MOSCOW INVESTMENT DIGEST February 2020
The Moscow Department of Investment and Industrial Policy in cooperation with the Moscow City Investment Agency presents you the next digest of the main investment events in the capital.
Moscow Will Conclude the First Offset Contract in the Food Industry
Moscow has announced an off-set contract tender to create to upgrade or to develop in Moscow a production of food products for children, pregnant and nursing women to be supplied through infant-feeding centers.
“The tender starting conditions are as follows: investments of at least RUR 2.1 bn in production facility to manufacture 38 food items: milk, juices, fruit, vegetable, meat and meat and vegetable purees, cereals, cottage cheese, kefir, sour-milk mixture, as well as dry mixture. The contract with the Moscow Government foresees an 8-year-long supply since 2022. The initial (maximum) contract price is RUR 30.6 bn”, said Vladimir Efimov, Deputy Mayor in Moscow Government for Economic Policy and Property and Land Relations.
An offset contract as a form of interaction with investors has proved its viability: the offset for the purchase of baby food will be the fourth for the capital. The total investment for the three signed contracts is RUR 9.8 bn, the supply volume is RUR 41 bn.
“All previously concluded offset contracts have shown efficiency in terms of budgetary savings: their initial (maximum) prices as a result of competitive procedures were reduced by a total of 31.6%”, clarified Alexander Prokhorov, Head of the Moscow Department of Investment and Industrial Policy.
Moscow concluded the first two contracts in pharmaceuticals. As part of them, new factories for the production of drugs for the treatment of oncological, cardiological, endocrine, and immune diseases are being built in the city. The third offset, signed with Gemamed at the end of last year, involves the creation in the city of almost one hundred percent import-substituting production of medical devices for ostomy patients. Subsequently, medicines and medical devices will be supplied to the capital.
Equipment for Cable Way Line Will Be Manufactured in Moscow
The Moscow Government and Bartholet Maschinenbau AG (Switzerland) signed an agreement to implement an investment project on cable way equipment production in the Technopolis Moscow special economic zone. “The project will allow to localize a modern full-cycle enterprise in Moscow, to transfer standards and innovative technologies from Switzerland to the territory of the Russian Federation. The start of construction and installation works is scheduled for April, the start of production is scheduled for September this year. The amount of investments in the project over the course of 5 years will amount to RUR 1.5 bn”, said Vladimir Efimov, Deputy Mayor in Moscow Government for Economic Policy and Property and Land Relations.
During the project, the manufacturer will launch the production of equipment to create a cable car between the Skhodnenskaya and Rechnoy Vokzal metro stations. Construction will be carried out by a consortium that won the competition for the right to conclude a concession agreement. It includes Moscow Cableways LLC and the Swiss company Bartholet, a leading international manufacturer of equipment for cable cars, amusement parks, engineering and lighting systems.
“The production of ropeways in the Russian Federation will be held according to Bartholet technologies and the highest standards of Swiss quality. At the factory, 70 new jobs will be created with an average salary of RUR 90,000. I am sure that the document signed today will give a new impetus to the development of the capital as a metropolis with the latest and breakthrough solutions”, said Roland Bartholet, President of Bartholet Maschinenbau AG.
Moscow Saved RUR 61 Bn Thanks to State Procurement Price Examination.
“The price examination is an efficient tool to optimize the budget expenses. In 2019, this tool saved RUR 61 bn in budget funds”, said Vladimir Efimov, Deputy Mayor in Moscow Government for Economic Policy and Property and Land Relations.
The reliability of determining the initial (maximum) contract prices (IMCP) is carried out for purchases of more than RUR 10 m, as well as contracts of more than RUR 50 m for the procurement of state unitary enterprises, business entities, state autonomous and budgetary institutions of the capital.
“Over the past year, tenders worth almost RUR 1 bn have been announced for the needs of Moscow. Checking the initial (maximum) prices of state contracts and agreements conducted by the Moscow City Investment Agency and Mosgosexpertiza yielded RUR 57.3 bn in budgetary savings. In addition, another RUR 3.7 bn were saved thanks to inspections by the IMCP through an interagency working group”, explained Vladimir Efimov.
Examination of initial prices, with the exception of purchases for maintenance, landscaping, installation of pedestrian areas, demolition, local events and repair and restoration works, is carried out by the Moscow City Investment Agency (MCIA). “The results of the MCIA are quite convincing. During the examination of procurement prices since 2015, budgetary savings amounted to about RUR 149 bn. In 2019 alone, the MCIA experts issued 3210 conclusions. The declared procurement amount amounted to RUR 747 bn. According to the results of the examination, more than RUR 36 bn were saved”, said Leonid Kostroma, Director of the Moscow City Investment Agency.
Moscow Company Shipped 3D-Scanners to Korea and UAE
The main advantage of scanners from the Texel company – is the software which enables the quick and high-quality scanning of people and doesn’t require any further processing in third party applications. The university of Seoul will use the scanner to teach students at faculties related to 3D graphics and design. The Museum of Dubai will add the scanner to the exhibition of the future digital technologies. Three-dimensional models obtained on scanners can be used for 3D printing or integration into other services (send by mail, share on social networks, upload to AR/VR systems, a computer game or virtual fitting room).
“We support Moscow’s high-tech companies in their quest to enter the international market. The total export of high-tech products amounted to USD 10.9 bn for January – November 2019. The growth was 11.45% compared to the same period in 2018. Texel 3D-scanners are included in the list of the best full-height 3D-scanners according to Aniwaa – an independent French rating agency. For such companies, the Moscow Technopolis special economic zone provides the most advanced infrastructure and the opportunity to develop and operate in promising markets abroad”, noted Alexander Prokhorov, Head of the Moscow Department of Investment and Industrial Policy.
Investor Will Build a Construction Module Plant in New Moscow
“The Monarch company is in full swing engaged in design work. The project will be divided into two phases: first, relatively easy, so that it is possible to produce products, and the plant itself should be built in two years. The company intends to manufacture and sell the first products already at the end of this year or at the beginning of the future”, said Vladimir Zhidkin, Head of the New Territories Development Department.
The project can create 2,500 new jobs, the investments are RUR 15 bn. The plant area will exceed 160,000 sqm. The plant will manufacture world’s unique innovative modules for housing construction. The module is a block up to 100 sqm with all engineering systems 97% readiness. Thus, ready-made apartments will be delivered from the plant to the construction site, and the minimum number of hours will be required to install the module. With the new technology a 22-story building will be built in less than 20 business days with better quality.
Power Supply Equipment Plant Will Appear in Moscow
Intertransstroy – a Russian manufacturer of power supply equipment – will set up its own production facility in South-East Moscow. “The project investments to localize the production in Moscow special economic zone will amount to RUR 250 m. 89 jobs will be created with an average salary of over RUR 92,000”, said Alexander Prokhorov, Head of the Moscow Department of Investment and Industrial Policy.
OOO Intertransstroy manufactures modular transformer station packages and associated equipment to supply military, transport, industrial and civil facilities with power. The company's line of products also includes complete switchgears and prefabricated one-way service chambers.
Five More Companies Became Moscow SEZ Residents
The portfolio of the Moscow special economic zone Technopolis Moscow (SEZ) was replenished with five more residents: Diagnostika-M LLC, IVA Technologies, Intertransstroy, Aviation Technologies and Photoexpert. “New SEZ residents are planning to invest ca. RUR 1 bn in production within the upcoming 10 years and to create over 500 new jobs”, said Vladimir Efimov, Deputy Mayor in Moscow Government for Economic Policy and Property and Land Relations.
Thus, the total number of the Moscow SEZ residents has increased up to 67. The total investments have exceeded RUR 25 bn and over 6,000 jobs have been created since the SEZ was set up in 2006. In 2019, 24 residents were attracted with the amount declared investments - more than RUR 17 bn. These companies plan to create 2,219 jobs.
For residents of the SEZ, a number of tax incentives apply: property tax, land and transport tax are canceled for 10 years, income tax is reduced, the land lease has a reduced rate and a free customs zone. The overall reduction in the tax burden for an industrial enterprise upon obtaining resident status in the Technopolis Moscow SEZ reaches 47%.
The First Electronic Contract for the Sale of Urban Real Estate
In the capital, the procedure for buying and selling urban real estate has been simplified: now, based on the results of urban bidding, investors can conclude an agreement with the city to purchase an object online in their personal account on investmoscow.ru. The first electronic sales contract has already been concluded.
Previously, such an agreement could be drawn up only in paper form, the procedure for preparing and signing documents with further registration of ownership consisted of 11 steps, buyers were forced to travel to various authorities in different areas. The conclusion of an electronic contract is another measure to improve the quality and increase the efficiency of interaction between the city and investors. The innovation will not only make the process of buying and selling urban real estate even more affordable, but it will also greatly simplify the process of obtaining ownership of urban properties. In the future, the entire cycle of registration of rental of urban property is also going to translate into electronic form.
Moscow Industrial Output Increased by 7% in One Year
“The last year highest growth rates were shown by the production of vehicles and equipment (66.2%), computers, electronic and optic devices (49.8%), drugs and medical products (46.5%), ready-made metal products (45.5%), paper and paper products (41.5%), electrical equipment (34.4%) and rubber and plastic products (27,3%) as well”, said Vladimir Efimov, Deputy Mayor in Moscow Government for Economic Policy and Property and Land Relations.
The capital produces 13.2% of the total Russian output of manufacturing enterprises. At the same time, the manufacturing industry of the capital makes up 13% of the gross regional product and provides 5.3% of tax revenues to the city budget. More than 650 large and medium-sized industrial enterprises are currently operating in Moscow. About 700 thousand people work in this area.
Simplified Tax Revenue Increased by 18%
Moscow organizations and individual entrepreneurs using the simplified tax system (STS) transferred RUR 112.8 bn of taxes to the Moscow budget in 2019. This is 18% higher than the level of 2018. The revenue from the STS accounts for 4.3%, or every twentieth ruble of the tax budget of the capital.
Due to its simple reporting and the ability to choose a tax rate, this tax regime is especially popular among individual entrepreneurs: last year their number grew in Moscow by 10.6%.
“Revenues from taxpayers who chose income as the object of taxation (6% rate) amounted to RUR 86.9 bn, an increase of 19% compared to 2018”, said Denis Tikhonov, Head of the Department of Economic Policy and Development of Moscow. Taxpayers who chose the object of taxation as income reduced by the amount of expenses (15% rate) paid RUR 25.9 bn in taxes - 14% more than a year earlier.
Entrepreneurs Can Get Export Subsidies
Submission of applications from capital companies for financial support for export activities has been started. With the help of city subsidies, enterprises will be able to partially offset the costs of transporting their products abroad, obtaining security documents, certification of quality management systems and confirmation of compliance of goods with foreign requirements.
Legal entities and individual entrepreneurs registered in the capital at least six months before submitting an application can receive financial support. Subsidies for certification of export products and quality management systems, as well as for obtaining patents and certificates, are provided in the amount of not more than 50% of export revenue. Payments for the transportation of goods outside Russia cannot exceed 20% of the value of the transported consignment. In monetary terms, subsidies for certification of export products, for obtaining patents and certificates and for logistics costs are provided in the amount of not more than 3 million rubles, and the city is ready to provide no more than RUR 500,000 for certification of management systems.
“In 2019, as part of subsidiary export support, we gave out more than RUR 70 m to 50 capital companies. This year, the city budget provides for RUR 200 m for these purposes. We will be able to satisfy even more applications and encourage metropolitan entrepreneurs to take advantage of this opportunity more actively”, said Alexey Fursin, Head of the Moscow Department of Entrepreneurship and Innovative Development.
Business Leased a Record Number of Plots Through Tenders
“In Moscow, in 2019, 104 land plots with a total area of 26.3 ha worth RUR 511.9 m were sold at city tenders for leases. The bidding results not only tripled the quantitative indicators of 2018, but also became an absolute record for auctions for the right to conclude lease agreements since the start of tendering in 2011”, noted Vladimir Efimov, Deputy Mayor in Moscow Government for Economic Policy and Property and Land Relations.
Land transferred to investors in 2019 is located mainly in the Troitsky, Novomoskovsky and Eastern districts. Most of them are intended for individual housing construction, the rest - for the construction of garages, fitness and leisure facilities, industrial, commercial and household facilities.
Of the total land plots rented by investors in 2019, 15 plots with a total area of 10.8 ha were presented at a starting price of 1.5% of the cadastral value. They were intended for the construction of fitness centers and industrial complexes. As a result of the bidding, the total annual rent amounted to RUR 87.3 m.
Along with an increase in the number of objects sold, the number of participants in urban land lease auctions is also increasing. Last year, their number reached 384, while in 2018 there were only 58.
Five Buildings in Moscow Can Be Purchased at Half Price
They are put up for sale through a public offer – a format through which real estate can be redeemed for half its initial value. This method of sale is unique: bidders get the opportunity to bargain not to increase, but to lower prices.
Now a bid campaign is being conducted for five lots at once, which at the same time are single objects of privatization. “The building, together with the land, is included in a single object of privatization. Such lots are quite rare guests at city auctions, which at the same time require a sufficient amount of investment. Sale through a public offer, on the one hand, gives the city the opportunity to expand the number of interested parties for this property, on the other hand, buyers can buy it at a bargain price, often reaching 50% of the initial cost. Last year, the average competition for objects put up for sale through a public offer was 7 participants per lot”, said Ivan Shcherbakov, Head of the Moscow Department of Competition Policy.
In the Solntsevo area, a lot with a total area of 3,800 sqm was put up for sale. For an object with a free destination, a starting price of RUR 165.1 m is proposed. In the Tagansky district, a building of 307 sqm with land is for sale. The price at the start is RUR 31.5 m, the purpose is commercial. For unified privatization facilities located in Nekrasovka and West Biryulyovo, starting prices were set at RUR 36.7 and 12.4 m, respectively. And bidding for an object located in the Kosino-Ukhtomsky region will start from RUR 7.7 m.