More doubling

An innovative breakthrough in the Russian economy is possible only with the doubling of the high-tech sector of GDP (to 17-20 per cent by 2020) and all expenses for research and development (to 2.4 per cent of GDP), reads the draft strategy for innovative development of the Ministry of Economic Development (Innovative Russia – 2020). In January, the draft will be co-ordinated by the state agencies, says Deputy Minister of Economic Development, Andrey Klepach, after revisions it will become the basis of the state program.

Innovation repression

The formation of a leading and innovative economy is the only way to reach the ambitious goals that have been set: to provide a high standard of living to the population, and secure the country’s role as a global leader, indicate the ministry’s officials. For now, Russia could hardly be called a leader in innovative breakthroughs: the government has already adopted the strategy for development of the country’s science and technology sectors until 2015, but less than a third of the target indicators have been reached.

The demand for innovation, which in addition to everything else has an ineffective structure, remains low: we are aligned toward purchasing ready-made equipment abroad, thus undermining the introduction of our own developments. The balance of payments for technology was positive in 2000 ($20 million), and in 2009 was a negative $1,000.8 million. During the same time period, countries that are leaders in innovation had increased the surplus of their technology balance: the US – by 1.5 times, Great Britain – by 1.9 times, and Japan – 2.5 times. During the crisis, tens of billions of dollars were invested into the development of medicine, biotechnology, alternative energy, the nuclear industry, and information technology. Such powerful financial injections could, in three to five years, bring technological change closer, indicates the document. Russian state regulations, on another hand, are so far characterized as rather hostile toward the business sector, white the Ministry of Economic Development officials, and the tax and customs administration is repressive in nature. State power is not innovative and has failed to make any significant achievements in creation of an innovative climate, they say.

The private business sector responds to the government reciprocally: in 2009, development and introduction of technological innovations was performed by 9.4 per cent of the total number of enterprises. In Germany, these companies reach nearly 70 per cent, in Ireland 57 per cent, Belgium 60 per cent, and Estonia 55 per cent. Only three Russian companies are included in the world’s top 1,000 companies, leaders in research and development: Gazprom (108th place for the absolute volume of expenses, their earnings share is 0.6 per cent), AvtoVAZ (758th place, 0.8 per cent), and Sitronics (868th place, 2.6 per cent). 

An innovative person

The strategy includes five main goals. An innovative economy requires an innovative person, reads the document: a person who is focused on creating innovations and their introduction into all spheres of society. The first goal is to change people, make them more open to innovation, expand the categories of innovation entrepreneurs, and create an atmosphere of risk tolerance within the society.

Sharp, multi-fold increases in innovation activity of the business sector and dynamic emergence of new innovative companies is goal number two. Business needs to start seeing innovation not as a hobby or an obligation before the state, but as a vitally important model of behaviour. Then, labor productivity will increase and the industrial sector will modernize.

The third goal is to increase the innovativeness of the state. Formation of a balanced R&D sector and increasing the transparency of the national innovation system are the fourth and fifth goals. 

According to Klepach, the main thing is to focus on specific areas, such as aviation, space, composite materials and nuclear technology.

We need to start implementing the strategy this year, says Klepach. In the next two years, the proper conditions for innovation need to be created, believes Klepach: the spending on R&D and private and state partnership have been increased significantly, technological programs for sate-owned companies have been developed and additional tax incentives have been introduced. The Ministry of Economic Development officials are discussing tax holidays for companies that launch an innovative business, says another ministry official, as well as extension of concessionary rates on insurance premiums. The ministry’s new proposal is to create an institution of grant support for innovative work. It could be the Russian Foundation for Technological Development (RFTD), reads the draft. The Foundation will not only provide grants to medium and large-sized companies, but also interest-free loans for three to five years for design documentation, creation of mass production, and launching of sales.

The ministry suggests that in 2012, the RFTD will be allocating 10 billion, and in 2020, 50 billion rubles. Today, this foundation is practically non-operative due to formal inconsistency with the budget legislation, explains one government official. “The reincarnation of the RFTD – is a controversial move,” says a staff member of the Finance Ministry. 

An innovative vertical

Implementation of the strategy will be monitored by the Presidential Commission on Modernization and Technological Development. And in the ministries and state agencies, new subdivisions will be created that will be responsible for the innovative development in their fields.

The Ministry of Economic Development will be primarily responsible for commercialization of research results. The ministry’s main instrument, as it is stated in the draft strategy, is a functioning innovative elevator: networks of state development institutions that support innovative projects. The Ministry of Economic Development is proposing to reconsider the status of the science cities, and not simply grant it to high class academic institutions, but ones with a high level of commercialization of their developments. 

Whether or not the Ministry of Economic Development’s strategy will work, it unknown, says Yury Simachev, deputy director of the Interdepartmental Analytical Center: “But it is good news that it is a widely-discussed topic: this could lead to consolidation of the elites on the issue of innovative development”. In the draft strategy, the things that have been adopted by the government are evident: universal innovative policy is not entirely effective, it must be aimed at specific areas of development of new industries and markets, continues Simachev. The development of technological platforms will contribute to that process.

The most important thing for an innovative economy is to have a competitive environment; its creation must be the main strategic element, says FBK partner, Igor Nikolayev; at this time, competition’s main enemy is the government: 60 per cent of cases on violation of competition law have been opened against regulatory bodies. 

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