Russia’s silicon valley

Russian history advances in concentric circles – repeating the same mistakes (or courageous attempts). Once more the Russian government believes that lust and money is enough to realise the qualitative changes that the Russia economy needs.

The Kremlin (official residence of the President of Russia) plans to build up, in four years, a technology cluster situated 20 km west of Moscow called ‘Innograd Skolkovo’. This business hub will focus on research in five priority areas: energy, information technology, communication, biomedical research and nuclear technology.

In February, President Dmitry Medvedev announced the project as part of his modernisation policy for the country. Russia considers the development of the high-tech and innovation sector as a top priority, pledging 2.5 billion Euro to finance the area.

They hope that Skolkovo will attract prominent Russian and foreign scientists, and businessmen. Viktor Vekselberg’s appointment as the head of the project indicates that President Medvedev wants the research centre to be developed by the Russian private sector.

The science and technology centre will be constructed on a 370 hectare site outside Moscow, near the recently created Skolkovo business school. Companies and residents will have unprecedented tax benefits lasting for ten years, or until annual revenues reach 3 billion Rubles. There will also be tax breaks on land, transport and VAT.

In order to speed up the launch of the Skolkovo project, the Russian government has ruled that participants may begin to work using the area’s tax benefits without moving to Skolkovo until 2014.

Plan of ‘Innograd Skolkovo’ new Russian technology cluster

The Russian government has also simplified visa regulations for foreign high-skilled specialists interested in the project. The approved candidates will be applicable for a three-year Russian visa and will initially get a single 30-day business visa after submitting an application.

The Head of the Duma committee for constitutional legislation and state construction, Vladimir Pligin, believes that “the proposed changes to remove bureaucratic barriers will help to attract intellectual assets to our country and, in particular, to the Skolkovo Research Centre.”

However, Piotr Dutkiewicz, a professor at Ottawa’s Carleton University, notes that Russia’s traditional ‘coercive-intensive’ model of modernisation may have had some successes under Tsar Peter the Great, for example, and under Stalin but while it may be a good way of building smelters and steelworks, it is not suited to develop an economy based on innovative products and technologies. The ex-Soviet scientific base has already deteriorated – Russia submitted about as many new patents last year as the US state of Georgia.

Russian scientist Zhores Alferov, winner of the Nobel Prize in Physics 2000, heads the scientific and technical council overseeing the Skolkovo project. The council is also being co-chaired by the US biochemist and professor of structural biology at Stanford University School of Medicine, Roger David Kornberg.

Pure foreign investments have usually been channelled into the oil and gas sector and the metal smelting industries, so they are still going strong. Life is much harder for the real estate and trade sectors, but this type of investments is not absolutely essential for Russia.

Direct foreign investments in the first half of this year amounted to a mere 5.5 billion dollars, an 11 percent fall over the same period of 2009. Sergei Aleksashenko, a former Russian deputy, central bank chairman and analyst of the Carnegie Centre, says corruption is like rust eating through the hull of Russia’s economic ship.

The central question is whether the Russian society will get any real benefit of this modernisation initiative. According to Russian journalist Yulia Latynina, “no benefit to the society will be given without a political change in the country. They can reduce the bureaucracy, but the project can not be successful without fighting the corruption and implementing the rule of law.”

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