GUIDING LINES: A Word for DIPS


There seems to be three possible scenarios for the future of the agency. One could see the organizational structure of DIPS remaining unchanged, with Vladimir Resin – first deputy mayor of Moscow who oversees the city’s construction industry and currently runs the directorate himself – inviting an outsider to fill the vacant post or appointing one of the directorate’s officials, with Mayor Yuri Luzhkov’s approval.

Alternatively, DIPS may be merged with the Department for Town-planning, headed by Resin. The third scenario could see the department, bereft of its influential chairman, under the supervision of Yuri Roslyak, also a deputy mayor in the Moscow city government.

Basically, each of these three scenarios seems realistic. But the question remains as to how such developments will tell on the state of the city’s market for new construction projects, and whether they will entail a remodeling of the market.

Should the first scenario prevail, nothing is likely to change. The only exception being that the strong Soviet-era manager whose verbal guarantees were enough for a number of banks to extend a 1 billion ruble loan overnight (Krasnyansky said so himself) will most likely be succeeded by a modern type financier or a marketing expert. It should be remembered that DIPS only had the financial safety net of the Moscow city government for the first 12 months of the department’s existence. When those guarantees expired, the department evolved into a purely market-based structure making money for the city. And a significant amount, too.

The second variation looks almost certain to fail. Considering his large workload Resin is unlikely to find time to pay enough attention to DIPS’ affairs, while the nature of the management role is such that once the units merge the leadership’s attention to each of them wanes. This means that DIPS’ revenues will probably start to fall, with the city failing to fulfill its plans for construction in full.

But what kind of construction? For example, nowadays DIPS is dealing with the problems of rehousing residents from the Khrushchev-era five-story blocks, known as ‘pyatietazhka’. It seems logical that the agency in charge of development should be the one to take charge of rehousing. Even more so as it was Leonid Krasnyansky himself who promised that all the re-housed would be provided with residential space in the same area of the city. But this issue is more likely to fall under the jurisdiction of the Department for Residential Policy and Municipal Housing, or DZhP and MZh respectively. Wouldn’t it be easier to transfer DIPS’ revenues to the city budget and then to allocate funds to DZhP for the construction of new housing?

Well, actually no, it wouldn’t. Disregarding the struggle between the various agencies for finances, it should be noted that DZhP, just like many other structural divisions of Moscow city hall, does not have the opportunity, technical facilities or experienced subcontractors to examine the buildings, sites and soil where communication lines need repairs, or to take clear-cut decisions as to when buildings should be dismantled, renovated, or left untouched. Last year alone DIPS decided against renovating over 100 sites, ruling, after extensive examination, that the buildings situated there were in a normal condition, requiring neither emergency repairs nor a major overhaul, although other governmental agencies had reached different conclusions.

On the other hand, DIPS has always enjoyed a special status on the market compared to other participants. The department secured sites for construction under decrees from the Moscow government, not through tenders, and was allowed to invite contractors without holding tenders as well. The city center was officially assigned to the department as a sole investor… Of course, private investors complained about the practice.

But Moscow, even in relations with the federal authorities, has always defended its interests. For instance, it never allowed federal-owned companies to buy land plots; threatened those who ventured to do so; obliged them to secure permission for new construction, and banned the laying of additional communication lines. Therefore, if he doesn’t want to, the mayor does not have to reckon with private investors. If that is indeed what he wants.

There are other problems, as well. DIPS has, over time, become the agency in charge of all the important real estate projects. Thus, it was charged with development of the Atrium shopping mall near the Kursky train station and other commercial real estate properties, with hotel construction in other cities… The question arises: why? Can nobody else cope? After all, DIPS was established for other purposes – for the construction of housing in Moscow.

Again the problem of allocation of sites arose. In line with the new rules of the game a city investor must take part in tenders. But DIPS is still in charge of preparing the documentation for sites in the city center. Thus, it transpires that DIPS issues permission on behalf of the city, incurs considerable expenses, transfers paperwork to Yuri Roslyak’s department, and then itself makes a bid.

The third scenario may seem the most logical one. DIPS – currently a part of the city’s construction complex – will be moved to the economic bloc, because making money for the city is exactly what DIPS has been doing for some time now. But if this happens, DIPS will either preserve its privileged status as compared to other economic entities – which will of course bring about well-founded complaints from market players and antimonopoly authorities, or, on the contrary, it will face obstacles thrown in its way for the benefit of companies with close links to the Moscow city hall.