The Russian economy is steadily recovering. Over the first five months of this year, the GDP has grown by 0.6% and is expected to grow by another 2% by the end of the year. Being among the key growth drivers, infrastructure projects form a solid and effective foundation for development. By creating the multiplier effect for the economy, stimulating employment rate growth and consumer demand, they are true locomotives for the economy. Participants in the annual Strong Russia business summit discussed the role of infrastructure projects for the comprehensive development of Russian territories and key tools for their implementation.
Growth base
Infrastructure projects continue to stimulate the development of individual regions and the economy in general, according to Alexander Shokhin, President of the Russian Union of Industrialists and Entrepreneurs.
“We all, both businesses and the government, agree that infrastructure projects serve as a basis for developing the economy, including under the current restrictions,” Alexander Shokhin commented.
The multiplier effect remains one of the key effects for the economy. It is among the highest when it comes to infrastructure projects.
Presidential Aide Igor Levitin explains that infrastructure projects directly affect the state of regional budgets.
“The Russian regions’ own taxable base has seriously grown in the past years,” Igor Levitin commented.
This dynamic is the outcome of the territories’ expedited development as infrastructure projects help build up industrial production and stimulate small and medium-sized businesses.
Comprehensive development
Infrastructure development is driven by construction, including housing construction that brings along more social facilities, engineering and transport networks. The law on the comprehensive development of territories provides support. For example, the Russian Ministry of Construction, Housing and Utilities estimates that around 2 mln sq m of housing will be completed in 2023 alone.
“The comprehensive development of territories is a future-oriented project. The regions are currently exploring the development of 900 territories. We estimate that 160 mln sq m can be potentially included in urban development,” First Deputy Minister of Construction, Housing and Utilities Alexander Lomakin notes.
The program also focuses on the construction of replacement for residents of dilapidated housing in 13 regions. Some 54,000 sq m of housing has been built.
Choice of tools
Financial support of infrastructure projects is available under the Infrastructure Menu, a federal project supporting the regions. There are plans to allocate more than RUR 2 trln ($22 bln) for their implementation in 2022–2025.
The tools available under the Infrastructure Menu include infrastructure budget loans, infrastructure bonds, subsidized interest rates for long-term contracts, and budget loan restructuring. The National Wealth Fund may allocate funds for the Housing and Utilities Fund. There are also infrastructure loans offered by VEB.RF.
Alexander Lomakin notes that infrastructure budget loans are the most capital-intensive tools. RUR 1 trln ($11 bln) has been allocated for almost 1,000 regional projects.
Scaling up
The practice of co-financing also helps with attracting funds. Thanks to this practice, the territories additionally receive private funds, at least one ruble from non-budgetary sources per ruble from the budget.
Truly large-scale territory development projects become possible. One example is a project in Mendeleyevsk, Tatarstan.
Thanks to the mechanism of the comprehensive development of territories, the quality of life in the city has significantly grown, according to Roman Trotsenko, member of the Management Bureau of the Russian Union of Industrialists and Entrepreneurs and Chairperson of the union’s Coordination Council on the Development of the Arctic and Northern Territories. The co-financing has attracted around RUR 5 bln ($55.4 mln) for an entire scope of projects in the town.
As a result, the housing prices soared by 400% in the city and 68% of residents believe that their quality of life is higher than in Naberezhnye Chelny, Roman Trotsenko says.
The future is digital
The introduction of smart technologies in construction, in particular, smart home and smart building solutions, remains an important component of the infrastructure development. In the long term, they will significantly reduce expenses on building maintenance and improve their safety and comfort, says Alexei Melnikov, managing partner at F+ tech Marvel Group.
At the same time, regulatory support is needed to actively introduce innovations, with a relevant standard being enshrined in law. Localizing relevant solutions and providing support to Russian producers is also important – as of now, most devices are manufactured in China and Taiwan, which creates imports risks.
Maximum support
The development of Russian territories will be provided by expanding support tools. Their number is growing; thus, a program of special treasury loans to implement infrastructure projects was launched with RUR 190 bln being allocated; part of it will to the transport infrastructure development.
It often happens that the tools have been launched and working but a bigger funding boost is required. Thus, it is necessary to increase investment in the modernization of the energy engineering infrastructure, including the heating sector, says T Plus General Director Alexander Vilesov.
The comprehensive approach, investment planning, as well as the introduction of the practice of accounting and efficient use of the resources are also important. Boosting financing will help increase the rate of heating networks replacement to 5%.