PARIS—The use of public sector money to support private sector enterprise is a controversial topic, but few, if any, other countries have committed to spend on the scale and with such ambition as the Russian Federation.
Its Skolkovo project is gargantuan. While Berlin spends a few hundred thousand euros on a marketing program and the U.K. a few million on promoting what had previously been an unloved corner of London, Russia has committed to spending at least $4 billion (and potentially up to $8 billion) to build an entirely new city just outside of Moscow complete with its own special police, its own immigration status, its own courts, its own intellectual property regime (a notorious problem for companies doing business in Russia). It hopes to be open in 2014.
Katia Gaika, deputy director for education and research for the project, said the aim of the program, which envisages a city of 30,000 people, was about positioning Russia as a center of innovation and investing its oil and gas revenues into future industry. Its aim was to position the Russian economy to exploit those areas in which the country excelled, and to invest in those areas in which it lagged.
“There are certain areas in IT that Russia has a strategic advantage in, historically speaking, complex engineering, cryptography, search and things that are heavily math-driven,” she said.
“Then there are areas that Russia has [such as] historical gaps. We did not have financial services in the Soviet Union. IT in medicine was poor and we did not have green technologies. Those we have to develop.
“Finally there are areas that industry is following such as networking, mobile development and the like. We need to invest in all of these.”
For Ms. Gaika building an ecosystem in this century is the same as building a road and rail network in the previous one: ecosystem as infrastructure.
“One of the roles of government is to invest in infrastructure. I believe that building ecosystem is building infrastructure.
“Russia has a long-standing history of investing in fundamental science, but we don’t have a history of successful entrepreneurship.”
That ecosystem is both virtual, such as funding, the legal framework, etc, but also physical, the huge city, a new university, real estate for start ups etc. Of the $4 billion, she said, $3 billion would go on the fabric of the new city, the remaining $1 billion would go on funding entrepreneurship and on running the program.
It is hard to overstate the scale of this project. A city of 30,000 people, a new university, grants, not loans, are available to startups (they anticipate it will host at least 600) of up to $10 million, and companies can enjoy a tax holiday of up to 10 years if their turnover is below $30 million.
So how will Russia know that it was money well spent, and not just frittered away. Ms. Gaika is a little less clear on what the metrics are for success. She talked about seeing great successes like Mail.ru and Yandex, although both of them achieved their success without the need for a huge new city.
blogs.wsj.com