Infrastructure development in Russia and global insights
Infrastructure as the way forward
The majority of respondents (60%) confirmed that they understand the strategy and direction of Russian infrastructure development, but not in all areas. This demonstrates that business is focused on infrastructure as a major opportunity.
There are two key viewpoints on the issue of whether investments in infrastructure will become a significant impulse for Russian economic development. Industry professionals and state and investment unit experts generally agree that infrastructure investments will spur economic development. 81% answered yes or yes, but not in all areas.
However, 45% of the combined group expressed the opinion that investments could only prove effective in certain areas.
Asked about the prospects of involving foreign business in Russian infrastructure projects, 32% of respondents said every incentive should be provided for foreign involvement in infrastructure projects and, correspondingly, 32% said foreign business has little motivation since quality control over project implementation and spending is ineffective. 17% said foreign involvement is feasible, but only in certain segments.
The results demonstrate that while foreign involvement would be welcome, the respondents do not believe that there are currently sufficient incentives to entice international companies to invest in Russian infrastructure projects.
Improving the effectiveness of infrastructure projects
The survey results show that questions around planning and the regulatory environment are the areas where there is the most room for improvement. 69% of all respondents, including 78% of major foreign investors, said that ensuring transparent and competitive tenders would make investments in Russian infrastructure more effective.
State and investment unit experts and major foreign investors both stressed the importance of improving the quality of project preparation and selection (78% and 66%, respectively), while 53% of Industry professionals believe that ensuring transparent and competitive tenders would do the most good.
About one-third of respondents believe the following measures would prove effective:
- Well-functioning mechanisms for obtaining state financing or support
- Simplified procedures for obtaining state approvals for projects involving foreign organizations that have experience with similar projects and involving foreign organizations that have experience with similar projects.
As Russian regions have reduced their investment into infrastructure projects in recent years, some have called for federal financing of regional infrastructure development projects.
The survey respondents were split fairly evenly in their opinions on this topic. 47% said that before any federal financing for regional projects was approved, support mechanisms for regional projects that do not require federal subsidies should be developed: partial state guarantees and methodological support.
A slightly smaller, though still substantial, minority (42%) agreed without qualification that federal financing of regional projects would be helpful. However, it is noteworthy that only 33% of major foreign investors agree, a decidedly smaller percentage than Industry professionals (42%) and state and investment unit experts (46%).
When asked about the main obstacles to infrastructure development in the region where the respondents are active, 77% pointed toward policy concerns. 49% cited a lack of regional policy for infrastructure development, while 38% pointed to the lack of synchronization between regional strategy or policy and federal programs.
The third most popular response was inadequate financing, noted by 35% of respondents.
The majority (72%) said that insufficiently transparent decision-making in regard to projects is the main obstacle to the development of infrastructure in Russia. Other significant obstacles include poor project preparation (39%) and poorly developed legislation (36%).
Uncertainty is cited as a chief obstacle to obtaining private investments for infrastructure. Three choices received the support of a majority of the respondents. Sixty-eight percent of respondents said inadequate guarantees of a return on investments is a chief obstacle to obtaining private investments for infrastructure, while 57% noted non-competitive access to infrastructure projects and 54% said lack of a clear and detailed strategy for infrastructure development and consequently a poor understanding of the potential of such investments.