Natalya Sergunina on why Moscow does not fear the crisis and what the city’s government is betting on

02 November 2015

– Economists believe the current crisis will hit big cities especially hard because finance and services are concentrated there. What’s your take on that? How is the city’s economic activity changing?

– There is no doubt that adverse external factors affecting Russia’s economy have not spared Moscow. At the same time, capital expenditures, construction, energy consumption and some other indicators rose in the first eight months of 2015. According to tax records, businesses are far from fleeing the city: actually, the opposite is true. For example, the average monthly rise in the number of individual entrepreneurs in 2015 is 2.5-fold higher than last year. Whereas the city was adding 800 such entrepreneurs each month before, the number rose to 2,000 between January and July 2015. In other words, the city is adding 100 active entrepreneurs every single business day.

– Do you see any positive sides to this crisis?

– The best thing to do in a crisis is to make the best of it. Rent is one good example. In the past, end-tenant rates were inflated. The current property tax based on cadastral value discourages holding idle office space. On the other hand, the crisis prevents landlords from hiking rents. Supply and demand are more balanced now. As a result, those who couldn’t afford to open even a corner store before, because of skyrocketing rents, can do so now.

– What is going on with development institutions (such as technoparks and technopolises)? How much has the city invested in developing them? Are there estimates of revenue generated by these institutions?

– Moscow has established 17 technoparks and two technopolises (Skolkovo and Moscow). Their combined area is 814,000 square metres, with a capacity utilisation of 87%. Yet only five facilities are state-owned: the TechnopolisMoscow and the Slava, Strogino, Mosgormash and Nagatino technoparks. The rest have been established with private investment. They operate in a wide variety of sectors, such as IT, microelectronics, development of composite materials for racing cars, etc. Many technoparks could have shut down; we have bolstered them by granting various breaks, such as partial compensation for interest on loans for infrastructure or property development – up to 300 m RUB for technology towns and up to 100 m RUB for industrial parks. By the beginning of 2017, the total number of industrial parks and technology towns could well rise to 60.

– What are the city’s plans for developing industrial areas?

– A considerable proportion of industrial areas have not yet been integrated into the city’s emerging technology environment. Many landlords are holding on to their properties as assets, without developing production. The Moscow City Government is urging property owners to modernise and develop industrial areas.

– How?

– Our comprehensive support programme for industrial manufacturing includes legal protection for investment, tax breaks and simplified administrative procedures. Incentives include a reduced ground tax rate, property tax breaks, discounted land lease rates and various subsidies. Yet only those companies that meet the efficiency criteria under discussion with the industrial community, such as investment volume and revenue per hectare and wages above the industry average, will get the breaks.

We have also developed an investment strategy setting Moscow’s investment policy through 2015; a set of bills has been passed recently on priority investment projects developed by our division. Those documents have introduced a uniform investor support system, including tax breaks ranging from 10% to 25% and other incentives, such as guarantees against non-commercial risks.

– Have you been successful in attracting investors into infrastructure projects?

– We signed more than 500 bn RUB worth of PPP contracts in 2013 and 2014. Under concession projects (construction of the Northern bypass for Kutuzovsky Avenue and healthcare projects), 75 bn RUB worth of agreements were signed. Life-cycle contracts for acquisition and continued maintenance of rolling stock for the Moscow Metro amounted to 245 bn RUB.

 

Source: Vedomosti

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