Moscow investment digest

November 2018

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 entered into a second offset contract

Moscow has signed a second a medicines supply contract providing for counter investment obligations, with R-Opra (a subsidiary of the R-Farm Group of Companies). According to the contract, the company will be working for 4 years to localize in Moscow the production of medicines under 31 international non-patented names that will be subsequently delivered to the city.

R-Opra proposed to fulfill the contract obligations for 18.4 bn RUR, with the initial contract price of 22.5 bn RUR. The estimated amount of investment under the offset contract will make ca. 5.87 bn RUR. The investor plans to create 12 production lines.

“The offset contract conclusion will allow the city to solve a number of tasks: ensuring import substitution in socially significant areas, creating jobs and increasing the taxable base, as well as saving budget funds for procurement. For an investor, an offset contract with Moscow provides for the buyer's reliability, the guaranteed long-term sales of localized products (i.e. return on investment) and the subsequent inclusion in the regional register of sole suppliers,” Head of the Moscow Department for Investment and Industrial Policy Aleksandr Prokhorov said.

In turn, Head of the Moscow City Investment Agency Leonid Kostroma reminded that the first offset contract in Russia was concluded by Moscow with ZAO Biocad in October 2017. It provides for localizing in Moscow the high-tech production of 22 drugs (oncology, immunomodulators) and supplying those for 7 subsequent year, for the amount of 14 bn RUR. The investments will make at least 3 bn RUR.

Technopolis Moscow is recognized as one of the most investment-attractive SEZs

Technopolis Moscow Special Economic Zone has become a leader of Russian investment-attractive SEZ ranking by the Cluster and Technopark Association.

In total, experts evaluated 16 special economic zones in 13 regions of Russia: 9 industrial SEZs, 6 technical innovative SEZs, and one port SEZ “Ulyanovsk”. The ranking did not include tourist and recreational SEZs (9), since industrial and technical innovation activities are not allowed there.

As part of the study, the experts evaluated the investment attractiveness of the special economic zones, the presence of the favorable conditions for attracting both Russian and foreign investors, infrastructure, promotion of investment competition among the SEZ management companies, as well as replication of SEZ best management practices.

A New Moscow Technopark topped the national ranking

The TehnoSpark Group of Companies from Troitsk topped the national most efficient technoparks ranking for the third time. The ranking is compiled by the Russian Cluster and Technopark Association using a number of indicators, including the total technopark residents’ activity, the companies’ spending on scientific research, the number of intellectual property objects created by the residents, their revenue and specific exports.

Today, the territory of the TekhnoSpark Group of Companies accomodates more than 100 organizations. According to the Moscow General Plan until 2035, 20 technoparks are expected to be arranged in the Troitsky and Novomoskovsky districts. Almost all the major Moscow developers have made proposals for those to be created in New Moscow.

The technoparks, which have been granted an official status by the Moscow Government, serve as a convenient platform for small and medium-sized businesses, where state-of-the-art areas can be rented. The residents are exempted from land lease payments and property tax and provided a significant income tax reduction. The technoparks anchor residents may receive maximum regional income tax benefits.

Moscow expanded the benefits for legal entities

The tax benefit for industrial enterprises will be specified after 2019. This will affect the territories occupied by their administrative services. At the moment, the benefits are granted, if the area is at least 20% of the total building area, provided that the rest of it is not leased. On January 1, 2019, these restrictions will be lifted, which will lead to an increase in the number of industrial enterprises enjoying this benefit.

New property tax preferences will be also granted to private schools and kindergartens. The benefits will allow educational institutions investing in construction or reconstruction to reduce the tax 10 times. “These measures (together with other support measures taken by the city) are expected to promote the involvement of investors in the educational sector,” Vice-Mayor of Moscow for Economic Policy and Property-Land Relations Vladimir Yefimov said.

Another change will affect the taxation of the organizations that employ disabled people. Starting next year, the benefit will only apply to the jobs occupied by disabled people. This will exclude the evasion of taxes on leased expensive commercial real estate.

Eight large-scale investment projects received implementation permits

In 2018, the Urban Planning and Land Commission approved the implementation of 8 large-scale investment projects, with 7.01 ha of land plots to be leased without bidding. The total amount of private investment in these projects will make 8.55 bn RUR; 1,682 new jobs will be created.

“In order to develop Moscow’s scientific and production potential, the city authorities are providing comprehensive support to enterprises helping them to rent land plots without bidding. Thus, as part of large-scale investment projects, many companies are able to expand production, revamp their sites, build a more advanced and space effective industrial infrastructure at the enterprise,” Head of the Moscow Department for Investment and Industrial Policy Aleksandr Prokhorov said.

For example, in 2018, positive land lease decisions were taken for such companies as OOO Vander Technologies (construction of a diamond and laser technology production center), OOO Predpriyatiye Segment (construction of a production building for medical orthopedic products manufacture), OAO Moskovsky Kombinat Shampanskikh Vin (construction of an industrial building with a common use center), as well as ZAO Khlebozavod No. 24, OOO Chasovoy Zavod Nika, OOO Khudozhestvennye Kovka i Litye, etc.

The Moscow Investment Portal popularity is growing

In November, the main Moscow investors’ portal investmoscow.ru registered the 6-millionth visitor. Simultaneously, the portal number of views exceeded 23 m. The portal offers the detailed information about the Moscow investment projects, industry support measures, tenders to sell and lease city real estate, tax regimes and benefits effective in Moscow, as well as business events, etc.

“Since the beginning, investmoscow.ru has been the main “single window” for investors who want to develop their projects in Moscow. The portal saves investors a significant amount of time, reduces administrative barriers, improves the communication between business and the government,” Head of the Moscow Department for Investment and Industrial Policy Aleksandr Prokhorov said.

The portal is daily visited by more than 6 thous. users, a quarter of which are foreigners. The portal is translated into 5 foreign languages, English, German, Spanish, Chinese and Arabic, for foreign investors.

The portal currently contains 16 online services. Those can be used to calculate the patent cost for an individual entrepreneur, to send an application to inspect an auctioned facility, to receive an industrial complex status and a Moscow special economic zone resident status, to subscribe to news, etc. Head of the Moscow City Investment Agency Leonid Kostroma explained that the portal functionality is constantly expanding.

Another technopark was created in Moscow

The Research and Production Corporation Sistemy Pretsizionnogo Priborostroyeniya has been assigned a technopark management company status; the specialized status of the Modul Technopark has been confirmed. These decisions were taken at the Moscow Government Presidium meeting. 42 industrial complexes and 34 technoparks with over 96.5 thous. employees are currently operating in Moscow.

The Research and Production Corporation Sistemy Pretsizionnogo Priborostroyeniya is one of the leading domestic instrument-making enterprises. It occupies an area of 0.69 ha. The premises area is 26.1 thous. sq. m. The corporation employs over 1.1 thous. people. The RPC plans to create a site for the mass production of picosecond laser transmitters with quick-change modules, and to expand the production area.

The Modul Technopark has been assigned specialized status on June 15, 2016. The technopark accommodates 5 residents that specialize in navigation systems creation and mechanical engineering. Modul occupies an area of 0.76 ha. Offices and production facilities are located within the area of over 14.5 thous. sq. m. The company employs 370 people. In 2018, the technopark invested 3.7 RUR of its own funds in infrastructure development against one ruble of the benefits provided.

An investor will build a new production site in the Severnoye Ochakovo industrial zone

A food processing facility will be located in Ochakovo-Matveyevskoye in Ryabinovaya street. The construction area will be 62 thous. sq. m. As part of the complex construction, about a hundred extra jobs will be created. The project private investments will amount to more than 4 bn RUR. OOO Kombinat Zapadny will act as an investor.

The Severnoye Ochakovo industrial zone occupies 539 ha. It accommodates the city-important engineering infrastructure facilities, industrial and public production buildings, large administrative complexes.

“Today there are 208 industrial zones with a total area of 7.8 thous. ha in Moscow. Moscow is actively working on the renovation of those. Many industrial objects need serious revamping and adjacent territory improvement. The city authorities are doing everything possible to attract private investments in this sector, among other things, making it easier for investors to obtain construction and reconstruction permits for industrial facilities,” Head of the Moscow Department for Investment and Industrial Policy Aleksandr Prokhorov said.

A medical technopark will be created in MIMC

An educational center, a laboratory building, production premises and support infrastructure with a total area of about 100 thous. sq. m. are planned to be built until the end of 2022 within the territory of the Moscow International Medical Cluster (MIMC) in the Skolkovo Innovation Center.

The work will be performed as part of the creation of a medical technopark under a project being developed. An educational center, a laboratory building and production sites will occupy 30 thous. sq. m; supporting infrastructure will cover 10 thous. sq. m. The educational center will be managed by a large operator, the role of which can be performed by the University of Strasbourg. It will enter into partnerships with MIMC medical participants, as well as Russian educational and medical centers. The Russian partner is the Sechenov University.

Participants of the Skolkovo Innovation Center will be priority residents. The project is planned to be launched in 2021 and fully implemented in 2022.

A private kindergarten was granted rent preferences

The Department of City Property has switched a private kindergarten in the Airport district to a preferential rent rate under the “1 RUR per 1 sq. m a year” program. Earlier, the building in Shebashevsky Proezd was handed over to the kindergarten OOO Detsky Sad Znayka after the auction. The investor overhauled the room, adapted it for a kindergarten and fulfilled the necessary standard requirements of the Department of Education.

The kindergarten building occupies 1,456.1 sq. m. To date, it is attended by 50 children.

“An investor that has opened a kindergarten under the city program can now rent a building at a rate of 1 RUR per 1 sq. m a year by 2063. This kindergarten became the 18th educational institution in Moscow switched to preferential rent terms. The program makes it possible to not only restore non-residential facilities, but also to attract investments in such a city-important area as education development, resulting in more and more private kindergartens and schools being opened in Moscow,” Head of the City Property Department Maksim Gaman said.

In total, under the “1 RUR per 1 sq. m a year” program 113 premises were handed over to investors: 62 to be used for medical offices (49 such offices were opened and switched to a preferential rental rate), 25 for private educational institutions (18 already commissioned), and 26 cultural heritage facilities (11 restored).

MACROECONOMICS

Moscow industry grew by 12.7%

"During 9 months of this year, the production of processing industries increased by 12.7% against the same period last year", Vice-Mayor of Moscow for Economic Policy and Property-Land Relations, Head of the Department of Economic Policy and Development of Moscow Vladimir Yefimov stated.

From January to September, the highest rates of processing industry growth ranging from 13% to 35% were registered by statistical authorities in the production of packaging, petroleum products, rail transport equipment, printing materials, chemicals, cars and car components.

“The processing industry growth is boosted by Moscow’s new industrial policy, which is focused on supporting modern industries that are investing in development under the increasing demand conditions,” the Vice-Mayor said.

SUPPORT MEASURES

Moscow will provide tax benefits to an aviation material developer

The All-Russian Research Institute of Aviation Materials (VIAM) will receive an industrial complex status. This will allow the institute to reduce the rate of income tax paid to the city budget from 17% to 12.5%. The institute plans to spend the saved funds on revamping and new equipment purchase. The decision to grant the institute a new status was made by Sergey Sobyanin.

“Moscow has always helped the development of high-tech enterprises and will continue to do so. We will surely grant your company an industrial complex status and additional substantial tax benefits, Including property, land, and income taxes. And of course, we will help you to develop the infrastructure,” the Mayor of Moscow stated.

Over 85 years of the Institute operation, scientists and engineers have mastered more than 3,200 brands of structural and functional materials. The total number of patents and know-hows exceeds five thous. units. It was VIAM that developed 96 percent of the materials that are now used in aviation in Russia and the CIS countries. In addition, the institute products are used in engineering, transport, energy, construction, medical and other industries.

A Moscow manufacturer received a preferential loan under the Moscow Government program

The Moscow manufacturer of environmentally friendly packaging, AO Smerfit Kappa Moskva SOYUZ has received a preferential loan in the amount of 100 m RUR as part of the Moscow Government measures to support industrial enterprises. Loan is granted for 5 years with the possibility of payment deferment. The rate is 2% per annum.

The company will use these funds to acquire a modern high-performance line with a four-color printer for corrugated cardboard items production. Goods packaged in corrugated cardboard can be immediately put on the shelves of retail stores without the need to remove the packaging, which is convenient and easy to recycle.

“The enterprise was provided support as part of the product “Industrial Complexes” of the Moscow Fund for Industry and Entrepreneurship Support. The new equipment will allow the Moscow manufacturer to increase production and expand the product range. On similar conditions, financial support can be provided to the residents of Moscow special economic zones, members of industrial clusters, leaseholders of technopolises, technoparks and industrial parks,” Head of the Moscow Department for Investment and Industrial Policy Aleksandr Prokhorov noted.

AUCTIONS

Investors can rent premises for 1 RUR a year

Moscow has put up for auction two premises for medical clinics under the Doctor Nearby Program. Auction winners will be awarded lease agreements for 20 years. Having executed the medical clinic renovation and equipment contracts, investors will be able to switch to a preferential rate of 1 RUR per 1 sq. m a year.

The first facility is located in the Yuzhnoye Butovo district in Brusilova Street (the South-Western Administrative District). The premise area is 181.9 sq. m. The initial annual rent is 1.4 m RUB.

The second premise is located in the North-Eastern Administrative District in the Lianozovo area. It occupies 170.5 sq. m. The initial rent is 1.3 m RUR a year. Both rooms are located on the first floor of a residential building with separate entrances.

The bids for the both open auctions may be submitted in electronic form until December 21. The bidding will take place on December 27.

More city-leased facilities subject to the “1 RUR per 1 sq. m a year” program are presented at the Moscow Investment portal in the “Preferential programs” section.

The 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.