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BUSINESS MAGAZINE №2 (38) 2014RUSSIAN RAILWAYS

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Infrastructure: to spend or not to spend

/ orIentatIon towards north / do russIan BusInessmen never smIle? /

«The rzd–parTner inTernaTional»№2 (38) 2014

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Editorial

Due to the development of global logistics, existing routes can’t satisfy all their customers, both passengers and shippers. Therefore the development of new lines will be the main prior-ity for railway companies in future.

This year RZD will focus on development of a high-speed railway system in Russia. Thus, the project for the first HSR line linking Moscow and Kazan is ready. A number of foreign companies are willing to take part in it, but the question of in-vestment still remains (pp. 28-29).

According to Alexander Misharin, the First Vice President of RZD, the mechanism for investment has already been devel-oped. It should be a concession, as such a scheme is familiar to the government, the ministries, and business.

However, many experts say that the problem is a lack of private companies ready to take part in other important infra-structure projects, because companies still have doubts about profitability. Many PPP projects failed around the world, but there are still some really great examples in Russia. The best one is the construction of the Pulkovo airport in St Petersburg. Also there are the construction and utilisation of the “Western High-Speed Diameter” toll road, bridges over the Kama and the Bui in Udmurtia and the Lena in Yakutia. There are not so many PPP projects in the railway sector now, but the situation may change after the federal law “On Public-Private Partner-ship” comes into force (pp. 14-17).

Heavy investment will soon be made into the development of railway infrastructure by both the government and RZD. Lastly, it was agreed to spend RUB 562 billion for moderni-

sation of the Baikal-Amur and Trans-Siberian Mainlines. The reasons why Russia must focus on these projects now, despite an uncertain payback period, are rather important. For exam-ple, the development of the New Silk Road, the backbone of which is the TRACECA project. Roads from the Southeast of Asia to Europe bypassing Russia can take away a significant share of traffic from Russian ports located in the Primorsky Krai area. And now, when logistics are moving eastwards, this investment is a really clever decision (pp. 46-47).

Süleyman Karaman, current President and Director General of TCDD shares his experience: “When I took up this position after the neglect of the railways for 50 years, the existing tracks were in very bad condition, the rolling stock obsolete and worse, the railmen lost their hope and the railways were forgot-ten in the public’s eye. The people were used to seeing railways which used to make a loss, as a burden. We had two options; a loss maker establishment would either be closed down or the railways would be revitalised with investments similar to the examples in other developed countries” (pp. 59-61).

Without any doubt, it is important to learn from our neigh-bor’s experience. Even if it is not a positive one. Such as in the USA, where the majority are still against construction of HSR (pp. 22-25). But it is important to understand that every coun-try has its own strengths. In the USA, the network of highways is developed extremely well. But in Russia, where more than 85% of people support the Moscow-Kazan HSR project, devel-opment of high-speed railways will be the solution to many of the problems of passenger traffic.

Investment RequiredDue to the development of global logistics existing routes aren’t enough to satisfy all their clients, both passengers and shippers. Therefore the development of new lines will be the main priority

for railway companies in future.