4.424 million of Rubles; the amount of added value would increase by more than 45% - from 6.887 million of Rubles to 10.021 million of Rubles.

Authors:

Glotov D.B., President of Association of Primorye Fish Industry Companies

Blinov A.Yu., Consultant, Bachelor in Technical Sciences

Project Manager: Tkachenko I.V., APFIC President Adviser

Consultant: Slyusarev V.A., APFIC President Adviser

Reviewers:

Bocharov L.N., Doctor of Sciences,

Director of Pacific research fisheries centre (TINRO-CENTRE)

Baklanov P.Y., Academician,

Director of the Pacific Institute of geography

(Far-Eastern Branch of Russian Academy of Science)

Fig.2. Correlation of the TAC volume and the scale of TAC exceeding for king and blue crab in 1993-2005

VLADIVOSTOK

2005


CONTENT

  • PREFACE
  • INTRODUCTION
  • Chapter

    I. EVALUATION OF ECONOMIC LOSS FROM ILLEGAL CATCHING OF LIVING MARINE RESOURCES IN THE FAR EASTERN BASIN

  • Chapter II. EVALUATION OF REAL AND POTENTIAL CAPABILITIES OF THE FAR EASTERN PORTS TO PROCESS FISH PRODUCTS
  • Chapter III. EVALUATION OF ECONOMIC LOSS FROM INRTODUCTION OF THE MANDATORY DECLARATION OF THE FISH PRODUCTS ON THE

    Russian Federation

    TERRITORY

  • Chapter IV. EVALUATION OF ECONOMIC EFFECTIVENESS OF SECONDARY PROCESSING THE LIVING MARINE RESOURCES IN THE

    Russian Federation

    TERRITORY

  • CONCLUSION
  • REFERENCES
  • APPENDIX

P R E F A C E

«The fishing business in

Russia must be construed in the new way – without hypocrisy,

either from the side of the State, or from the side of the fishermen themselves».

Russian Federation Minister of Agriculture, Alexey Gordeyev.

What is the real situation in the fishing industry? What should be done first? What are the consequences of those decisions? The answers to these questions require a complex and systematic analysis. The authors used this approach to conduct this survey.

Certainly, the Minister of Agriculture, Alexey Gordeyev is correct in stating, “The peak of the crisis, noted in the industry some 2-3 years ago, was dependent on the weakness of the legal system”. The elimination of auctions, attribution of commercial shares for a 5-year term, adoption of the Federal Law “On Fishing and Preservation of the Living Marine resources”, amendments to Law, along with the Government’s decrees – these are the most important milestones in changing State policy in the industry.

The industry did not have to wait long to see results – in 2005, the growth in total catch volume was forecasted at 15% above that of 2004. By maintaining and increasing such a rate of growth, the production output of the industry will double within 6-7 years.

Clear, comprehensive options to solve the crisis facing the industry relate to the transition from the Administrative approach to economic methods that combat poaching. Specifically, this is the essence of adopting the step-by-step introduction of all fish products declaration in the Russian territory. This is the only way we can break the vicious circle, where ports and enterprises are underutilized and preconditions is not being developed because of the lack of the raw materials; while raw materials cannot be delivered because of lack of sufficient preconditions.

For the fishing-industrial complex to realize its full potential, by becoming a competitive and effective industry of

Russia’s economy, we must unite the efforts of the State and the industry.

Authors


INTRODUCTION

The fishing industry of the Far East continues to remain an extremely complicated situation. In spite of the increased catch and rising profitability of many fishing enterprises in 2005, there are unresolved problems that significantly slow down the development of the fishing-industrial complex.

The main problem is the illegal catching of living marine resources in the Far East basin, which at present is inflicting a tremendous harm to the state, industry and private interests.

It is obvious, that the State regulation and control system now in force does not permit effective measures to combat illegal catching of the living marine resources. In that context, practically the only possibility to make any significant progress in resolving this problem is to adopt a decision on the mandatory declaration of fish products caught within the 200-mile economic zone of the Russian Federation, within the territory of Russia.

Realization of this decision will solve two of the main problems: One is mainly a tactical meaning, while the other is of strategic significance.

Task 1 . Struggle with the illegal catching of the living marine resources.

Task 2. Establishment of preconditions for secondary processing of living marine resources and product production with a higher percentage of added value in the territory of Russia

Additionally, at the same time of adopting a decision to introduce mandatory declaration of fish products in Russia, the industry could address a number of additional tasks. These should put forward:

- Modernization of the working mechanism of the State regulations on catching, protection and reproduction of the living marine resources;

- Increasing the turnover of Russian ports;

- Simplification and unification of the permit and notification systems of commercial fishing activity.

As a whole, the solution of these problems completely corresponds to, and is partially incorporated in, the formally declared social-economic policy on Russian Federation development and may receive the support of the Federal bodies of the legislative and executive powers.

However, one cannot help but notice that there are certain limitations, economic and technical, involved in adopting the decision on the mandatory declaration of fish products in the territory of the Russian Federation.

The first one relates to the problem of the fishing enterprises increased operating expenses and the reduced effectiveness of the entire Russian Far East fishing industry’s effectiveness. Quite obviously, adopting the decision on mandatory declaration of all fish products produced from of the living marine resources caught in the 200-mile Russian Federation economic zone, within the territory of Russia, would cause economic loss to many fishing enterprises of the Far East.

Technical limitations in this case relate to the fact that there are not enough production facilities to process all the products, produced from the living marine resources caught in the 200-mile Russian Federation economic zone within the Russian territory. During the last 15 years, due to the orientation of the Far East fishing industry to export their catch with little or no added processing, the capabilities of the Far East basin ports as for the processing the fish cargoes have been significantly reduced.

To account for all these factors mentioned it was decided that a survey should be conducted. The survey would encompass a comprehensive evaluation of the consequences of adopting the decision on mandatory declaration of all products produced from of the living marine resources caught in the 200-mile economic zone, within the territory of Russia.

In order to reach this target it was decided to divide the work into four main blocks.

Block 1. Evaluation of the economic loss resulting from of the illegal catching of living marine resources in the Far Eastern basin.

Block 2. Evaluation of real and potential capabilities of the Far East seaports for processing fish cargoes.

Block 3. Evaluation of the Far East fishing enterprises loss from the introduction of mandatory declaration of fish products within the territory of the Russian Federation.

Block 4. Economic effectiveness of the living marine resources secondary (added value) processing in the Russian Federation territory.


Chapter I. EVALUATION OF THE ECONOMIC LOSS RESULTING FROM ILLEGAL CATCHING OF LIVING MARINE RESOURCES IN THE FAR EASTERN BASIN

Illegal catching of living marine resources has traditionally been considered the most serious problem facing the Far East fishing-industrial complex development. For more than a decade its solution has been considered to be the top issue of State importance. Thus, it is found referenced in many standard legal acts of the Federal and Regional powers. Unfortunately, significant practical results were not achieved.

Meanwhile, within the last years the scale of illegal catching of certain species of the living marine resources has reached the most threatening extent not only to the State and industry interests, but to the interests of the sole enterprises of the fishing-industrial complex as well. For this reason, one of the main elements of this survey is the seriousness of the evaluation of illegal catching scale from both the side of the State’s interests and the interests of the industrial enterprises.

Today, one can speak about the existence of two principal forms of illegal catching of the living marine resources in the Far Eastern basin:

- catching the living marine resources in excess of the limits established, allocated in accordance with the laws in force, either catching without necessary permit documents;

- catching within the limits established; however, in violation of the fishing rules.

These forms of illegal catching of the living marine resources differ from each other not only by their content (it is important to note that catching the living marine resources in excess of the limits established and the catching without permits as a rule are accompanied with many violations of the fishing rules), but, most importantly, by the level of harm and the amount of loss inflicted to the ecosystems, to the state, industry and private interests.

The most dangerous and potentially of the most significant loss is considered the first form of the illegal catching – catching the living marine resources in excess of the limits established and catching without permit documents.

Presently, the biggest extent of this form of illegal catching of the living marine resources in the Far East basin has been recorded in the following species:

- king crab

- blue crab

- Snow crab

- Hairy crab

- Other species of crab

- Sea urchin

- Sea cucumber

- Scallops

Maybe less dangerous, from the point of view of the loss inflicted to the ecosystems, is the second form of the illegal catching of the living marine resources ─ catching within the limits established, but in violation of the fishing rules.

Now, we can say that violations of the fishing rules to some extent can be seen in the catching of most species of the living marine resources in the Far Eastern district; however, the largest extent was seen in the catching of Alaska pollock.

Within the framework of this survey an evaluation was made on the extent and volume of loss from illegal catching for the principal from the point of view of harm and level of loss to the species illegally caught. These evaluations were attributed to the catching of king and blue crab, and Alaska pollock.

1.1 Economic loss from of the illegal catching of king and blue crab in the Far East basin Within the last ten years, regardless of the sharp decrease of the resources base, king and blue crab remain the main objects of the illegal catching of living marine resources in the Far East basin.

Traditionally, the main importer of the crab illegally caught within the 200-mile economic zone of Russia is Japan. This is mainly contributed to the convenient geographic location and creating favorable conditions for vessels in Japanese ports by not requiring the vessels to possess the documents confirming the legality of the living marine resources caught.

As of April 1, 2002, Japanese authorities declared the necessity of presenting Customs cargo declarations to pass port formalities in the ports of

Japan. This forced the re-orientation of part of the deliveries of illegally caught crab to South Korea.

In the long run, the extent of Japan’s efforts turned out to be not so significant. The decision to make tougher controls over the importation of fish products from the Russian Federation used to be, for the most part, a formality and has not lead to any real curb in deliveries of illegally caught crab in the exclusive economic zone of Russia to the territory of Japan.

Within the last ten years, another large importer of Russian crab turned out to be the USA, where mainly king crab is being delivered.

As a whole the total share of Japan and the USA amounts to not less than 90% of all the deliveries of live and frozen crab caught in the exclusive economic zone of the Russian Federation. For the evaluation of the extent of illegal crab catching in the Far East basin the data of the Customs Statistics of the Ministry of Finances of Japan and the US Customs Service were used.

It is worth mentioning, that the customs statistics of Japan possess a number of specific peculiarities. Thus, when using the term “king” (Kamchatka) crab two species of crab are mentioned: king and blue, which differ slightly in the price ranges (the price of blue crab is 5-7% lower than the price of king crab).

As mentioned, the mass deliveries of the Russian crab to the markets of Japan and the USA have been ongoing for more than ten years and all of a sudden, their combined deliveries exceed the amount of the officially established level of total allowable catch (TAC). According to the data from the Customs statistics of Japan and the USA in 1994 these countries 40.1 thousand MT of king and blue crab from the Russian Federation [1] were delivered to these countries, while the TAC level at that time amounted to only 38.7 thousand MT (fig.1).

The mid-90s of the 20th century are considered the boom time for illegal catching king and blue crab within the 200-mile economic zone of the Russian Federation. In 1995, the volumes delivered to Japan and the USA increased up to 54.9 thousand tons, exceeding 40% of the TAC level. One year later, the deliveries reached their highest level, which remained within the limits of 72.5–76.0 thousand MT in 1996—1999.

The growth of the catch of king and blue crab within the 200-mile economic zone of the Russian Federation took place at the same there was significant fluctuation of the TAC level. Previously, for four years the TAC level had remained stable – from 38.7 to 39.1 thousand MT. In 1997, the TAC for king and blue crab decreased to 26.3 thousand MT. Then again, in 1999, it increased to the highest level within the last decade–42.1 thousand MT. Regardless of this short span of increase, the volume of king and blue crab deliveries, caught within the 200-mile economic zone of the Russian Federation, to Japan and to the USA in 1996-1999, on the average exceeded the TAC by twofold: in 1996 – 1.92 times, in 1997 – 2.78 times, in 1998 – 2.26 times, in 1999 – 1.8 times.


Source: “king crab – 2005 (catching season forecast)”. –

Vladivostok: TINRO-Center, 2005.

Fig. 1. Exceeding the total allowable catch (TAC) levels of king and blue crab in 1993-2005

Large scale illegal catching has negatively influenced the amount of resources of king and blue crab in the Far East basin. As a result in 2000-2002, a clear tendency to reduce both the TAC and exports was started. The TAC was reduced from 42.1 thousand MT in 1999 to 18.76 thousand MT in 2002. The amount of crab deliveries to Japan and the

USA decreased from 75.87 in 1999 to 44.97 thousand MT in 2002. Even when considering these preservation measures, the illegal catching king and blue crab within the 200-mile economic zone of the Russian Federation has been remained at a very high level. In 2000, the amount of deliveries to the markets of Japan and the USA exceeded the TAC volume 1.77 times, in the 2001 – 2.57 times, and in the 2002 – 2.40 times.

Beginning in 2003 the illegal catching of king and blue crab in the Far East basin entered a new phase. The TAC volume began to decrease rapidly; by 2005, it was just 7.16 thousand MT, while the amount of the crab deliveries to Japan and the USA in 2003-2004 remained at a high level, annually exceeding 48 thousand MT. The analysis of crab deliveries data to Japan and the USA within the first five months of 2005 show that the total volume of crab delivered to the markets of these countries amounted to 48 thousand MT of king and blue crab.

All this shows the rapid acceleration of the situation within the last three years and the increased scale of illegal catching. Thus, by 2003 the volumes of king and blue crab deliveries to Japan and the USA exceeded the TAC by 2.95 times, in the 2004 – 4.76 times and in the 2005, based on preliminary figures – 6.64 times. Moreover, it should be noted, that in fact the extent of illegal catching within these last years has been even higher. This is because the calculations used did not take into account the data of king and blue crab deliveries to countries other than Japan and the USA.

Such an obvious quantitative imbalance became possible, first of all, because of the changing the qualitative character of deliveries of king crab and blue crab to the markets of other countries. In order to maximize the volumes of the catch alongside with the sharp decrease of the resources, the enterprises, engaged in the illegal catching have started to violate the fishing rules in mass.

In mid-90s of the 20th century most of the king crab deliveries to the Japanese market consisted of the male species, which are traditionally larger than the female species. However, now the largest sized king crab,[“ Kamchatka” or as it is named in Japan «hor-taraba»], is practically absent from the Japanese market. More than 80% of all the catch consists of female and juvenile species.

Another factor testifying to the change in the qualitative character of king crab deliveries to the Japanese market is the decreased amount of crab with a high year-round flesh content, without taking into account the period when the catch is banned in Russian waters [2].

The catching of king and blue crab in the Far East basin now is the most representative example of illegal catching of the living marine resources’ negative influence on the most unique incidents and factors.

The biggest influence is traditionally executed at the status of the ecological systems. Exceeding the catching limits established is one of the main reasons for reduced populations and inevitably leads to the reduction of the total resource. Thus, within the last ten years the summary TAC volumes of king and blue crabs have been reduced more than five times – from 38.71 thousand MT in 1995 to 7.16 thousand MT in 2005. Alongside that there is a clear interrelation between the scale of the illegal catching of the living marine resources and TAC volume (fig.2).

It’s worth mentioning, that in fact the pace of decreasing stock of king crab in the Far East basin within the last ten years turned out to be even more significant. The decrease was partly compensated by the increase in the scale of catching blue crab; the TAC volumes of which in 1994-2005 have remained at quite the same level.

Fig. 2. Correlation of the TAC volume and the scale of TAC exceeding for king and blue crab in 1993-2005.

Fig. 3. The volumes of the Total Allowable Catch of king and blue crab in 1993-2005, MT

Within the last ten years, the king crab TAC volume in the Far East has declined more than 15 times – from 32.79 thousand MT in 1996 to 2.16 thousand MT in 2005 (fig. 3). All this indicates that the resources of king crab in the Far East basin are undermined and their restoration in this situation is only slightly possible.

Except for the impact upon the status of the ecosystem, the illegal catching of king and blue crab within the 200-mile economic zone of the Russian Federation has inflicted serious loss to the State.

The research shows that starting in 2001 at least 60% of all the deliveries of Russian crab to Japan and the USA are attributed to illegal catching, while in 2004-2005 this figure increased to 80%.

Thus, one may say, that the annual volume of the non-declared hard currency income, received from the export of king and blue crab caught within the 200-mile economic zone of the Russian Federation for the last several years exceeds $245 million (Fig.4). Totally, within the last five years, the whole amount of the non-declared hard currency income makes up not less than $1.25 billion.

Based on data on the amount of non-declared income received from king and blue crab catching within the Russian Federation 200-mile economic zone it is possible to estimate the direct economic loss to the state from illegal catching.

In the narrow sense, the economic loss inflicted to the State is the loss to the budgets of various levels and to the extra-budget funds from not receiving taxes, fees and other due payments paid by the fishing enterprises. The procedure used for determining such loss is quite simple. Taking as a base the average statistics data on the share of taxes and other due payments within the trade income of the Far East fishing enterprises (as for the 2004 results this amounted to 23%) we may find the sum of the direct tax loss due to the illegal catching of king and blue crab.

Alongside with that it is necessary to understand that in reality the loss to the State from illegal catching is much higher than purely the loss of tax revenue. In a broad sense of the word the loss can be identified by the total amount of the income not returned to the territory of the Russian Federation. According to the experts evaluation its size exceeds the 30% barrier, because unlike the legal suppliers of the fish products abroad, the main part of the current and long-term expenditures of the enterprises, engaged in the illegal catching the crab, falls to the share of the foreign counter-agents.

To the territory of the Russian Federation there constantly returns only the part of the income necessary for covering the expenses related to the salaries and administrative-production activity, as well as a part of profit from the illegal catching the living marine resources.

Besides that, the calculations on the income not returned to the territory of the Russian Federation (Fig.40) only partially reflect the loss to the State from illegal catching king and blue crab within the Russian Federation 200-mile economic zone. In fact, the real figure is much higher because the calculations do not take into account a number of additional factors.

First, the domestic consumption on the Russian market and the export of king crab to South Korea and other countries, the share of which as evaluated by the specialists, amounts to 10% of the total catch.

Second, when determining the amount of income received from selling the king and blue crab were taken into account the customs value not the market price was used.

Moreover, besides the non-declaration of hard currency income received from the export of non-declared fish products, the illegal catching of the living marine resources is inflicting indirect loss to the State and the industry’s interests, and to the interests of the lone producing subjects.

Fig. 4. Minimum extent of the direct economic loss from illegal catching of king and blue crab in the

Far East basin in 1995-2005

The indirect loss, inflicted by illegal catching and export of living resources embraces several trade-market aspects. First it is related to purely price factors. The demand for crab and other high valued products on the Japanese market is characterized by its high elasticity – when the supply is increased, the result will be a decrease in the price level (Fig.5).

Fig. 5. The volume of import and the medium customs cost of king and blue crab from the USA and the Russian Federation to Japan (in the raw form)

The customs cost of 1 kilo of the raw crab, imported to the territory of Japan from the Russian Federation and to the USA used to be the maximum cost in 1993-1994 and 2002, when the delivery volumes were the lowest. However, in case of increasing the volume of imports, like was the case in 1995-1999, the decrease in price was inevitable. Within the last ten years, the extent of the range in fluctuation of annual average prices, depending on the volume of deliveries, amounted to 34% and the range of the monthly average prices within a calendar year reached 40%.

In the meantime, such a significant price fluctuation has influenced not only the pure market factors related to the correlation of demand and supply, but a whole number of additional factors reflecting the distinctiveness of illegal catching and export of the living marine resources.

The significant influence on the export cost of king and blue crab caught within the Russian Federation 200-mile economic zone is that it is being done without even any primary processing of the living marine resources.

The enterprises engaged in illegal deliveries of king and blue crab, to a greater extent are interested in maximizing the catch, but not in increasing the added value and selling a product unit at a higher price. In this regard, these enterprises are mainly engaged in delivering live and fresh crab to the Japanese market, while the enterprises doing legitimate business are producing boiled and frozen products.

As the practice shows, the more the illegal crab suppliers are forced to sell their product at lower prices to the Japanese market, the more they dump on the market, sometimes plummeting prices. Not having the documents that confirm the legal status of their products, and mainly dealing with products of a limited storage term, the enterprises turn out to be directly dependent on their Japanese partners.

More visually the influence of illegal catching on the cost of king and blue crab within the Russian Federation 200-mile economic zone can be tracked by the correlation of frozen crab; i.e., product that have received some type of primary processing and fresh crab deliveries (Fig.6,7).

In the beginning of large deliveries of king and blue crab caught within the Russian Federation 200-mile economic zone to Japan, the share of live and fresh crab amounted to only 13% of the total volume. Of that the customs cost of a kilo of live and fresh crab used to be a bit higher than the cost of primarily processed crab (in the raw form), that corresponds, primarily, to the unusual nature of the product.

In general, the mentioned deviation was insignificant and up until 1995 the customs cost of a kilo of crab, both processed and non-processed, in the raw form used to be practically the same.

Fig. 6. Correlation of king crab and blue crab deliveries – live and frozen (in the raw form), imported from the Russian Federation to Japan in 1993-2004, %

Fig. 7. Dynamics of the customs cost of the frozen and the live king crab and blue crab, imported from the Russian Federation to Japan in 1993-2004, Yen per Kilo (in the raw form)

Beginning in 1996, when the volume of king and blue crab exports to Japan and the USA for the first time has exceeded the TAC volume by more than 50%. The share of live and fresh crab in the total deliveries to the Japanese market started to grow rapidly. In 1995 ã. the share was 16.85%, in 1996 ã. – 24.84%, within the period 1997 to 1999 it was oscillating between 35-36%, in 2000-2002 it exceeded 40%, in 2003 it reached 56.57%, and in 2004 – 64.7%.

Alongside with the growth of the live and fresh crab share within the total deliveries there occur a sharp decrease of its customs cost – from 870Yen per kilo in 1994 to 517 Yen per kilo in 2004. Meanwhile the customs cost of a kilo of the frozen crab (in the raw form) still remained at a rather high level.

As a result, the difference between the cost of frozen and live crab, practically unseen until 1996, started to rise, having reached an abnormal scale from the market point of view. Thus, in the 2003 the customs cost of the frozen crab (in the raw form) was twice as much as the fresh one, and in 2004 – by more than 70%.

From this one can conclude that within the last years all the deliveries of live and fresh crab to the Japanese market have been accomplished illegally. This, on its own, allows one to calculate the main component of the indirect loss from illegal catching king and blue crab within the Russian Federation 200-mile economic zone.

This component also permits one to take into account several factors at once that influence the reduced cost of king and blue crab caught within the Russian Federation 200-mile economic zone. It also completely accounts for the loss arising from the lack of primary processing and, in part, the loss from selling the live and the crab at prices lower than those market prices.

Although the indirect loss from illegal catching king and blue crab are not limited by those factors. The situation that formed within the last few years on the Japanese market is that the activity of the enterprises engaged in the illegal catching is dependent upon the profit of the legal suppliers. The dumping influence of the illegal suppliers forces them to sell their products at a lower price also.

It is necessary to mention that besides the deliveries of king and blue crab caught within the Russian Federation 200-mile economic zone there are also deliveries of Kamchatka crab, also named as a king crab, from the USA to the Japanese market. Though the technologies of processing the crab used in the USA slightly differ from those used by Russian fishermen, in general, one can see that the prices for the US king (Kamchatka) crab on the Japanese market are much higher than the prices of Russian crab (Fig.8).

Fig. 8. Dynamics of the customs cost of king and blue crab from the Russian Federation and king (Kamchatka) crab from the USA (in the raw form), imported by Japan in 1995-2004

The analysis of the customs statistics data of the Japanese Ministry of Finances for 1995-2004 show, with a rather high degree of evaluating precision, the influence of illegal catching of king and blue crab caught within the Russian Federation 200-mile economic zone on the general market situation.

As previously noted, the Japanese market for high-valued products is characterized by high elasticity; when the volumes of deliveries from the Russian Federation and the USA increased there occurred a decrease in the price, and vice versa – decreased volumes increased the price. However, one must note that the dynamics of the cost of the Russian and US products significantly differed.

The general trend is that in the case of increasing the scale of illegal catching of crab within the Russian Federation 200-mile economic zone, the products delivered from the Russian Federation became cheaper much faster than the US products (Fig.9). This is because, aside from the pure market factors, a significant impact on the cost resulted from the dumping influence of illegal suppliers.

Fig. 9. Dependence of the customs cost of the Russian and US crab (in raw form) on the amounts of illegal catching in Russian waters in 1995-2004

Thus, having construed the necessary grade trends and making the calculations, there appeared a possibility to evaluate qualitatively one more component of the loss from illegal catching king and blue crab – the dumping influence of the enterprises engaged in illegal catching on all the participants of the market.

Correlation of all the calculations made permits one to make the conclusion that beginning in 1995 illegal catching started to inflict not only direct, but indirect as well, economic loss, revealing the decrease general cost of the product that came about from selling a significant share at dumping prices and lacking any primary processing (Fig.10).

The main peculiarity of the indirect loss is that the main loss in this case is not inflicted on the State, but rather the fishing-industrial complex as a whole and certain fishing enterprises engaged in legal business. Specifically, that is the net short-received profit, made by certain concrete production units, has the biggest advantage is the fact they are ahead of the enterprises involved in processing and reselling the crab on the territory of Japan and the final customers of the products.

It is worth mentioning that according to the methodology chosen it is possible to calculate another component of the loss, which is only partially related to illegal catching. We are speaking about the loss relating to the lower cost of the Russian crab on the Japanese market in comparison with the crab from the USA.

It should be noted that the cost of the whole fish production, exported from the USA to the markets of Japan and South Korea has always been much higher than the cost of a similar product delivered from Russia. This has a rather substantial economic corroboration (detailed in the p.1.2.). However, the difference in the cost between the products does not exceed 15-20%. Although, in case with king and blue crab deliveries, customs statistics data show they reach abnormally high indices.

Fig. 10. Minimum volume of the indirect economic loss from illegal catching king and blue crab in 1995-2005

Thus, in 2002 the customs cost of a kilo of crab imported by Japan from Russia used to be 3.24 times lower than crab imported from the USA (in the raw form), in the 2003 – 2.79 times, in 2004 – 3.01 times (Fig. 9).

To arrive at such a significant quantitative unbalance there are several factors, considerably differing from each other in their content, that figure into the impact. These factors can be related to the conclusive results:

1) Downgrading the real cost declared upon entry of the fish products to the territory of Japan;

2) Existing market differences on the cost of fish products from the USA and Russia;

3) Practicing less sophisticated technologies by the Russian fishing enterprises then the US enterprises’ crab processing techniques.

Of these three main factors, only the one (the derived difference in price for fish products from the USA and Russia) is directly related to the current market situation and has an objective character, while the other two factors are related, more or less, with illegal catching and illegal deliveries of crab to the Japanese market. Particularly, the overwhelming of illegal deliveries and sharp decline in the crab resources has made it impractical to implement in mass the new, more sophisticated crab processing technologies used in the USA [3].

Thus, if taking as a base the cost of king (Kamchatka) crab delivered from the USA to Japan and using the real existing market difference in the cost of the fish products of 20%, then it is possible to calculate one more component of the Russian Federation loss from illegal catching of king and blue crab.

However, it is necessary to realize that this category of loss is only somewhat related to the problem of illegal catching of living marine resources and is predetermined by a number of other factors. Among those, specifically, it is possibly to show an ineffective policy of the State in the area of the regulation of catching living marine resources. In relation to that, this kind of loss should be logically called the conditional economic loss.

Fig. 11. The extent of the Russian Federation relative loss from catching king and blue crab in 1995-2004, $ million

Considering all the above mentioned, it is possible to draw a number of conclusions. First, it is necessary to point out the extent of direct and indirect economic loss from illegal catching within the last five years has visually grown (Table 1). This is despite the decrease in the TAC volume and the deliveries volumes of king and blue crab caught within the Russian Federation 200-mile economic zone to Japan and the USA, as compared to the mid-90s of the last century

If during 1995-1999, the minimum extent of the economic loss to the Russian Federation from illegal catching of king and blue crab amounted to $1,127.6 million ($828.79 million, direct economic loss and $298.82 million, indirect loss), and then during 2000-2004 its extent increased 12.28% to $1,266.05 million ($901.44 million, direct economic loss and $364.60 million, indirect loss).

The main reasoning these factors were used was the increased scale of illegal catching of king and blue crab within the Russian Federation 200-mile economic zone. If, during 1995-1999 the share of illegal catching declined to some 49% of all deliveries to the markets of Japan and the USA, then in 2000-2004 its share would be not less than 60%.

Fig.12. Economic loss and relative economic loss to the Russian Federation from illegal catching and the lack of deep processing of king and blue crab in 1995-2004, $million

Now, the illegal catching of king and blue crab within the Russian Federation 200-mile economic zone is inflicting the biggest loss, not to budgets of various levels and extra-budgets of the Russian Federation, but to the interests of the Russian economy, and most importantly, to the interests of the fishing-industrial complex as a whole and to private fishing enterprises, as well.

Particular attention in this case should be paid to the accelerated growth of the indirect loss from illegal catching of king and blue crab. During 2000-2004, the extent of indirect loss increased 11.01%, as compared to the period of 1996-1999. During the same time, the increment of direct loss amounted to 8.77%.

Fig. 13 Structure of economic loss inflicted to the Russian Federation by illegal catching king and blue crab, $ million

As just noted, the difference between the indirect loss and the illegal catching lies in the fact that the indirect loss may be identified as the loss of the fishing industry as a whole and certain fishing enterprise as well. Namely, indirect loss means the net loss of profit suffered by the enterprises engaged in the catching king and blue crab.

In general, based on the calculations made, it is possible to say that the structure of total loss (without conditional loss) from illegal catching of king and blue crab is a rather comparative.

Slightly more than 30% of the total loss falls to the share of tax loss of the various levels budgets and extra-budget funds: some 31% to the share of the fishing industry and some 39% to the share of other sectors of the Russian economy, excluding the fish catching and other industries making part of the fishing-industrial complex (Fig.13).

As for the conditional economic loss emerging from not utilizing modern technologies of crab processing – it is quite impossible to give this component a more or less detailed structure. In this case, it is quite possible to identify the theoretical amount of tax loss (Table 1).


Table 1

Economic loss and conditional economic loss of the

Russian Federation from illegal catching and lack of deep processing of

king and blue crab in 1995-2004, $ million

name of indices

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

Direct economic loss to the

Russian Federation from illegal catching king and blue crab

85,62

180,71

231,77

173,23

157,46

158,28

177,65

171,20

186,30

181,08

Including:

- tax loss

28,46

60,07

77,05

57,59

52,34

52,62

59,06

56,91

61,93

60,20

- loss of the fishing industry

10,27

21,69

27,81

20,79

18,89

18,99

21,32

20,54

22,36

21,73

-other economic loss (including those of other sectors of the fishing-industrial complex)

46,88

98,95

126,91

94,86

86,22

86,67

97,27

93,75

102,01

99,16

Indirect economic loss to the

Russian Federation from illegal catching king and blue crab

Including:

30,52

64,02

73,53

57,48

73,26

96,31

79,39

53,03

118,20

84,83

- tax loss

7,10

14,90

17,11

13,38

17,05

22,41

18,47

12,34

27,51

19,74

- loss of the fishing industry

23,42

49,12

56,42

44,11

56,21

73,90

60,92

40,69

90,70

65,09

name of indices

1995 ã.

1996 ã.

1997 ã.

1998 ã.

1999 ã.

2000 ã.

2001 ã.

2002 ã.

2003 ã.

2004 ã.

Extent of the direct and indirect economic loss from illegal catching king and blue crab

116,14

244,73

305,30

230,71

230,72

254,58

257,04

224,23

304,51

265,91

Including:

- tax loss

35,56

74,97

4,16

70,96

69,39

75,03

77,53

69,25

89,44

79,94

- loss of the fishing industry

33,69

70,81

84,23

64,90

75,11

92,89

82,24

61,23

113,05

86,82

- other economic loss (including those of other sectors of the fishing-industrial complex)

46,88

98,95

126,91

94,86

86,22

86,67

97,27

93,75

102,01

99,16

Conditional economic loss of the

Russian Federation from illegal catching king and blue crab

318,08

529,67

488,51

402,74

819,95

600,53

685,39

593,70

421,99

388,46

Extent of the economic loss and the conditional loss of the Russian Federation

434,22

774,40

793,82

633,45

1 050,67

855,11

942,43

817,93

726,49

654,37

Including:

- tax loss

109,58

198,22

207,84

164,68

260,19

214,77

237,02

207,41

187,63

170,33



1.2. Economic loss from illegal catching Alaska pollock in the
Far East basin

It is very difficult to evaluate the extent of loss from illegal catching Alaska pollock within the Russian Federation 200-mile economic zone right for several reasons.

First, the deliveries of Alaska pollock (and the derived products) are characterized by a higher level of market diversification, rather than king and blue crab. Within the last ten years significant volumes of Alaska pollock caught within the Russian Federation 200-mile economic zone have been delivered to several countries’ markets simultaneously: Japan, Korea, China, USA, European Community countries as well as to the Russian domestic market. For this reason the generalization and correlation of the data is extremely difficult.

Second, the illegal catching of Alaska pollock differs significantly from the illegal catching of crab. As noted before, Alaska pollock catching is characterized by the second form of the illegal catching the living marine resources – violation of the fishing rules while actually exceeding the established volumes of catching is of a concealed character.

In the Far East basin Alaska pollock with roe was traditionally considered to be the most precious specie (its catching takes place in the Okhotsk Sea during February-April). The main aim of the enterprises engaged in the illegal catching of the living marine resources, in this case is to maximize the volumes of the catch; however, not of Alaska pollock itself, bat rather its roe. To conceal the data about the actual exceeding the volumes of the catch, the enterprises engaged in the illegal catching Alaska pollock in the Okhotsk

Sea are getting rid of the juvenile species, small-size and even large-size males.

To establish the actual amount of the catch under these conditions it is possible only by using indirect data. The main component used is the amount of Alaska pollock roe that Russian enterprises produced and delivered by to the markets of other countries. Within the last five years one of the main peculiarity of Alaska pollock catching in the Okhotsk

Sea is the constant growth of the production output of Alaska pollock roe (Fig.13). If in 2001, based on the reporting data, it amounted to 2.29%, then for the first 5 months of 2005 it would be 5.33%.

Fig. 14. Minimal output and the volumes of the prepared Alaska pollock roe during the Okhotsk Sea seasons during 2001-2005

Analysis of the auctions, where the trade of Alaska pollock roe took place during March-June 2005, shows that Russian fishery businessmen received not less than 25 thousand MT of roe [4]. To ensure the production of this quantity, with regard to the official data on the total catch of Alaska pollock, the production output of the roe taken during 2005 Alaska pollock Okhotsk Sea season was less than 5.65%.

Thus, both the unofficial and official data on Alaska pollock roe output confirm the magnitude of the violations against the fishing rules and actual amounts that exceeded the limits established for the catch during Alaska pollock Okhotsk Sea season.

According to the “Norms of recovery, loss, production output of ready products and nature of the raw product when producing frozen products from the Far East fishes” (Moscow, 2003), the production output of roe from the raw Alaska pollock caught during the 2005 season should not exceed 4.5%.

One can say there are several legitimate reasons to justify the emergence of such obvious quantitative disproportions and an extremely high production output of Alaska pollock roe. Thus, according to the specialists’ evaluations of the Federal State Enterprise (FGU) “TINRO-Center”, part of the catch used to consist of large-size Alaska pollock, representing the generation of the abundant 1997 season, thereby ensuring a higher production output of the roe than in previous years. However, generally, according to the scientists’ opinion, this factor could not produce a decisive influence on the increased production output of Alaska pollock roe [5].

Based on this, the conclusion can be made that the main reason for the increase in the production output of Alaska pollock roe during the 2005

Okhotsk Sea season was the violation of the fishing rules and surpassing the established volumes of catching. Thus, as to the evaluations of the Federal State Enterprise (FGU) “TINRO-Center” specialists, based on observations in Kamchatka-Kurilskiy and in the southern part of the West-Kamchatka subzones, the total quantity of discarded juvenile Alaska pollock in the Okhotsk Sea amounted to 120 thousand MT [6].

Besides, using the standard average roe output of 4.5%, the real catch of Alaska pollock during the Okhotsk Sea season should amount to not less than 567.7 thousand MT. This exceeds the official data on the catch by 116.6 thousand MT and the TAC by 58.9 thousand MT (based on the results of the catching season, the level of the TAC used amounted to 88.6%).

A number of additional factors and, most importantly, the analysis of Alaska pollock roe production structure, characterized by a high grade of non-homogeneity (Table 2), testify to the actual amount that surpasses the catch volumes and the violations of the fishing rules. Thus, during January-March 2005 the total output of Alaska pollock roe in the Far East basin did not exceed 5%, but in April its level amounted to 7.49%. As for the various Russian Federation subjects this disproportion reached an even higher grade.

Production output of Alaska pollock roe produced by the enterprises of the Chukotka Autonomous District in February 2005 amounted to 10.6%, in April – 9.98%; by enterprises of Kamchatka region – 9.4% in April 2005, significantly exceeding both the determined standard production output and the average indices in the basin.

Table 2

Alaska pollock roe production structure within the Okhotsk Sea season 2005

Russian Federation subject

Indices

January

February

March

April

Total:

Jan - Apr

Primorye territory

Volume of the roe prepared, MT

349,19

2 109,35

3 794,32

2 784,03

9 036,89

Roe output, %

3,53

3,94

5,02

6,88

5,05

Sakhalin region

Volume of the roe prepared, MT

127,25

755,73

1 410,29

909,98

3 203,20

Roe output, %

2,12

3,25

3,47

6,45

4,11

Kamchatka regionà

Volume of the roe prepared, MT

342,32

3 204,27

3 164,80

1 675,39

8 386,78

Roe output, %

4,88

7,20

6,20

9,40

6,96

Magadan region

Volume of the roe prepared, MT

36,36

228,16

340,04

214,77

819,32

Roe output, %

2,39

3,42

4,10

7,21

4,21

Khabarovsk territory

Volume of the roe prepared, MT

82,43

424,36

503,81

501,48

1 512,09

Roe output, %

3,65

3,68

3,03

7,95

4,12

Koryak Autonomous District

Volume of the roe prepared, MT

61,73

173,69

352,38

241,92

829,71

Roe output, %

0,05

0,07

0,06

0,08

0,06

Chukotka Autonomous District

Volume of the roe prepared, MT

3,69

64,85

60,48

69,80

198,82

Roe output, %

1,61

10,60

4,09

9,98

6,56

TOTAL:

Volume of the roe prepared, MT

1 002,97

6 960,41

9 626,12

6 397,36

23 986,80

Roe output, %

3,57%

4,88%

4,83%

7,49%

5,34%

Source: M.V.Stratovich «About the results of Alaska pollock

Okhotsk Sea season, 2005».

Based on the facts noted, it is possible to say, that as to the results of the Okhotsk Sea expedition, the volume of Alaska pollock TAC has exceeded by at least 180 thousand MT (as for the evaluation of the FGU TINRO-Center specialists - 175 òûñ. òîíí [7] ), and the official figure of Alaska pollock catch – by 238 thousand MT. With that, as it was just noted, by the evaluation of the FGUP KamchatNIRO specialists, some 120 thousand MT of the undeclared fishing output were Alaska pollock juvenile fishes that were discarded.

One of the most unusual circumstances of the 2005 Alaska pollock

Okhotsk Sea season turned out to be a rather ironic situation from the industry point of view. According to official data, the established TAC volume used was less than 90%, while in reality (even not taking into account the juvenile fish thrown overboard) it exceeded the TAC by at least 11.55%. The resulting deviation in the amount of at least 21.55% of the TAC or some 115 thousand MT of Alaska pollock is the consequence of the frenzied activity of the enterprises, engaged in the illegal catching of the living marine resources.

Thus, using the method of calculation chosen (see p.1.1), one may evaluate the minimal extent of the direct economic loss that can be attributed to illegal catching Alaska pollock in the Okhotsk Sea as for the first 5 months of 2005. According to the calculations, using the price of $1,180 for one ton of Alaska pollock H/G and the output coefficient 1.742, it amounted to $72.62 million (which includes the tax loss of $12.54 million).

However, the direct economic loss from illegal Alaska pollock catching in the Okhotsk Sea for the first 5 months of 2005 is not limited to the calculation. Using the data on the discarded Alaska pollock juvenile fish, it is possible to calculate one more component – potential economic loss that characterizes the extent of the short-received income of the fishing enterprises in the future.

To calculate the extent of the loss methodically it is extremely difficult. In this case, it is necessary to consider many factors and to make all the calculations in the conditions based on high degree of uncertainty.

Additionally, using 2005 data as a basis it is possible to say that the extent of the potential economic loss amounted to not less than $340 million that includes $78 million are the direct loss to the budgets and extra-budget funds because of nonpayment of the taxes, fees and other due payments.

In addition to the direct economic loss, illegal catching of Alaska pollock in the Far East basin is inflicting indirect economic loss, which can be seen in the loss of the trade income from price changes for the products on the market (see in details p.1.1.)

Lately, the world Alaska pollock market price has been rather controversial, from the point of view of Russian fishermen’s activities. From one side, the price for one of the main processes products, traditionally supplied by Russian fishing enterprises to the foreign markets,

Alaska pollock H/G, reached a maximum level within the last few years – $1,150-1,180 per ton. However, from the other side, there has been a quite visible trend of decreasing

Alaska pollock roe cost, produced by the Russian fishing enterprises to the record lower level. As for the results of May 2005, the average price of one kilo of the Russian produced

Alaska pollock roe was established at the level of $9 (Fig. 14).

Through analysis of the situation on can conclude that the main reason this happened is the significant increase of Alaska pollock roe proposed by the Russian fishing enterprises, making 33% as compared to the 2004. Generally speaking, the influence of using this factor has a fragmented characteristic; it produces a significant impact not upon the market as a whole, but on Alaska pollock roe of Russian production only.

Fig. 15. Dynamics of the average prices for Alaska pollock H/G and Alaska pollock roe, exported by Russian fishing enterprises to foreign markets in 2001-2005

Today, Japan and South Korea remain the main world importers of Alaska pollock roe and the USA and Russia are the main exporters. Since 2001, the aggregate production of Alaska pollock has been roughly from 40—43 thousand MT. Of that production, the USA’s share is 55—66% and

Russia’s share is 35—44% (Fig.15).

In 2005, the situation drastically changed. For the first time within the last five years Russian fishermen produced more Alaska pollock roe than their Americans counterparts – 24 thousand MT compared to US production of 22.1 thousand MT, and the combined total production reached a record of more than 46 thousand MT, an increase of 5.63% over 2004, and 14.40% over 2003.

However, the increase of the production output has produced a significant influence only upon the price of the Russian produced roe, which as compare to the level of the 2004 has become cheaper by more than 20%, while the price of Alaska pollock roe produced in the USA, as for the results of the 5 months of the 2005, has remained at the level of the 2004.

Fig. 16. Production and average price of Alaska pollock roe made in the USA and

Russia in 2001-2005

As mentioned in p.1.1, the situation on the markets of Japan and the South Korea, for quite some time, has been that when the cost of fish products exported from the USA were generally 15-20% higher than the cost of the similar products from Russia. This situation is subject to a number of objective and subjective factors.

Of those, the first factor to consider is the generally higher reputation of the US fishing enterprises and the established stable relationships between sellers and buyers; thereby, resulting in a much higher cost value of the US products.

Along with that, analysis of the price formation peculiarities for Alaska pollock roe, - allows one to draw the conclusion that during 2001-2004 a certain parity in the market price for US and Russian production formed. The difference in an average price for 1 kilo of Alaska pollock roe produced in the USA and in Russia during these years stabilized at the level of 13-17%, (the only exception was in 2002).

For the first 5 months of 2005, the situation changed drastically. At the first auctions, the price of the Russian-made roe was fluctuating between $15-19 a kilo. Later on, the end of March the price dropped to $8-11, due to the growing proposal and dumping influence of the enterprises not participating to the auctions and selling their production at much lower prices.

A great influence upon the cost of products produced is the mass deliveries of roe at the end of April-May, which was sold at $4-6 per one kilo.

The analysis of the prices changes for Alaska pollock roe of Russian production allows one to draw the conclusion that the main influence on the decreased average cost, as compared to the previous year, was produced not by market factors but by the dumping influence of enterprises engaged in the illegal catching of living marine resources. In this case, the influence of these enterprises can be divided in two categories.

First, one must look at the influence of the enterprises that did not have the legitimate right to be engaged in Alaska pollock catching in the Okhotsk Sea. Most of these enterprises produced smaller production units (200-300 tons) and could not participate in the auctions; thereby, delivering products at much lower prices and thus applying pressure on the market situation.

Second, the influence of the enterprises having legitimate permit documents, but for whatever reason exceeded the established catch limits. Their impact upon the market is also apparent. Quite visibly, this impact can be tracked by correlating the monthly data on the actual output of Alaska pollock roe and the prices dynamics.

As was previously noted, the average output of Alaska pollock roe during the Okhotsk Sea season significantly exceeded the normal level: 5.34% as compared to 4.5%. Additionally, one cannot help but notice that generally in the Far East basin the most significant portion of the catch that exceeded the normal overage occurred during the final phase of the Okhotsk Sea expedition. If, in January 2005, this portion of the Alaska pollock output amounted to 3.57%, during February-March it was 4.88% and 4.83%, however, in April it reached 7.49%. This actually coincided with the beginning of the sharp price decrease.

With regard to the practice formed during the previous years, it is possible to say that in the end of April and in May 2005 more than 3 thousand MT of additional Alaska pollock roe, produced during the final stage of the catching season, was delivered to the market, thus it was not corresponding to many qualitative parameters. In other words, the market situation was undermined by not only the unpredictable increased supply, by more than 40%, but also by the selling the product of lower demand and quality at dumping prices.

Regarding the market practice of price setting, formed in past years, and the correlation between the price dynamics and the production volumes of Alaska pollock roe in Russia and the USA, it is possible to identify a rough deviation of the price of one kilo of Alaska pollock roe that occurred from the amount of catch that exceeded the limits and the dumping impact of the enterprises engaged in the illegal catching. Such an amount, found by calculating the results for the first 5 months of [8], amounts to $2.66 lower than the average price for Alaska pollock roe of the Russian production.

All this allows one to evaluate the extent of the indirect economic loss contributed to illegal catching Alaska pollock in Okhotsk Sea for the first 5 months results of 2005. From this point of view, calculations amounted to $53.86 million (that includes $12.39 million in tax loss).

Thus, to summarize, economic loss that can be attributed to the illegal catching of Alaska pollock to the 2005

Okhotsk Sea expedition, amounted to not less than $466.5 million. Of that, according to the calculations made, the share of the tax loss to the budgets and the extra-budget funds amounts to $107.3 million; the loss to the fishing industry – $130.4 million; other loss inflicted on the Russian Federation economy (including the loss of other sectors of the fishing-industrial complex) – $228.8 million (Fig.16).

Fig.17 Economic loss structure from the illegal catching of Alaska pollock in the Okhotsk Sea in 2005, $ million

Chapter II . EVALUATION OF REAL AND POTENTIAL CAPABILITIES OF THE FAR EASTERN PORTS TO PROCESS FISH PRODUCTS

Regarding adopting the decision on the introduction of mandatory declaration of fish production produced from the living marine resources, caught within the Russian Federation 200-mile economic zone, inevitably the problem of availability of sufficient processing production capabilities arises.

The reality of this problem relates to the fact that within the last five years not more than 30% of all the fish products caught in the Far East basin within the 200-mile economic zone of the Russian Federation (Fig. 18) were processed in the Far East ports.

Fig. 18. Share of the fish products, produced in the Far East basin and processed on the territory of the Russian Federation, 2000-2004

In 2000, 542.45 thousand MT of fish products were processed through the seaports of the Far East. At that time, the total catch of the living marine resources in the Far East basin amounted to 2.3 million tons; in 2001, production was 620.19 thousand MT, from a catch of 2.1 million tons; in 2002, production was 488.39 thousand MT, from a catch of 1.7 million tons; in 2003, production was 466.8 thousand MT, from a catch of 1.97 million tons; and, in 2004, production was 421 thousand MT, from a catch of 1.72 million tons.

When evaluating the relationship of the production capabilities to the potential requirements of the fishing enterprises (in case of adoption the decision on mandatory declaration of all the fish production within the territory of the Russian Federation), it is necessary to take into account the possibility of an increase in the total catch of the Far East basin living marine resources of up to 2.2 million tons. This is notwithstanding the significant decrease of the catch volumes of the living marine resources, which within the last three years amounted to not less than 2 million tons,

Presently, along the Russian Far East shore there are 10 specialized fishing ports, 22 commercial ports and some 300 harbors possessing of piers and anchors. Officially, 270 business enterprises are registered in the region as being engaged in port functions activities [9].

Within the past years, the main feature that stands out in the Far East fishing ports’ operations has been the reduced share of fish products produced in their turnover. Because of the sharp decrease in the catch of the Far East living marine resources and the trend that the majority of fishing enterprises are now taking their fish to foreign markets, the ports that were mainly engaged in processing fish products had to look for additional possibilities to increase their turnover.

All this leads to changing the orientation of a part of the production capabilities, initially meant for fish products processing, to the processing of other types of cargo.

For example, in the largest Far East fishing ports, “ Vladivostok Sea fishing port” and “ Nakhodka Sea fishing port”, the share of fish products in the 2004 was only 17.69% and 6.34% of the turnover.

However, despite the orientation of these ports to the processing of other types of cargoes, today, a significant part of their production capabilities still is not being utilized. Thus, according to the latest data, the utilization coefficient of the “ Vladivostok Sea fishing port” makes some 65.8%, and the “ Nakhodka Sea fishing port” – 26.8% [10].

Totally, the existing production capabilities of these two ports permit them to process, without obstacles, some 1 million MT of fish products: “ Vladivostok Sea fishing port” - 500 thousand MT, “ Nakhodka Sea fishing port” - 450 thousand MT. Additionally, according to the information of the ports’ authorities, their production capabilities to process fish products can be increased, without obstacles, by more than 20%. Moreover, in the case of arising needs and development of the related investment programs, the production capabilities of “Nakhodka Sea fishing port” could process some 1 million tons of fish products a year. Besides “ Vladivostok Sea fishing port” and “Nakhodka fishing port”, three other ports in the Far East have significant capabilities to process fish products: « Vanino Port» , «DMP Portò» and «Seaport in the Troitsa Bay». For quite some time, « Vanino Port» has been the third largest processor, by volume, of fish products in the Far East region. In 2001, the Port’s services processed 99.2 thousand MT of fish products, after that its volume started to sharply decrease, amounting to 35.5 thousand MT in 2003 [11]. Although the Port’s production capabilities still permit processing of more than 100 thousand MT a year.

Actually, today, « DMP Port» is considered a unique large port in the Russian Far East having purely fishing specialization. In 2000-2002, because of the financial problems of the head company, the Joint Stock company “Holding company Dalmoreproduct”, the Port has not been actually functioning and restarted its activities only in the 2003, having processed some 23 thousand MT of the fish products. In 2004, the turnover of the Port significantly increased, making its year-end results 55.6 thousand MT of fish products. Existing production capabilities, the modernization of which is underway in accordance with the prospective development plan for 2005-2006, permit the port to process more than 100 thousand tons of fish products a year.

The transshipment of fish products through the “Seaport in the Troitsa Bay” is not being conducted because of nonfunctioning refrigeration machinery and the lack of stable demand for the fish products’ processing. Along with that, according to the authorities of the “seaport in the

Troitsa Bay” information, the production capabilities of the Port make it possible to process up to 300 thousand MT, and in the case of conducting crucial renovation – up to 600 thousand MT a year.

The share of other ports, engaged in processing the fish products in the Far East of Russia today, makes some 7% of the total turnover. By preference, they serve the local interests, usually oriented to the activity of a one company, in particular. According to calculations, in 2004 these ports have transshipped some more than 30 thousand MT of fish products. However, their real production capabilities permit handling a turnover of more than 100 thousand MT, and after a small amount of reconstruction – more than 160 thousand MT.

In general, on the basis of the production capabilities analysis of the Far East Seaports, it is possible to draw the conclusion that now they can ensure the processing, without impediments, of not less than 1,510 thousand MT of fish products. This makes up some 72% of the possible requirements (with regard to the growth of the total volume of the living marine resources catch in the

Far East basin up to more than 2.2 million tons).

In case of completing the primary reconstruction, not requiring the significant time and material expenditures, the handling capacity of the Far East ports used for fish products processing would amount to not less than 2,160 thousand MT.

All that permits one to say that the Far East Seaports situated along the seashore possess enough production potential to be engaged in processing all fish products produced from the raw fish caught within the

Russian Federation 200-mile economic zone.

Fig. 19. Actual and potential production capabilities of the Far East ports as for processing fish products, thousand MT

Table 3

Actual and potential production capabilities of the

Far East ports for processing fish products

Name

Fish products turnover, thousand MT

Production capabilities, thousand MT

2000

2001

2002

2003

2004

Actual

Potential

«Vladivostok Sea fishing port»

287.5

328.7

273.5

297.3

252.4

500

600

«Nakhodka Fishing port»

124.8

130.2

112.3

88.8

55.8

450

600

«Vanino Port»

86.8

99.2

68.4

35.5

No info

More than 100

No info

«DMP-port»

-

-

-

23.0

55.6

áîëåå 60

100

«Seaport in the

Troitsa

Bay»

-

-

-

-

-

300

600

Other ports

43.4

62.0

34.2

22.2

More than 30

More than 100

More than 160

TOTAL:

542.5

620.2

488.4

466.8

421.8

Not less than

1,510

Not less than

2,160

Chapter III. EVALUATION OF ECONOMIC LOSS OF THE FAR EAST FISHING ENTERPRISES FROM THE INTRODUCTION OF MANDATORY DECLARATION OF FISH PRODUCTS ON THE

RUSSIAN FEDERATION

TERRITORY

The adoption of the decision on mandatory declaration of fish products, caught within the Russian Federation 200-mile economic zone, on the Russian Federation territory would inevitably lead to the growth of the costs of production and to the reduction of the Far East fishing enterprise profitability.

The analysis of the Far East fishing enterprise production activity and the Russian legislation in force made permits to say, that the necessity to transport the fish products to the

Russian Federation territory would influence two articles of expenditures:

- Expenditures for the customs fees payment;

- Fish products transportation costs (freight).

Thus, according to “TURNIF” fishing company data, in case of adopting the decision on mandatory declaration of fish products on the Russian Federation territory, - the expenditures for the customs fees payment, as per one ton of Alaska pollock caught during the 2005 Okhotsk Sea season would have grown by 66.78%, fish products transportation costs (freight)– by 25.02% (Table 4).

However, in general the influence of these changes to the fish products unit cost turns out to be insignificant. In the case of the necessity to declare all fishing products in the territory of Russia, the total costs to produce 1 ton of Alaska pollock during the 2005 Okhotsk Sea season would have grown by 5.48%, then about the price, would amount to 1,043 Rubles or $26.


Table 4

Calculation of the unit cost of catching 1 ton of Alaska pollock in the Okhotsk Sea in case of introducing the 100% declaration of the product on the Russian Federation territory on example of the “TURNIF” Joint stock company

¹

Articles of expenditures

Existing order

100% declaring

Growth rate of expenditures, %

Expenditures per 1 MT of quota, Rubles

Expenditures per 1 MT of quota, $$

Expenditures structure, %

Expenditures per 1 MT of quota, Rubles

Expenditures per 1 MT of quota, $$

Expenditure

structure, %

1

Wages

2 ,424

84

12.7%

2,424

84

12.1%

0,00%

2

Deductions from wages

624

22

3.3%

624

22

3.1%

0,00%

3

Fishing gears

507

17

2.7%

507

17

2.5%

0,00%

4

Fuel and oils

5,246

181

27.6%

5,246

181

26.1%

0,00%

5

Quotas cost

2 750

95

14.4%

2,750

95

1.7%

0,00%

6

Foodstuff

308

11

1.6%

308

11

1.5%

0,00%

7

Tara cost

262

9

1.4%

262

9

1.3%

0,00%

8

Repair

995

34

5.2%

995

34

5.0%

0,00%

9

Spare parts

669

23

3.5%

669

23

3.3%

0,00%

10

Radio equipment

63

2

0.3%

63

2

0.3%

0,00%

11

Supplies

561

19

2.9%

561

19

2.8%

0,00%

12

Port charges

58

2

0.3%

58

2

0.3%

0,00%

13

Insurance

154

5

0.8%

154

5

0.8%

0,00%

14

Communication

127

4

0.7%

127

4

0.6%

0,00%

Indirect costs

Indirect costs

2,153

74

11.3%

2,153

74

10.7%

0,00%

Transportation costs (freight)

Tax fees

359

12

1.9%

959

33

4.8%

166,78%

17

Transportation costs (freight))

1,776

61

9.3%

2,221

77

11.1%

25,02%

TOTAL expenditures:

19,035

656

100.0%

20,078

692

100.0%

5,48%



The data, presented by other Far East fishing enterprises and detailed surveys, made by the authors, permit the conclusion that the increase in expenditures related to the necessity of declaring all fish products within the Russian Federation territory would be of homogenous character. In other words, the growth of the unit cost for the products, produced by different fishing enterprises would insignificantly vary from each other, is related to objective factors.

The reality is that the expenditures to pay the customs fee and fish products transportation costs (freight) do not depend on the business activity of certain fishing enterprises and remain constant at the industry’s level. The exclusions are only those fishing enterprises that are autonomously engaged in fish products transportation – the unit cost of their products would increase an average or 1% less than of other fishing enterprises.

In general, according to the calculations made, in the case of adopting the decision on mandatory declaration of all fish products on the Russian Federation territory, the unit cost of the products produced by different Far East enterprises, would increase by 4-7%, while industry-wide would amount to not more than 5.9%.

On the basis of this data, it is possible to evaluate both the extent of the possible loss to be suffered by all the Far East fishing enterprises during the 2005 Alaska pollock Okhotsk Sea expedition and the total amount of the economic loss to the Far Easy fishing industry caused by introducing the mandatory declaration of fish products on the territory of Russia.

The total amount of possible loss of the Far East fishing enterprises during the Okhotsk Sea season could be calculated by the following formula: where Ï îìý 2005 – total sum of possible loss of the Far East fishing industry during the 2005 Alaska pollock Okhotsk Sea expedition;

Ä – production output of catching during Alaska pollock Okhotsk Sea expedition;

D Ñ – change of the unit cost of the fish products per 1 ton of Alaska pollock.

Thus, taking as a base the total production output during the Okhotsk Sea

Alaska pollock expedition, which, according to the National Center of Fishing and Communication Monitoring System [12] amounted to some 450 thousand MT in 2005, and the calculated norm of the production unit cost increase – 1,043 Rubles. This was calculated to the extent of the potential loss.

In the case of the necessity to declare all fishing products on the Russian Federation territory, the loss to the Far East fishing enterprises, for the results of the 2005 Alaska pollock

Okhotsk Sea season would amount to 470 million of Rubles or $16.18 million.

The total extent of the economic loss to the Far East fishing industry from introducing the mandatory declaration of fish products on the territory of the Russian Federation can be calculated on the basis of the ROSSTAT Russian Federation (Russian Federation Statistics Department) on the volume of production output and the volume of profit and loss of the Far East enterprises of the fishing industry.

However, the mechanism of the possible economic loss extent calculation, in this case, would have a different shape and would be based on the following formula:

where

ÝÓ – extent of economic loss to the Far East fishing industry;

Îïð – fishing industry production output;

W ý – share of direct export (without entering the Russian ports) in the total catch by the Russian enterprises in the

Far East basin;

I c / c – normative of the product unit cost growth for the products produced in average in the

Far East fishing industry.

Thus, taking as a base the norm of the product unit cost growth (5.9%), obtained by calculations of official data by the ROSSTAT Russian Federation on the production output and the balance of profits and loss of the Far East fishing industry enterprises and the data on the share of fish products declared on the Russian Federation territory during 1999-2004, it is possible to calculate the amount of conditional loss from introducing the mandatory declaration of fish products on the territory of the Russian Federation (Table 5)

Table 5

Amount of the Far East fishing industry conditional loss because of introducing the mandatory declaration of the fish products on the territory of the

Russian Federation in 1999-2004

1999

2000

2001

2002

2003

2004

Production output volume, million of Rubles

30,209.4

36,347.0

40,384.0

38,161.2

47,555.2

43,016.2

Balance of profit (+) / loss (-), million of Rubles

-28.8

-49.0

-3.8

-142.1

-139.2

No info

Production costs, million of Rubles

30,238.2

36,396.0

40,387.8

38,303.3

47,694.4

43,016.2

Expenditures growth normative, %

6.0%

6.0%

6.0%

6.0%

6.0%

6.0%

Share of fish products, declared on the

Russian Federation territory [13], %

24.50%

23.58%

29.53%

28.73%

23.67%

24.47%

Fishing industry loss, million of Rubles

1,369.8

1,668.7

1,707.6

1,637.9

2,184.3

1,949.5

Fishing industry loss, $million

47,2

57,5

58,9

56,5

75,3

67,2

It is also necessary to mention, that the total loss of the Far East fishing industry, presented in the Table 5, largely are exaggerated.

When calculating these production costs expenditures of not only the catching enterprises, but of the entire Far East fishing industry were taken into account. The reality is that the statistics system in

Russia used for 1999-2004 counted the data on the fishing industry in general that does not permit exact division of the catching and processing segments of the fishing industry.

Meanwhile, in various Russian Federation Far East subjects the share of the catching segment in the fishing industry production output is not similar. For example, the Primorye territory its share is some 80-85%, while in Chukotka autonomous district it is quite 100%.

Totally, for the six Far East subjects of the Russian Federation (Primorye territory, Kamchatka region, Sakhalin region,

Khabarovsk territory, Koryak autonomous district and Chukotka autonomous district) the share of the catching segment of the fishing industry produces some 85-90% of the total fishing industry production output.

In this relation, it is possible to conclude that in fact the amount of conditional loss to the fishing enterprises from introducing the mandatory declaration of fish products on the territory of the Russian Federation should be at least 10% lower than the calculated meanings presented in the Table 5.

Chapter IV . EVALUATION OF THE ECONOMIC EFFECTIVENESS OF THE DEEP PROCESSING THE LIVING MARINE RESOURCES ON THE

RUSSIAN FEDERATION TERRITORY

Adopting the decision on introducing the mandatory declaration of fish products, produced from the living marine resources caught within the Russian Federation 200-mile economic zone, on the territory of Russia would permit more effectively combative measures against illegal catching and, in the long run, create conditions for deep processing of the living marine resources on Russian Federation territory.

Presently, the development of deep processing of living marine resources is the main direction for the Far East fishing industry development. This is directly related to the current situation of the fishing-industrial complex and is predetermined by a number of objective reasons.

The main reason, in this case, is the catch reduction of traditional species for the Far East fishing industry-targeted species. Most importantly, Alaska pollock, where the TAC volume has been reduced more than three times within the last eight years (Fig.19).

Under these conditions the possibilities to increase the production output, which is one of the key conditions for stability and increased profitability of the Far East fishing industry enterprises, on the account of extensive development are limited; i.e., increasing the production output. Within the framework of a separate business subjects, a significant increase in the production output (in terms of value) is possible only at the intensive course of development – through production and sale of products with much higher added value [14].

However, the commercial effectiveness of deep (secondary) processing of the living marine resources from the Russian Federation territory presently has not been proved; neither have significant surveys in this direction been conducted.

Fig. 20

Far East basin living marine resources TAC volume in 1997-2005

Evaluation of the economic effectiveness of the deep processing of the living marine resources requires a multi-criteria approach. The methodology uses different indices of effectiveness and simultaneously takes into account the interests of different interested groups, producing their impact on the functioning of the fishing industry as a whole and on certain fishing subjects in particular.

For these groups, they should represent the business subjects themselves (fishing enterprises) and the State.

It is important to point out that there are a number of other groups interested in the operations of the Far East fishing industry. However, for some reasons these other groups cannot produce any significant influence on the industry’s development.

Thus, it is possible to say that from the position of the two main interested groups, the evaluation of the effectiveness of deep processing development on the Russian Federation territory would be beneficial to both parties.

The interests of the fishing enterprises in a broad sense, as well as of their shareowners in a narrow sense are quite obvious—maximizing profits. To determine the State’s interests in the operations of the fishing industry is a bit more difficult. However, generally speaking, it is possible to say that the main task of the Far East fishing industry (as well as of other industries of the Russian economy) is to produce added value products; i.e., increase its input (value) into the gross domestic product (VVP) and the gross regional product (VRP) [15]. This is based on the official declarations of representatives of Federal and regional power bodies, and existing legislative and acts of general law.

Considering all this, one can state that in this case the interests of the State and the business subjects are in partial agreement that profit, most of the taxes paid and the labor cost are the most significant components of the added value product.

Maximizing the profit and production of added value is abstract in nature. In order to evaluate the economic effectiveness of deep (secondary) processing development and to compare different scenarios of the Far East fishing industry development it is necessary to use concrete indices of effectiveness.

Traditionally there are two main indices used for evaluating economic effectiveness.

First, is the extent of the economic effect, characterizing the enterprise, industry, region or country functioning yield in terms of value.

The second is the economic effectiveness, which characterizes the correlation of the economic effect to the expenditures.

Moreover, the specifics of the present day condition of the Far East fishing industry, which within the last years has been operating in the environment of reducing the traditional raw base, requires the analysis of one more key indices of effectiveness – the yield per unit of raw materials. The meaning of this indices is a rather simple, it means the yield received per one ton of the living marine resources caught [16].

The necessity to evaluate the economic effectiveness of the living marine resources deep processing from the point of view of the yield per unit of raw materials, is substantiated both by the purely business and the legal-organization reasons.

From the business point of view, the necessity is directly related to the reduction of the traditional for the Far East fishing industry enterprises raw materials base and inadequate employment in the processing area.

Under these conditions, the possibilities for growth in production output, based on increasing the catch, are limited. The biggest influence on the level of the business subject’s activity is access to the raw materials, which becomes the most precious resource.

From the legal-organization point of view, the necessity of evaluating the yield per unit of raw materials is related to state regulation of the catching of living marine resources that is in force in Russia and, most importantly, the distribution of catching quotas, where the base is a unit of measurement – a ton.

This is why in the foundation used for the evaluation and control system interrelation with distributive functions is one of the main conditions for management effectiveness. It is practical to use similar units of measurement.

These three groups of indices mentioned (economic effect, economic effectiveness and the yield per unit of raw materials) permit the evaluation of the development of deeper processing of living marine resources from all sides impacted.

From the point of view of evaluating the interests of the fishing enterprises and the State these indices have the following assumptions:

For the fishing enterprises—this is the total sum of profit earned, profitability of business operations and the sum of the profit earned per one ton of live resources caught.

For the State— this is the sum of added value, the share of added value in the trade profit and added value portion per one ton of live resources caught.

It is important to mention that in this case there are possibly different interpretations of these indices.

Thus, the majority of the profit and profitability of the fishing enterprises can be evaluated using various indices, among them the most popular are:

- profit on sales (profitability on sales, size of profit on sales received per one ton of the live marine resources);

- balance profit (general profitability, amount of the balance profit received per one ton of the live marine resources);

- net profit (net profitability, amount of the net profit received per one ton of the live marine resources);

The choice of indices that permit optimal evaluation of the economic effectiveness of development of deeper processing of the living marine resources in this case is dependent directly on one regards the interests of the fishing industry enterprises.

The profit on sales, for the most part, characterizes the interests as business complexes, whose purpose is not only to generate the profit but also to ensure the survival, longevity and further development of the business itself, while the net profit represents the interests of the shareholders.

Table 6

System of indices, characterizing the effectiveness of the fishing industry enterprises operations

Interests of business subjects

Interests of the State

Economic effect

1. Total sum of the profit earned:

1.1 Profit on sales

1.2 Balance profit

1.3 Net profit

1.1 Total sum of the added value generated

1.2 Sum of the taxes and dues paid

1.3 Sum of the profit reinvested

Economic effectiveness

2. Profitability of business activity:

2.1 Profitability on sales

2.2 General profitability

2.3 Net profitability

2.1 Share of the added value in the profit

2.2 Share of taxes and dues in the profit (added value)

2.3 Share of the expenses for salaries in the profit (added value)

2.4 Share of reinvested profit i the sales proceed (added value)

Yield per unit of raw material

3. Amount of profit received per 1 ton of bio-resources caught:

3.1 Profit on sales

3.2 Balance profit

3.3 Net profit

3.1 Amount of added value per 1 ton of bio-resources caught

3.2 Sum of taxes and dues per 1 ton of living marine resources caught

When evaluating the effectiveness of the deep processing development from the position of the State a certain variation of the indices is possible.

With the exception of evaluating the amount of added value and the share of added value in the sales proceeds, the analysis of the added value structure has great significance. The most important components of the structure that from the side of the State interests, are the taxes and dues paid, salary costs as well as the profit re-invested into the development of the enterprise (Table 6).

Although, in this case, the main indices used for the economic effectiveness analysis of the living marine resources deep processing development should be the overall indicators of effectiveness. The partial indices should not be considered because the last ones, to a greater extent, characterize the distributive and re-distributive processes but not the economic effectiveness.

Thus, the greatest importance has been set on the following overall indices, characterizing the economic effectiveness from the position of the State interests:

- total sum of the added value generated;

- share of added value in the profit on sales;

- amount of added value per one ton of the living resources caught.

For an objective evaluation of the economic effectiveness of the living marine resources deep processing development, the Authors have chosen Alaska pollock as the principal object for the

Far East fishing industry. The deliveries of Alaska pollock are mainly to foreign markets and its processing in Russia is only at the beginning stage of development. The data of enterprises, engaged in catching and processing Alaska pollock, “TURNIF”, that exports the fish products, and the “Fish processing factory TURNIF”, engaged in primary processing Alaska pollock in Russia.

The data about the structure of the unit cost (Addendum 1), income from selling and the profit (Table 7), were presented by the fishing company “TURNIF” based on their results of Alaska pollock Okhotsk Sea season.

Thus, the company gained a portion of the profit from selling the production from selling

Alaska pollock roe [17].

Based on the results of Alaska pollock Okhotsk Sea expedition, the added value share of the product’s unit cost structure is 32.3%, and 28.6% of profitability on sales. Therefore, the share of the added value in the sales proceeds amounted to 51.7%.

Table 7

The share of the added value in the sales proceeds per a ton of Alaska pollock with roe, not subjected to deep processing, on example of the “TURNIF” Joint stock company

¹

Indices

Per 1 MT of living marine resources caught, Rubles

Share in the sales proceeds, %

1

Sales proceeds:

26,651

100.0%

1.1

-

Alaska pollock

18,821

70.6%

1.2

-

Alaska pollock roe

7,830

29.4%

2

Unit cost

19,035

71.4%

3

Added value size in the unit cost

6,157

32.3%

4

Amount of the profit earned on sales

7,616

28.6%

5

Size of the added value in the profit

13 773

51,7%

The final product of

Alaska pollock deep processing are the fillets. If minced pollock is produced as an additional product, this raises the effectiveness of the use of the raw material. The data on the unit cost structure of a 1 kilo of ready product, produced from Alaska pollock, are quoted in the Addendum 2. The information on the sales proceeds, profit and the amount of the added value are quoted in the Table 8.

Table 8

The share of the added value in the profit on sales of 1 kilo of a ready product,

on example of the “Fish processing factory of TURNIF”

¹

Indices

Per 1 kilo of the ready product, Rubles

Share in the sales proceeds, %

1

Sales proceeds

118.5

100.0%

1.1

Alaska pollock fillets

93.5

78.1%

1.2

Alaska pollock mince

25.0

21.9%

2

Product unit cost

98.0

82.7%

2.1

Alaska pollock fillets

76.5

64.6%

2.2

Alaska pollock mince

21.5

18.1%

3

Amount of added value in the unit cost

38.9

32.7%

4

Amount of profit on sales

20.5

17.3%

5

Amount of added value in the sales proceeds

59.4

50.1%

The calculations show that the share of added value in the unit cost of producing Alaska pollock fillets and minced makes 32.7%, and the share of added value in the sales proceeds, with the profitability on sales at 17.3%, amounts to 50.1%.

It is important to mention that the unit cost structure of the fish processing enterprises differs significantly from the costs structure of the fish catching enterprises. More than 50% of all the expenses of the production of Alaska pollock fillets and minced is the purchase of the raw material, while the main expenses components of the fish catching enterprise are the payment for the use of living marine resources and the purchase of fuel and oil materials (some 40%).

Besides, the fish catching and fish processing enterprises are differing much from each other as for the profitability. In our case, the profitability on sales of Alaska pollock catch makes 28.6%, while Alaska pollock processing amounts to 17.3%.

The survey of fish catching and fish processing enterprises financial-business operations permitted an analysis of the issue of deep processing development effectiveness from three different sides.

First, the survey was used to evaluate the effectiveness of the fish catching enterprises; second, the effectiveness of the fish processing enterprises activity; third, to give a generalized evaluation of the effectiveness of fish catching and fish processing, as a unique complex.

Final indices of effectiveness of a fish catching and a fish processing production facilities are presented in the Table 9.

Based on the results, the analysis drew the conclusion that, in the case of Alaska pollock deep processing development, an overall decrease of business activity profitability–from 28.58% to 22.54%—could occur.

Additionally, the yield of profit per 1 ton of the resources caught increases significantly – by more than 16.18% and the total gross profit, received from the 500 tons of Alaska Pollock, increases from 3,808 thousand to 4,424 thousand of Rubles.

In the case of processing the fish products, the share of value added in the structure of the sales proceeds decreases, however, insignificantly–from 51.68% to 51.06%.

Meanwhile, the amount of the value added, generated per 1 ton of living marine resources caught, is increased by more than 45% and the total sum of the value added received from 500 tons of Alaska Pollock is increased from 6,887 thousand Rubles to 10,021 thousand Rubles.

Table 9

Main indices of effectiveness of fish catching and fish processing Alaska pollock (with roe) on the sample of the JSC “TURNIF” and the JSC “Fish-processing factory TURNIF”

Fish catching

Fish processing

Joint complex

Profit on sales of 500 tons of

Alaska pollock, thnd. MT

3,808

2,703

4,424

Added value for 500 tons of

Alaska pollock, thnd. MT

6,887

7,830

10,021

Profitability on sales, %

28.58%

17.30%

22.54%

Share of the added valueÄîëÿ äîáàâëåííîé ñòîèìîñòè â âûðó÷êå îò ðåàëèçàöèè, %

51.68%

50.10%

51.06%

Profit on sales, as per 1 ton of bio-resources caught, Rubles

7,616

5,408

8,849

Added value, as per 1 ton of the living marine resources caught, Rubles

13,773

15,660

20,042

The survey allowed a number of key conclusions to be drawn. First, it is important to note that the development of fish products processing brings the largest profit to the State interests, while the profit of the business subjects is less significant.

An indisputable advantage of deep processing development of living marine resources, from the State’s point of view, in this case, is the fact that the total increase in the production output occurs behind the scene by preserving a high share of the added value in the sales proceeds structure. As noted, the amount of these effectiveness indices is decreased by less than 1%.

In other words, the raising of results capacity in the fishing industry does not produce negative impact upon its effectiveness from the positions of the State interests. All this is the main reason for a sharp increase in the yield that the State receives from a unit of raw materials.

At first glance, the fishing enterprises profit from development of deep processing of living marine resources is not as visible. An initially lower profitability of the fish processing enterprise leads to a notable reduction of total profitability. That is, from the point of view of the financial analysis, the deep processing of living marine resources development on the Russian Federation territory leads to a decrease of the Far East fishing industry effectiveness.

However at present this allegation isn’t a substantiated one, as, in this case, its necessary to take into account a number of additional factors and, first of all, the current status of the Far East fishing industry.

In the conditions of the traditional raw base limitation, the concentration on the fish catching only doesn’t permit for the business subjects to increase their production output, preserving at the same time a high production activity’s profitability. The possibilities for maximizing the profit by the way of increasing its mass are significantly limited, because, and that is the most important, they aren’t actually related to the activity of this enterprise, depending completely upon the natural factors and the specifics of the State regulation.

In the meantime, as it was just noted, the detailed survey of the financial-business activity of the fishing enterprises, executed by the Authors, shows, that it’s impossible to ensure the stable functioning and high profitability of the fishing enterprises without raising the production output volumes [18].

High profitability of the production, which can be seen in the process of Alaska pollock catching doesn’t permit to ensure the high profitability of the business subject in general, because it doesn’t permit to ensure the full loading of the main production funds and, as a consequence, leads to raising the needs in capitals and making difficult the process renovation the basic production assets.

Namely the low effectiveness of the use of the main production capabilities has become one of the main reasons for emerging the chief paradox of the Far East fishing industry – the profitability of the fish catching is still high, while the effectiveness of the industry and the profitability of the business subjects still remain at a low level.

The only possibility to get a change in the situation is to ensure the growth of production output, which at present, in the conditions of lack of the traditional for the Far East fishing industry raw base, is possible at the extent of the development of the deeper processing the fish products.

The main result of the deep processing development would be the growth of not only the State, but the commercial effectiveness of the

Far East fishing industry functioning at the account of growing the yield per unit of the living marine resources caught and the growth of the total profit mass.

CONCLUSION

Notwithstanding a significant reduction of the most precious catching species resources, taken place within the last years, the illegal catching of the living marine resources in the Far East basin still is inflicting a heavy economic loss, the scale of which isn’t far from decreasing, but as for certain catching species is even growing.

Thus, according to the surveys made, based on the official data of the customs statistics of the Ministry of finance of Japan and the US Customs service, the economic loss because of illegal catching of just three species: Alaska pollock, king and blue crabs, - at present amounts to not less than $700 million a year.

Also in the course of the survey there was established, that within the last five years there has been started to change the structure of the economic loss because of illegal catching the Far East living marine resources.

In spite of the existing opinion, the illegal catching of the bio-resources at present is inflicting the greater loss not upon the State interests, but the interests of the fishing industry and the fishing-industrial complex as a whole.

The loss is revealed in direct and indirect loss of the profit on sales, short received by specific fishing enterprises, as well as in overall industry loss – funds, which on various channels are evading from the fishing industry thereby reducing its investment potential and the possibilities for development.

Within the framework of the quotas distribution system in force to catch the living marine, foreseeing the allocation of shares to fishing enterprises for a five-year term, such a situation is of key significance. Shares distribution, itself, is abstract in character and directly depends on the status of the living marine resources and the amount of the total allowable catch, both of which are determined every year based on scientific surveys.

All this permits one to say that from the beginning a strong hostility between poachers that have no legal access to the living marine resources and the enterprises engaged in legal catching depending directly upon the status of the living marine resources and interested in their rational use.

One of the main reasons for the existence of the illegal catching of the living marine resources in the Far East basin is the inefficiency of the protection system in force in the Russian Federation. Presently, the authorized control bodies lack sufficient capabilities to reduce the illegal catching intensity.

To reach significant progress in this problem, a solution is possible now by only one method – by essentially changing the existing system of control. The most logical move in this case is the adoption of the decision on mandatory declaration of all fish products on the territory of Russia.

However, such a decision is quite controversial. Right away, two significant limitations require overwhelming evaluation and analysis before adoption.

The first being the availability of enough production capabilities in Russia to process all the fish products produced from the living marine resources caught within the Russian Federation 200-mile economic zone.

The second is an inevitable increase in expenses and a reduction in profitability of the Far East fishing enterprises.

Existing production capabilities of the Far East basin seaports processing, without obstacles, of more than 1,510 thousand MT of fish product. This amounts to 72% of the possible requirements, with regard to a possible increase in catching of up to more than 2.2 million tons.

Although, in case of renovating present construction, that would not require significant time and material expenses, the handling capacity of the Far East ports to process the fish products would amount to not less than 2,160 thousand MT. For the present stage of the Far East fishing industry development, this would be quite sufficient.

The survey also shows that in case of adopting the decision on mandatory declaration of all fish products, the increase in the unit price of the products produced by the Far East fishing enterprises would amount to 5-6% and the potential loss of all the Far East fishing industry would not exceed $70 million a year.

The increase in the unit price mentioned would not lead to a significant decline in the financial-economic situation for the majority of Far East fishing enterprises; however, for some it would have critical meaning.

In this regard, the adoption of the decision on mandatory declaration of all fish products, produced out of the living marine resources, caught within the Russian Federation 200-mile economic zone, should be accompanied by the development and adoption of a whole complex of additional measures aimed at minimizing the Far East fishing industry loss.

To those measures, the first attributed should be:

- Decrease either completely lifting or lowering the customs fees for entering fish products;

- Reduction of bureaucratic procedures required by customs for entering vessels;

- Introduction of a special preparation period that permits fishing enterprises to prepare the work under the new conditions.

The loss to the State from the decrease in either completely lifting or lowering the customs fees for entering fish products would be completely compensated to the extent of decreasing the amount of economic loss from illegal catching the living marine resources. According to the calculations, the tax loss to the budgets at all levels and extra-budget funds from illegal catching of Alaska pollock, king and blue crab in the Far East basin amounts to $170-190 million annually.

Except for reducing the intensity of illegal catching, the adoption of such measures would create favorable conditions for the development of deeper processing of the living marine resources on the territory of Russia. Presently, this is one of the most prospective directions for the Far East fishing industry development.

The survey has shown that production of the products with a higher share of added value is now an effective option, both from the point of view of the State interests and the interests of the business subjects.

A detailed analysis of the Far East basin’s main catching specie’s, Alaska pollock, deep processing effectiveness, whose deliveries now are mainly made to foreign market, shows that when the profitability on sales generated per 1 ton of the living resources caught is preserved by more than 20% a significant increase on the profit on sales and the added value occurs.

Thus, in case of the deep processing, the profit on sales of 500 tons of Alaska pollock caught during the 2005

Okhotsk Sea expedition would increase by 16.18% - from 3.808 million of Rubles to 4.424 million of Rubles; the amount of added value would increase by more than 45% - from 6.887 million of Rubles to 10.021 million of Rubles.

Fig 1. Exceeding the total allowable catch (TAC) levels of ring and blue crab in 1993-2005

Fig.2. Correlation of the TAC volume and the scale of TAC exceeding for king and blue crab in 1993-2005

Fig.3. The volumes of the Total Allowable Catch of king and blue crab in 1993-2005, MT

Fig.4. Minimum extent of the direct economic loss from illegal catching of king and blue crab in the Far East in 1995-2005

Fig. 5. The volume of import and the medium customs cost of king and blue crab from the USA and the Russian Federation to Japan (in the raw form)

Fig.6. Correlation of king crab and blue crab deliveries - live and frozen (in the raw form), imported from the Russian Federation to Japan in 1993-2004, %

Fig.7. Dynamics of the customs cost of the frozen and the live king crab and blue crab, imported from the Russian Federation to Japan in 1993-2004, %

Fig.8. Dynamics of the customs cost of king and blue crab from the Russian Federation and king (Kamchatka) crab from the USA (in the raw form), imported by Japan in 1995-2004

Fig.9. Dependence of the customs cost of the Russian and US crab (in raw form) on the amounts of illegal catching in Russian waters in 1995-2004

Fig.10. Minimum volume of the indirect economic loss from illegal catching king and blue crab in 1995-2005

Fig.11. The extent of the Russian Federation relative loss from catching king and blue crab in 1995-2004, $million

Fig.12. Economic loss and relative economic loss to the Russian Federation from illegal catching and the lack of deep processing of king and blue crab in 1995-2004, $million

Fig.13. Structure of economic loss inflicted to the Russian Federation by illegal catching king and blue crab, $million

Fig.14. Minimal output and the volumes of the prepared Alaska pollock roe during the Okhotsk Sea seasons during 2001-2005

Fig.15. Dynamics of the average prices for Alaska pollock H/G and Alaska pollock roe, exported by Russian fishing enterprises to foreign markets in 2001-2005

Fig.16. Production and average price of Alaska pollock roe made in the USA and Russia in 2001-2005

Fig.17. Economic loss structure from the illegal catching of Alaska pollock in the Okhotsk sea in 2005, $million

Fig.18. Share of the fish products, produced in the Far East basin and processed on the teritory of the Russian Federation, 2000-2004

Fig.19. Actual and potential production capabilities of the Far East ports as for processing fish products, thousand MT

Fig.20. Far East basin living marine resources TAC volume in 1997-2005

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4. Development and raising the competitiveness of the Russian fishing industry. Report of the RF State Council. Materials to the report of the RF State Council. – Ì. 2005. - 325 p.

5. Concept of the Far East fishing industry development for the period up to 2010- Vladivostok – TINRO-Center Publ.-1996.-220 p.

6. Latkin A.P. Organization-economic and legal basics of the enforcement the regulating role of the State in the Far East fishing industry development / À.P. Latkin // Development of the Far East fishing industry.- Khabarovsk: 2003.- p.15-36.

7. Maritime doctrine pf the Russian Federation for the period up to 2020. ¹ Ïð-1387 of July 27 2001- Legal System Consultant Plus

8. Development of the Far East fishing industry / edited by Zausayev V.K., Bystritskiy S.P.- Khabarovsk.- 2003.-142 p.

9. Teplyakova N.V. Development of the fishing-industrial complex / N.V.Teplyakova // Fishing industry.- 2002.- ¹6. - p.9-11

10. Tobolev A.N. Integration in the fishing industry as a growth factor of social-economic effectiveness /A.N.Tobolev // Fishing industry.- 2002.- ¹2. - p.11-13.

11. Federal Law of the Russian Federation “On fishing and preservation of the living marine resources” of December 20, 2004. ¹ 166-ÔÇ. - Legal System Consultant Plus

12. Certain results of the 2005 Alaska Pollack Okhotsk sea season (biological and organizational aspects)// FGUP TINRO-Center. Analytical note.

Vladivostok: 2005. – 4 p.

13. Stratovich M.V. About the results at catching the Alaska Pollock during the 2005 Okhotsk sea expedition. Vladivostok. “Intraross”, 2005. – 7 p.

14. Blinov A.Yu. Modernization of the management system on results at the fishing industry’s enterprises (on example of Primorye territory). Dissertation. Economic sciences bachelor Vladivostok: DVGU, 2004. – 151 p.

15. Blinov A.Yu. At the risks’ hook // Far East Capital, ¹6.

Vladivostok: published «Zolotoy Rog», 2005. – p. 36-42.

16. Baklanov P.Ya. Far East region of Russia: problems and premises for the stable development. – Vladivostok: Dalnauka, 2001. – 144 p.

17. Brovko P.F., Lymarev V.I., Basics of the littoral-knowing. – Vladivostok: DVGU, 1997. – 112 p.

18. F.A.Brockhous, Efron I.A. Encyclopedic vocabulary: modern version – Ì.: Eksmo-Press, 2002. – 672 p.

19. Concept of the Russian Federation fishing industry development up to 2020 // Decree of the RF Government of September 2, 2003 ¹1265-ð. Legal System Consultant Plus

20. Decree of the RF Government of November 12, 2003 ¹ 1644-ð. Legal System Consultant Plus

21. Decree of the RF Government of November 14, 2002 ¹1603-ð. Legal System Consultant Plus

22. Decree of the RF Government of December 21, 2000 ¹1827-ð. Legal System Consultant Plus

23. Decree of the RF Government of November 26, 2001 ¹1588-ð. Legal System Consultant Plus

24. Fishing industry in the Far East Federal district / Statistics yearbook – Vladivostok: Primorye territory Committee of the State statistics – 2002. – 26 p.

25. Fishing industry of Primorye territory / Statistics yearbook – Vladivostok: Primorye territory Committee of the State statistics – 2001. – 40 p.

26. Fishing industry of Primorye on the boundary of centuries / Edited by prof.A.P.Latkin. – Ì.: Publ. «Sea», 1999. – 170 p.

27. Economic problems of the Russian fishing industry development. Collection of scientific articles. – Ì.: Publ.VNIIERH, 2003. – 322 p.

28. Ostrovskiy P.A. Rational use of the fishing ports production potential (on example of the Primorye territory) dissertation, economic science bachekor. –

Khabarovsk, 2005. – 157 p.

29. Transportation complex of Russia in 2003. Information-analytical magazine.- Ì.: Mintrans, 2004.

30. Voitolovskiy G.K., Moskovenko M.V. Federal purpose program “ World Ocean” and main problems of organizing its scientific – in the book “World ocean” Issue 1. – M., VINITI, 2000.

31. Dvornyakov V.A. Fishing of Russia . – M.: International relations, 2000.

32. Zilanov V.K. International cooperation new approaches for the sustainable use of water bio-resources on the XXI century eve // Fishing industry, ¹4 – 1996.

33. Ivanov I.V. System of managing the fish resources of Norway // MGU Gerald, v.4, ¹2 – Murmansk, 2001.

34. Kraishkin A.S., Ranenko V.V. Development trends of the world fish catching fleet // Information-analytical collection «World ocean: use of living resources», iss. 2. – Ì.: VINITI, 2001.

35. National maritime policy of the Russian Federation in the Far East: problems and the ways of ensuring the strategic interests of the State in the World ocean: Materials of the international scientific-practical conference (December 16-17, 2003)/ Vladivostok Maritime Assembly – Vladivostok: DVGTU Publish., 2003. – 332 p.

36. Strategic response of Russian to the new century’s challenges. General edition by L.I.Abalkin. – Ì.: Publish house «Exam», 2004.- 608 p.

37. Fishing industry in Russia in 2001 (White book) – Ì.: VNIIERH, 2002.

38. Titova G.D. Crisis of the world fishery: economic and legal problems. – SPtsb, 2003.

39. F.Harrison. Natural rent in the development of society and leveling the economic cycles // Taxes in the civil society. Whom in Russia the power belongs to. – SPtsb., 2003.

40. Analytical and economic materials on the Far East and Primorye territory’s fishing industry to prepare “The strategy of the Primorye territory’s fishing-industrial complex for 2004-2005 and up to 2010”. – Vladivostok, 2003. ANO NTC «Dalrybtechnika», v.1, p.231; v.2, p. 80; v.3, p.124.

41. Golovnin S.D. Evaluation of the economic activity’s results. – Ì., 2000. – 172 p.

42. Ermolovich L.L. Analysis of the industrial production effectiveness -Ì.: Finance and statistics, 2003 – 317 p.

43. Zhurko V.F. Operative economic analysis in the production management. – Kiev, 1999. – 215 p.

44. Lvov D., Dementiev V. New industrial policy of Russia // Economy. - 2000. -¹10. -p.10-16.

45. Sea ports of Russia, CIS and Baltic countries: Reference book.- StPtb.: CNIIMF, 2004.- 248p.

46. Petukhov R.M. Evaluation of the industrial production effectiveness: Methods and indices

Ì.,Economy, 2000 – 364 p.

47. Transportation complex of Russia in 2003. Information-analytical magazine.- Ì.: Mintrans, 2004.- 208 p.

48. Blinov A.Yu. Blinov A.Yu. Ways of modernizing the mechanisms of the fishing quotas distribution // Economic problems of the Russian fishing industry development. Collection of scientific articles. – Ì.: Publ. VNIIERH, 2003. – p.134-142

49. Blinov A.Yu. State management system of economy at the level of an industry (on example of the fishing indsutry) // Scientific works of DALRYBVTUZ. Issue 15. – Vladivostok: Dalrybvtus, 2003. – p.25-27. – 0,4 p.p.

50. Blinov A.Yu. Fishing industry after reformation: consolidation or stagnation // Far East capital .– 2004, ¹2 –p.8-9.– 0,25 p.p.

51. South West Regional Office / National Marine Fishery Service (NMFS)- http://swr.ucsd.edu

APPENDIX 1

Share of added value in the unit cost of the fish product, produced out of 1 ton of Alaska Pollack on example of the fishing company “TURNIF”

¹

Articles of expenditures

Expenditures per 1 ton caught, Rubles

Expenditures structure, %

Added value component

1

Salary

2,424

12.7%

Yes

2

Deduction from salary

624

3.3%

Yes

3

Fishing gears

507

2.7%

No

4

Fuel, oils

5,246

27.6%

No

5

Quota cost

2,750

14.4%

Yes

6

Foodstuff

308

1.6%

No

7

Tara cost

262

1.4%

No

8

Repair

995

5.2%

No

9

Spare parts

669

3.5%

No

10

Radio equipment

63

0.3%

No

11

Supply items

561

2.9%

No

12

Port expenses

58

0.3%

No

13

Assurance

154

0.8%

No

14

Communication

127

0.7%

No

15

Overhead charges

2,153

11.3%

No

16

Customs fees

359

1.89%

Yes

17

Freight charges

1,776

9.33%

No

TOTAL expenditures

19,035

100.0%

32.3%



APPENDIX 2

Unit cost of Alaska Pollack fillets and mince production per 1 ton of Alaska Pollack H/G on example of the “Fish processing factory TURNIF”

¹

Articles of expenditures

Alaska Pollack fillets

Alaska Pollack mince

Added value component

Rubles

%

Rubles

%

1

Raw material

51.3

67.1%

-

0.0%

No

2

Tara and materials

0.6

0.8%

3.0

14.1%

No

3

Production workers’ salaries fund

12.0

15.7%

5.9

27.4%

Yes

4

Deductions from the production workers’ salaries fund

3.2

4.2%

1.6

7.3%

Yes

5

Electric energy

0.5

0.6%

0.2

1.1%

No

6

Heating energy

0.1

0.2%

0.1

0.3%

No

7

Water and piping

0.1

0.2%

0.1

0.3%

No

8

Cold producing cost

1.0

1.3%

0.5

2.3%

No

9

Equipment check, inspection control

0.2

0.3%

0.1

0.5%

No

10

Auxiliary materials

0.1

0.1%

0.0

0.2%

No

11

Working clothes

0.3

0.4%

0.1

0.7%

No

12

Labor protection and daily needs

0.2

0.3%

0.1

0.5%

Yes

13

Production servicing

0.4

0.6%

0.2

1.0%

No

14

Depreciation of buildings and equipment

1.4

1.8%

6.5

30.0%

Yes

15

Managing stuff salaries fund

3.8

5.0%

2.4

11.3%

Yes

16

Deductions from managing stuff salaries fund

1.0

1.3%

0.7

3.0%

Yes

TOTAL expenditures

76.5

100%

21.5

100%

-



[1] In the customs statistics there is being accounted the export of crab either in frozen or in fresh form. For correlation and unification of data all the information is transformed into the raw form. The coefficient of transformation of the frozen crab into the raw form, in accordance with the norms adopted is equal to (1/0,6)

[2] King (Kamchatka) crab – 2004 (seasonal forecast). – Vladivostok: TINRO-Center, 2004, p.58.

[3] A number of the Far East fish catching companies also use such technologies.

[4] Certain results of the 2005 Alaska Pollack Okhotsk sea season (biological and organizational aspects)// FGUP TINRO-Center. Analytical note. (reply to the ARPP request ¹ 263330). p. 1.

[5] Certain results of the 2005 Alaska Pollack Okhotsk sea season (biological and organizational aspects)// FGUP TINRO-Center. Analytical note. (reply to the ARPP request ¹ 263330). p. 1-2.

[6] Same

[7] ] Certain results of the 2005 Alaska Pollack Okhotsk sea season (biological and organizational aspects)// FGUP TINRO-Center. Analytical note. (reply to the ARPP request ¹ 263330). p. 1-2.

[8] In reality the influence of such factors was rather uneven and was varying significantly within a timeframe.

[9] Transportation complex of Russia in 2003. Information-analytical magazine.- Ì.: Mintrans, 2004.

[10] Ostrovskiy P.A. Rational use of the fishing ports production potential (on example of the Primorye territory) dissertation, economic science bachelor. – 64 p.

[11] Same there. p. 62

[12] www.ncmc.ru

[13] Found by calculation, by correlating the amount of the real catching output and the turnover volume of fish products through the Far East ports.

[14] Blinov A.Yu. Modernization of the management system on results at the fishing industry’s enterprises (on example of Primorye territory). Dissertation. Economic sciences bachelor Vladivostok: DVGU, 2004. – 113 p 

[15] Blinov A.Yu. At the risks’ hook // Far East Capital, ¹6, 2005.

[16] ] Blinov A.Yu. Ways of modernizing the mechanisms of the fishing quotas distribution // Economic problems of the Russian fishing industry development. Collection of scientific articles. – Ì.: Publ. VNIIERH, 2003. – p.134-142.

[17] In this relation at making the further calculations the production costs, profit and the added value were distributed in accordance with the profit distribution proportion: 70.6% - Alaska Pollack, 29.4% - Alaska Pollack roe.

[18] ] Blinov A.Yu. Ways of modernizing the mechanisms of the fishing quotas distribution // Economic problems of the Russian fishing industry development. Collection of scientific articles. – Ì.: Publ. VNIIERH, 2003. – p.113

Fig. 1. Exceeding the total allowable catch (TAC) levels of king and blue crab in 1993-2005

Fig.2. Correlation of the TAC volume and the scale of TAC exceeding for king and blue crab in 1993-2005

Fig.3. The volumes of the Total Allowable Catch of king and blue crab in 1993-2005, MT

Fig.4. Minimum extent of the direct economic loss from illegal catching of king and blue crab in the Far East in 1995-2005

Fig. 5. The volume of import and the medium customs cost of king and blue crab from the USA and the Russian Federation to Japan (in the raw form)

Fig.6. Correlation of king crab and blue crab deliveries - live and frozen (in the raw form), imported from the Russian Federation to Japan in 1993-2004, %

Fig.7. Dynamics of the customs cost of the frozen and the live king crab and blue crab, imported from the Russian Federation to Japan in 1993-2004, %

Fig.8. Dynamics of the customs cost of king and blue crab from the Russian Federation and king (Kamchatka) crab from the USA (in the raw form), imported by Japan in 1995-2004

Fig.9. Dependence of the customs cost of the Russian and US crab (in raw form) on the amounts of illegal catching in Russian waters in 1995-2004

Fig.10. Minimum volume of the indirect economic loss from illegal catching king and blue crab in 1995-2005

Fig.11. The extent of the Russian Federation relative loss from catching king and blue crab in 1995-2004, $million

Fig.12. Economic loss and relative economic loss to the Russian Federation from illegal catching and the lack of deep processing of king and blue crab in 1995-2004, $million

Fig.13. Structure of economic loss inflicted to the Russian Federation by illegal catching king and blue crab, $million

Fig.14. Minimal output and the volumes of the prepared Alaska pollock roe during the Okhotsk Sea seasons during 2001-2005

Fig.15. Dynamics of the average prices for Alaska pollock H/G and Alaska pollock roe, exported by Russian fishing enterprises to foreign markets in 2001-2005

Fig.16. Production and average price of Alaska pollock roe made in the USA and Russia in 2001-2005

Fig.17. Economic loss structure from the illegal catching of Alaska pollock in the Okhotsk sea in 2005, $million

Fig.18. Share of the fish products, produced in the Far East basin and processed on the teritory of the Russian Federation, 2000-2004

Fig.19. Actual and potential production capabilities of the Far East ports as for processing fish products, thousand MT

Fig.20. Far East basin living marine resources TAC volume in 1997-2005

REFERENCES

1. Water Code of the Russian Federation, of November 16, 1995 N 167-ÔÇ.- Legal System Consultant Plus

2. Catching output of fish and non-fish species in the Far East basin in 2003-2004 // Materials of the TINRO-Center Laboratory of economics.-2004.-120p.

3. Far East express bulletin: monitoring of prices for fish and sea-products in the Far East region.- ANO NTC Dalrybtechnika.-2005.-¹ 4 (59).- 43 p.

4. Development and raising the competitiveness of the Russian fishing industry. Report of the RF State Council. Materials to the report of the RF State Council. – Ì. 2005. - 325 p.

5. Concept of the Far East fishing industry development for the period up to 2010- Vladivostok – TINRO-Center Publ.-1996.-220 p.

6. Latkin A.P. Organization-economic and legal basics of the enforcement the regulating role of the State in the Far East fishing industry development / À.P. Latkin // Development of the Far East fishing industry.- Khabarovsk: 2003.- p.15-36.

7. Maritime doctrine pf the Russian Federation for the period up to 2020. ¹ Ïð-1387 of July 27 2001- Legal System Consultant Plus

8. Development of the Far East fishing industry / edited by Zausayev V.K., Bystritskiy S.P.- Khabarovsk.- 2003.-142 p.

9. Teplyakova N.V. Development of the fishing-industrial complex / N.V.Teplyakova // Fishing industry.- 2002.- ¹6. - p.9-11

10. Tobolev A.N. Integration in the fishing industry as a growth factor of social-economic effectiveness /A.N.Tobolev // Fishing industry.- 2002.- ¹2. - p.11-13.

11. Federal Law of the Russian Federation “On fishing and preservation of the living marine resources” of December 20, 2004. ¹ 166-ÔÇ. - Legal System Consultant Plus

12. Certain results of the 2005 Alaska Pollack Okhotsk sea season (biological and organizational aspects)// FGUP TINRO-Center. Analytical note.

Vladivostok: 2005. – 4 p.

13. Stratovich M.V. About the results at catching the Alaska Pollock during the 2005 Okhotsk sea expedition. Vladivostok. “Intraross”, 2005. – 7 p.

14. Blinov A.Yu. Modernization of the management system on results at the fishing industry’s enterprises (on example of Primorye territory). Dissertation. Economic sciences bachelor Vladivostok: DVGU, 2004. – 151 p.

15. Blinov A.Yu. At the risks’ hook // Far East Capital, ¹6.

Vladivostok: published «Zolotoy Rog», 2005. – p. 36-42.

16. Baklanov P.Ya. Far East region of Russia: problems and premises for the stable development. – Vladivostok: Dalnauka, 2001. – 144 p.

17. Brovko P.F., Lymarev V.I., Basics of the littoral-knowing. – Vladivostok: DVGU, 1997. – 112 p.

18. F.A.Brockhous, Efron I.A. Encyclopedic vocabulary: modern version – Ì.: Eksmo-Press, 2002. – 672 p.

19. Concept of the Russian Federation fishing industry development up to 2020 // Decree of the RF Government of September 2, 2003 ¹1265-ð. Legal System Consultant Plus

20. Decree of the RF Government of November 12, 2003 ¹ 1644-ð. Legal System Consultant Plus

21. Decree of the RF Government of November 14, 2002 ¹1603-ð. Legal System Consultant Plus

22. Decree of the RF Government of December 21, 2000 ¹1827-ð. Legal System Consultant Plus

23. Decree of the RF Government of November 26, 2001 ¹1588-ð. Legal System Consultant Plus

24. Fishing industry in the Far East Federal district / Statistics yearbook – Vladivostok: Primorye territory Committee of the State statistics – 2002. – 26 p.

25. Fishing industry of Primorye territory / Statistics yearbook – Vladivostok: Primorye territory Committee of the State statistics – 2001. – 40 p.

26. Fishing industry of Primorye on the boundary of centuries / Edited by prof.A.P.Latkin. – Ì.: Publ. «Sea», 1999. – 170 p.

27. Economic problems of the Russian fishing industry development. Collection of scientific articles. – Ì.: Publ.VNIIERH, 2003. – 322 p.

28. Ostrovskiy P.A. Rational use of the fishing ports production potential (on example of the Primorye territory) dissertation, economic science bachekor. –

Khabarovsk, 2005. – 157 p.

29. Transportation complex of Russia in 2003. Information-analytical magazine.- Ì.: Mintrans, 2004.

30. Voitolovskiy G.K., Moskovenko M.V. Federal purpose program “ World Ocean” and main problems of organizing its scientific – in the book “World ocean” Issue 1. – M., VINITI, 2000.

31. Dvornyakov V.A. Fishing of Russia . – M.: International relations, 2000.

32. Zilanov V.K. International cooperation new approaches for the sustainable use of water bio-resources on the XXI century eve // Fishing industry, ¹4 – 1996.

33. Ivanov I.V. System of managing the fish resources of Norway // MGU Gerald, v.4, ¹2 – Murmansk, 2001.

34. Kraishkin A.S., Ranenko V.V. Development trends of the world fish catching fleet // Information-analytical collection «World ocean: use of living resources», iss. 2. – Ì.: VINITI, 2001.

35. National maritime policy of the Russian Federation in the Far East: problems and the ways of ensuring the strategic interests of the State in the World ocean: Materials of the international scientific-practical conference (December 16-17, 2003)/ Vladivostok Maritime Assembly – Vladivostok: DVGTU Publish., 2003. – 332 p.

36. Strategic response of Russian to the new century’s challenges. General edition by L.I.Abalkin. – Ì.: Publish house «Exam», 2004.- 608 p.

37. Fishing industry in Russia in 2001 (White book) – Ì.: VNIIERH, 2002.

38. Titova G.D. Crisis of the world fishery: economic and legal problems. – SPtsb, 2003.

39. F.Harrison. Natural rent in the development of society and leveling the economic cycles // Taxes in the civil society. Whom in Russia the power belongs to. – SPtsb., 2003.

40. Analytical and economic materials on the Far East and Primorye territory’s fishing industry to prepare “The strategy of the Primorye territory’s fishing-industrial complex for 2004-2005 and up to 2010”. – Vladivostok, 2003. ANO NTC «Dalrybtechnika», v.1, p.231; v.2, p. 80; v.3, p.124.

41. Golovnin S.D. Evaluation of the economic activity’s results. – Ì., 2000. – 172 p.

42. Ermolovich L.L. Analysis of the industrial production effectiveness -Ì.: Finance and statistics, 2003 – 317 p.

43. Zhurko V.F. Operative economic analysis in the production management. – Kiev, 1999. – 215 p.

44. Lvov D., Dementiev V. New industrial policy of Russia // Economy. - 2000. -¹10. -p.10-16.

45. Sea ports of Russia, CIS and Baltic countries: Reference book.- StPtb.: CNIIMF, 2004.- 248p.

46. Petukhov R.M. Evaluation of the industrial production effectiveness: Methods and indices

Ì.,Economy, 2000 – 364 p.

47. Transportation complex of Russia in 2003. Information-analytical magazine.- Ì.: Mintrans, 2004.- 208 p.

48. Blinov A.Yu. Blinov A.Yu. Ways of modernizing the mechanisms of the fishing quotas distribution // Economic problems of the Russian fishing industry development. Collection of scientific articles. – Ì.: Publ. VNIIERH, 2003. – p.134-142

49. Blinov A.Yu. State management system of economy at the level of an industry (on example of the fishing indsutry) // Scientific works of DALRYBVTUZ. Issue 15. – Vladivostok: Dalrybvtus, 2003. – p.25-27. – 0,4 p.p.

50. Blinov A.Yu. Fishing industry after reformation: consolidation or stagnation // Far East capital .– 2004, ¹2 –p.8-9.– 0,25 p.p.

51. South West Regional Office / National Marine Fishery Service (NMFS)- http://swr.ucsd.edu

APPENDIX 1

Share of added value in the unit cost of the fish product, produced out of 1 ton of Alaska Pollack on example of the fishing company “TURNIF”

¹

Articles of expenditures

Expenditures per 1 ton caught, Rubles

Expenditures structure, %

Added value component

1

Salary

2,424

12.7%

Yes

2

Deduction from salary

624

3.3%

Yes

3

Fishing gears

507

2.7%

No

4

Fuel, oils

5,246

27.6%

No

5

Quota cost

2,750

14.4%

Yes

6

Foodstuff

308

1.6%

No

7

Tara cost

262

1.4%

No

8

Repair

995

5.2%

No

9

Spare parts

669

3.5%

No

10

Radio equipment

63

0.3%

No

11

Supply items

561

2.9%

No

12

Port expenses

58

0.3%

No

13

Assurance

154

0.8%

No

14

Communication

127

0.7%

No

15

Overhead charges

2,153

11.3%

No

16

Customs fees

359

1.89%

Yes

17

Freight charges

1,776

9.33%

No

TOTAL expenditures

19,035

100.0%

32.3%



APPENDIX 2

Unit cost of Alaska Pollack fillets and mince production per 1 ton of Alaska Pollack H/G on example of the “Fish processing factory TURNIF”

¹

Articles of expenditures

Alaska Pollack fillets

Alaska Pollack mince

Added value component

Rubles

%

Rubles

%

1

Raw material

51.3

67.1%

-

0.0%

No

2

Tara and materials

0.6

0.8%

3.0

14.1%

No

3

Production workers’ salaries fund

12.0

15.7%

5.9

27.4%

Yes

4

Deductions from the production workers’ salaries fund

3.2

4.2%

1.6

7.3%

Yes

5

Electric energy

0.5

0.6%

0.2

1.1%

No

6

Heating energy

0.1

0.2%

0.1

0.3%

No

7

Water and piping

0.1

0.2%

0.1

0.3%

No

8

Cold producing cost

1.0

1.3%

0.5

2.3%

No

9

Equipment check, inspection control

0.2

0.3%

0.1

0.5%

No

10

Auxiliary materials

0.1

0.1%

0.0

0.2%

No

11

Working clothes

0.3

0.4%

0.1

0.7%

No

12

Labor protection and daily needs

0.2

0.3%

0.1

0.5%

Yes

13

Production servicing

0.4

0.6%

0.2

1.0%

No

14

Depreciation of buildings and equipment

1.4

1.8%

6.5

30.0%

Yes

15

Managing stuff salaries fund

3.8

5.0%

2.4

11.3%

Yes

16

Deductions from managing stuff salaries fund

1.0

1.3%

0.7

3.0%

Yes

TOTAL expenditures

76.5

100%

21.5

100%

-



[1] In the customs statistics there is being accounted the export of crab either in frozen or in fresh form. For correlation and unification of data all the information is transformed into the raw form. The coefficient of transformation of the frozen crab into the raw form, in accordance with the norms adopted is equal to (1/0,6)

[2] King (Kamchatka) crab – 2004 (seasonal forecast). – Vladivostok: TINRO-Center, 2004, p.58.

[3] A number of the Far East fish catching companies also use such technologies.

[4] Certain results of the 2005 Alaska Pollack Okhotsk sea season (biological and organizational aspects)// FGUP TINRO-Center. Analytical note. (reply to the ARPP request ¹ 263330). p. 1.

[5] Certain results of the 2005 Alaska Pollack Okhotsk sea season (biological and organizational aspects)// FGUP TINRO-Center. Analytical note. (reply to the ARPP request ¹ 263330). p. 1-2.

[6] Same

[7] ] Certain results of the 2005 Alaska Pollack Okhotsk sea season (biological and organizational aspects)// FGUP TINRO-Center. Analytical note. (reply to the ARPP request ¹ 263330). p. 1-2.

[8] In reality the influence of such factors was rather uneven and was varying significantly within a timeframe.

[9] Transportation complex of Russia in 2003. Information-analytical magazine.- Ì.: Mintrans, 2004.

[10] Ostrovskiy P.A. Rational use of the fishing ports production potential (on example of the Primorye territory) dissertation, economic science bachelor. – 64 p.

[11] Same there. p. 62

[12] www.ncmc.ru

[13] Found by calculation, by correlating the amount of the real catching output and the turnover volume of fish products through the Far East ports.

[14] Blinov A.Yu. Modernization of the management system on results at the fishing industry’s enterprises (on example of Primorye territory). Dissertation. Economic sciences bachelor Vladivostok: DVGU, 2004. – 113 p 

[15] Blinov A.Yu. At the risks’ hook // Far East Capital, ¹6, 2005.

[16] ] Blinov A.Yu. Ways of modernizing the mechanisms of the fishing quotas distribution // Economic problems of the Russian fishing industry development. Collection of scientific articles. – Ì.: Publ. VNIIERH, 2003. – p.134-142.

[17] In this relation at making the further calculations the production costs, profit and the added value were distributed in accordance with the profit distribution proportion: 70.6% - Alaska Pollack, 29.4% - Alaska Pollack roe.

[18] ] Blinov A.Yu. Ways of modernizing the mechanisms of the fishing quotas distribution // Economic problems of the Russian fishing industry development. Collection of scientific articles. – Ì.: Publ. VNIIERH, 2003. – p.113


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