Moscow Investment Digest

February 2017

Dear Colleagues,

The Department of Economic Policy and Development of Moscow and the Moscow City Investment Agency present the new issue of the Digest of Moscow’s principal investment events.

Macroeconomy: developing business in Moscow becomes more profitable

Over the first 11 months of 2016, the share of profitable enterprises and organisations in Moscow was over 75%. Moscow’s indicator exceeded that for the country as a whole by 3% over the same period.

In January – November 2016, the profits of large and medium-sized companies grew by 4.6% year-on-year to total RUB 3.193 trn.

The manufacturing industry demonstrated the highest growth rate (+15%). Light industry demonstrated profit growth of between 14% in textile and clothing and 133% in footwear and leather goods. Moscow’s hospitality industry and construction sector increased their profit by 51% and 43%, respectively.

“Manufacturing enterprises have successfully adapted to the new economic reality, due in part to the systemic real sector support measures the Moscow City Government has been implementing since 2015. The data on business profitability growth in the capital over two years confirm the decisive turning point in the falling profit trend of 2013 – 2014, when an acute dearth of own capital restricted investment by big and medium-sized businesses and organisations”, emphasised Vladimir Efimov, Moscow City Government Minister and Head of the Department of Economic Policy and Development of Moscow.

Number of sole traders up almost 10% in 2016

Moscow remains the leader in terms of growth rates in the number of sole traders. More than 270 sole traders have been registered each day in Russia’s capital since the start of the year. Meanwhile, growth in all other regions of the country is less than 2% over the same period. Moscow sole traders accounted for a quarter of the growth in the number of sole traders in the country. The positive dynamics seen in 2016 have carried over to the start of this year as well. In January–February 2017, 9,500 sole traders registered in Moscow, a 16% increase over the same period of last year.

Deputy Moscow Mayor Natalya Sergunina said the continued active growth in sole tradership in the capital is largely attributable to improvements in special taxation policies. “The number of sole traders who are choosing the permit to use the simplified tax system to work in business is increasing thanks to the comprehensive measures of the city’s tax policy: the fine-tuning of the parameters of the simplified tax system, the introduction of a retail activity fee and information support provided by the Moscow Government. Today, sole proprietorship has become a driver for the active development of small business in the capital”, Sergunina said.

The number of newly registered legal entities in 2016 in Moscow is 150.5 thousand, that is by 13.8% more than in 2015.

PPP: an educational institution will be opened in Moscow under the “1 RUB per 1 sq. m.” programme

A building located in Moscow’s Eastern Administrative District at Novogireevskaya St. bld. 39а has been auctioned off under the reduced rent programme. This is a combined purpose building, which means the investor may open either a kindergarten or a school there.

“Implementing the ‘1 RUB per 1 sq. m. a year’ reduced rent programme in education allows us, on the one hand, to ensure efficient use of city real estate and, on the other hand, to develop education, a crucial social sphere. Since the city attracts investors by offering reduced rent rates, this promotes the necessary competition with budget-financed institutions in the social sphere and a wider range of educational services is offered”, says Natalya Sergunina, Deputy Mayor of Moscow for Economic Policy and Property and Land Relations in the Moscow Government.

Vladimir Efimov, a Moscow Government Minister and Head of the Department of Economic Policy and Development of Moscow, says that the reduced rent programmes are quite popular among investors. Currently, 29 real estate facilities are rented out under the “Education” programme; 13 have already been made operational and switched to the reduced rent rate.

Four more Moscow buildings to be included in the “1 RUB per 1 sq.m.” programme

The list of Moscow’s cultural property sites being restored under the “1 RUB per 1 sq.m.” reduced rent programme will have four new buildings added to it this year. Currently, investors rent 19 cultural property sites in Moscow; of these, seven have been fully restored, and acceptance by the city of work done on one more building is pending.

We would like to remind you that the reduced rent programme for Moscow’s dilapidated cultural property sites was launched in 2012. Under the programme, investors switch to the 1 RUB per 1 sq.m. rent rate upon completing renovation and restoration of the buildings.

Taxes: Moscow residents saved over RUB 4 bn on reduced rates and deductions when paying their 2015 property taxes

The Moscow City Government has done everything necessary to afford Moscow residents a smooth transition to paying property taxes calculated on the basis of the property’s cadastral value and to make sure that the tax burden for the majority of apartment owners would change only slightly.

Owing to social support measures and the fact that 95% of housing falls under the minimum tax rates of 0.1% and 0.15%, the average 2015 tax on most apartments (up to 60 sq.m.) was RUB 2,600, or a little over RUB 200 a month.

The Department of Economic Policy and Development of Moscow estimates that, next year, the costs of reduced rates and deductions will double and exceed RUB 8 bn, and that the average apartment tax will increase by about 40%. According to Natalya Sergunina, Deputy Mayor of Moscow for Economic Policy and Property and Land Relations in the Moscow Government, the authorities are using all available mechanisms to allow Moscow residents to adapt to the new terms for paying their taxes.

Technoparks and business centres to be built in New Moscow

Approximately 10 technoparks and public and business centres are slated to be erected along the Central Ring Road within New Moscow, says Vladimir Zhidkin, Head of the Department for the Development of the New Territories.

“Two projects for developing the territory along the CRR have already passed public hearings. The plans involve constructing technoparks and public and business centres at a distance of about 2 km to the north and south of the highway”, says Vladimir Zhidkin. He also noted that most of the area would be used to create new jobs. The investor who holds the title to the land will also assume the costs of constructing utility networks and access roads for the new facilities.

Transfer hubs: investors will be able to implement a development project involving construction of the Khoroshevskaya Transfer Hub in the north of Moscow

The investor, to be selected by tender, will gain the right to conclude a sales agreement for 99.9% of the shares in Khoroshevskaya Transfer Hub CJSC. The transfer hub will be linked to the Khoroshevskaya Metro station on the Third Interchange Circuit.

Two land plots with a total area of 1.37 hectares have been allocated for construction of the transfer hub. Pursuant to the terms of the transaction, the investor will erect a multi-purpose transfer hub building and a public and business centre with an underground parking lot for 100 cars.

No later than the end of February 2022, the investor should transfer to the city, free of charge, the facilities that constitute the technological part of the transfer hub, with a total area of 2,500 sq.m.

The lot starting price is RUB 75.8 m. Applications to participate in the tender are accepted until 18 April. The envelopes with applications will be opened on 19 April 2017.

Moscow in the rankings: Moscow tops the National Procurement Transparency Ranking of the Constituent Entities of the Russian Federation for the fifth ear running

In 2016, under federal laws No. 44-FZ (government procurement) and No. 222-FZ (procurement with government participation), clients in the city of Moscow held auctions to a total of RUB 1.45 trn. Direct savings amounted to nearly RUB 37 bn under Federal Law No. 44 alone.

This result was achieved by introducing standardised procurement documentation, a system for verifying procurement expediency and pricing assessment, by setting price ceilings, centralising procurement and developing the purchasers’ portal for small-volume procurement.

The ranking is compiled by the National Association of E-Commerce Participants on the basis of research into procurement systems and procurement procedure transparency in Russia’s constituent entities.

The World Bank also gave a high grade to Moscow’s procurement efficiency in its Benchmarking Public Procurement project, which is part of the Doing Business ranking. Russia is one of the ranking’s leaders, alongside the US, Germany and Singapore.

The 2016 Quality of Life ranking of Russian regions has been published

Moscow and St Petersburg retain the top spots inthe Quality of life ranking of the Russian regions.

The ranking was compiled on the comprehensive basis of various indicators reflecting the actual state of certain aspects of living conditions and of the situation in various social spheres. The population’s income, economic development level, and accessibility of various services in the regions were also figured into the ranking.

The ranking was compiled on the basis of data from the Federal State Statistics Service (Rosstat), the Ministry of Health of Russia, the Ministry of Finance of Russia, the Central Bank of the Russian Federation, and others.

Moscow is a finalist of the Smart City Forum

For the first time in fourteen years, Moscow has made it into the top seven smart cities and districts, together with Taiwanese, Canadian, and Australian competitors. Moscow is the first Russian city to earn a high grade.

The Forum’s professionals noted technoparks and technopolises created in Moscow, the education system, and also research institutes, the system of e-referenda and e-voting.

Finalists were selected on the basis of, among others, such important factors as Internet access, start-up stimulation policy, interactive city portals, etc.

The winner of the Smart City Forum will be selected in June 2017.

Moscow auctions: mobile retail outlets are in great demand among Moscow’s investors

In March-April, entrepreneurs can compete at auctions for the right to trade in Moscow’s street kiosks in various city districts. Over 90 mobile retail outlets have so far been put up for auction: “Ice cream”, “Fruits and Vegetables”, “Bread and Bakery Products”, “Flowers”, “Meat Deli”, “Religious Items“, “Souvenirs” and “Everyday Services.”

The Department for Competition Policy organises the e-auctions. The monthly starting price for the right to trade in Moscow kiosks varies between RUB 6,000 and 10,800. Auction winners will receive the right to trade all year round in a kiosk for five years. All retail outlets are properly equipped, depending on the types of goods to be sold.

Gennady Degtyov, Head of the Department for Competition Policy under the Moscow Government, says that the Moscow Government’s project to sell rights to trade in various-purpose kiosks has been in place since 2015 and is in great demand among entrepreneurs.

Investors may launch a manufacturing facility in the Pechatniki neighbourhood

Moscow’s Department for Competition Policy has put a two-storey non-residential building up for auction . The facility is located in the Southeastern Administrative District at Ugreshskaya St. 18/1, bld. 25 (the building faces the street). The lot includes a two-storey brick building with an area of over 2,000 sq.m. It is connected to the power grid, water supply system, centralised heating and wastewater disposal system. The Technical Inventory Bureau puts the building’s amortisation at 34%. Adjacent to the non-residential building is a land plot with a total area of over 1.5 hectares intended for various types of manufacturing facility. The facility is 10 minutes away from the Ugreshskaya Station of the Moscow Central Ring, close to the site of the proposed Ugreshskaya (Volgogradskaya) transfer hub, next to the Third Traffic Ring.

The lot’s starting price is RUB 50.142 m. Applications to participate in the auction are accepted until 23 March. The auction will be held on 29 March 2017.

Approximately 3,000 of the city’s property facilities have so far been put up for auction. The complete list may be found in the “Auctions” section of the Moscow Investment Portal.

Thank you for your attention!

We remain sincerely yours and hope for further cooperation,

 

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.