Moscow investment digest

February 2018

Dear Colleagues,

The Moscow Department for Economic Policy and Development, in cooperation with the Moscow City Investment Agency, presents a new issue of the Moscow Investment Digest.

NEWS

Moscow presented its investment potential and concluded a number of strategic agreements at the Investment Forum in Sochi

At the Forum, Moscow presented its major infrastructure and digital projects. "The city created a digital business ecosystem that has already proved to be effective. The city online platforms are successfully developing business relations between Moscow, regional and foreign entrepreneurs. Thes are the Supplier Portal, an automated procurement management system, and the Moscow Investment Portal, which many people call "one window" for investors," Deputy Mayor of Moscow for Economic Policy and Property and Land Relations Natalya Sergunina said.

During the Forum, the Moscow City Government concluded a number of strategic agreements, including the one concerning high-tech production localization and development. 

Mayor of Moscow Sergey Sobyanin and Governor of the Moscow Region Andrey Vorobyev signed an agreement on the Moscow and Moscow Region strategic development until 2025.

Sergey Sobyanin also signed an agreement with the Russian biotechnology company BIOCAD, which will be supported by the city while building an innovative pharmaceutical plant in the Technopolis Moscow special economic zone. This is the first offset contract in Moscow (signed in October 2017). Another pharmaceutical production site in the Technopolis Moscow special economic zone will be established by Bright Way Industries.  The plant will produce ca. 60 life-saving medicines.

The Moscow City Government signed a new agreement with CJSC Renault Russia to extend the previous one signed in 2013.  Due to this agreement, CJSC Renault Russia will be able to revamp its Moscow plant and increase the car production, including export.

The Moscow City Government stand was visited by Chairman of the Russian Government Dmitry Medvedev. Reviewing the city investment projects, Mayor of Moscow Sergey Sobyanin spoke about the first offset contract in Russia, which the city is implementing jointly with an investor, and another 10 technoparks that may be created in Moscow during the next 12 months.  

According to the Mayor, technoparks bring more profit to the city, than office buildings. In addition to municipal support in the form of benefits, technopark residents can get some other advantages, including the access to high-tech equipment, Sergey Sobyanin explained.

Today, Moscow has 35 technoparks, this figure being more than tenfold higher than several years ago. In total, ca. 40 thousand people work in technoparks.

Moscow City Government Minister and Head of the Moscow Department for Economic Policy and Development Vladimir Efimov said that Moscow is receiving more than one tenth of all the investments in Russia.  "Moscow is really open to cooperation. We are constantly engaging in a dialogue with business enterprises to make decisions aimed at simplifying administrative procedures and to introduce business tax benefits. Today, entrepreneurs can use a number of services to remotely perform many operations, such as buying real estate, obtaining permits and submitting various online applications," Vladimir Efimov said.

According to Head of the Moscow City Investment Agency Leonid Kostroma, Moscow is actively implementing the mechanisms of public-private partnership.  To date, the public-private partnership contracts launched in the capital since early 2013 are accounting for almost 800 billion rubles.  These are mainly large infrastructure projects, such as the construction of the North alternate route for Kutuzovsky Prospekt (the first road concession in Moscow), the construction of transfer hubs, etc. Leonid Kostroma believes that urban infrastructure is driving the Moscow investment development.

Moscow City Duma adopted a law to exempt enterprises from movable property tax

The exemption applies to the movable property registered since January 1, 2013. "The tax exemption is aimed to encourage enterprises to upgrade and modernize their fixed assets, including equipment. In total, due to this support measure, the tax expenses of business enterprises will decrease by more than 19 billion rubles in 2018," Moscow City Government Minister, Head of the Moscow Department for Economic Policy and Development Vladimir Efimov said. According to Vladimir Efimov, the Moscow City Government decided to introduce the benefits after receiving appeals from entrepreneurs.

Moscow is the first "city of the future" in Eastern Europe, according to Financial Times ranking 2018/19

Moscow took the 1st place among the cities of Eastern Europe and the 6th place among all European cities, ahead of Berlin and Stockholm, in the European Cities of the Future ranking by Financial Times FDi Intelligence.  This year, the ranking is based on the data about 301 cities in such areas as economic potential, labor, infrastructure, business environment and expenses. The ranking also takes into account the cities' strategies for attracting foreign direct investors. Moscow was highly ranked in such areas as economic potential, favorable business environment and human resources.

SUPPORT MEASURES

Moscow is supporting high-tech production

Under the program for high-tech production support, the city is granting various tax and other benefits to promising enterprises, Moscow City Government Minister Vladimir Efimov said. "It allows leading companies to invest the exempted funds in accelerated development," Vladimir Efimov noted. "For example, in creating new jobs and revamping production facilities." This policy is already yielding results. 

High-tech economic industries, including pharmaceuticals and IT production, are a new priority of the city industrial policy.  For example, according to Vladimir Efimov,medicine production in Moscow increased by 40%, and computer equipment production by 36% in 2017.

Also the Moscow IT export is growing.  According to Vladimir Efimov, it is annually increasing by 16%. In addition, the salary in this branch increased by 5% in the period from January to November of 2017.

The industrial production index in Moscow has been growing continuously for the past 24 months. 

Deputy Mayor of Moscow Natalya Sergunina believes that this positive dynamics are related to the active implementation of the new industrial policy. Due to the city infrastructure development, the production of electrical and distribution equipment has increased by 97% as compared to 2016, this figure making 37% for paints and varnishes, 31% for plastic pipes of various diameters, and 10% for radiators.

At the Sochi Investment Forum, Head of the Moscow City Investment Agency Leonid Kostroma noted that technopark development was one of the promising areas of the Moscow investment policy. Technoparks and technopark residents receive support in the form of tax burden reduction for a ten-year period:  up to 100% for land tax, rent, property tax and up to 26% for income tax.

Investors are also receiving non-tax support in the form of targeted subsidies for interest on loans, leasing contracts, utility connections (up to 50% of costs), for production launch and expansion through R&D activities. In addition, investor companies can apply for concessional loans and subsidies.

INVESTMENTS

Another 25 foreign clinics ready to join Moscow international medical cluster

25 foreign medical operators have expressed their interest in joining the Moscow International Medical Cluster (MIMC) in Skolkovo. These are clinics and medical consortiums from Israel, Germany, Austria, France, Spain, Poland, Finland, South Korea, USA, and Japan, which take leading positions in such areas as oncology, cardiology, rehabilitation, orthopedics, pediatrics, etc.

The cluster projects will be implemented jointly by a foreign operator and a Russian investor.  MIMC will allow Russian innovation project developers to find foreign partners and develop their products according to foreign medical standards to enter global markets.

The city plans to invest more than 9 billion rubles in the cluster creation. The first cluster facility will be launched as early as 2018. It will be a clinical and diagnostic center, operated by the Israeli clinic Hadassah.

MOSCOW AUCTIONS

22 investors bid for renting the tenement building in Khamovniki

This cultural heritage item will be leased to the winner for 49 years at a preferential rent rate of "1 ruble per a square meter", after the repair and restoration works to be completed in a period of 3 to 6 months.

"Demand for the Moscow historical sites among businesses is increasing year by year. This was proven by the last trading session for the tenement building in Khamovniki, where 22 potential investors bid for the lot, increasing its initial price 13 times up to 31.2 million rubles. The investors were literally fighting for this item for six hours,"- Head of the Moscow Department for Competition Policy Gennady Dyogtev said.

Department of City Property will lease more than 700 city property items to entrepreneurs

The Moscow Department of City Property continues to support entrepreneurs by leasing the city premises for business development. The city plans to put up for auctions about 700 non-residential items in 2018.

To support small and medium-sized business development, the city is implementing preferential rent programs at a rate of 1 ruble per 1 sq. m., such as "Doctor Next Door", "Preschool Education Facilities" and "Cultural Heritage Items".

In addition, there is a program for small and medium-sized business support offering premises for small and medium-sized businesses at specialized auctions with an initial annual rent of 4 500 rubles per a sq. m. It is planned to auction 278 such facilities in 2018.

You can find the lot list  in the Auctions section of the Moscow Investment Portal.

20 ancient buildings in Moscow saved due to "1 ruble" lease program

20 historical sites in Moscow were leased to investors for 5 years under the city program "1 ruble per a square meter". The main condition of the program is that an investor can rent the facility at a reduced rate for 49 years only after the repair and restoration works have been completed. 

"The House with Caryatides by stuccoist Peter Sysoev, the barracks of the Catherine Palace, the Burnes Residential House and many other buildings have been saved from destruction. Historical sites are leased to the auction winners,"  Deputy Mayor of Moscow Natalya Sergunina said.

The preferential leasing program terms are very attractive for businesses. Natalya Sergunina noted the high demand for historical real estate items among investors.

In March, Moscow will auction land plots for warehouses, logistics centers and private housing construction

7 land plots for warehouses and logistics centers construction have been put up for auctions. Two of them are located in the Zelenograd and South-Western Administrative Districts, and three in the Northern, Western and Southern Administrative Districts, one in each.

Moreover, one of the auctioned land plots can be used to build a multifunctional industrial center including warehouse premises with an area of 17.1 thousand square meters (in the communal zone along Vnukovo Highway, Western Administrative District).  Another land plot is leased for constructing an office and warehouse complex with an area of 13.1 thousand square meters (the Malino industrial zone, Zelenograd Administrative District). 

The city authorities believe that the land plots put up  for open auctions may interest retailers, distributors, logistics and manufacturing companies.

In addition, 23 plots in the Eastern and Northern Administrative Districts, as well as in  the Troitsky and Novomoskovsky Administrative Districts of Moscow can be rented for private housing construction.  12 of the auctioned plots are located in the Teterenki village, 2 in Starogromovo, 2 in Burtsevo, 3 at the 6th Novye Sady Street in the Western Administrative District, 2 at the Mikhelsona and Kaskadnaya streets in the Eastern Administrative District.  The land plot area ranges from 700 square meters to 2.7 thousand square meters. The initial annual rent rate ranges from 148 thousand rubles for land plots in Teterenki to 5.6 million rubles for land plots in the Kosino-Ukhtomsky area.

You can find more info about the lot list and the auction dates  in the Land Plots section of the Moscow Investment Portal.

Small businesses bid for the right to trade in Kolomenskoye

Deputy Mayor of Moscow for Economic Policy and Property and Land Relations Natalya Sergunina spoke about the results of 39 auctions offering the right to arrange kiosks, mobile pavilions and vending machines in the Kolomenskoye estate. According Natalya Sergunina, the auctions were won by small business representatives.

"39 non-stationary retail facilities located in the Kolomenskoye estate were auctioned at the Moscow unified trading platform with a high competition level. On average, there were 7 bidders per lot. High bidding activity could be easily predicted, since street retailers are highly interested in a trading place with a favourable city park location and a lot of pedestrians," Natalya Sergunina said. All the sold lots were distributed between individual entrepreneurs and small commercial organizations.

Blocking equity holding of Intourist put up for a public auction

The blocking equity holding (25,036% of the authorized capital) of the Intourist hotel operator will be sold at a public auction.  The auction organized by the Moscow Department for Competition Policy will be held on March 21, 2018. The initial price exceeds 990 million rubles. Bids are accepted until March 13.

The Moscow Investment Portal https://en.investmoscow.ru/ is currently representing over 3 thousand items of the city real estate.

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.