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Government discusses Strategy for Developing the Russian Far East and Baikal region

Yesterday, the government held its regular weekly meeting. This time, the key topic was the Strategy for Developing the Russian Far East and Baikal region by 2018. Prime Minister Dmitry Medvedev commented that the planned financing (from the private sector, federal government and regional governments) of RUB 10tn (vs. Russia’s GDP of RUB 62tn in 2012), was «without precedent». In order to attract private investment, the government has suggested special tax reliefs, to be applied at the regional level. Improving transportation infrastructure is the top priority (49% of total funds), including the Baikal-Amur Mainline and the Trans-Siberian Railway. Medvedev also mentioned that the Kuril Islands might be developed as a tourist resort.
Infrastructure in the Russian Far East and Baikal regions certainly needs investment. Expanding capacity on the Baikal-Amur Mainline and the Trans-Siberian Railway would facilitate tighter economic integration, both within the region and between it and central Russia. It would also enhance Russia’s role as a transport link between Asia and Europe.

However, Russia probably cannot afford RUB 10tn. First Deputy Prime Minister Igor Shuvalov suggested treating the document as a long list of desired projects, and then refining it by the end-2013 to differentiate between the mandatory and optional parts. Even though the overall amount of spending commitment is unclear at the moment, this programme fits the ‘investment push’ agenda promoted by the Russian authorities since the start of 2012.

Alexey Zabotkin, Maxim Oreshkin, Daria Isakova
VTB Capital analyst

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