Background

The United States government has been standing behind the reformist platform of the Russian government since August 1991. The U.S. Congress has provided the legislative authorization for the Department of State (DOS) and other government agencies to assist in the reform process in Russia. The "Freedom for Russia Act," which authorizes DOS to provide assistance to the Commonwealth of Independent States (CIS), also includes a provision to provide support for the CIS transport sector. However, independent of the DOS foreign assistance authority, the Department of Transportation (DOT) has authority to provide technical assistance throughout the developing world under provision 6003 of the Intermodal Surface Transportation Efficiency Act (ISTEA) of 1991. DOT is cooperating with DOS and the Trade and Development Agency to help Russia evolve toward a free-market economy and to promote the resulting opportunities for the export of good and services by the U.S. private sector.

Russia's transportation system -- specifically its highways -- were built without using competitive procurement procedures, modern construction techniques, or rigorous quality control measures. They were also constructed with little consideration of changing consumer demands, market-based energy costs, or efficiency. Up to 70 percent of all freight is moved by rail, including much of the short-haul freight typically carried by truck in Western Europe and the United States.

With the development of a private sector and the privatization of local trucking enterprises, freight is shifting from the slow-moving and increasingly expensive rail carriers to the highways. Also, the number of privately owned vehicles on the roadways is increasing. Russia's road system, already crumbling in many areas, will be pushed to the breaking point under this increase in vehicular traffic, if massive rehabilitation and repair work do not begin soon.

The Federal Highway Administration's (FHWA) expertise and experience is expected to be most useful to the Russians. Over the past 60 years, FHWA, through its Office of International Programs, has contributed to the road programs of more than 70 countries. Not only does FHWA share practical information about building roads; it also serves as a model of a federalist agency as Russia decentralizes its Soviet-era bureaucracy.

FHWA Cooperation with the World Bank

FHWA is currently providing technical assistance in support of the Russian Federal Highway Department's (FHD) institutional reform measures. Through an unprecedented, cooperative effort with the World Bank, staff from FHWA's Offices of Policy, International Programs, and Program Development traveled to Russia with various World Bank missions to assist in preparing the scope of a project loan for road rehabilitation and maintenance in Russia. FHWA contributed to the Project Appraisal Report and also prepared a separate report that assessed the structure and process of decision making at the federal, provincial, and municipal levels of the Russian road transportation sector.

FHWA is co-financing the technical assistance component of the $340-million project and has committed $5 million worth of staff resources over a four-year period to its Russian counterpart, FHD. Several FHWA experts, including a highway engineer and a financial manager, will be working in Moscow to advise the FHD Project Implementation Unit (PIU).

Although several foreign governments offered to advise the PIU, FHD preferred FHWA largely because of the American experience in sustaining a decentralized -- federal, state, municipal -- transportation system with stable funding sources.

Technical Assistance and Institutional Reform Through "Twinning"

FHWA plans to establish "twinning" relationships at the federal, state, and local levels of government and to encourage U.S. highway-related industry and professional associations to develop twinning arrangements with Russian counterparts. Twinning focuses on organizational and manpower development efforts. The twinning plans include the following proposed pairs:

• FHWA with FHD.
• U.S. state highway agencies with the highway agencies of Russian autonomous republics and oblasts (a Russian territorial division, roughly comparable to a state in the United States).
• U.S. industry organizations -- such as the American Road and Transportation Builders Association (ARTBA), American Consulting Engineers Council (ACEC), Construction Industry Manufacturers Association (CIMA), National Asphalt Pavement Association (NAPA), and others -- with yet-to-be-established Russian counterparts.
• U.S. professional associations -- such as the American Association of State Highway and Transportation Officials (AASHTO), the Transportation Research Board (TRB), and the American Society of Civil Engineers (ASCE) -- with Russian counterparts, which are in various stages of formation. A Russian version of AASHTO was established in June 1993 by 24 oblasts and other regions. The director of the Moscow Regional Highway Department became the principal founder after visiting AASHTO in Washington during an FHWA-sponsored observational study tour through the United States in the spring of 1993.

Observational Study Tours

Meetings of Russians and Americans in relevant work areas ranging from engineering to law making have facilitated better communication, understanding, and cooperation by both sides.

During a three-week observational study tour for eight senior Russian highway officials from March 20 through April 8, 1993, the Russian officials spoke informally with their U.S. counterparts and gained a more concrete understanding of the interaction between the private and public sectors in the United States and among the public sector entities at the federal, state, and local levels. The FHWA-sponsored tour included visits to a number of professional organizations. Additionally, the Russians conferred with representatives of private companies, industry associations, and governmental agencies in New York, Las Vegas, San Diego, Los Angeles, San Francisco, Minneapolis/St. Paul, Baltimore, Atlanta, and Washington, D.C.

The Russian officials were pleased by the strong interest expressed by U.S. business representatives in exploring investment opportunities in Russia. They were convinced, after attending a state-of-the-art technology exhibit at ConExpo in Las Vegas, that the United States has a significant competitive advantage over European equipment manufacturers. Also, they concluded that the U.S. experience in federal, state, and local government relations would be an appropriate model for their country.

The positive results of the tour were important for American businessmen and contractors, as the United States is only one of many countries interested in establishing strong commercial ties in Russia by exerting an early influence on the reform process within the transportation sector.

Subsequent FHWA-sponsored tours will continue a broad approach to familiarize the first-time visitors with America's federal structures. However, for repeat visitors from Russia, the focus will narrow and emphasize indepth coverage of specific aspects of transportation-related structures and the decision-making process to support the Russians' institutional reform agenda. Largely as a result of the first FHWA-sponsored study tour and the formation of RADOR, the Russian version of AASHTO, the Russian highway group has contracted with a commercial tour organizer to bring more than 60 officials per year to the United States.

Personnel Exchanges and Training

In November 1993, seven employees from the FHWA Federal Lands Highway Program traveled to Moscow to appraise the FHD's road design capabilities and verify the availability of data for the preparation of contract documents for two of the World Bank's Highway Rehabilitation and Maintenance Projects. These projects were subsequently designed in the Federal Lands Eastern Division in Sterling, Va., with four Russian engineers, who came to the United States for six weeks in January and February 1994. Because the Russians are not yet experienced in competitive bidding procedures, the projects are considered a "training exercise" leading to the preparation of tender packages for local and international competitive bidding. Most of the subsequent design work will be undertaken by foreign and Russian engineering firms to be retained by the FHD/PIU under the World Bank's international competitive procurement procedures.

Congressional Visit to Russia

When the Russian participants in the observational study tour met in the spring of 1992 with Congressman Norman Mineta (D-Calif.), chairman of the House Public Works and Transportation Committee, Mineta's then Russian counterpart, Gennady Alekseev, invited Mineta to visit Russia. Mineta accepted and asked FHWA to prepare and participate in a congressional oversight visit.

Congressman Mineta, seven of his committee members, FHWA Administrator Rodney E. Slater, and Office of International Programs Director John D. Cutrell were in Russia from Aug. 22 through Sept. 1, 1993, and met with high-ranking officials. The congressional delegation held meetings with U.S. Ambassador Thomas Pickering; the ministers of foreign affairs, economy and international affairs, and transport; representatives of the regional and municipal governments in Moscow and St. Petersburg; and their legislative counterparts in the Russian Parliament. The visit also included contacts with U.S. corporations -- such as 3M, Caterpillar, and Paccar/Kenworth Trucks -- that have significant interests and investments in Russia.

The ambassador and American businessmen presented first-hand reports about conditions in Russia. The ambassador explained the status of the Russian government's privatization efforts and the role of the U.S. Agency for International Development (AID). He also said that, despite the Russian government's ability to obtain international credits, the majority of the capital for road rehabilitation and maintenance must still come from private investors. The businessmen reported that it is still somewhat difficult to do business in Russia and amplified the need for institutional reform.

High-ranking officials in the Russian government expressed a strong willingness to model their government on the American experience. Congressman Mineta discussed the importance of transportation in a free market economy and the significance of Russian-American private sector cooperation.

Initiatives to Develop the Private Sector

FHWA's direct interaction with Russian colleagues will help guide their policy formulation and standard-setting processes. This will ultimately open the Russian market to U.S. products and services. It will also help strengthen the Russian desire to import American -- rather than European or Asian -- technology. The equipment-procurement requirements of the capital investment projects of multilateral finance institutions and private banks are only now being formulated, and FHWA's involvement will ensure that U.S. companies receive timely notification of opportunities.

The principal sources of U.S. funding for multimodal transportation feasibility studies in Russia are AID and the U.S. Trade and Development Agency. Several U.S. transportation companies are active in Russia, including CSX Sealand, involved in railroad and port access improvements; Cummins Engine, working with a diesel engine plant at Kamaz; and Kenworth Trucks and Caterpillar, which are part of a U.S.-Russian joint venture to manufacture a new truck for Russia. The World Bank is also concerned with urban transportation and the upgrading of the bus fleets. These projects are only a few of many projects covering all modes of transportation.

Summary

As the world's economies become increasingly interconnected, transportation networks will be even more important for continuing growth. The availability of adequate surface transportation infrastructure and services will be an essential precondition for any other capital investment in production facilities, for the efficient distribution of goods and services in the Russian market, and for the mobility of the Russian people. On the American side, early involvement in the Russian reform process will not only shore up the foundations of an emerging democracy but will also contribute positively to the export of U.S. transportation-related products and services. In the end, by helping to build roads for a new free-market economy, we all stand to benefit.

Bert Schacknies, Ph.D., is an international programs officer at the FHWA's Office of International Programs. He has been to Russia on various fact-finding and project appraisal missions. Prior to joining DOT in 1991, he served for six years with the U.S. Agency for International Development in the Middle East. He has also worked for six years as a transport economist with the Federal Railroad Administration and for nine years as an urban and regional planner in Baltimore, Md. He has a doctorate in international development from the University of Pittsburgh and a master's in city planning from the University of Cincinnati.