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2 Dec, 2008 11:59

Interview with Dmitry Kozak

Despite the world economic crisis, Russia has no regrets about spending billions on the Sochi Winter Olympics according to its organiser, Deputy Prime Minister Dmitry Kozak.

RT: Has the government revised the Olympic budget following the impact of the global economic crisis?

Dmitry Kozak: So far there has been no revision of the finances for the Olympic Games. Since the number of Olympic facilities and the number of participants remain the same, the programs of private investors who have undertaken commitments to the Olympstroi Company to build Olympic facilities remain in force. It’s their responsibility.

Therefore, we haven’t revised any of the Olympic parameters from this point of view.  At the same time, we are re-evaluating the finances for the construction of some facilities in order to make them cheaper.  The situation in the market for construction materials has already changed and will continue changing significantly, so from this point of view, especially if projects are financed from the federal and regional budgets or from the taxpayers’ pockets, we’ll follow  the situation in the market for construction materials and services. A decision has already been made to switch over to a more flexible price formation system.

If previously the price of a concrete facility was set only once for the long-term, based on inflation forecasts, today the situation has become less predictable. Therefore, we have to amend legislation in order to make this system clear and transparent and in order to be able to place orders and allocate contracts. But, it’s going to be more flexible, enabling us to react more promptly to the price situation in the market. At this point, all the factors linked to changing prices show how prices have dropped for metals, sand and other materials. As a result, the price of facilities could drop by 30%.  It’s very significant.

RT: Your British colleague responsible for organizing the 2012 Olympic Games has regretted London’s Olympic obligations because of the current economic crisis. Do you share these feelings?

DK: So far, the consequences of the economic crisis and the economic situation in this country haven’t been so grave.  So, we have no grounds for making such complaints. We have enough reserves accumulated thanks to the optimal economic policy that was pursued in recent years. Thanks to a positive situation on the world market, including that of fuel and energy, we didn’t eat up those surpluses. We have a very solid safety buffer to cope with the crisis, even if it’s going to be mid-term. Therefore, we are ready to fulfill all the commitments that we’ve undertaken. And we have no regrets. We understand that the Olympic Games held in Russia will give additional impetus to the social and economic development of our country.

RT: What progress has been made in the construction of all Olympic facilities? And how are the  deadlines being met?

DK: So far, there’ve been no factors affecting construction deadlines. There are no such factors.  We are moving ahead according to the schedule that was approved late last year with regards to all the facilities and to all types of work. There are no factors which could seriously affect the completion terms and I don’t have any great concerns that they may not be finished on time.

It doesn’t mean that it’s a simple facility. We understand that it’s one of the most complicated and large-scale projects that has ever been implemented in the territory of Russia or the former Soviet Union. This is a multi-faceted project and there are many tasks which need to be solved.

There are many difficulties but we have a clear understanding of all the difficulties and risks which we may face and, therefore, we’ve already undertaken all the necessary measures to reduce these risks.  Most of them lie in the managerial sphere, and coordination and interaction among the numerous participants in the Olympic project.

Many different contractors are building concrete facilities. Their actions need to be coordinated. That stands behind the decision of the Russian prime minister and the Russian president to promote the leader of this project to the status of vice-premier.

RT: You’ve already said that we can make use of falling prices for metals and building materials. Do you think that the current situation is even better for implementing such large-scale projects?

DK: The proverb says that every cloud has a silver lining. On the one hand, those financial and economic problems faced by our business will inevitably have an impact on our budget. We understand that revenues in the federal budget and budgets of the Krasnodar region, if we speak about the Olympic Games, may fall, but at the same time we can of course use the advantages of the current situation to reduce the cost of state orders. The cost of state contracts should be in line with the current market price.

RT:  What’s the position of companies involved in the construction of Sochi facilities?

DK: They are in the same situation as companies that operate in the housing market. The situation is absolutely the same, apartment blocks and the Olympic facilities are built out of the same construction materials by the same workers who use the same metals. And if metal prices drop, prices for housing, sport facilities and transport infrastructure, including bridges, will also fall.

Therefore, we are going to react to this situation by using a system of flexible prices in construction, including the construction of Olympic facilities. It’s going to be a single principle that will be applied to all state contracts without exception. Most facilities, which are under construction in Sochi, as part of preparation for the Olympic Games are not sport facilities on which budget means are spent, they are the facilities of social and public infrastructure that will stimulate the development of regions in the first place in the post-Olympic period.

You know that a decision was made in 2005 to develop and implement a full programme of development for Sochi and the Sochi region as a climatic and mountain resort irrespective of the Olympic Games.

RT: The Olympic facilities are being built on conditions of partnership between the state and big business. What’s the proportion of expenses made by the state and the private sector? Has it changed?  

DK: The new economic situation hasn’t affected these proportions. Moreover, business is working more effectively. As for the pricing policy for their facilities, business will most likely be able to reduce prices for their contracts just because of the fact that it’s business and it’s spending its own money, even more than the state. Therefore, the proportion of state and private funds hasn’t changed. Today this proportion is approximately one to three – businesses have  fewer commercial projects than facilities of public infrastructure and the state has more.  

Thanks to a positive economic and budget and financial policy, we’ve accumulated huge reserves and we intend to meet all our Olympic commitments but also other obligations. Naturally, we are discussing all this today and are following the situation with account taken of all the recent changes. We haven’t considered any of the Olympic projects with the aim of reducing the number of facilities under construction as of yet. We simply have strict commitments to the International Olympic movement with regards to competitive facilities. As for infrastructure facilities, most of them are already under construction and they won’t be frozen. That would deliver a serious blow  to the economy and the construction business  

RT: How are the disagreements with local people being solved?

DK: We should buy out the land plots or houses from citizens at a fair market price. A fair price is a price which allows citizens, at a time when their property is being bought out, to solve their problems and buy similar property, similar housing and similar land plots at a market price in places which have the same value.

Today’s situation is different from the one last summer. The cost of buying a plot with a comfortable house near the sea in summer was very different from today’s prices. We have to pay the money according to today’s demands. On the other hand, we’ll need a number of plots in 2010 or 2012, but we don’t need them today. Why should we invest money according to the summer’s prices to buy this land today if we don’t know what the proper market price situation will be like, in, say, 2010?

RT: What’s the situation with the eco nature reserves around Sochi?

DK: In relation to the environmental problems, ecological organisations insist that there are no more environmental issues after the last decision to move three sport areas from Grushevaya Polyana in Sochi. In relation to construction technologies and environmental safety during the construction period, this is required from construction companies on every project. Concerning the end result, the entire programme of building the Olympic facilities and the programme for Sochi’s development are aimed at the radical improvement of the environmental situation.