Investments in the development of the Baikal-Amur and Trans-Siberian railways

The reformation of the Baikal-Amur and Trans-Siberian railways has been carried out for some years. In March 2018, the President of the Russian Federation Vladimir Putin in his Annual President's Message to the Federal Assembly said that the carrying capacity of the Baikal-Amur and Trans-Siberian railways towards the Far East borders was to be increased 1.5 times during the next 6 years (up to 180 million tons). Due to their modernization, including the construction of new railroads, it will be possible to implement more than 50 large-scale investment projects estimated 3.7 trillion rubles (including 1.2 trillion rubles in the development of the railway infrastructure).

The research indicates that economic sanctions imposed against Russia, made the implementation of an effective fiscal policy aimed at regional development by public administration authorities very problematic [1]. In 2013, the Government of the Russian Federation made a decision to finance the implementation of the “Russian Railways” projects aimed at the reconstruction and modernization of the Baikal-Amur and Trans-Siberian railways infrastructure. Taking into consideration high cost of the projects, the Government of the Russian Federation acted as a co-investor, having invested in these projects, on the initial stage, 450 billion rubles from the National Wealth Fund (NWF). It was planned to invest 110.2 billion rubles from the federal budget, of which 44.57 billion rubles during the year 2018. However, budget allocations for the implementation of the projects were excluded from the federal budget 2018 [2]. The financing from the National Welfare Fund was supposed to be 150 billion rubles, including 30.44 billion rubles in 2018. It should be highlighted, that the purpose of the National Wealth Fund establishment is legitimatized by the Budget Code of the Russian Federation – “ensuring the co-financing of voluntary pension savings of Russian citizens, as well as the deficit coverage of the Pension Fund of the Russian Federation”.

On the basis of the evidence currently available, it seems fair to note that sovereign funds play a key role in the economic development of all nations [3]. The Russian experience of creating sovereign funds fits into the recommendations of the International Monetary Fund (IMF), which state that at the third stage of their development the investment priorities are to be clearly defined. At the end of 2017, the Government of the Russian Federation made a decision to reduce the volume of budget investments in the projects aimed at the Baikal-Amur and Trans-Siberian railways development. Since 2018, the infrastructure projects of the Eastern polygon have not been financed from the federal budget, as it was promised earlier. According to the decision taken by the Government, funding is provided exclusively at the expense of the NWF [4].

In this respect, a reduction of investments in infrastructure projects of the Eastern polygon will lead to a slowdown in their implementation, and as a result, both consigners and consignees will incur losses, as well as the “Russian Railways” as a whole. For about fifty years, the Trans-Siberian Railway has remained the longest railroad in the world. Its development is not only aimed at developing regional infrastructure, but could also allow our country to play the role of a major participant in the global transit of goods along the route connecting Europe and Asia. Thus, the financial support from the Government of the Russian Federation is a necessary condition for the implementation of the projects designed to develop the Eastern polygon.