«High-speed Railway»
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HSR 1 Creation Effects

Social and economical effects of HSR 1 for the society

Positive effects of HSR projects realization are not confined by the direct effects of a national transport system development. HSR project realization will also bring to the origin of common economics effects in view of positive influence on the employment, labor productivity and rates of a regional development. These effects are not taken into account during the standard calculation of benefits for users. HSR projects realization will supposedly bring to the origin of following economics effects:

  • Agglomeration effect;
  • Job growth;
  • Regional development effect;
  • Effect of employment in building industry;
  • Increasing investment appeal of Russia in the context of direct foreign investments;
  • Growth of travel industry.

Agglomeration effect

Large scale investments in transport infrastructure similar to HSR construction investments bring to the improvement of connection between administrative centers and remote areas which leads to the centralization of labor market and to the concentration of labor force. As is known, there is a strong correlation between the concentration of labor force, the level of labor efficiency and the further economics growth which can be explained by following basic factors:

  • Increase of size and depth of a labor market. The wide choice of employees  for employers and the opportunity to save direct labor costs through the competition between employees;
  • Increase of a number of competitors and potential contractors. The creation of additional incentives for innovations development and efficiency improvement. The development of specialization in sphere of service;
  • Enormous opportunities for the knowledge and contacts sharing (for example, in sphere of scientific research).
Therefore, HSR is an important factor promoting consolidation of markets at the expense of access for financial, land and labor resources, which brings to the labor efficiency, positive scale effects and the growth of regional economics.

These benefits add direct benefits for HSR users and as a rule they are not taken into account during the calculation of integrated transportation expenses (since users don’t realize the consequences of HSR using).

The linking research made by the World Bank in 2007 showed that in the middle of 2000s the economics of many retarded regions of Russia had showed more fast rates of growth just as the economics of some resource-abundant regions had grown considerably slower. The statistical analysis points the hypothesis that the strong urban and regional agglomerations effect promotes the strong economics growth in the Central, Northwest and Southern regions in comparison with other parts of the country. According to expectations the improvement of the transport infrastructure will intensify the concerned effect for the retarded regions of the country including regions beyond the zone of HSR.

Job growth

The demand for the transportation service is a derivative demand. It means that people use this service only to satisfy another requirements (for example, to make a meeting or to get to a work). Therefore, people make trips only if their transportation expenses don’t exceed benefits of their activity in a destination point. Before HSR a number of economic areas could be inaccessible for many labors and organizations because transportation expenses (in terms of time and money) were too high and exceeded benefits of their activity in a destination point.

Putting HSR into operation will bring residential zones and employment zones together by force of decrease of integrated transportation expenses. As consequence, the previously unemployed will become members of a labor market. The mobility of a working population who can work in more remote areas will also increase. It will promote the increase of labor market efficiency and the level of economic activity of a population.

For example, it will be possible to build HSR stations in 50-100 km from Moscow and to build a new urban area which will decrease the tension on the Moscow housing market through the increase of the realty offer. HSR passengers will get the center of Moscow from this urban area for less than 30 minutes which is faster than going from Moscow suburbs by car. 

In 1950s not far from London a number of “new cities” was built along main rail lines. Today, the daily work trips from these cities to the capital is a widespread occurrence. The launch of HS1 project in Great Britain included in London labor market those cities which previously had been considered as too distant for daily work trips.

Regional development effect

HSR building will bring to the joining of wide areas to the zones of employment, increase of a labor mobility of a population and as a consequence to the growth of a labor efficiency. On the other hand HSR building will also more than likely bring to the increase of the desirability of previously distant regions weakly included in economic activity of administrative centers. It will bring to the economic development of these regions and to the increase of the cost of land and realty.

The clear effect of these processes is unidentified. It is necessary to make a careful analysis of  the following problems: if the economic activity in major economic centers will decrease; if the redistribution of the realty demand will happen in new regions involving in economic activity; what will be a relationship between positive effects in zones of a new activity and possible inverted effects in major economic centers. Regional development effects can be very considerable and before making any investment decisions about HSR projects  it is necessary to make more detailed analysis.

Lille city on the north of France which is situated on the cross-way of HSR routes London — Paris and London Brussels can exemplify this problem. Over the years this city was a fading away industrial and coal mining center with a high unemployment rate. Due to the HSR Lille at this point is the third in order of importance trade and financial center of France. The increase of economic benefits in this city more than likely brought to the  economic decrease in other centers. Nevertheless in such situation the redistribution of economic activity from the most  economically successful regions such as Paris is most likely. It also should be considered as a positive effect.

Direct foreign investments

There are a number of cities in Russia which have a high desirability for direct foreign investments. Foreign investors usually prefer to develop business just in such cities rather than in Moscow or in Saint Petersburg where the cost of living and business making is too high. The general weakness of local cities from investors angle is a limited choice of young professionals and top managers on a labor market. The development of HSR, which cut the travel time to 1-1.5 hours, will allow local cities to be less dependent from a local labor market, local universities and to cross this barrier.
Direct foreign investing will essentially and positively influence Russian economics.

Growth of travel industry

The travel industry in Russia is a market by essentially lower level of development comparably with the majority of European countries. Such situation is connected with a number of factors including the traditional insularity, intricate visa regime and the large territory of the country which force tourists to cover enormous distances in European interpretation.

HSR projects will unite the considerable number of cities having an essential development potential of the travel industry and still lesser-known outside Russia (for example, the historical center of Nizhni Novgorod). What is essential, the HSR operator will have big opportunities in the development of tourist traffic. In the course of this analysis the potential of the travel industry development has not been considered. But it stands to mention that the majority of foreign HSR operators pay great attention to this segment of market. Thus, the tourist stream in Malaga increased by 25% after the high-speed line launch.

According to the statements of the Russian government representatives the vise regime in Russia will be essentially simplified during the 2018 FIFA World Cup. In case of active marketing  campaign to develop Russian travel industry with the use of railroads the sporting events as a part of the World Cup can bring to the general increase of popularity of the tourism in Russia.

Impact of the HSR 1 Project on public interests:

  • Satisfaction of rising demand for transportation services along the Moscow — St. Petersburg corridor;
  • Creation of new jobs — both on the HSR 1  itself and in related industries;
  • Improvements in passenger traffic safety;
  • Reductions in travel time along the Moscow — St. Petersburg route;
  • Easing of demands on ORW transportation capacities.

Impact of the HSR 1 Project on private interests:

  • Possible localization of technologies and production;  
  • Growing loading on the production capacities of industrial concerns;  
  • Improvements in the qualifications of Russia’s construction and engineering companies, increasing demands on and modernizing of  manufacturing facilities involved in production of the goods necessary for HSR 1 construction per international standards;
  • Enhanced investment climate in the regions located along the line.