MOSCOW INVESTMENT DIGEST June 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.
Russian and Foreign Business Continues to Invest in Moscow
The investments volume in fixed assets in Moscow for the Q1 of 2020 amounted to RUR 452.4 bn, which is 14.9% higher than for the same period in 2019. This was announced by Vladimir Efimov, Deputy Mayor for Economic Policy and Property and Land Relations.
‘For the 3 months of this year, the share of off-budget investments amounted to 81.7%. Over the past 9 years, investment in fixed assets in the capital has more than doubled in comparable prices. Currently, Moscow accounts for 15% of the total Russian investment in fixed assets and about half of Russia's foreign direct investment (FDI),’ - said the Deputy Mayor.
The growth in investment in the capital fixed assets is largely due to support measures provided by the Moscow Government. Actively investing companies that have been granted the status of an industrial park, industrial complex, and an anchor resident of an industrial park can reduce the regional tax burden by 17–25%. A similar mechanism applies to new investment projects.
Leonid Kostroma, Director of the City Investment Agency, noted that in addition to existing support measures, the city authorities are constantly developing new ones. ‘So, due to the changes in the Federal Law since 2023 the preferential income tax rates established by the regions will expire, the capital has introduced a new measure of support for industrial companies - an investment tax deduction,’ - Kostroma said.
Foreign entrepreneurs are not far behind: The amount of accumulated foreign direct investment (FDI) in Moscow, according to the latest data from the Bank of Russia, amounted to USD 260.2 bn as of January 1, 2020.
The largest investments in the capital’s economy came from investors from countries such as Germany, France, Finland, Italy, Austria, and the United States. Most often, foreign business invests in companies engaged in financial and insurance activities, in the field of trade, in the industry and high technology sectors, as well as in real estate.
Currently, many foreign enterprises have already localized their production in Moscow, including the factory of the French Renault group, the plant of the German concern KSB, the French group of companies Orpea Group, the Swiss company Bartholet Maschinenbau AG and others.
Moscow Got New Oncologic Center Under the Concession Agreement
The Moscow International Oncologic Center – a new world class clinic – has opened its doors in the Russian capital. The clinic is the result of the concession agreement signed by the Moscow Government and European Medical Center in 2013. The investor has rented the buildings of the former city hospital #63 with a total area of 29,600 m2 on Durov Street. He received it for 49 years - until 2062.
The concessionaire contributed RUR 1 bn to the city budget. Investments amounted to more than RUR 6 bn (3 bn for repairs, 3.5 bn for equipment and equipment of the center).
By agreement with the Moscow Government, the Moscow International Oncology Center will provide high-tech medical care at compulsory health insurance (MHI) rates.
The Pharmaceutical Plant Construction in the Framework of the Second Offset Contract Began in Moscow
Pharmaceutical manufacturer R-Opra, a Technopolis Moscow Special Economic Zone resident, localizes its production in Moscow under the second offset contract. Construction of the plant began this year.
The new production will produce demanded drugs, most of which are not currently manufactured in Russia. More than 30 types of drugs for the treatment of cancer, as well as antipsychotic, anti-rheumatic and anti-asthmatic drugs will be delivered to medical treatment facilities in Moscow, regional healthcare institutions and pharmacies throughout the country.
The plant will begin operations in 2023. Under the terms of the offset contract, the company will produce RUR 18.4 bn worth of medicines within 7 years.
Investor Will Put RUR 2.8 Bn in Construction of New Pharmaceutical Plant in Moscow
Bright Way Industries LLC, a Technopolis Moscow Special Economic Zone resident, will start constructing a pharmaceutical plant at the end of June. The investor will invest RUR 2.8 bn in the creation of a new production, said Vladimir Efimov, Deputy Mayor for Economic Policy and Property and Land Relations.
‘The company is planning to manufacture 78 drug SKUs., which will reduce dependence on the import of medicines and ensure the needs of all groups of city residents in medicines at affordable prices. The investor will invest RUR 2.8 bn in the implementation of the project and create almost 370 jobs, another RUR 2.5 bn will be allocated for tax deductions to the budgets of all levels,’ - the Deputy Mayor said.
The plant will be commissioned in Q3 2021 in the territory of the Technopolis Moscow Special Economic Zone on the Alabushevo site. It will produce a wide range of drugs for the treatment of the cardiovascular system, digestive tract and metabolism, respiratory system, musculoskeletal system, as well as antimicrobial agents for systemic use.
Moscow Is in Top 20 among European Tech Cities of the Future
Moscow entered Top 20 of the European cities which are most attractive for investments in technologies, innovations and start-ups. The Russian capital took place 18 of 76 in the Tech Cities of the Future Ranking, and according to one of the 5 rating categories, the ‘Startup Ecosystem’, it rose immediately to the 10th line.
‘Moscow is becoming a more attractive city for investments – also in hi-tech – and is successfully competing in this direction with the world’s leading centers as for example Helsinki or Milan. The city has created a favorable environment for the development of startups and digital platforms. The work on introducing innovative solutions into the life of the city showed its relevance during the time constraint regime, when the demand for obtaining services and goods through online services sharply increased,’ - said Kirill Purtov, the Minister of the Moscow Government, the head of the Department of Economic Policy and Development.
The Tech Cities of the Future 2020/21 ranking was compiled by fDi Intelligence magazine and TNW (The Next Web), a specialized technology and innovation publication, this year for the 1st time.
Business Activity in Moscow Reached Pre-Crisis Level
The current revenue of Moscow retail and service companies in the second week of June increased by 4.2%, amounts to RUR 24.5 bn - 98% of the activity level before the restrictions imposed.
The restoration of the turnover level was also influenced by the balanced structure of the city economy and the support measures adopted by decision of Sergei Sobyanin.
‘Since the beginning of the month, we have seen steady and positive dynamics in terms of business activity in the city. The business support measures and step-by-step lifting of restrictions helped businesses to pretty fast come back to work and to fulfill the safety requirements for their employees and customers. In some areas, business turnover in just a week increased significantly. Thus, the sphere of household services showed a double increase compared to the previous week, the sphere of air and road transportation - 1.9 times. Attendance at retail facilities last week more than doubled,’ - Vladimir Efimov, Deputy Mayor for Economic Policy and Property and Land Relations.
Significant growth in trade was also observed in sectors of the economy that were most affected by the pandemic. Over the past week, the average daily turnover in the fields of culture, leisure and sports grew by 26.9%. Also, due to successful adaptation to changes in consumer behavior through the use of online technologies, Moscow wholesale trade in mid-June exceeded the average daily turnover of the week from March 23 to 27 by 27.5%.
Moscow Agricultural Export Went Up by Almost 33%
The export of meat, poultry subproducts, chocolate, flour- and milk-based products grew up most of all.
The Q1 Moscow agricultural export amounted to ca. USD 861 bn. It is by almost 33% higher than in the same period last year.
'Export is deferred, and the indicators that we now have are the results of work begun by Moscow manufacturers last year. Capital companies were able to implement their accords on international markets in the Q1 and adapt their work in the Q2 to new conditions. For this, the city offered individual support measures to exporters, such as a mentoring room, as well as special anti-crisis measures - export cashback and reimbursement of expenses for entering the international market,’ - Vladimir Efimov, Deputy Mayor for Economic Policy and Property and Land Relations.
In Q1 2020, Moscow exported agricultural products to 112 countries. Key partners are Turkey, Kazakhstan, Belarus, Egypt and Sudan. According to the Mosprom Center, these countries account for 47 % of the total agricultural exports in Moscow.
As Alexander Prokhorov, the Head of the Department of Investment and Industrial Policy of Moscow, specified, the export growth of meat and poultry by-products showed a record increase - 548.9 %. Also in the Q1 of this year, it was possible to achieve growth of 13.5 % in the export of chocolate, and products based on flour and milk - by 44.3 %.
36,000 Businessmen Were Directly Supported By Moscow Government
By mid-June, 36,000 businesses of the most affected industries, employing 770,000 people have already enjoyed the business support measures approved by Sergei Sobyanin. The actual support amount was almost RUR 25 bn. These companies can direct the released funds to fulfill obligations to their employees and to support their business. The help was given to retail units, hotels, cultural, sports and public catering facilities.
Support is also received by SME representatives in the capital. The Department of Entrepreneurship and Innovative Development of Moscow provides support for 13 types of subsidies and grants. With their help, companies can reimburse the costs of exporting goods, services and intellectual property results, participation in exhibitions, staff training, online product promotion, the implementation of an innovative project and engineering. In addition, special payments are provided for franchisees, representatives of the hotel business, social enterprises, commercial coworking centers, residents of technology parks and participants of the Moscow innovation cluster.
Businessmen Will Be Supported to Enter Russian and International Markets
The Mosprom center has developed a program to stimulate the demand for Moscow-made products. Moscow businessmen will be supported to enter Russian and international markets.
‘In the framework of economic recovery and the normalization of business activity, we will resume inter-regional cooperation. This direction will not only ensure steady domestic demand for Moscow producers, but will also become the foundation for access to foreign markets,’ - said Alexander Prokhorov, Head of the Moscow Investment and Industrial Policy Department.
The program will involve a number of industries. These are construction, transport, agriculture, engineering and other export-oriented directions.
The center will help Moscow business establish contacts with regional suppliers, take part in procurement sessions, and also join the work of federal infrastructure projects. You can get support at all stages of the life cycle of a company operating in both domestic and foreign markets.
The program allows you to get free personal support on certification, logistics, customs clearance, production localization or the creation of international service centers.
246 Premises in Moscow Can Be Rented at a Reduced Rate
SME representatives will be able to rent 246 commercial premises at a reduced rate. The area of the premises put up for open auction varies from 5.2 to 405.8 m2. They all have a free appointment.
The initial rental rate is RUR 1,000 per 1 m2 per year for basements, RUR 4750 - for rooms on the ground floors and above.
The preferential rental program for commercial premises allows Moscow entrepreneurs to create and develop their own business even in the current economic conditions. In 2020, under this program, SME representatives rented 132 premises from the city, 931 bidders claimed for them.
Most of the objects that can be rented at a reduced rate are located in the Southern Administrative District, where 51 lots are put up for auction. For entrepreneurs, for preferential rentals, objects are also available in other districts of Moscow, they can be found on the Moscow Investment Portal in the Auction section.
Investors Can Purchase Premises in the Center of Moscow from the City
The 1st lot is a premise in a house of the beginning of the 20th century in the Yakimanka district, located on the ground floor of a 1900 brick building. The free space is 17.3 m2. The building is equipped with all necessary utilities.
Applications for participation in the auction are accepted until July 22, bidding will be held on July 30.
The second lot is a basement, which is located in the house on Savvinskaya embankment (Khamovniki). The property is for sale through a public offer. Its area is 89.5 m2. The initial sale price of the lot is RUR 11.4 mn.
Applications for participation in tenders are accepted until July 8, the winner will be announced on July 16.
In total, 4,000+ units are available on www.en.investmoscow.ru at the auction for the sale and rental of city property.