Moscow creates smart investment opportunities


Investment decisions are regarded as the most important and sophisticated as soon as they imply assessment of potential opportunities and risks associated with a number of different factors and trends. Often, when deciding on an investment, an investor takes into account the ease of solving administrative issues and the tax rates in the certain region. From this point of view, Moscow is now recognized as one of the most comfortable cities for investors among seven major cities with emerging economies.

This fact is confirmed by the recent PricewaterhouseCoopers (PwC) report. The study “From Moscow to Sao Paulo“, which was held for the third time, revealed socio-economic advantages and disadvantages of Moscow, Beijing, Mexico City, Istanbul, Sao Paulo, Mumbai and Jakarta. According to the managing partner of PwC in Russia Igor Lotakov, these cities are now characterized by high development dynamics in many respects, they accumulate intellectual capital and leading-edge technology – the key wealth of the modern civilization.

Moscow scored 338 points, or 11 more than the Chinese capital (2nd position) and 46 more than Mexico City (3rd position). Russia’s biggest city took first place in five of the 10 indicators used in PwC analysis. These five indicators, which are critical for any modern urban center, are Intellectual Capital and Innovation, Technology Readiness (here Moscow and Beijing scored an equal number of points), Transport and Infrastructure, Sustainability and the Natural Environment, and Demographics and Livability. That’s more than any other city, with improvements in four and a consistent performance in another five.

This also proves that Moscow is becoming really comfortable city for its residents. “There is the concept of “New Urbanism” which promotes new kind of urban planning policy, new style of urban development. The idea is that we should not forget about the people. We should create walkable neighborhoods containing a wide range of housing and job types. To this end, a comfortable environment should be created. This is a global trend, and Moscow is moving in this direction,” the Mayor of Moscow Sergey Sobyanin noted in his interview.

In accordance with PwC report, the most notable of these improvements for Moscow is in Ease of Doing Business, where the Russian capital advances three places. Moscow, which moves up from fifth place to a second-place tie with Beijing, leads in Ease of Starting a Business and Tax Efficiency.

According to the recent Ernst&Young survey on Moscow construction sector regulations, the city authorities have made significant progress in lowering administrative barriers. Result of this work is particularly evident in construction industry, which is one of the drivers of economic development of Moscow and the whole country.

The city is interested in attracting investments to construction sector, including foreign ones, therefore the city authorities are implementing the program on reducing excessive bureaucratic burden for developers and investors. The large-scale reform in construction industry of the capital which was carried out in 2015, significantly reduced the number of required steps for obtaining a construction permit. Moreover, almost all state services related to construction can be obtained in electronic format.

This year the city authorities has launched a new set of measures named “9 Steps From Project to Object“. Construction of low-rick objects, involving simplified procedure provided in the Construction Code, will take minimum effort: 9 steps, 99 days and 0.9% of construction cost. The figures speak for themselves: according to World Bank estimates, in 2006 real estate developers of Moscow were forced to go through 49 approval procedures, and in 2016 only 19 of them remained.

Due to effective actions taken by the city government, Moscow gained a number of new competitive advantages on the global investment market. For example, in the January-June 2016 the cost value of doing business in US dollars decreased by 30-60% compared to the first half of 2014. Moscow actively supports companies of the real sector. For example, in 2015-2016 the Government of Moscow has adopted measures which will provide industrial complexes and technoparks a 17 – 25% decrease in the overall tax burden.

By means of these and other measures Moscow boosted up to 10th position in the Investment Attractiveness Rating of Russian regions. But the best indicator of the high investment attractiveness of Moscow is the fact that, according to the Bank of Russia, in 2015 Moscow has received 65 billion US dollars of foreign direct investment. It is worth noting that the share of Moscow in total investment in fixed assets in Russia exceeds 11%, and this figure is constantly increasing. Thus, in 2015 the volume of investments in fixed assets in Moscow amounted to more than 1.6 trillion rubles.

According to the Mayor of the Russian capital, “the best cure for the crisis is a continuation of the adopted programs, persistence of development, maintenance of construction activities, investment, including budget funding. Given that budget investments encourage investments from business. That is why neither in 2014 nor in 2015 there was no decline in the volume of investments in Moscow”.

The volume of Targeted Investment Program of Moscow in the years 2016-2018 amounted to 1.23 trillion rubles. Of these, more than 800 billion rubles (70%) are aimed at development of transport infrastructure, more than 200 billion rubles (20%) are meant for development of social services. In the next three years it is planned to open 36 new metro stations, to build 323 km of roads, more than 120 objects of social infrastructure, 2.2 million square meters of new homes. The priorities are clear: the main goal of the authorities is to make life of citizens more comfortable. Working hard to achieve this goal, Moscow is open to cooperation with all interested participants.

During the VI Moscow Urban Forum Mayor Sergey Sobyanin told about a number of urban mega-projects relating to construction of transport infrastructure, development of Metro, renovation of industrial zones, landscaping and redevelopment. The city is interested in investments and offers both domestic and foreign businesses to participate in a number of major and profitable projects.

NEW MOSCOW. In 2012, 148 000 hectares of land of the southwest suburbs were attached to Moscow. The new Moscow territories comprise two large urban okrugs – Troitsky and Novomoskovsky, which now bear the common name of “New Moscow”.

New Moscow today is a sweet spot for investors and developers, being a large-scale project, which provides an opportunity to develop the city in the next 20 years. It is planned that by 2035 the volume of private investment in development of New Moscow will amount to 5 trillion rubles. With regard to urban development, the New Moscow will be equipped not only with bedroom communities, but also with the major centers of business activity. The urban development potential of this area is huge enough – 100 million square meters of real estate.

INDUSTRIAL ZONES. Another major investment opportunity is a program of comprehensive development of industrial zones located in the city. Industrial zones in Moscow occupy 18.8 thousand ha, of which at least 4.7 thousand ha can be redeveloped to become new city districts. For instance, only one redevelopment project of the former plant “ZIL” with the area of 333 ha includes large-scale construction of several tens of thousands of square meters of new homes, office and retail facilities, sports facilities and social infrastructure.

Over the past three years more than 1 million square meters of real estate is commissioned annually on the territories of former industrial zones of the city. Besides “ZIL” the major development projects include “Tushino” (2.3 million square meters of real estate) “Nekrasovka” and “Rudnevo” (10.5 million square meters of real estate).

MOSCOW CENTRAL RING (MCR). The project involves the reconstruction of the Moscow railway ring, which is situated close to the historic center of the capital, the purpose of reconstruction – launching passenger service on it. Moscow central ring line will be included in the system of the Moscow Metro. According to preliminary calculations, about 250 million people a year will use the new railway line. The reconstruction is planned for completion by 2020.

The Moscow Central Ring will also serve as a key to logistics development of industrial zones in the center of Moscow. Development potential of the MCR area is estimated at about 750 thousand square meters of commercial real estate, including hotels, retail and office space.

TRANSPORT HUBS (TPU). Investors can also take note of the opportunity to participate in the program of construction transportation hubs (TPU). These projects involve not only organization of the system of convenient interchange between all types of public transport, but the creation of shopping areas, office and other facilities on their territory. The program provides construction of 271 TPU, 175 of them will be built as capital constructions. The estimated volume of investment for implementation of these projects up to 2020 amounts up to 3,000 billion rubles.

The volume of direct foreign investments accumulated in Moscow’s economy before January 1, 2016, amounts to 173.6 billion dollars, including participation in the capital – 91.1 billion dollars (53%), and debt instruments – 82.5 billion dollars. However, the Moscow authorities draw no distinction between domestic and foreign investors. The Government of Moscow do not change the rules for the “game” giving all players equal opportunity to participate in economic and social development of one of the largest cities in the world and ensuring the most favorable form of cooperation to achieve mutual benefits.