Page 10 - RusRPTNov18

of GDP; increase productivity in the non-extractive sectors by 5% a year; and push the volume of non-resource exports up to $250bn by 2024, from $133.5bn in 2017.
The export target is not unrealistic; in a useful analysis this May, the Higher School of Economics found that, to meet the target, the government would have to match the average annual export growth of the past 20 years. However, non-resource exports do not necessarily mean high value-added exports; the definition includes, for example, timber and metal products.
The government is also trying to increase high added-value machinery exports to $60bn, from $28bn last year. Automobiles and civilian aviation sales are set to account for about a fifth of this increase (which will prove difficult if the US imposes sanctions on the United Aviation Corporation). Judging by the lack of further deals, higher arms sales are set to account for a large chunk of the target.
The investment target is very ambitious: even in the boom years in the mid-2000s, Russia’s investment rate averaged under 20% of GDP. In an article published in June, Economy Minister Maxim Oreshkin noted that the investment target would require an additional 5.5 trillion rubles by 2021 in 2017 prices and could only be met by significantly improving the investment climate and increasing the domestic long-term savings rate. Most experts remain sceptical that Russia can achieve its growth targets. Last week the Bank of Finland published its latest growth outlook for Russia to 2020, forecasting expansion of under 2% a year.
One final note on the government’s strategy: it contains almost nothing on responding to the challenges of climate change or the transition to a low carbon future. Russia is signatory to the Paris climate agreement, but it is not engaging currently with the potentially major implications for its political economy.
2.3 Infrastructure plan to 2024 set
The Russian government has approved its plan for the main transport and energy infrastructure development through to 2024, as announced on October 11 by the Minister of Transportation Yevgeny Dietrich. The plan is the backbone of massive six-year spending drive under the May Decree signed by President Vladimir Putin for his fourth non-consecutive term in office earlier this year.
Transport infrastructure investment of RUB6.3 trillion is detailed in the plan, out which RUB3 trillion will be financed by the federal budget, and the rest raised from private co-investors . The cost of the energy part of the plan has not been disclosed.
The RUB3 trillion from the federal budget is more than the previously estimated RUB2.3 trillion ($35bn), which in turn, was almost double the initial estimate of RUB1.2 trillion . Russia's spending drive thus is already ballooning in cost, as in September a separate report suggested that the Digital Economy roadmap cost estimates also increased by over 60% .
Analysts surveyed by Vedomosti daily welcome clear articulation of the plan, but still see raising private co-investment as challenging due to absence of affordable "long" money in the economy, a limited number of players thinking of long-term investments rather then immediately profiting from massive state procurements.
The situation could be helped by the new investment mandates of the state development bank Vnesheconombank, slated by Kremlin to become one of the main hubs of infrastructure financing after an appointment of Igor Shuvalov. Unnamed construction industry sources told Vedomosti that planning and budgeting for the infrastructure projects still has a long way to go. Unlike the Kerch straight bridge to the annexed Crimea peninsula that was spearheaded
10 RUSSIA Country Report November 2018 www.intellinews.com