Russia Lagging Behind in Infrastructure, Modernization – Inozemtsev

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Russian roads are world-famous for their unbearable potholes and poor state of repair.  The same is true of the country’s other infrastructure, from an aging power grid to a crumbling rail network.  Vladimir Inozemtsev, an economic expert with the Center for Research of Post-Industrial Studies, argues in the Vedomosti newspaper that these issues must be addressed immediately in order for Russia to modernize and become competitive in the world market.

Unfortunately, Russia’s redevelopment is hindered by an inept state and unfathomable levels of corruption.  Even as the government raked in record windfalls from energy sales in recent years, roads were left to rot, and infrastructure projects were not initiated.  Russia is falling behind, Inozemtsev argues, and for the moment, the path to modernization looks bleak unless a drastic change is made.

Read more about Russia’s crumbling roads from the LA Times. Billions in Asphalt

Vladislav Inozemtsev

In order to modernize the economy, a series of conditions are necessary, and one of the most important is the condition of infrastructure.  Accelerated development is unthinkable without a network of roads, accessibility of power and communications, and the ease of mobility for workers.

All countries that have successfully modernized ran into this limiter of economic growth in the early stages, and decisively took to amending the situation.  One can confidently say: only those who managed to jump this barrier succeeded in modernizing.  Those who threw in their hands were left in the past.  Russia, sadly, had nothing to brag about here.  From 1995 to 2008, the length of the auto and rail network hardly expanded (comprising 750,000 and 755,000, and 87,000 and 86,000 kilometers [respectively]; Russia by numbers.  Official publication.  Federal State Statistical Service, 2009, chart 18.9).  From 1989 to 2008, the volume of overseas transport fell by 4.8 percent, and the number of airline passengers- by 2.1 times;  housing stock put into operation fell by 34%, and connecting to the power grid became a nationwide problem.  Leading countries, on the other hand, behaved in a completely different manner.  Its customary now to compare Russia with the other BRIC [Brazil Russia India China] countries – and the comparison here is staggering.  In Brazil, the length of the road network grew by 65% from 1988 to 2005; the volume of overseas transport by 90%; and the number of airline passengers more than doubled.  It’s better not to recall China: in only the last five years, 3.1 billion square meters of housing were built, 480,000 km of automotive and 19,000 km of rail routes; 16 large new airports have been put into operation, the first high-speed trains have been launched, six Chinese ports entered the list of the top 12 sea gateways of the world (moreover, the least busy of them handles more cargo than all of Russia’s ports combined), and connecting to the electrical grid now takes 19 days.

Russia is losing in this competition as result of the incompetence and corruption of the government, which does not set complex development goals as a priority.  The less authorities interfere with infrastructure development –the better the end result.  In 2000, the revenue from providing mobile telephone services was three times lower than services for stationary local and long-distance telephone communications.  In 2008, it was four times greater.  Yet there is no competition in road construction, and there are no results: in 2008, just 2300 km of motor ways were built (in China, this much is built in 10 days!), and the Avtodor state corporation (which was recently granted fiduciary management over 18,000 km of roads) will sooner work to change them into paid toll roads than build new ones.

What is the reason for the failure of Russia’s infrastructure modernization?  In our opinion, it’s clear: unlike the Chinese, Korean of Brazilian, the Russian government is incapable of lodging firm demands on its contractors and optimally organize production.  Today, 1 kilometer of four-lane highway costs $2.9 million in China, $3.6 mln in Brazil, and in Russia – $12.9 mln (for the section of highway from Moscow-St. Petersburg, the figure from the 15th to the 58th kilometer amounts to $134 mln for 1 km; for the Western High-Speed Diameter in St. Petersburg – $142 million for 1km, for Moscow’s Fourth Transport Ring – around $400 mln for 1 km).  The cost of building warehouses and commercial real estate in Russia is higher than in France or Germany, and exceeds the Brazilian figures by 2.4 times, and the Chinese by 3.2 times.  With that said, 1 square meter of area in a residential home expends .9 cubic meters of concrete and 90 kilograms of reinforcing metal, although in developed countries this is 2 times less (in turn, the equivalent of 210 kilograms of fuel oil is spent to produce 1 ton of cement, which is used to make concrete.  In the European Union- 125 kg).  In Germany, 65% of highways are built by laying precast concrete pads, in PRC [China] – 38%, in Russia – 0%.  After all, these coverings do not require repair for 20 years or more, and we spend 5.5 times more funds on repairing existing roads than laying new ones.

The Russian government overpays builders by tens of billions of dollars and throws away capital in even larger sums, simply because those who associate themselves with the government are not “statists,” but “feeders.”  It would not be an exaggeration to say that Russian infrastructure projects in recent years have become the site of the most widespread, non-transparent redistribution of wealth in the world (in 2006-2008 around $230 billion was expended without any visible material result).  Unsurprisingly, this market is completely closed to foreign companies, and the cost of work is growing each year by 25-40%.

Modernization presupposes a rigid system of rule- a true vertical, that can impose terms.  It succeeds where such a system has been built, and falters where bureaucrats act like businessmen.  And since the latter is visible in Russia much more distinctly, then as long as the situation does not change, one can’t expect a more modern infrastructure or modernization as a whole in the country.

The author is the director of the Center for Research of Post-Industrial Studies;   publisher and editor-in-chief of the Svobodnaya Mysl (Free Thought) magazine.

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