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INVESTMENT OPPORTUNITIES IN THE SECTOR: AGRICULTURE

APRIL 2018

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GOVERNMENT SUPPORT OF INVESTORS IN THE FAR EAST OF THE RUSSIAN FEDERATION 2 2 3 STRATEGIC IMPORTANCE OF THE FAR EAST

“The Upswing of and the Far East is our national priority throughout the whole XXI century round.”

Vladimir Putin President of the Russian Federation

3 4 WHAT OFFERS TO INVESTORS IN THE FAR EAST

Simplified Low level of administrative fiscal burden procedures

Provision of Low costs infrastructure, Efficiency of investors’ labor resources, inputs concessionary financing

4 5 VERTICALLY INTEGRATED SYSTEM OF GOVERNMENT SUPPORT FOR INVESTORS

THE GOVERNMENT OF THE RUSSIAN FEDERATION

Far East Development Far East Human Capital КОРПОРАЦИЯFar East Development РАЗВИТИЯ Fund Agency ДАЛЬНЕГОCorporation ВОСТОКА

SUPPORT AND ATTRACTION OF CO-FINANCING OF INVESTMENT ATTRACTION OF SKILLED CONSTRUCTION OF INVESTORS PROJECTS WORKFORCE INFRASTRUCTURE IN SEZ

5 6 FAR EAST INVESTMENT AND EXPORT AGENCY (FEIA)

FEIA’S BUSINESS MODEL HOW FEIA HELPS INVESTORS IN THE RUSSIAN FAR EAST

1 PROJECT SOURCING: ▪ Greenfield and brownfield investment projects with local partners ▪ Development of new investment projects Investors

2 PROJECT FINANCING: “One-stop shop” Investment for investors Projects ▪ Far East Development Fund (low-cost, long-term) ▪ State financing of infrastructure development (free of charge)

3 LAND ALLOCATION / ZONING / PERMITS ▪ Finding agricultural land and industrial sites for investors ▪ Control of zoning and receipt of permits

Federal and regional authorities 4 INFRASTRUCTURE SUPPORT: ▪ Assisting in the development infrastructure facilities

Regional development institutions 5 EXEMPTION FROM TAXES, SPECIAL AGREEMENTS ▪ The status of special economic zones for projects Local business groups, banks and suppliers ▪ Agreeing special conditions (as required)

6 7 ADVANCED SPECIAL ECONOMIC ZONES (AEZS) AND THE FREE PORT OF (FPV)

Advanced Special Free Port of Vladivostok ASEZ Economic Zone (ASEZ) (FPV)

FPV Chukotka Autonomous Area 18 economic zones with 21 districts with simplified ready-to-use administrative infrastructure procedures

Kamchatka Krai Free customs zone The Region Simplified land acquisition procedure Republic of (Yakutia) “Single window” approach

Khabarovsk Krai Simplified regulation of business The Sakhalin Region

Simplified customs control procedure The Amur Region 8-day electronic visa for foreign citizens The Jewish Autonomous Region Government financing of infrastructure construction Primorski Krai

7 8 TAX PREFERENCES

ASEZ and FPV

RF

0% in the first 5 years 0% in the first 5 years 0% in the first 2 years for 10 years 10% in the next 5 years 0,5% in the next 5 years 1,6–7,2% in the next 8 years

30%

8% 8% 20% 2.2%

0% 0% 0% Social Dues Profits Tax Property Tax Mineral Extraction Tax*

* Note: By the example of the Mineral Extraction Tax on nickel 8 9

INVESTMENT ATTRACTIVENESS OF THE AGRICULTURE SECTOR IN THE RUSSIAN FAR EAST 9 9 10 AGRICULTURE: INVESTMENT APPEAL OF THE FAR EAST

OPPORTUNITIES FOR INVESTING

Dynamic sector of economy :

▪ >10% growth (CAGR) within the period from 2006 to 2016. Chukotka region Production volume - USD 3 bln (in 2016) Availability of land resources:

▪ Potential: 8 mln hectares of cultivated areas, including 2,9 mln hectares of arable land Region ▪ Actual: 0,8 mln hectares are not cultivated and can be used Magadan Region by new investors Geographic proximity to major markets of APAC countries:

▪ USD 280 bln – annual import of agricultural goods in Eastern Yakutia Region and South-Eastern Asia (6% of import growth in 2010-2016) Low level of self-sufficiency of the Far East in the food production: Region ▪ USD 3-5 bln – market size for new investors. Meat, milk, Sakhalin Region vegetables are the most sought-after goods.

Amur Region State support: ASEZ ▪ Federal and regional system of institutions for development “YUZHNAYA” ASEZ and support of investors “BELOGORSK” ▪ State and regional program to support agriculture ▪ Jewish Primorskiy Region Preferential business environment in the territories of ASEZ Region and FPV ▪ Funding of the Russian Far East Development Fund ▪ Government subsidy for the construction of infrastructure ASEZ “MIKHAYLOVSKY” 10 11 AGRICULTURE: LAND AVAILABLE FOR INVESTORS (1/2)

AGRICULTURE LAND OF THE RUSSIAN FAR EAST

Region Total: 8 014 th. ha Arable land: 2 766 th. ha

Amur Amur 2 734 1 574 Chukotka region Region Region

Primorskiy Primorskiy 1 649 754 Region Region

Yakutia Yakutia 1 640 105 Kamchatka Region Region Region Magadan Region Khabarovsk Khabarovsk 666 98 Region Region

Yakutia Region Jewish Jewish 537 95 Region Region

Kamchatka Kamchatka 476 64 Khabarovsk Region Region Region

Sakhalin Region Sakhalin Sakhalin 183 51 Region Region

Amur Magadan Magadan 122 24 Region Region Region

Chukotka Chukotka Jewish Primorskiy Region 9 0 Region region region

▪ Amur and Primorskiy regions – key clusters of arable land in the Russian Far East 11 12 AGRICULTURE: LAND AVAILABLE FOR INVESTORS (2/2)

REGIONAL STRUCTURE OF CROP PRODUCTION IN THE FAR EAST COMMENTS

000 ha 2 900 ▪ Arable land in Far East: 2,9 mln ha. Actual crop operations 2 076 cover 2,1 mln ha. 0,8 mln ha – 1 884 1 949 1 788 potential for new investors but 1 672 1 596 1 383 1 482 land requires melioration 435 474 424 414 379 379 ▪ During 2010-2017 CAGR of 314 341 actual crop operations 1 059 1 165 1 214 1 261 790 855 1 001 929 increased 6% ▪ Amur region has the largest 2010 2011 2012 2013 2014 2015 2016 2017 Potential* size of arable land (1,6 mln Amur region Primorskiy region Jewish region Khabarovsk region Yakutia region ha), in 2017 crop operations Sakhalin region Kamchatka region Magadan region Chukotka region covered 1,3 mln ha. Primorskiy region is top-2 CROP PRODUCTION STRUCTURE region in terms of arable land 000 ha ▪ Far East is a largest producer of Russia of soybeans. During 2010-2017 area of soybeans 141 production doubled and 124 149 117 amounted 1,4 Mt in 2017. 137 101 128 Soybeans are mainly 130 1 267 1 422 produced in Amur, Primorskiy 1 109 1 244 950 935 and Jewish regions 710 802 ▪ Other key crops in Far East include wheat, perennial 2010 2011 2012 2013 2014 2015 2016 2017 grass, potato, oat, corn, Soybeans Wheat Perrenial grass Potato Oat Annual grass barley, vegetables, buckwheat and rice Corn Barley Vegetables Silage corn Buckwheat Rice

Note: * During Soviet times crop area in the Russian Far East amounted to 2,9 Mha 12 13 AGRICULTURE: TARGET FOREIGN MARKETS

IMPORT DYNAMICS, $BN China Japan South Korea ASEAN India

99 100 97

76 70 61 56 45 44

26 27 22 16 17 10

2009 2013 2016 2009 2013 2016 2009 2013 2016 2009 2013 2016 2009 2013 2016

MAJOR IMPORT PRODUCTS, $BN

Oil seeds 38 Fish 11 Fish 4 Fish 10 Fats/oils 11

Meat 10 Meat 9 Meat 4 Feed 10 Vegetables 4

Fats/oils 7 Meat pre. 6 Cereals 3 Cereals 10 Fruits 3

Fish 7 Cereals 5 Feed 2 Fruits 7 Sugars 1

Fruits 6 Oil seeds 5 Fruits 2 Meat 7 Coffee/tea 0,8

Cereals 6 Beverages 3 Oil seeds 2 Beverages 7 Beverages 0,6

Beverages 5 Fruits 3 Sugars 1 Sugars 6 Cereals 0,5

Cer. Prep. 5 Veg. prep. 3 Fats/oils 1 Vegetables 5 Feed 0,5

Dairy prod. 4 Vegetables 3 Veg. prep. 1 Oil seeds 5 Oil seeds 0,4

Feed 3 Feed 2 Beverages 1 Fats/oils 5 Cocoa 0,2 13 14 AGRICULTURE: LOCAL MARKET POTENTIAL OF THE FAR EAST

DYNAMICS OF “CROP PRODUCTION” SECTOR CROP YIELD COMMENTS bn RUB Russia Far East ton/ha ▪ Agriculture is the most 15.3 dynamically developing sector of the Russian Far 12% 12.8 CAGR East. >10% growth (CAGR) within the period from 2006 to 2016. The production 98 105 volume is USD 3 bln (in 87 2016) 64 62 2.6 2.4 53 57 1.5 1.2 1.8 1.8 ▪ The possibility of increasing the yield of major crops Cereals Potato Soy Perennial through the use of modern 2010 2011 2012 2013 2014 2015 2016 grasses technologies, development of infrastructure of agro- industrial complexes and DYNAMICS OF “LIVESTOCK ” SECTOR PRODUCTION observance of crop rotation ▪ bn RUB Russia Far East Per capita The Russian Far East is 297 characterized by low self- CAGR 7% sufficiency in key livestock products. To achieve all- 210 Russian average level, it is 190 required to produce 290 67 thous. tons of meat, 760 60 64 54 thous. tons of milk and 660 48 52 87 44 67 mln eggs in the Russian Far East. USD 3 bln – volume of 20 local market for new investors Milk, kg Livestock, kg Eggs, pcs 2010 2011 2012 2013 2014 2015 2016

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