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Japan’s Sumitomo Corporation plans to invest a total of $175 million in construction of a timber-processing factory in Primorye.

The Japanese company intends to build two units of the new plant in the northern Primorye village of Plastun where the largest Primorye wood-cutting company Terneiles is conducting its activities, news reports said Tuesday.

The trial launch of the plant is scheduled for the fall of 2008 and the full-scale production is supposed to be started in January 2009, with the annual production volume of 420,000 cubic meters.

Sumitomo Corporation first entered Russian timber market in 1996 by buying 11 percent of shares in Terneiles Company. Last July the company increased its shares to 45 percent thus acquiring the controlling stock. Annual trade turnover of Terneiles accounts to $146 billion, 70 percent of trade is performed with China, South Korea and Japan. These countries export raw, unprocessed timber.

The decision to build a processing plant in Primorye can be explained by a planned increase in taxation for exports of Russian raw timber. In January 2009 the taxes will increase from existing 25 percent to 80 percent thus making exports of Russian raw timber materials costly for businesses.