Working Day

26 april, 2012 17:22

Prime Minister Vladimir Putin holds a conference on developing railway infrastructure and high-speed service

Prime Minister Vladimir Putin holds a conference on developing railway infrastructure and high-speed service
“We must proceed from the following basic task – today we must create advanced, powerful infrastructure capacity in railway transport and form a clear series of priority projects for the long-term perspective, and most important, we need to be fully clear on the funding.”
Vladimir Putin
At a conference on developing railway infrastructure and high-speed service

Vladimir Putin's opening remarks:

Good afternoon,

We have gathered in an interesting atmosphere – quasi-production and quasi-exhibition. At any rate, it is interesting. I hope Mr Yakunin (head of Russian Railways) let you now about the company's latest achievements. They look good and make us eager to work.

In the last few years the company has made a big achievement in its development, both technologically and organisationally. It goes without saying that the strategic plans for developing railway transport have enormous significance for the country's entire economy. We all understand very well that, like the energy industry, transport forms the foundation of economic development. In many respects these industries determine the trajectory of GDP growth and therefore demand the implementation of large-scale goals. It is necessary to display here a long-term government approach, considering the interests of the regions and practically all industries, as well as geopolitical and social factors. We must look 10, 20 and 30 years ahead.

I'd like to cite one example, or rather recall how it was and you can confirm this –in the early 2000s many experts believed there were enough railway infrastructure reserves and there was no need to think about complicated, expensive and non-urgent projects. Many considered it a waste of time to think about increasing the capacity of key railways, such as the Baikal-Amur and Trans-Siberian. As for a project such as a railway crossing to Sakhalin, it was brushed aside as an unnecessary fancy because this was the idea at that time. In general, it corresponded to the view that there was enough railway infrastructure, the railways were not loaded to capacity and it was not even clear whether they would be loaded. Railway capacity was sufficient for the economy at the time, but the real dynamics of its development formed entirely new conditions. What seemed to be a project for the remote future became a necessity.

The demand for railway shipments increased many times as a result of economic growth. Let me recall that we set the task of doubling the GDP. We approached the crisis having practically reached this goal – before the crisis we increased it by 90%. All this (the economic growth) set other goals and tasks for us and created new conditions. Thus, the Baikal-Amur and Trans-Siberian railways are working at the limit of their capacity, and this is already impeding many projects of the country's development, primarily in the Far East and Eastern Siberia. The pace at which we are entering new markets is slowing; Russian business has to suspend interesting ideas and work half-heartedly in this direction; we are also accumulating lost gain from unused transit potential. And, finally, we understand, especially if it come to the Baikal-Amur and Trans-Siberian railways, that this is a strategic direction and the expansion of our potentialities in the Asia-Pacific region, which (unlike the economic giants of today and the recent past – Europe and other regions with traditionally developed economies) is growing much faster. This is a promising market and we must think of how to work in it and create infrastructure opportunities for work in this direction.

Experts believe the cargo turnover on the Baikal-Amur Railway may almost triple by 2020 rather than increase by some percentage. In general in Russia up to 2014 (which is just a year and a half away) railway shipments are expected to rise by about 15%.

Therefore, we must proceed from the following basic task – today we must create advanced, powerful infrastructure capacity in railway transport and form a clear series of priority projects for the long-term perspective, and most important, we need to be fully clear on the funding. We can use several instruments at once. These may be private investments in commercially attractive transport projects and the formation of major pools of investors, including raw materials companies, transport operators and other participants in the market interested in effective logistics. We have spoken about this at many conferences, including in Kemerovo last January.

In addition, we can speak about different forms of private-public partnership, the resources of development institutes and direct budget funding for projects with a significant social or geopolitical dimension. We must find the best option for each specific project and, most likely, these options should be mixed.

Upon the completion of this meeting I would like to ask all interested parties to specify the list of priority projects and present considered proposals on their funding.

We must significantly increase the scale of work considering that railway investment programmes have increased substantially. Thus, in 2008-2011 (in the course of four years) Russian Railways invested 1.361 trillion roubles in its development. Am I right, Mr Yakunin?

Vladimir Yakunin: Absolutely.

Vladimir Putin: Can you imagine, 1.361 trillion roubles? Last year alone the company's investment budget increased by 26%, nearly a third. Dozens of railway terminals have been repaired and high-speed service has opened between Moscow and St Petersburg, Moscow and Nizhny Novgorod, and St Petersburg and Helsinki. We have started implementing projects for intermodal shipments that make it possible to connect ground and air transport into a single transport system.

We are finishing building the Kuznetsov Tunnel in the Far East, which will allow us to lift restrictions for shipping cargoes to the ports of Vanino and Sovetskaya Gavan; we are expanding approaches to the ports of Ust-Luga and Primorsk in the North-West and have built a railway to Nizhny Bestyakh. This will allow us to launch projects for the comprehensive exploration of the south of Yakutia, which is a very important region for the development of Eastern Siberia.

According to expert estimates, we will have to invest another five trillion roubles in infrastructure modernisation and development in the next decade. One of our priorities is to increase access to Eastern Siberia and the Far East and to develop approaches to our major sea ports. Thus, we must organise new routes as part of preparations for the 2014 Olympics and the World Cup in 2018. We will also expand our programme for high-speed passenger service. Obviously, all these projects will require serious capital investment.

This is why it is important to form effective and predictable rules of work in this industry. They should be understandable to all participants in the process – the infrastructure owners, transport operators, investors and consumers of transport services, of course. We must correctly determine the balance in resolving the main issue, or at least one of the main issues – I'm referring to the cost of shipping, which should not suppress the general economic activity in the country. This is obvious. Moreover, railway operators should have enough funds not only for maintaining existing infrastructure but also for developing new infrastructure.

In this regard, I'd like to mention several important aspects. First, we cannot put all the costs of the railway network's modernisation and development into tariffs or else we will simply suppress economic development. We must once again attentively review investment programmes and reduce internal costs – we spoke about this yesterday (or at least I spoke about this). We must see where we have additional reserves for optimisation and alternative sources of funding, including loans. I understand that the company has a debt load, but we should still think about this. On our part, we will help you do this. This is the task that Russian Railways faces and, as I said, we will render the necessary support to you.

Second. Clearly, we must fundamentally improve our tariff policy on railway transport and switch to modern methods of regulation in this sphere. We need a predictable tariff formula that is understandable to all economic players, and it should last for five to ten years rather than one.

And, finally, the third point. I think that, as with the energy market, we should consider introducing the principles of economically justified profit on investment capital. In this way we will be able to form transparent, stable and long-term rules of the game for the future and attract to the industry really big, so-called long-term investment, including money from pension and insurance funds, Russian and foreign financial institutions and resources of strategic investors.