speaking out against corruption. for the top stories here in art's he'll be back shortly with more dates before that though we look at what can be done to modernize russia's infrastructure much of which is stuck in the country's soffit past. hungry for the full story we've got it for. the biggest issues get a human voice face to face with the news makers on. hello and welcome to on the money with the business of russia is business i'm peter lavelle 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 we have cousin yet chairman of the board of directors at barclays

corp michael franca he's an analyst at ferus and stephen cousins he is partner in the p.p.c. group in the moscow office of c.m.s. 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 the one percent excellent in any way because 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're saying not so low but it's not enough yes in any way we we are ready we are ready to help but exactly plan how realized this project and this case work of course was he said what you have now and we have idea what it will be in that time it was not but maybe not enough and like all projects around we start with this position and they have to date improve that situation ok with a little bit you are optimistic not knowing about you what about in your sector you

are 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 world project. brings out the experts. this technology from the help to rebuild the russian structure this is once and cannot. be true should consider where what part of contrary is the most critical to develop this infrastructure because you know most of g.d.p. generated by our own guess sectors probably 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 go into twenty first century make a jump. we move very fast very fast maybe it's where

that cater to understand enough why you would like to as fast as possible to prostitution about all kinds of technology what we need. to understand is it enough we understand maybe later not now for our position we do our best michel if i can go to you what is the economic implications of all of this when you know there's 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 is having a problem with inflation with the exception of the great turned out in two thousand and eight i think that the main issue of inflation is the monetary base and how many money a print that so basically in my view inflation is increasing when 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 i'm here to stay with you 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 the government can go on 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 vital and. tracked private companies through their infrastructure and ok let's talk a little bit more about foreign investment later stephen if i can go to you is the this stage creating the 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 the political support there's a 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 to the development of infrastructure in certain sectors for example the government has stated that the develop 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 or 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. vestment fund which will provide for state co financing and infrastructure projects both the regional and national importance. the development of special economic zones and i'm sure everybody has heard recently at the economic forum in st petersburg the government announced that there's going to be vigilant investment fund which is going to make funds available for high growth. 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 concessions laws and in relation to financing so we've seen there is. ok stephen stephen you've given all the great pluses of selling in the 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 downside of these projects involves a huge amount to they require 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 yourself the electricity sector how much of a problem is it 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 bounce it out because obviously an investor is going to come here and want to get the best return they can possibly get but then 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 again and tease how do they do it. i think not enough investment probably in that industry

yet the reason are i say so because of productivity efficiency of industry should be improved it should be a definite improvement in the complex or percs in your sexual what is the if efficiency in efficiency 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 you can all do should be selected from. how best experiences from global for global industry plan. 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 forward technical competence our message if you should be improved some particle or technology already exists to improve it's maybe even fifty percent michael if i can go to you if we this look very globally invest investors looking at infrastructure in russia what is the sexy sector or sector is right now. third i think that first of all it's toll toller are the building that is there are a couple of projects underway there is the. taller order and from moscow to st petersburg and i think that is the primarily air way of international investors to participate. 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 the recent clear mr putin and mr medvedev said. recognize the problem going on in the right direction on the march eleventh mr medvedev highlighted some of the problem of the greek. tariffs about greed over all for regionals this includes all the things that should be considered are same when mr putin mentioned about what needs to develop a low rise building because it's so critical for regional development if we are saying about regional development it's that important 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 and 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 are the state and looking at you know what do you do first. i think from some other 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 fully for foreign investors how it's their goal it's how it's possible to manage it and i think a lot of the technical problems and then i talk with so partners from foreigners and westerns and banks has had a lot of question how it's manage how it's going to it was the girl and you what the plan was the schedule khalid's to collect money how the keep money has the guarantee i 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 in infrastructure i think it's just step but ok we'll go to those other steps here after a short break we'll continue our discussion on russia's infrastructure state with our team. most of the. consummate philosophy. maximum thrust. muslim efficiency. marks mom come for. months mom maneuverability most mediation decent to denmark's moscow's world famous here show on technology update

here on r.g.p. we've got the future covered. as you know song was sixteen years old when he committed these murders that's not to say that song sellers and not be punished for his crimes song is being passed no rational person can deny that song has been punished is being honest and will be honest. a sow's must be executed for the brutal crime committed this is a punishment this is not. an imagined. bandstands day. because we've been immersed nami one so however. i didn't come here last justice. and heard of a farmer's. scholar of the small.

violin wife now in my class now. welcome back up on 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 bottlenecks substandard housing in public buildings and legendarily bad roads there is barely a facet of russian one of i'm affected by infrastructure generally seen as amongst

the worst in the world. the government has committed to readily transforming russia's infrastructure brace bringing billions of dollars of its own to the table but also needing the expertise offered by global investments 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 parlance 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 time frames that i think is quite clever all done from the government to run for such events since. like your lympics like soccer or championship like. all the.

they are putting themselves and everybody around on the big pressure to do something. so and with that pressure of course and with the money and for that the money would be there and with that present you have to you can do a lot beyond these electricity systems logistics pursuit roads are all said to be. industry globally experience shows russia can expect a major economic dividend with investors also seeing significant infrastructure has done well every way in the world just because we're starting from such a low level because they such a huge amount that would need to be invested there so here. 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 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 were very rosy reporting my say but you know which go back to the issue of just transparency in confidence because as we 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 but investing in russia i think that's right. and i think that when investors thinking about projects in russia they are since i was 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 taxes.

it's foreign exchange rates and of course they're also concerned about the question of corruption. but you know i think what we've seen is that president made bit of has taken steps. this 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 solve a bypass and of course talk of a port in st petersburg ok but what 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 just too rich for my blood you know i 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 performing the earth as a good is a good idea to buy long infrastructure bonds so basically. obligations through other than equity just because of. the undeveloped in russia so basically it's several companies a trade of our own russia which you can invest and which equity can pretty bad so that is why in my view of the only way to invest is the buying bonds well what about you i mean in investing in the. electricity sector is the government doing the right things as far as you're concerned giving companies because we've all agreed here this is a very long term. trajectory investing because it's such a huge amount of money definitely it's a question of how to improve for a few. for us in this country reiterating korea and we thought we're here we're

here for about fifty one hundred people over here in russia five facilities for the afflicted facilities for us definitely very interesting so the government focusing on really recognize. chances to improve energy efficiency is huge from industry to greed to the whole infrastructure. it would define the russian competitiveness in the global market exactly where i want to go man of what about you because this is what it really gets down to is that it's a very competitive world out there and in if you don't pay attention you fall very far behind ok and there's russia's 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 project russia had one of the most distressed budgets in europe so understandably the government deferred spending and investment in public infrastructure but now it's 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 you know when you 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 some problem i think it's all budget all the forces of the country will focus on these because it's very important for military polish now of course we have a free market and it isn't possible to come to all or sources all cancer just exactly the mental structure and of course the concentration for structure is ultimately best as well it depends how its competitors how it's profitable and my idea is necessary to make more profitable more interest for investors for nation or foreign or some investors 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 our own. 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 a new infrastructure so there is my view on the oil price link stephen if i go back to you it was mentioned earlier in this program is could 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 proof 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 the toing to be economy a tow 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 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 as that was 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 such a thing because against it didn't it didn't happen but i hope that two thousand and eighteen football championship will help to improve standards and the improved 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 that so it's a blessing but i have to agree with previous speakers that it's exactly where the importance of what's the regulation hundred pollution going to be new technology going to be applied for entirely russia for was a regional because and we've been 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.

p.b.s. rebels and nato are closing in on colonel gadhafi as hometown words believe he might be hiding as western countries wasted no time in securing big business and the war torn country. battle at the u.n. russia calls for dialogue to broker peace in syria while criticizing the west and european states are showing bias in siding with anti-government protesters. and a british court is accused of gagging a world war two veteran by jailing him for speaking out against corruption in the judiciary. is not out of the russian capital you're watching our teasings for being with us the levy unravels are advancing on colonel gadhafi as hometown.