tv [untitled] August 27, 2011 8:31am-9:01am EDT
sentence was dismissed he was jailed for making all the recordings that hearings but claims courts are simply trying to gag him. and the republican looks to its newly elected president to rebuild the nation's economy which lies in ruin after years of struggling to maintain independence. will have his hands full as he leads the country through the next five years. ok well if you join me in less than thirty minutes time for more news but for now our we look at what can be done to modernize russia's infrastructure much of which was stuck in the country's soviet past on the money is now. hello and welcome to our in the money with the business of russia is business i'm peter all about today we're talking about infrastructure and the building of the new russia. to discuss this issue i'm
joined by you know our team here in the studio with me he's director of strategic development for a.b.b. in russia also live cousin yet chairman of the board of directors at barclays corp michael franca he's an analyst at ferus and steven cousins he is partner in the p.p.c. group in the moscow office of c.m.s. oh ok we're never going to go to you first give me the bad news just how bad is russia's infrastructure in two thousand and eleven. but ok now what percent excellent and in a way with a lot of opportunity to improve our position in a way like this project has a lot of challenge so you're starting from a low base and you say not so low but it's not enough for us in any way we we are ready we are ready to help but exit the plan how good a life this project in this case because of course the position what you have now and we have no idea what it will be in next time and of course not but maybe not
enough and like all projects around we start from this position and they have to improve that situation ok well you know they're right if you're optimistic or you know what are you betting your sector you're in the electricity sector i think we have number of targets here one target would be to bring the newest technology because of the really have to benchmark against top wall to project. brings up this technology it definitely help to rebuild the russian infrastructure this is once and cannot. be true should consider it so where. what part of com three is the most critical to develop this infrastructure because you know most of g.d.p. generated by all of the guests so you look at oil and gas a little bit later we go back to you. is the upside for russia now in building its infrastructure is it introduces new technologies or uses new technologies where they don't where if you're looking at technologies that exist today from the one
nine hundred sixty s. and now you're going to twenty first century make a jump we. remove very fast very fast maybe it's very. complicated to understand enough why you would like to as fast as possible to prostitution about all kinds of knowledge of what we need. understand is it enough we understand maybe later not now opposition think we do best michael if i can go to you what is the economic implications of all of this when you know that there is a whole lot of money out there the state has a lot of money are you worried about issues like stoking inflation because russia always has been having a problem with inflation with the exception of the great turn down in two thousand and eight i think that the main issue of inflation is the monetary base and how many money and print that so basically in my view inflation is increasing when their pensions and government spending increases but not infrastructure spending
creates this so basically spending on infrastructure is not so bad for inflation just simply increase pensions ok michael stay with you i mean again there's so much cash out there is there any need and what i want to talk about it later for in foreign investment i mean if the government has enough money in the coffers in that he can go it alone or it can't. i think it. i think that government can go on but in my view it's better to share the risk with us just because. expertise and they know how to build proper objects how to manage them how to make profitable this projects and how to manage costs so that is why i think. to. attract private companies through their infrastructure they will talk a little bit more about foreign investment later stephen if i can go to you is the this stage creating the best possible legal environment for foreign investors that
come in because we have to remind our audience here we're looking at multibillion dollar projects here we're looking at stadiums we're looking at freeways we're looking at all kinds of things because an enormous amount of money and take a long time to build is the state doing the right thing when it's trying to attract foreign investors i think it is i mean i think the government has been taking certain steps to encourage foreign investment in a number of from a number of angles for example political support financial support and there's a little support so from the political support we're seeing that the government has in its recent budget it's committed for the development of infrastructure in certain sectors for example the government has stated that the developer of development of transport facilities is a priority as is the development of health care education infrastructure and also infrastructure in relation to technology so for example everybody's heard about the development of skolkovo which is going to be the russian of equivalent of our
silicon valley. in addition to that there is there is the state privatization project which is going to see shares in. utilities and infrastructure companies being sold. on the financial side that is the development of the end. vestment fund which will provide for state co financing and infrastructure projects both the regional and national importance. there is the development of special economic zones and i'm sure everybody has heard recently at the economic forum in st petersburg the government is going to be the direct investment fund which is going to make funds available for high growth high growth sectors such as i t. health care and infrastructure and then on the legal side you know what we've seen is that there has been. there's been legislation adopted in relation to the concession laws and in relation to financing so we've seen.
ok stephen stephen you've given all the great pluses of selling in investment in this country in a great way tell me what the obstacles are because i'm the great contrarian all the time what's the downside what do they still have to do what i think the dire side of these projects involve a huge amount to require a huge huge amount of investment even at the regional level you're talking of projects in the tens of millions where is it projects at a federal level you're talking talking about hundreds of millions so investors need to be sure that there's going to be a return on upon their investment and that their investment there to get that. investment is going to be guaranteed that there are protections there for them me how if i go to you back here in the studio when you look at your search sector how much of a problem is when you're there is a huge investment in this in the sector here but there are price controls and things like that how do they balance it out because obviously an investor is going to come here and want to get the best return they can possibly get but in the state
will say but this is a social concern and it's a really huge one at that ok how do they balance it out do we go there guarantees how do they do it. i think you're smart enough investment probably in that industry yet the reason i say so because of productivity efficiency of industry should be improved it should be definite improvement in the complex and or perks in your sector what is the if efficiency of inefficiency right now because what was it we were talking before the program something like up to forty percent of all the trees we generate in russia is lost due to sub standard electricity transmission infrastructure i mean that is huge i think even more is lost is the matter is how to apply the newest technology what technology should be selected from the how best experiences from global for
global industry should be applied. back to your question about rates are it's different rates is different so probably it should be a normal life somehow but it's saw a little bit outside the fog of technical competence our message if you should be improved some particle or technology already exists to improve its maybe even fifty percent michael if i can go to you if we this look very globally and invent investors looking at infrastructure in russia what is the sexy sector or sector is right now third thing that first of all it's. toller are the building that is there are a couple of projects on the way there is the. taller order and from moscow to st petersburg and i think that is primarily their way of international investors to participate the infrastructure build in as well as invest in russian railways. all
right if i go back to you here. in your set you what is the biggest challenge when for investors coming here and working with the state because the state is the huge regulator of this and the electricity grid and things like this i mean what is the state doing to help your sector and your business actually if you look what three some of mr mr medvedev said. recognize a problem going on in the right direction on the march eleventh mr medvedev highlight that some of the problem of the great. tariffs about greed over all four regions this include all the things that should be considered our same one mr putin mentioned about what
we need to develop a low rise building because it's so critical for regional development if we are think about regional development it's that import of again for all the gas for the whole industry for the whole society and if we do you start you know and i've traveled around russia there in needs an enormous amount of needs an upgrade a huge upgrade where do you start you start with the roads do you start with how do you prioritize these things and don't just do it from a business point of view but i mean when you say you the state and looking at you know what do you do first. i think from some low regulation it's very important yes because. there are a lot of questions a lot of problem what it's not one hundred percent understand clear for foreign investors how it's sort of lies how it's possible to manage it and i think a lot of technical problems and then i talk with our partners from foreigners and westerns and brands that had
a lot of question how it's manage how it's going to it was the current year what the plan was the schedule khalid's to collect money how the keep money has the guarantee and think but important to make one hundred percent believe system regulation laws and rules and improvements and license and one hundred percent around is for investors and infrastructure i think it's just step but until we go to those other steps here after a short break we'll continue our discussion on russia's infrastructure stay with our team. well into the. maximum velocity. maximum thrust. maximum efficiency. comfort. for ability.
to the marks world famous here show on technology update here. the future covered. last time the team was. where the gold rush still gets people like. this time. where the local government is giving power back to the people. where everyone from. the locals turned their land into a tourist paradise. close up on our. twenty years ago the largest country. to.
have been trying. to teach began a journey. where did it take. to . welcome back the money i'm peter lavelle and today we're talking about russia and its infrastructure but first let's have an overview of russia's physical plant. from electricity wastage on a massive scope to logistics both unix sub standard housing in public buildings and legendarily bad roads there is barely a facet of russian law if i'm affected by infrastructure generally seen as amongst the worst in the world. the government has committed to readily transforming russia's infrastructure base bringing billions of dollars of its own to the table but also needing the expertise offered by global investors i think foreign investment is absolutely crucial not only because it brings fresh capital and those
investors can invest alongside got a lot of fun the same with russian pals but also because they bring now how events are a key part of the drive being used to provide a lasting infrastructure legacy for cities across russia industry players say this will help ensure outcomes and timeframes mitt i think is quite clever all done from the government to run for sarge events since events like your lympics like soccer or championship like that where you know all the value was there putting themselves and everybody around on the big pressure to do something so and with that pressure of course and with the money after and for that the money should be there and with that present you have to you can do a lot beyond these electricity systems logistics facilities roads and housing are all said to be overhauled industry players say that the global experience shows
russia can expect a major economic dividend with investors also seeing significant upside infrastructure has done well every way in the world in russia's case because we're starting from such a low level because they such a huge leap and the amounts that would need to be invested are so huge we expect that the returns will be fantastic infrastructure investment will boost russian g.d.p. growth for the coming decade creating thousands of new jobs and underpinning spending but if it is handled properly the longer term benefits will include more efficiently do sticks and transport more reliable energy and a more economically competitive russia james blake on the money. ok i'd like to go back to stephen what we just heard there was very rosy reporting my say. which go back to the issue of just transparency in confidence because as
we will talk about the olympic games in sochi football and all that these are huge huge projects over a long period of time do investors have the confidence that this government the next government in the next government after that we're all going to keep their word because there's always the issue of confidence when in but investing in russia i think that's right. and i think that when investors are thinking about projects in russia they also saw a number of questions because obviously they've got to balance out the risks of making investment into the country so they want to look at the strength of the legal and regulatory framework and. they also take a look at a number of not correct anomic factors for example interest rates inflation tax rates foreign exchange rates and of course that they're also concerned about the question of corruption. but you know i think what we've seen is that the president made beautiful has taken steps to an anti corruption program which i hope is going to give encouragement to foreign investors. but i think the other thing
that investors are looking at projects that have actually been undertaken here in russia at the moment for example in two thousand and ten in april two thousand and ten we saw the financial close of three major infrastructure projects being the first stage of the moscow st petersburg toll road the one i didn't so bypass and of course airport in st petersburg ok about michael fine go to you when you look at investors looking investing in companies here what is the sentiment when they look at these long term projects is that it's just too rich for my blood you know don't want to get into it's such a long long term commitment or is there a growing confidence that it is a good idea considering what we just heard from stephen. i think that performing there through the good is a good idea to buy a long infrastructure bonds so basically obligations through other than equity just
because of. the undeveloped in russia so basically it's several companies are traded on russia which you can invest and which equity can participate so that is why in my view of the only way to invest is buying bonds well what about you i mean in investing in the. electricity sector is the government doing the right thing this is far as you're concerned given confidence because we've all agreed here this is a very long term. trajectory in investing because it's such a huge amount of money definitely it's a question of how to improve for future. or for us in this country we have to rethink really can we thought we're here we're here for about fifty one hundred people over here in russia five facilities for some afflicted are facilities for us definitely very interesting that the government focusing on to really recognize. chances to improve energy efficiency is huge from industry to greed to the
whole infrastructure. it won't define the russian competitiveness in the global market but if exactly where i want to go then and what about you because this is what really gets down to is that it's a very competitive world out there in if you don't pay attention you fall very far behind ok and there's a rush is neighbors something about china investing huge amounts of money into its infrastructure i mean what is the connection there i mean is there it's an imperative or is it just the right thing to do because if russia doesn't do it start doing it now in a lot of people's that would say they needed to do a decade ago can it catch up. ok go ahead steve go ahead but i think i think it's absolutely critical that the investment is made into infrastructure at the moment because you know as we discussed earlier basically the problem is russia is running down the infrastructure it inherited upon the collapse of the soviet union and in the ninety's of course russia russia had one of the most distressed budgets in europe
so understandably the government deferred spending and investment in public infrastructure but now as russia comes out of the economic crisis there's going to be economic growth which is going to lead to a demand for infrastructure and new infrastructure or developing existing infrastructure is going to be the cornerstone of economic and regional to growth in the country and if we do think about that i mean if they doing the right things looking far enough ahead because as we just heard in iraq i visited the soviet union and there's a lot of this country today that still looks like the soviet union i think for example in time of soviet union where a lot of concentration about some of the technology and dust and so probably i think that's all budget all the first of all the country will focus on these because it's very important for our military polish now of course we have a free market and it isn't possible to control of resources all cancer just exactly
infrastructure and of course the concentration of construction to results and investors where depend how its competitors how it's profitable and my idea is necessary to make more profitable more interest for investors or for nation or foreigners and west indies in this case it will be enough money in now enough interest and enough results michael if i go back to you. on this program on the money i always ask one question no matter what the topic is is it all about oil and gas i mean high oil prices the state will have enough money to invest wherever it wants is it ah. always get down to oil and gas i think in that case where actually reached the level of g.d.p. is not growing even if the oil price is still high so i think that there is an understanding within the government that further growth is possible only if you're invest enough into existence for
a structure and build an infrastructure so there is my view on the oil price lng stephen if i go back to you it was mentioned earlier in this program is going to be a whole slew of privatizations how can that be a trigger for foreigners to come in invest here because it is pending on the percentage that is proved privatized with the sector and things like that the state looking for are for the nothing head to make sure they find the right mix for foreigners to get involved in this privatization process or i think it's definitely a step in the right direction i think what's important here it goes back to what you were saying before is that now is the time is right to allow foreign investors to get a toe into the economy a toe into these infrastructure projects. because the scope for development is huge right if you take a look at the critical sectors there's transport there's water management there's waste management the social infrastructure projects like schools and hospitals and
of course electricity. so i think it's right that the. companies can position themselves now to get into the market so they can further then develop their market share ok me michael fine go to you will the sochi games and getting prepared for that world cup without be the litmus test for russia's infrastructure for the world to showcase itself. i think it should be actually but unfortunately the regulations of the construction market didn't change at the point expected by the industry so basically when we are going through a giant building and china project as a lympics we actually have to move on the new standards to introduce new requirements to help these project and to help all over the infrastructure and all over the construction industry in russia unfortunately in sochi and in peace games
that didn't it didn't happen but i hope that two thousand and eighteen football championship will help to improve standards and to improve new requirements for the construction and me on the give you the last word are you looking forward to the olympics for infrastructure definitely it's a very important project and for all suppliers so it's so it's a black sink but i have to agree with previous speakers that it's exactly where the importance of what the regulation hundred dilution going to be new technology going to be applied for entirely rational for cars a regional details and we'll be talking about this topic in the future i want to thank my guests and i want to thank our viewers for watching on the money see you next time and stay with r.t. . i.
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libyan rebels already. european governments. in the country. a draft resolution brewing at the u.n. security council on the west proposed two different approaches to tackling the escalating crisis in syria. to expose corruption in british courts is losing his appeal against a six month jail sentence dismissed. elected president to rebuild the nation which lies in ruins.
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