Russian freight railways, pipelines, ports and power generation projects to see high levels of growth

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Infrastructure sector growth in Russia will be underpinned by the government's drive to develop its vast natural resources, especially in Siberia and the Far Eastern provinces.

(PRWEB UK) 17 October 2013

Business Monitor has just released its latest findings on Russia’s recovering infrastructure sector in its newly-published Russia Infrastructure Report.

The report identifies that infrastructure sector growth in Russia will be underpinned by the government's drive to develop its vast natural resources, especially in Siberia and the Far Eastern provinces. The flagship is the multibillion dollar Eastern Gas Programme, which will cement Russia's economic pivot towards Asia. In light of the developments planned, especially in the oil and gas sector, Business Monitor see this remaining the case to the end of the decade. Freight railways, pipelines, ports and power generation projects will therefore see high levels of growth in the coming years.

Business Monitor maintains its forecast for construction industry value growth of 4.9% in 2013 and an average 4.2% annual growth rate to 2022.

Key developments in the sector covered in the report:

■ The Russian government has created a US$10bn investment fund to share the risks inherent in investing in Russia's private sector. The government will use this investment fund as seed money for private investment, reportedly spending US$50-90bn over the next few years to finance up to 20% of privately procured development projects.

■ Infrastructure associated with the export of commodities (pipelines, ports and transport infrastructure – to support oil and gas output east and west of the Urals) has a high growth potential - as development is predicated on growth in the natural resources sector. These projects have been prioritised by the government.

■ The infrastructure projects surrounding the 2014 Winter Olympics and the 2018 FIFA World Cup continue to buffer wider sector growth.

■ The world's largest public-private partnership project in the toll road construction sector finally seems to be off the ground after years of delays. The first phase of the symbolic US$6.5bn Western High Speed Diameter (WHSD) toll road secured a US$1.8bn loan in June 2012, backed by a consortium of five banks comprising: Vnesheconombank, VTB Capital, Gazprombank, the European Bank for Reconstruction and Development, and the Eurasian Development Bank. The remaining US$1.2bn required for the first section will be supplied by the Russian government and state sponsors.

■ The privatisation wave within the domestic construction sector that was expected in 2011 did not ultimately gain momentum (with the exception being the energy and utilities sector, which saw considerable foreign participation).

■ Business Monitor’s Russia country risk analysts note that a gradual reshaping of the Russian business environment will be underpinned by a weakening external climate, a decrease in oil-fuelled surplus and the need to maintain capital inflows. With this in mind, they see the potential for partial privatisation of big state owned assets.

■ Business Monitor maintain their view that political risk is the main element that can ultimately curtail growth as public policy remains opaque, convoluted and subject to frequent change. The planned privatisation scheme remains on the agenda; yet, on the back of heavy state involvement and strong vested interests, they believe foreign enthusiasm to be muted.

Business Monitor is a leading, independent provider of proprietary data, analysis, ratings, rankings and forecasts covering 195 countries and 24 industry sectors. It offers a comprehensive range of products and services designed to help senior executives, analysts and researchers assess and better manage operating risks, and exploit business opportunities.

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