Russian infrastructure in the global context

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Over the last 10 years, Russia has attracted more foreign direct investment (FDI) than Brazil and India, but significantly less than China. However, at 3.3%, the FDI share of GDP in Russia is just behind BRIC leader China (3.7%), and far outpaces Brazil (2.4%) and India (1.4%). 

The lack of infrastructure investment over the last 10 to 20 years has dropped Russia to 93rd globally in quality of overall infrastructure in The Global Competitiveness Report 2013–2014 prepared by the World Economic Forum. China and India are placed at 74th and 85th, respectively. 

Only the quality of railway infrastructure in Russia comes in at a relatively high level (31st). All other areas (quality of roads and highways, quality of port infrastructure, quality of air transport infrastructure and quality of electricity supply) need improvement. 

There are many strategies and programs dedicated to infrastructure development in Russia. EY analyzed them and created a map of forthcoming projects, classifying them according to a number of aspects. Overall, 325 infrastructure projects were announced in the last five years. The majority (51%) are planned to be realized in the period from 2015 to 2020, with some projects planned to finish close to 2030.

Sectors 

The greatest amount of money is planned for railway transport infrastructure development. This mainly includes the projects set out in the program of high-speed railway development through 2030. 

The second-largest direction of planned infrastructure investments is road and bridge construction. This mainly includes projects under the jurisdiction of the state corporation Avtodor and those in the Russian transport strategy through 2030. 

The greatest quantity of projects is expected to be realized in the power and utilities segment (including electric power supply, water supply and gas supply infrastructure projects).

Projects location 

Most investment projects are located in Western Russia, which has higher population density and features more economic activity than the Eastern part of the country. 

Positive impact of infrastructure development 

Meanwhile, the positive impact of infrastructure development has been proven by the experiences of other countries. The most cited effects are: 

  • Lower costs of production
  • Increased net output for the national economy
  • Widening labor catchment areas
  • Increased competition
  • Increased inward investment
  • Reorganization of land use
  • Previously inaccessible sites opened for development 

The overall effect of infrastructure investments is increased productivity, a key goal for many companies operating in Russia.