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There are few willing to construct the CRR. What is to be done?

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There are few willing to construct the CRR. What is to be done?

Today, the CRR is the largest automobile transport object in the country. If it is not completed, it will seriously impact upon the authorities’ prestige.

According to expert opinion, Russia lacks 1m km of highways. The Central Ring Road, which is being laid in the Moscow region, is capable of decreasing this deficit somewhat, though recent events have revived initial anxieties that the main construction may either be delayed or stop entirely. 

 

Neither money nor bidders

This anxiety is connected with the fact that the recent tenders for the construction of the third and fourth start-up facilities did not take place, as only one bid was submitted to each of them. The Chair of Board of “Avtodor” GC, Sergei Kelbakh, assured us that the third and the fourth sections of the CRR were planned to start construction in spring, 2016.

It is well known that officials are accustomed to wishful thinking. According to Ekaterina Reshetova, senior associate at the Transport Economics and Transport Police Institute of the Higher School of Economics, this result was quite predictable and is not worth paying too much attention to.

There are few willing to construct the CRR. What is to be done?

Photo: The CRR construction stages

Private money is not enough, and besides, the CRR is competing for it with the М-11 which is also being done with private investments, the expert reminds us. So the small number of tender participants does not mean that the construction will stop: it may proceed with the participation of only one bidder.

One should take the real conditions into account: there are few companies on the road construction market capable of coping with a commercial loan. For now, the CRR is one of Russia’s biggest projects, and its implementation can’t proceed without its share of hardships.

 

Steeplechase

The situation with investments in road construction is dictated by the economy. Investments in expensive projects may be realized by those who have the money – and these are mainly companies with foreign partners, but in the current geopolitical situation, there are few of these.

Another kind of company capable of such big investments are those with access to financial sources: for example, pension money. That is why one of the tender participants is the “Leader” company, which has such access, and this decreases its risks.

And what happens to those with no such access may be seen from the example of the “Stroygazconsulting” company. First it won a contract for the construction of the first section but soon fell out of the race. “Stroygazconsulting” was to start work in 2014, but could not cope with its commitments.

Player substitution took place: “Crocus International”, belonging to construction magnate Aras Agalorov, entered the game, taking the contract for the construction of the first 49.5 km-long start-up facility (96th — 146th km). The road will be located on the territory of the Domodedovo urban district, the Podolsk district of the Moscow region, the Troitsk administrative area of Moscow and the Naro-Fominsk district of the Moscow region.

Build in spite of everything 

Is it necessary to construct the CRR given present economic conditions? According to Alexei Mednikov, Deputy Director of the KPMG Group in Russia, it is a good, high-quality project. The “Avtodor” GC carried out large-scale preparations. The main parameters of the CRR were calculated, and 5-6 participants took part in every tender.

But, alas, the economic conditions got worse, and this impacted upon the project’s implementation – the number of participants dropped. But even with all that said, the road should be constructed. We need it, and it will be very useful from an economic point of view.

It should be taken into account that any infrastructure project has a rather long life cycle – no less than 30 years. This includes a few years of construction and further operation. It is impossible to calculate all risks over such a long period, but all possible estimation has been done to the greatest possible extent.  Marketing research has been carried out, international experience has been studied, modern technologies are being applied, and good concession schemes are being used, Alexei Mednikov summarises.  

All this allows us to say that main risks have been taken into account while preparing the project. As far as the current turbulence is concerned, it is not permanent, and sooner or later the situation will stabilise.

There are few willing to construct the CRR. What is to be done?

Photo:The CRR toll sections

But Mikhail Blinkin, Director of the Transport Economics and Transport Police Institute of the Higher School of Economics, thinks that not all the risks were taken into account, and now they are seriously aggravating the work on the project’s implementation. Firstly, there is a lack of regulation in the land allocation process in Russia, which is more serious than any other macro-economic drawback. There is no single body in Russia today capable of guaranteeing that all necessary sections will be completed in good time, and this results in the non-availability of many construction sites for work.

Secondly, there is the readiness to pay for the toll road. The figures pertaining to the tariff and the traffic do not correspond - the example of the M-11 showed this vividly, and the Prosecutor’s Office interfering in the process of tariff formation is a bad sign for any investor. The way the agency interprets the issue of social justice may kill any business project.  

 

Transport backwater

One should not forget that the CRR as it is may be considered a large-scale project only in Russia, where even now few roads are constructed, especially high-level roads. But neighboring China, for example, as of 1997, has been laying 5,000-6,000 km of similar highways annually (!). So, from a Chinese perspective, our CRR is a rather modest object.  

Besides this, Russian road transport infrastructure isn’t keeping up with either the domestic or the world economy. If the country builds roads at the same tempo, we shall lag behind the rest of the world for years to come and turn into a transport backwater.

Mikhail Blinkin thinks that it is necessary to build more toll roads. In Europe, they comprise 2% of all roads, in China more than 10%, and in Russia – we’re not sure. Those who construct using PPP schemes later have problems with operating the roads.

The state does not want to invest the necessary money in this sphere, and has not done so lately. The CRR is one such projects and is an especially interesting one.

We’ll keep an eye on its implementation.

 

Vladimir GURVICH 

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