The cart of the Russian industry lost the horse

28.03.2011 — Analysis

Russian engineering industry tumbled down into the early period of industrial development typical of the 1930s. Insufficient number of high-tech manufacturing companies and facilities results in degradation of higher engineering education, which is additionally eroded by half-baked reforms. Experts think that even multi-billion-ruble investment in manufacturing facilities will not be worthwhile: first of all, management must be streamlined; then, we can speak about technological upgrading. However, as the "RusBusinessNews" columnist has found it out, Russia makes no attempt to teach production management, while there are very few who are interested in learning subtleties of engineering management.

Two years ago, RF President Dmitry Medvedev outlined the policy of modernization of the country's industry. However, Russia is still uncertain about the actual meaning of this term. The 7th Euro-Asian Machine building Forum, which took place in Ekaterinburg at the end of March 2011, even designated a special panel discussion to engineering modernization. Its participants split over, discussing the ways of the industry's development.

Andrei Bukhmastov, Director of the non-profit organization, the Union of Engineering Enterprises of the Sverdlovsk Region, thinks that over two years the country has not moved ahead with the model of engineering industry development. At first, there was a rush to build techno-parks, and then everybody started talking about specialized technology centers. However, all the above terms have been left without translation into the language of law.

On the other hand, Boris Golementsev, Deputy General Designer of the Novator Experimental Design Bureau, OJSC, does not see anything wrong with the terminology; what he does not understand is why modernization started at the wrong point? The main problem of engineering companies, according to him, is not the lack of money or obsolete machine tool equipment, but the appalling management of production. It is poor management that is the main obstacle, due to which Russian manufacturers cannot bring sought-after products to the market and gain a foothold on it. Though the metal and labor costs are almost equal, Russian companies are yielding to European and American factories only because they do not give proper attention to production efficiency.

B. Golementsev asserts that Russian managers did not get used to "squeezing" costs into the framework of the established price for finished products on the world market. To tap the market, companies should upgrade the system of production planning, operational control, labor remuneration and only then they can embark on technical re-equipment. Though for a short time, efficient management can alleviate problems caused by outdated equipment, but the model typical of Russia and known as "the cart before the horse" brings discredit on the very concept of modernization: the purchased state-of-the-art equipment is going to stand idle, of the company does not have management.

Manufacturers state that today it is possible to find funds for upgrading of machinery stock: apart from bank loans there are other opportunities. According to Dmitry Krasnoselsky, Director of Development Department at the Pumori-SIZ Engineering Corporation, companies can receive 300 million rubles as a non-repayable subsidy from the government. The Rosnano State Corporation is ready to provide 49% of financing for the project that has been approved by experts, and if registered in free economic zones like Skolkovo, companies will be able to buy imported equipment, paying a 75% lower price (the appreciation in price when crossing the Russian border).

Therefore, experts are sure that all the talks about the obsolete machinery stock are of evil. It is not equipment that is a problem. Andrei Bukhmastov asserts that the lack of human resources is a barrier to engineering industry development. Machining centers can be bought to cut production costs, but there are no personnel to operate them.

It is wrong to state that no attention is paid to training of operating personnel. For example, Pumori-SIZ has opened customer application centers in Ekaterinburg, Perm, St. Petersburg, Kazan, and Rostov. However, by and large, the situation is quite gloomy: firstly, new training centers are very difficult to set up due to lack of research and education institutions that were stripped in the 1990s; secondly, everything is done à la Russia; in other words, in the way that is not economically or organizationally feasible.

The spectacular example - setting up of training centers in the Sverdlovsk Region. The regional government allocated 100 million rubles for their organization. Experts think that it would be more logical to install the new machining centers at factories where they would be used by trainees during the hours of the first shift and for their intended purpose during the second and the third shift, helping to manufacture industrial products, and, thus, paying for the purchased tools. However, in accordance with legislative restriction, the centers were given to educational establishments where they stand idle and are poorly maintained, as the Ministry of Education cannot find skilled operators who would work for meager budget salaries. As a result, instead of personnel inflow, manufacturers have obtained a headache: they have to send a repair crew every time the equipment causes problems.

The education reform of the 2000s aggravated the human resources situation. Machine-builders state that the transformation of the system shifted the focus of educational establishments to the cash flow they receive during teaching of students rather than to the final product - professional graduates. Interests of manufacturing companies have not been totally neglected in the academic process. Students are drilled in nuts and bolts of macroeconomics, while manufacturing companies need professionals who know how to manage a production facility, manufacturing site or machinery pool.

In the meantime, most of the young Russian people dream to become officials rather than engineers. Alexander Mokronosov, Director of the Institute of Economy and Management at the Russian State Professional and Pedagogical University, states that true specialists account for not more than 7% of the total number of graduates; instead of knowledge, the rest of the graduates need a document certifying their higher education. If the trend remains unchanged, high-tech companies are facing the risk of being left without production managers and technologists.

Vladimir Terletsky