RUSSIA -The Russian government has decided to increase infrastructure spending to over $1trn (€650bn) over the next 10-15 years, creating attractive investment opportunities in the Russian infrastructure market, suggests Pictet, the Swiss private bank.

This year alone, fixed investment will increase from $240bn in 2006 to $420bn, with the majority of money going into the railway network.

"We like steel investments in Russia because there is strong global demand but the domestic demand is even higher because of the plans to modernise the railway," explained Agne Zitkute, manager of Pictet's €350m Russia fund.

Investment in the Russian railway network is expected to reach $500bn by 2030, yet there was almost no investment in infrastructure by the government prior to 1990, noted Zitkute, while the level of investment in 1999 was still at only $28bn.

"Now there is the political will to invest in infrastructure," stressed Zitkute, so the increase in foreign direct investement in Russia is supporting a positive outlook on the developments

Foreign direct investment is expected to hit $55bn this year, up from $31bn in 2006.

A large part (21%) of this is labelled as coming from Cyprus but Zitkute points out it is mainly Russians who emigrated during the Cold War who are now investing their money back in their home country.

"This the best confidence vote for what is happening in Russia," she told IPE Real Estate.

"Putin's presidency was one of preparation, while Medvedev's is expected to be one of spending and investment."

That is why Pictet is looking to "invest along with the state" with the big state companies such as Gazprom and Sberbank, which according to Zitkute are "well placed to benefit from increased state spending" along with companies in other sectors affiliated to infrastructure such as construction and services.

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