Cross-border projects require comprehensive quality assessment

In this blog, Svetlana and Roberto discuss the major cross-border projects currently being planned and delivered with Russia’s involvement, and the importance of comprehensive quality assessment in delivering these projects. Their discussion practically illustrates several elements of successful cross-border project delivery that are detailed in the GI Hub’s cross-border reference guide, Connectivity Across Borders:

• The use of intergovernmental project agreements (section 4.2.1)
• Assessing mutual costs and benefits (section 4.2.3).

Cross-border projects are increasingly essential for global and regional development, both socially and economically. As more countries have become regional transit hubs and begun to rely on an uninterrupted flow of commodities, the demand for and use of connectivity infrastructure has increased. European and Asian countries in particular are developing their overland and maritime trade routes and trying to make them faster and more reliable by implementing cross-border projects. These projects have significant potential to create jobs, provide new business opportunities, foster mobility and improve quality of life throughout the regions they serve. 

Russia’s transit capacity and main cross-border projects 

Being the largest country in Eurasia, Russia has vast transit capacity. It shares a land border with 14 countries in Asia and Europe and considerably impacts Eurasia's economic development. It is participating in various ongoing and planned cross-border projects and has intergovernmental agreements to develop infrastructure with several neighboring countries, including China, Kazakhstan, Poland, Lithuania, Finland and Belarus. Such intergovernmental agreements help translate the political vision and project idea into a sustainable and durable governance model for the project. While the binding power of the agreement varies based on what it includes and specifies, it provides the foundations for project development and delivery.

One of the most significant railway projects Russia is currently participating in is the Eurasia High-Speed Railway (HSR), part of the Belt Road Initiative (BRI). In 2018, the countries signed a memorandum on the management of high-speed freight rail transportation between China, Russia and Europe through implementation of HSR Eurasia. It involves constructing a 7,200 km cargo-passenger high-speed railway crossing the territory of six countries: China, Kazakhstan, Russia, Belarus, Poland and Germany. The project is expected to consolidate two of the world’s largest high-speed rail networks in China and Europe and increase Eurasian transport mobility. It is estimated that by 2050, passenger traffic will grow by 60% and freight traffic by 92%. The socioeconomic impact on Eurasia will be substantial, with the project expected to improve traffic safety, increase transport mobility of the population, create jobs (370,000 jobs on the Moscow-Kazan section alone) and develop supply chains by competing with air and sea transport and delivering goods in less than 3 days. The unified transit system will also provide economic benefits by developing and transforming remote areas into transport hubs.

Russia has also signed an intergovernmental agreement with China to construct and operate the Tongjiang-Nizhneleninskoye Railway Bridge over the Amur River (also known as the Heilong Jiang River) between Tongjiang in China’s northeast Heilongjiang Province and Nizhneleninskoye in Russia’s eastern Jewish Autonomous Oblast. It is the first cross-border railway bridge between Russia and China. The total length is 2.21 km and construction is slated to finish in 2021, for an estimated capacity of 21 million tonnes of cargo annually.

This follows completion of the first highway bridge between China and Russia in 2019. Located 450 kilometres northwest of the Tongjiang-Nizhneleninskoye bridge and also over the Amur River, the bridge connects Heihe and Blagoveshchensk. It was initiated in 1995 following the signing of a joint agreement under which the governments of Heilongjiang Province and Amur Region agreed to share the cost of the bridge construction and set up a joint venture to construct and operate the bridge. However, in subsequent years the organisational and financial model of the bridge changed and construction did not commence until 2016. The project involves toll collection, two lanes for passenger vehicles and two lanes for cargo trucks. A temporary border checkpoint has been built on the Russian territory to receive up to 200 cargo trucks per day until a permanent checkpoint is built. As of May 2021, organisational work is ongoing, the toll collection system has been tested and the bridge is ready for operation. However, the bridge will be allowed to open only after COVID-19 restrictions lift. The launch date will be announced by joint decision of Russia and China. The project's transport capacity is expected to be over 300,000 cargo and passenger vehicles per year, offering unique export opportunities for both countries.

Two more cross-border initiatives involve constructing transport transit corridors that will link the Chinese and European markets. One of them is the Western Europe-Western China (WE-WC) Highway, named the New Silk Highway. It is a transcontinental expressway with a total length of 8,445 km that will pass through China, Russia and Kazakhstan, thus linking China’s port of Lianyungang with St. Petersburg in Russia. It’s estimated that once complete, the WE-WC Highway will allow products to travel between China and Europe in 10 days, instead of the current 30 to 50 days by sea.

The Meridian Tall Highway would be one of the shortest East-West overland connectivity routes. The circa USD9.3 billion highway is planned to span 2,023 km from the Russia-Kazakhstan border to an existing road that connects Minsk in Belarus with Moscow. Plans are for the highway to be built through private investment only. Both projects aim to improve regional connectivity and increase transportation efficiency and availability.

These initiatives have significant socioeconomic potential but face multiple challenges, including: social and environmental risks; dependence on private investment; increased reliance on environmental, social, and corporate governance (ESG) performance; and technical complexity. One of the solutions to respond to these challenges is following a holistic approach for infrastructure quality assessment.

Comprehensive tool for cross-border project assessment and development

Assessment of costs and benefits is a prerequisite to understand the viability of any project, but even more so for cross-border projects, given the commonly low visibility countries often have of their neighbor’s internal plans, processes and markets. Low viability might be a barrier to project development, implementation and completion – particularly for projects seeking commercial financing.

Cross-border projects therefore require innovative assessment approaches based on best globalpractices and standards, as recognised by stakeholders from investors and financial institutions to government authorities and citizens. The assessment approach should serve as a rating tool based on the principles of transparency, versatility and comprehensiveness and should give investors a holistic understanding of a project's benefits, financial efficiency and lifecycle risks – including ESG.

Russia is developing an infrastructure project assessment and certification tool called IRIIS (Impact and Responsible Investing for Infrastructure Sustainability). IRIIS considers the economic, governance, social and environmental aspects of project implementation, including their cross-border effects. The G20 Quality Infrastructure Investment (QII) principles and UN Sustainable Development Goals are the basis of IRIIS. It is also being developed in line with leading international rating schemes like Envision (USA), CEEQUAL (Great Britain) and Infrastructure Sustainability (Australia). It applies to most infrastructure categories: transport, social, utility, power generation and telecommunications.

IRIIS allows assessment at different stages of the project lifecycle and offers practical solutions for the main challenges faced by cross-border projects. It: 

• Embodies best international standards and practices of infrastructure quality and sustainability
• Provides comprehensive assessment, covering economic, social, and environmental aspects
• Facilitates quality and sustainable infrastructure practices in countries involved
• Sets modern standards for infrastructure construction, design, engineering, operation and decommissioning
• Provides transparency and evidence of a project’s ESG performance, including as required for informed investment decisionmaking.

IRIIS is currently being used to assess the Russia-Scandinavia Link highway. The road is the only transport link between the Russian north-west and Northern Europe and is part of the route through Finland, Sweden and Norway. The highway construction length is 43.4 km, with four traffic lanes that will increase the region’s transit capacity and improve the accident record. The Asian Infrastructure Investment Bank is participating in project financing and implementation. IRIIS assessment will help the project mitigate risks, avoid possible negative impact on the territories involved and improve quality.

There are plans to scale up the IRIIS system to Russia’s neighboring partner countries of the EAEU (Eastern Europe and Asia), to allow consistent assessment of cross-border projects and foster their effective and successful implementation, including the ability to attract necessary financing.  

About the authors 

Svetlana Yachevskaya is a Deputy Chairman, Member of the Board at VEB.RF with more than 20 years' experience in the legal sphere. Prior, Svetlana was a Director of the Legal Department in the Russian Ministry of Finance and received gratitude for merits in financial and economic activities. At VEB.RF Svetlana is responsible for public debt and sovereign guarantees management, IFIs’ projects monitoring and implementing best practices related to infrastructure investment and PPPs. 

Roberto Cialone has 25 years of experience in Construction Management in high profile, high investments, critical and technical complex industrial, high-rise, commercial office buildings, mixed-use developments and other infrastructure projects. He joined AECOM in 2006 and has covered different leading roles in Continental Europe. Roberto is currently leading the operations in East Europe as Managing Director, based in the Russian Federation.