Page 76 - RusRPTJune18

9.1.12 Transport sector news
Deputy Nikolai Asaul from the Ministry of Transport announced that it's preparing a deal with China allowing shippers from both countries (namely trucks) to deliver door-to-door instead of delivering to specified customs zones. The deal is meant to be signed in June. Logistical logjams on Russian Railways are one of the biggest problems facing a large increase in trade turnover between Russia and China. Railways move as much as 85% of Russia's non-pipeline freight. Allowing Russian and Chinese shippers to deliver door-to-door helps relieve some of the pressure on RZhD and improves market access. Moscow and Beijing are hoping to hit a trade turnover target of $100 billion f or 2018, driven most directly by rising oil prices. However, ease of access for deliveries will create new opportunities for non-resource trading in the Far East in particular. Trade for Jan.-April showed 27.3% growth year-on-year to $31.1 billion, with $17 billion of Russian goods and services being exported to China. Assuming the agreement proceeds, the move would mark an important development in Sino-Russian economic relations -- a breakthrough that largely benefits private sector actors outside of strategic areas, namely energy. Door-to-door deliveries will create plenty of trade opportunities for the Far East in particular as well as broader supply chains running through Eastern Siberia to European Russia, something Russia's private sector will look upon excitedly. While there are red flags in the relationship between Russia and China via state-owned enterprises, it appears that the private sector and regional governments are in the clear.
The state commission on transport has approved a plan to federalize 17,572 kilometers of roads for repairs by 2031 so that they meet federal safety and quality requirements. Only 1,000 kilometers will be federalized through 2021 and Rosavtodor, the state roads agency, will return the roads to regional ownership once they're in acceptable condition. Road quality in the country's regions is a pressing issue that weighs on the economy, quality of life, and Moscow's ability to retain influence over remote areas. The road to the Kerch Strait bridge is included in the proposed list, as are roads to Nizhny Novgorod, Chita, and Khabarovsk in the Far East. The regions frequently lack money for roads. According to Pavel Chistyakov, vice-president of the Center of Infrastructure Economy, that it's normal for 40-60% of roads to not meet safety norms. Sometimes it's as high as 80%. It's only lower in oil-rich regions with greater revenues to spend. The proposal will likely improve compliance by 5-10% and only affects 17,000 kilometers of roads out of 500,000 kilometers nation-wide that do not meet requirements. Transport taxes and excise taxes on fuel cover road costs in the regions, which means federal money is needed. To meet Putin's decrees, 11 trillion rubles will have to be spent on roads by 2024 vs. 6.4 trillion the last six years. The decree calls for over half of the nation's road network to meet quality requirements. The trend line is clear -- MinFin's attempts to wean the regions off of federal money and imposing spending cuts have made the regions even more dependent on federal money for big infrastructure works. A silly idea to narrow roads as a money-saving maneuver is now floating around, but the reality is that federal money will have to back these projects and a lot more will have to be spent no matter what. A massive spending increase for roads projects will mean a host of new chances for contractors to inflate prices and game state spending. The question will be how the projects are structured. Check out our profile of PPP's in particular and ministerial fights here.
76 RUSSIA Country Report June 2018 www.intellinews.com