Russian logistics connectivity. The impact of transport corridors on economic development

3 September 2024

Russian logistics connectivity. The impact of transport corridors on economic development

The development of international transport corridors in Russia will significantly increase freight traffic, thereby contributing to economic growth and improving the mobility of the population. Expanding infrastructure through new alternative routes should ideally anticipate market demands. Simultaneously, it is essential to address the shortage of transport capacity on railways, waterways, and in aviation. These challenges can be most effectively tackled by attracting private investors. These conclusions were reached by participants of the session entitled Russian Logistics Connectivity. The Impact of Transport Corridors on Economic Development, held as part of the Eastern Economic Forum.

KEY CONCLUSIONS

All aspects for developing transport infrastructure must be engaged

“It is not advisable to focus on a single direction. All of this is capital-intensive and requires investment. Naturally, a single company like Russian Railways (RZD) cannot handle this alone; it must be ensured through collaboration – possibly by establishing new types of partnerships. However, infrastructure development should be pursued across all directions,” Irina Magnushevskaya, General Director, Institute of Economics and Transport Development.

“In the long term, to address the uneven development of infrastructure, an approach to developing Russia's overall transport potential is required, not just in the Far East. Among other things, cooperation between key logistics industry participants and the government should be established to explore alternatives,” Alexander Iodchin, Deputy General Director for Strategy and Development, Delo Group of Companies.

Collaboration between the government and private investors is necessary

“Where is growth most effective? In areas with private ownership. We must create conditions that encourage private owners to enter the market, giving them the maximum opportunity to participate,” Andrey Kutepov, Chairman of the Committee on Economic Policy of the Federation Council of the Federal Assembly of the Russian Federation.

“Each of the proposed alternatives to the Far East, including the North–South route, involves resolving several issues and eliminating bottlenecks. Cooperation between market players and the government is crucial here,” Alexander Iodchin, Deputy General Director for Strategy and Development, Delo Group of Companies.

PROBLEMS

Inefficient use of water transport

“Waterways are not being used effectively. In the 1960s and 1970s, when we had greater opportunities to use the shipping fleet, they were employed far more efficiently,” Andrey Kutepov, Chairman of the Committee on Economic Policy of the Federation Council of the Federal Assembly of the Russian Federation.

Lack of railways in the Eastern region and shortage of funds for road maintenance

“Undoubtedly, the eastern direction is the most deficient. All shippers are vying for space, but we are unable to transport all the cargo that has been requested,” Valentin Ivanov, First Deputy Minister of Transport of the Russian Federation.

“Federal roads are deteriorating due to the lowering of maintenance standards in recent years. This summer, for the first time, federal roads in Yakutia were closed because vehicles could not pass through,” Aisen Nikolaev, Head of Sakha Republic (Yakutia).

Insufficient operational efficiency of railway transport

“Across all directions, RZD is experiencing a shortage of rolling stock and delays, with idle times ranging from 10 to 20 days. As a result, the turnaround time for wagons has increased. Operational efficiency is suffering. Trains are fully loaded in one direction, but return empty,” Mikhail Yurchuk, Deputy CEO for Government Relations, UGMK.

Exacerbation of railway capacity shortages due to new infrastructure construction

“The more we build railway infrastructure, the more we are forced to restrict the normal functioning of the railways. More time is needed for maintenance windows, more restrictions on material delivery, and so forth,” Valentin Ivanov, First Deputy Minister of Transport of the Russian Federation.

SOLUTIONS

Shifting focus from modernizing existing infrastructure to creating new lines

“The most important point to address now is that all the so-called 'quick' construction projects are complete, and the infrastructure now requires significantly more capital investment. This means creating new lines, not continuing or modernizing existing ones, but rather developing entirely new routes,” Irina Magnushevskaya, General Director, Institute of Economics and Transport Development.

“We lack operational efficiency, transformation, and the resolution of these bottlenecks because the volume is so large. The country is vast, the freight flow is enormous, and the range of goods is diverse. It is important to develop alternative schedules and explore bypass routes,” Mikhail Yurchuk, Deputy CEO for Government Relations, UGMK.

Transition from reactive to proactive measures

“The Ministry of Transport, in conjunction with the Ministry of Economic Development, is actively implementing an information system for transport-economic balance. This involves forecasting freight traffic, inter-regional communications, and transport between regions and countries. These forecasts, made 10 to 15 years in advance, are overlaid on the existing infrastructure, taking into account domestic freight volumes and the projected increases in capacity. This approach allows us not only to identify problem areas now but also to foresee issues 10 to 15 years ahead, based on all forecasts,” Valentin Ivanov, First Deputy Minister of Transport of the Russian Federation.

“Many projects that initially appear unnecessary or premature turn out to be both in demand and profitable, generating significant business along the routes and, consequently, fostering economic development,” Vitaliy Sergeychuk, Member of the Management Board, VTB Bank.

Reducing the key interest rate to boost infrastructure investment

“The interest rate must be lowered. Under the current rate, it is easier to halt construction, place funds on deposit, and still have enough for salaries, bonuses, and dividends. The interest rate stifles investment planning and future development,” Mikhail Yurchuk, Deputy CEO for Government Relations, UGMK.

*This is a translation of material that was originally generated in Russian using artificial intelligence.

For more information, visit the Roscongress Foundation’s Information and Analytical System at roscongress.org/en.

Russian logistics connectivity. The impact of transport corridors on economic development

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