MOSCOW INVESTMENT STRATEGY May 2014

2 CAPITAL INVESTMENTS in Moscow Source: Russian Federal State Statistics Service (RFSSS) bln. US $ Private, demand- driven 59% 26% Budgetary (infrastructural) Private, competitive 15% ,4 24,1 29,1 39,339, , Source: IBM, Moscow City Investment Agency MOSCOW INVESTMENT STRATEGY

3 INVESTMENT STRATEGY: OBJECTIVES AND RESULTS 45% To attract private investments into spheres traditionally funded by public funds To improve investment climate for private investments, considering social and urban priorities of the city To increase volume of private direct investments, to improve competitive position against international peers MOSCOW INVESTMENT STRATEGY Private, demand-driven Budgetary (infrastructural)Private, competitive 25% 30% 59% 26% 15%

4 INVESTMENT CLIMATE: STRONG POSITION AND RISKS Economic, political and business center of Russia and the CIS The largest distribution market in Europe Favourable geographic location, regional logistic hub Solid and balanced city budget, high credit ratings “New territories” potential Budget’s dependence on “capital rent income” Increasing international competition for investors Increasing international competition for highly skilled labor Decreasing Russia’s economic growth rate Условия ведения бизнеса Skilled workers, a high proportion of the population with a higher education Developed financial market (compared with other Russian regions) “Russian gateway to abroad” Advanced IT infrastructure Considerable scientific potential Russia’s general problems associated with a low level of property rights protection and inefficient justice system Deterioration of the image of Russia’s business climate internationally Limits to cost reduction Место для жизни Rich historical heritageVast opportunities for recreation Positive growth of public spaces (parks, pedestrian zones) Relatively low crime level High cost of living (especially for foreign employees) Overuse of urban infrastructure (e.g. congestion) Relatively low quality of social services (compared with global peers) Potential business opportunities Business environment Comfortable place to live Strong positions Risks MOSCOW INVESTMENT STRATEGY

5 INVESTMENT STRATEGY: OBJECTIVES To attract private investment into areas traditionally funded mainly by budgetary funds, for example, by involving in the economic turnover inefficiently used city properties (education, health, transport, culture, etc.). To create highly paid and highly productive jobs (technology parks, science parks, and industrial parks). To develop Public Private Partnership (PPP) projects. POTENTIAL BUSINESS OPPORTUNITIES Cost reduction of business operations by simplification of administrative procedures, improvements in tax system, etc. Competition development and enforcement of clear «rules of the game» Creation of infrastructure facilities for project realisation Development of flexible state support system Promotion of Moscow’s investment image IMPROVING BUSINESS ENVIRONMENT Balanced infrastructure development Creation of comfortable urban area A COMFORTABLE PLACE TO LIVE IN MOSCOW INVESTMENT STRATEGY

6 STRATEGY IMPLEMENTATION: MEASURES AND PRIORITIES General measures, aimed at improvements in the city’s investment image in general Specific measures, aimed at attracting investments to priority fields MOSCOW INVESTMENT STRATEGY

7 GENERAL MEASURES: BUSINESS OPPORTUNITIES BUSINESS OPPORTUNITIES Attraction of private investors into areas traditionally funded mainly by public funds Involvement in the economic turnover of inefficiently used city properties Reduced rent of city property in priority sectors Public Private Partnership (PPP) projects Subsidies for public services to private organisations Long-term contracts (Lifecycle Contracts) Support for investment projects Creation of highly paid and highly productive jobs Support measures for priority sectors Technology, science, and industrial parks creation The inflow of investment and job creation by improving the existing business environment MOSCOW INVESTMENT STRATEGY

8 GENERAL MEASURES: BUSINESS ENVIRONMENT MOSCOW INVESTMENT STRATEGY

9 GENERAL MEASURES: A CITY TO LIVE IN Moscow – a comfortable city to live in Balanced infrastructure development Balanced urban policy Changes to the city planning rules and regulations Development of a polycentric city structure Creation of parks, pedestrian zones, etc. Integrated development of territories (including comprehensive redevelopment) Expansion and modernisation of transport infrastructure The development of the public transport system Intelligent traffic management systems Reorganisation of parking space Creation of a comfortable city environment Improvement of social service quality (education, public health service, etc.) Service improvements of Government organisations Increased private sector involvement Public security The development of a legal residential rental market Saving the city’s historical heritage Restoration of cultural heritage sites, using funds by private investors (preferential rent) MOSCOW INVESTMENT STRATEGY

Priority fields Transport Infrastructure Health & Education New EconomyTraditional IndustryFinancial & Business Services Wholesale, Retail, LogisticTravel, Hospitality, Leisure & Sport, Urban Environment Housing & Utilities

MOSCOW INVESTMENT STRATEGY Field priorities OBJECTIVES AND PRINCIPLES: Improvements to the transport situation in Moscow; smoothing of key burdens on a city budget; development of Public Private Partnership mechanisms; promotion of new technologies, including administrative; creation of a united transport system for the whole Moscow agglomeration. Transport infrastructure OBJECTIVES AND PRINCIPLES: Promotion of private sector growth, competition development, quality improvement and price reduction, creation of new facilities; attraction of foreign investors with competencies which are lacking or insufficient in Moscow; creation of attractive projects for private businesses considering city’s interests. Social sphere (education & health) PRIORITIES: Reconstruction and modernisation of existing healthcare services, using PPP mechanisms; support in construction of private health services using funds of private investors; using private investment for creation of preschool and school facilities, using PPP mechanisms; attraction of private investments to high-school and professional education; promotion of education programmes recognised internationally. PRIORITIES: Tube development; public transport modernisation; development of railway services ; long-term purchases of trains; creation of transport hubs; road building, including different forms of PPP. TOOLS AND MEASURES: Concessions, long term purchases (lifecycle projects) and other forms of PPP; building transport infrastructure using special Moscow investment program. TOOLS AND MEASURES: Reduced leasing price (1 rub per 1 sq. m); subsidiaries for private businesses providing services for Muscovites; concession s and PPP mechanisms; consultation and support.

MOSCOW INVESTMENT STRATEGY Industry priorities OBJECTIVES AND PRINCIPLES: Creation of well-paid and highly productive jobs; development of knowledge intensive spheres ; attraction of international investment; increase in production and export of high-technology products with greater added value; building infrastructure for innovative industries. «New economy» OBJECTIVES AND PRINCIPLES: Optimisation of industry territories, increasing efficiency; increase in competitive industries; restructuring of inefficient enterprises. «Traditional industry» TOOLS AND MEASURES Concessions for investments; elaboration and approval of documents concerning urban areas that cannot be redeveloped; subsidies to compensate costs for personal training. PRIORITIES: Upgrade of existing industries and increase in their productivity; introduction of energy saving technologies; improvements in safety and environment facilities. PRIORITIES: Electronics, microelectronics, nanoelectronics; development of new materials, laser-based and radiation technologies; aerospace complex; pharmaceuticals (as related to research and development); telecommunications and information technologies; other spheres. TOOLS AND INSTRUMENTS Creation of infrastructure for technological and industrial parks; tax privileges for residents of science, technological and industrial parks; subsidiaries for innovative companies; consultation and support.

MOSCOW INVESTMENT STRATEGY Industry priorities OBJECTIVES AND PRINCIPLES : Integrated land development: accommodation, infrastructure, employment within walking distance ; creation of economic conditions attractive for investors considering city’s interests; maintenance of cultural heritage objects and their involvement in the economic turnover. Urban area OBJECTIVES AND PRINCIPLES : Upgrade and develop municipal infrastructure; transition to financing of engineering public infrastructure by using funds of utility service providers. Public services PRIORITIES : Electricity, heat and gas supplies; Develop and upgrade collector facilities; water-pipe and canalisation facilities; clearing and processing waste water; unified lighting area development; creation of network of public toilets. TOOLS AND MEASURES : Long-term contracts; Public Private Partnership mechanisms. TOOLS AND INSTRUMENTS : Elaboration of redevelopment projects; attracting private investment into renovation work and maintaining the sites by offering them for long- term lease; consultation and support. PRIORITIES : Redevelopment of existing territories; renovation of cultural heritage; involvement in the economic turnover of shabby objects ;

MOSCOW INVESTMENT STRATEGY Results Investments in capital ($ US bln.) Foreign direct investment (%) Competitiveness index of the cities in the world (The Global City Competitiveness Index), Moscow Private investment in education (% to 2012) Private investment in health services (% to 2012) GRP per worker (% to 2012) OVERALL RESULTS Opportunities for business 32, / % % % % % % % % % 2025 Moscow in Innovation Cities Top 100 Index 74/

15 REALISATION PLAN: SHORT-TERM PROJECTS (EXAMPLES) MOSCOW INVESTMENT STRATEGY Transport: Life cycle contracts to purchase rolling stock for the Metro; PPP in building and maintenance of Northern Back-Up for Kutuzovsky Avenue; Creation of transfer hubs (255 overall). Education: Reduced leasing rate for private schools and kindergartens (40 objectives in ) Health services: Reduced leasing rate of 1 rub per 1 sq.m for «Doctor Round the Corner» project; Concession projects. Urban area: Reduced leasing rate for cultural heritage; Old industry modernisation. «New economy» High-tech: Investment proposals and state support: Zelenograd, special economic zone, Moscow Technopolis, innovation cluster and other infrastructure for innovative production.