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Challenge to turn Moscow into financial center

Challenge to turn Moscow into financial center
Moscow authorities have taken up the challenge of turning the city into international financial center by 2016. The metropolis should undergo significant changes in its skyline and infrastructure.Experts say the goal may be difficult to achieve.

­The Ministry of Economic Development in a report points out that nearly all of Moscow's infrastructure should be rebuilt. The Ministry says the infrastructure is only 40% formed if compared to the world’s biggest financial centers, such as London, New York and Singapore. 

According to the experts, the development program will be financed by Moscow, the Federal budget and other financing sources.  In 2012 Moscow will spend nearly 20 billion roubles, and about the same amount in the years up to 2016.

As part of the highways reconstruction program 19 major roads will be modernised. Main roads will have new tunnels, flyovers, crosswalks, some highway sections will be extended and traffic signals modernised.  “In the last 5 years the number of cars has increased from 2.5 millions to 4 million, but the number of roads and communications remained the same”, said Moscow Mayor Sergei Sobyanin.

In order to increase traffic capacity public transportation will be improved, mainly by providing bus lanes and free park and ride facilities. The program could improve traffic capacity between 10% and 50%.

In 2011, 14 park and ride facilities with capacity for 6,500 cars were built near subway stations. Government plans to construct another 15,000 places for park and ride in 2012. In the first seven months of 2011 Russians bought 1.5 million cars which is 1.5 times more than in 2010. “According to our estimations we will get about 4.4 million cars in Moscow by the end of the year”, says Vladimir Tomchak Deputy Head of the Metropolitan State Traffic Safety Inspectorate. Experts say at the moment only 40% of cars can be parked in the Moscow center.

The Moscow government plans to extend subway lines by 8.5 killometres in 2012 and by 2020 it plans to construct 98 killometres of subway tunnels and open 44 new metro stations. In 2011 government opened four new subway stations. Three of them were built in the south of Moscow and connected two lines, so that the journey time for passengers from suburbs to the center was cut to 30 minutes from an hour. 

The Russian Government points out that foreign specialists at the Moscow international financial center should be provided with high-quality housing, which requires hotel development. In December 2011 Moscow announced a hotel construction contest. The winner should take into consideration the surrounding infrastructure and the cost of the project. Hotels in Moscow are too expensive. Even though the 3-star rooms make up 42% of the market, it’s still not enough since the average price of those rooms has reached $215/day.

According Irina Tyurina from Russia’s Union of the Tourism Industry, the problem lies in the price of land in the capital. “The pay-back period takes longer for cheaper hotels and faster for expensive ones. So to put it simply – building 3-star hotels in Moscow is not profitable,” says Irina Tyurina.

Office real estate is another important Moscow problem. According to a Colliers International report in 2010 office construction decreased by 85.5% and amounted 970 thousand square meters. In 2011 the figure will be the lowest in the last 7 years – 680 thousand square meters. Meanwhile the average rental rates increased by 10% (A class) and 6% (B class) – up to 825$ and 480$ per square meter respectively.

"We plan there will be no mass office construction in the center of Moscow”, says Sergei Levkin head of the Moscow Town-planning Department. In this respect the capital government contemplates developing the suburban part of the city in order reduce pressure on the Moscow business center.

The International financial center also requires developed air transportation. At the Moscow Airport Hub conference dedicated to Moscow airport reconstruction plans it was decided that by 2020 the traffic capacity of the three main Moscow airports should be increased by 100 million people per year from current 50 million passengers.

“Present figures are close to the traffic capacity limit. Airport traffic tends to increase, thus reconstruction is highly necessary”, said PM Putin at the conference. It’s planned to create integrated facility on the base of Sheremetjevo and Vnukovo airports, and expand Domodedovo airport with new runways.

Michael Kardash from Moscow Economic Policy and Development Department says the City of Moscow is not an international financial center per se. “In the latest world cities ranking Moscow is 68th out of 72 cities”, he says. “It’s important to finalize basic infrastructure construction – engineer, transport, social infrastructure by 2016”, adds Marina Ogloblina Moscow Government Minister.