Russia masters high technologies

04.03.06

MOSCOW. (RIA Novosti political commentator Andrei Kislyakov.) - Russia
cannot develop nowadays without high technologies introduced in every branch
of its economy.

Priorities here are the aerospace, defense, 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 program 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 favorable 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 favorable 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 centers and technology parks
specializing 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 Center 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 centers. 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 centers 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 center 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 center
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 centers. 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 centers 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 centers. 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 center 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 rancor 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 center, 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 centers 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 organizations, 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 sq km in area) and for engineering promotion
(not more than 2 sq km). 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 sq km) were found. Preliminary choice fell on Shuvalovo, a
territory north-west of the city assigned to the Russian Academy of
Sciences' St. Petersburg Science Center 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 capitalization 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 favorable
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 program of support for
technology parks in information technologies, as President Vladimir Putin
initially sought? -0-