Over the past seven years, Moscow has strengthened hand as one of the most attractive cities in the world for investment. The city is open to investors and today is the best moment to swing into this hypersonic train of new Russian manufacturing.
Today the whole world is glued to TV-sets watching the FIFA World Cup held in Russia. Moscow hosts a few key games, including a final one, at Luzhniki stadium, one of the most legendary and largest arenas in the world. It has been redeveloped for the World Cup by Moscow authorities along with other works, including transportation, hospitality, etc. In total the city has invested about $5 billion so that thousands of guests from all over the world would make themselves at home.
Over the past seven years, Moscow has strengthened hand as one of the most attractive cities in the world for investment, ranked 5th among European cities in FDI attractiveness according to FT. Since 2010, direct investment has grown by 80%, reaching $ 33 billion. The economy of the Moscow agglomeration is one of the largest along with New York, London, Seoul and Paris. In 2017, PWC has put Moscow second after Beijing in its first global ranking of agglomerations.
What is a formula for success? It lies within consistent policy of building and unlocking city’s potential even in the situation of high political uncertainties. It all started with the assignment of the Mayor Sobyanin in 2010. New team has set a new strategic goal of Moscow becoming one of the top global cities in the world. It meant that city governance must be rethought and restarted fully. Environment, infrastructure and resource must meet today’s needs and requirements and comply with international standards. To this end, the city began to invest into infrastructure for investment, improve investment climate, pursue liberal policy for business, implement strategic thinking, attracting world’s leading experts and still relying on its own resources.
What is Moscow offering today?
It is hard not to mention attractiveness of Moscow. Here are just some key facts:
· Consumption: Moscow consumption level is third in Europe and is in top-20 worldwide;
· Real Estate: minimum capital rate for offices is 9-10% whilst it is just 3-5% in leading European cities;
· Business: top-20 business hubs in the world: more than 60% of transnational corporations have its offices in Moscow (Paris – 56%) and the number of business has grown by 50% for the last five years;
· Finance: Moscow stock exchange is the largest in the CIS, Eastern and Central Europe;
· Technologies: Moscow ranked top-7 as smart cite according to The ICF.
Unlocking hidden potentials is the core
Existing Moscow context has become a key capital for city’s development. Moscow population keeps on growing both due to migration and natural increase. There are more than 9 million employed, half of them having higher education. There is a huge amount of various scientific centres, known worldwide with a proud history of winning Nobel prizes over Soviet and modern periods, where a third part of all Russian scientists work. Cultural heritage attracts tourists from all over the world: more than 22 m people have visited Moscow in 2017. Geography and capital status determined Moscow as one of the largest transport and logistics hubs in the world, including 5 international airports, 3 river ports, 9 railway stations, and 17 directions for federal highways. And finally, the city’s territory by itself has a huge potential for further development: industrial production used to occupy 20% of city’s area, one of the largest in the world, while recent streets’ reconstruction in the central zone has decreased vacancy rate by 2.3 what just proves a huge capacity of existing capital.
Key solution – new approach to management of resources
A new philosophy was brought in with the arrival of mayor Sobyanin and his team: investors and business should feel comfortable and confident, the outcomes must be predictable, and there must be opportunities to capitalise for further growth.
Moscow has started consistently advancing the dialogue with business. It made possible to optimize bureaucratic processes and improve legislation for businesses. Clear and transparent competitive mechanisms were introduced into the city procurement procedures. Most of state services were digitalized and transferred to one-stop shop format, for instance, the city’s investment portal, where a potential investment can apply for the auction of one of 2000 city’s assets in a few clicks.
Moreover, the city has created various tax and financial incentives for businesses to invest. The city may act as a guarantor for sales of goods of a business via offset agreement. The city government has also run a few programs, providing subsidies and warranties for new business and investors.
The city also focuses on developing specific territories and infrastructure for business to allocate their offices and production. Today, there are 33 science parks in the city with a vacancy rate just of 5% (for instance, there are 33 science parks in London and South East of England combined). The city has established SEZ Technopolis Moskva, where the tax burden can be reduced by 47% for its residents and there are significant subsidies for construction and technical connection loans.
Finally, Moscow invests actively by itself. The city has adopted a strategic planning document until 2020 which is revised every year – Address Investment Program (AIP). The Program lists all the city’s investment for the next three years, address by address. Transportation, social infrastructure, recreation and housing are key areas of the Program. AIP encourages private parties to invest in urban development leading to a multiplier impact for the city’s economy: for every public rouble spent three roubles of private investment attracted. So in total the city has awarded PPP contracts for $13 billion for the last five years.
Up next – megaprojects as drivers of the future
Moscow will keep on growing and actively investing into its development. For the last eight years Mayor’s office has gained much of valuable experience, skillset and knowledge and managed to build a sustainable basis for transferring to new governance approach – city development through megaprojects.
According to AIP it is planned to develop more than 600 facilities with total investment of $25 billion. One of key driver for the next 15 years would be city’s housing renovation program. The programme implies construction of 16 million sqm of housing, total investment would exceed $50 billion. International Medical Cluster at Skolkovo is being under construction, more and more industrial lands to be reprogrammed, Moscow City, a shiny financial district, would be developed further, a new amusement park by Dreamworks to be completed by the end of this year. Moreover, the city has launched a few megaprojects for transportation system: new LRT and urban commuter train systems are announced, forthcoming Moscow metro development is planned to be the most outstanding in its history, Sheremetyevo and Domodedovo, Moscow largest airports, would be redeveloped.
Moscow urban development potential is one of greatest in the world. During the next 15–20 years Russia’s capital will steadily overtake Paris, New York City, London and others. The city is open to investors and today is the best moment to swing into this hypersonic train of new Russian manufacturing.
© 2018, paradox. All rights reserved.