Moscow investment digest

August 2018

Dear colleagues!

Moscow Department for Economic Policy and Development, in cooperation with Moscow City Investment Agency, presents the next issue of the Digest covering the main investment events in Moscow.

NEWS

Investments in Moscow Fixed assets had grown by almost 5%

The volume of investments in fixed assets of Moscow during the first half of 2018 amounted to RUR 723 bn, which in comparable prices is 4.8% higher than the same period index of the last year.

According to Mosgorstat data, the ultimate sources of such a growth were the investment increase in the intellectual property units. The share of such investments in the first two quarters of this year in the total amount had comprised 10.5%, while during the same period in 2017 it was 8.5%.

"The metropolis pays great attention to increasing the attractiveness of the city for the investment growth in industry and high-tech sector. In 2016, the mechanism for supporting operating and efficient enterprises, technoparks and new investment projects in the real sector of the economy was restarted. Investors can locate modern production facilities both in technoparks and in the territory of the special economic zone Technopolis Moscow", explained Natalya Sergunina, Deputy Mayor of Moscow for Economic Policy, Property and Land Relations.

In addition, the possibility of concluding offset contracts, stipulating guaranteed orders from the state and obligation of investments in production on behalf of business was introduced. "Enterprises of the metropolis can receive a guaranteed support from the Government of Moscow, subsidies, as well as soft loans for up to 5 years", added the Deputy Mayor.

According to the latest data of Mosgorstat, the share of extra-budgetary sources of investments in fixed assets during the first half of this year comprises 73.4% of all investments, while during 2017 this share was equal to 71.5%.

Foreign companies began to invest more in Moscow economy

Direct investments on behalf of foreign companies registered in Moscow in 2017 have grown by 28.4% compared to 2016. The investment volume amounted to USD 83.9 bn. "According to the Bank of Russia, this comprises 56.3% of all direct investments in the country during 2017," said Natalia Sergunina, Deputy Mayor of Moscow for Economic Policy, Property and Land Relations.

She noted that good growth rates result from the hard work that the city is systematically pursuing to improve the investment climate, simplify administrative procedures, and develop new investment tools.

Record number of individual entrepreneurs was registered in Moscow

As of July 1, 2018, 302,351 individual entrepreneur (IP) had been registered in Moscow. Since June last year, this index has grown by 11.2%. It was stated by Vladimir Efimov, Minister of Moscow Government, Head of Moscow Department for Economic Policy and Development.

According to him, the growth in the number of IPs is due to the fact that Moscow is one of the largest consumer markets in Europe. The metropolis has high demand for goods and services in the variety of industries.

Since 2010, the number of individual entrepreneurs in the city has increased by 71%. Of these, more than 60% work in the services sector, and about 25% in the retail trade. The share of businessmen who are engaged in production activities has increased by 13% over the past three years.

Entrepreneurs in the metropolis can work on a patent or simplified taxation system which indeed facilitates doing business. In the first quarter of 2018, Moscow businessmen acquired more than 51,000 patents. This is 22% more than in the first three months of 2017.

Breakthrough of the Year competition for entrepreneurs will be held in Moscow

Breakthrough of the Year competition will be held in the metropolis for entrepreneurs. The decision was made at the session of the Moscow Government Presidium. Entrepreneurs of all ages will compete for the title of the best businessmen. The Winners in seven nominations will be decided by experts.

The main objectives of the competition are to attract young people and older people to entrepreneurship, to involve women in business, and also to attract foreign and domestic investments and create a sustainable business environment in the city.

Construction of plant to manufacture unique glucose meters has been started in Technopolis Moscow SEZ

So far the plant is at the stage of foundation construction, but it is planned that the five-story building will be completed in 2020. It will comprise both production facilities and laboratories.

"The construction of the plant will allow us to launch the domestic cycle of medical equipment manufacturing. Thanks to this, we will be able to keep prices for products regardless of the dollar rate, "said Yuri Glukhov, CEO of Elta company, resident of the Technopolis Moscow special economic zone (SEZ).

The main products of the plant will comprise unique for Russia glucose meters, able to transmit indications either to the mobile application of user or directly to attending doctor. The same technology is planned to be used for producing cardiogram sensors, the readings of which will also be transferred to attending doctor. In addition to the equipment manufacture, the plant will produce a domestic, more powerful analogue of aspirin. The drug has already being subjected to preclinical tests and has proved itself well.

Accommodation in the territory of a special economic zone gives tangible tax preferences. "Within ten years after we finish building, the profit tax will be zero percent," explained Yuri Glukhov. - In addition, it will be possible to redeem land plot for one percent of the cadastral value. I would also note that utilities availability is important for such sites. We are provided with free electricity, water, heat. Everything is close by, no need to build utility lines".

Innovative production complex and industrial park will be built in metropolis

Urban Planning and Land Commission of Moscow City headed by the Mayor of Moscow have approved the provision of the land plot for the purpose of carrying out industrial and production activities at the address: Zorge Street 5. The plot area is 0.27 hectares. The investor plans to build a six-story production building having total area of about 5,000 square meters and locate manufacturing facilities to produce medical orthopedic products.

It is planned to implement the construction of the production building project in the Khoroshevsky subdistrict of the metropolis within the framework of the State Program Economic Development and Investment Attractiveness of Moscow.

And in the east of the metropolis in Rudnevo industrial zone it is planned to build an industrial park with a total area of more than 100,000 square meters. The project has already been approved by the Committee on Architecture and Urban Planning of Moscow.

The project was developed within the framework of the investment project named Moscow is a City for Business and Innovations. In general, it is planned to divide Rudnevo into three large zones equipped with a developed pedestrian and automobile infrastructure. It is assumed that the enterprises of construction, aviation, printing and electronics industries will be located in the Industrial Park.

MACROECONOMICS

Volume of non-resource-based and non-energy exports of Moscow grew by 8%

The volume of non-resource-based and non-energy exports of the metropolis in the first half of 2018 amounted to USD 10.79 bn. Compared to the same period of 2017 (RUR 9.9 bn) the growth amounts to USD 890 m.

"Moscow maintains leading positions in the country: according to the results of the first six months of 2018, the metropolis accounts for almost 16% of Russia's non-resource-based and non-energy exports. "Due to the high quality of the products and the city's support of manufacturers, the recognition of Made in Moscow brand abroad is growing", said Natalia Sergunina, Deputy Mayor of Moscow for Economic Policy, Property and Land Relations.

According to her, among the most popular categories of non-resource-based exports for six months are: mechanical equipment, machinery and computers (USD 1.26 bn); electrical devices, communications equipment (USD 807.9 m); motor vehicles (USD 363.1 m); optics, instruments, medical equipment (USD 265.63 m); household chemicals (USD 107.91 m).

"In the first half of 2018, the key partners of Moscow in the field of non-resource-based and non-energy exports were the USA, India, Belarus, Algeria, Kazakhstan. Their share was approximately 40% of the total, "- said Alexei Fursin, Head of the Department of Science, Industrial Policy and Entrepreneurship at the Moscow Government.

High-tech industries are leaders of growth in Moscow industry

"The index of industrial production for manufacturing industries of Moscow has increased by 25.7% since the beginning of 2018 compared to the same period in 2017," said Deputy Mayor of Moscow for Economic Policy, Property and Land Relations Natalia Sergunina. In January-June period of this year high-tech business showed the highest growth in the manufacturing sector of industry. The maximum positive dynamics was observed in the production of electrical equipment, chemicals, vehicles and equipment. "

She noted that in these areas the growth rate compared to the same period of the last year amounted to 121, 23 and 18% respectively. According to Vladimir Efimov, Minister of the Moscow Government, Head of the Department for Economic Policy and Development, in the first half of the year good development dynamics was proven in cars manufacturing industry, refrigeration and ventilation equipment production, packaging materials, trade and office furniture fabrication, as well as in repair and installation of machinery and equipment.

"The overall production in the manufacturing industries had increased from 7 to 10%. Industrial development of the city is fast-moving and exceeding last year's pace ", - summarized Vladimir Efimov.

SUPPORT MEASURES

Moscow extends measures to support industrial enterprises

The city increased the amount of subsidies to industrial enterprises that purchase equipment of domestic production. The applicable decision was made at the session of Moscow Government Presidium.

"It is necessary to take a number of very important decisions to support industrial enterprises in Moscow. In particular, increase to almost 40% expenses compensation of leasing payments, almost double the compensation of expenses related to loans interest payments, and expand the list of equipment that is subject to support measures", said Sergei Sobyanin, Moscow Mayor.

The share of reimbursable costs for rent of leased Russian equipment had been increased from 25 to 35%. And the cost of paying interest on loan agreements for the purchase of such equipment will be reimbursed in the amount of a key rate announced by the Central Bank of Russia and increased by 5 percentage points.

Now the rate is 7.5 percent, said Alexei Fursin, Head of the Department of Science, Industrial Policy and Entrepreneurship of the city. "For domestic equipment, it is proposed to raise the rate by five points, but not higher than the rate on the loan agreement. It means that 12.5 percent can be reimbursed”, he said.

Detailed information on the conditions of participation in the program can be found on the website of Moscow Department of Science, Industrial Policy and Entrepreneurship. The list of equipment for which the subsidy applies includes facilities for local treatment and equipment for codes labeling of finished products.

Moscow exporting enterprises will receive new subsidies

Moscow will expand support measures for Moscow-based exporting companies. A corresponding resolution was adopted at the session of Moscow Government Presidium.

As the analysis of foreign trade practice shows, that high costs for goods certification, for obtaining patents and certificates, and also for transport logistics often hinder the export of Moscow enterprises products. To help exporting enterprises overcome these difficulties, new subsidies have been introduced:

- for obtaining patents and certificates, certification of goods and management systems (partial cost recovery);

- for goods transportation beyond the country boundaries.

The amount of subsidies for certification and intellectual property protection cannot exceed 50% of the revenue from goods sale outside of Russia. The cost of each shipment transporting can be fully compensated; however, the subsidy cannot exceed 20% of the shipment cost.

The maximum amount of subsidies for cost recovery has been established:

– for product certification, patenting and transportation (RUR 3 m);

- for management certification (RUR 500,000).

When choosing enterprises-applicants for costs subsidizing, the size of average annual wages of workers will be taken into account, as well as the ratio of tax payments to the sum of the requested subsidy and a share of export revenue in the total amount of enterprise's revenue.

TENDERS

Shares of a major lesser of commercial premises in Moscow center have been tendered

The city tendered a 100 percent stake in SUE Ekonomika, which leases office space in the city center. The company building is within walking distance from the Novoslobodskaya metro station.

The company owns non-residential premises having total area of 470 square meters and which premises are located on the second floor of an apartment building. They are suitable for offices, beauty salons, medical centers and leisure centers.

"The premises are gradually being repaired, utilities and communication lines have been built in the building. The height of the ceilings is three meters, there are display windows installed in the building. "All these characteristics suggest that market players will be interested in such a proposal, "said Gennady Degtev, Head of Moscow Department of Competitive Policy.

Now the premises of the enterprise are leased. The term of the longest contract expires on January 31, 2019.

Applications for participation in the auction are accepted until October 2. The auction will be held on October 10.

Investors are offered three plots of land in the north, east and south of the metropolis

The site for the construction of manufacturing facility has been tendered in the southern administrative district. The plot area (it is located at: Promyshlennaya Street, land plot 6) - 1.4 hectares, and the area of the future building – 21,000 square meters.

One more production facility (8,850 square meters) may appear in the Eastern Administrative District, on the land plot area of 0.6 hectares. It will be located at: Irkutskaya street, land plot 17, building 1.

It will be possible to build a retail and household complex (5,400 square meters) in the north of the metropolis at the address: Marshal Fedorenko street, land plot 1. The area of the land plot tendered equals to 0.3 hectares.

Rental houses and estates: 20 units in the city center had been auctioned

"20 units located in the central historical part of the city have been auctioned. Among them - three buildings which have the status of Cultural heritage units. "Buying premises in such units the Buyer is obliged to carry out a number of necessary works depending on the technical condition of the building", "said Gennady Degtev, Head of the Department for Competition Policy.

The premises in the buildings - units of cultural heritage are located in the Small Zlatoustinsky Lane (the city estate of M.F. Kazakov - EM Tatishcheva, the middle of the XVIII - XX century), Klimentovsky Lane (rental house M.I. Babanin, 1912-1913, architect E.K. Nirnsee) and on Bolshaya Dmitrovka Street (apartment house, 1799-1836, 1886, 1927-1933, architect R.I. Klein).

Five facilities are located in Basmanny subdistrict, three units are in Khamovniki, two - in Tver region, two in Zamoskvorechye and Krasnoselsky subdistrict and one of each in Arbat, Yakimanka and Meshchansky subdistrict.

The average starting cost of the units is RUR 120,000 per square meter. Lots' area varies from 92 to 1415 square meters. You can find the unitt of interest and see lots' documentation at the Investment Portal in the section Sale of non-residential premises.

Auction of premises in Malenkovka houses

The city had auctioned two non-residential premises in the so-called Malenkovka houses (accrued from the surname of the Soviet statesman Georgy Malenkov) built in the 1950s. They are located in the Academic District on Krzhizhanovskogo Street near the metro stations Akademicheskaya and Profsoyuznaya. All facilities are connected to utilities.

The first premises have an area of 214.9 square meters and are located in the basement of residential five-story building at the address: Krzhizhanovskogo street, house 24/35, building 3. The opening price of the lot is RUR 18.1 m.

The second lot is a room with a total area of 708.5 square meters on the first floor and in the basement of an apartment building at the address: Krzhizhanovskogo street, house 20/30, building 2. The opening price of the lot is RUR 58.9 m.

The auctions will be held on September 19, 2018.

The Department of Economic Policy and Development of Moscow

www.depr.mos.ru

Moscow City Investment Agency

https://en.investmoscow.ru/agency/

Purchasers’ portal

www.zakupki.mos.ru

The Moscow Digest archive is available at the Moscow Investment Portal.