Moscow investment digest

January 2019

Dear colleagues!

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

NEWS

Moscow became a part of a major special investment contract in automotive industry

Moscow Government acted as a party to a special investment contract (SIC), concluded between The Ministry of Industry and Trade of the Russian Federation, AVTOVAZ and Renault – Nissan – Mitsubishi alliance. SIC provides for development of car product range and increase of local manufacturing content in Russia.

The key investor under the contract is AVTOVAZ. ZAO Renault Russia with its major production premises in Moscow is an engaged enterprise along with LADA Izhevsk (part of AVTOVAZ Group), Nissan Manufacturing Rus and Mitsubishi Motors Rus. Conclusion of the contract will allows attracting around RUR 70 bn of investments to Russian car making industry as well as create over 2,300 new jobs. SIC validity period is 10 years.

“The signed SIC will support development of Renault cars product range in Russia, as well as other models of Renault – Nissan – Mitsubishi alliance. In addition to that, the contract will contribute to upgrade and expansion of manufacturing capacities of Renault factory in Moscow, - says Mr.Vladimir Efimov, the Deputy Mayor of Moscow for economic policy and property&land relations,- Moreover, in the end of 2018 ZAO Renault Russia got the status of a car manufacturer acting at Moscow territory. This allows the company to enjoy regional tax exemptions”.

Investor to create a research and production complex in Moscow

A new production facility with contemplated employment of 200 people and projected investments of RUR 320 m will be launched with the support of Moscow Department of Investment and Industrial Policy.

Construction project of a research and production complex will be implemented by Umka at the site of 1.86 hectares located at Moskovskiy town (nearby Rumyantsevo village). “Incorporation of production and R&D in a single cycle will not only allow react to demand fluctuations promptly but reduce the time required to introduce innovative products to the market. I strongly believe that this synergy will allow the company to compete with foreign manufacturers successfully” - says Mr.Alexander Prokhorov, the head of Moscow Department of Investment and Industrial Policy.

“The Russian market of Coriolis mass flow meters – these are the measuring instruments we plan to produce – amounts to circa USD 40 m in the oil&gas industry. Foreign instrumentation is mainly used. The production facility will be able to meet at least a quarter – and up to half of industry demand for such instruments in the longer term” – says Mr.Andrey Shtirlin, the General Manager of PJSC Umka.

Metropolitan innovation cluster to start this year

The cluster will include educational institutions, R&D establishments, high-tech enterprises, technoparks, IT companies and other entities.

“Innovative trend has a peculiar attention and support of the city. The major task of 2019 is an innovation cluster. The President has signed a decree on its establishment. We envisage about 20 tsd potential participants in the cluster. These are either developers or manufacturers of innovative products” – declared Mrs.Natalia Sergunina, the head of Moscow Mayor and Government Administration.

The overarching objective of the innovation cluster is to create the basis for a breakthrough development of the whole country. In particular, to intensify cooperation between researches, developers and manufacturers, establish internal connections and logistic chains between them as well as to cut their losses and increase competitive ability.

Moscow keeps transiting to green transport

The capital has concluded a life cycle contract (LCC) with KAMAZ for supply of 100 electric buses and 36 ultra-high speed charging stations for them. More than a half of the overall scope of projects of Moscow public-private partnership falls within life cycle contracts in transportation industry. The scope has amounted to RUR 435 bn in 5 years.

A life cycle contract has a long-term nature, thus the city obtains the best price-to-quality ratio of vehicles due to its conclusion. In addition to that, the budget expenses are uniformly distributed.

Vehicles by KAMAZ will conform to the world modern standards. They will be equipped with facilities for passengers with reduced mobility, climate control system, GPS navigation system and USB connectors for charging of mobile devices. In addition to that, passengers of electric buses will be able to enjoy free Wi-Fi.

The life cycle contract with KAMAZ provides for purchase of electric buses, designed in full accordance with the city requirements, as well as future service and supply of components within the next 15 years. The contract price is RUR 6.57 bn.

Sales tax rate to decrease for small businesses in Moscow

Sales tax rate will decrease by 10% for entities with salesrooms of up to 50 sq.m. and by 2-10% for showrooms of up to 300 sq.m. At that, the levy will grow from RUR 50 to 75 for 1 sq.m. per quarter for the showrooms of over 300 sq.m. The changes will come into force on July 1, 2019.

“We intensify our efforts to improve ways of support for small and mid-sized businesses by providing discount, tax deductions and reliefs to entrepreneurs. There are over 800 thousand currently active small and mid-sized enterprises in Moscow. These entities provide employment for over 2.4 m people. This is why we think that it is very important for the entrepreneurs to operate in the city in a comfortable way” – noticed Mr.Vladimir Efimov, the Vice Mayor of Moscow.

Standard contracts ease participation of suppliers in Moscow procurement

“Buyers of Moscow pursued 18,000 procurements using standard documentation for the total amount of over RUR 150 bn in 2018. Thus, the lot documentation for 50% of procurements has been prepared automatically in the Unified Automated Information Tender System. The target indicator of 60% of the total procurement volume of Moscow will be reached in Q12019” – says Mr.Vladimir Efimov, the Deputy Mayor of Moscow for economic policy and property&land relations.

Standard documentation, that is to be compulsorily used by the client, has been approved in relation to 166 matters. Uniformity of lot placement procedure as well as lack of requirements to description of goods make the work easier for the suppliers and contribute to attraction of new players to the procurement market. On the average there are 6 requests applied for pursue of the standardized procurement, and reduction of the initial ceiling price amounts to 8%.

Seven packages of standard documentation were approved in the end of December 2018. These include one of the most highly-demanded and socially important types of work, i.e. equipage of single level parking lots, development of design and estimate documentation and repair&maintenance of the common property in an apartment building as well as replacement of moving staircase complexes.

Moscow investors built 11 kindergartens and 4 schools in 2018

Investors built 11 kindergartens for 2,420 seats and 4 schools for 2,854 seats in 2018 as per the projects of the integrated development of the areas. Educational institutions have been put into operation both within old city limits and on the new territories. 5 kindergartens for 1,290 seats and 2 schools for 2,112 seats have been commissioned in New Moscow (Novaya Moskva) area as part of construction of residential complexes.

6 kindergartens for 1,130 seats have been commissioned within the boundaries of the “old” Moscow area in the regions with the highest construction activity – mainly at the south of the city. New schools appeared in the Southern Administrative Okrug as part of Yasniy Residential Complex (a school for 192 pupils) and in the Northern Administrative Okrug as part of Life-Botanicheskiy Sad Residential Complex (a school for 550 pupils).

5 m sq.m. of real estate to be built in the Big City

It is planned to erect around 5 m sq. meters of real estate at the territory of the Big City of over 3 thousand hectares.

“The Big City is considered to be the largest investment project of the capital. As soon as the former industrial areas are reorganized, new housing estates, public spaces and office premises will appear here” – wrote Mr.Sergei Sobyanin, the Mayor of Moscow, on his Twitter page.

It is planned to erect transportation infrastructure objects, build and reconstruct 74 km of highways, arrange reсreational areas as well as equip and green up 24 km of embankments at the territory of the Big City.

The Big City territory is located on industrial areas northward of the Moscow International Business Center Moscow City. A transfer hub with office premises will appear in close vicinity.

MACROECONOMICS

The major rise of Moscow exports falls on IT and manufacturing sector

The total volume of exports of Moscow goods and services amounted to RUR 9.8 tn for three quarters of 2018 – it is equal to the amount of the whole 2017. Significant growth of Moscow exports falls on high-tech sectors of economy, that are of peculiar attention of the city government. According to the Moscow Department for Economic Policy and Development, the major rise of exports of the largest Moscow enterprises fell on IT (+ RUR 12.6 bn) and manufacturing (+ RUR 12.1 bn) industries in 2018.

Moscow is the leader of the Russian regions in terms of exports as of today. The capital exports its products to 189 countries.

SUPPORT MEASURES

Small business got almost RUR 23 bn in 2018

Moscow entrepreneurs obtained over RUR 22.7 bn in banks in 2018 under the guarantee support program of the Fund of Small Business Credit Assistance of Moscow. The volume of the fund guarantees reached a record number at last year end and amounted to over RUR 13.7 bn – that is 13% higher than the indicators of 2017.

“Since the launch of the governmental guarantee cover program the small business of Moscow obtained over RUR 137 bn of credits and guarantees. An average volume of the fund guarantees amounted to RUR 16 m. At that, the highest volume of guarantees fell on trade (55%), production and innovations (16%) as well as construction (8%). Small enterprises got around 58% of guarantees, micro businesses obtained 35% and mid-sized entities got only 7%” – said Mr.Aleksey Fursin, the head of the Moscow Department of Entrepreneurship and Innovation Development.

The fund facilitates small and mid-sized enterprises to get financing on favorable terms and for the more extended time frames that the market average. For instance, only 13% guarantees fell on short-term transactions (up to 1 year), while 67% of guarantees have been issued for the period of 1 to 3 years, 12% - for 3 to 5 years and over 8% - for more than 5 years.

BIDDING

Business acquired non-residential properties from the city for RUR 2.5 bn

Moscow sold 283 objects of city property on auctions for RUR 2.5 bn in 2018. The overall area amounted to around 31 tsd sq.m.

According to Mr.Vladimir Efimov, the Deputy Mayor of Moscow for economic policy and property&land relations, purchase or lease of premises from the city is a reliable and transparent deal. On the one hand, an entrepreneur is 100% protected legally, is able to review the complete history of the object and can be sure of the deal legality. On the other hand, the city effectively sells premises, thus developing its infrastructure and replenishing the budget of Moscow. The winning bidders are free to use the objects at their own discretion within the limits of operation of the company.

A non-residential property of 89.1 sq.m., located at Leninskiy prospect, was sold in 2018 with the highest excess of 6.6, i.e. by 560%. The initial price of the object amounted to RUR 12,381,000 (RUR 138,956.23 per 1 sq.m). The bottom-line price was RUR 81,714,000.6 (RUR 917,111.11 per 1 sq.m). Another city premises of 119.7 sq.m, located at Bochkova street, was sold with the excess of three times (190%). The initial price amounted to RUR 20,794,000, the bottom-line price was RUR 60,302,000.6.

Investors can rent premises at Gostiny Dvor

The following property has been put out to tender: two premises of 127 and 393 sq.m for art galleries and two objects for storage purposes of 76 and 263 sq.m. Premises for art galleries are located at the 1st and 2nd floors; storage premises are located in the basement of the building.

The initial rent price of the premises for galleries is RUR 20,200 and RUR 15,800 per 1 sq.m annually. The initial rent price of the storage premises is RUR 12,300 and RUR 12,600 per 1 sq.m annually.

All four lots have the same address: Ilyina street, 4 (Gostiny Dvor). Requests to tender are accepted by February 15. The auctions will be held on February 21, 2019. Lot documentation for the objects is available at the Investment Portal of Moscow in the section “Property Rent”.

Property at Kitay-gorod metro station put out to open tender

The premises of 35 sq.m is located in the yard of residential “house with angels” at Solyanka street, 1/2, building 2. The building is a part of the group of the revenue houses of Moscow merchant society of the beginning of the XX century and is a cultural heritage site.

“The deal terms stipulate that a new owner undertakes to perform works to save the purchased premises and adapt it for modern use within 18 months. Based on experience of such deals, we may suppose that the premises will be of high interest for the business representatives. On the average, there are 6 bidders for small-space general purpose premises in the center of Moscow” – clarified Mr.Gennadiy Degtev, the head of the Moscow Department for Competition Policy.

The initial price of the lot is RUR 2 mn. Requests to open tender are accepted by March 13. Bid opening commences on March 19, 2019.

New spaces for business: a land lot in North-East Moscow put out to tender

“The winning bidder of the open auction will be able to implement a development project of a business center construction at the land plot of over 3.5 hectares. The project is expected to be a rather large-scale one. It is possible to erect buildings of up to 75 meters high at the land plot. It might be interesting for large investors” – says Mr.Gennadiy Degtev, the head of the Moscow Department for Competition Policy.

The aggregate building area will amount to around 156.8 tsd sq.m. Now the land plot is free of buildings and not used. The initial annual rent is RUR 111 mn RUB. The tender will be held on April 18.

There are 1,320 objects for business put out to tender as of today. All actual information on them is available at the Investment Portal of Moscow in the section “Tender. Property”.

5,179 property and land tenders for the total amount of RUR 34.3 bn were held in 2018. Average excess of the initial price of the property objects amounted to 45.4% and to 118.5% in terms of non-stationary trade objects.

Moscow Department for Investment and Industrial Policy

www.mos.ru/dipp

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.