VEB.RF, National PPP Centre and AECOM Assess the Potential of Encouraging Investment in Infrastructure

10 march 2020 года
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VEB.RF, National PPP Centre and AECOM have prepared a research guide “Infrastructure for Sustainable Development. How to Attract Investment in New Quality Projects”. The document analyses the potential for attracting investment in Russian and foreign infrastructure assets and considers instruments and mechanisms for evaluating the quality of infrastructure projects, which are widespread globally.

Numerous research studies confirm that increased investment in infrastructure positively affects the development of the economy and has a multiplying effect. However, there is a profound lack of funding for infrastructure development worldwide. According to the World Bank and Global Infrastructure Hub, the scarcity of funds is estimated at 13 trillion US Dollars for 2021-2040, with Russia’s share accounting for 625 billion US Dollars. For 2020 alone, the global shortage of investment in infrastructure will exceed 500 billion US Dollars. In total, global financing institutions and institutional investors manage global assets exceeding146 trillion US Dollars, with infrastructure assets currently accounting for no more than 5%.

The Russian investment market has a number of features impeding the fulfilment of this task. For example, according to the Bank of Russia, since 2013 annual direct foreign investment in the economy has not exceeded 30 billion US Dollars, whereas prior to sanctions imposition such investment was above 40 billion US Dollars.  Project financing, according to ROSINFRA infrastructure project support platform, covers only 3% of infrastructure investment and equity financing is underdeveloped: Debt-to-equity (D/E) ratio, including mezzanine lending and shareholder loans, may be 90/10 per cent. There is almost a complete lack of institutional investors making regular investment in infrastructure development in Russia.

Attracting long-term investment in infrastructure projects should be based on a systemic and transparent approach to investment decision making. Investment activities are governed by the G20 infrastructure agenda based on the Road Map for Infrastructure as an Asset Class adopted in 2018. G20 experts have summarized different approaches to infrastructure development and adopted the principles for quality infrastructure investment covering various aspects of preparing and implementing infrastructure projects.

Alongside the principles for quality infrastructure investment, there are more than 50 global instruments aimed at implementing sustainability approaches and supporting investors in the evaluation of financial, economic, environmental, social, managerial and other aspects of infrastructure projects. Evaluation and certification instruments affect the global market through forming an integrated ecosystem. For example, over eight years of existence the Envision evaluation system has helped to attract 22.5 billion Us Dollars worth of investment for infrastructure development (about 1.5 trillion roubles).

In February 2020 VEB.RF, National PPP Centre and AECOM announced the development of the national system for evaluating and certifying infrastructure projects for compliance with the principles of sustainable development and investment in quality infrastructure.

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Moscow-Tatarstan Teleconference Discusses Wildberries Distribution Centre Construction in Zelenodolsk

28 january 2020 года
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The Zelenodolsk industrial park in Tatarstan is to house a distribution centre of Russia’s largest online retailer Wildberries. The local utility and transport infrastructure was built with MONOTOWNS.RF’s financial support totalling 930 million roubles. Progress in setting up the large-sized distribution centre was discussed during a teleconference attended by VEB.RF Chairman Igor Shuvalov, Tatarstan President Rustam Minnikhanov, VEB.RF Deputy Chairperson and MONOTOWNS.RF Director General Irina Makieva, and Wildberries CEO Tatyana Bakalchuk.

“It’s important to take an integrated approach to the development of small towns. This project is not only support for entrepreneurship, but also infrastructure development and job creation. When completed, such projects will give urban areas a new quality of life,” VEB.RF Chairman Igor Shuvalov said during the online discussion.

According to Tatarstan President Rustam Minnikhanov, the republic has seven single-industry towns with more than 1 million residents, or a quarter of the economically active population.

“The republic’s key companies representing various economic sectors operate here. The further development of single-industry towns needs support for new investment and infrastructure projects,” he said.

The Tatarstan President added that the region had plans to apply to the Monotowns Development Fund for new projects. These include the Kamskie Polyany transport infrastructure project and Phase 2 of the infrastructure project for the Haier industrial park.

The teleconference also discussed the construction of the Wildberries distribution centre in Zelenodolsk, which started in November 2019. At the first stage, a facility with an area of 50,000 square metres will be launched in the first half of 2020. Overall, the investment project will create over 4,000 jobs.

“Zelenodolsk today is an economically sustainable place. The town sees alternative businesses and new investors coming; the urban environment is changing. We are pleased that the Fund takes part in these changes. There are good prospects for growth in the town; I’m sure we have a lot of joint projects in the years ahead,” VEB.RF Deputy Chairperson and MONOTOWNS.RF Director General Irina Makieva emphasised, adding that Russia’s largest e-commerce retailer Wildberries coming to Zelenodolsk would open the door to new small businesses.

It is worth noting that in addition to logistics functions, the new Wildberries distribution centre will help entrepreneurs to grow their businesses and export their products to other countries. Wildberries became a resident of the Zelenodolsk advanced development zone in December 2019. Currently, the total number of residents is 11. The industrial park already houses 13 companies now.

“We are confident the opening of the centre will enable Tatarstan entrepreneurs, especially small and medium-sized businesses, to expand their product range on Wildberries and consequently increase sales. The number of suppliers from the republic to Wildberries has increased more than threefold to 66 in the last three years, while their turnover has grown more than fivefold,” Wildberries CEO Tatyana Bakalchuk said.

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