Can Russia Replicate China’s Infrastructure Miracle?

Friday, April 19th, 10:00-11:15

In this day and age, it is impossible to imagine an emerging market country speeding along in an attempt to catch up with the most developed global leaders without first creating an advanced infrastructure, which perhaps highlights why investment in this sphere is so vital. Russia’s inheritance from the Soviet Union is largely spent, essentially leaving an infrastructural asset base that needs to be rebuilt from scratch. This will require trillions of rubles of investment over the next 5-10 years.

The sharp spike in infrastructural public-private partnerships (PPPs) in the mid-2000s was made possible thanks to laws allowing concessions, the formation of an investment fund, and state guarantees on private pension fund investments in infrastructure projects. However, the realities imposed by the crisis hindered progress in this arena.

China has a unique experience of superfast construction of highly modern infrastructure projects. China has increased the length of its rail network 50% over the past 20 years and quadrupled the number of roads in 30 years, including more than doubling the length of high-speed roads over 2005-10. The country has built three of the five largest ports in the world and expanded its oil and gas pipelines at an annual rate of 12-14% over the past 5-10 years. In 2012-17 alone, a staggering $157 bln (2.1% of GDP) is slated for 60 new projects in China. The keys to such rampant success are: various forms of state funding, including PPPs; a strong backbone of domestic strategic investors; and infrastructure companies capable of churning out highly ambitious projects in record timeframes.

This poses a number of questions for our panel members to discuss. What is wrong with Russia’s current infrastructure funding system, and what is holding private investors back from more active participation in such projects? How can Russia strike the optimal balance between the interests of the state and private players? Is it even possible for Russia to replicate China’s infrastructure miracle? If yes, then what are the keys to China’s success that Russia can use?

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