BMI View: Overall we believe the Russian water and sanitation sectors are showing steady improvement in the quality of the service offering; however, the high costs and limited revenues, in conjunction with poor infrastructure in many regions, will continue to render them an unappealing investment option. Falling private investment, stubbornly high inflation and slowing economic growth support our overall bearish outlook for Russia s water infrastructure industry, in spite of much needed modernisation, replacements and expansions of existing facilities and networks - much of which is likely to be shelved given the current economic climate. ...BMI View: Overall we believe the Russian water and sanitation sectors are showing steady improvement in the quality of the service offering; however, the high costs and limited revenues, in conjunction with poor infrastructure in many regions, will continue to render them an unappealing investment option. Falling private investment, stubbornly high inflation and slowing economic growth support our overall bearish outlook for Russia s water infrastructure industry, in spite of much needed modernisation, replacements and expansions of existing facilities and networks - much of which is likely to be shelved given the current economic climate. However, one bright spot is the Russian focus on developments in Crimea; key among these are water infrastructure developments for supply, distribution and treatment as the region is suffering severe water shortages after being cut off from its former Ukrainian supplies. ...However, while the Russian government is taking steps to improve the quality of water and its accessibility, the potential for foreign investment in water infrastructure is still limited. Improvements are being made to water quality as more treatment facilities are built, but we expect work in all areas to slow until the political situation stabilises and international sanctions are lifted.
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...A revitalisation of the structural reform agenda - including support for small- and medium-sized businesses, restructuring of the banking sector, administrative reform to tackle red tape and corruption, as well as a revamp of the natural monopolies - would go a long way towards developing the non-oil economy and improving long- term growth prospects. A US$-trn public-private investment plan over the long term will substantially modernise Russia s transport, communications, electricity and utilities infrastructure. ...
...Current political instability is limiting rewards on investment and discouraging new investment and stalling improvements. High water wastage and consumption due to low tariffs. The aging water network is in need of extensive renovation and modernisation. High levels of government corruption and bureaucracy hinder private investment into the industry. The government sets unreasonable water tariffs; as a result, many water services managed by municipalities are in debt. ...
