welcome back now here's a recap of the top stories here on our team libyan rebels are ready to storm or get off his hometown under a nato air shield in a desperate effort to find a fugitive colonel holdouts as european governments start their own fight for oil deals in the country. for world war two veteran who is leading a campaign to expose corruption in british courts is losing his battle that soften his appeal against the six month sentence was dismissed he was jailed for making audio recordings that hearings claims courts are simply trying to gag him.

in the i of this story new york city braces itself for the fast approaching hurricane irene as all public transportation is shut down president obama declares a state of emergency along the u.s. eastern seaboard. and the republic of qazi a looks to its newly elected president to rebuild the nation's economy lies in ruins after years of struggling to maintain and dependence alexandr on will have his hands full was eliezer country through the next five years. i'll have more for you in less than a thirty minutes tire in the meantime aren't you looks at what can be done to modernize russia's infrastructure much of which is stuck in a country soviet past all the money is next. hello and welcome to our in the money with the business of russia is the business

side 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 here live cousin yet chairman of the board of directors at barclays corp michael owen franca he's an analyst at ferus and stephen cousins he is a partner in the p.p.c. group in the moscow office of c.m.s. ok we're going to go to you first give me the bad news just how bad is russia's infrastructure in two thousand and eleven. ok not so excellent and in a way we have a lot of opportunity to improve our position in a way like this project has a lot of challenges so you starting from a low base you say not so low but it's not enough yet in any way we we are ready we are ready to help but exactly plan how to get

a life with projects in this case because of course as you said what you have no idea what will be the next time it was not but i did not have nothing like that all projects around we start with this position and they have to improve the situation ok with a little bit you are optimistic not me no wait are you willing your sector you are in the electricity sector i think we have number of targets one target would be to bring in new was the core because first the really have to benchmark against top water projects. bringing south expertise this technology from the up to rebuild the russian infrastructure this is once and cannot. be true should consider it so where. what part of come through is the most critical to develop this instead of structural because you know g.d.p. generated by all of the guests so probably will get oil and gas a little bit later we're going to go back to you. 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 move very fast very fast maybe so it that complicated to understand enough asked why you would like as fast as possible to cross into the ocean about all kind of knowledge of what we need. to understand is it enough good to understand maybe later not now but our position we do best michael if i think 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 are printed so basically in my view inflation is increasing when pensions and government spending increases but not infrastructure spending increases so basically spending on infrastructure is not so bad for inflation just simply increase pensions ok michael i'm here with you again there's so much cash out there isn't really needed and what i want to talk about it later for in foreign investment i mean if the government has enough money in the car through he can go it alone or it can't i think. i think the government can go along in my view it's better to share the risk with in their thirst just because the. 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 they're right on and social to. attract private companies to the infrastructure 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 best possible legal environment for foreign investors the committee 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 it's a little support so from the political support we see. the government has in its recent budget it's committed to due to the development of infrastructure in certain sectors for example the government has stated to develop of development of transport facilities. as a priority as is the development of health care and 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 improvement of our silicon valley but. in addition to that there is there's the state privatization project which is going to see shares in. utilities and infrastructure companies being sold. on the financial side because the development of the investment fund which will provide for state code financing infrastructure projects both the regional and national importance. the development of special economic zones and i'm sure abuse occurred recently at the economic forum in st petersburg the government announced that there's going to be direct investment fund which is going to make funds available for high growth high growth such as 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. ok stephen stephen you've given all the great pluses of new selling in investment in this country in a great way to 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 are these projects involve a huge amount of 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 in 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 personal and very person and their grip. investment is going to be guaranteed that there are protections there for them we have here in the studio when you look at your search. tricity sector how much of

a problem is when you're there isn't a huge investment in this in the sector here but there are price controls and things like that how they balance 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 do we go there karen t's how do they do it i think a lot of us probably in that industry here and the reason i say so because our productivity efficiency of industry should be improved and true definite improvement in the complex or percs in yourself to what is the if efficiency of inefficiency right now because what was it we were talking before the program something like up to forty percent of all it really generate in russia is law student substandard electricity transmission infrastructure i mean that is huge i think even more is warthe. it's how to outlaw is the newest technology

what technology should be selected from the how best experience us from global or from. back to your question about rates are it's different rates is different so probably true been out of our lives somehow but it's a little bit outside of probably practical competence our message that if you chanson should be improved here's some our particle or technology exists to improve it's maybe fifty percent and 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 sector is right now. third playing first of all it's called toller are the building that is there are a couple of projects underway there is the. toll road and from moscow to st

petersburg and i think that is primarily a way of international investors to participate in infrastructure building as well as investing in a russian railways. i mean if i go back to you here. in your search what is the biggest challenge when for investors coming here in working with the state because the state is a huge regulator of 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 of mr westermann. recognize the problem government moving in the right direction on the much. mr bailiff are highlighted some of the problems of this group. tariffs. greet over all regions this includes

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 think about regional development it's the report of the game for all gas for the whole industry for the whole society and if we do you start you know you know i've traveled around russia a bit and meet an enormous amount of needs an upgrade a huge upgrade where you start you start with the roads do you start with do you 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 what do you do first. i think from some outlaw regulation that's where important yes because. there are a lot of question a lot of problem was it's not one hundred percent understand clear for joining us just how it's

a good how it's possible to manage it and i think another technical problem and then i talk with our partners from our corners and westerns and banks there's a lot of question how it's manage how it's done it was the current year what the plan was the schedule halid so collect money hodes keep in mind it was a guarantee and i think when important to make one hundred percent believe system regulation laws and rules and improvements and license and one hundred percent around is for investors an infrastructure i think it's first step but can we go to those other steps here after a short break we'll continue our discussion on russia's infrastructure stay with our team. is you know. song was sixteen years old when he committed these murders that's not

inside the song so it should not be punished for his crimes so and is being punished no rational person can than i ever saw has been punished is being honest and will be honest. most hours must be as you know for the brutal crime committed this is a punishment this is not. imagine. that it's. because we've. been immersed know me whatsoever. now i didn't come here ask justice. and heard they first. start were dismissed. by a martin. and my that is now.

their calmness child was overshadowed by this tragedy. they still feel the fear they faced. and remember every second of the site. will remain in their memories and hearts forever. and you see so. i'm going to see. a link ups on our cheek. to. 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 scale to logistics both the next substantive housing in public buildings and legendarily bad roads there is barely a place that a russian unaffected by infrastructure generally seen as amongst the worst in the world the government has committed to radically transforming russia's infrastructure but it's bringing billions of dollars of its own to the table but also needing the expertise offered by good investments i think foreign investment is absolutely crucial not only because it brings fresh capital and those investors can invest alongside got along fine. but also because they bring now how. against the ricky part of the drive being used to provide a last name for structural legacy for cities across russia industry players say

this will help ensure outcomes and timeframes that i think is quite clever done from the government to run for such events since with an event like your limping around like you know sort of world championship like that we have that income and all the uptick in the us that they are putting themselves and everybody around on the big question to do something. so and with that pressure of course and with the money and for the money. and with approach where you have to you can do a lot beyond these electricity systems logistics. all seem to be. industry globally experience shows russia can expect a major economic and. also seem significant. structure has done well every way in the world just because we're starting from such a low level because they are such a huge. vested they're so huge. there it would be

fantastic infrastructure investment will boost russian g.d.p. growth coming decay creating thousands of new jobs and underpinning spending but you can he's handed probably a longer term benefits will include more efficient reduce dixon transport and energy and more economically competitive russia james play on the money. ok i'd like to go back to stephen what we just heard there was very rosy report in my say it will go back to the issue of just transparency and confidence speakers as we talk about the olympic games it's all cheve football and all that these are huge huge projects over a long period of time you investors have the confidence that this government the next government and the next government after that are all going to keep their word because there's always the issue of competence 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 and make you know that sometimes 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. 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 the president made beautiful has taken steps. 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

moscow st petersburg toll road the one i did so bypass and of course in st petersburg. but you know michael fine go to you when you look at investors looking interesting and companies here what do you still be sentimental when they look at these long term projects is that it's just too rich for my blood you know you want to get into it's such a long long term commitment or is a growing confidence that it is a good idea considering what we just heard from stephen. i think there. is a good idea to buy a long infrastructure bonds so basically. obligation through rather than equity just because. so on developed in russia i thought basically several companies are traded on russia which you can invest and which equity can pretty bad so that is why in my view of the only way to invest and bonds well what about you i mean

you're 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 such a huge amount of money therefore it's a question how to improve. for us in this country we have to rethink really we're here for about fifteen people over here five. percent for us definitely very interesting that the government focus and. really recognize . chances to improve energy efficiency is huge from industry to greet to there's a whole infrastructure. what's a different russian competitive with in the global market you know exactly where i'm going and what about you because this is what 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 sort of doing it now in a lot of people that would say they needed to do i becky to go can it catch up. ok go ahead steve go ahead but 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 back and in the ninety's of course russia had one of the most distressed projects 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 the growth in the country and if we do think about that i mean it would be doing the right things looking for 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 the soviet union i think it was for example in time of soviet union where a lot of concentration about some of the technology investments are probably ok i think it's all budget all the first or the country will focus on these because it's very important for our military polish now of course we have a free market and it isn't possible to control or resources all cancer just exactly coming from structure and of course the concentration for structure is outside investors where it depends how its competitors how it's profitable and that my dear it is necessary to make it more profitable more interest for investors or a coronation on our foreigners investors and in this case it will be enough money

in our enough interest and enough results include michael fine 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 or meat high oil prices the state will have enough money to invest wherever it wants is it all out on. always get down to oil and gas i think and that actually reached a level of g.d.p. is not growing even if the oil prices are still high so i think there is an understanding within the government that further growth it's possible if you're investing enough into existing infrastructure and build a new infrastructure so there is my view on the oil price going 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 think i mean invest here because you're paying on the

percentage that is proved privatized with a scepter 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 while 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 for a burst is to get a toe into the economy a toe into these infrastructure projects. because the scope for development is huge right if you take a look at the critical sectors those transport this water management those waste management 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 my microphone go to you will be

a key games in getting prepared for that world cup will that be the litmus test for russia's infrastructure for the world is to showcase itself. i think it should be actually but unfortunately regulations of the construction market didn't change it i thought it was expected by the industry so basically when we are going through a giant building and china project link takes we actually have to move on the new standards to introduce new requirements to help these projects and help all over the infrastructure and lower the construction industry in russia unfortunately in sochi olympic games that have. happened but i hope that the thousand and eighteen football championship will how to improve standards and improve the new requirements for the construction and we are going to be the last word to you looking forward to being one picks for infrastructure. it's

a very important project and for all suppliers and so it's a black sink what i have to agree with progress it's exactly what is important what sort of how. how you technology going to be up i point to russia for other regional growth and we be talking about you starting 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. twenty years ago largest country. sometimes it. was the. janitor. where did it take.

great.