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Russia must learn from the UK's PPP mistakes, warns transport expert

Saint Petersburg, Russia -- A large-scale public-private partnership
(PPP) programme in Russia has huge potential to burden public budgets, according to independent British transport commentator and journalist Christian Wolmar speaking at a press conference in Saint Petersburg this week organised by the non-governmental organisations Save Yuntolovo and CEE Bankwatch Network.

Wolmar commented: “Before launching any PPPs, the Russian authorities should consider the UK’s mistakes, compare PPPs with normal state funding schemes and fairly assess any potential problems.”

He cited the disastrous London Underground reconstruction project, in which one of the private companies involved in the project, Metronet, collapsed less than five years after the contract was signed. GBP 500 million was spent on the preparation of the contract alone, and annual subsidies have reached GBP 1.1 billion, even though none were originally planned.

A massive PPP programme was launched in Britain in the 1990s, and in recent years PPP schemes have been heavily promoted in central and eastern Europe, regularly featuring multi-million euro financial backing from international public banks such as the European Bank for Reconstruction and Development, the European Investment Bank and the World Bank.

Pippa Gallop, Bankwatch's Research co-ordinator, said: “PPPs have mostly been used for motorways in central and eastern Europe, but the results have been far from impressive. Many projects have been overpriced though have secured almost guaranteed profits for the project companies, while others such as the Hungarian M1/M15 and M5 have failed and been renationalised, contracts have been torn up in Serbia and Bulgaria and, in the case of the A2 motorway in Poland, renegotiated after unexpectedly low traffic levels.

“Contrary to widespread misconceptions, PPPs do not bring any additional money into infrastructure. Instead, they just spread the costs over 20-30 years. And when things go wrong, it's taxpayers who have to cover the costs.”

In Russia, the launch of a wide PPP programme supported by the State Investment Fund was announced in 2006. Currently, more than 20 projects have been approved [1], with the Moscow-Saint Petersburg motorway among the most advanced. Approximately EUR 100 billion is to be allocated from the state budget to supplement the private sector financing. However, the total annual project fees are not known, raising concerns about future budget burdens. The municipal budget costs for the PPPs are estimated at several billion dollars for Saint Petersburg alone.

Tatiana Skrodenis, of the Saint Petersburg group Save Yuntolovo, said:

“In Saint Petersburg, PPPs are becoming an instrument to implement giant but questionable projects, most of which have led to big protests from local people.”

In Yuntolovo alone, more than 12,000 people have protested against the Western High-Speed Diameter project, a multi-lane international highway project that is being routed only 100 metres from residential areas and along the border of Yuntolovo nature reserve, a unique conservation area on the edge of Russia's second largest city.

For more information, contact:

Tatiana Skrodenis, Save Yuntolovo +7 921 580 82 07 (Russian only)

Vera Ponomareva, Save Yuntolovo +7 921 772 70 42

Pippa Gallop, CEE Bankwatch Network +385 997 559 787 (English only)

Notes for editors:

1. Four large pilot infrastructure PPPs are currently planned in Saint-Petersburg Pulkovo airport reconstruction, the construction of the Western High-Speed Diameter (WHSD) toll motorway, the Orlovsky tunnel under the Neva river, and the Nadzemny Express light rail project.

Bankwatch's analysis of PPP projects in central and eastern Europe, “Never mind the balance sheet”, is available in nine different language versions at:

http://bankwatch.org/publications/document.shtml?x=2132584

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==========================

Greig Aitken, Media coordinator

CEE Bankwatch Network

Bratislavska 31, 602 00 Brno, Czech Republic Tel. + 420 545 214 431, ext 19; Mobile: + 420 605 216 705

Skype: greigaitken

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Tuesday 08 Sep 2009
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