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The Foundation was established in 2007 with the aim of facilitating the development of Russia’s economic potential, promoting its national interests, and strengthening the country’s image. One of the roles of the Foundation is to comprehensively evaluate, analyse, and cover issues on the Russian and global economic agendas. It also offers administrative services, provides promotional support for business projects and attracting investment, and helps foster social entrepreneurship and charitable initiatives.

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The Far Eastern Concession: How to Achieve an Infrastructure Breakthrough
3 September 2021
12:30—14:00
KEY CONCLUSIONS
Investment is flowing into the regions of the Far East

At present, we have 30 projects on the go at a total value of RUB 250 billion. 12 of the projects are worth RUB 180 billion and are infrastructure projects aimed at investors, and the other 18 are worth RUB 66 billion and are focussed on social services — Anatoliy Bobrakov, Deputy Minister of the Russian Federation for the Development of the Far East and the Arctic.

The Amur Region is currently experiencing a real investment boom. More than USD 20 billion is being poured into investment projects in all fields of endeavour, and the projects are being carried into effect. Of course, it is important that the infrastructure be able to keep up with such active investment development. Engineering infrastructure too, but first and foremost the social infrastructure — Pavel Puzanov, Director of the Amur Region Investment Promotion Agency .

Up to now, we have traditionally focused on four different areas: airports, ports, toll roads, and logistics. I can say that over the past year we have added three more areas to the existing ones: waste processing, social infrastructure, and metro construction. In principle, we have significantly expanded the volume, so to speak, of our investments and the scope of their application. As for the Far East region, we presently see it as a priority region for our own investments — Oleg Pankratov, Chief Executive Officer, VTB Infrastructure Holding.

The Far Eastern Concession creates new opportunities for development

The task of the Far Eastern Concession is to involve investors in the process and have them create infrastructure on their own, as it were. As far as I understand, however, investors’ expenditures will ultimately be reimbursed by the state anyway. Precisely therein lay the goal and the incentive behind the Far Eastern Concession — Alexander Dolgov, Managing Partner, Head of Infrastructure & PPP Practice in Russia and CIS, Central Asia and Caucasus, Squire Patton Boggs.

The Ministry for the Development of the Far East can allocate approximately RUB 25 billion a year to create infrastructure. There are many projects, more than 6,000 have been implemented to date, with RUB 2 trillion invested, and RUB 4 trillion is still to come. Projects need infrastructure. Business needs infrastructure, and so do social services — Anatoliy Bobrakov, Deputy Minister of the Russian Federation for the Development of the Far East and the Arctic.

Of course, one of the primary and probably most important aspects of the Far Eastern Concession is compensation of up to 100% for estimated site cost in the long term — Anatoliy Bobrakov, Deputy Minister of the Russian Federation for the Development of the Far East and the Arctic.

ISSUES
A lack of social infrastructure is a hinderance to many projects

Social infrastructure is of vital importance to the Far East. If people are fleeing the region, how can we motivate them to stay here? They need the right social infrastructure: health care, education, and everything in between — Oleg Pankratov, Chief Executive Officer, VTB Infrastructure Holding.

Infrastructure in the Far East is more than large infrastructure projects: it is also socially oriented projects, projects in housing and communal services. And in this regard, it should be noted that different banks have different views on what projects to finance, and what amount makes a project interesting to them — Alexander Dolgov, Managing Partner, Head of Infrastructure & PPP Practice in Russia and CIS, Central Asia and Caucasus, Squire Patton Boggs.

We are currently moving together with the governors on issues related to the modernization of urban heat supply systems. The question of heat supply is especially pertinent for the Far East, more pertinent than in other parts of Russia — Roman Berdnikov, First Deputy General Director, Member of the Management Board, RusHydro.

Concession timeframes and the conditions of state support do not always suit investors

Investors are given the opportunity to finance infrastructure at the expense of the state, but the state does not act without a delay. And the investors end up paying for the delay. They have to bear the interest burden in its entirety. And there is a lot of discussion right now about what this burden will ultimately be. The timeframe for the concession is up for discussion, whether it will be ten years or thirty. Investors want it to be ten, to only have to deal with the interest for ten years, but the authorities want it to be thirty, because that way it’s easier to carry out a greater number of projects — Yuriy Korsun, Deputy Chairman, Member of the Management Board, VEB.RF.

At present, we are dealing with mechanisms for additional support coming from the Russian Federation among others for infrastructure projects: so-called infrastructure loans, which behind the scenes people would call infrastructure mortgages. But it seems to me that the criteria are not applicable in this situation for the Far East. One of the main criteria for determining the amount of support is population. You know what population density is like in the Far East — Dmitry Pronchatov, Chairman of the Board of Directors, National Transport Concessions (VIS Group).

SOLUTIONS
New tools to support and attract investors

We have developed an amendment to the Regulation on the Ministry for the Development of the Russian Far East that allows the Ministry to act as a grantor for the entire spectrum of infrastructure specified in the Law on Concession Agreements. At the same time, a well-known instrument known as the ‘single subsidy’ was restructured slightly so that it would be possible to establish long-term limits with respect to the budgets of the constituent entities of the Russian Federation. This is necessary for providing funds to ensure payment of obligations under concession agreements at the regional level — Anatoliy Bobrakov, Deputy Minister of the Russian Federation for the Development of the Far East and the Arctic.

It’s no secret that together with an investor we can generally make any medium-sized concession in literally an hour and a half with the use of a tool that we call a concession constructor. It works in relation to a specific site — Mikhail Chachin, Vice President, Sberbank.

We have created a community called the Investment Accelerator, which is administered by the Far East Development Corporation. We have already held two meetings for the Investment Accelerator. In just two meetings it has become evident that we have a rather effective tool for finding a project initiator — Anatoliy Bobrakov, Deputy Minister of the Russian Federation for the Development of the Far East and the Arctic.

The material was prepared by the Russian news agency TASS