Investments in Russia – New Ideas

THIS POST WAS ORIGINALLY PUBLISHED JULY 16, 2007

Investments in Russia – New Ideas

A while ago I wrote about Russian state-capitalistic model – the new Russian way. In recent months some new developments emerge and here I want to pin point some new investment opportunities. The tendency for public private partnerships (PPPs) is growing stronger with every month. In fact an excellent study was made recently by Mmd PR company that describes in detail what is going on. Just a few citations:

“ Public Private Partnership has become an integral part of a new national idea: creating a strong Russian state that defends its national interests, combined with strong Russian businesses competitive worldwide.”

"- The Ministry of Transport is now attracting consultants to develop a model for infrastructural PPPs to implement the Federal Program ‘Upgrading Russia’s Transport System by the Year 2020.’ (look at the World Bank Group presentation here)

-The Government is launching a road show in November-December this year to attract investors to develop hi-tech parks on a large scale. In parallel, representatives of the
Government are beginning to approach potential partners, such as DuPont, to launch
discussions on the involvement of private business in these projects.

- The Government, in consultation with State Duma experts, is beginning to conceive a
green paper on PPPs that may become a bill in the nearest future."

 

Today the DENGI magazine published some hints for investors that show that PPPs tendency may play well into the hands of investors. As one of the examples the magazine shows that after a nitrogen compound making plants were transferred to the ownership of GAZPROM that stock of these companies has a good change to rise. That is because all companies of the sector are really undervalued due to the corporate risks. Another example is the government proposal to establish a management company that would run about 40 airports throughout the country. In my view that may be an excellent investment opportunity – otherwise existing airports are not actually juicy for investors. A nice description of the airport industry and PPPs is supplied by the World Bank Group in their presentation here.

In my opinion investing in ventures resulting from PPPs in Russia may be very profitable, as they would guarantee stability and are having good future. This is described in the mentioned above presentation on transport infrastructure

I would also take the liberty to reproduce one of the slides of the World Bank Group presentation that supports my earlier advice on investing in railroad sector

And finally. Today everyone discusses the news about Rusal’s owner Oleg Deripaska statement that he may cancel the $ 9 billion IPO in favor of JV with the government. Is this the proof of PPPs popularity???