Moscow investment digest

July 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

Soyuzmultfilm will receive privileges to create technopark

Moscow Government Presidium has decided to assign the status of Moscow City Investment Priority Project to the Soyuzmultfilm studio. On the basis of Soyuzmultfilm an animation technopark named House of Russian Animation will be created.

The status of the investment priority project will provide a reduction in the tax burden in regional taxes by 25 percent (namely: land tax, property tax, profit tax). This will allow Soyuzmultfilm to allocate additional funds for modernization of the production facilities and obtain the status of Technopark in the future.

It is expected that on the basis of modernized facilities Soyuzmultfilm will start to produce no less than 200 minutes of domestic animated cartoons per year. Residents of the future Technopark (independent animation studios) will be able to collectively use core business equipment and software in special centers.

Moscow entered the world's top 3 by start-up number

According to the results of Moscow's competitiveness study in the sphere of the new economy, conducted by The Boston Consulting Group (BCG) analysts, Moscow has become one of the megalopolises of the planet that have made a significant progress in creating resources for quality growth and development.

Analysts compared Russian capital to the cities comparable in GDP size, population number, innovation level and economic structure – such as New York, Berlin, Paris, London, Hong Kong, São Paulo, Mexico City, Singapore, Seoul, Shanghai and Tokyo. Moscow alongside with Tokyo, Berlin and Singapore, is included into the group of megalopolises, which currently have achieved a high factor endowment.

According to the number of technopark zones, Moscow lost only to Berlin. However, the quality of the technopark infrastructure and the support provided to residents (subsidies, benefits) is considerably better than in other megalopolises.

Moscow holds third position in the technological start-ups number (New York is in the first position, 6.3-7.8 thousand, London holds the second position, 4.3-5.9 thousand). Indicators of the Russian capital are comparable with Seoul (1.5-3.4 thousand). According to the study, by 2025 Moscow will reach the group of megalopolises-leaders in the new economy competitiveness.

MUF has discussed global issues of megalopolises development

From July 17 to July 22 Moscow Urban Forum (MUF) was held in the megalopolis’ Zaryadye park for the eighth time. The event was attended by 416 speakers, including 125 foreign experts. About 7 thousand people from 68 countries took part in the business program. They were Russian and foreign cities administrations' representatives as well as architects, urban planners, developers, heads of financial companies, investors, media representatives and common citizens.

At the MUF, experts discussed the role of digital technologies in the economy and the investment attractiveness of large cities, as well as why megalopolises have changed over the past decades.

The President of Russia Vladimir Putin addressed the plenary Session City of the Future. He emphasized that Moscow sets standards for the development of modern megalopolises. According to Moscow Mayor Sergei Sobyanin, Smart City projects are the maximum and effective use of those resources and opportunities that are available in megalopolises.

At the stand of Economic Policy and Property-and-Land Matters of Moscow Government Complex, visitors could watch videos about the programs implemented in Moscow, and among them - Digitalization, Economy and Investments, Human Megalopolis and Comfortable City.

As a part of the discussion about eventivity as a driver of the city economy, experts discussed how urban events affect the increase in the tourist flow in cities, what is needed to make the place attractive, and why the most valuable tourist is the one that comes back again. Deputy Mayor of Moscow Government Natalia Sergunina noted that due to the eventivity, the Russian megalopolis has become fashionable and attractive for tourists. According to her, in recent years Moscow has become a serious competitor to other megalopolis-leaders in investments, people, tourists.

Within the framework of the Moscow Urban Forum, the PPP conference as to: how partnership with business helps to grow and develop the City was held, at which Moscow Government Minister and Head of the City Economic Policy Department Vladimir Efimov spoke about the development of public-private partnership (PPP) mechanisms in the megalopolis.

Head of the City Science Department, Industrial Policy and Entrepreneurship Alexey Fursin spoke about the role of cooperation in modern industry and how it affects competition.

Moscow businessmen held more than 350 meetings with potential investors at INNOPROM-2018

Supported by the Moscow Government 40 Moscow manufacturing companies held 345 meetings with potential customers, partners and investors at the INNOPROM International Industrial Trade Fair INNOPROM in Yekaterinburg. The geography of business negotiations was extensive. «Japan, China, Korea, Indonesia, Singapore, Australia, Germany and India were among the countries with which the meetings were held», said Natalia Sergunina, Deputy Mayor of Moscow for Economic Policy, Property and Land Relations.

Moscow industrialists presented their latest developments, some of them are unrivaled not only throughout Russia, but also throughout the world. For example, the world's fastest blockchain platform, system for monitoring and analyzing traffic situation and traffic safety; artificial intelligence, which helps to prevent accidents at work in real-time operation mode, as well as innovative solutions in cybersecurity and virtual reality.

First time in Russia: Moscow introduces new ways of procurement

Moscow became the first region of Russia to introduce new methods of procurement. Unified Information System started to have electronic competitions for metropolitan customers.

«While the procedures are in the pilot mode, they are real contests in which representatives of the business community can take part,» said Natalia Sergunina, Deputy Mayor of Moscow for Economic Policy, Property and Land Relations.

Since July 1, state customers can electronically conduct competitions, request quotes and proposals, and from January 1, 2019 such procedure will become mandatory. The beginning of the first two competitions in electronic form has already been announced. Currently, a process of applications filing is in progress. The discoverer was Moscow Directorate of Capital Repair. It is planned that metropolitan customers will start using the new methods of procurement massively in September.

«The new format will expand the capabilities of business representatives who work with government customers. In case of successful piloting of the project on developing contests in electronic form, capital customers will be recommended to transfer to a new format beginning September,» explained Gennady Degtev, Head of the Competition Policy Department.

Investors build three-quarters of all facilities in New Moscow

«Almost 870 billion rubles were invested in the construction of real estate in the Troitsky and Novomoskovsky administrative districts», said Vladimir Zhidkin, Head of the Department for Development of New Moscow Territories. According to him, two thirds of the money spent is private business money.

«100% of housing, about 75% of social infrastructure and facilities for creating jobs were commissioned by investors. In general, this is about 10 million square meters of real estate,» said V. Zhidkin. According to him, the volume of investments will grow: by 2035, budgetary and extra-budgetary investments in the development of new territories will amount to at least 7 trillion rubles.

MACROECONOMICS

The trade turnover between Moscow and partner countries exceeded $ 75 billion

«In the first five months of 2018, the trade turnover between Moscow and ten largest partner countries increased by more than a quarter compared to the same period of the last year and exceeded $ 75 billion,» said Natalia Sergunina, Deputy Mayor of Moscow in Economic Policy, Property and Land relations.

The share of partner countries accounts for more than 60 percent of the total turnover of the megalopolis. China trade volumes during five months reached $ 20.3 billion. This is 6.2 billion more than in January-May 2017. Turnover with Germany grew to 13.6 billion dollars. The Netherlands ($ 7.9 billion) and Italy ($ 6.5 billion) are also leading in the rating of trade partners. The positive dynamics of trade relations confirms the stability of the Moscow economy, demonstrates its credibility on the part of the world business partners.

The profits of metropolitan enterprises increased by almost a third

The profit of large and medium-sized Moscow enterprises and organizations in the four months of 2018 increased by 27.9 percent compared to the same period of the last year.

Revenues grew both in industrial companies and in organizations engaged in serving the population. This is a clear example of economic growth and an increase in the city's demand for goods and services, empathized Natalia Sergunina, Deputy Mayor of Moscow on Economic Policy, Property and Land Relations.

During one year the rate of industrial production increased almost by a quarter. The production of electrical equipment has grown 2.4 times, and the production of equipment for railway transport and medicine has doubled. Such indicators are the result of the city's support. Business receives tax preferences and financial support. Free coworking and the system of training programs is opened for entrepreneurs.

SUPPORT MEASURES

Innovation and production cluster will help to develop high-tech projects

Moscow executive authority’s representatives, state corporations, development and business institutions and international experts within the framework of the Moscow Urban Forum shared their experience in implementing cooperative projects and attracting partners for the production of new products.

«The capital has a huge production, scientific and human resources potential. In particular, 43 percent of all-Russian patents and inventions is registered in Moscow. Now there are more than 20 thousand enterprises that make up the scientific and production potential of the capital – 752 organizations accomplish research and development, more than 12 thousand of IT companies, more than 1.2 thousand of large high-tech enterprises, more than 300 small innovative companies created in Moscow higher schools, 134 coworking and other facilities,» – said Alexei Fursin, Head of Science, Industrial Policy and Entrepreneurship Department of Moscow.

To stimulate the development of production capacities, the city authorities subsidize the expenditures of industrial enterprises associated with the payment of credits interest, loans, and partly on leasing payments for equipment purchasing. During five and a half years of this program existence 99 companies used such preferences, which allowed raising 1.6 billion rubles in subsidies.

Aiming to develop cooperation and, accordingly, to strengthen export potential of Moscow's products, the Government of Moscow currently works on the concept for creating an innovation-production cluster that will unite enterprises for the development of high-tech projects. This initiative was supported by the President of Russia Vladimir Putin in the spring of this year.

Such cooperation will help companies find each other, and have a tremendous synergistic effect. The cluster will support projects aimed at creating goods that are competitive both on the domestic and foreign markets.

The volume of guarantee support for entrepreneurs is growing in magalopolis

About 11 billion rubles of loans were received by megalopolis’s entrepreneurs during six months of this year thanks to the program of state guarantee support on behalf of the Fund for Assistance to Small Business Crediting in Moscow. This almost doubles the figure for the same period of the last year.

During six months, the volume of guarantees issued by the Fund to representatives of small and medium-sized businesses amounted to 6.6 billion rubles, which is almost two times as much compared to the same period last year. 46 percent of these guarantees were issued to microenterprises, 48 percent - received by small enterprises, the rest – medium-sized enterprises. The largest number of guarantees fell on trade (60 percent), production and innovation (13 percent), construction (9 percent), and other areas (18 percent).

Since the launch of the program of state guarantee support, Moscow's small business has received over 125 billion rubles of loans and guarantees. Entrepreneurs can apply for a guarantee both in the fund and in business services centers located in the metropolitan districts.

Unique opportunities: what does Moscow offer investors?

Moscow is invested by the world's largest economies from the USA to Japan. The aggregate amount of accumulated foreign direct investments as of January 1, 2018 amounts to 260 billion dollars.

«If we talk about priority sectors for private investment, Moscow, as the largest international player, relies on industries related to the new economy and urban media development: science-based business, high-tech production aimed at implementing import-substitution program and promoting exports, city transport infrastructure improvement,» – said Vladimir Efimov, Minister of Moscow Government, Head of Economics Department of the capital.

Moscow offers favorable tax conditions for city investors, developers, investment funds and companies that finance projects for the development of transport and social infrastructure, including those within the framework of public-private partnership (PPP). The peculiarity of Moscow's approach to such projects is the minimization of state interference in the investor's operational activities.

The main forms of cooperation between the state and private investors in Moscow are long-term state contracts with an investment component (including offset contracts), concessions, life cycle contracts, preferential rental of real estate with investment commitments, corporate forms of PPP.

«Since Moscow is aimed at obtaining results from PPP projects, the investor must have deep competencies both in attracting financing, and in creating (reconstructing) and operating the facilities. Proposals can be sent through the line of direct applications placed on the Investment Portal of Moscow City (www.investmoscow.ru),» explained Leonid Kostroma, Director of the City Investment Agency

AUCTIONS

TH (Transfer Hubs) projects in Moscow had been realized at the auctions for the amount of 1.7 billion rubles

The Moscow authorities sold the projects of 14 transfer hubs (TH) at the auctions. Auctions were held on such THs as Botanical Garden, Lefortovo, Seligerskaya, Rasskazovka, Dmitrovskaya, Paveletskaya, Park Pobedy, Pyatnitskoe Shosse (section 1), Technopark, Troparevo, Fonvizinskaya, Khovrino, Lublino, Khoroshevskaya. The volume of funds received at the end of auctioning amounted to about 1.7 billion rubles. When implementing Transport Hub projects, investors will be able to build 1.35 million square meters. m of commercial facilities.

By the end of this year and during the next year, it is planned to sell at auctions 9 THs, which are characterized by a large transport and passenger busy rate (over 100 thousand people a day), and the possibility of building retail real estate. In the coming months, Nekrasovka, Novokosino and Alma-Atinskaya THs are expected to be put up for auctioning. At the auction in 2018 it is planned to sell the projects of Pyatnitskoe Shosse, Savelovskaya, Luhmanovskaya THs, in 2019 – Petrovsko-Razumovskaya, Ryazanskaya, Lermontovskiy Prospekt Ths.

At special price: small businesses were offered more than 100 lots

«The city auctioned 112 real properties at a reduced rental rate. Only representatives of small and medium-sized businesses will be able to bid for the offers», said Gennady Degtev, Head of Moscow Competition Policy Department.

«Rental contracts will be concluded with entrepreneurs, for a period of 10 years at a fixed rate, which will be determined based on the results of the auctions,» he said.

The real properties are located in ten Moscow districts. Entrepreneurs will be able to purchase most lots in the South-West (24 sites), SEAD (22 objects), and 13 more - in Zelenograd and Northern districts. The premises are located on the first floors of residential buildings, ground floors and in basements. The area varies from 5.6 to 568.8 square meters.

All lots will be placed for bidding before the end of the summer. Details on the objects for auctioning can be found on the Investment Portal of Moscow in the Objects for SMEs section.

Cultural heritage objects of Moscow are put on auctions

The first object is located in the former household building of P. D. Akhlestyshev’s revenue house, dating back to the XIX century. This is the smallest lot in the Central Administrative District - only 14.5 square meters. m. In 2017, all the premises of the building were overhauled, and now the utility lines are in proper operation. The applications for participation in the auction are accepted until August 16, and the auction will be held on August 22.

Another object of cultural heritage - an outbuilding of the city mansion - dating back to the beginning of the XIX century in the Basmanny district was put on auction at a reduced rate of rent 1 ruble per square meter. m per year. This is one-story non-residential building having an area of 242.4 square meters. m. Applications for participation in the auction are accepted until August 17, the auction will be held on August 23. The initial amount of annual rent is 2 million 138 thousand rubles.

The third object is the coach-house, which fits into the ensemble of the 18th-century Lepyokhins' city estate. The building is located 500 meters away from the metro station «Rimskaya». The area of the coach-house is 171.4 sq. m. «The winner of the auction will be able to rent an object at a rate of one ruble per square meter per year after fulfilling the obligation to preserve the cultural heritage object, which is the coach-house,» explained Gennady Degtev, Head of the Competition Policy Department.

One-story building of the coach house is located inside the courtyard of the mansion, in a fenced and guarded territory. The initial price of the lot is 823.6 thousand rubles. Applications for participation in the auction are accepted until August 17 at the Investment Portal of Moscow. Bidding will be held on August 23.

Investors can purchase a minority stake in the property complex of ZAO Demetra

Large investors are invited to compete for the right to purchase 31.3 percent of ZAO Demetra shares through the auction. The minority stake is owned by the joint-stock company Development of Assets.

The main activity of the company is operations with real estate. The company owns a land plot of about 10 hectares, which is built up with office and storage facilities having total area of more than 54 thousand square meters, which serve for wholesale and small-scale wholesale trade of fruit and vegetable products as well as other food products. There is a parking lot for trucks and cars on the territory, a telephone station, which provides tenants with ground telephone numbers, trading grounds to sell from vehicles and car scales.

The property complex is located on Ilovaiskaya Street, 3, 5 minutes from the Maryino metro station, 4 km from Moscow Circle Road and 8 km from the Third Circle Road.

The initial value of the asset is 250 million rubles.

Video

Moscow Urban Forum-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.