PPP and Foreign Policy for Good of Tyva

The Tyva Republic, a usual outsider among regions by investment attractiveness and economic potential, took the 46th place in the rating of subjects of Russia by development of public-private partnership (PPP) mechanisms in 2014, having outrun, for example, Chelyabinsk and Novgorod Regions, or the Republic of Chuvashia. Will developed PPP mechanisms help economically weak subjects?

PPP projects are directed, first of all, at development of infrastructure — transport, social, energy, etc. Thus, the given mechanism can make it possible for Tyva to achieve two aims at once:

1) attract private investment and thus obtain, firstly, experience of joint implementation of projects and make the region less “frightening” for business further on, and, secondly, learn to conduct right communication with the private sector, and, thirdly, optimize the limited expenditure of the region on projects by conducting tenders;

2) develop the infrastructure the quality of which, even for the whole of Russia, leaves much to be desired.

The Tyva Republic is characterized by rating agencies as a region with low investment potential and extreme investment risk. The region’s GRP share in the total Russian structure is less than one thousandths of a percentage point, while economic problems are too complex and resemble a vicious circle (infrastructure, manufacturing, workforce, internal market and other). Even with a great desire region development is impossible without large-scale investment. Besides, many participants of economic relationships have no enthusiasm about such public investment, considering it more reasonable to invest in the regions where economic effect will be evident.

At that, in PPP rating Tyva confidently stays in the middle. The law of participation of the republic in public-private partnerships was adopted as early as 2009, moreover, in pre-crisis 2008 the region approved of a standard agreement on creation of conditions for implementation of such projects. The largest and most famous project, great hopes are laid on, is, certainly, construction of the “Kyzyl — Kuragino” railroad (apart from it, PPP projects on construction of a HPP in Kyzyl, creation of a technological cluster and others were discussed at different times). Its aim lies in providing the region with a railroad and simultaneous compensation of coking coal deficit in the country’s manufacturing. A private investor, Ruslan Baysarov, is to allocate 54 billion rubles, which is a quarter of the total project cost (the project, ready for implementation as early as 2009, and then 2011, stopped first because of a crisis and then through fault of another investor, who in fact turned out to be unable of financing it). Besides, the project is jointly credited by VEB, Sberbank and VTB.

It should be noted that the plans of the state are explained not only by its concern about the growth rate of the lagging-behind region. Otherwise, probably, optimistic 20-year payback period of the dead-end road to the undeveloped republic would be too long. This road can be extended to the East — to China, Pakistan and India, Russia’s strategic partners.

Thus, thanks to combination of external political factors and successful implementation of infrastructure projects with participation of private investors, the economic and geographical position of the republic and its potential will improve, and use of PPP mechanisms at the starting stage of investment attractiveness with favourable market conditions can bear good fruit for the republic.