Md. firm to head Russian project Plan would aid redevelopment

October 23, 1993|By Gilbert A. Lewthwaite | Gilbert A. Lewthwaite,Washington Bureau

WASHINGTON -- A Maryland company announced yesterday that it was heading a consortium to redevelop a huge area of Russia in partnership with the Russian government, although financing of the multibillion-dollar project remained unsecured.

The 15-year program would resettle thousands of Russian military veterans and refugees in an area about the size of Germany.

"It's almost like creating a whole new country," said Paul D. Lamberth, president and chief executive officer of SBS Group Inc., of Bethesda, a company recently created to pursue economic development in Russia.

No dollar figure was put on the plan to resettle 40,000 families a year and provide the social, industrial and commercial infrastructure for the entire corridor from Moscow and St. Petersburg to the Finnish border. Part of the plan calls for the construction of a toll superhighway along the well-traveled route. The tourist industry was also designated for development.

Despite the grand plans, there was little real information about the ambitious project: no estimate of the cost, no firm source of financing, no details of other U.S. participants. Details were promised later.

Mr. Lamberth told reporters that his background was in information research, government management and private business but, again, gave no details. He said 15 companies, many of them from Maryland, had already "been brought into the process," but he would not name them.

Thomas Henry, of the international division of the Maryland Department of Economic and Employment Development, confirmed that there had been initial interest "from major players -- no doubt about that." But he added: "Until the ink is dry on the contracts, you don't have an agreement. That's why they are being as vague as they are."

Mr. Henry said 85 percent of the companies actively involved were from Maryland. A "good" financing target for the first year, when the master plan and funding blueprint are being drawn up, would be $75 million to $100 million -- "and a lot of that is going to be privately raised," he said.

The development money, mainly Western, is expected to come from public and private sources, including the World Bank, the U.S. government and venture capitalists.

"I think once the seed money is in, there to start the program and get initial operations going, we will be able to build up the industry and financial capability that we think can leverage more private money," said Rudolph M. Dahl, director of the Reconstruction and Development World Fund, who is charged with raising the necessary capital.

He said acquisition of land and raw resources would be among the financial tools used to leverage private capital. Money could be funneled to the project from the $400 million designated by the World Bank for construction and development of six cities, four of which -- Moscow, St. Petersburg, Novgorod and Tver -- fall within the development zone. A $165 million U.S. allocation for resettlement housing could also be tapped. But most long-term funding would be private, he said.

The ambitious project announcement was made at the Russian Embassy, signaling the approval of Russian President Boris N. Yeltsin. Two senior Maryland economic development officials who helped put the deal together were on hand to give it further official blessing.

Scott M. Blacklin, director of the international division of DEED, expressed optimism about the project's viability but acknowledged that it is a long way from getting under way.

"They [the Russian-SBS partnership] have got a lot of milestones to cover," he said. "If things blow up at any milestone all this could be for naught."

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