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. Last Updated: 07/27/2016

Rebuilding Russia Without a Grant

Alexander Levchenko, president of the Inzhener Construction Company, is never without his pocket calculator. During an interview in his Moscow office, Levchenko pounds the machine constantly, figuring out the future income, expenses and profits of his real estate projects.


Levchenko's focus on the bottom line is well-founded. His company is one of the few construction firms in Russia using its own funds for building projects. Inzhener is now involved in its second project: renovating a dilapidated downtown building into a Western-style office building.


In Russia, where the early stages of private enterprise have meant trade rather than production, Inzhener is an exception. Few firms defy the bureaucracies and regulations that still inhibit economic activity and actually produce something useful.


For capital-intensive projects such as office construction, it is even more surprising that Inzhener is not using any outside money, such as government investments or advance payments, to complete the project.


"It is simply because of the astounding inflation, and because of the astounding instability of Russian law", Levchenko said. "We simply do not want to have any obligations on our balance right now".


Inflation makes interest payments on loans unaffordable and laws are too new and unreliable to enter into meaningful business contracts, Levchenko explained.


Instead, he is reinvesting all the income from his first project - the office building on Prospekt Mira that he shares with the pharmaceutical firm Upjohn and a Russian bank - into the next construction project. In January, he bought a small building on Ulitsa Trubnaya, off Tsvetnoi Bulvar. By the time Inzhener is done with it, it will be doubled in size, Levchenko said.


Inflation also means that time is money for Inzhener.


Levchenko said he needs to finish and sell his building as fast as possible, before inflation bankrupts him.


It took his firm 18 months to get the first office building ready for occupancy, and Levchenko plans to get his new project done in a year.


In a country where construction projects can take 20 years, Levchenko's plan is ambitious. It means no days off for any of the workers, who get a higher salary and a long leave only after the project is completed, Levchenko said.


Inflation also means that Levchenko has no time to bargain on the price of production materials.


"Our expenses on worker's salaries are higher than the costs of the building materials", he said. "Our main expense is wasted time".


Once-scarce building materials are now available to whomever is willing to pay high prices, Levchenko said.


Completing the project quickly also will mean bending the rules and offering bribes, Levchenko added.


"If I had to follow all the instructions and regulations imposed in this town, I would have never been able to build my office", Levchenko said.


The approvals required from district councils, for instance, "cannot be obtained without a few presents", Levchenko said.


To maintain full control of his projects, Levchenko keeps his business small, with 60 workers reconstructing one small building at a time.


Levchenko started his business, then a building materials research company, with 400 rubles in 1987. The business now includes research, construction and design, and calls itself "the first commercial company that has worked independently since 1987".