MOSCOW INVESTMENT DIGEST

October 2017

Dear Colleagues,

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

Russia is among the TOP-35 leaders in Doing Business report, climbed 5 places from last year’s report

At year-end 2017, Russia held 35th place in the Doing Business 2018 (DB) ranking.

The latest version of the World Bank’s Doing Business report 2018 (DB) marks Russia as the 35th easiest place in the world to do business, , ahead of Italy and Belgium. Russia climbed 5 places from last year’s report, setting its own record since taking part in the annual ranking.

Russia showed its best results in “Getting credit” and “Getting electricity.” It went up 40 places in “Trading across Borders.” The World Bank’s ranking also marked “Starting a Business (28th place) and “Registering Property” (12th place) as Russia’s strong points. For instance, when property registration is requested via Multipurpose Centers (MPCs), waiting time was cut to 9 business days. In addition, today, MPCs offer a much broader range of services.

The ranking is based on a set of ten indicators showing the state of the country’s business climate and the reforms implemented by local authorities. For Russia, Moscow and St. Petersburg’s aggregated indicators are considered at a ratio of 70:30. Consequently, we may say that Russia’s consistent advance is due, among other factors, to the improvements in Moscow’s business environment.

“We may be proud of Moscow’s contribution to Russia’s economic development. We have succeeded in creating a comfortable business environment in Moscow. Work on improving the investment climate is continuing, focusing supporting and developing small and medium-sized businesses”, said Natalya Sergunina, Deputy Mayor of Moscow for Economic Policy and Property and Land Relations.

The city’s 2018 budget will be double to what it was seven years ago

Moscow Mayor Sergei Sobyanin has submitted to the Moscow City Duma a draft law on the Moscow 2018 budget and on the subsequent period of 2019–2020. “In absolute figures, next year’s budget will be double to what it was seven years ago”, emphasized Sergei Sobyanin. He said the city had succeeded in not only preserving but also expanding the treasury’s revenues, which mostly determine the welfare of Moscow’s residents and ensure the city’s development.

Social expenditures in Moscow’s 2018 budget and in the subsequent period of 2019–2020 are twice higher than those in other areas. The city will continue to invest in the key projects in education and healthcare. For the first time, the draft budget includes renovation expenditures. In addition, the city is prioritizing building of roads, as well as housing, the subway and social facilities. Moscow will also continue to support industrial enterprises through tax benefits and subsidies for developing the infrastructure and for utilities connections.

Compared to 2010, investment in Moscow’s economy has increased by more than 2.5 times. At year-end 2017, it will amount to 1.9 trillion RUB. By increasing investments out of the city treasury, the capital has laid the foundations for developing its economy in the near future and it can afford a socially-orientated budget.

Three-year forecast of Moscow’s socioeconomic development is presented

“Moscow has achieved a sustainable economic development pace and will continue to bolster its positions”, Vladimir Efimov, the Minister of the Moscow Government, Head of Moscow Department for Economic Policy and Development, said at a meeting the Moscow City Government in his report on the forecast for Moscow’s socioeconomic development for 2018 and for the subsequent period of 2019–2020. Vladimir Efimov said that the stabilized macroeconomic situation, restored corporate lending and investment growth, as well as recent transformations in the city’s environment, had brought Moscow’s economy on to the growth track. Inflation had dropped to its historical minimum, opening up new opportunities for development. “Moscow has decisively overcome difficult times and achieved a sustainable economic development pace. The city has sufficient resources and instruments for management and further development”, Vladimir Efimov summarized. At year-end 2017, the Moscow Department for Economic Policy and Development forecasts an average annual inflation of 4.8%, with a drop to 4.5–4.2% in 2018–2020.

Macroeconomy: the number of private entrepreneurs in Moscow grows by 70%

Over the last few years, Moscow has remained Russia’s leading region in dynamically growing numbers of private entrepreneurs. Compared to 2010, their number increased by 70%, said Vladimir Efimov, the Head of Moscow Department for Economic Policy and Development. “Entrepreneurial activity is measured not only in the number of enterprises but also in profit tax revenues, which are keeping pace”, he emphasized. Vladimir Efimov said that this was happening owing to, among other factors, Moscow significantly expanding the patent system for businesses. Patents are most popular in retail, domestic and personal services, and leasing out non-residential space. According to the Federal Tax Service, as of 1 August 2017, Moscow had 274,000 registered private entrepreneurs, which means that one private entrepreneur out of seven of Russia’s works in Moscow. In January–June 2017, 57,000 patents were purchased in Moscow worth 4.6 billion RUB.

Moscow celebrates the first Moscow Industry Day

Moscow Mayor Sergei Sobyanin presented awards to individual employees and employee teams at an event celebrating the Moscow Industry Day. “We may be fairly proud of Moscow’s contribution to Russia’s economic development, and to make that contribution even greater, to provide Moscow residents with high-quality jobs, the Moscow Government has instituted a system of support measures for the economy’s real sector. Moscow’s industrial enterprises are granted tax benefits and subsidies to modernize their manufacturing and to connect to utilities”, he said. The date of the new professional day is significant: on this day in 2015, the law “On Moscow’s Industrial Policy” was passed.

Moscow’s support for the real sector has a positive effect on export

Moscow enterprises’ export has grown by more than 20%, reaching 33 billion RUB in monetary terms”, said Vladimir Efimov, the Minister of the Moscow Government, Head of Moscow Department for Economic Policy and Development. “In addition, chemical manufacturing grew by nearly 50%, and that of machines and equipment grew by nearly 40%.” Moscow works systemically to stimulate industry. Benefits offered by the Moscow Government induce companies to invest in projects and self-development and to move to an entirely new level of production of goods and services. Sectors related to the production industry, science and IT are improving their key indicators; as a consequence, their productivity is on the rise and their export is increasing. 64 Moscow enterprises enjoy benefits offered by the real sector support programme, said Vladimir Efimov.

Moscow’s industrial enterprises to be granted subsidies for utility connection

“Industrial enterprises are to be granted subsidies to offset 50% of their expenses, but no more than 100 million RUB. The cost of technological connection to electricity and water supply, and wastewater disposal will be recompensed”, said Alexei Fursin, the Head of the Department of Science, Industrial Policy and Entrepreneurship of Moscow. The relevant resolution was adopted at a meeting of the Moscow Government Presidium.

Industrial enterprises are eligible for the subsidies. The facility must be built within two years of concluding the subsidy agreement. Subsidies will only be disbursed when the work has been fully completed and the expenses have been calculated. Availability of hi-tech jobs with decent wages at the enterprise will be major criterions for granting a subsidy.

High-productivity jobs in Moscow are concentrated in technoparks, technopolises and industrial parks

The number of high-productivity jobs in Moscow will increase significantly over the next five years, according to the participants of the “Creating high-productivity jobs in Russia is the growth strategy for Russia and Moscow” discussion initiated by the Industrial Committee of the All-Russia People’s Front.

“Hi-tech industry should become the driver of Moscow’s economic development. It will help knowledge-based added value achieve its maximum economic weight. Our top priority is supporting industry, stimulating entrepreneurship and establishing personnel reserves”, said Natalya Sergunina, the Deputy Mayor of Moscow for Economic Policy and Property and Land Relations.

She emphasized that Moscow is continuously improving its business environment. The city has introduced tax incentives, which stimulate business activity, while the economic growth rate exceeded the all-Russia average indicators.

Innovations drive the development of Moscow economy

Moscow has topped the World Technopark Association’s Eurasian Division, which now includes 18 Moscow-based organizations. Over the last few years, Moscow has created a comprehensive innovation infrastructure that now drives development of the city economy. Currently, Moscow’s innovation infrastructure includes approximately 1,500 facilities. Its support was discussed at the Moscow Government Presidium. “Sectoral institutes, both private and public, technoparks, space, aviation, nuclear, medical research and production clusters are involved in the innovations”, Moscow Mayor Sergei Sobyanin mentioned, emphasizing that innovations were the foundation for the future of Moscow’s economy.

In October, Sergei Sobyanin opened up the renovated Central Entrepreneur House. This multipurpose venue will be a portal for Moscow innovation infrastructure. As a reminder, Moscow subsidizes equipment purchases (up to 200 million RUB), develops the relevant infrastructure (up to 300 million RUB) and offers tax benefits to technoparks and their residents (tax cuts of up to 25%).

At the “Transformation” business forum, Sergei Sobyanin said that Moscow was Russia’s leading hi-tech exporter. Dozens of technoparks manufacturing innovative products have been established in the city. The city supports them with benefits, opens service centers and lending assistance funds. In the near future, a rewards programme for entrepreneurs will be announced and a startup school opened.

Moscow Investment Portal a great example of digital economy development

Transition to digital technologies is one of Moscow’s priority policies. At every point, we are introducing state-of-the-art technologies into our collaboration with the business community”, said Vladimir Efimov, the Minister of the Moscow Government, Head of Moscow Department for Economic Policy and Development. Most services for businesses have been digitized as part of the efforts to create a favorable investment climate in Moscow. The Moscow Investment Portal is one instrument used to raise investment into the city, an innovative tool for collaboration between the city and the business community. It is a way-finder for investors and entrepreneurs either working in Moscow or planning to launch a business in the city. “A major advantage of working online is being able to enter the Moscow market quickly. Without leaving their offices, entrepreneurs may make an appointment to view the city real estate listed for auction, apply for tax benefits or to lease vacant sites in Moscow’s technoparks”, Vladimir Efimov specified.

Leonid Kostroma, the Director of the Moscow City Investment Agency, added that “The Investment Portal is a tool for investors and entrepreneurs to give feedback to the Moscow Government and an important element of the open investment policy.” According to him, systemic development of and introduction of digital technologies into the economy and entrepreneurship promotes more active collaboration with investors and keeps them better informed about the reforms implemented by the Moscow Government.

Since the start of 2016, the Portal’s online services have been used more than 63,000 times. Over 11,500 entrepreneurs have an account on the portal. Since the portal was launched in February 2014, it has registered over 3.5 million visits. Today, it has more than 6,000 unique visitors daily.

Over the last six years, Moscow has increased its procurement from small businesses 8 times

“In 2011, the volume of Moscow’s procurement from small business entities (SME) was 26.7 billion RUB. By the year 2016, it had reached 192 billion RUB and it is still growing. We expect procurement from small businesses to grow by 11% to 215 billion RUB. 187 RUB billion worth of contracts were signed in the first nine months of this year”, said Gennady Dyogtev, the Head of the Moscow Department for Competition Policy. He said that the increase in SME contracting was a result of efforts to streamline purchasing, which have helped set uniform and transparent tender participation rules and product requirements.

More than half of Moscow’s procurement has been standardized. The agency forecasts an increase in the SME contract portfolio to over 200 billion RUB by the end of 2017.

Moscow auctions: 11 e-auction bidders compete to lease a part of the 19th century Tatarnikov city estate

A stables building located within a 5-minute walk of Taganskaya Metro was listed for auction. RSM LLC outbid its competitors and may now lease the cultural heritage site.

“11 bidders applied to lease part the Tatarnikov estate, a former stables. The final price of the annual lease was RUB 11.5 million, with a starting price of RUB 941,000”, said Gennady Dyogtev, Head of the Moscow Department for Competition Policy. He drew particular attention to the fact that it was the first cultural heritage site to be e-auctioned.

“Restoring cultural heritage sites under the reduced-rate lease programme is a profitable form of public-private partnership. Ultimately, the city gains a restored cultural heritage site, and the investor a historical building leased at a reduced rate of 1 RUB per 1 sq. m. a year”, said Leonid Kostroma, the Director of the Moscow City Investment Agency. He pointed out that 20 sites had been leased to investors under the programme; 10 of them had already transitioned to the 1 RUB per 1 sq. m. rate.

Moscow auctions: investor found for a complex of buildings on Moskvoretskaya Embankment

The tender committee announced the winner of the open tender for sale of a complex of 33 buildings on Moskvoretskaya Embankment. GorKapStroy-Garant LLC won with a bid of RUB 10 billion. The starting price had been RUB 8.6 billion. City Developer LLC, with a 8.9 billion RUB bid, came second.

The complex on Moskvoretskaya Embankment consists of 33 buildings; 9 are cultural heritage sites; another 5 are important landmarks. Under the approved concept, the investor is to preserve the historical exterior of every building while making them suitable for today’s use, and to open the territory of the complex (11 hectares) to the public.

16 land plots for constructing manufacturing and warehousing facilities listed for auction

Moscow has listed for auction 16 plots in industrial areas located close to railway and transport hubs. They are should be used for manufacturing and warehousing facilities. The auctions are being held by the Moscow Department for Competition Policy.

The biggest number of lots (five land plots) are leased out in the Shapovskoye settlement of the Troitsk and Novomoskovsky Administrative District. Four lots have been listed for auction in the Southern District; Zelenograd and Western Districts have listed three lots each; another lot has been listed in the north of Moscow. Construction area varies between 5,700 sq.m. (Solnechnaya industrial zone in the west of Moscow) and 33,000 sq.m. (the industrial zone along Doroshnaya St. in the south). Depending on the construction area, the term of the lease varies from three months to two years and seven months. Urban development plans are available for all the land plots, which are owned by the City of Moscow.

Moscow Department for Economic Policy and Development

www.depr.mos.ru

Moscow City Investment Agency

www.investmoscow.ru/agency

Purchasers’ Portal

www.zakupki.mos.ru

The Digest archive is available on the Moscow Investment Portal.