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Moscow infrastructure development

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Moscow’s Own IFC Criteria

10.10.2011 / Izvestia

Russian government wants to promote Moscow as an international financial center (IFC). This requires a scale of criteria, similar to the existing Western analogues, but drawing on local specifics, left out of the picture in Western reports.

In March, the President gave orders to the Ministry for Economic Development and Moscow city government for groundwork to be finished by 30 September – with a finalized list of criteria for Moscow as IFC. Government source said that the list has been prepared by the Ministry for Economic Development and forwarded to the Moscow city government.

According to the plan, the capital will have its own KPI (Key Performance Indicator). The city will have a clear and detailed plan aimed at moving up in foreign ratings. The KPI will be used as a guide by foreigners to judge Moscow’s advantages as a financial center.

The Ministry for Economic Development has listed factors that will serve as a basis for the KPI. Interestingly, Moscow is well-developed in terms of education, internet coverage, public transport system and parks, according to the study. However, finance indicators are lagging behind – and they matter most when it comes to IFC.

Moscow has been on the IFC list for years. Z/Yen Group placed Moscow #61 out of 75 last week, seven places up, but nothing to write home about yet. Source says the KPI factors are over a hundred. Every aspect of city life is there, from security and transport to waste disposal and entertainment. The list has been approved and forwarded to the city authorities.

The Mayor’s Office department for Economic Policy and Development confirmed this.

“State program for economic development is almost ready and approved, this program includes development of Moscow as IFC. On 11 October the program will be presented”, said a department official.

The approved list of criteria was followed by a tender for KPI system development on 29 September, with terms including one year and 67 million roubles. No contractors have applied so far.

Rating agencies know nothing of the tender, saying that this is a likely task for research institutes.

The Mayor’s Office department for Economic Policy and Development states that city life will be monitored for KPI compliance and necessary adjustments will be made to state programs.

IFC-supporting experts say the KPIs are a good idea.

“I think the decision is right”, says General Director at IK BKS Yuri Mintsev. “I think there is a chance for us to improve our ratings with the KPIs. Goals will become clearer (they are not really clear and measurable today) and responsibilities will be distributed. Moving to #48 from #61 will be a good achievement.

However, as before, nobody asked the IFC participants opinion. Nearly everyone else’s opinion was taken. IFC criteria development source says that “absolutely everyone” was approached. The shortlist was complete with most ministries, city authorities and some companies. Still, not everyone volunteered. According to source, ideas came from a mere two dozen. Some said they had nothing to add. Most – a vast majority – stayed out.

Some of these non-participants were approached for comment. Some said they had not even heard about it and had no clue. Only Opora Rossii Entrepreneurs Union had this to say: “We need to get a clear picture of future Moscow”, said Union President Sergei Borisov. “The bones first, then there will be meat. We will definitely take part. Our foremost concern is switching from trading to full-scale services provision. Today, small and mid-size enterprises are underdeveloped, which is not enough for Moscow to claim IFC status”.

Market participants say the KPIs should feature legislation, which fails to protect investor interests.

“Investor rights protection, capitalization of infrastructure – stock exchanges, depositaries, brokers etc must also be on the agenda”, says Yuri Mintsev. “This is the major KPI in my opinion. Traffic jams matter too. But I think Singapore has similar jams, yet their rating is so much higher than ours”.

Igor Moryakov, General Director of Moscow Partners, is of the same opinion, saying that practically non-existent market infrastructure should also be taken care of as soon as possible.

Project Group №5