Russia to be Less Reliant on Food Imports

According to RIA Novosti, the President of Russia, Dmitry Medvedev has approved a plan to boost domestic food production and reduce the country’s dependence on imports. Russia plans to enhance its food production through a new food policy which is expected to produce up to 95 percent of domestic grain needs followed by 80 percent of sugar and vegetable oil, meat and meat products to 85 percent, milk and dairy products to 90 percent and fish products to 80 percent.

During the Soviet era, Russia was a gross grain importer and over the last few years the country has grown as the largest grain exporter. Through the new food policy Russia seemed to have set an achievable target as grain exports to other countries are expected to reach 38mn tons by 2015.

Russia during the World Grain Forum in June, 2009 had initiated a food security tie up with the largest wheat consuming states such as India, China and Turkey to build wheat reserve stocks as well as to cushion future price slides, which has been faced by Russian farmers today. Despite the second-best year for exports and increasing demand from livestock farmers, grain prices still remain low on account of high domestic grain inventory.

Viktor Zubkov, the first Deputy Prime Minister of Russia during the Forum had urged foreign investors to develop the 20mn hectares of unused arable land in Russia. The country’s wheat production has crossed 65mn tons, and has set eyes at producing 100mn tons this year despite sinking wheat prices.

In a last week’s report by RIA Novosti, it stated meat production in Russia was also witnessing significant growth over the past few years. Agriculture Minister Elena Skrynnik while she met Medvedev informed domestic meat production grew 14 percent to 3.3mn tons last year, reducing imports by 20 percent.

Similarly, though Russia is short of poultry production, the recent ban on the US poultry is intended to stimulate domestic poultry production. Russia banned imports of the US chlorine-treated poultry as of 1 January on non-compliance to country’s safety standards, a decision likely to hike domestic poultry prices.

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N-Korean Redenomination Boomerangs – Economy Collapses

Several reports suggest the fizzled out redenomination or currency swap enacted by North Korea to contain inflation has literally brought the country to its knees. Last November’s decree which gave citizens one week to surrender/exchange 100,000 old won (North Korean currency) for 1,000 new won sparked off mad rush for essential goods and fast depleted stocks to ignite hyperinflation thenceforth.

The decree stipulated that any cash in excess of a certain limit would become invalid. This in turn forced citizens to convert the old won to goods including electronic items, kitchenware and so on to avoid losing their lifetime earnings. The Tribune News Service reported the price of rice last month in the North rose tenfold at private markets, and residents hoping to purchase food often had to wait in line for hours in subzero temperatures.

The North Koreans largely saved money in the physical form as they mistrusted state-run banks. Song Jung-su, a former railroad security official who defected from the North in 2006 but who is still in touch with his relatives apprised that the wresting of people’s life savings by the totalitarian government had made many to commit suicide.

The currency change is understood to have designed in a bid to check inflation as well as to re-establish Communist Kim Jong-Il regime’s control over the economy that was slipping from its hand for sometime from now to the increasing free market forces. As the direct fallout of the redenomination debacle, the dictatorial government has shown the door to the Workers’ Party finance and planning department chief Pak Nam Gi, the one who spearheaded the currency revamp. It is been rumoured that Pak has been made a whipping boy in an attempt to save the heir apparent to the Kim Il-sung dynasty, Kim Jong-Un, the third son of the current leader.

A diplomatic source is understood to have informed Chosun Ilbo newspaper that if the redenomination had been a success North Korea would have attributed it to the leadership of Jong-Un and used it to justify a third-generation succession. The situation is believed to have made worse by an order which permits shops to be opened only for four hours a day and operated by women above 40, and many have already downed shutters.

The North which is reeling under the pressure of hyperinflation has witnessed sporadic violence where any protest against the state is meted out with death penalties. Such incidences clearly indicate that people do not fear for their lives anymore as many feel they have already lost almost everything. The move which was supposed to curb rising prices backfired as the limited supply of goods in the public distribution system failed to keep up with the demand.

Ever since the formation of the North, it has largely suffered while yielding to be misused by failing states and emerging powers as a deterrent to the constantly intervening Western interests in the regional affairs. The Communist Korea has relied on the overseas essentials aid since the mid-1990s, when the economy crumpled owing to famine and mismanagement, which wiped out 2mn people. The absence of aid from the former and now defunct Soviet Union has also made it worse since then for the Stalinist state.

A state that used most of its revenues to build defense infrastructure is already facing the UN sanctions for its recent nuclear test. Prima facie, its economy looks frail with the country’s latest suicidal redenomination move. It is hoped that both the international community and the North Korean government would come to their senses to save the people of this failing economy.

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El Nino Impact – Rice Prices to Skyrocket

Based on the last month’s report on El Nino by the US Climate Prediction Center, the global rice production as well as other food products will be drastically impacted by the ongoing climatic phenomenon. El Nino, characterized by a warming of the equatorial Pacific, brings increased rain to the South American region and drought or reduced rainfall in Asia, hurting crops.

Consequently, several Latin American and Asian countries will be importing more rice to offset the resulting shortage. The South American countries such as Brazil, Venezuela, Columbia and Panama and the Asian countries like India and the Philippines are understood to have increased their import quotas as El Nino effect is likely to last till June.

The US Rice Producers Association President Dwight Roberts told Bloomberg that Brazil may start buying this month, a total of 1mn metric tons throughout the year, direct fallout of El Nino. In another statement, the Agriculture Undersecretary of the Philippines Bernardo Fondevilla said his country, the world’s biggest rice buyer could lose more than 0.8mn tons of paddy rice, from a severe dry spell caused by El Nino triggering renewed rice imports.

Brazil would be importing from Vietnam, the largest rice exporter behind Thailand after the latter fulfills its November and December tenders from the Philippines. As per the Philippines National Food Authority figures, the delivery of four tender amounting to 2.25mn tons mostly from Vietnam would start from January to June.

The Filipino government has set aside about $37mn to mitigate the impact of El Nino on crop and fishery production this year. The phenomenon is expected to devastate 453,204 hectares of rice, 227,843 hectares of corn fields and 14,160 hectares of the fishery industry in the Philippines alone.

Robert on a rice update to Bloomberg informed that Iraq, the fifth largest rice importer, might buy at least 120,000 tons by next week. El Nino effect is likely to peak this month causing speculative buying in the global rice market.

Robert told that the apparent decline in Mercosur production and increased demand in the South American and other Central American countries, supplies will be tight and some markets could pay considerably higher prices for imported rice. The data on rice stockpiles and production trickling in from almost all regions across the globe indicate world rice market is in for severe price rice which in a worst case scenario could even reach the all time high of 2008.

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China to Tax E-tailers as an Act of Internet Regulation

China’s Administration for Industry and Commerce will soon keep tabs on its online businesses to check fraud and generate revenue through one of the country’s fastest growing industries. A new proposal which is expected to be rolled out by mid-March this year will force entrepreneurs of online stores to register and pay tax.

According to sources, the department responsible for business registration and regulation of China is likely to charge a registration fee between $15 and $30 depending upon the area of business. Similarly, sales tax of 3 percent will be charged on total online sales.

Though Beijing province promulgated similar registration and taxation process back in 2008 none of the online firms got enrolled in the program till date due to non-enforcement of the rule. An official of the Beijing Bureau of Industry and Commerce, Wu Song stated that all internet business entities should be in accordance with any other businesses in the country.

However, there was no confirmation on how the department would tackle those who infringe on the law. It is been assumed that the penalties would range from onsite warning that could damage the reputation of the firm to complete shutting down of the access to the respective perpetrator’s portal.

A recent release by an online marketing research firm, iResearch says that the online revenue generated in the country from advertising, games and shopping totaled about $11bn last year, up by 30 percent. Besides, the company is upbeat on the prospect of online revenue generation to grow by 51 percent to reach $16.5bn this fiscal.

On the flipside, some fear that the new regulation on e-tailers would hamper the industry’s stupendous growth as startup cost and prices of the merchandise on offer would rise significantly. Currently, online stores offer lower prices than the physical ones.

Nevertheless, another school of thought feel the new regulation would substantially reduce online frauds, and would rather streamline the industry. Online stores have negligible or no inventory cost, and therefore, they are able to offer products for lower prices as compared to its brick and mortar counterparts.

The figures from the Beijing Bureau of Industry and Commerce show that around 4,700 complaints on e-tailers were investigated in Beijing alone in 2009, with 1,067 prosecuted. The county which has close to 400mn internet users has today more than 1mn online stores to shop from.

Lately, China has taken several initiatives to regulate internet activities including alleged disinformation campaigns; and the new proposal is largely designed to protect consumer rights. According to China Internet Network Information Center, combined retail sales amounted to only about 2 percent of total retail sales of consumer goods in 2009, and the online retail sales grew 94 percent in the year to total $36.6bn.

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FIFA and SA Allay Fears over World Cup Security

The president of South Africa (SA) Jacob Zuma and the FIFA’s secretary general Jérôme Valcke at separate occasions informed there was no security threat to the forthcoming football (soccer) World Cup (WC) to be held in SA this year in June and July months. Zuma said this at the World Economic Forum (WEF) in Davos while Valcke was responding to the censure by British and German media over granting the WC to an ‘unsafe’ African country.

At WEF, Zuma again downplayed concerns over security, which was sparked off by the recent deadly attack on Togo footballers in Angola. On the other hand, he stressed the mega event offered great business opportunities for investors to showcase their merchandise.

According to the FIFA, 2mn tickets have now been sold, around two-thirds of the total that will be available. The third ticketing sales phase, which will conclude with a random draw for oversubscribed matches on 1 February, saw a total of 1,206,865 applications from 192 countries.

In the wake of the attack on Togo players at the Africa Cup of Nations in Angola, many famous football personalities as well as the English and German media have been making concerted effort to brand SA as an unsafe destination. In response, Valcke on the premise of nowhere is safe in the world, argued “Where can we organize the World Cup? On the moon, where there is no one?”

Franz Beckenbauer, the former West Germany captain and coach who won the WC in both capacities, has said slow ticket sales were due to doubts over the cost and security. Likewise, the manager of Hull City, an English Premier League club, Phil Brown, has said the Angola incident put a “question mark” over the WC.

The FIFA blamed both the media and the football personalities for making potential investors and spectators to panic over the eagerly awaited global event of the year. Valcke urged the media to stop publishing articles such as, the WC is the biggest mistake by holding in SA, don’t fly to SA – it is dangerous and so on.

Zuma as a rebuttal to the criticism said that no security breach has ever happened in previous international sporting tournaments hosted by SA. He expressed confidence by saying that SA was truly ready for business and football fans from across the globe.

The SA president told that what happened in Angola would not happen in SA as the former had just emerged from a war. He informed his country was prepared for the big event with the backing of its police force, army and other security elements.

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