Moscow has taken the lead in the rating of the provinces with the most attractive climate for investments
Russia’s capital city has for the 4th time taken the lead in the state’s national rating of the investment climate in sub-federal entities of the Russian Federation of the Agency of Strategic Initiatives. Moscow has been in the top three of the said ratings since 2017, as reported by the city’s investment portal.
The rating estimates the efforts of provincial administrations in the creation of a favorable environment for business and identifies best practices. The outcome of the ratings stimulates competition for investments on a provincial level.
Moscow’s current share is almost 18% of total Russian investments in owner’s equity and about half of the direct foreign investments in Russia. At the end of 2021 the investments value in owner’s capital had increased by 19 percent and came to 4.8 trillion rubles.
Investments in the capital city economy are on the rise
Investments in tangible common equity of the capital city from January until March 2022 were 713 billion rubles, which is 4.8% above corresponding indicators of the previous year. Moscow’s share is 17.8% of the total of Russia’s investments. The majority of the funds go to machines and equipment – 37.6% of the total investments in fixed capital.
The increase in the volume of investments in owner’s equity of the city has been determined, among other things, by support measures, rendered to businesses by the city. Companies that had gained Techno Park status, status of industrial complexes, and Techno Park anchor residents could reduce the tax burden by 17-25%. Companies with such status have received, during the previous 5 years, 112.8 billion rubles. A similar support mechanism has been applied to novel investment projects. Presently, 137 Moscow companies have the right to receive various benefits; these are 64 industrial conglomerates, 42 Techno Parks, 18 anchor residents, and 13 investment priority projects.
TECNOPOLIS MOSCOW will accommodate two new electronics production firms
The resident companies, operating in the microelectronics and optics domain intend to launch both facilities in the territory of the special economic zone TECHNOPOLIS MOSCOW and the investors have contributed to new enterprises above 1.3 billion rubles.
As such, one of the companies at Alabushevo Park will start to develop and manufacture high precision electronic metering devices and systems for temperature metering. The devices are planned to be produced out of Russian raw material and components and are intended for the utilization in commercial metering of heat and thermal efficiency.
One more resident company has constructed a high tech plant at TECHNOPOLIS MOSCOW for production and assembly of electronic modules and circuit boards for modern computers, mobile phones, and appliances. This year the company is planning to commission a building and by next spring, the production shops will be fully operatational.
The TECHNOPOLIS MOSCOW special zone includes five venues. One of them is in Pechatniki, the other four: Alabu- shevo, Micron, MIET, and Angstrem in the city of Zelenograd. The total production floor area is 550000 sq. m.
In the territories of the Special Economic Zones (SEZ), more than 200 high tech enterprises are being localized; these are pharma, instrument making, and micro-electronics. The value of investments in the SEZ-located enterprises exceeds 75 billion rubles.
Special support measures are being rendered to the residents. Therefore, they are exempt from property, transport, and land taxes and customs duties. The property tax rate for such enterprises is only 2%.
The capital city’s machine building industry demonstrates sustainable growth
Moscow’s machine building industry increased by 77.4 percent during the period January–April 2022. The quantity of shipments during the aforementioned months grew by 42 percent and was worth nearly 50 billion rubles.
This type of growth is due to the development of Moscow industries as well as the high demand for Moscow goods in Russia and abroad. Positive dynamics in this segment has continued since last year: in 2021 the plants boosted production of goods almost four-fold, as stated by the official site of the Moscow Mayor.
There are 249 machines and equipment manufacturers in Moscow, 47 of them are large and medium. All of them can count on the broad support of the city. The Moscow fund for support of industry and entrepreneurship accepts applications from companies for preferential loans for replenishment of working capital and realization of investment programs. In March, a decision was made to funnel 10 billion rubles into the fund.
Foreign companies are selling their assets with at least 50 percent discount
Alexander Shokhin, the head of the Russian Union of Industrialists and Entrepreneurs (RSPP) declared at the organization’s convention that the discount for selling Russian assets of foreign companies is at least 50 percent.
At the same RSPP convention, the Ministry of Finance head Anton Siluanov explained that governmental commis- sion on foreign investments would permit the sale of assets of foreign companies if the application for selling complies with two conditions. A company must receive approval from the relevant agency for selling an asset and the buying of it by a Russian business and provide a discount of at least 50% from the last market value. “If they wish to leave, let them incur losses while exiting this asset”, – stated the minister.
Foreign companies are leaving the Russian market after the beginning of the special military operation in Ukraine. Some of them infer that this decision is due to complications of operating in Russia under the sanctions of the West, which impose restrictions on financial transactions, trading, and logistics.
New personnel recruitment services are offered in the capital city
From 2017, the total number of vacancies in Moscow grew by four percent or by 288 thousand, passing a benchmark of eight million. – Professionals employed in the IT domain, construction, retail, science, and finances.
In four years the number of vacancies in public governance has decreased – by 7 percent (18000 people), in finance – by 4 percent (26000 people), and in retail–by 1 percent (140000 workers).
The increase in headcount of employees is being supported by wage dynamics.
The average wage rate of healthcare staff and social workers increased in four years by 52.9 percent, administrative workers by 51.8 percent, and salaries in the IT sector grew by around half. In addition, we observed a significant growth of wages in education, public governance, finances, and insurance – by more than 48 percent. The slowest was the increase of personal revenues in transport and warehousing – by 22.7 percent.
The capital city government is developing state support programs and offering new and effective staffing services to employers and optimal variants of employment to applicants. There are about 330000 mass and niche vacancies for applicants in the consolidated database of the Job Exchange. More than 15 thousand new jobs were created by 140 companies, participating in the state support system.
Seventy foreign banks from 12 countries have joined with the Russian analogy of SWIFT
The Russian Central Bank is ready to invite any foreign banks to use the financial messaging system (SPFS), declared the regulator’s head Elvira Nabiullina, at the convention of the Russian Union of Industrialists and Entrepreneurs (RSPP). According to her, 70 foreign organizations from 12 countries have now joined up with the financial messaging system, yet their names are not disclosed due to the threat of secondary sanctions. The regulator is ready to connect everyone to the system – it has got technical solutions.
The Bank of Russia’s financial messaging system (SPFS) was developed in 2014 as an analogy of the international banking system SWIFT after Russia had annexed Crimea and the question of disconnection of Russia was raised for the first time. More than 11000 financial organizations in more than 200 countries are members of SWIFT. The SPFS includes around 400 users, such as Russian and overseas banks and companies.
In the eyes of experts from the Institute of International Finance (IIF), SPFS will cover the needs of domestic payment traffic but the capacity for international transactions will be severely limited, necessary international coverage for transactions will not be provided even by linking with the analogous Chinese system SNAPS.
Number of private investors on the Moscow Exchange has exceeded 20 million
By end of June 2022, the number of individuals owning brokerage accounts at the Moscow Exchange had exceeded 20.4 million (+629.2 thou- sand in June), and they had opened 34.2 million accounts.
In June 2022 more than 1.9 million people transacted on the stock market.
Private investors trading stocks volume share in June was 74%, trading bonds volume – 25.2%, forex spot-market volume – 10.6%, and forward market volume – 72%. In June, the number of opened personal investment accounts (IIS) had exceeded 5.5 million. From the beginning of 2022 turnover in the IIS was 961.3 billion rubles; out of total turnover structure 88.7% was stocks trading, 3.5% – bonds, 7.8% – Exchange Traded Funds.
Regions – the leaders in number of opened IIS: Moscow (613000), the Moscow province (342.1 thousand), and St. Petersburg (266.5 thousand).
In June 2022 the most popular securities in portfolios of private investors were shares of Gazprom (30.4%), com- mon shares and preference shares of Sberbank (20.3% and 5.9% respectively), Nornikel shares (11%), Lukoil(8.5%), Surgutneftegaz preference shares (6.6%), MTS shares (4.9%), Rosneft (4.8%),Yandex (4.2%), and NLMK(3.4%).
Analysts have improved forecasts for Russia’s economic decline
The recession in Russia is perhaps not as bad as it was expected to be at the beginning of the year, mostly due to the volume of oil production, which softens the effect of western sanctions. Bloomberg is writing about this, referring to renewed economists’ forecasts. Economists with JPMorgan Chase & Co. have improved and revised their forecast for a decline in the Russian economy twice – from March’s 7% to a decline of 3.5%.
Expectations were improved by other analysts, including Citigroup experts and other large banks’ experts, according to Bloomberg. Clemence Graffe, the Goldman Sachs economist in his analytical report noted: ‘…indicators of activity point at significant economic potential for improvement of the bank’s forecast as well as the expected decline of the economy by 7% in 2022.
‘The boxer keeps moving after being knocked down, – was noted in conversation with the agency by chief economist of the EXPERT RA Anton Tabakh, – the knock-down has happened but was substantially offset by comfortable export prices, even considering discounts and the capacity of the budget to invest money into the problem’.
The main recovery driver is oil production, which shrank soon after the beginning of the special operation, but in June grew by 7% in relation to minimums, thanks to domestic demand and the shifting of resource exports to Asia, stated Bloomberg. Gas production has not yet returned to the pre-crisis levels, although fuel price increases have provided higher sectoral revenues, the agency stated.
Will there be a Russian crypto-currency trading floor?
The State Duma’s financial committee head Anatoliy Aksakov declared that Russian crypto-currency trading floor might be created within the Moscow Exchange, reports INTERFAX.
‘Certainly, there must be a crypto exchange, created in compliance with the Central Bank’s strict regulations. I will allow it to be a subdivision of the Moscow Exchange, and this subdivision will operate under a reputable organization that has solid traditions and is accustomed to actively interacting with the CB’, – said Aksakov at press conference.
According to him, the Moscow Exchange will be best equipped to manage operations with digital currency.
However, Aksakov is skeptical about electronic money. Last week the head of the financial markets committee compared interest in crypto-currency to a gambling addiction. Also, as reported, the lower house of Russian parliament has enacted a statute on the regulation of digital financial assets (CFA), which prohibits, among other things, to pay for goods, works, and services in Russia. Excluded are cases provided by federal statutes.