Time to Invest in Moscow

investmoscow.info

Time to Invest in Moscow Contents: 1.

Moscow today

6

2.

Why Moscow?

12

3.

Where to invest?

20

4.

Who to contact?

32

5.

A city for comfortable living

36

Social and economic status

Competitive advantages for doing business in Moscow

Promising areas for investment

Information resources, development institutions and executive authorities

Urban environment

An address from the Mayor of Moscow,

Sergei Sobyanin Moscow is one of the world’s largest business and financial centres. It is a megalopolis on a global scale, which is carrying out a major infrastructure development programme and offers wide range of opportunities to investors from all over the world. Information and communication technology, banking, finance and insurance, construction and real estate, transport and trade, science, education and health care — these are the main industries that are driving Moscow’s rapid economic development. The industrial sector plays an important role which accounts for one sixth of the capital’s gross regional product. In 2015, capital investments in Moscow amounted to EUR 23.7 bn. The amount is impressive, but there are reserves for increase.

An address from the Mayor of Moscow, Sergey Sobyanin

Moscow has gained additional competitive advantages in the new economic context. While maintaining the superb quality of its investment environment, the capital has become one of the world’s most attractive investment destinations in terms of many types of costs. In recent years we have implemented a number of measures to reduce operating expenses, simplify administrative procedures and improve tax and tariff policies. The city is actively promoting public–private partnership mechanisms, including concessions, life cycle contracts and property lease with mutual obligations. We are opening new technoparks and technopolises to cater to high-tech production lines. All these factors will only ensure that Moscow will become more and more attractive to investors. Our main goal is to transform the capital of Russia into a modern, successful megalopolis which is comfortable to live in and where it is easy to do business. To achieve this goal, we  strive for a mutually beneficial and fruitful partnership with the investment community. The result of such a partnership will be exciting new ideas and projects for the benefit of Moscow and Muscovites.

Mayor of Moscow

Sergei Sobyanin

1

Moscow today Social and economic situation

6

1. Moscow today I Social and economic situation

Moscow has one of the world’s largest economies among cities Moscow is one of the Top-10 largest metropolitan areas by gross regional product (GRP) in the world

1/5

of gross added value of all Russian regions

Moscow’s diversified post-industrial GRP structure is as follows:

19.8%

35.4% Trade sector

Business services, including R&D

18.7%

26.1%

Other areas: Construction; Transport and communication; Social sphere; Public sector etc.

Industrial production

One of the largest consumer markets in Europe The total population of the Moscow metropolitan area:

20

m people

14%

of Russia’s overall population

200 mpeople the point of entry to the Russian and CIS markets

7

EUR

149

bn consumer spending in 2015, ranks third among European cities

17% of Russia’s retail turnover in 2015 Stable consumer demand: Consistent growth in public spending of 10% annually in 2011–2015. Relatively low public loan debt burden — ratio of loan debt to  bank deposits by individuals — 15% as of 1st of September 2016 (28% in Saint ­Petersburg and 46% nationwide).

Stable growth in investments EUR

23.7

bn fixed capital investments in 2015

Five-year growth in fixed capital investments:

61.3% in real terms since 2010 11% of total fixed capital investments in Russia 8

1. Moscow today I Social and economic situation

51 m m

2 of real estate built in 6

years

10% of the real estate fund updated, including about 20m m2 of housing 10% of all Russia’s real estate is built in Moscow all incoming foreign direct investments 50% ofin Russia

EUR

8.5

bn worth of public-private partnership contracts concluded: in 2013-2016, including:

concessions — EUR 1 bn life cycle contracts for supply and maintenance of Metro rolling stock and above ground urban transport — EUR 4.5 bn long-term contracts with an investment component — EUR 2.9 bn

st place in «public-private partnership development in Russia» rating in 2015

9

International business, trade and investment centre A Top-10 global business hub — over 60% of leading international companies have offices in Moscow. Home to 90% of the headquarters of foreign banks and international financial organisations operating in the Russian market. Focal point for almost all of the nation’s securities exchange. About 1.0 m legal entities, over 250 thousands of sole traders or (in total) 15% of the total number of companies registered in Russia. Around 25% of companies in Moscow specialize in business and financial services.

Favourable geographic location

London (-3)

Frankfurt (-2)

Moscow

New Delhi (+2,5)

Beijing (+5)

The core of the Moscow metropolitan area, strategic centre of the Eurasian Economic Union's Customs Union and free trade zone of the Commonwealth of Independent States (CIS). Convenient time zone for working with European and Asian commercial and financial markets.

10

1. Moscow today I Social and economic situation

Proximity to key consumer markets in Russia, Eastern Europe, CIS, and Baltic states.

Flights to European and Asian financial centres RUSSIA

Moscow London 4 hours

Frankfurt

Beijing

3,5 hours

7,5 hours

Zurich

3,5 hours

New Delhi Dubai

6 hours

5 hours

Hong Kong 9 hours

Stable position in international ratings Investment attractiveness of Moscow based on Financial Times fDi Markets: 1st place among Eastern European cities; 12th place among European cities; In the Top-25 of 130 cities worldwide.

In the Top-25 of the world’s most economically powerful cities — CITYLAB: 25 Most Economically Powerful Cities of the World. 18th place among global cities Global Cities Index A.T. Kearney.

11

2

Why Moscow? Competitive advantages for doing business in Moscow

12

2. Why Moscow? I Competitive advantages for doing business in Moscow

Quality of labour force

11

m people economically active population in Moscow

200

thousand people graduating professionals with diploma of higher education annually

A magnet for competitive and qualified staff from other regions of Russia and the CIS.

High level of education: 50% of the employed population have a higher education degree.

Average monthly salaries (2016 estimate for all categories of the employed): EUR 850.

High potential for science and R&D There are over 200 public and private higher education institutions (universities, institutes, academies, etc.) in Moscow. Six of Russia’s Top-10 higher education providers according to the QS rating (Quacquarelli Symonds) are located in Moscow. More than 20% of Russia’s research and development organizations are based in Moscow.

30%

of research and academic staff in Russia

27

technoparks and technopolises

13

33% of all useful model and invention patents issued in Russia. Moscow occupies the 45th place among 500 cities of the world in the Innovative Cities rating 2thinknow, +147 positions since 2011. Extensive infrastructure for innovative manufacturing and R&D facilities: – 27 technoparks and technopolises; – Special economic zone Zelenograd; – Innovative territorial clusters Troitsk and Zelenograd.

Developed real estate market Moscow’s commercial property pool:

75 thousand buildings

200 mtotalsqmfloor area

sqm 16 moffice spaces in Moscow, including 3.9 mn sqm — class A office spaces

18 %available office spaces

Average price for class A office space rent (Results for Q3 2016) EUR

361

per sqm per year

Average price for rent of space in technoparks:

163 96

EUR

EUR

14

per sqm per year for office spaces

per sqm per year for production sites

2. Why Moscow? I Competitive advantages for doing business in Moscow

Spare capacity of public utility infrastructure

50%

of energy supply capacity reserves

6.7

50%

of heat supply capacity reservices

thousand MW spare capacity for new power consumers in Moscow

50%

spare water supply and drainage capacity

Utility costs for businesses (as of September 2016): Electricity — EUR 0.06 per kW; Heat — EUR 20.2 per Gcal; Water supply (including drainage) — EUR 0.72 per cubic meter.

Advanced information and communication technologies

4G network covers over 99% of the city’s territory

EUR

0.52

per Mbps

аverage price of broadband Internet services

over 30 thousand public Wi-Fi connection points

households have 80% ofbroadband Internet

with an average speed of 20 Mbps

15

Advanced transport infrastructure airports: m passengers 5 international 78 Sheremetyevo, Domodedovo, in 2015 — passenger Vnukovo, Zhukovskiy and Ostafyevo business airport

17

federal highways leading out of the city The Moscow rail hub includes 2 ring railways and 9 radial railways

40%

transit freight (around 4 bn tonnes)

turnover of the Moscow air hub

3

river ports

2,700 km track length 60%

export and import products

EUR

0.54 petrol price

per litre

2. Why Moscow? I Competitive advantages for doing business in Moscow

Price competitiveness The rouble’s decline since late 2014 has led to substantial growth of ­Moscow’s price competitiveness compared to other big cities.

Business expenditures in EUR have dropped:

30%

40%

50%

for manufacturing companies

for high-tech exportoriented companies

for particular kinds of expenditures (wages, property rent)

These price benefits over peer cities are expected to hold strong in the mid-term.

Simple and transparent administrative procedures In recent years Moscow has significantly simplified the administrative procedures for setting up and conducting business. Establishing a company

Property registration

3 steps, 3 working days.

1 procedure, 5 working days.

Connection to electricity grids: 80 days and 0 visits for facilities with a capacity of 15–150 kW; 380 days and 3 visits for facilities with a capacity of 150–670 kW.

In the Doing Business-2017 dating, Moscow has risen 84 positions compared to 2010 and is now in 40th place.

17

Support from the Moscow City Government

Stable fiscal policy — a balanced budget, substantial investments in the development of municipal infrastructure (primarily transport) and an increase in the transparency of government contracting. Reasonable tariff policy — restrained tariff growth and the restriction of cross-subsidies. The growth in tariffs for business in Moscow in 2014–2016 was significantly lower than the inflation rate. Active investment policy — a favourable environment to attract investments from a variety of sources, ‘one-stop shop’ project administration, the mobilization of projects from industry leaders and international companies as well as the encouragement of publicprivate partnerships in the development of municipal infrastructure.

Ample financial capacity

22.3 1.0

EUR

bn Moscow’s budget in 2016

% of GRP Low regional debt

18

2. Why Moscow? I Competitive advantages for doing business in Moscow

Investment focused budget:

25%

70%

investment expenditures EUR

24.9

TIP costs — transport infrastructure development

bn

EUR

value of the Targeted Investment Programme (TIP) 2016–2019

8.1

bn

value of the city contracts with 20% of all purchases coming from small and medium businesses

Over 4 years (2016-2019), Moscow is to build:

478 km

117km

of new roads

800 new city facilities

of new lines

103

engineering structures

&

52

metro stations

59 pedestrian underpasses

In September 2016, the Moscow Central Ring was opened

54 km of lines

31 stops

Annual passenger traffic — 250 m passengers; An average of 260 thousand journeys a day 134 — modern electric trains; Integration with public transport (underground, ground transport); 15% reduction in the load on the Koltsevaya Metro line, 20% reduction in the load at central stations; Transport coverage of Moscow’s industrial zones.

19

3

Where to invest? Promising areas for investment

20

3. Where to invest? I Promising areas for investment

The Moscow City Government’s key goal is to attract industry leaders and investors to the city’s real economy.

Moscow is interested in attracting investments to: Sectors and projects that focus on phasing out imports and meeting domestic demand in Russia and the Customs Union nations; Export-oriented high value added sectors and projects; Public-private partnership projects in transport and social infrastructure and  the development of the New Moscow area.

Moscow offers beneficial tax rates and support to sectoral investors, industrial developers as well as investment funds and companies that finance transport and social infrastructure development projects, including public-private partnerships.

21

3.1. For industrial investors The goal of the Moscow City Government is to attract investments into the real economy, construction and extensive renovation of existing industrial enterprises and innovative infrastructure facilities.

New investment projects Beneficiaries: New projects with an investment amount of at least EUR 14,8 m. Investment phase — maximum 5 years.

Priority sectors*:

Pharmaceuticals and biotechnologies

Medical equipment and tools

Electrical equipment

Transport vehicles and car parts

Foods and beverages

Microelectronics and computer engineering

* Including but not limited to

22

Construction materials Information technologies

Research and development

3. Where to invest? I Promising areas for investment

Support mechanisms: Projects are implemented under special investment contracts with the Moscow City Government.

Support measures: Tax exemptions: Up to

25% — reduction of the total tax burden, including: Profit tax payable to Moscow reduced by 26% (12.5% instead of 17%); Property tax reduced by 100%; Land use tax reduced by 99% (0.7% of the sum of calculated tax); Land rent reduced by up to 99%.

Up to

60% — reduction of tax per 1 sqm of property.

Additional support measures: Guaranteed security from non-commercial risks. Potential allocation of land without tenders. Special terms for utility connections.

23

Guaranteed protection against non-commercial risks:

Guaranteed risks

Nationalization and seizure of property; Termination of land title or other property rights due to the actions of  the Moscow authorities; Unfavourable changes in Moscow legislation;

Impact of such circumstances for investor

Investor is incapable to deliver the investment project; Investor incurs a major loss: increase in implementation period by more than 18 months and/or cost increase of over 20%.

Unlawful actions (lack of action) by ­Moscow officials.

Out-of-court compensation from the budget of Moscow

24

3. Where to invest? I Promising areas for investment

Investment sites Land plots for industrial production More than 50 hectares of available land for new industrial facilities with connections to public utilities. 22 land plots manufacturing enterprises in open tendering or under elaboration

* map of land plots location

Technoparks and technopolises Ready-to-use spaces and business infrastructure for R&D projects and innovative manufacturing:

27

1,866 thousand sqm

technoparks and technopolises

total space

1,436 residents

38,000 work places

25

Industrial specialization: Information and telecommunication technologies;

Laser technologies;

Microelectronics;

Biomedical technologies;

Lighting solutions;

Pharmaceuticals and medical tools, etc.

Innovative materials, composites and coatings;

All information about technoparks is available at the portal investmoscow.info

* map of technoparks location

Advantages of technoparks in Moscow: ready to use premises for the projects; preferential rental rates; availability of land plots for construction;

26

preferential connection to utilities; access to shared centres (prototyping, certification, etc.).

3. Where to invest? I Promising areas for investment

Special economic zone Zelenograd Activities in the field of research and development, manufacturing of high-tech products. Special economic zone mode Without customs duty and VAT on imported foreign materials and equipment

160

ha

total area

15.7

available for construction

Free of charge connection to utilities

0

%

ha

Preferential terms of lease and possibility of land acquisition

Property tax

tax 12.5% Income (instead of 20%)

Transport tax

14

% Contribution to social security funds (instead of 30%)

Land tax

Administrative and business centre (16 thous. sq.m.): - 4 thousand rentable spaces, - innovative business centre, - personnel training and further training centre – technical university, - collective use centre (R&D-centre), - customs terminal. Innovative regional cluster Zelenograd: micro- and nano-electronics, electronic devices and equipment, IT.

27

3.2. For investment companies and funds Transport and social infrastructure Moscow has vast experience in public-private partnership projects.

Key areas of private investments: Construction of transfer hubs on new lines and at existing metro and city railway stations.

Projected construction of

271

transfer hubs

96 junction hubs 175 main hubs

Transfer hubs include service and commercial areas; Investors install all transfer hub facilities and hand over the service areas to the city; Return of investments through the lease and sale of commercial space (retail facilities, offices, etc.); The distribution right is competed for within the open auctions.

EUR

28

17.7

bn — expected volume of investments in the development of transfer hubs

3. Where to invest? I Promising areas for investment

Private investments in the development of social infrastructure — childcare centres, schools, healthcare centres, and cultural heritage sites.

Reduced rent of space for children’s educational centres and healthcare centres within walking distance of city residents’ study and work places (“One rouble per square metre”, “Doctor nearby”). Reduced rental cost of cultural heritage sites for reconstruction and preser­ vation projects (“One rouble per square metre” programme).

29

Development of New Moscow The main development driver for Moscow ­today is the ­utilization of new territories. The area of the Russian capital grew by 148,000 hectares in 2012 (2.5 times) due to the integration of the Novomoskovsky and Troitsky administrative districts.

148

thousand ha

were added to Moscow in 2012

Territory of Moscow before 2012 Territory of New Moscow

New Moscow has: Over a dozen major business and economic clusters

1.5 30

m people — expected population by 2035

Construction of 600 km of roads and 40 km of metro lines

1

m— new jobs will be created

3. Where to invest? I Promising areas for investment

Unique opportunities for investment projects in a variety of areas — from new innovative production enterprises to transport and social infrastructure facilities.

Support measures The Moscow City Government offers preferential terms for investors who implement their projects on the territory of New Moscow: ‘One-stop shop’ administration principle; Tax benefits and land lease benefits for priority investment projects; The active development of New Moscow’s basic infrastructure based on national ­programmes; Consistent demand from city residents and public sector; Additional guarantees to investors and coverage of non-commercial risks.

4

Who to contact? Information resources, development institutions and executive authorities

32

4. Who to contact? I Information resources, development institutions and executive authorities

The Portal is avalible in 5 languages:

English

German

Spanish

Arabic

Chinese

Point of entry for a new project in Moscow; List of ongoing and planned investment projects. Multifunctional platform for investors who do or would like to start a business in Moscow: Up-to-date statistics and analytics; Information on how to set up and do business; Government support measures; Industrial and innovative infrastructure. Access to the united electronic market place of Moscow: Information about all the tendered public property assets (lease, sale, etc.); Interactive map of traded assets; Tender documentation and tender calendar; Preview of assets to be tendered. Prompt and personalized interaction with the Moscow City Government. Investor’s personal account; Direct line.

33

Development institutions The Moscow city has a number of effective institutions that engage with investors. Their mission is to coordinate investors’ interests with the city’s development priorities and offer the  business community profitable projects and transparent mechanisms of engagement with the city. Moscow City Investment Agency www.en.investmoscow.ru/agency

The Moscow City Investment Agency is the authorized provider of investment projects support services based on the ‘one-stop shop’ principle in the Moscow City. The Agency promotes investment opportunities, advantages and achievements of Moscow; creating greater investment appeal of  the  city’s infrastructure and improvement of investment procedures; and project administration. The Agency seeks to introduce new forms of engagement with both domestic and foreign investors, builds effective cooperation among the public authorities, business and citizens.

Moscow City Innovations Agency www.inno.msk.ru

The mission of the Moscow City Innovations Agency is to draft and implement development programmes for the city’s high-tech sectors.

34

4. Who to contact? I Information resources, development institutions and executive authorities

Executive authorities of Moscow Moscow City Government www.mos.ru

Department of Economic Policy and Development of Moscow www.depr.mos.ru

Department of Science, Industrial Policy and Entrepreneurship of Moscow www.dnpp.mos.ru

Urban Development and Construction Complex www.stroi.mos.ru

Department of Transport and Road Infrastructure Development www.dt.mos.ru

Department of Competition Policy of Moscow www.tender.mos.ru

Department of City Property www.dgi.mos.ru

Department of External Economic and International Relations www.dvms.mos.ru

35

5

A city for comfortable living Urban environment

36

5. A city for comfortable living I Urban environment

Moscow is a modern metropolis that offers comfortable living conditions and is attractive for businesses. Convenient transport infrastructure Unified, integrated city public transport network

14 lines and 203 Metro stations, 31 MCR stations

Europe’s newest bus fleet. Average vehicle age: 1 year.

55,000 licensed taxis

Advanced retail and food & beverage infrastructure Over

30,000

11,000

shops, including more than 1,500 hypermarkets and supermarkets

cafes and restaurants

Educational capital of Russia: There are over 200 public and private higher education institutions (universities, institutes, academies, etc.) in Moscow. 1 m students. Specialized programmes of international schools: 9 institutions for international Bachelor degrees; 8 institutions of DSD (Deutsches Sprachdiplom); 4 institutions for Spanish Bachelor degrees; 14 bilingual educational institutions.

37

World-class cultural and historic sites World culture monuments and Russian national landmarks: Kremlin of Moscow; Bolshoi Theatre; Tretyakovskaya Gallery; Moscow Conservatory, etc.

1,500

8

thousand cultural heritage sites (10% restored over 6 years)

250

libraries

theatres and concert organisations

450

144

museums and exhibition halls

cinemas

17

m tourists visit Moscow every year

750

hotels and mini–hotels

An attractive tourist destination

40% rise in tourism since 2010 38

5. A city for comfortable living I Urban environment

Active development of event tourism: 2018 FIFA World Cup International military music festival Spasskaya Tower Moscow International Festival Circle of Light

With Moscow City Government support, Moscow Seasons festival events were held in 2016

50

m participants

Moscow Jam Moscow Cinema

City Day 869

Golden Autumn Fish Week

Trip to Christmas Back to School

Moscow Spring Our Product

Moscow Ice-cream

Information portal for Russian and foreign guests who come to Moscow is available in 6 languages.

Official Moscow guide

39

Building a comfortable urban environment is an absolute priority for the Moscow City Government. Over the past six years a number of programmes designed to improve the city’s infrastructure were implemented in Moscow:

Transport infrastructure development

>500 km

of new roads (12.5% increase in the length of main roads)

+21 stations were built (metro stations network is increased by 10%)

+156

overpasses and motorway junctions (25% increase in the number of engineering structures)

Purchased: over 1,600 carriages, more than 7,000 buses

Social infrastructure development:

+273

schools and kindergartens

More than

100

health and sports facilities

5. A city for comfortable living I Urban environment

Improved quality of public spaces

437

+212

203

>6,000

green areas created and landscaped

new parks were created

streets beautified

buildings façades were renovated

>15.5

thousand

facilities equipped with additional exterior lighting

High level of security

142

thousand video surveillance cameras are functioning

In terms of safety, Moscow is similar to European cities such as Stockholm, Barcelona, and Hamburg.

41

Notes

42

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