MOSCOW INVESTMENT DIGEST January 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.
Investor Will Build a Medical Device Production in Moscow
The Moscow government has signed an offset contract with OOO Gemamed, according to which the investor will localize the production of medical devices for ostomy patients in the capital for three years.
“An investor will invest RUR 1 bn in the Moscow project. The investment stage will be held in two stages, taking into account the varying degrees of complexity of manufacturing products that will be supplied for urban needs for 8 years. The volume of products purchased by the city will amount to RUR 8.6 bn”, said Vladimir Efimov, Deputy Mayor in Moscow Government for Economic Policy and Property and Land Relations.
This is the third offset contract of the capital. According to its conditions, the city receives almost one hundred percent import-substituting production in a vital sphere. The total amount of investment in three offset, concluded in the capital, approached RUR 10 bn.
Along with pharmaceuticals and medical devices production, offset contracts in the capital are planned to be concluded in such significant sectors as transport, engineering for housing and communal services, IT equipment, and food.
International Experts Stated Moscow Infrastructure Development
Russian capital was ranked 5th in the World’s Best City Brands 2020 by the international Resonance Consultancy agency. It is one step higher than the year before.
The Moscow upcoming is due to the constant urban environment comfortability improvement, the development of international air transport hubs, the support culture, arts and entertainment industry development. The experts of Resonance Consultancy stated a high level of the Moscow infrastructure development.
“Moscow invests over RUR 600 bn in the infrastructural development. The volume of the targeted investment program of the capital for 2020–2022 will amount to more than RUR 2 tn. Its funds are allocated for priority projects in construction and for the reconstruction of urban infrastructure (transport, social services, etc.) – due to this a multiplier effect is achieved. So, for each ruble invested by the city, there are more than three rubles of private investment”, said Alexander Prokhorov, Head of the Moscow Department of Investment and Industrial Policy.
All this forms a modern urban environment, convenient for residents and guests of the capital, stimulates business and tourist activity, helps increase business confidence in long-term investments in Moscow and thereby develop public-private partnerships.
French Company Will Create a Gerontological Center in Moscow
The French company Clinea, part of the ORPEA Group, will build a world-class gerontological center in Moscow with comfortable living and rehabilitation facilities. To implement the project, the Moscow Government will provide ORPEA Group with a land plot on the territory of the Peredelkino scientific-methodological gerontological center. A memorandum of understanding on this issue was signed by Moscow Mayor Sergei Sobyanin and Clinea CEO Emmanuel Masson.
Gerontological center will be designed for 150 places. His specialization will be general care for the elderly, as well as social services and rehabilitation of disoriented and weakened age citizens. About a third of the places are intended for living and rehabilitating Muscovites as part of urban social services – in the direction of the Department of Labor and Social Protection of the Population.
The staff of the center will be selected in accordance with international standards of medical and social services. More than 100 qualified specialists will be hired. ORPEA Group will create a team of European employees. Their tasks will include the development of new forms of rendering social services according to advanced world standards. Work will go together with Russian doctors.
The construction of the gerontological center is planned to be completed in 2023. Now there is a development of design documentation.
Moscow Invites Regions to Joint Purchases of Medical Equipment
Successful experience in tendering for life cycle contracts (LCC) has shown that this form is attractive to both manufacturers and the city. The contractor is responsible not only for the supply and installation of equipment, but also for the training of doctors, software updates, service and repair.
In 2020, Moscow plans to purchase computer tomographs (CT), mammographs, X-ray, endoscopic and ultrasound equipment. Regions can submit a proposal to include equipment in the procurement plan by February 15 in a special form. Bidding for the benefit of several customers will be held in 223-FZ.
“Joint purchases have entered into the practice of the contract system. The format of the life cycle contract allows for the involvement of direct producers, stimulates an increase in the quality of work at all stages of the project and minimizes the risks of non-fulfillment of contracts. Real market players who produce equipment, rather than intermediaries, enter the competition. This will allow budgetary institutions to significantly save their money”, explained Vladimir Efimov, Deputy Mayor in Moscow Government for Economic Policy and Property and Land Relations.
Last year, Moscow purchased 42 angiographs, 101 magnetic resonance imaging scanners (MRIs) and 116 CT scans with savings of about 43% per lot. The region-innovator, which joined the competition, was the Perm Territory. It received an angiograph with a price reduction of 50%.
“The format of life cycle contracts is of interest to the regions. They are interested in purchasing medical equipment together with the capital. After the meeting with representatives of 30 regions, many had clarifying questions, to which there are answers on a specially created website with organized feedback”, said Ivan Shcherbakov, Head of the Moscow Department of Competition Policy.
9 Industrial Enterprises Will Be Built in the Capital by Investors
“The implementation of a set of measures aimed at attracting new investors to the capital industry is one of the priorities for the city development. Now in Moscow various measures are in place to support this segment of the economy, and the possibility of renting a land plot for the construction of an industrial facility directly from the city is one of them. Since 2013, 9 lots have been sold through auctions in the capital, bidders will build enterprises in the North-West, Western administrative districts and Zelenograd. The largest production area of 32,700 sq. m. will be built before 2027 in the south of Moscow”, said Vladimir Efimov, Deputy Mayor in Moscow Government for Economic Policy and Property and Land Relations.
The enterprises will be located on Vnukovo highway, in Ochakovo industrial zone # 37, in Zelenograd, on Tarny proezd, in the village of Desenovskoye (Desna village), on Dorozhnaya, Narva and Ryabinovaya streets.
In addition, the city provides land for industrial production without bidding. “Since 2016, the Moscow City Planning and Land Commission regarding the provision of land for rent decided to implement 32 large-scale investment projects without tendering. This is 41 land plots with a total area of 76.3 he with the maximum possible area for the construction of facilities - 1.02 m sq. m. The total amount of planned investments in the implementation of these projects is almost RUR 53 bn, the number of newly created jobs is 13,820”, said Alexander Prokhorov, Head of the Moscow Department of Investment and Industrial Policy.
Technopark Constructed in Former Industrial Zone in North Moscow
A 17,784-square-meter building is permitted for commissioning, which is part of the technopark in Voikovsky subdistrict. This is a separate building, which stands on the banks of the Golovinsky Canal. It is combined with the main building. It is erected within the comprehensive Bratsevo industrial zone redevelopment program. The project is financed by an investor – Krost concern.
Functional area including residential and commercial infrastructure and round-the-corner services (banks, pharmacies, restaurants, kids’ development centers) are intended for development, which operates not only for the residential complex, but also for the entire area.
More than 1,500 highly qualified jobs have already been created here in the field of production of building materials and the development of the construction sector, a shopping gallery with an area of 15,600 sq. m has been built, the project of comprehensive improvement of the embankment of the Golovinsky Canal as part of the city program of revitalization of small rivers was implemented, the Nevsky residential complex in the style of Novomoskovsk architecture is being built.
Over RUR 1.4 Tn Invested in New Moscow Development Since 2012
“1.39 m sq. m of residential housing, 0.7 m sq. m of commercial property, 11 modern social facilities are commissioned. We opened a park in an old manor in Klenovo village. In total, there are 19 park and recreational zones on the territory of the Troitsky and Novomoskovsky administrative districts. 111 km of new roads are constructed, 4 metro stations of line 1 are taken into operation. New jobs are being created - at least 10,000 at the end of 2019. I cannot but note a new trend: the city’s share in the cost of developing new territories is gradually decreasing, and the share of private investment is increasing”, said Vladimir Zhidkin, Head of the New Territories Development Department.
TiNAO is a megaproject capable of generating a large flow of private investments: over the past seven-plus years in the development of territories ¼ of these investments were provided by the Moscow budget. Every fourth ruble comes from the city budget, the rest was private business money.
Moscow Industrial Product Export Increased by 1/3 Last Year
Moscow companies export products to 195 countries. The total export volume of the Moscow industrial products in January to November 2019 amounted to USD 23.6 bn. It is by more than 30% higher than in same period in 2018.
“According to the results of 11 months of 2019, the export volume of key sectors of the industrial complex shows a positive trend. For example, the export of engineering products amounted to USD 9.3 bn and increased by 9.23%. Light industry exports totaled USD 0.5 bn, up 9.18%. Also, a steady increase in exports is accounted for by chemical products. Its export volume increased by 21.8% to USD 2.6 bn”, said Vladimir Efimov, Deputy Mayor in Moscow Government for Economic Policy and Property and Land Relations.
The experts point out the stable export growth in:
- mechanical equipment, machinery and computers (USD 5.97 bn, an increase of 2.48%);
- electric communication devices, (USD 1.8 bn, an increase of 19.41%);
- vehicle equipment (USD 952.3 m, an increase of 48.92%).
New Incentive for Entrepreneurs
The law on investment tax deduction for income tax for organizations that have received the status of Moscow investors entered into force on January 1, 2020.
According to the explanatory note to the document, the right to apply an investment tax deduction is established for organizations that have received the status of a Moscow investor of the first or second category. The size of the investment tax deduction can be 90% of the amount of expenses from the initial cost of acquired or created fixed assets, as well as 90% of the amount of expenses that is the amount of change in the initial cost of modernized fixed assets.
In addition, “the tax rates for organizations to be credited to the Moscow budget, which are used to calculate the maximum investment tax deduction for organizations that have received the status of a Moscow investor of the first or second category, are set at 12.5% and 8%, respectively”.
Three Moscow Companies Received the Status of Technopark Anchor Resident
OOO Tekon Membrane Technologies received the status of the Tekon technopark anchor resident, OOO Laboratory of Chromatographic Systems received the status of Slava technopark resident, and OOO LED Effect received the status of Mosgormash technopark resident according to the order of Sergei Sobyanin, Moscow Mayor. In this way, the number of companies with the status of anchor resident of the technology park increased to 13.
“In accordance with the Moscow legislation, anchor residents of industrial parks pay income tax payable to the city budget at a reduced rate of 12.5% instead of the standard 17%. Now these companies will be able to take advantage of tax benefits provided by this status. By reducing the fiscal burden, they will be able to increase investment in development, create new high-tech jobs and increase the production of their products”, said Alexey Fursin, Head of the Moscow Department of Entrepreneurship and Innovative Development.
Moscow Supported Production Extension of 2 Companiesй
The MicroEM Technology company has got a loan of RUR 10 m at reference terms from the Moscow Fund of Industry and Business Support. The company will invest this money in the production capacity extension and equipment upgrade in order to attract new clients.
The total amount of investments in the project will amount to RUR 14.3 m, with 70% of the required amount the company will receive from the Fund. The loan was granted to the company for 5 years at 2%, which is much lower than the bank loan rate for companies.
Smerfit Kappa Moscow Soyuz JSC received a loan of RUR 120 m. The company is the largest Moscow company producing corrugated board products. “In 2017, the company was granted the status of an industrial complex, which gave it the right to receive benefits on income tax, real estate and land. One of the preferences of this status is also the opportunity to get a soft loan in the capital fund. Thanks to the funds received, the company will launch a new line, which will replace two existing ones. When reaching maximum productivity, it is planned to receive an additional more than RUR 400 m of revenue per year, and the amount of tax deductions to the city budget will grow by 12% and amount to at least RUR 30 m per year”, said Alexander Prokhorov, Head of the Moscow Department of Investment and industrial policy
Thanks to borrowed funds from the city authorities, the company plans to purchase a high-performance rotational die-cutting line with multi-color printing for the production of corrugated cardboard products, ready for laying on a shelf (the so-called SRP packaging), which will increase production volumes by 13.8 m sq. m per year. It is planned to produce up to 40 m sq. m annually. m packaging. In addition to borrowed funds, investments in the project will amount to RUR 52 m.
Moscow Businessmen Got RUR 26.7 Bn as Loans with Guaranteed Support
The support for business is provided within the state guarantee support program run by the Moscow Small Business Credit Assistance Fund (MSBCAF). Last year, the Fund issued guarantees to small and medium-sized businesses of approximately RUr 13 bn. Under these funds, entrepreneurs were able to get RUR 26.7 bn as loans with guaranteed support in 2019. It is by 17% more than in 2018 (the total loan amount was RUR 22.8 bn). 11% of guarantees were received by medium-sized enterprises, 34% - microenterprises, and 55% – small companies.
MSBCAF issued the most guarantees to trading enterprises – 59%. Companies that work in manufacturing, medicine, construction and the innovation sector received 25% of the total volume of guarantees, while services and other industries account for 16%.
MSBCAF pays great attention to the participants of the state order, which supply food, medicine and other goods, as well as provide various types of services. Last year, they simplified the guarantee procedure and reduced the rate on bank guarantees to 0.5% per annum.
Now the average guarantee amount is about RUR 20 m, and the maximum is RUR 100 m. The fund covers up to 70% of the loan - this greatly reduces the risk of lending to small companies. For the entire duration of the state guarantee support program, the capital's small business received RUR 164 bn of assistance.
Part of Shubins’ Mansion Can Be Rented for RUR 1
Level 1 of the Shubins’ mansion has been listed for auction. The winner will be able to rent the units with a total area of 142 sq. m under the RUR-1-per-square-meter program. The mansion is a regional cultural heritage unit. It is a five-minute walk from Pushkinskaya metro station.
The winner of open tenders must conduct restoration work within five years, after which he will be able to qualify for a preferential rental rate. The lease is for 49 years. Applications are to be submitted by February 21. The auction will take place on February 27.
70 Properties Leased at a Reduced Rate
Since 2013, 70 premises and buildings have been leased at a preferential rental rate under the RUR-1-per-square-meter. Among them there are objects of cultural heritage – former estates and apartment buildings that will be restored. Part of the premises is intended for the opening of educational institutions – schools and kindergartens.
Each type of property has its own conditions for switching to a preferential rental rate. So, when opening educational institutions, it is necessary to provide a certain amount of educational services in a timely manner. In addition, when placing in a kindergarten facility commissioned at a reduced rental rate, at least 80% of children must be registered in Moscow, and when placing at school – at least 50% of students.
To date, 33 objects of cultural heritage and buildings intended for opening schools and kindergartens have already been transferred to a preferential rental rate. “Since the start of the RUR-1-per-square-meter program, the City Property Department has concluded 70 lease agreements with entrepreneurs. The total area leased under the ‘RUR 1 program’ amounted to 73,600 sq. m”, said Maxim Gaman, Head of the City Property Department.
In just seven years, 255 investors applied for the ‘RUR 1 program’ educational institutions and architectural monuments. The average competition is four to five participants per lot. At the same time, bidders are more interested in objects of cultural heritage – here the competition is at the level of seven bidders for the lot.
Investors Rented 1,000 City Premises in 2019
“1,000 premises were rented out trough auctions in 2019 what is 2.5 times higher than last year. The total space was over 140,000 square meters, the contract value exceeded RUR 1.5 bn”, noted Vladimir Efimov, Deputy Mayor in Moscow Government for Economic Policy and Property and Land Relations.
Last year, the most popular premises for capital investors were located in the Central, Southern and South-Western districts. The most popular were facilities ranging from 80 to 250 sq. m.
In 2019, the sale rate of urban property under lease agreements to private investors reached 81%. For comparison: for the same period in 2018, it amounted to 57%. According to the results of the bidding in 2019, the final price of the lot exceeded the initial price by an average of 95%, approximately 6 bidders claimed for each object. This is an absolute record at auctions for the right to conclude lease agreements since the start of trading in 2011. This effect was achieved primarily due to an increase in the number of objects prepared for sale at auctions. Also, the first repeated auctions were organized, at which real estate was exhibited at a 30% discount.
Meeting of the Business Protection Office’s Working group on investment climate improvement