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Multiplicative effect

“Infrastructure and Transport Projects - a Fad for Russia”

Multiplicative effect

The head of the Center for Economic Research of the Institute for Globalization and Social Movements (IGSO) told about the role the Eastern Polygon project can play in the development of the Far East, how it will affect trade in Eurasia and why Europeans can envy Russia. Vasily Koltashov:

- Is the Vostochny Polygon, in fact, one of the largest transport and logistics infrastructure projects in Russia? What are its goals and objectives on a national and Far Eastern scale?

- The project is much broader than just transport. It covers territorial development and is not accidentally called a "polygon": it involves the deployment of works on the vast expanse of Siberia and the Far East, primarily in Primorye, Transsib and BAM zones. It is on this basis that it is calculated to intensify the regional economy, create conditions for investment in the extractive industry and, at the same time, improve the quality, speed and volume of traffic on the Trans-Siberian Railway and BAM.

The project solves a very important task for the country: it develops the east coast. As we know, the US has two main economic development zones - the west and east coasts. Russia also has its own European part, quite densely populated, developed industrially, with old cities, and there is an underdeveloped region of Siberia and the Far East, which has huge potential in terms of resources and investments. At the same time, there is a task to improve the competitiveness of rail transport in comparison with container shipments by sea, increasing the share of the transit flow of goods from Asia to Europe.

Well, further there are also plans for the construction of new railway lines up to North America through the Bering Strait. This, of course, is a long-term task. In the meantime, it is important to link the railway communication system and the loading and unloading unit of Primorye into a single system.

- Which ports do you give priority to?

- I would not talk about priority here. The point is to activate the entire network of maritime ports, starting from Vladivostok. Modernization of ports is already underway. At the same time, bottlenecks are being cleared, that is, modernization of BAM and Transsib. Such work will allow in future to increase traffic volumes.

An important factor in favor of the Eastern Polygon project is that the situation in the Russian economy is not the most favorable. If to look objectively, in Russia for stimulation of economy large projects are necessary. Not investing in a particular city, what we did in the case of Sochi, when large investments were made both public and private. It seems to be declared that dozens of Russian regions participate in the project economically, but, meanwhile, there was no effect. It was evident that the economy does not launch, does not have a multiplicative effect.

Today, along with the "Eastern polygon", for example, the project of high-speed railways to Kazan was created. It is already clear that the project will be somewhat detrimental, because it is necessary to build many branches at once, otherwise the Russian industry will not be loaded. The peculiarity of the "Eastern polygon" is also that it can provide Russian heavy industry with orders. And metallurgy, and engineering, and rail production, and the construction sector, because it will be necessary to build new buildings. And not only the buildings of new industrial enterprises, but also new cities, develop new stations and a system of rocky railways.

- It turns out, the project will contribute to the development of industry in general?

- "The Eastern polygon" should theoretically connect a whole range of directions, such as timber industry, mining, machine building, that is, the entire manufacturing industry and innovation sphere, because a lot of equipment will be required. It will be very good if orders are received by Russian enterprises.

It is assumed that the "Eastern Polygon" will operate as a project that stimulates demand. Demand at least in the business-to-business format, and then in the format of consumer demand. These are new jobs that will "improve" the labor market in the country. Look, the demand for cars in Russia has been declining recently, the real estate market is stagnant. A decrease in prices in a number of segments is already underway. At least in some places, demand has dropped dramatically. For example, it sank in Moscow, and this is a very important indicator; Moscow is the economic heart of Russia.

The world market does not stretch the Russian economy, it does not come to the rescue and does not say: "All problems will be solved by increasing the demand for Russian products." At the same time, there are problems of geopolitical order. The conflict with the European Union and the United States is jeopardizing the established trade relations with these countries, primarily European ones, because it becomes unclear whether stable supplies of Russian raw materials to these markets will continue, whether competition with Russian goods will intensify, or whether Russian raw materials will be squeezed out. Under these conditions, Russia is making a turn to the East, and rapprochement with China begins. By the way, China has also received a serious lesson recently. That is why Chinese investors are interested in working more actively in Primorye and Siberia.

In 2012, the economic blockade of Iran took place, and the EU, the US and their partners demonstrated to China that its sea communications can be easily cut off, and China is enormously dependent on imports. Despite the fact that China pays a huge amount of steel, it produces a huge amount of ore and coal, it constantly lacks raw materials. In these conditions, there is only one country that is able to provide China with stable and reliable supplies - Russia.

Meanwhile, in China they are talking about building the Silk Road - a railway that will go in the direction of the Southern Silk Road through Iran, Afghanistan, perhaps Pakistan, or bypass these dangerous zones through Kazakhstan. But this is still projects, and only Russia has ready-made lines of communications that have been built for more than one decade, this is Russian Railways. Therefore, it is one of the objectives of the Eastern Polygon to modernize rolling stock, means of communication, stations, and to reduce the time for transportation.

- That is, the "Eastern polygon" can make some changes in the world trade turnover?

"He, so to speak, can make changes in the direction of the world flow of goods, at least on the scale of Eurasia - the largest and most developed economically continent in the world. The project really has a great Eurasian significance. It is interested in South Korea and other countries that would like to use railroads for the delivery of goods. Russian companies are also planning numerous investments in the extraction of various natural resources in this region.

Now the question is solved, how the construction of skydiving railways will be paid. Probably, 50% will be paid by RZD, 50% - by investors. But the main problem of the "Eastern polygon", in my opinion, is that it requires the state to change its own role in the economy. This is not the situation when our economic bloc officials like to say: let investors invest, and we stand apart or create a climate, we will give some tax discounts. This is the situation when the state itself must invest. It's no secret that the Transsib (and there is nothing to say about BAM) was built with direct and active state participation. Today, when the task is to make Primorye an accelerator, maybe even a locomotive, of the Russian economy, it is impossible to do without state investments.

Thus, the "Eastern polygon" will allow to tie the east and west of the country. The last 15 years, despite the economic recovery, it is felt that people who live in the European part of the country are very distant from those who live in the east. To fly from Primorye to Moscow is sometimes cheaper through China. A strange situation, when transportation and flights proved to be more convenient not through the territory of the Russian Federation. The situation should be changed and this should be related primarily to the volume of traffic - the volume of passenger flights and with a general regional development.

- Have you taken any steps in this direction?

- As I see from the news, the issue of interaction between local and federal authorities is actively discussed. Russian President Vladimir Putin makes statements, holds regional meetings, where the question of the "Eastern Range" is raised. There are signs that interest in the project is quite large, especially since it is also important because it will give the Russian economy an active protected zone, the growth of which does not depend on the wave of sanctions from the European Union. The Moscow region has been the leader in attracting investments and economic growth rates over the past few years. Siberia and the Far East were not sufficiently developed. Now the situation can change.

- "Eastern polygon" - a long-term project. Do foreign investors show interest?

- Yes, and this is another advantage of the project. Long-term nature is a guarantee for investors that their investments will be repulsed. That this is not a project for a year, when you must very quickly invest and quickly leave. You can be sure that the state will not abandon this direction of work.

I'm sure many will be scared of the scale of costs - the estimated cost of the project is 60-65 billion dollars. But I am sure that this is not enough, you need to invest several times more in the region in order to get the maximum effect.

- How do you feel about the creation of the territory of advanced development (TOP) in the Far East, in many ways precisely for their stimulation and is created the "Eastern polygon"?

- It is very difficult for me to talk about advanced development. If we look at the European part of the country, we will see that economic growth has stalled. I would call it the policy of a deaf-and-dumb state, which creates zones in the Russian regions, gives some benefits to those who invest there, but at the same time does not care about the development of the Russian economy to be stable and guarantee investors the reliability of their investments. If investors make investments in the economy with decaying growth, then they can be sure that after some time they will get problems with assets. Economic indicators are steadily deteriorating. The state creates a zone with lower taxes (please invest in these regions and you pay less taxes), but what happens? Nothing happens because there is not enough investment. No one is sure that these investments will pay off in the near future simply because of the general picture of the Russian economy.

The search for private solutions with a formal, deaf-and-dumb approach to investment attractiveness has completely failed. Similarly, the approach associated with private, local zones of revival, for example in Sochi, failed. Here we are preparing for the Olympics, a lot of money was invested in one small place. What is the effect on the economy? Incomprehensible. There is no effect in practice. And for Sochi, too, the problem.

Therefore, large-scale projects, especially infrastructure-transport, are objective for Russia. If we have not yet developed infrastructure, this is an opportunity to stimulate Russian production. The EU does not have such an opportunity. The US also does not have it, as they used it once before. Japan does not have it at all. So this is what you need to use. The only thing here is capital investment, and not only private investments. Just the state and a number of leading monopolies, including Russian Railways, should be led by private investors. They must signal to other investors that there is a stake on the development of the region, on the expansion of demand, that economic growth is guaranteed.

- In your opinion, which regions of the Far East will benefit most from the implementation of the Eastern Polygon project?

- I think that the regions of the south of the Far East will win. Primorye, Southern Siberia - originally. Further development will depend on the development of the railway communication system. Yakutia - at some point, because with the expansion of railways, the development of many natural resources becomes more profitable. It is impossible to mine iron ore in the northern regions, transporting products on airplanes. It is insanely expensive, irrational, uncompetitive. With the development of the railway network, it is possible to profitably extract natural resources, and processing can be organized on site. 

Thus, the project "Eastern polygon" will connect both the transit movement of goods, and the movement of local goods, and an increase in commodity turnover for Russian Railways, and an increase in demand for the Russian market. Of course, I do not think that one "Eastern polygon" can pull out the Russian economy. It must rely on a number of additional measures from the Russian government.

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