Page 14 - RUSRptOct18

2.6 Kremlin draws up investment list for private business
In the aftermath of Kremlin aide Andrei Belousov’s tax proposal turned private investment plan, officials are discussing a list of projects for business to pursue .
Participating companies—most notably NLMK, Severstal, Rostelecom, Novatek, and Sibur—submitted their lists of proposed projects in early September, and the Ministry of Finance will soon publish its own.
It's still in the discussion stages, but the current Vedomosti report suggests that Belousov's tax threat has been tamed. Rather than taxing firms, government officials are trying to find ways to offer subsidized loans, stable investment climates, and tax breaks along with other measures to encourage firms to invest in sectors from infrastructure to medicine. Most notably, the infrastructure projects currently discussed by Rosavtodor are considered lower priority than the May decrees. This suggests a two-tier project model for infrastructure planning has emerged with the state taking the biggest contracts directly into its own hands and trying to privatize lower priority projects.
● According to Vedomosti, MinFin’s current list includes 394 projects worth RUB11.5 trillion ($172.5bn). Target areas are as diverse as forestry and nuclear medicine.
● The Ministry expects private business to invest at least RUB2.1 trillion rubles ($31.5bn) in the projects. To attract private participants, MinFin plans to offer subsidies, preferential financing, reduced customs duties, and guarantees of stable regulatory and tax conditions.
● The most expensive element of the working plan is infrastructure, which will cost roughly RUB10 trillion ($150bn). Private investors will likely be offered transportation projects such as the Sakhalin bridge (RUB543bn, $8bn), the Moscow-Kazan railway (RUB1.8 trillion, $27mn in private investment needed), and the Meridan highway to Kazakhstan (RUB593bn, $9bn).
● The government hopes this plan will help fulfill Putin’s May decree of increasing investment to 25% GDP by 2024.
2.7 Infrastructure spending plans get a big boost
The comprehensive plan for infrastructure development received significantly more funding than expected, with spending totals increasing from RUB2.3 trillion ($34.6bn) to RUB5 trillion ($75.3bn).
Increasing the approved spending totals sends several signals. First, the state desperately needs to generate growth and look like it's doing something about quality of life. For that reason, spending plans appear to focus most on large road projects, in particular looking to improve East-West connectivity and build up the Chelyabinsk-Ekaterinburg region. Expect Oreshkin and Co. to push back against any attempts to funnel funds towards wasteful rail projects.
The most expensive project in the current plan is the construction/ reconstruction of the Europe-Western China route, which will cost the federal budget an estimated 361bn ($5.4bn).
The government has prioritized projects that will strengthen the connections between large cities, and thus hopefully have the largest effect on the economy.
14 RUSSIA Country Report October 2018 www.intellinews.com