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Business news
Russia masters high techs
12.28.2005 15:42

high_technology Russia cannot develop nowadays without high technologies introduced in every branch of its economy. Priorities here are the aerospace, defence, nuclear industries, pharmaceuticals, biotechnology, and information technologies. Remembering that today, Russia is one of the leaders in information technologies and computer programming, the success of the government's innovative programme is beyond doubt.

Particularly successful has been the Russian method of writing computer software. The large number of available high-tech specialists helps to develop both information management systems inside the country and export such technologies at a good profit.

Russia could earn as much from such exports as from selling arms. An example is India, which annually exports up to $5 billion worth of software. But its macro-economic indicators are way lower than Russia's. Experts from the International Finance Corporation belonging to the World Bank Group estimate that given credible guidelines on high information technologies and technological services their export from Russia could rise from not less than $200 million dollars in 2000 to $45 billion in 2010.

It stands to reason therefore that it is the right time to think of a new generation of information technologies (IT).

Speaking at Novosibirsk's Science City in January of this year, President Vladimir Putin stressed that Russia has the required personnel and solid scientific backing for a breakthrough in this field.

This is just one example confirming the president's word: Russian-speaking specialists produce up to 30% of Microsoft software. This is both a proud and a frustrating fact. On the one hand, it demonstrates the brilliant qualifications of Russian-trained specialists and their creative thinking. On the other, we acknowledge that they work for another country.

In the opinion of Alexander Narinyani, director of the Russian Research Institute of Artificial Intellect, it is necessary to change the situation and rules of the game on the world information market, and fast. Today the market is worth $4 trillion and is the fastest growing in cost-benefit terms. Also, IT is the key strategic industry determining each country's ranking in the global breakdown of the next ten years. "As regards Russia, IT is not only a promising market sector, but also a branch that can catapult it back among the leading world economies."

Some role is also being played by the fact that the current growth of the present-day Russian market in information technologies is clearing the way for future expansion, since today it is more favourable to long-term investments than in any developed country. A mass of indicators confirm this - one is the doubling of the Russian market of laptops in recent years. Sales in this sector have grown over the last year more than threefold compared with West European countries.

But it is clear that a future national Russian IT project will not be able to cover (at least in its initial stages) all aspects of the information industry. So a choice of strategic priorities is needed. And software appears to be the most effective in cost-benefit terms in comparison with other IT components (microchips, the Internet and other networked systems, mobile communications, etc.). Software can become one of Russia's leading branches in the next three to five years. It does not call for heavy investments and at the same time can finance both the other IT sectors and alternative high technologies.

The world information market has been very favourable to Russia recently. Its present sidelined position may prove a healthy factor in triggering a rapid future explosion. The fact is that we are now approaching the end of a 30-year cycle of information technology development, a period which Narinyani describes as "vegetative." It was mainly concerned with technological developments to lower costs and scale down size. Today these possibilities are practically used up, and there is an inevitable phase coming concerning intellectual information technologies, where Russia is more firmly entrenched, and it will have the chance to work another "Russian miracle" - to land among the trend-setters in the IT industry. The Russian path should be one of pursuing qualitatively new avenues as yet beyond the horizon, but bound to provide the starting point as the next stage begins.

In short, what to do and where to move is clear enough. What remains to understand is how.

Task No. 1 is to adopt a law on special economic zones with appropriate infrastructure and tax breaks and set up centres and technology parks specialising in information technologies. The relevant law spent several years making rounds of the ministries despite Vladimir Putin's eagerness to have it adopted as soon as possible. It was not until the summer of this year that the federal government endorsed it and referred it to the State Duma.

At the president's bidding, the government also promised to "speed up" updating bills dealing with intellectual property, because innovation is becoming almost illegal in the absence of a regulatory framework.

The president okayed, as a first step towards a special economic zone in Novosibirsk's Science City, the establishment of a Siberian Centre for Information Technologies, backing the move with a pledge to allocate budget money.

Novosibirsk, together with Moscow and St. Petersburg, is among the main Russian programming centres. It boasts more than 200 IT companies, with 40 of them grouped in non-profit partnerships Sibakademsoft and Informatsia i Tekhnologii. Sibakademsoft alone produced $50 million worth of software last year with a staff of 1,500. Seven of the Novosibirsk higher educational establishments train IT specialists in 22 professions with an annual output of 1,500-1,700 graduates. The sum needed to implement the Siberian IT project with principal venues in Science City and Novosibirsk and affiliates in other scientific centres of the Russian Academy of Sciences' Siberian branch works out at 6.3 billion rubles ($219.82 million), including 2.6 billion rubles ($90.72 million) from the budget.

Early returns are expected: the Siberian branch's management estimates that the centre may be producing $120-150 million worth of output by the end of 2006 and $500 million by the end of 2010. In the opinion of Academician Nikolai Dobretsov, chairman of the Siberian branch, the Siberian IT centre is a first-priority project, since the Siberian institutes have the required theoretical background and a developed telecommunications structure. Capital outlays needed are relatively small, while capacities can be easily built up with resources from other regional research centres. Besides, the brand of the Siberian branch is widely known in the world.

St. Petersburg's information technology community is offering its version of IT parks. The northern capital has laid a good groundwork for high-tech: 66 innovation technology centres and one innovation industrial complex, four technology parks with a high proportion of IT enterprises and four more similar parks on the way. The city helps to develop innovation and technology centres. For the first time the St. Petersburg budget is allocating money on a tender basis. True, we must get our terms right: as distinct from an innovation technology centre where science intensive firms rent space with easy terms, in technology parks they buy out the land and become owners of buildings and equipment, presupposing a higher level of autonomy and prosperity.

Opening the Norwecom-2005 exhibition, Russian Information Technologies Minister Leonid Reiman spoke of the establishment of an IT park next to the Bonch-Bruyevich University of Telecommunications as a foregone conclusion. The IT community not without rancour noted that Bonch was just lucky to be in the right place at the right time - under the ministry's wing.

On the other hand, speaking of the specifics, it makes no sense to increase the number of IT parks. Telecoms have no frontiers or guarded fences to cross. Smaller IT parks may be situated on the territory of different universities and research institutes, but will coordinate their work between themselves in getting not only orders, but also preferences from the city and/or the federal centre, at least initially.

No wonder three years ago LETI Electrotechnical University, seeing that IT firms were most effective in its technology park, suggested that the St. Petersburg government set up a city-wide information park on that basis. In fact, that same IT park which is being formed today as an integrated structure is being built on the networked or distributed principle.

St. Petersburg, perhaps of all cities in Russia, is game for such integration. In addition to Bonch and LETI, University of Information Technologies, Mechanics and Optics, the Ioffe Physical-Technical University (a federal-level technology park), the Russoft Association of Software Developers and others are offering "offshoot" projects. Even without state support these and other centres will mushroom, but at random and maybe getting in each other's way. It is the task of administrative bodies to stimulate and steer this growth through standard legal and information channels.

The city's research, academic and industrial design organisations, it was said at a meeting chaired by Nobel-prize winning Academician Zhores Alfyorov, should work out a joint strategy for IT parks. The discussion was continued at an enlarged meeting of the Scientific and Technical Council of the St. Petersburg government - given new realities such as the federal government's endorsement of a draft law on special economic zones in Russia.

Two types of zones are stipulated by the draft bill: for industrial production (not more than 20 square kilometres in area) and for engineering promotion (not more than 2 square kilometres). In the case of St. Petersburg the latter is more relevant. They are called upon to provide incentives for the development of high technologies through tax preferences (the uniform social tax will be cut to 14% from 26%) and customs breaks (materials and equipment will be brought into the zone without paying any taxes or fees if they are to produce goods for export). Funding for the establishment of zones is to come from the federal budget (starting in 2006) and from regional budgets on a 50/50 ratio. It has been tentatively decided to establish five such zones, including one in St. Petersburg, and the city authorities have agreed.

But within city limits few "greenfield" patches of the required size (not more than 2 square kilometres) were found. Preliminary choice fell on Shuvalovo, a territory north-west of the city assigned to the Russian Academy of Sciences' St. Petersburg Science Centre in 1995. At that time it had an area of 445 hectares. Today 340 hectares of it is left, but that is enough for a national IT park.

A stone's throw away is the Physical-Technical Institute with its science education center and new Academic University, Polytechnic University, Institute of Electrophysics of the Russian Academy of Sciences, Svetlana and Pozitron electronic enterprises, not far away there is another university - Electrotechnical university - and also the institutes of high-molecular compounds and silicate chemistry. An ideal version is to have a technology park across the road opposite the University such as at Shuvalovo, for example. Alfyorov proposed to set up a technology park for the development and manufacture of micro and optic-electronic devices called Global Dialogue with money from German investors.

Shuvalovo will be developed stage-by-stage. Early estimates indicate that property and infrastructure for the first 50 hectares will call for $400-500 million. It will come from a variety of sources.

St. Petersburg is no doubt interested in such a zone because it concerns the development of high technologies and a provision for qualified jobs. But tight-sealed special economic zones and all-invasive Internet technologies and partnership ties are wrong bed-fellows. Oleg Byakhov, director of the department for the strategy of building information society of Russia's Ministry of Information Technologies, is frank: "... it is an inconvenient mechanism for us. An IT park is a third type of special economic zone, but the law found no room for it. Not accidentally the University of Telecommunications dropped from the short list of those seeking law-envisaged benefits."

But there is also a different point of view. "Unfortunately," says Reiman, "the feeling among some of our colleagues is that IT parks are an alternative to the special economic zones proposed by Russia's Economic Development and Trade Ministry. This is not the case. Special economic zones are an economic instrument of territorial development covering many sectors of the economy, and not only the IT industry. The mission of IT parks is more finely-focused and specific: to insure that vibrant IT companies could grow and increase their market capitalisation in Russia, something which is hamstrung now by tax complications. Special economic zones are not rivals of or alternatives to IT parks. IT companies can function both inside and outside special economic zones."

The real truth, however, is that a technology park is science, education and business all rolled into one. It has some elements of self-development, but also needs external stimulants. In the view of Vladimir Vasilyev, chairman of the St. Petersburg Council of Rectors, these stimulants are "a favourable investment climate, a venture fund with state capital to encourage private investors, a service infrastructure to act as an incubator for innovation companies because only few of them prove successful. It is, lastly, equal conditions with competitors at the minimum." Indeed, Indian IT companies pay export taxes at 6% of the cost of their products, while Russian ones about 50%.

In the words of Oleg Byakhov, Russia's current Minister for Information Technologies, his ministry sorely needs a positive experience of building IT parks throughout Russia. So why not add the logic of the St. Petersburg IT community as a pilot project to a special federal programme of support for technology parks in information technologies, as President Vladimir Putin initially sought?

Andrei Kislyakov, RIA Novosti analyst

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