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Russia Infrastructure Report Q4 2008

http://www.companiesandmarkets.com/Summary-Market-Report/russia-infrastructure-report-q4-2008-55947.asp

Report Summary

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.

Table of Contents

Executive Summary .........5
Market Overview...............7
Industry News – The Credit Crunch And Cost Inflation: Are They Jeopardizing Infrastructure Projects?................................................................. 8
Mega-Urban Regions: Opportunities And Challenges For Infrastructure........................................................................................................... 11
Mega-Urban Regions: Investment Opportunities And Risks 12
Table: The World's 30 Largest Urban Agglomerations ....... 15
Table: The World's Richest Cities In 2020 By GDP............. 19
Table: The World's Fastest Growing Urban Areas .............. 21
SWOT Analysis...............23
Russia Infrastructure Industry SWOT.................................. 23
Russia Political SWOT......................................................... 24
Russia Economic SWOT ...................................................... 25
Russia Business Environment SWOT ................................... 26
Major Infrastructure Developments And Key Projects.........................................27
Transport Infrastructure Overview........................................... 27
New And Ongoing Projects....................................................... 29
Airports................................................................................ 29
Ports .................................................................................... 31
Roads And Bridges .............................................................. 33
Railways .............................................................................. 35
Energy And Utilities Infrastructure Overview........................... 38
New And Ongoing Projects....................................................... 41
Power Plants And Transmission Grids ................................ 41
Pipelines .............................................................................. 47
Water ................................................................................... 49
Construction Overview ............................................................. 50
New And Ongoing Projects....................................................... 50
Residential Construction...................................................... 50
Commercial Construction.................................................... 54
Industrial Construction........................................................ 61
Tourism Construction .......................................................... 62
Special Events........................................................................... 64
Sochi 2014 Winter Olympic ................................................. 64
Table: Russia – Major Infrastructure Projects: Transport Infrastructure ........................................................................................................... 67
Table: Russia – Major Infrastructure Projects: Utilities ..... 70
Table: Russia – Major Infrastructure Projects: Constructi 73
Industry Forecast Scenario ......................................................79
Table: Russia – Infrastructure Industry Forecast ................ 79
Risks .................................................................................... 81
Business Environment......................................................82
Regional Overview – Europe .................................................... 82
Business Environment Rating .......................................................86
Table: Regional Infrastructure Business Environment Rat 86
Limits Of Potential Returns.................................................. 86
Risk To Realisation Of Potential Returns............................. 87
Foreign Direct Investment ................................................... 87
Labour Force....................................................................... 88
Legal Framework................................................................. 89
Tax Regime .......................................................................... 89
Macroeconomic Outlook .....................................................................91
Table: Russia – Economic Activity....................................... 93
Political Outlook.............94
Company Monitor...........98
Mirax Group........................................................................ 98
Russian Railways ............................................................... 101
BMI Forecast Modelling ........................................................104
How We Generate Our Industry Forecasts ............................. 104
Construction Industry ........................................................ 105
Sources ................................................................................... 105
Business Environment Ratings ............................................................106
Introduction ............................................................................ 106
Ratings Overview............................................................... 106
Table: Infrastructure Business Environment Indicators .... 107