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in 2024. Construction of the HSR is estimated to cost RUB360bn ($5.3bn). The HSR is the first major project of its kind, effectively linking two of Russia’s largest industrial centres into one. In theory this should create synergies, boosting both labour productivity and industrial efficiency. However, given the novelty of the endeavour, it is difficult to assess how much growth associated with the HSR will outstrip growth that would’ve been without it. But the project is certainly a step in the right direction toward curtailing the country’s extreme centralization in Moscow and St. Petersburg. The CIE calculations are based on foreign methodology for evaluating infrastructure projects that has been adapted to Russian industrial indicators. The project will stimulate growth directly by boosting production of building materials, increasing demand for development services, and tapping into high-tech industries—all of, which increase tax flows. Indirectly, the HSR will reduce travel time (and thus transportation costs), increase the movement of labour and goods, and boost investment in the region. By linking Chelyabinsk and Yekaterinburg, the HSR should create the third largest economic centre in Russia with a collective population of more than 3mn people. The 218-km railroad will transport passengers at speeds between 200-300 km/h, notably reducing the current 3-hour transport time between the cities. Virtually uniting these two large cities into one directly advances the federal government’s goal of forming strong economic growth centres outside of Moscow and St. Petersburg. Officials further note that 80% of materials and equipment for construction will be produced in the Urals. Authorities at the Ministry of Transport now must decide if they want to include private investors in the project. Negotiations on potential terms of participation should be completed by September 30, so the authorities can conclude a concession agreement by the end of the year.
State monopolies may direct dividends to infrastructure projects The government is discussing the possibility of allowing monopolies Russian Railways, Transneft, and Rosseti to skip paying dividends to the state and direct the money towards infrastructure development instead. With Russia's budget in better shape thanks to MinFin's efforts, policymakers need to find every last cent to spend on investments designed to stimulate growth. The question is whether state monopolies can really spend money on infrastructure more efficiently than the federal government, and there's little guarantee the money will be spent wisely. Companies will have more money to reward their friends internally. The policy is broadly in the interest of most state firms, so expect a fair amount of pressure behind closed doors. Russian Railways requested that it pay dividends on preferred shares (as of 2017, 50mn rubles or $734,000) but not on common shares (8.75bn rubles or $128mn) until 2025. Otherwise, the company threatens, it might not be able to move enough cargo. The head of Rosseti has also made requests to change dividend policy, but Transneft has been focusing its lobbying efforts on getting permission to raise its rates. The proposal was discussed at a meeting between Vice Prime Ministers Maksim Akimov and Dmitry Kozak on August 13. A request for commentary on the proposal was sent to the Ministries of Economic Development, Finance, Transportation, and Energy and to the Federal Antimonopoly Service. Kommersant’s sources indicate that the future of the initiative will be determined by MinFin’s position.
99 RUSSIA Country Report September 2018 www.intellinews.com