Russian Ministry of Construction Facilitates Market Reforms

Recent years have proven difficult for Russian builders: declining investment, delays in financing, non-payments... nevertheless, adaptation to the new ways of doing business in a market economy and the restructuring of the building industry have continued.

In a relatively short period of time, the Russian Ministry of Construction has done much to decentralize industry management, continue privatization, create a market infrastructure and the legal framework it requires. Coupled with the strengthening collaboration between the Ministry and the regional administrations of Russia, this created new organizational and economic structures that helped bring the construction industry into the mainstream of the market economy.

Stock companies and private construction firms are developing rapidly in Russia. Today, they are responsible for up to 85 percent of all contracts. The Ministry of Construction has encouraged the formation and growth of publicly held financial-industrial groups. A number of leasing and holding companies have been created and they have been successful. Other steps, such as the introduction of contractual bidding, have created further competition within the industry.

Housing has been one of the Construction Ministry's highest priorities, with foreign investment accounting for 80 percent of all housing investment last year. In 1996 some 50 thousand new apartments were built in Moscow alone. Other priorities include the renovation of the existing housing stock, conforming ministerial policy and the general legal framework with international norms, and utilizing the scientific and research potential of Russian companies more effectively.

The Ministry of Construction continues to enhance its scientific, technical and economic relations with ministries and companies from 38 foreign countries, organizing 27 international fairs throughout the country last year alone. Today, the Russian construction industry boasts about 950 joint ventures.

There are presently more than 150 thousand construction, design and scientific-research companies including 130 thousand construction firms and small businesses in Russia. Their market share is nearing the levels seen in developed Western countries such as the United States, England, France and Germany, where small construction companies account for 97 to 98 percent of the market.

This information was provided by Mr. Efim Basin, former Minister of Construction of the Russian Federation. The Ministry's list of over 70 Russian construction companies seeking foreign partners for detailed projects is available through the American-Russian Chamber of Commerce & Industry.