MOSCOW INVESTMENT DIGEST MARCH 2020
The Moscow Department for Investment and Industrial Policy, in cooperation with the Moscow City Investment Agency, presents a new issue of the Moscow Investment Digest.
Investments in Moscow Economy Amounted to Almost RUR 3 Tn
The investments in the Moscow fixed capital amounted to RUR 2.9 tn in 2019 what is by 8.9% higher than in 2018. This is a record for the city economy. Over the past 9 years, investment in fixed assets of the capital in comparable prices more than doubled. Moscow is currently gaining 15% of all Russian investments in fixed capital and ca. 50% of the foreign direct investments (FDI). The volume of accumulated FDI in the capital on October 1, 2019 amounted to USD 251.7 bn. Investors come from different countries, the biggest ones are from Germany, Finland, France, Italy and Austria.
The growth in investment in fixed assets in the capital is largely due to support measures provided by the City Government. Actively investing companies that have been granted the status of an industrial park, industrial complex, and an anchor resident of the industrial park can reduce the regional tax burden by 17–25%. A similar mechanism applies to new investment projects.
“Today, 112 Moscow companies are entitled to various benefits: 53 industrial complexes, 36 industrial parks, 13 anchor residents, 9 investment priority projects, 1 manufacturer of motor vehicles. Over the past 5 years, the volume of investments made by companies with the status of industrial complex, industrial park and anchor resident amounted to RUR 95.6 bn, 111,100 new jobs were created”, said Alexander Prokhorov, Head of the Moscow Department of Investment and Industrial Policy.
Starting January 1 of this year, another support measure is introduced - an investment tax deduction. The right to it is granted to companies that are located in the capital and have the status of a Moscow investor. “To determine the maximum amount of the investment tax deduction, the income tax rate to be credited to the city budget was set at 12.5% for organizations with the status of Moscow investor of the first category and 8% of the second one. The standard income tax rate credited to the capital budget is 17%. The requirements for the status of a Moscow investor and the procedure for obtaining it will be determined in the near future by the Moscow Government”, said Leonid Kostroma, Director of the Moscow City Investment Agency.
Investors Will Implement 3 Large RUR-1.5-bn-Worth Projects in Moscow
“Investment project 1 foresees to create the Pererva technopark in Moscow, which will carry out activities in the field of manufacturing, research and development, technical testing, analysis and certification, as well as in the field of information and communication. The investor, Stalmontazh-Optim, will invest RUR 728 m in the project in 2 years. 544 jobs will be created in the new technology park”, said Vladimir Efimov, Deputy Mayor in Moscow Government for Economic Policy and Property and Land Relations.
Within investment project 2 – Senior Group Malakhovka – will create a general-type residential 90-bed care facility in Moscow. It will provide care for elderly citizens and people with disabilities with the provision of accommodation. The volume of investments in the reconstruction of the building is RUR 310 m over 4 years. The area of the gerontological center will be 3,600 square meters. 64 new jobs will appear in the new boarding house.
“The third company – Pixel ST – plans to create an industrial complex to manufacture transformers, independent power supply sources and hydraulic equipment. For 4 years, the investor will invest RUR 478 m in the reconstruction of the production and testing building of the plant. 134 jobs will be created in the industrial complex”, said Alexander Prokhorov, Head of the Moscow Department of Investment and Industrial Policy.
The Moscow Government has assigned to all investors the status of an Investment Priority Project (IPP), which makes it possible to reduce the regional tax burden by a quarter.
“At the moment, 10 priority investment projects are being implemented in the capital: the creation of an industrial park, food production, an auto parts factory, technology parks, an art object, and others. With the assignment of three new statuses in Moscow there will already be 13 IPPs, the total investment on which will amount to RUR 26.8 bn. The numbers indicate that this form of support is in demand by investors when implementing new projects in the city”, summed up Leonid Kostroma, Director of the Moscow City Investment Agency.
The French Will Construct Gerontologic Center in Moscow
“ Orpea Rus, a subsidiary of the French Orpea Group, plans to create a modern gerontological center with 150 beds in Moscow, the volume of investment in construction from 2020 to 2022 will be about RUR 453 m, 116 new jobs will be created”, said Vladimir Efimov, Deputy Mayor in Moscow Government for Economic Policy and Property and Land Relations.
The total area of the center in the Novo-Peredelkino area will be about 15,000 square meters. It is planned to be open in 2022. The Gerontology Center is equipped with everything necessary, taking into account the particular health and needs of older people and people with disabilities. Guests will be under medical control, specialists will monitor their nutrition and rehabilitation, as well as provide psychological support. Qualified staff will look after patients according to specially designed individual programs.
Russian Center of Flexible Electronics Opened in Troitsk
It will function in the technology campus at Technospark. “This is a big event not only in the innovative life of Moscow, but also in our country. Technospark is generally one of the best technoparks in Russia. Today we are launching the first phase of the Russian Center for Flexible Electronics (RCFE). I hope that we will not stop there”, noted Moscow Mayor Sergei Sobyanin.
RCFE occupies an area of 4,200 square meters, of which 1,800 square meters is reserved for sterile rooms. This is the only company in Russia that produces on an industrial scale thin-film transistor arrays and key components for various devices using flexible electronics technologies. It is about TFT-matrixes for displays – electronic paper, LCD screens and OLED displays as well as about biometric sensors, X-ray detectors, integrated circuits, RFID tags and sensors.
Now the plant employs 30 people; upon reaching full capacity, their number will increase to 100. Investments in the RCFE exceeded RUR 4.9 bn. In particular, the center’s building was built with this money and 41 units of high-tech equipment were purchased. The main investors are the Technospark Group of Companies, the Rusnano Group's Infrastructure and Educational Programs Fund, and the Business Development Center OOO.
Moscow Summed Up the Address Investment Program for 2019
More than RUR 546 bn were allocated for the Address Investment Program (AIP) of the capital last year, which is 21% of the total expenditures of the city budget. More than 30 social facilities were built using these funds: 13 schools and kindergartens, 6 healthcare facilities, 6 sports facilities, 8 metro stations, Moscow Central Diameters (MCD-1 and MCD-2), 111 km of roads, new bridges, interchanges and pedestrian crossings.
“Of the total expenditures on AIP, 70% – RUR 384 bn – were allocated for the development of the city’s transport system. RUR 22.8 bn were transferred for the construction of health facilities, and RUR 15 bn for education. The development of utility infrastructure was funded in the amount of RUR 23.9 bn. RUR 3.7 bn were spent on cultural facilities, 8.6 bn were spent on sports. In addition, RUR 38 bn were spent on the implementation of Economic Development and Investment Attractiveness of Moscow program”, said Vladimir Efimov, Deputy Mayor in Moscow Government for Economic Policy and Property and Land Relations.
Moscow Agribusiness Export Grew Up by 28%
The total Moscow agricultural product export amounted to USD 263.07 m in January what is by 28.2% higher than in the same period last year. Among the popular export products, the Center for Support and Development of Industrial Export and Export of Products of the Agro-Industrial Complex Mosprom allocates poultry meat (USD 9.52 m). Also, the most popular goods included confectionery: in particular, chocolate exports amounted to USD 4.19 m, an increase of 11.32% in January 2019.
“Moscow products are valued all over the world. In the first month of 2020 alone, Moscow became a generator of almost 14% of agricultural exports throughout the country. Moscow products are represented in 75 countries, the key importers are Turkey, Bangladesh, Saudi Arabia, Egypt and Kazakhstan. Our main task is to increase export volumes, including by expanding the presence of capital companies in foreign markets”, noted Alexander Prokhorov, Head of the Moscow Department of Investment and Industrial Policy.
Moscow Industrial Complexes Technoparks Received Land Rent Preferences
Moscow industrial complexes and technoparks has received the 10-year-long preference land rent rate. The contracts set a discounted annual rent rate which is 0.3% of the land plot cadaster value for industrial complexes and 0.01% for technoparks and industrial parks.
“Preferential lease of land is another measure to support the highly efficient industrial enterprises of the capital. Today, organizations of such socially significant sectors as the food industry, pharmaceuticals, and high-tech industries such as the aviation industry, mechanical engineering, and others use the preferential rental rate in Moscow”, underlined Alexander Prokhorov, Head of the Moscow Department of Investment and Industrial Policy.
In 2019, 19 industrial parks and 16 industrial complexes received a privilege from the city for the rental of land plots. The total area of land leased at a reduced rate was 69.7 ha. The benefits provided by the city allowed tenants to save a total of RUR 120.4 m.
SEZ Residents Can Apply for Moscow Subsidies
Applications for subsidies for residents of industrial parks, the Technopolis Moscow Special Economic Zone and technology parks will continue to be accepted by April 30. Moscow is ready to compensate these companies up to RUR 10 m for purchased equipment, paid loan interests and made leasing payments.
Count on financial support can companies that do not have debts on taxes and fees, no violated obligations under subsidy agreements for the past three years. The share of foreign participation in the enterprise should not exceed 50%. In addition, the company cannot conclude an agreement on the provision of funds from the city budget for the same purposes.
Business Will Save RUR 38 bn in Property Tax
Moscow companies will save RUR 38 bn over 5 years by extending the transition period for corporate property tax. “From 2019, the maximum tax rate of 2%, established by federal law, began to operate. At the same time, in Moscow, by decision of the City Duma, a law was passed last year to extend the transitional period for property tax by four years. As a result, in 2019 the tax rate was 1.6% and will reach 2% by 2023”, explained Vladimir Efimov, Deputy Mayor in Moscow Government for Economic Policy and Property and Land Relations.
Since 2014, Moscow organizations have been paying property tax at the cadastral value. To make this transition progressive, the city set a reduced tax rate. So, in 2014, the rate was 0.9%; by 2018, it gradually increased to 1.5%. The measure is aimed at systemic support for business development. It provides a gradual comfortable transition of organizations to new tax requirements.
In addition, the transition to the calculation of the tax on the cadastral value allows you to take into account the real price of objects, which ensures fair taxation conditions, helps to improve the competitive environment and the growth of capital budget revenues. Revenues to the treasury of the property tax of organizations after switching to its payment from the cadastral value increased 1.5 times – from RUR 94 bn in 2014 to RUR 141 bn in 2019. Over 6 years, the growth of property tax revenues to the budget amounted to RUR 47 bn.
Units in Book-House in New Arbat Listed for Auction
Several units of total 951 square meters have been listed as a single lot for an open auction in the New Arbat street. “Proposals for renting or selling individual premises as part of book houses at city tenders are rare. Since 2014, 8 such lots have been leased through auctions with a total area of almost 160 square meters. The lot put up for auction today has a free appointment and may become a popular offer for business”, noted Vladimir Efimov, Deputy Mayor in Moscow Government for Economic Policy and Property and Land Relations.
The book-house, in which the basements are put up for auction, is located an eight-minute walk from the Smolenskaya metro station. The starting square meter price is RUR 78,800. All rooms are prepared for further operation: equipped with the necessary utilities. Applications are to be submitted by April 30.
Investors Will Build Two Shopping Malls in the North-East and West of Moscow
2 land plots for the construction of shopping complexes were sold at once through city rental auctions. Following the auctions, a new facility with an area of more than 5,000 square meters will appear in the Otradnoe area. The amount of the transaction for the lease of land amounted to RUR 7.3 m. Construction will be carried out by Melange company. Another shopping complex will appear in the Vnukovo area. Here, the investor will build an object with an area of 2,700 square meters. The size of the annual lease amounted to RUR 3 m.
“On the land plots intended for the construction of shopping malls, private investors will be able to place shops and consumer services, including repair shops, dry cleaners and ateliers. A lease agreement will be concluded with the first winner for a period of 3 years 2 months, with the second - for 2 years 8 months. After the contract expires, investors will have the opportunity to switch to long-term leases at a reduced rate of 1.5% of the cadastral value of the plots”, said Maxim Gaman, Head of the City Property Department.