Prospects for Russian project design and exploration companies to enter international markets

25 January 2019

Despite the obvious economic difficulties and the lack of necessary access to bank credit financing, the leaders of many survey and design organizations of the Russian Federation continue to think about introducing new technologies, consider participating in the implementation of national projects and entering foreign markets. It is these issues that were in the center of attention of the participants in the meeting of the Committee for the Development of Design and Survey Activities and Engineering of the Russian Public Organization “Business Russia”.
The chairman of the Сommittee, the general director of Geoproektizyskaniya LLC and the head of the Rating Agency of the building complex (RASK) Nikolay Alekseenko, report on the current state of the construction services market. In general, by 2018 there has been a decrease in the volume of contracts concluded by state corporations and natural monopolies, there is a reduction in the volume of the loan portfolio of companies, and there is still a high delay in credit debt. Opportunities for lending are either customers or large contractors. Small and medium business that performs the bulk of the work is actually cut off from borrowed funds. There can be no technical re-equipment in such a situation, the speaker noted.
It is obvious that in the next 5-6 years, participation in the implementation of national projects will be of great importance for the development of design and survey activities in Russia. Practically all the projects provide a substantial construction component, therefore the demand for survey and design work will grow. The main question is whether the enterprises of the industry are ready in their present condition to fulfill the tasks that will be set for them.
The secretary of the committee, Kirill Kuzmenko, presented the results of the RASK study on the state and features of the regulation of the markets of engineering and design and survey services in 35 countries of the world. The study noted the growth of the construction services market - by 2030, growth is projected at 70% - up to 15 trillion dollars a year. International analysts come to the conclusion that the current market players will not be ready to master such volumes of construction, so there are real opportunities for new participants to appear. Interestingly, 57% of global growth will be in the 3 largest markets - the USA, China and India. However, according to the authors of the study, Russian companies will most likely not be able to enter these markets due to protectionism, sanctions and the presence of strong local players who take up the place that Russians could claim.
The main deterrent is the lack of access to financial resources for Russian companies, which is necessary for technical re-equipment. The authors also note the dominance of large international construction conglomerates, which do not leave an opportunity to get to large orders: the 30 largest engineering companies in the world occupy 37% of the market for all services. These are vertically integrated holdings that provide a wide range of services - from the production of materials to the production of survey and design work, as well as construction management. There are not so many such companies in Russia.
As possible strategies for entering the foreign market, the authors of the report propose the opening of a foreign branch, cooperation with the Russian state corporation that carries out projects abroad, and the search for an international partner. At the present stage, it would be useful to conclude intergovernmental agreements with friendly countries that would provide for the implementation of construction investment contracts. At the same time, it is necessary to provide for the implementation of these agreements by Russian companies.

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