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Analysis & Opinion
26.03.10 Russia Profile Weekly Experts Panel: Russia’s Silicon Valley In Skolkovo

President Dmitry Medvedev said last week that Russia's version of the Silicon Valley would be built in the Moscow region town of Skolkovo. The decision bypasses existing techno parks to build a brand new technology town from scratch, in the hope of attracting young, creative scientists who will produce technologies as groundbreaking as the Internet and cell phones. But Russia already has several such “innovation centers, and they have yet to prove successful. How viable is the entire approach of a government sponsored technology town? Is it possible to replicate the Silicon Valley in Russia at all?

The Skolkovo Valley will seek to spur research and development projects in the five "presidential" priority areas for modernization: energy, IT, telecommunications, biotechnology and nuclear technology. "I made the decision that we will build this center where we have already laid the groundwork for doing it quickly. Speed matters, so we will build it in Skolkovo," Medvedev said at a meeting with students last week.

The town of Skolkovo, located just west of the Moscow Ring Road (MKAD), hosts the Moscow School of Management Skolkovo, a prestigious business school founded by a group of Russian businesspeople and high-placed government officials as part of the National Project on Education, launched and supervised by Medvedev before he was elected Russia’s president in 2008.

The idea to create the center was Medvedev's, the president's First Deputy Chief of Staff Vladislav Surkov, told Vedomosti last month. Medvedev hopes to create a town for young, creative scientists and businessmen. The plan is to have a comfortable location with all necessary infrastructure, as well as business development and marketing services to launch commercial products based on innovative technologies developed in Skolkovo Valley.

The government hopes to spur technologies for which commercial applications do not yet exist, but which have the potential to revolutionize people’s lives the way the Internet, cell phones and satellite navigation services have in the past 30 years. Only cutting-edge technologies with such a breakthrough potential will receive government and private funding as part of the Skolkovo Valley project.

The development of the town will be spearheaded by Rusnano chief Anatoly Chubais, and work on the project could begin as early as this year. The project would be financed out of the government's ten billion ruble ($340 million) modernization and innovation budget. For Medvedev and Surkov, who runs the presidential commission on innovation and is said to be the brain behind the Skolkovo Valley, the project is a high-stakes gamble.

Previous government attempts to create a high-tech center for innovation to attract engineers and scientists have largely failed, despite former President Vladimir Putin’s imprimatur. Four special economic zones in St. Petersburg, Tomsk, Dubna and Zelenograd have been named new centers for research and development in the fields of biotechnology, nanotechnology, information technology, nuclear technology and telecommunications. But they are yet to show any results, with some simply turning into pricey commercial real estate and office buildings.

Many of the technology centers already have the necessary infrastructure in place, but are currently underused or not utilized at all – raising the issue of whether building a green-field facility in Skolkovo would be a waste of resources.
Obviously there are analogies with Stalin’s closed cities for nuclear weapons and missile technology development, as well as with the U.S. government’s nuclear labs during and after the Manhattan Project. But this was research and development in military technologies with no immediate commercial applications. Silicon Valley is something different. The government does not pick technology winners there: private investors do.

But a larger question remains: is it all going to work? Could a Russian analogue of the U.S. Silicon Valley really take off as a center of cutting edge technological innovation? Is it possible to replicate the Silicon Valley in Russia at all? How viable is the entire approach of a government-sponsored technology town? Is it more of a political project for Medvedev, who wants his own success stories that define his presidential legacy and provide the platform for his reelection campaign in 2012?

Vladimir Belaeff, President, Global Society Institute, Inc., San Francisco, CA:

Having worked professionally for decades in direct contact with the Silicon Valley (as a technologist and leader of major high technology initiatives), I find the Skolkovo project particularly interesting.

There is a need to dispel misconceptions on the general subject of advanced technology centers.

The introduction mentions several other localities in Russia which are dedicated to advanced technologies and which appear to be less than 100 percent successful. Much depends on the definition of “success.” There is an undertone of reformist impatience in these allegations that the existing technology centers have failed. Technological innovation, like many other inventions, is ten percent inspiration and 90 percent perspiration. The perspiration takes time and sustained investment.

Advanced technical innovation must tolerate dead-ends and failed initiatives. It took about 30 years for the Internet - originally a U.S. Defense Department initiative via the Defense Advanced Research Projects Agency (DARPA) - to become the civilization-shaping tool that it is today. For every success in the Internet industry there are literally hundreds of failed or semi-failed attempts to reach the top. For every Oscar-winning movie, billions of dollars are sunk into literally hundreds of films that never make the shortlist, and often do not even recoup the original production costs.

Therefore, one must carefully define “success” for advanced technology. It is very important to remember that even “failed investments” achieve two very important macroeconomic objectives: they act as economic “pumps” that maintain the circulation of money in the economic system and they sustain the human and physical resources necessary to eventually achieve success. A director, whose film fails one year, may win the Oscar in the next round.

It is worth the ultimate payoff to sustain operations long-term. We assume of course a reasonably honest operating environment. Even as we speak, in Zelenograd someone may be developing a new technology that will profoundly change human lives and bring fame and fortune to the town and the inventors. It may take 20 years or more: like television, the transistor, the telephone and the automobile (both now well over a century old), and Silicon Valley’s Apple personal computer, now 40 years old.

Lasting success in advanced technologies requires patience and a long view – something often lacking in modern culture, oriented to quick speculative gains (the more obscene, the better) and in which “day trading” in questionable equities can with a straight face be called “investment.”

The Silicon Valley in northern California started even before World War II (HP was one of the earliest firms to set up there) and was nurtured by the proximity of world-class universities (Stanford, the University of California at Berkeley) which supplied the most important component in science – creative human intellect.

Contrary to current market theories (which are proved wrong by every new event of the global economic crisis), sustained government investment was and continues to be mission-critical to technological advancement. Defense contracts as far back as the late 1930s, the establishment of NASA’s Ames Research Center, the military technology production at Lockheed in Sunnyvale and Santa Cruz all remain essential to the engineering and technological success of the Silicon Valley, which is integrated into the American military-industrial complex. This will not be strange to any historian of science – one only needs to remember Leonardo da Vinci’s inventions and consulting engagements in Northern Italy.

Skolkovo, like the other similar localities in Russia, will succeed if it receives substantial government support over a long time (i.e., decades) and manages to attract and retain creative and honest engineers and managers. This may seem self-evident, yet simple realities are often missed in grandiose and grandiloquent views of the world.
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