28-fold Increase in Revenue Reported by VEB.RF’s Chinese Subsidiary for 2021
Beijing Hua Nuo E Xiang (REX) Trading Company Limited (REX, a subsidiary of VEB.RF’s entities VEB Asia Limited and Russian Export Center) has reported a 28-fold increase in revenue and a 21-fold increase in gross profit for 2021. The company’s support for exports totalled 340 million US dollars, including 295 million US dollars for non-resource non-energy exports. “There’s more work ahead to achieve our financial targets, but amidst continuing severe pandemic restrictions in China and with almost discontinued passenger service, we believe our performance is satisfactory,” said Artem Sharov, General Director of VEB Asia and Chairman of the Board of Directors of REX.
REX was established in April 2020 to encourage the external demand for Russian-made products. Organised as a for-profit, the company provides agency and consulting services and conducts international trade operations. REX is an important mechanism for implementing the Russian-Chinese governmental agreement to achieve 200 billion US dollars in trade turnover. In this connection, the company is included in the road map for promoting trade in goods and services between Russia and China by 2024. REX completed 28 transactions in the Russian and Chinese local currencies in 2021.
The most significant exports supported by the company were dairy products, colza oil, petrochemicals, polyethylene, platinum-group metals, aluminium etc. The most important high-technology exports included taxifolin, a natural antioxidant present in the Siberian larch and the Dahurian larch, used in cosmetology, food processing and pharmacology. “This is not significant by volume yet, but the product wasn’t previously supplied to China at all—although this is really high-tech exports from Russia, and we all want to boost it,” Artem Sharov emphasised. “There are plans to increase taxifolin exports by a factor of several times.”
As a reminder, passenger traffic between the two countries has fallen almost to zero since the outbreak of the pandemic: China implemented one of the strictest lockdown policies (the so-called “zero-tolerance approach”) and banned almost all travellers from foreign countries. The fact that additional inspections were introduced and that ports were closed was also a substantial impediment to trade.
VEB.RF has plans to form Russian trading companies similar to REX in South-East Asia, where Russia has a limited presence. “A business organised as a trading company is particularly suitable for Russian exporters that want to enter the lucrative and attractive markets in this region. Trading companies can provide a broad range of commercial services while serving as competency centres to promote trade with a specific country and using their quasi-public status to establish ties with its government entities,” Artem Sharov added.
Kostroma Region to Launch Unique SIB in Education with Support from VEB.RF and Sistema Foundation
VEB.RF; the Sistema Foundation, the social investment arm of Sistema; and the Kostroma Region Administration are to launch a social impact bond (SIB) in education to train personnel for the local timber industry.
The project charter was approved by the Kostroma Region Administration. The document was signed by Governor Sergey Sitnikov.
The project is designed to provide young people with career guidance and job search assistance for highly sought-after occupations in the region.
The investor and service provider are the Sistema Foundation, a Russian major charity and Sistema’s ESG competency centre. VEB.RF is traditionally the SIB operator, helping the stakeholders throughout the project life cycle.
The principal beneficiaries are eighth- to eleventh-year students from 16 schools in the cities of Kostroma and Galich and the municipalities of Kostroma, Galich and Chukhloma as well as students at the Kostroma Engineering School of Construction and Forestry, the Galich Engineering School of Agriculture, the Chukhloma Engineering School of Forestry, and Kostroma State University.
Over the next three years, the Sistema Foundation will provide Kostroma Region students with career guidance and job search assistance based on their received education.
The project will contribute to retaining young talent in the region, making them attractive to employers and ensuring that they are paid decently. Segezha Group, part of Sistema, is to recruit adequately trained, highly motivated employees.
The project will deliver social outcomes if at least 75 high school students enroll on the sponsored college or university programmes and if at least 30 trainee programme graduates are employed by timber companies.
If the social outcomes are achieved, the investor will be paid 35 million roubles from the Kostroma Region budget.
The project delivery period is three years. The project will start with supplying modern equipment to the educational institutions and training the teaching staff.
Svetlana Yachevskaya, Deputy Chairperson and member of the Management Board, VEB.RF:
“The Kostroma Region project is Russia’s second social impact bond in education. It is noteworthy that according to a global SIB database, Russia ranks seventh among 34 issuing countries by number of bonds. We have seven more projects in the pipeline for over 300 million roubles and intend to carry out projects on a pay-for-success basis in the future at nationwide level.”
Oksana Kosachenko, President, Sistema Foundation:
“A responsible business has to invest in dealing with difficult problems across a wide range of areas, including staff training and understaffing, and the results of such investments are increasingly important. The Sistema Foundation is one of Russia’s first non-profit organisations implementing a project on a pay-for-success basis. We want to use the project in the Kostroma Region to help with responses to the loss of employees, providing an opportunity to receive special training and get a job at a local member company of Sistema Group. The principal outcomes of the project are to increase staffing by 18 per cent for the group’s entity, the Galich plywood mill, every year. The Sistema Foundation has two similar projects in the pipeline.”
