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. Last Updated: 07/27/2016

$75Bln Highway Overhaul Approved

Prime Minister Mikhail Kasyanov on Thursday approved a 2.1 trillion ruble ($75 billion) public works program to overhaul Russia's highway network over the next 10 years.

"We want to start the 21st century with good roads," Kasyanov told the weekly Cabinet meeting in remarks broadcast by RTR television.

The plan is part of a larger one announced earlier this week by Transportation Minister Sergei Frank to revamp every sector of the transportation industry at a total cost of 4 trillion rubles.

Frank said he expected federal and regional budgets to split the cost of the road portion of the plan, but he didn't rule out attracting foreign investors and inviting foreign companies to help build toll roads.

"We are ready to consider the possibility of foreign investors participating in building roads, especially in the European part of Russia where traffic is more intensive," Frank was quoted by Prime-Tass as saying.

Frank defended the large price tag by arguing that the multiplier effect of upgrading the road network would eventually add a total of 8.4 trillion rubles to the economy.

President Vladimir Putin has said that he wants a lot more cars on the road, and this plan would help accomadate that goal. Frank was quoted by Interfax as saying that "there is no alternative to the 'auto-mobilization' of the population."

Ten years ago, just 7 percent of Russia's 150 million people owned cars, and that number is expected to quadruple by 2010, Frank said.

The 21st Century Road Program foresees the construction of 80,000 kilometers of roads. Russia has just 925,000 kilometers of roads, a little more than half of what experts say is needed.

The plan calls for new transit roads to be built around major transport hubs like Moscow, St. Petersburg and Vyborg, which borders Finland, to ease traffic congestion and increase the speed of transport.

The government hopes the effort will increase the overall transport capacity of the nation's highways by up to three times — with the end result being lower transportation costs and the development of tourism, trade and domestic industries.

But while no one doubts that the overhaul is needed, there is much doubt about where the money will come from.

"It looks like the type of grand scheme cooked up without a focus on fiscal reality," said Rennaissance Capital analyst Kim Iskyan. "Constructing highways will not have investors tripping over each other," he added.

"Seven billion dollars a year is a significant sum," said Andrei Ivanov, transportation analyst with Troika Dialog.

"The economy is shifting from big industry to small business and services. To accomade this change there has to be a different transport infrastructure. Roads now service 10 percent of cargo turnover, and this share will grow, and it's positive that the government is addressing this need."

Kasyanov gave the four ministries involved — Transportation; Finance; Industry, Science and Technology; and Economic Development and Trade —two weeks to finalize plan. The finance transportation ministries will determine the amount to be allocated in next year's budget. The financing for 2003 will be worked out this September.