Offset contracts became a new tool to support manufacturing localization in Moscow

Moscow is one of the largest manufacturers of pharmaceutical products in Russia. Today, there are 32 large and medium-sized enterprises producing pharmaceutical products, 82 research institutes, and 243 medical facilities.

Pharmaceuticals and medical products are the priority areas for localization of production in the capital. 38 resident pharmaceutical companies are located in 10 Moscow industrial parks; and 2 residents, 6 companies have the status of industrial complexes in the territory of the special economic zone (SEZ) ‘Technopolis Moscow’.

Artem Barashev, Deputy Director of the Moscow City Investment Agency, stated:

“Offset contracts have become a new tool supporting the localization of production in Moscow.  They assume government procurement with investment obligations. For the investor, the offset contract is a guarantee of the sale of localized products and inclusion in the regional register of sole suppliers. For the city, the conclusion of an offset contract helps to achieve whole range of goals: for example, import substitution in socially important areas, guarantee of uninterrupted supply of products, saving budget funds for the purchase, because the price of purchased products goes down as a result of competitive procedures.”

Moscow signed the first offset contract with Biocad CJSC in October 2017. Its terms provide for localization of 22 drugs (oncology, immunomodulators) in the city of high-tech production and their subsequent delivery for 7 years for 14 billion rubles. The volume of investments will be at least 3 billion rubles. The investor has been granted the status of a resident of the Technopolis Moscow SEZ, the owner of the territory where production will be located, a land lease agreement has been concluded, and the design of the plant has been completed. By the end of 2018, construction of pharmaceutical facility will begin.

In late September, the second offset contract for the supply of drugs in Moscow was summed up: the contract will be signed with OOO R-Opra. Within 4 years, the company localizes the production of 31 drugs (international non-proprietary names) with their subsequent delivery to the city. The drugs are intended for the treatment of cancer, psychiatric, lungs and heart diseases, as well as for multiple sclerosis and chronic renal failure.

“More than half of the drugs that Moscow will acquire under the second offset contract are not produced in the territory of the Russian Federation. Drugs of the three international non-proprietary names will be localized as a full cycle production. The estimated volume of investments under the second offset contract will be about 5.87 billion rubles,” said Mr. Barashev.

The potential mechanism of the offset contract is not limited to pharmaceuticals. Promising areas for the signing of offset contracts in Moscow are also medicine, vehicles, equipment and materials for construction, computers and telecom equipment.

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