“Our products were always unkillable but we didn't know how to sell”

The departure of foreign companies from the Russian market created a number of problems for the Moscow industry, but also opened up new niches, freeing up the sales market. How the functioning of city enterprises has changed over the past year and whether the capital's products are ready to compete with world players – he said in an interview with “Vedomosti. City” head of the Department of investment and industrial policy of the city of Moscow Vladislav Ovchinsky.

– Vladislav Anatolyevich, at the end of 2021, Moscow's industrial production showed good growth against the background of 2020 (34.7%). However, in March, the figures began to fall sharply. In what sectors is the decline most noticeable and what is the reason for this?

– In fact, the decline in the sectors of the economy was insignificant. I would say that it was a downturn in the economy due to temporary disruptions in the supply of components and raw materials. At the same time, the industry of the city quickly stabilized in the changed conditions. Enterprises began to increase the output of current products, expand and modernize production. Of course, there were also affected industries. For example, the automotive industry is the most significant problem for us during this period. The Renault plant stopped producing cars, justifying this with a lack of raw materials and components. Although later it became clear that the release is not carried out more for political than for economic reasons. Nevertheless, production resumed in November at the site of the former Renault plant, now the Moskvich plant.

– Did you manage to save the workforce?

– Probably, the biggest problem in the industry not only in the city, but also in the country is the lack of highly qualified personnel, both engineering and technical, and personnel with secondary specialized education. Therefore, one of the important priorities for the city was the preservation of human resources. All the people who wanted to continue working at the plant remained. In total, more than 700,000 people work at the capital's industrial enterprises today.

Also this year, a decision was made to create an electric vehicle cluster in the city. Now we are negotiating to attract new production facilities to the sites of the Technopolis Moscow Special Economic Zone. This applies to cargo drones, electric trucks and all-terrain vehicles on electric traction. A number of lease agreements with obligations to create production facilities have already been drawn up. Now the issue of concluding an offset contract for the supply of batteries for electric vehicles is being worked out.

– Returning to the difficult situation of this year, are there any industries in which you managed to win back the fall by December? Where is the growth taking place?

– Moscow industry, as well as the country as a whole, shows interesting dynamics in 2022. Despite the hardships, economic growth is observed in almost the entire manufacturing sector. Previously, this was not easy, because large foreign transnational corporations created serious competition, and given the scale of their production, sales market and level of development, our small and medium-sized businesses, like startups, could not rise. Especially without state support, which cannot cover 100% of potential recipients. With the departure of transnational corporations from the country, small and medium-sized businesses not only continued to produce products, but also began to increase production.

Over the past decade, Russian business has begun to cooperate with the countries of Southeast Asia. We have always considered China as one of the key partners, as well as the countries of the EAEU, the countries of the Persian Gulf and Latin America. Since 2014, when the first sanctions were announced against Russia, we began a systematic reorientation of the economy and export-import relations. This allowed us to quickly transfer technologies and launch our own production. This year, the food industry (+4% from January to October 2022 compared to the same period in 2021), the medical equipment industry (+42%) and the engineering industry (+36%), as well as high-tech direction and production of consumer goods.

– By filling in the vacated niches, are Moscow products able to compete with the departed players in terms of quality?

– Even when there was heavy competition, our industrial products confidently occupied their niche and were competitive. Since the 90s there was a feeling that the Western is tastier, better, more high-tech. But let me remind you that it was in our country that the first space satellite appeared, we were the first to launch a man into space, invented an artificial heart, a microwave – and there are a lot of such inventions. Our products have always been easy to use, indestructible and at the same time with good quality characteristics and consumer properties. But we never knew how to sell. A few industrial Russian enterprises have strong marketing divisions capable of promoting products in foreign markets.

– In March 2022, an alternative supplier selection service was launched. How much is it in demand and what are the most frequent requests?

– Many enterprises looked at their supply chains differently, especially medium and small businesses. Organizations on a whim bought products abroad, in unfriendly countries, not seeing that products of the same quality are produced practically at the same site where they themselves work. It was important for us that companies began to find suppliers not abroad, but within the country, and more often within Moscow.

Compared to March, by the end of the year, the volume of applications for the service decreased significantly. After all, it was important not so much to find a supplier as to show the algorithm of how to find this supplier. But we continue to implement a service for those who are just starting to face similar problems.

– Similar problems are also being solved in the established Industry Support Center. What issues remain on the current agenda?

– The Industry Support Center was created to help enterprises in a difficult crisis situation, but it took over the entire pool of accumulated problems that have not been resolved at industrial enterprises for years. Basically, these are issues related to urban development, property and land relations. In some places, enterprises could not register a lease agreement for a land plot, in others they could not arrange parking for employees near the plant. We realized that the Support Center would be relevant not only in times of crisis, but also in times of a calm, working economy. And there will be new issues that need to be addressed quickly. After all, the mentality of investors has already begun to change towards the real sector of the economy. We are used to the fact that the state is the main investor in the country. But with the help of large-scale investment projects (LsIP), this logic can be reoriented. Today, investors are ready to invest not only in residential or office construction, but also in the construction of industrial facilities.

This year, taking into account the decision taken by the mayor to provide land plots for the ruble, the volume of such investments in the city's economy has increased many times over, as has the number of lease agreements within the LsIP. At the moment, we have concluded agreements on the allocation of land at a preferential rate with 13 investors – manufacturers of architectural concrete, pasta and confectionery, packaging, furniture, with an instrument-making complex, a meat processing plant, a complex for the manufacture of components for special fire equipment, etc. At new enterprises about 3,000 people will be able to work.

– What is the situation in the food industry? After the February events, Muscovites began to actively purchase food and essential goods. Is there a risk that store shelves will be empty?

– Food production is one of our priorities. This year, decisions were made to create not just industrial facilities, but entire food clusters on the territory of the Troitsky and Novomoskovsky districts. This gives confidence in the future to small and medium-sized businesses, which are the main supplier of food products for urban needs. We plan to increase production volumes in order not only to cover the needs of the city, but also to provide food products to nearby regions.

In addition to food clusters, new industrial parks are being created. For example, Rudnevo is a whole industrial city where high-tech industries will be located. This year we completed 120,000 m² of production space. The first federal center for unmanned aerial systems will be created in Rudnev. The site will become a driver for the development of unmanned vehicles in Russia.

– In addition to such centers, offset contracts between business and the state lay a big foundation for the future. What contracts are you planning next year?

– This year we are reaching record numbers in terms of public-private partnerships and the number of decisions to conclude offset contracts. There will be at least 11 of them – twice as many as in total for the previous five years. In the summer, amendments were made to federal law No. 44 on public procurement, which made it possible to conclude inter-subject offset contracts, where small and medium-sized businesses act as an investor. The minimum investment volume was reduced to RUB 100 mln. Since the beginning of 2022, Moscow Mayor Sergei Sobyanin has approved a number of tenders for the supply of medicines, medical devices and medical furniture, as well as consumables for blood service and batteries for electric vehicles. Now we are working on proposals in other industries, most of them will be formed into offset contracts. We hope that next year investors will come who are ready to localize their production facilities in the city. A decision on the inter-subject offset may soon be made. I think this will become an example for other regions, since intersubjective cooperation is in many ways the key to the successful functioning of industrial enterprises.

Source: Vedomosti