October 23, 2012

Russia's IN-Invest, Italian companies to build agricultural complex

Moscow-based firm IN-Invest has teamed up with a dozen Italian companies to build an agricultural complex in the valley of the Sulak River worth RUB14 billion (US$455 million), which local authorities hope will become one of the biggest of its kind in the south of Russia.

Dagestan President Magomedsalam Magomedov, who joined the companies implementing the project at the ground breaking ceremony Friday (Oct.19), said that local and federal authorities are working on creating a favourable business climate in the republic.

"We are trying to compensate the safety risks by providing tax breaks … This makes the region economically attractive for foreign investors," he told reporters ahead of the ceremony.

He pointed out that the republic's investment portfolio includes a total of 74 projects jointly worth RUB 230 billion (US$7.4 billion). Magomedov said that the new agricultural project, called AgroDagItaliya, will boost the development of the republic, where agriculture is a staple industry, and help create thousands of jobs.

IN-Invest, which invests primarily in construction and agricultural projects, has contributed 23% of the project's funding, with the remaining portion to be provided in loans by Russian banks, said Gadzhimurad Gadzhiyev, chief executive of AgroDagItaliya.

The complex will be built in three stages, with the first one - construction of a poultry farm - to be completed by the end of next year, he said. The second stage, which involves building a cattle farm and the third one - construction of grain production facilities - are slated to be completed by 2018, Gadzhiyev told reporters after the ceremony.

AgroDagItaliya will make 50,000 tonnes of poultry and 650 million eggs a year, with 40% of the products to be exported. The company has signed preliminary agreements to export poultry to Armenia, Moldova, Poland and Luxembourg over the next 10 years, Gadzhiyev said.

Russia plans to increase annual poultry exports to 500,000 tonnes by 2020 from 50,000 tonnes this year, president of the Russian Poultry Union Vladimir Fisinin said earlier this month.

Russian poultry farms are expected to produce 3.5 million tonnes of poultry this year, and that figure might grow to four million tonnes by 2020, he told Interfax, adding that the increase in poultry output will result in the country fully meeting domestic demand and allowing for expanding exports. But it will take a while before Russia's accession to the World Trade Organisation, which was widely expected to boost the country's export potential, brings results.

Exports "are facing difficulties so far," as European countries remain wary of buying Russian poultry, Fisinin said without specifying the reasons. "We hoped that the EU would buy [meat], that accession to the WTO would help to achieve this, but they show a cautious approach," he said.