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Russia land lease likely to draw foreign investors

Updated: 2012-03-16 07:56
By Cui Haipei in Mudanjiang, Heilongjiang ( China Daily)

As temperatures begin to rise this spring, thousands of Chinese migrant workers will cross the Sino-Russian border to work on farms. They will remain there until November, and then return home.

Russia land lease likely to draw foreign investors

A man carries firewood to a dormitory where Chinese migrants live in Khakassia, South Siberia. [Alexander Kolbasov / for China Daily]

In the busy harvest season, Chinese people can be seen everywhere on the vast and exotic fields of the Far East, even in Moscow and the edges of the Black Sea. They plant soybeans, corn and vegetables.

The number of Chinese migrant workers crossing the border to work on farms has boomed over the last 20 years. This growth may intensify, as Russia is considering leasing millions of hectares of idle cropland in the Far East to foreign agribusinesses during its 2012 APEC presidency in Vladivostok.

"We have idle land that could be offered to foreigners," Russian Deputy Economic Development Minister Andrei Slepnev said, referring to the vast areas of the Far East that were abandoned during the market reform period, according to the Russian newspaper Nezavisimaya Gazeta.

The newspaper said the plan is to lease 150,000 to 200,000 hectares in the Primorsky, Khabarovsk and Amur regions.

The proposal will be officially announced by Russia's new president at the APEC 2012 forum. Several investment projects are also being discussed with Vietnam, Singapore, Japan and other countries and regions, the paper said.

Dongning county, located in southeast China's Heilongjiang province, and its port are among the three land ports to the Primorsky region of Russia.

Wang Liangwu, the county's top publicity official, said Dongning has leased idle land in Russia with a gross area of nearly 213,333 hectares and has developed about 160,000 hectares. "Russian local officials want Chinese peasants to work there because it is a waste to not use fertile land," he said.

"If this information is accurate, there surely will be much more Chinese coming there to rent land," said Wang Xinping, 42, who began selling vegetables at a Russian bazaar in 1995. In 2003, he decided to rent a 50-hectare abandoned farm near the Russian city of Ussuriysk. He began planting and selling potatoes, onions, radishes and cucumbers.

The boom in Chinese people renting farms in Russia began in 2000, when rice prices were less than half of the current price. "At that time we did not make money by farming or even lost money," he recalled.

Rental boom

Russia uses only three quarters of its 168 million hectares of croplands, and in the vast but thinly populated Far East there are about 6.7 million hectares of idle cropland, said Qu Wei, a researcher with Heilongjiang Academy of Social Sciences.

Vast areas of croplands were abandoned during the market reform period after the breakup of the Soviet Union, and the rigid demand for food and vegetables offers a great opportunity for China and Russia to strengthen agricultural cooperation, he said, adding that the Far East has one-fifth of Heilongjiang's population, and 90 percent of them live in cities.

"So the Russian government has taken account of the proposal both economically and strategically. It could both guarantee domestic grain supply and reverse the situation of being marginalized in the Asia Pacific, and this new model could be the foundation of economic cooperation between Russia and other countries," he said.

There are no official statistics on the number of Chinese migrants working on farms in Russia, but Wang Xinping estimated that there were more than 10,000 just from Dongning.

Wang said he may eventually stop renting farms in Russia because of fluctuating vegetable prices from increased competition. "It is harder to run the business than before. Choosing the kinds of vegetables to plant is just like a roll of the dice, because you can hardly predict the prices the next year," he said.

The Russian government has tightened labor visa rules for immigrant workers. The cost of applying for a labor visa is around 20,000 yuan, and it usually takes around six months to process the application, said Bi Simin, a sales manager for Luxi Labor Service Consultation Company in Dongning.

Bi estimated that more than half of Chinese workers apply for business or short-term tourist visas to Russia, which - at 3,000 to 5,000 yuan - cost much less. "But according to Russian law, foreigners with these two kinds of visas are not allowed to work there, so there are many Chinese people being deported every year."

Dongning Huaxin Industry and Trade (Group) Ltd is the largest enterprise in Heilongjiang province to develop untouched arable land in Russia. In 2004, the company signed a contract to develop 40,000 hectares over a period of 49 years.

In most instances, lessees must sign contracts with Russian farms or local governments, said Zhang Ying Shan, assistant general manager of the company, adding that contracts for small plots can be signed with collective farms, while larger developments require the participation of a Sino-Russian joint venture authorized by local governments.

Although vegetables and crops are sold at local markets, large enterprises can cope with the fluctuations in prices easier than small farms, said Zhang, adding that big companies generally pay only a few dozen yuan a year for each hectare.

"Considering that the Chinese farming cultivation system has a double role of government and enterprise, the Russian side worries that it could potentially monopolize its market," Zhang explained. As a result, most Chinese State-owned collective farms often cooperate with private companies like Huaxin.

Wang Xinping said other problems with renting land abroad arise from uncertain policy changes. "Collective farms or local officials often violate or even tear up contracts," he said, adding that some local gangs also pressure Chinese farms for protection money. "I hope this could be changed with Russia's entry into the WTO."

Because of the uncertainties in renting land in Russia, Wang spent 3 million yuan last October to rent a six-story building in downtown Dongning. He has turned it into a hotel. "I am thinking of quitting my business in Russia, but it is unpractical to do it in one sweep."

Controversial proposal

The proposal to lease millions of hectares of idle cropland in the Far East to foreign agribusinesses has generated some controversy within Russia.

Dmitry Balkov, of PETKUS Technologie Russia, thinks the plan has promise. "Idle land (in the Far East) is a problem. In fact, the Koreans are the only people who have ever used it productively. Back in the Soviet era they grew vegetables and watermelons there," he told the Nezavisimaya Gazeta newspaper.

Boris Frumkin, an agriculture expert from the Russian Economics Institute, described the proposal as "controversial and fraught with potential conflict." It would be safer to set up joint ventures with Vietnam or the Democratic People's Republic of Korea to avoid the emergence of "technological or ethnic enclaves", he said, according to the newspaper.

Sergei Shandybin, another agriculture expert from the Razvitiye Group, cautioned that foreign farmers using these lands under long-term leases might employ unsafe farming methods, polluting and depleting the soil and making it difficult to restore the land's fertility afterward.

"Wouldn't it be more natural, before starting such projects, to offer these lands to Russian companies on the same terms? People have problems finding jobs in small towns. There should be state programs to get them interested," he said.

Asian investors said they are ready to put the idle land to use and that this could be the start of long-term cooperation. "There are risks too," said BCS analyst Bogdan Zykov. "They could drive the local people from their land, or deplete the soil by careless farming."

On the other hand, some of them may decide to stay after working on the land for years. "Farming is not just an occupation. It's a lifestyle," he said.

Feng Yujun, head of Russian studies at China Institutes of Contemporary International Relations, said Russia's proposal to develop the Far East is a practical idea for both economic and political reasons. "Russia needs to find a balance between opening up and protecting national security, and it is decided by its attitude," Feng said.

"On one hand, the Russian government wishes to develop this area but is restricted by its finances. On the other hand, they have an indefinable mistrust of foreign capital and labor.

"But for now, the biggest issue for Russia is to attract foreign capital by putting land available for rent into the market," said him.

Contact the writers at cuihaipei@chinadaily.com.cn.

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