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Business news, 05.05.2006 11:24

With Kremlin backing, oligarchs invest in Russian electronics

electronics There may finally be hope for investors seeking opportunities in the Russian electronics market, according to a Russian official.

Alexander Kurlyandskiy, general director of Electronintorg Ltd., said government plans and diversification by oil and gas oligarchs is spurring investments in Russian high technology development.

"The government has proposed a partnership between the state and the business community, and has approved a three-year economy development plan that forecasts economic growth above the world average," Kurlyandskiy said here at the 15th annual International Electronics Forum. The Forum is the first to be held in the former Eastern bloc country where Soviet tanks crushed the first democratic seeds 50 years ago.

"The government has decided on joint development of high tech to be applied to healthcare, social infrastructure, education and agriculture," he said.

To that end, six special economic zones have been approved targeting high-tech development (Zelenograd and Dubna, St. Petersburg and Tomsk) and production (Elabuga and Lipetsk). Another is planned in the Russian enclave in the Kaliningrad Region.

Under Kremlin guidance, Russian oligarchs are investing in major electronics centers like Zelenograd, the former Soviet Union's Silicon Valley. "Everybody is coming to realize that investment in just the country's vast natural resources is not the way to proceed. Diversification of the economy must be encouraged," said Kurlyandskiy.

Kurlyandskiy added that all four major application areas—IT, telecom, automotive and consumer—have shown steady growth. The Russian IT market is estimated to have reached $10 billion in 2005. Sales are up 25 percent over two years, and several Russian OEMs are among Europe's top tech companies. They include R&K, Formosa, Aquarius and Kwazar.

The telecom market grew 25 percent last year to $21 billion while growing Russian auto sales have fueled the domestic auto electronics market. Most Western TVs are now assembled in Russia while Korean TVs are assembled in Russia and exported to European countries. Sitronics, the largest TV manufacturer in Russia, is aiming for $1 billion in annual sales this year.

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