Ken Research announced latest publication on,
“Russia 2016 Construction Outlook: Growing Market with USD 300 Billion of Infrastructure Mega-Projects Pipeline”, offer
insights on the changing trends and key issues within the
Infrastructure and Construction industry in Russia. The analysis of the
aforementioned trends has been done across main sectors: Real Estate;
Transportation; Energy, Industrial & Utilities; and Social
Infrastructure, within the industry with comprehensive overview of key
sectors: Power sector, Railways sector and Real estate-Mixed Use sector.
Key Topics Covered in the Report
- Detailed profile of Infrastructure and Construction industry in Russia
- Overall, Regional and Sector wise analysis of Megaprojects spending in Russia
- Changing Dynamics, Opportunities and Challenges in the Russian Infrastructure industry
- Detailed coverage of ‘Project Financing’ and ‘Project Risks (Cost & Time overruns) & Returns’
- Comprehensive overview of Key sectors: Power sector, Railways sector & Mixed-use sector
- Competitive landscape of the Infrastructure and Construction industry in Russia
- Regulatory framework (including PPP growth) applicable toInfrastructure and Construction industry in Russia
Economic Environment of Russia
Russia
is one of the most affluent mixed economy in the world. Vast natural
resources are the key determinant of the Russian economy. It has
abundant oil, natural gas and precious metals making up a major share of
Russian exports and comprising about half of the Govt.’s revenue. This
huge revenue helped Russia overcome the economic collapse of 1998and is
also presently one of the key drivers of country’s growth. The Russian
economy is characterised by significant state-control on key sectors of
the economy. Large state-owned institutions hold strong influence over
political and financial institutions; and distort the economy. From
early 2014,, as a result of falling oil prices and economic sanctions
from EU & US, the economy is in recession and expected to show
recovery by 2017 (World bank).
Looking at the macroeconomic
landscape, Russia is home to 143.7 million people. With GDP 1.178
trillion USD and GDP (PPP) 3.6 trillion USD, it is the fifteenth largest
economy in the world as per nominal GDP and sixth largest as PPP. The
sector wise contribution to GDP includes 59.7%, 36.3% and 4% by
services, industry and agriculture respectively. Consumption and
investment has expanded although with a declining rate. Surging
inflationary pressure is a major cause of turbulence to macroeconomic
stability. Russian govt. is not very welcoming to the external global
world. FDI inflows amounts to just 21billion USD. Government’s import
substitution policy aims at substituting imports with domestic goods
restricts the inflow of foreign products as well as market players in
the country.Exports have also shown impressive increase with Russian
Exports value standing at 82.1 billion USD and dominated by petroleum
products, natural gas and metals.
Brief Overview of the Construction Industry in Russia
Construction
industry is the pillar of a country’s development and growth.
Unfortunately, Russia has a struggling one. In 2015, the industry
witnessed significant deterioration on account of declining construction
activity due to weak economic growth, declining fixed capital
investments, reduced oil & gas investments, currency depreciation,
international sanctions, and declining oil prices. As a result, the
country has consistently been placed low on the infrastructure quality
by the Global Competitiveness Report. This has led to an immediate need
to restore its deteriorating assets, build new ones and improve its
global position. Russian Govt. has placed Infrastructure &
Construction industry at the centre of the national policies and
agendas, with the commitment of investing more than 1 trillion USD by
2020.
Despite strong growth of the Russian infrastructure industry
since independence, the industry is still ranked low on the global
platform. With some improvement in its global ranking to 74th position
in 2015 from 101st in 2012; the country still lags behind in providing
best infrastructure facilities.It has a decent power and railway network
but inefficient infrastructure in transport and telecommunication
sector. Primarily focussing on the power and railway sector, huge
investments are committed by the govt. under various development &
strategy programmes. Under ‘Energy Strategy 2030’ the govt. aims to
double the electricity generation capacity by 2030. Russia has a
megaprojects pipeline worth USD 300 billion. Similarly, to strengthen
the railways, the backbone of Russian trade, govt. has announced few
high speed rail projects costing more than USD 20 billion. Looking at
strategic trends in Russian Megaprojects, investment in brownfield
megaprojects have increased along with increasing average size of the
megaprojects. Since most of these projects are public centric, hence are
largely funded by state, with 60-70% of the fund coming from state
budget. However, global crisis has forced the govt. to look for other
financing options especially PPP. There has been a significant growth in
PPP projects in Russia. As a result of low interest rates offered on
loans, many foreign construction companies & domestic private
companies have entered the industry. Apart from the govt. creating vast
opportunities for the growth of the industry, it still faces challenges
such as few stalled big projects with little progress due to delays in
finding investors, also impacting the final cost and timely delivery of
these projects.
Major Market Players in the Construction Industry in Russia
To
reduce the burden of Govt. of financing megaprojects, private players
are increasingly being attracted through various ways. From PPP projects
to offering low interest rates on loans, govt. is trying hard to
incentivise the private companies to enter the industry.
Some
major market players in selected sectors of construction industry such
as Power sector, Railway sector and Real estate sector include:
RusHydro, ROSATOM, RUSAL, Interbering, Russian Railways, Gazprom,
Rosneft, Mitsubishi, Mitsui & Co, Shell, Eastern Energy Company,
State Grid Corporation of China, Russia Ministry of Transport, Moscow
Ring Railway, Saint Petersburg City Administration, Kaltchuga Capital
Management SA, Rublyovo-Arkhangelskoye, CDS Group, Sibur, LukOil
Company, Vnesheconombank, African Development Bank, KFW Development
Bank, Clean Technology Fund, European Investment Bank, World Bank, SK
Most, AO Institute Stroyproekt, Jsc Bamstroymekhanizatsia, VTB,
Rosmorport, Uralkali, Suek, United Grain Corporation, Global Ports
Investments Plc, Metalloinvest MC LLC, Sberbank, Power Construction
Corporation of China, SUE Moscow Metro, Mosinzhproekt, CRCC, China
International Fund Management, COMEX Holding, Classic Group Ltd, RDI
Group, DON Story Invest etc.
The weak performance of the industry
over the last few years is expected to continue in 2016 as well with a
slight further contraction of the construction industry on account of
worsening business environment and capital outflows due to
Russia-Ukraine conflict. However, the growth momentum will be steadily
regained through expanding infrastructural construction over the coming
years. Also, increased investment in brownfield projects are expected as
the country focuses on improving its existing assets. Industry
competitiveness is also anticipated to increase on account of influx of
foreign and domestic players in the industry as a result of PPP and low
interest rates on loans.
Some key factors that will be driving the growth of Russian Construction Industry in coming years include:
- Recognition of Infrastructure construction as a major contributing factor to country’s long term growth
- Huge
investment by the govt. under various socio-economic development plans
such as ‘Energy Strategy 2030’ and ‘Strategy for Developing Rail
Transport in the Russian Federation to 2030’
- Rising disposable income boosting the residential construction in the country
- Fifa
World Cup, 2018, expected to generate increased demand for
infrastructure construction in related areas such as hospitality and
transportation, along with attracting investment
- Growing number of PPP projects in Russia& low interest rates charged on loans
However,
international sanctions and low oil prices will continue to challenge
the growth of the Russian Construction Industry over next few years.
To know more on coverage, click on the link below:
https://www.kenresearch.com/manufacturing-and-construction/infrastructure/russia-construction-outlook/38143-97.html
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https://www.kenresearch.com/manufacturing-and-construction/infrastructure/vietnam-construction-outlook/38145-97.html
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Ken Research
Ankur Gupta, Head Marketing & Communications
query@kenresearch.com
+91-124-4230204
