welcome back you with art you live from moscow with me roll research headlines now libyan rebels are ready to storm coffee's hometown under a nato air shield in a desperate effort to find a fugitive colonel that's a european governments start their own fight for oil deals in the country. a draft resolution a deal is brewing at the u.n. security council as russia and the west proposed two different approaches to tackling the escalating crisis in syria calling for a peaceful dialogue in the conflict one country while the u.s. and europe want to change of power in damascus. a world war two veteran who is

leading a campaign to expose corruption in british courts he's losing his battle that's off his appeal against a six month sentence was dismissed he was jailed for making all the a recording that hearings but claims courts are simply trying to get him. under a public eye as he looks to its newly elected president to rebuild the nation's economy which lies in ruin after years of struggling to maintain independence. uncle parke will have his hands full as he leaves the country through the next five years. ok well if you join me in less than thirty minutes time for more news but for now our we look at what can be done to modernize russia's infrastructure much of which was stuck in their countries or soviet past or when the money is now. hello and welcome to the money with the business of russia is business i'm here all

about today we're talking about infrastructure and the building of the new russia. 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.d.d. in russia also we're live cousin yet chairman of the board of directors at barclays corp michael franca he's an analyst at ferus and steven 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. but ok now so that's a lot but anyway there's a lot of opportunity to grow our position in a way like this project has a lot of challenge so you're starting from a low base you say not so low but it's not enough for us in any way we we are ready we are ready to play exactly play how we'll license projects in this case because

of course that was issued what it's now and will be in next time it was not but not enough like all projects are out and stuff for this position and they have to improve that situation ok well if you're an optimist you know you know what are you betting your sector you're in the electricity sector i think we have a number of targets one target we're going to bring in us to call because obviously we have to benchmark against top project. expertise a cyclone. help to rebuild the russian and french this is once and come out. of it so we're. what part of cancer is the most critical to develop this infrastructure because. g.d.p. generated by all of us so probably look at oil and gas a little bit later we go back to you on 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're going to twenty first century make a jump. we moved very fast very fast maybe and so it took complicated to understand enough that's why i would like to as fast as possible to prostitution about all kinds of knowledge and what we need. to understand is it enough we understand maybe later now for our position that we do our best michel if i can go to you but if we 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 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 and print that so basically in my view inflation is increasing when their pensions and their government spending increases but not infrastructure spending increases so basically spending on infrastructure is not so bad for inflation just simply increased pensions ok michael i'm here to stay with you i mean again there's so much cash out there is there any need and what i want to talk about later for in foreign investment i mean if the government has enough money in the car for is in there he can go it alone or it can't. i think it's i think that the government can go it alone in my view it's better to share the risk with threats just because. experts and they know how to build proper objects how to manage them how to make profit on this project and how to manage costs so that is why i think. to. attract 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 state 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 for example the political support 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 to the city development of infrastructure in certain sectors for example the government is the developer of means 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. there is. the state project as asian project which is going to see. utilities and infrastructure companies being sold. on the financial side the development of the. pressman fund which will provide for state financing and infrastructure projects both the 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 the government is going to be better direct 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 your selling in investment 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 to be require huge huge amount of investment even at the regional level you're talking of projects in the tens of millions where is 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 parent person and their. investment is going to be guaranteed but there are protections there for them anyhow if i go to you back here in the studio when you look at your search through electricity sector how much of a problem is it when you're there isn't 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 out and we go there karen keys how do they do it. i think first as not often with me probably not in the story yet the reason i say so because of productivity efficiency of industry should be improved. from the improvement in the complex or something in your sector what is the if efficiency in efficiency right now because what was that we were talking before the program something like five to forty percent of all it really generate in russia is lost to do substandard electricity transmission infrastructure i mean that is huge i think even more is lost. is how

to apply the newest technology what technology should be selected from the how best experiences from global for what will play. back to your question about rates. it's different in three different three so probably it should been out of my life somehow but it's a little bit outside of i would quickly call competence our message if you chanson should be improved some are practical or our technology already exists to improve it's maybe fifty percent. michael if i can go to you if we just look very globally investors looking at infrastructure in russia what is the sexy sector or sector is right now so i think that first of all it's. hard to build in. there are a couple of projects underway there is. a polaroid and from

a status in petersburg and i think that is primarily a way of international investors to participate the infrastructure given as well as in western in russian railways. i mean if i go back to you here. in your step to what is the biggest challenge when for investors coming here in working with the state because the state is is the huge regulator of this 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. mr putin and mr medvedev say. recognize a problem going on in the direction of the world on the march eleventh mr medvedev highlight that some of the problem of this group. tariffs about green over all regions this i have read to include

all the things that should be considered are same when mr putin mentioned about what needs to develop. a building because it's so critical for regional development if you think about regional development itself a report of for all the 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 a bit and means an enormous amount of needs an upgrade a huge upgrade where you start you start with the roads 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 see the state in looking at you know what do you do first. i think from some a lot of politicians that's where important yes because. there are a lot of questions a lot of broadening what is not one hundred percent understand clear for foreign investors how it's sort of lights how it's possible to manage it and i think

a little technical problem and then i talk with our partners from our farmers investment banks there's a lot of question how it's managed how it's done it what the current year what the plan what the schedule halid so collect money because keep money in the barents and i think very important to make one hundred percent believe system regulation laws and rules and improvements and license and one hundred percent or up is thought in person and structure i think it's just step in front ok we're going to go the other steps here after a short break we'll continue our discussion on russia's infrastructure stay with our team. playing to the. maximum velocity. mark simone trust. us

a moment efficiency. some comfort. for ability most nabi asian decent to denmark's moscow's one famous ear show playing technology jump a cheer on a large we've got the future covered. the. last time the close up team was moving where the gold rush still gets people hike up. this time the party goes to zero three the floor of the local government is giving power back to the people the clear everywhere from will be adopted. the locals turn their land into a closed paradox while comes. the close up on r.g.p. . twenty years ago this country.

began a journey. where it's taken. welcome back up on the money on people and today we're talking about russia and its infrastructure but first let's have an overview of russia's physical plant. again. from electricity wastage on a massive scale to just exporting next substandard housing in public buildings and legendarily bad roads there is barely a russian left unaffected by the infrastructure generally seen as amongst the worst in the world the government has committed to radically transforming russia's infrastructure base bringing billions of dollars of its own to the table but also

needing the expertise offered by global investments i think absolutely crucial not only because it brings fresh capital and those investors can invest alongside. pilots. because they bring now how again sorry key part of the drive being used to provide a lasting infrastructure legacy to cities across russia industry players say this will help ensure outcomes and timeframes. i think is quite clever done from the government to run for such events sounds. like lympics like soccer or championship like that with. me. putting themself and everybody around on the big question becomes something. so and with that pressure of course and with the money of follow the money. and with the

present you have to say you can do a lot beyond these electricity systems logistics facilities roads are all said to be. industry so it would be global experience shows russia can expect a major economic and business also seeing significant infrastructure has done well every way in the world. because we're starting from such a low level because they. are so huge we expect there will be fantastic infrastructure investment will boost russian g.d.p. growth will be coming creating thousands of jobs and underpinning spending but if it is handled properly the longer term benefits will include more efficient logistics and transport more reliable energy and more economically competitive russia james on the money. ok i'd like to go back to stephen what we just heard

a very rosy report in my say. about could be 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 become an instant 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. but 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 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 macroeconomic factors for example interest rates inflation taxes. rates 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 mitt beautiful

has taken steps to or not it's this anti corruption program which i hope it's 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 recent petersburg toll road the m one i can sort of bypass and of course put in st petersburg. about michael fine go to you when you look at investors looking investing in companies here what is to be sentimental when they look at these long term projects is it just too rich for my blood you know 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 for in the through

the good is a good idea to buy long infrastructure bonds. obligations rather than equity just because they're pretty. and so on developed in russia basically several companies are traded on russia which you can invest around which equity can pretty big so that is why and i view the only way to invest is the guy on bonds well what about you i mean in investing in the. electricity sector is the government doing the right things as far as you are concerned given carbonates because we've all agreed to this is a very long term. trajectory investing it's such a huge amount of money definitely a question how to improve for future. or for us in this country reiterating what we can we've got here for people who are here in russia five pursuits for. this for us definitely a very interesting is that the government focus and. recognize.

chances to improve energy efficiency is huge from industry to greet to there's a whole infrastructure. it was a good fire in the russian competitiveness in the global market exactly where i want to go now what about you because this is what 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 needed to do a decade ago can it catch up. i thought ok people yeah absolutely critical. to 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 had one of the most distressed budgets in europe so understandably the government deferred spending and investment in public infrastructure but now as 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 the growth in the country 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 agree i visited the soviet union and there's a lot of this country today that still looks like the soviet union i think it was for example in terms of soviet union where a lot of concentration about some of the technology investments are prominent there i think it's all gadgets all the first and so that tangible focus on these because

it's very important for our military polish and now of course with a free market and it isn't possible to control all resources all cancer just exactly the common cause structure and of course the concentration of presidential results and questions where depend how those competitors clouds profitable and the mileage is necessary to make more profitable more interest for investors or national are foreigners investors invest in the space it will be enough money in our enough interest and enough results if 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 always get down to oil and gas i think and that we are actually reached the level of g.d.p. . you know growing even if the prices so high so i think that there is an

understanding within the government that the further growth is possible only if you're invested enough into existence for structure and building infrastructure so there is no you are no oil price then even if i go back to you knew 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 invest here because it is pending on the percentage that is proved privatized with a sector in pains i go to state looking for are for the not prepared to make surely find the right mix for foreigners to get involved in this privatization process so 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 towing to economy so into these infrastructure projects. because the scope for development is huge right if you take

a look at the critical sectors there is 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 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 be a saatchi games and getting prepared for that world cup without be the litmus test for russia's infrastructure for the world just to showcase itself. i think it should be actually but unfortunately their regulations for the construction market didn't change that that was expected by the industry so basically when we are going through a giant building india and china project lympics we actually have to move on the new standards to introduce new requirements to help the peace project

and to help all over the infrastructure and all over the construction industry in russia unfortunately in sochi i think it's painted it didn't happen but i hope that two thousand and eighteen football championship will help to improve standards and improve new requirements for the construction and we'll give you the last word are you looking forward to the human 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 it's exactly really important what's the regulation hundred pollution going to be change and how new technology going to be up for entire russia for as a regional definitely 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 r.t. .

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