Strategic Snapshot of the Russian Municipal Water and Wastewater Markets

Abstract

Research Overview

International Financing to Revive the Russian Market for Municipal Water and Wastewater

The Russian market for municipal water and wastewater treatment, supported by international financing, is generating numerous opportunities for suppliers, thereby rejuvenating interest and demand in this geographically widespread continent. Refurbishment in the Russian market is being primarily facilitated by international loans and financing programs worth nearly $1 billion by various International Financing Institutions (IFIs), which include the World Bank as well as the European Bank for Reconstruction and Development (EBRD). Increased international investment and financing programmes together with the growing decentralisation and privatisation of water facilities are bolstering positive trends in the market.

Current Market Opportunities Favour Local Manufacturers

Local manufacturers and suppliers control almost 70.0 per cent of the market share, thereby dominating the market for water and wastewater treatment equipment as well as networks and pumping stations. Their leadership is likely to be sustained by apprehensions about international operators and investments in Russia until they prove their long-term interest, not just in big cities such as Moscow and Saint Petersburg, but also in middle and small-sized cities.

"International companies have found that joint manufacturing is vital for entering the Russian water markets," says the analyst of this research service. "Alliances with local distributors have also proven largely successful."

Decentralization and Privatization is a Key Driver in this Market

The water sector in Russia is primarily experiencing problems associated with physical deterioration of systems, centralization of responsibility at the municipal level, the need to improve management capacity and weak public finance mechanisms.

"However, with the Russian Government's initiative to decentralize and privatize water bodies, the local dynamics are likely to change and increase competition among the existing suppliers and open the market up to foreign participants as well," notes the analyst.