Construction and investment in infrastructure projects in Russia’s Vladivostok region are driving ahead as the region readies itself to host the 24th annual meeting of the Asia Pacific Economic Corporation (APEC), due to be held on Russky Island in 2012. Infrastructure projects currently underway include the reconstruction of Knevichi Airport. The Russian Transport Minister, Igor Levitin, has pledged a total of RUB120bn (US$4.68bn) to be spent on Vladivostok’s transport system to bring it up to date in time for the APEC summit. BMI notes that another major transport infrastructure project has also been launched, with the Pacific Bridge Building Company, a firm based in Ussuriisk, to construct a US$698mn bridge spanning Zolotoi Rog (Gold Horn) Bay. Once completed, the bridge will stretch a total of 1,900m and stand 220m tall. The island’s power infrastructure is also due for an overhaul, and in July 2008 it was announced that two 220KV underwater power transmission lines are to be laid, connecting Russky Island with the mainland.

BMI asserts that such projects are sure to modernise the area, and provide a much needed boost to the development of Russia’s Far East, which in terms of infrastructure development has been somewhat left behind. Another major project currently underway is the renovation of the Sakhalin Island railway. The island’s rail network currently uses a different line gauge to that on the mainland, and if the island is ever to be connected to the wider existing network, its internal railway tracks must be replaced.

The huge new infrastructure initiative in Vladivostok demonstrates Russia’s ability to quickly direct funds into a sector, in order to meet a tight deadline. All required infrastructure projects for the APEC meeting must be in place by 2012, leaving just five years for the completion of a massive build schedule. BMI has in the past been witness to Russia’s determination to meet its obligations as host. The country is set to host the 2014 Winter Olympic Games in Sochi, and preparations are already well underway. In September 2008, Valery Gurin, the Vice President of Olimpstroi, announced the construction of six core Olympic facilities for the Sochi Winter Olympics, to begin by December 2008. The facilities to be completed include two ice-hockey stadiums, a figure-skating and speed-skating complex, a curling centre and the main Olympic stadium.

Despite large, event-specific infrastructure build programs, the remainder of Russia’s construction market appears to be feeling the effects of the global financial crisis. Major building initiatives have characterised the country’s development over the last five years, spurred on by huge investment in the real estate sector.

New housing complexes have offered Russia’s developing middle class the opportunity to leave behind old soviet-era apartments, and shopping malls and entertainment centres have appeared in commercial centres. Investment in this sector, however, now appears to be cooling, and BMI predicts that the construction industry will witness a drop in growth figures. Although our figures are currently being revised to take into account the current global financial crisis, we project that 2008 will see growth fall to 7.32% before dropping even further to 5.71% in 2009. Russian real estate developers are starting to feel the pinch, with the Wall Street Journal quoting Dmitry Lutsenk, from major Moscow-based developer Mirax Group, as saying that the company has cancelled US$4bn of new projects, to focus instead on existing projects.