starts on t.v. don't come. for the. we've got. the biggest issues get the human voice face to face with the news makers. welcome back you're working hard to live from moscow these are the top stories leaders rebels and nato are closing in on colonel gadhafi hometown word it's believed he might be hiding in while western governments waste no time in securing big business in the war torn country. russia puts forward a un resolution calling for dialogue to broker peace in syria the document is to counter what is proposed by the u.s. and european states which moscow says is siding with anti-government protesters. very british court is accused of trying to gag a world war two veteran the eighty five year old has been jailed for reporting

a court hearing but activists claim the real reason was he's speaking out against corruption in the judiciary. although we look at what can be done to modernize russia's infrastructure much of which is stuck in the country soviet past on the money is next year on our city. hello and welcome to the money with the business of russia is business i'm peter all about 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 and when it doesn't yes chairman of the board of directors at barclays corp michael our franka 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. oh 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. that ok not so excellent and in a way a lot of opportunity to improve our position in a way like this project there's a lot of challenge for you starting from a low base you say not so low but it's not enough yes and in a way we we are already we are ready to help but exactly plan how they realized this project in this case because of course there was you said what you have no idea what it will be next time it was not but not enough like all projects around we start with this position and they have to improve that situation ok let. me know what are you betting your sector if you're in the electricity sector i think we have number of targets on one target we're going to bring in new or stick not

because verse three have to benchmark against top water project. bringing in south expertise this technology help to rebuild russian infrastructure this is once and cannot. be true should consider it so where. what part of can three is the most critical to develop this infrastructure because. g.d.p. generates a. problem you will get oil and gas a little bit later it will go back to you. is the upside for russia now in building its infrastructure is it introduces new technologies or uses new technologies we really don't know where if you're looking at the acknowledges that existed before the one nine hundred sixty s. and now you're going to twenty first century make a jump. we move very fast very fast maybe so it. could be catered to understand enough just now i would like to as fast as possible

to prostitution about all kinds of technology and what we need. to understand is that enough good we understand maybe later now our position to 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 in the state has a lot of money are you worried about issues like stoking inflation because russia says i've been having a problem with inflation with the exception of the great turn down in two thousand and eight i think that the main issue of inflation is the monetary base and how many money are printed so basically in my view inflation is increasing when their pensions and government spending increases but not infrastructure spending creates this so basically spending on infrastructure is not so bad for inflation just simply increased tensions ok michael i'm here in stay with you i mean 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 car for you can go it alone or it can't. i think it i think that government can go on in my view it's better to share the risk with threats just because. experts and they know how to build proper object how to manage them how to make profitable this project and how to manage costs so there is one thing. and two. tractor private companies through their infrastructure overlook a little a little bit more about foreign investment later stephen if i can go to you is the this stage creating. the best possible legal environment for foreign investors the commune 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 example there's political support financial support and there's a little support so from the political support we're seeing. the government has in its recent budget it's committed for the development of infrastructure in certain sectors for example the government is still you could put the developer of development of transport facilities as 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 but. in addition to that there is. the state probably transition project which is going to see.

utilities and infrastructure companies being sold. on the financial side because the development of the. pressman fund which will provide for its financing in infrastructure projects both regional and national importance. the development of special economic zones and i'm sure everybody's heard recently at the economic forum in st petersburg because an announcement is going to be that a great investment fund which is going to make funds available for high growth. such as i t. health care infrastructure and then on the legal side you know what we've seen is that has been. there's been legislation adopted a relation to the concessions laws and in relation to financing so we've seen. ok stephen stephen you've given all the great pluses a new showing in investing in this country in a great way tell me what the obstacles are because i'm the great contrarian over time what's the downside what do they still have to do what i think the downside

are these projects involve a huge amount 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 to the 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 personal and very personal and. investment is going to be guaranteed that there are protections there for them anyhow if i go to you back here in the studio when you look at your search through the city sector how much of a problem is 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 in the state will say that this is a social concern and it's a really huge one at that ok how do they balance it now or do we go there karen keys how do they do it. i think not a muffin with me probably in that industry yet the reason i say so

because productivity efficiency of industry should be improved and should be there for an improvement in the car park or. in your sector where you see 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 pretty general in russia is law students substandard electricity transmission infrastructure i mean that is huge i think even more is. how to art wise the newest technology or what is called you should be selected from. how best experiences from global or what will. back to your question about rates are it's different three different regions so probably it should be normalized somehow but it's a little bit outside of i would call competence our message if you chanson should

be improved on our part to core technology exists to improve it maybe fifty percent. michael if i can go to you if we just look very globally invest investors looking at infrastructure in russia what is the sexy sector or sectors right now. third thing first of all it's. toller are the building and. there are a couple of projects underway there is a. taller order and from moscow to st petersburg and i think that is primarily a way of international investors to participate. infrastructure building as well as investing in a russian railways. all right if i go back to you here. in your set you what is the biggest challenge win for investors coming here in working with the state because the state is 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 in your business actually if you look at what three some clear mr putin and mr medvedev say . recognize a crumbling government moving in the right direction the world or the march eleventh mr are highlighted some of the problem of this group. tariffs about green over all regions this are very the include all the things that should be considered our same one mr putin mentioned about what we need to develop a low rise building because it's so critical for regional development if we are seeing a broad regional development itself import of again for all gas for the whole industry for the whole society and then if we do you start you know you know i've traveled

around russia and it includes an enormous amount to anything upgrading 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 the state and looking at you know where you do first. i think from some other laura bush and it's very important yes because. there are a lot of questions a lot of problem but it's not one hundred percent understand believe for one in the west it's how it's sort of lights how it's possible to manage it and i think there's a lot of technical problems and then i talk with our partners from our furnace and west and some banks that have a lot of question how does manage how it's done it was the what's the plan what's the schedule halid so collect money holds keep money on the guarantee and i think were important to make one hundred percent believe system regulation laws and rules

and improvements and license and one hundred percent around it's thought in versus an infrastructure i think it's just step and. they will go to those other states here after a short break we'll continue our discussion on russia's infrastructure stay with archly. the are. the limits. to just set the some up.

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welcome back up on the money time people felt like they were talking about russia and its infrastructure but first let's have an overview of russia's physical plant . again. from electricity. to just expose substandard housing in public buildings and legendarily bad roads there is barely a considered russian affected by infrastructure generally seen as amongst the worst in the world the government has committed to radically transforming russia's infrastructure bringing billions of dollars of its own to the table but also needing the expertise offered by global investors i think foreign investment is

absolutely crucial not only because it brings fresh capital and those investors can invest alongside. us. because they bring you know how i've been so rick a part of the drive to provide a lasting infrastructure legacy cities across russia industry players say this will help ensure outcomes and timeframes that i think is quite clever. from the government. run for such events sounds. like you're going to like. me like he was putting themselves and everybody around on the question of them something. so and with that pressure of course with the money and follow the money. and with the president you have to you can do a lot beyond these electricity systems logistics roads. industry

global experience shows russia can expect a major economic and. also seeing significant infrastructure has done well everywhere in the world. because we're starting from such a low level because they such a huge. vested that so here. we expect there will be fantastic infrastructure investment will boost russian g.d.p. growth for the coming decade creating thousands of jobs and underpinning spending but you could use handled properly the longer term benefits will include more efficient logistics and transport more reliable energy and 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 report in my say. back in the issue of just transparency in confidence speakers as

we talk about the olympic games in 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 and the next government out of 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 are thinking about projects in russia they are since i was a number of questions because obviously they've got to balance up 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 macroeconomic factors for example interest rates inflation taxes. point 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 beautiful 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 most was in petersburg toll road the one i did so by pass and of course in st petersburg. about michael fine go to you when you look at investors looking interesting in companies here what is to be sentimental when they look at these long term projects or is 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 it a growing confidence that it is a good idea considering what we just heard from stephen. i think before in the thread because it is a good idea to go along infrastructure bonds so basically. obligation with rather

than equity just because of. the undeveloped in russia so basically several companies are traded on russia which you can and which can pretty big so that is why in my view the only way to invest is buying bonds ok what about you i mean you're investing in the. electricity sector is the government doing the right thing this is far as you are concerned given carbonates because we have all greedy this is a very long term. trajectory investing because it's such a huge amount of money there from the question how to improve. for us in this country we have to rethink really over here for about fifty one hundred people over here in russia for pursuit it's for. us it's for us there from the play very interesting that the government focusing on. a recognize. chances to improve energy efficiency is huge from industry to greed to the

whole infrastructure. it was a different time the russian competitiveness in the global market exactly where i want to go when and what about you because this is where it really gets down to is that it's a very competitive world out there and if you don't pay attention you fall very far behind ok and there's russia's neighbor or 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 a lot of people would say they need to do i get k. to go can it catch up. i've heard ok go ahead steve go ahead 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 russia russia had one of the most distressed budgets in europe so understandably the government to furred spending and investment in public infrastructure but now is russia comes out of the economic crisis there is 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 the growth in the country and when you think about that i mean it would be doing the right things looking far enough ahead because as we just heard and i visited the soviet union and there's a lot of this country today that still looks like a soviet union i think for example in time of soviet union where a lot of concentration about some of the technology and asked in surprise i think it's all gadget all the forces for the country will focus on these because it's very important for our military college now of course we have free markets and it

isn't possible to control all resources all cancer just exact with them infrastructure and of course the concentration of instructions results and verses where it depends how its competitors how it's profitable and my dear so you can make more profitable more interest for investors for nation our cornerstone of esther's in the beach area in this case it will be enough money in our enough interest and enough results if we think michael frayn go back to you. on this program on the money and we always ask one question no matter what the topic is is it all about oil and gas i mean high oil prices and stable have enough money to invest wherever it wants is it our own. always get down to you on gas i think that we are 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 if you're

invested into existence for structure and building infrastructure so there is my view on the oil price i mean even if i go back to you it was mentioned earlier in this program as could be a whole slew of privatizations how can that be a trigger for foreigners to come in here because it is pending on the percentage that is proved privatized with a 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 a towing to be economy so into these infrastructure projects. because the scope for development is huge right if you take a look at the critical sectors those transport based water management those waste management the soft social infrastructure projects like schools and hospitals and

of course electricity. so i think it's right. that companies can position themselves now to get into the market so they can further vent develop their market share ok me michael thank go to you will be a games and getting prepared for the world cup would i 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 it if it was expected by the industry so basically when we are going through a giant building and try and project a little bit we actually have to move on the new standards to introduce new requirements to help the peace project and to help bolster the infrastructure and what were the construction industry in russia unfortunately in so i think that it

didn't happen but i hope that the thousand and eighteen football championships will help to improve standards and improve the new requirements for the construction and we are going to be the last were you looking forward to the one picks for infrastructure oh definitely it's a very important project and for all suppliers and so it's a blessing but i have to agree with progress because of it's exactly really important what action how glacial going to be new technology going to be up i point to rush report as a regional because and we be 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 in stay with our team.

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