Stimulating Russian construction

The Russian construction market was given fresh hope for growth at this year’s St. Petersburg Economic Forum (SPEF), at which the Russian President Vladimir Putin announced a state initiative to significantly reduce existing duties on the import of construction equipment to the country.

According to Putin, the Russian government planned to support the domestic construction market – which he said had been steadily recovering from the financial crisis caused by Western sanctions – by speeding up the implementation of investments in the industry. Previously, these had been suspended as a result of sanction wars and deteriorating relations between Russia and the West.

At the latest SPEF, a record number of contracts were signed, coming to a total value to about RUB2 trillion (€31.23 billion). Almost half of this sum was said to have gone towards the implementation of large-scale construction projects.

These projects included the Moscow Renovation Program, the building of the new St. Petersburg Ring Road and the construction of a plant by the German firm Daimler. Preparations are also ongoing for the World Cup 2018.

Dmitry Peskov, an official spokesman of Vladimir Putin, said that the introduction of sanctions against Russia has resulted in a decline of the domestic construction market by between 40 and 60%, depending on the segment.

An even greater rate of decline was recorded for imported construction equipment. This was said to have been aggravated by the fact that many Western construction machinery producers had refused to supply their equipment to Russia amid fears that sanctions might be introduced against them in their native countries.

According to state plans, the reduction of duties would initially affect equipment produced solely abroad. This primarily included micro excavators weighing between one and five tonnes, on which import duties were currently set at 70%, and mini excavators weighing between five and ten tonnes, on which import duties were presently 35%. There was a possibility that the existing duties would be reduced to between 3 and 5%.

The reduction of duties would also affect other types of imported construction equipment such as articulated haulers, for which import duties would be cut from 15 to 3%. It was said that such a reduction could save producers and importers around RUB3.5 million (€55,000).

According to data from the Russian Ministry of Industry and Trade, imports of construction equipment in the first quarter of 2017 grew by 40.5% like-for-like to RUB56 billion (€876 million). It was expected that the planned reduction in import duties could bring about a further increase in imports by the end of 2017.

In addition to reducing import duties, the Russian government had plans to encourage major global construction equipment manufacturers to set up shop in Russia. To this end, the government was planning to incentivise producers to build production facilities in special economic zones by offering tax breaks and customs benefits.