New Forms of Attracting Private Investors to Railway Projects are Required

21 november 2019

"The topic of attracting private investment in infrastructure construction is quite new for our country, although not completely new for the world," said Vladislav Onishchenko, the Head of the Analytical Center, at Transport Week 2019. "Many tools have already been explored, and we have every reason to use them". According to Mr. Onishchenko, this possibility is also provided for by the Federal Law On Railway Transport.

The history of attracting private investment in rail infrastructure knows many attempts. Concession legislation is still the basis of the process; there are examples of existing concession agreements – the Northern latitudinal railway, the Vyshesteblievskaya–Taman section, the Elegest–Kyzyl–Kuragino line.

According to the head of the Analytical Center, other options were not previously used for a particular reason. These include, for example, public-private partnerships. Some time ago, the "take and pay" principle was discussed in terms of application, for example, at the Eastern site, but the initiative did not receive the support of the transport community at that moment.

Mr. Onishchenko noted that railway construction was always resource intensive. It does not matter whether public or private money is used — two questions always arise. The first question is the return on investment, and the second one is the risks of demand for a long-term planning horizon. Returning to the examples, the Head of the Analytical Center noted that concession agreements are quite effective for attracting private resources.

Talking about the Comprehensive Plan for Development of the Transport Infrastructure, Mr. Onishchenko noted that the request for state participation in the declared projects averaged 50% and was lower for railway projects as compared to the airport and road projects. According to Mr. Onishchenko, such a share of state participation will continue to persist.

As for the foreign experience, the speaker emphasized that concession agreements were also most often applied in other countries. The general trend shows that bank financing is gradually being replaced by less costly methods, in particular bond loans insured by the state.

Mr. Onishchenko summarized that attracting non-state investment implies three areas — the formation of mutually beneficial obligations and rights of both parties, the development of mechanisms to attract a wider range of private investors, and the introduction of high technologies, in particular digital, in the work and service capabilities of railways.