Moscow Investment digest June 2019
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.
Moscow has become the region of most attractive investment climate
According to the Agency for Strategic Initiatives the capital took on leadership in the National Rating of investment climate in the regions of the Russian Federation. As a result, Moscow’s position had significantly strengthened in several indicators at once. At the end of 2019 б 27 indicators of the capital (62% of the total in the integral rating) were assigned to the highest groups A and B (47% in 2018). This year, Moscow demonstrates growth in comparison with the previous rating in 18 indicators (more than 40%). Another 19 indicators had saved achieved positions.
“Statistics show a steady increase in investment activity in Moscow: according to the results of 2018, the volume of investments in fixed assets in the capital amounted to 2.43 trillion rubles, which is 15.3% higher than the figure of 2017. During the first quarter of this year, the volume of investments in fixed assets in Moscow grew by 25.8% over the same period last year and amounted to 403.3 billion rubles. Over 8 years from 2010 to 2018 investments in fixed assets have more than doubled in comparable prices,” said Vladimir Efimov, Deputy Mayor of Moscow for Economic Policy and Property and Land Relations.
In 2019 the highest rating value was reached in the investment legislation quality, information support for investors and business, development of public-private partnership mechanisms, effectiveness of regional organization arrangement for attracting investments and dealing with investors.
The highest rating value in 2019 was reached in the quality of investment legislation, information support for investors and business, development of public-private partnership mechanisms, the effectiveness of a regional organizational work to attract investments and dealing with investors.
“The city government supports entrepreneurs throughout the whole project implementation cycle - from the idea to its completion,” explained Leonid Kostroma, Director of Moscow Investment Agency (MIA). - MIA supports investment projects based on the principle of “one window”, develops economic and legal terms for the projects taking into account the interests of both the city and of investors. Currently we support about 200 investment projects.”
Moscow has concluded a two large Special Investment Contracts
Special Investment Contract (SIC) to build up a power press line for stamping automobile parts from sheet steel was signed at St. Petersburg International Economic Forum by Moscow Mayor Sergei Sobyanin and CEO of Alfa Automotive Technologies LLC Maxim Kondratyev.
The company will be located in the area Biryulyovo West. The plant with a total area of 32.5 thousand square meters will be built on a plot of 3.25 hectares. Production workshops will occupy 20.2 thousand square meters. The construction of the plant should be completed within two years - in 2020. The volume of investments in the creation of the enterprise will amount to 1.16 billion rubles. It is planned to create 385 new jobs.
According to the second SIC in the settlement Shchapovsky the company NovaProdukt AG will build Healthy Lifestyle food production plant. The company will produce baby food and dietetic food products, including sugar substitute in tablets, instant chicory, fruit and nut bars, muesli baked (granola), protein porridge. Construction of the plant should be completed by 2023. The volume of investments will amount to 633.56 million rubles. It is planned to create more than 200 jobs.
The government of Moscow will provide support measures for investors: income tax of the companies will be reduced by a quarter, property tax will be zeroised and land rent reduced by 100%. Each SIC will be valid for 10 years.
Four more metropolitan enterprises received the status of Industrial Complex
Moscow government had assigned Industrial Complex status to four companies: the manufacturer of cosmetic products Faberlic, the manufacturer of bakery and confectionery products Proletarets, Shcherbinsky Lift-building factory and the Instrument-Engineering factory Elemer.
The enterprises will receive such preferences as: the regional part of the profit tax will be reduced from 17% to 12.5%, property tax exemptions will be 50% (current rate is 2.2% of the property book value of or 1.5% of the cadastral value) land tax will be reduced by 80%. The rent rate for land will be 0.3% of the cadastral value of the construction site instead of 1.5%. Normally the status of the Industrial Complex is assigned for a period of up to 10 years and is subject to mandatory annual confirmation.
In addition, nine enterprises in Moscow confirmed the status of Industrial Complex: Tsaritsyno, Aeroelectromash, Cherkizovsky Meat Processing Plant, Servier Rus, KBK Cheryomushki, BRPI, NPO Almaz, Wimm-Bill- Dunn and MTZ Transmash. Thus, today in the capital 48 companies have the status of Industrial Complex.
In 2018, enterprises which have Industrial Complex status had invested more than 4 billion rubles in renovation, modern equipment and production facilities commissioning. And in the next five years the volume of investments may exceed 26 billion rubles.
Moscow authorities met with representatives of German industrial enterprises
Alexander Prokhorov, Head of the Investment Department and Industrial Policy of Moscow together with Andrey Sobolev, the Trade Representative of the Russian Federation in Germany, took part in the panel discussion of Pricewaterhouse Coopers Russian club (PwCRussianclub) and visited Berlin Innovation Center.
Participants of the panel discussion PwCRussianclub Investing in Russia - right now were representatives of about 40 industrial enterprises in Germany. The participants of German companies took part in the discussion Why they have to invest in Russia. Among the guests of the event were representatives of pharmaceutical companies, developers of innovative technologies and services for industrial enterprises and many others.
Alexander Prokhorov spoke about the measures of state support for industry and investors operating in the Russian capital, the city’s infrastructure, the investment climate and the requirements for Moscow production facilities.
As a result of series of meetings held with representatives of German business, new investment projects may appear in Moscow.
Small and medium scale businesses in the capital employ 2.5 million people
In the capital, there are more than 800 thousand small and medium-sized businesses (SMEs), which is 13% of their total number in the country. During 3 years tax revenues from SMEs to the city budget increased by 47% and by the end of 2018 exceeded 473 billion rubles. Moscow also ranks first in Russia in terms of growth in the number of individual entrepreneurs. For example, in 2018 their number increased by 12.5% (more than 35 thousand people).
The city government try to further stimulate economic growth: entrepreneurs all year round can count on consulting support, subsidies, loan guarantees and participation in free educational programs.
Moscow has transferred the sale of city property exclusively in electronic form
“Due to changes in federal legislation in Moscow, the procedure for tenders to sell cultural and cultural heritage objects of regional and federal significance was transferred exclusively to electronic form, the format of selling urban objects without a price announcement also changed,” said Vladimir Efimov, Deputy Mayor for Economic Politics and Property and Land Relations.
Earlier the participants of the procedure for selling urban real estate without announcing prices and of the tenders for the sale of cultural and cultural heritage sites of regional and federal significance used to submit their applications in concealed form and awaited the opening of envelopes and the winner was being determined based on the prices offered in the applications; while nowadays when buying such real estate investors will apply openly on the day of tender. Besides of the above, to purchase cultural heritage sites, investors had to actually attend the competition and expect pronouncement of the decision while nowadays the competition will be held in electronic form.
According to Vladimir Efimov, the transition to the electronic form of privatization is intended to make the procedure for selling state property at the competition more transparent, as well as to simplify the format of participation for potential investors, to eliminate the human factor in accepting applications and conducting tenders. Due to open competition, the final cost of the objects will also increase, which will increase the amount of revenues to the city budget.
Sales tax brought almost 28 billion rubles into the city budget
“Sales tax receipts in Moscow in the first quarter of 2019 amounted to 1.9 billion rubles, which is 1.6% higher than the figures for the same period last year,” said Denis Tikhonov, head of the Department of Economic Policy and Development of Moscow.
The sales tax in Moscow is intended to solve the problem of effective administration of the trade sphere. The effect of its introduction in the capital during four years of the project’s existence was the legal work of 22 thousand retail properties. Also, the legalization of trade has produced a positive effect on the quality of goods and services provided. Entrepreneurs operating in the legal field are more interested in this than sellers who do not bear any responsibility. In addition, an additional source of revenue to the budget has been formed.
Since the introduction, sales tax brought nearly 28 billion rubles into the city budget. This is the cost for example of 15 new schools and 45 kindergartens for Muscovites.
From July 1, the size of the sales tax will be decreased for objects which occupy less than 300 square meters. The rate will be decreased by 2-10% depending on the area and location.
In 2019, socially oriented companies will save 3.1 billion rubles on land rent
Moscow supports organizations that provide services in the fields of education, health, sports, culture and religion, and provides them with preferential land rent rates. For socially oriented organizations, the rental rate is not the standard and equal to 1.5% of the cadastral value, but 0.05% of the cadastre, which reduces the cost of land renting by about 30 times.
Deputy Mayor of Moscow on Economic Policy and Property and Land Relations Vladimir Yefimov: “Today, the preferential rate has been granted to 517 social organizations that rent land plots from the city with a total area of 1.18 thousand hectares. Thanks to the benefits, private schools, clinics, cultural and sports centers can save a total of 3.1 billion rubles in 2019”.
To obtain benefits from the city on the rent, organizations can apply to the City Property Department and obtain public service named “Issuing additional agreement on amendments to the lease agreement for a land plot located in Moscow”.
Small business in the field of medicine saves at the expense of benefits
“For entrepreneurs who open clinics and medical centers in city facilities, the Government of Moscow offers a concession for renting premises in the amount of 3,500 rubles per square meter per year. As of today, the city has provided rental benefits for 222 medical organizations, the total area of facilities is 53 thousand square meters. The preferential rental rate allows us to save about 489 million rubles a year for private medical institutions,” said Maxim Gaman, Head of the City Property Department.
In order to receive benefits from the city, private institutions in the field of medicine must submit to the Department of Municipal Property a medical license issued to the address of the leased premises. A prerequisite for establishing a preferential rate is compliance with the medical purpose of using the premises under a lease agreement.
Moscow will support franchising entrepreneurs
Moscow is planning to approve a new business support program in the nearest future. What it involves are subsidies for franchisee entrepreneurs. The draft decree of Moscow Government provides for subsidies paid to purchase equipment, to pay lease fees and interest on loans. It is proposed to compensate for up to 35% of documented investments. This measure of support is focused primarily on small companies and start-up entrepreneurs.
“Thanks to such a support, new coffee houses, snack bars, shops, and consumer services will appear. This will ensure the creation of new jobs and an increase tax revenue paid to the budget. So, the investment will pay off and the city will benefit,” said Vice-Mayor Natalya Sergunina.
For the first time the city will put up for sale parking space without announcing the price.
For the first time Moscow will put up for sale 72 parking spaces, with unannounced prices and located in underground parking lots of apartment buildings and non-residential buildings. Muscovites will be able to buy them as property before the end of August 2019.
The parking places are located mainly in five administrative districts of the capital: Eastern district (Golyanovo, Bogorodskoe), Western district (Filevsky Park), North-Western district (Kurkino), Central district (Meshchansky, Tverskoy, Zamoskvorechye), South-Western district (Cheryomushki).
The area of parking spaces that the City Property Department will offer to investors with unannounced price varies from 14.9 square meters to 70 square meters. The cost of the objects will be determined by the investors themselves, the participant who offered the highest price per lot will be recognized as the winner of the sale procedure with unannounced price. You can find out more detailed information about the car parking lots put up for sale, the conditions of participating in the procedure can be found in the Investment portal, section Auction of car parking lots. "
Since the beginning of this year, the city has already sold 124 properties with a total area of 17,000 square meters at the sum amounting to 679 million rubles.
Repeat tenders: initial rental rate will drop by 30%
“Representatives of small and medium-sized businesses will be able to acquire premises at repeat city tenders at a discount of 30% of the initial rate 4,500 rubles per 1 square meter per year. Thus, the initial rental price of objects for small and medium-sized businesses at repeat auctions will be 3150 rubles per 1 square meter per year,” said Vladimir Efimov, Deputy Mayor of Moscow for Economic Policy and Property and Land Relations.
Last year entrepreneurs following the results of bidding, became tenants of 226 premises with a total area of 32.5 thousand square meters. However, 25% of auctions were declared invalid, and the objects remained unsold. Reducing the initial rental rate by 30% for premises, put up for auction for the second time will make them more affordable for metropolitan entrepreneurs.
By the end of the year it is planned to put up for re-bidding about 60 premises for small and medium-sized businesses at initial (minimum) contract price. The first auctions will be held in July.