Moscow to choose a medical devices factory investor

Russia’s capital has announced a tender for the right to make an offset contract with municipal authorities for creating the first national large-scale production of a broad range of medical devices for ostomy patients. The knockdown bid is RUB 8.6 bln ($132 mio).

“The investor in this new modern production of medical devices will be established by the competitive procedures by the end of this year and an offset contract for 10 years will be concluded with this investor who over three years will have to invest no less than RUB 1 bln ($15.3 mio) in this Moscow project. The investment as such will envisage two stages, given varying degrees of complexity of the manufacturing processes. The produced medical devices will be supplied to meet the needs of the municipal healthcare for eight years,” Vladimir Efimov, Moscow Vice-Mayor for Economic Policy and Property and Land Relations, said.

To implement the project under the contract, the investor is to use either its own or borrowed funds. Moscow government will in turn offer various benefits available under the current local system of investor support, such as provision of land plots or ready-made industrial facilities for rent, tax relief, etc.

“To date, Moscow has already completed two offset contracts in pharmaceuticals with Biocad and R-Pharm. The contracts stipulate production localization in the city and the subsequent supply of medications for treating oncology, cardiology, and endocrinology diseases and of immunomodulators. The aggregate investment in two offsets is RUB 8.8 bln ($135 mio), the anticipated supply scope is RUB 32.4 bln ($496 mio),” Alexander Prokhorov, Head of the Moscow Department of Investment and Industrial Policy, noted.

Offset contracts signed earlier have proved their cost-efficiency for the municipal budget since competitive procedures resulted in their initial (maximum) prices’ reduction by a total of 36%. Currently, those projects are being implemented at the special economic zone in Moscow’s Zelenograd district.

The two pharmaceuticals production projects and the anticipated medical devices production project all aim at import substitution.

“Under offset contracts, government agencies undertake to procure goods for municipal needs whereas investors undertake obligations to localize their production. The purpose of offset contracts is to stimulate private investment in creating new enterprises or modernizing existing industrial facilities in Moscow. Offset contracts may be made for up to 10 years subject to a minimum investment of RUB 1 bln ($15.3 mio) and an obligation to supply goods of exclusively Russian origin,” Leonid Kostroma, Director of Moscow City Investment Agency, explained.

The authorities of the capital city intend to also make offset contracts in industries such as transport engineering, manufacturing of machinery and materials for housing and public utilities, IT equipment, medical products and food.

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