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The project will inject liquidity directly into the primary agricultural sectors of grain farming, where Russia has a great natural advantage - having probably one of the best natural growing conditions in the world.
The farming sector in Russia is in an early stage of transition and the project will address two obstacles to transition of the sector, (i) the inefficiency of the primary markets for the origination of agricultural products, resulting in lack of transparency, high volatility and low prices for the farmers and (ii) the lack of trust in a reliable grain warehousing system.
The project will help achieve the transition objectives as follows:
1. By injecting liquidity, the project improves the functioning of the market. The availability of working capital financing will allow farmers to decide when to sell their commodities in order to maximise return.
2. Before the Warehouse Receipts (WHR) system is in place, the project will help improve services available in the sector: upgrade the warehouse storage facilities, and introduce inspection and licensing systems. Actex and its key shareholder, Toepfer, is strongly committed to reform of the grain storage sector and introduction of the WHR legislation, will demand adequate standards from the local silos and promote the WHR system in Russia.
3. The visible participation of Toepfer will lead to increase in the transparency in this market. An international player will be thus reducing the proportion of cash transactions and helping the farmers get better prices for their produce.
4. The project supports the Bank’s policy dialogue with the Russian Government on the introduction of the adequate WHR system. The demonstration effect of the project with participation of a large international sponsor in one of the key sectors is expected to be significant. The experience in other countries (e.g., Kazakhstan, Ukraine) shows that commitment of international traders can be an important factor in strengthening policy dialogue.
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