New centre of attraction

The Skolkovo innovation village, often called “Russia’s Silicon Valley”, has joined forces with more than 600 partners. One of the latest companies to join is IBM, which has signed agreements to drive innovation in Russia and establish a science and technology centre employing up to 150 technical staff by the end of this year.

IBM and Skolkovo plan collaborations in the oil and gas industries, and business analytics technologies to improve road safety.

Construction of the innovation centre only began a year ago. The founders have high hopes that it will become not only the engine of the Russian economy, but a major player in global research and development. 

Sceptics have branded the whole concept a pipe dream but, as more and more big-name companies sign up, their criticism appears misplaced. 

The place is already making its mark in the Russian consciousness. Skolkovo as a brand is widely known; it is responsible for more words with the prefix “nano” popping up in everyday language, along with the use of the buzzwords “innovation” and “modernisation”.

Skolkovo has also revived an older Russian acronym: NIOKR, which is the Russian equivalent of research and development. It refers to a full-cycle research centre where scientists come up with a new technology, build a pilot product, test it and, if the test is successful, begin mass production. 

In the United States, US$382.6 billion, or 2.7 per cent of its GDP, is spent each year on research and development. In contrast, Russian firms spend just a little over US$23 billion, which is 1 per cent of GDP.

The centre will be located near the village of Skolkovo, 3km west of the Moscow Ring Road. An area of 370 hectares - and in future, probably more - will host 1,200 partner companies and a population of 40,000. The design of the Innovation Center borrows the principles developed at the Shanghai World Expo two years ago: primarily, a combination of ecology, infrastructure and the latest technological advancements. 

The Innovation Center is one of those projects that takes time to gain recognition. It is essentially a huge business site that brings together foreign investors and start-ups, and not just young entrepreneurs but more often young scientists. In other words, it has three functions: to support the Russian scientific community, to attract foreign investments, and create a competitive environment in the hi-tech field.

Roman Romanovsky, Skolkovo’s operating director for key partners, says: “Our main task is to create the most favourable conditions for work. The Innovation Center is thought to be aimed exclusively at young start-up companies, but that is not the case. Nor are we adept only in corporate research. We seek to make the circulation of ideas within Skolkovo constant and we would like everyone who comes here to find what they come for. Major companies find young specialists, start-ups find investors, investors find new ideas and so on.”

It’s not easy creating this kind of cycle in Russia, as infrastructure that meets all modern requirements has to be built from scratch. The founders of the Innovation Center also face a psychological challenge, and that is to foster Russian scientists’ business streak and teach them not to be ashamed of it. For a long time the conventional wisdom in this country was that earning money through scientific discovery was something despicable, and that a true scientist doesn’t need money. Many institutions went broke because of this odd attitude. Their funding was cut dramatically after the collapse of the Soviet Union and nobody had taught these scientists how to raise money from sources other than the state.

Although Skolkovo is a government project, the government’s financial participation in it is limited. According to Stanislav Naumov, vice-president of the Skolkovo Foundation, budget injections are minimal, just enough to enable the foundation to survive until revenue from projects start flowing in. The government expects to recoup all its spending within seven or, at most, eight years. The cost of creating the Innovation Center (construction, research infrastructure, co-financing innovative projects) is, according to Naumov, US$1 billion a year. The government puts up no more than two-thirds of that sum. That destroys one of the sceptics’ chief arguments, namely that the Innovation Center is just another corrupt mechanism for money laundering. One can hardly call an institution that shies away from government financial infusions corrupt.

Skolkovo’s investment potential is growing rapidly. At the recent MIPIM-2012 international real estate exhibition, foundation president Viktor Vekselberg said more than 20 of the 600 resident companies at the Innovation Center are major anchor partners. They include international giants such as IBM, CISCO, Siemens and Nokia, to name a few.

The Innovation Center has a special tax climate that offers massive benefits to resident companies. Co-operation with the international scientific community is growing. One recent achievement is successful negotiations with the Massachusetts Institute of Technology to build a number of student programmes through which Russian researchers would receive investments from Western companies and foreign start-ups would share their experience with their Russian colleagues.

“All this is very timely,” says a representative of one of the partners, Mikhail Podoprygalov, Ericsson’s vice-president for work with government agencies. “There has been much talk about the need to develop the economy, non-commodity exports, and now we have a place where this can be done. Skolkovo creates an ecosystem - it is an important cornerstone. There are many who would say that it could be done differently. But one has to understand that considering Skolkovo’s ambitious goal and its huge number of specific tasks, it is hard to say what has panned out and what hasn’t.”

“This is Skolkovo’s main problem,” says RBC financial analyst Timofei Shatskikh. “Until the first project is implemented, the Innovation Center will remain in the minds of most Russians as just another grandiose government idea. People consider Skolkovo to be not a scientific outfit, but a political project aimed at projecting a positive image.” 

Nevertheless, foundation vice-president Stanislav Naumov maintains that a positive image can be created even before the first successful project materialises. 

Source: rbth.asia