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Infrastructure normally should serve the function

to assure the same and fast economic development.

And that's not the case as we have already understood,

that's not exactly the case in Russia.

And there are many reasons for that,and one of the challenges for the road

building and infrastructure projects in general, that's a challenge of corruption.

There are estimates, I would call them pessimistic estimates, but still we should

reproduce them to have the objective picture of what's going on inside Russia.

Some of the estimates say that as many as less as one third of the budget for

roads goes to road building and the rest, the remaining two thirds,

is either stolen, or misused,

or disappeared somewhere on the vast territory of the Russian Federation.

So, definitely that's a disaster and

should be, the situation should be mended dramatically.

Still another sad estimate according to different sources road building costs

at the time of the former Mayor of Moscow, Luzhkov,

were 10 times higher than, on average, in the USA.

Just imagine the difference.

Roads building process, 10 times higher price than, on average, in the USA.

Uncomparable, that only suggests that corruption figures or

estimates could be more or less accurate.

At least in the past, hopefully enough.

I don't have the data for the present,

but hopefully enough of the situation has changed for the better.

So the main thing about infrastructure that poor infrastructure

is definitely a challenge to economic efficiency.

Poor road infrastructure confines economic growth.

According to other estimates, Russia loses annually from

7% to 9% of it's GDP due to bad roads,

quality, and inefficient traffic regulation.

Goods can travel on average only 180 miles per day in Russia,

while in the European Union that's dramatically much more,

they could travel within a day up to 900 miles so.

That's a difference which demonstrates

inefficiency of infrastructure in Russian economy.

And that was the reason why the President Vladimir Putin

back in the year 2010 decided to set up a target

to build 14,000 kilometers of new roads in five years.

And that was a very appropriate thing to do.

And another target was set up that all

the federal roads were to be repaired by the year 2020.

Again, in necessity again, a well thing to do but a lot will again depend

on the quality, what will be the quality of those repaired roads?

Would they last 15 years or more?

Or would it be again the case of three to four years, and that is it?

And then we would have to rebuild them all.

So definitely the question of quality remains one of the crucial ones.

And again, we will talk about that later on, but again there is one fundamental

question related to the topic of infrastructure.

Normally if you have a well functioning market economy

then the market actors, the companies, businesses,

normally should deal with the situation if there is a need.

If there is a demand of the new road, then there should be a supply

of appropriate infrastructure according to the demand.

So this equation between demand and

offer is always one of the core fundamental

equations of all the market economies.

It is not happening in Russia.

We need interference of the top

people to dress up the goals to rebuild

infrastructure projects.

Why?

Why is it always the same?

Why should we wait for another to be issued in order to do something?

Why the economy does not function in itself?

Ensuring the necessities and economic needs.

And that's another big challenge.

That's another big issue.

We will definitely deal with that at a later stage within this presentation.

And finally, one more topic related to infrastructure development.

It is not only important for good functioning

of the national economy as such, the well developed infrastructure.

But Russia can enjoy high returns from the use of it's networks and

it's infrastructure projects if it suggests

those infrastructure links as transit links for other countries.

I'm talking namely about Europe-Asia transit link, and definitely,

we have heard a lot about the prospects of the development of the North Sea Link.

There are good prospects, partially because of the climate change, partially

because of the new technologies, partially because the new icebreakers did appear.

But it is a reality that many countries like China, India, Singapore,

South Korea, and other Asian countries, they think about using North Sea link as

a more important link to supply goods to the European destination.

And it is more rational because normally you can economize up

to 5,000 kilometers in transport link if you use the North Sea Link.

And that's the reason why in China they made up plans to extensively,

to more extensively use it and in seven years as they

plan to transport every six ton of exported goods to

the European Union destination by means of North Sea Link.

So, prospects, good but

usual the sad news about those enormous

prospects is that not enough is being

done by Russian businesses to assure the Link and

to offer necessary services, links,

networks to the customers which are ready to use them.

Again, we lose a lot of returns possible.

Hypothetic returns which could have been worked for the Russian economy prospects.

If we talked about another aspect of infrastructure,

the one which is related to railroads,

that's definitely also a very promising network to develop.

There are high distances, so speedy trains have a lot of prospects to be used.

You have to rebuild the roads.

You have to make operating environment more efficient.

And then, and only then, you can make use of railroads

networks also as a service, as an important service, and

suggested to foreign customers.

Again it is not yet the case, but hopefully enough it will be the case and

there are other infrastructure projects definitely to mention like oil and

gas pipelines.

That is a huge necessity in building those in the Asian direction.

Again, if all of those infrastructure networks had been already in place,

we could have delivered many more tons and cubic matters

of energy resources in the Asian direction, and that's the necessity today.

So, the conclusion is that the well developed infrastructure is

a must for any economy and for Russian economy anyway, and

that's a challenge to be addressed and to be met within the coming years.

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Infrastructure for an economic development

Understanding Russian Economy. Problems of Transition

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