How Much Does Russia Cost?
mosnews.com
Created: 30.04.2004 13:57 MSK (GMT +3), Updated: 13:57 MSK
MosNews
MosNews presents a study sponsored by the independent TV channel Ren-TV, the audit and consulting company FBK, and Russia’s business daily Vedomosti. Its aim is to determine how much Russia costs.
This installment will focus on the cost of the Russian housing and utility sector.
Introduction
The Russian housing and utility sector has been called a natural reserve of untouched problems which, in time, may turn into a grave. During the fall and winter, the situation in the sector usually borders on the catastrophic. It should come as no surprise then that a governmental appointment to oversee the sector is equated with a political death sentence.
The sector has two independent branches — the housing and the utilities.
N.B. The housing sector provides Russian citizens with the following services: housing, housing repair, servicing of apartment buildings, garbage disposal, and elevator maintenance. The per capita housing area available to Russian citizens is 20 square meters. Despite active construction of new apartment buildings and the decline in the country’s total population this figure remains quite low. In contrast, the per capital living area in Europe is 40 square meters and in the United States — 80 square meters.
Utility services include provision of electrical power, water and natural gas supplies, central heating and plumbing. The level of urban amenities in Russia is Spartan compared to the majority of European countries. Central heating can be found in 75 percent of apartments, indoor plumbing — in 70 percent of living quarters, while the number of apartments with indoor bathrooms is even less. Hot running water is to be found in two thirds of all housing. These figures, of course, are much higher than in, say, Kyrgyzstan, but much lower than in Great Britain where indoor plumbing and bathrooms could be found in every house back in 1991.
The low quality of utility services provided is compensated by the low price that the Russians have to pay for these services. The average share of utility expenses is six percent of the total income, and this is the highest figure over the last ten years. Earlier it was even less In other countries, the share of utility expenses make up nearly 30 percent of the total income. But, as Igor Nikolaev, director of the FBK’s strategic analysis department says, “one should not forget the vast differences in incomes among different strata of Russian society. And if for those with higher incomes the cost of utilities really is small, for those with low incomes utility costs take up to 30 percent of their family budget.”
Fixed assets
The degree of depreciation of fixed assets in the housing and utility sector is the highest as compared with the rest of the economy. The sector brings nothing but losses, which currently amount to 27 billion rubles ($931 million). Two thirds of housing and utility enterprises are bankrupt. Individual customers and local budgets owe the housing and utility sector 200 billion rubles ($6.9 billion).
N.B. According to various expert estimates, no more than 40 percent of the equipment used in the housing and utility sector is still usable. Instead of planned repairs, utility companies are forced to conduct emergency restoration jobs, which cost two to three times as much.
Workforce
The housing and utility sector employs 3.2 million people. Women make up slightly less than 50 percent of the total workforce. The majority of the sector’s employees have a professional education. The level of salaries is below average across the economy, and has been decreasing since 1997. Currently the average salary in the housing and utility sector is 5,000 rubles ($172) a month.
Forecast
The only way to jump-start this sector of the economy is to conduct extensive reforms and to attract private capital. Says Igor Nikolaev: “There is potential for development and growth in the sector. The most important reason for optimism is that utility services have always been and will always be in demand. People will always want to have hot running water, electricity and other amenities. And this is what makes the sector attractive — there is constant demand for the services that it offers.”
Private investors, however, have been slow in coming. Unified Energy System did create a Russian Utility Systems (RUS) subsidiary in May of 2003, along with Gazprombank and five other investors. But the initial optimism about the company’s potential has subsided greatly: Gazprombank already announced that it sold its 25 percent share in RUS, and some other shareholders expressed their desire to do the same.
In addition to a long lived tradition of not paying for utility services that is plaguing the Russian society, another fact that scares the private capital out of the sector is that all of the utility tariffs are determined by the state.
Experts say that it is too late to reform the housing and utility sector. The state budget has no funds that are necessary to make the sector function normally again and the private companies have no interest.
Cost
The current price tag on the Russian housing and utility sector is quite low as compared to other sectors of the economy. The experts estimate the total cost at 19 trillion rubles ($655 billion). |
