Moscow investment digest

December 2017

Dear colleagues,

The Moscow Department of Economic Policy and Development together with the Moscow City Investment Agency are happy to present a new issue of the digest of key investment developments in Moscow.

News

Moscow makes it to the top investment league tables

Moscow has been ranked as Russia’s leading region with its highest investment potential and lowest investment risks by the RAEX ratings agency (Expert RA). The ranking testifies to a strong investor interest in taking on projects in the capital city. “This only makes sense, because our industry, exports and public revenues – the entire Moscow economy – are growing”, Vladimir Yefimov, a Minister at the Government of Moscow and Head of the Moscow Department of Economic Policy and Development, said in remarks on the ranking.

Moscow’s strong performance in various rankings is a result of its systematic structural efforts to improve the entrepreneurial climate. For instance, for several years in a row Moscow has topped the National Rankings of Public Procurement Transparency among the Russian regions compiled by the National Association of E-Trade Participants. The city obtained the top score – “Guaranteed Transparency” – based on a review of 41,000 most important regional purchasers acting on behalf of constituent regions of the Russian Federation.

Offset contracts are an important tool for localization of pharmaceuticals manufacturing in Moscow

“Moscow’s competitive environment must undergo improvements by implementing an efficient procurement control system and a single procurement standard. Moscow purchases more than RUB 60 billion worth of medicines, medical devices and equipment annually”, Deputy Mayor of Moscow for Economic Policy, Property and Land Relations Natalya Sergunina told the “Procurement. A Dialog with Manufacturers” open business session.

She stressed that doing business with manufacturers directly, bypassing intermediaries, is a matter of principle for Moscow, which is ready to offer long-term purchasing guarantees to those who develop high-tech manufacturing in areas considered as a priority by the city.

Moscow is one of Russia’s biggest public purchasers today. Serious market players are prepared to compete for the right to supply the nation’s capital. That’s why it’s important to continue the practice of signing long-term contracts in exchange for investment, Natalya Sergunina said. “Moscow dabbled in offset contracts for the first time. We will definitely continue down this road, because there’s market demand for that. Moscow is interested in hosting modern import-substituting, high added-value manufacturing facilities and is prepared to create favorable conditions for that”, the Deputy Mayor said.

She added that long-term orders for locally manufactured products will help the city reduce the purchase prices of medicines substantially and obtain guaranteed physical volumes from reliable vendors.

Moscow City Investment Agency Director becomes a finalist of Vnesheconombank contest

Leonid Kostroma, Director of the Moscow City Investment Agency, successfully completed Vnesheconombank’s selection process for the position of a regional manager and made it to the finals. Regional managers will be responsible for pro-active origination and structuring of investment projects to secure long-term funding from Vnesheconombank. The new status will help Leonid Kostroma fully realize Moscow’s investment potential and bring new investment into the city’s forward-looking projects in the areas of transportation, utilities infrastructure, healthcare, and localization of modern manufacturing enterprises.

Moscow has a substantial economic and investment potential. According to Leonid Kostroma, his joint efforts with Vnesheconombank will focus on attracting investment into the city’s infrastructure, manufacturing and high-tech projects. “A deep understanding of investment project specifics and strong professional credentials of the Moscow City Investment Agency team will generate the best synergy from our work together with Vnesheconombank”, the Agency Director said.

Measures of Support

The Government of Moscow improves its system of enterprise support

Many Moscow enterprises can count on state support, according to a resolution passed by the Government of Moscow.

Specifically, the resolution has reduced the amount of qualifying investment for application for the status of Moscow Priority Investment Project as a new industrial or IT undertaking.

Besides, applicants for the status of an anchor resident eligible for exemptions have now been permitted to have separate divisions outside Moscow. Previously, having a branch in the Moscow Region used to be a single disqualifying condition for obtaining the status. That barrier has now been lifted. In addition, a number of previously general conditions have been specified, including the required amount of investment, revenue, payroll and average wage per square meter.

Vladimir Yefimov, a Minister at the Government of Moscow and Head of the Moscow Department of Economic Policy and Development, said: “Our city is improving upon its existing system of support for the real sector by relying on our own monitoring and opinion polls of entrepreneurs who make their needs known. The latest measures will expand the range of real-sector companies eligible for breaks. That, in turn, will intensify investment and thus help strengthen Moscow’s economy”.

Moscow introduces a new measure of support for industrial enterprises

Moscow Mayor Sergei Sobyanin said that a draft bill would be introduced to the Moscow City Duma canceling the payment of 80% of the cadaster value of a land lot if a company plans any construction of an industrial, manufacturing or scientific nature there.

This will lead to the creation of more manufacturing capacity and jobs and help increase industrial output. The Mayor of Moscow added that the city had created a solid system of support for industrial enterprises. “We have introduced tax and land lease breaks. Just recently we have approved exemptions for technological connections, subsidizing of a portion of equipment purchases and a whole range of other preferences”, he added.

Five more Moscow companies and international medical cluster members get tax breaks

Their newly acquired status as an industrial complex, management company or anchor technopark resident made those companies eligible for a reduction in the tax burden by 17–25% compared to the overall level.

The status of an industrial complex has been conferred upon: OAO Prostor Confectionery, a producer of bread, cakes, etc., PAO Scientific and Production Enterprise Impuls, a manufacturer of radioelectronic subsystems, devices and thermoelectric cooling systems, and OAO Production and Experimental Factory Soyuz, a leading maker of corrugated cardboard crates and packaging. PAO Radiofizika received the status of managing company of an eponymous technopark, and OOO ABBY, Russia’s leading OCR and linguistic software developer, became an anchor resident of the Otradnoye technopark. The Head of Moscow’s Department of Science, Industrial Policy and Enterprise Alexei Fursin said that companies received more than RUB 2.5 billion in tax breaks over the past four years. Moscow is home to 39 industrial complexes and 33 technoparks.

Tax breaks will also be granted to members of an international medical cluster being established at Skolkovo. Its properties will be exempt from the corporate property tax for the next ten years, according to a bill approved by the Moscow City Duma. The cluster’s management companies and members operating in its territory will be exempt from the transport tax for ten years too. According to Vladimir Yefimov, a Minister at the Government of Moscow and Head of the Moscow Department of Economic Policy and Development, such steps would help attract investments in the cluster development and in construction of modern medical clinics and diagnostic centers.

Macroeconomics

Moscow’s high-tech exports are on the rise

The real sector drove Moscow’s export growth over the first three quarters of 2017. In particular, R&D exports grew 50%, while manufacturing exports increased 40%. High-tech manufacturing has demonstrated export growth in 2017, including aerospace, chemicals, machinery and equipment, and auto making. “Moscow is a high-tech export hub, offering a wide variety of products and services”, Head of the Moscow Department of Economic Policy and Development Vladimir Yefimov said. “Around 75% of Moscow’s exports are to Europe, including Germany, the UK, France, Italy, The Netherlands and Finland, as well as to China, Turkey and Poland”.

Events

French business executives express an interest in localizing manufacturing in Moscow

A working meeting of general managers of localized international enterprises with government officials took place with support from the Localization Committee of CCI France Russie, the Russian-French Chamber of Commerce and Industry. Key topics covered manufacturing localization, special economic zones, measures of state support and government assistance with the strengthening and development of cooperation between Russian suppliers and foreign manufacturers on investment projects.

French investors stressed the importance of support for projects carried out in Moscow. “The French business has been demonstrating a sustained strong interest in investing in Moscow. As of April 1, 2017, accumulated French direct investments in Moscow had reached $4.2 billion”, Head of the Moscow Department of Economic Policy and Development Vladimir Yefimov said.

Investment

Moscow investment remains consistently strong

Investment in Moscow is growing at five times the national Russian rate. “This is a testament to our city’s efforts to improve upon our comfortable environment for doing business. Our main focus is on lowering administrative barriers, developing industrial, innovation, transport and social infrastructure, and improving public spaces”, Vladimir Yefimov, a Minister at the Government of Moscow and Head of the Moscow Department of Economic Policy and Development, said in remarks on the latest statistical data.

Investments in Moscow’s economy have risen 50% in recent years. “This number has approached RUB 2 trillion – these are all capital expenditures”, Moscow Mayor Sergei Sobyanin said, adding that the city was spending almost half a trillion roubles annually on infrastructure development.

Moscow Property Auctions

A future leaseholder to restore the historic Survey Office building

The city-owned mansion of a 17th-century town estate that used to host the Moscow Survey Office has been put up for auction sale at a discounted lease rate and subject to mandatory restoration. The former Survey Office is a three-story, 1,700 square-meter building located five minutes from the Kitay-Gorod Metro station. Investors have been invited to bid for the right to lease the historic building on attractive terms, according to Head of the Moscow Department of Competition Policy Gennady Dyogtev. “The prospective investor will be able to lease a historic building in the heart of Moscow for the next 49 years at RUB 1 per square meter annually”, he said.

Land lots zoned for manufacturing or warehouses within Moscow offered for sale

Eleven land lots inside MKAD intended for construction of manufacturing facilities or warehouses ranging between 0.3 and 4.4 hectares in area have been put up for sale through an auction. The properties are located in industrial areas, close to railway or other transport hubs. Three lots are offered in the Southern Administrative District, two in the South-Western, Troitsk and Zelenograd Administrative Districts each, and one in the Northern and Western Administrative Districts each.

The Department of Economic Policy and Development of Moscow

www.depr.mos.ru

Moscow City Investment Agency

www.investmoscow.ru/agency

Purchasers’ portal

www.zakupki.mos.ru

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