Olympic Reserve

Vladimir Kozlov

In Russia’s South Federal District, state is far more involved in investment process then anywhere in the country. Most major projects are developed by partnerships between the state and business, which helps maintain an illusion of stability in the region. Business people working there understand that their major risk is possible suspension of investment projects

Photo: sochi2014.com

Dmitry Kozak, the former Regional Development Minister who has been appointed Deputy PM to supervise Olympic projects in Sochi, said last week that the authorities were “psychologically ready” to see investment activities drop in the face of financial crisis. If such thing happens, the official said, “we shall look for other investors, or use federal budget funds”. At the same time, he said that two investors had just agreed to take part in two new “expensive” Sochi projects.

Today, it is very important to continue pursuing earlier plans, assuring the companies interested to work in the South District that major projects will not be reviewed and that the economy growth goals in the region will be met. The fact that Mr. Kozak was appointed to supervise the future Olympic host shows that some “reinforcement” was needed there. When Kozak was representing the President in the South, he managed to recruit business to implement the region’s most important projects. And when he left the post, many such agreements were put on hold, and Kozak’s former office ceased to play the role of “investor’s entrance” to the South. Kozak’s new appointment is no doubt an attempt to revisit the “entrance”.

Unlike the rest of the country, Russia’s South has yet seen no “abundance period”. There was only a time when it seemed that, for the coming seven years, there will be economy growth rate that is bigger than elsewhere in Russia. Will these hopes come true, depends on implementation of major development projects, especially those related to the 2014 Games. For most regional businesses, the Olympiad is attractive, in the fist place, as stimulating demand for materials and services. And now, their concerns are not baseless. Olympstroy, the state corporation responsible for holding tender competitions in Sochi, is said to be reconsidering competition terms, and decisions on many projects, initially scheduled to be announced in early October, is not yet known. Furthermore, some tenders are being help for the second time, meaning that the corporation’s offers are not so popular among investors as the government hoped they would be.