Niyazi Gasymov: it’s nice to invite competitors to the negotiation table
An interview with Niyazi Gasymov, President of the Association of Producers, Importers and Exporters of Fresh Produce, head of SoyuzPromContract
The importance of sectoral associations on the Russian fresh produce market grows every year. Due to such organizations, market participants can establish dialogues with state officials, representatives of other market segments, with the mass media and consumers, deliver their message, voice proposals, and insist on changing the rules of the game. One of such organizations is the Association of Producers, Importers and Exporters of Fresh Produce (APIEFP) established in 2014.
The previous interview with the Association President was posted at FruitNews two years ago, almost right after formation of this organization. This time again we would like to talk about changes in the Association, its development, plans for the future, as well as about current and foreseeable changes in the Russian market of fruits and vegetables.
Mr. Niyazi K. Gasymov, President of the Association of Producers, Importers and Exporters of Fresh Produce, head of SoyuzPromContract, responds to questions by FruitNews. Mr. Gasymov was elected the President of the Association in September 2016 having replaced Mr. David A. Kalikhman, the first President of the Association.
FN: Tell us about current activities of the Association of Producers, Importers and Exporters of Fresh Produce (APIEFP), please.
Niyazi Gasymov, President of the Association of Producers, Importers and Exporters of Fresh Produce, head of SoyuzPromContract
N.G.: Any activity has certain stages of development. There is a stage of initiation, formation, and development. We have become recognizable over the past two years. We have realized that, as association, we are in the making. This stage can obviously get prolonged, if there are no stimuli inside. But we, as association, have been assertive, we are known, and our opinion is considered
Our further objective is to invite more foreign companies to become Association members, to contribute to the Russian Federation development. We have communicated with companies from Egypt, Argentina, Israel, and Chile recently. These companies are ready to start investing in the Russian agriculture. We are happy and inspired that we can be useful to such companies, if they have some questions.
FN: Does it mean you feel like a bridge for foreign companies coming to the Russian market?
N.G.: The initiative to establish the Association originally came from the bottom. Usually it is the initiative of top tiers to create some superstructure. But we, four large Russian companies, got together several years ago, like we had done previously, to talk about certain programs. These companies were Globus, Nevskaya, SoyuzPromContract, and Tropic International. Initially, four of us were going to talk about current activities. Later on, AkhmedFruit joined us. And five of us started thinking of forming a platform for discussions. We realize that we are competitors, but it is nice to invite competitors to the negotiation table. Let each of us have its own plan. But if such a platform can help us be useful to each other and, correspondingly, to the country, why not?
Already then we talked about the beginning of decline in consumption of imported produce, and that it was time to provide assistance to farms in Russia, to finance farmers, give them seeds that our retailers needed, and make them interested in growing the produce in demand. There are speculations in the public that the produce should be sold by its producer. We fundamentally disagree with it. The labor was divided long ago in the world – those who grow cannot sell. If they start selling, they will feel the hunger for the money and will stop producing. We think that some should deal with growing, while others should sell the produce. A mediator retailing the produce has a separate technological process. We, traders, are useful for the market, retail chains, and producers. This is our role and place. We can provide farmers with a possibility to grow something that is profitable to produce, and the market will define conditions of pricing and how to sell it.
FN: In the meantime, most large importers implement their own produce growing projects. Is that correct? For instance, your Gusar apples [SoyuzPromContract grows them in Azerbaijan, FruitNews].
N.G.: We have Gusar apples, Astrakhan potatoes, and we grow onion. We are more and more eager to sell the domestic produce. For instance, at present we are negotiating with Israeli and Dutch partners on organizing our own production. This year we, jointly with the Chinese, are planting garlic in the Astrakhan Region, and we consider selling cauliflower and Chinese leaves. As far as investments in other countries are concerned, in Azerbaijan we have not only apple gardens, but there is also production of persimmons and drupes. Jointly with Spanish partners and employing a Spanish technology we have planted peach, nectarine, apricot and cherry trees there. We hope this year we will harvest some 2,000 tons of drupes. In 2016 we harvested persimmons. We have 75 hectares of persimmon trees. We plan to produce 40 tons per hectare in two years. By 2018 we plan to produce 25,000 tons of apples. In 2017 we expect to harvest 18,000 tons. Our annual plantation is as large as 60 hectares.
In the Soviet era Azerbaijan was a ‘cucurbitaceous’ republic for the Russian Federation. I hope that at bilateral meetings Vladimir Vladimirovich [Putin] and the Azerbaijani president discussed assistance to the agricultural segment with the aim to develop the produce that was previously delivered from the European Union. We will try to put the ideas of our two presidents into practice.
FN: Is everything that you grow in Azerbaijan intended for the Russian market?
N.G.: Mainly for the Russian market. The second and third grade produce is obviously left for the domestic market.
FN: What new trends in the geography of supplies of fruits and vegetables can be identified by your company and other members of the Association?
N.G.: We have indicated that it is interesting to be in the Association for everyone who wants to be present on the Russian fresh produce market. In this regard, the market dictates its conditions. We understand that the Russian market needs extremely high quality produce. Retain chains decide independently which produce to sell. In this regard, all members of the Association have begun developing supplies from former Soviet republics.
Uzbekistan has actively joined this process. We see that organoleptic properties of Uzbek produce are indeed on a very high level. This is why it enjoys certain demand on the Russian market, and members of the Association began importing produce from Uzbekistan. Azerbaijan and Kazakhstan have joined this trend recently. We see some products from Abkhazia, e.g. tangerine, some Armenian products. Armenian apricots and tomatoes enjoy significant demand. Georgian producers have joined supplies. There is very active demand for products from Belarus, e.g. carrots. Belarusians are doing well; their tomatoes are also in good demand. Carrots and potatoes are supplied from this country in spring. We have seen Belarusian cabbage and beetroot lately.
FN: What other changes on the market have been observed by members of the Association lately? How do they react to these changes?
N.G.: Members of the Association are trying to survive, dare I say it, in this difficult time. Incomes of Russians have begun falling; it is a fact. Every one of us, being a bridge between a store counter in Russia and a foreign supplier, tries to smooth and level relations that are evolving between producers and consumers in this difficult period. We see that the price of Moroccan, Turkish, and Egyptian tangerines on store shelves is not above $1 per kilogram. If we visit European supermarkets, we will not find anything below €2.5 to €3 on the shelves; but for us it would be too expensive.
The Association positions itself as organization that delivers joy to the population. Fruits and vegetables mean a healthy lifestyle. They are vitamins. When we visit a sick person, we surely bring some vitamins. We do not want to see fruit and vegetable consumption falling sharply, but it is the situation that has been observed lately. It depends directly on the living standards of Russian citizens. And we are starting to lobby certain things that could reduce costs of produce.
FN: Could you give some examples of such projects of the Association?
N.G.: We studied the practice of charging VAT on fruits and vegetables in European countries and were surprised to find out that in some countries, e.g. Great Britain, there is no VAT on fruits and vegetables, while in other countries the tax rate is from 3% to 8%. If we say that citizens of the Russian Federation are the main treasure of the Russian Federation, the question is why not leveling VAT on fruits and VAT on vegetables, i.e. reducing VAT on fruits from the current 18% to 10%. It will save 8% for the population.
In the end, we can sit down and calculate the benefit of the state from us living two years longer. Believe me, there will be benefit from such longevity. I understand that not many functionaries in the country think of the future. But let’s do what we are supposed to do. If it benefits the country in some way, it should be done without hesitating. From the tactical point of view, it is always difficult for the state. We always need money badly. We cannot afford living like Americans live. We cannot afford living like Europeans do. Americans have their own model; Europeans have a different one. It is always difficult for us, because we are so poor. But what should we do? Poverty is no sin. We always do not have enough money. But, why not finding an option not to deprive people of necessary vitamins and cellulose? If each of us lives two to three years longer, we can bring much more benefit to the country through different taxes, e.g. income tax.
We have arranged a meeting with a State Duma Committee on this question. We understand that to really promote anything in the country it is more beneficial to be a producer. But, unfortunately, our producers do not grow a lot of fruits. Since they do not produce much, their produce is quickly sold out. They are not concerned about cost reduction at present. But we, traders, have been calculating.
“In the beginning was the Word”. The same is here. Initially we voiced a proposal to cancel duties on oranges. And we have achieved it. Customs duties on oranges will be canceled for one year as of January 2. During this year the population will understand that if oranges on shelves are affordable, more of them will be purchased. Unpaid duties will be offset by other taxes, e.g. VAT.
To make sure that duties are lifted, we contacted the Ministry of Economic Development and demonstrated statistical figures: how many oranges were imported and how much the Russian budget may lose, and what potential benefits are. Constant interaction made it possible to convince the economic development ministry of carrying out an experiment in 2017. The question will be again discussed in November to December 2017. If consumption of citrus fruits rises in 2017, I think the preference will be prolonged.
FN: Are there such discussions about customs duties on other fruits?
N.G.: We are currently discussing bananas, and we hope that we will manage to get the same discount on bananas. In many Russian regions bananas are eaten mostly by children, because this fruit is very convenient – it can be eaten right after you have peeled it. Our children are our future. Each of us has children, and we understand that by ensuring affordability of such convenient fruits, we can provide more healthy food to children, so that children have fewer health problems in the future. This is why we made that proposal, and we hope to get the same preference for bananas, at least for a trial period.
FN: Getting back to activities of the Association. How has the composition of the Association changed? What are its new members? How do foreign, international companies and organizations join you?
N.G.: Over the past two and a half years only one Russian member has left the Association. It is Tropic International. We do not know the reason for their departure, but we respect this decision. However, in general, the number of members of the Association has grown. Three foreign companies joined us. There are talks with two more companies at present. We hope that in 2017 our Association will expand by five companies. At present we have 22 members of the Association, and they account for some 40% of supplies of main items of fresh produce (citrus and pome fruit, and etc.) to the Russian market of fruits and vegetables, including domestic produce. It is significant amount.
FN: We wish you successful growth and development. Thank you!