NOTHING VENTURED

Moscow is becoming a great place for developing industrial manufacturing

The establishment of technoparks is becoming one of the key trends when it comes to Moscow’s development. The appearance of yet another space begs the logical question: how is the Technopolis METMASH project different from the rest?

Here is what Alexander Pirozhenko, CEO, Center of Metallurgical Machine Building, VMM Holding Company, says: “We are creating the first industrial park in Moscow, and perhaps in all of Russia, that focuses on the latest metalworking technologies. We chose to focus on this because it has historically been our area of specialization. The territory that has been occupied by VNIIMETMASH Institute of Metallurgical Machine-Building for over half a century houses about 150 small and medium size enterprises, including 20 diversified tenant companies, and we wanted to create a more comfortable environment for them.” VNIIMETMASH, as a prominent resident of the industrial park, should become a point of attraction for companies that are connected to us through the production chain or through collaborative intellectual product projects. We are currently holding negotiations with several potential participants who are interested in relocating to our space.

Are there any foreign companies among them? What about this project interests them?

We are just starting our project, and right now the ratio of foreign companies to Russian companies is about 60:40. From the foreign business side, the interest is primarily coming from companies that are planning to localize production. As you know, because of the sanctions Western companies cannot sell certain types of equipment to Russia. But the sanctions don’t have any effect on setting up assembly lines for equipment inside the country. Naturally, companies that want to develop their business in Russia because they see a lot of potential in our market want to take advantage of this window of opportunity.

Can you give any examples?

For example, we have the company KOSKO, which is the exclusive distributor for the Italian company Bonetti. Last year, Bonetti Construzioni Meccanice S.r.l. decided to expand its presence on the Russian market and set up a full cycle production plant for bandsaw machines through KOSKO under the auspices of the Technopolis METMASH project. This is how the enterprise Bonetti Opus Rus, the first resident company of the industrial park, was set up. This company is not only our tenant, but also our client because we we make the frames for their equipment on our plant. We would like to establish similar working relationships with other resident companies as well: that is, to not only rent out the space, but also collaborate on the development of joint production activities.

What is the total area of the industrial park? What does it have today and what can we expect in the near future?

The total area amounts to 17.5 hectares. It houses our engineering center, which employs about 200 designers (about 2,000 visit or work in this space on a daily basis). Moreover, there is the experienced plant VNIIMETMASH, which can perform just about any kind of metalworking activities and make parts of varying complexity. We plan to incorporate about 100,000 square meters of space into the industrial park development program. We need to assess which buildings can be renovated and which buildings need to be torn down and replaced with modern industrial or office buildings. If the tenants need warehouse space or other auxiliary facilities, we are prepared to erect them as well. There is also potential for further development. The city authorities have given us a permit that allows us to double in size, to 230,000 square meters.

Is your engineering center the proprietor of this area?

No, the land is owned by the Government of Moscow: they own 100% of our industrial park’s shares. Therein lies the guarantee for its development in the aforementioned industry. It is no secret that a lot of developers would like to purchase spaces here in order to erect residential buildings. Taking into account the high cost of housing in Moscow, this could be very profitable. But this approach would disrupt the harmonious development is the city, which must have room for both residential housing and places of employment. This is why the city government, specifically the Department of Science, Industrial Policy and Entrepreneurship, does not allow the area to be converted into a residential space.

What advantages can a company that decides to have a plant here expect to receive?

The main advantage is our plant, which I already talked about. This is one of the few machine building enterprises in Moscow with a multipurpose machine pool, which we plan to use as the future shared metalworking space. This base can be used, for example, to make equipment ordered by industrial enterprises in Moscow, which there are a lot of because our city continues to be a major industrial center with a large number of hitech machine building enterprises. This is a sizeable market segment that is always generating orders for parts, replacements, and components. Right now, a lot of these orders have to be fulfilled outside of Moscow. Because of this, timelines for projects have to be extended and costs for logistics and transportation go up as well. Thus, a company that is able to fulfill these types of orders in Moscow automatically has a competitive advantage.

Some people say that having an industrial plant in Moscow doesn’t make much sense. You have to pay more for everything - land, rent, services, the cost of living here is higher and so are the wages. What do you think?

Moscow is undoubtedly an expensive city. Still, it makes sense to have this type of business here. Today, the cost of renting a space at VNIIMETMASH is comparable to the rent prices for industrial spaces in the neighboring regions. We plan to raise the rent prices as the quality of spaces and infrastructure improve, along with services for tenants. But this shouldn’t be anything significant for the resident companies we are targeting, especially considering the benefits they will receive in return. For them, the most important thing is having the opportunity to attract a qualified workforce. Considering the fact that we are in a historically industrial area of Moscow, there is no problem with finding qualified employees at all. If the employer is ready to pay good salaries, they will be able to find highly qualified experts in any profession.

Of course, an investor can choose another location for a plant, where everything will be cheaper. But in this case the company will have to figure out where to get qualified employees, where to house them or how to set up transportation for them. All of this sometimes amounts to expenses that can override the money saved on capital investment.

Will the capacities you currently have need to be upgraded?

This needs to be done. Our machine pool is a bit out of date. The machines themselves are quite reliable, work well and allow us to produce equipment that meets all quality requirements. But the speed isn’t that great, and we would also like the machines to be more up to date in terms of automation. We are already taking steps forward in this regard. Thanks to support from the Moscow government, which provided us with a grant, we have an opportunity to start upgrading our equipment. Among other things, we plan to acquire a machine that will allow us to increase the finishing quality of parts.

In your opinion, who can invest in the development of an industrial park and what kinds of incentives can they count on?

This depends on the concept, which is currently under development. The logic is that investors can be companies that are interested in the acquisition or long-term lease of industrial facilities in the park. Banks can also provide funding for investments. For example, Sberbank has a program called “New Industrialization,” which allows clients to attract long-term financing at preferential rates. The Moscow authorities and the Government of the Russian Federation also subsidize the interest rates on loans for the development of industrial park infrastructure. Moreover, the investor gets a return on the funds spent on infrastructure development. We consider these methods and incentives to be sufficiently effective.

Is it difficult to get to the industrial park by public transport?

In this sense, we have positive changes to look forward to. In 2018, there will be a new metro line that goes here. One of the stations, Stahanovskaya, will be located practically inside the industrial park. Today, people can already use a recently launched mode of above-ground transportation - the Moscow Central Circle (MCC), which I use frequently myself. The trip to the closest MCC station takes about 5-7 minutes. Do to the rapid rate of development in this district, future plans include the establishment of a major transport interchange hub, as well as the construction and expansion of roads. So our space has a lot of advantages in terms of access to public transportation.

What prompted you to start working on the Technopolis MATMASH project and why are recent graduates involved in the project, as opposed to experienced project managers?

I came to VNIIMETMASH two years ago. Prior to this, I worked in various Russian government institutions for ten years. I grew a bit weary of the endless cycle of documents and reports - everything that has to do with bureaucracy. I wanted something practical. I am very grateful that the Moscow government gave me this opportunity. Of course we’re launching this project at a difficult time. The institute and experienced plant are going through a challenging time. After all, during the Soviet era it was a big engineering center for metallurgy both domestically and internationally. Now we’re changing the team around and focusing on young people, putting faith in their energy, fresh outlook, and ability to find original solutions. After all, the country’s future is in the hands of young people, who will draw on all the best things developed by previous generations.

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