An innovative mess in the Sverdlovsk region

13.09.2010 — Analysis

The Sverdlovsk Region intends to create an infrastructure hub for small and medium-sized business. The local authorities expect that it will help innovation economy to gain weight. Experts claim that government officials opt for the cavalry attack tactics to grab all the resources for themselves. As a columnist for RusBusinessNews has explained, innovation business has no actual support from the regional administration so far.

The Sverdlovsk region's Commission on Modernization and Technological Development has approved the creation of an infrastructure hub, which will provide grants to create small, innovative companies, provide entrepreneurial training, support, and business loans. According to Maksim Godovy, the director of the Department of Small and Medium Businesses within the Sverdlovsk region's Ministry of Economics, this help will be available at all stages of an innovative company's development, beginning with the preparations to create a business and ending with help to promote the business's products on foreign markets. The regional government is planning this year to make a list of unused and vacant properties where innovative businesses and manufacturing business incubators could be housed.

The proposal is that this hub will unite business incubators, venture capital funds, funds that support small and medium businesses in the Sverdlovsk region, partner banks, a center for infrastructure, and other organizations. In particular, work is underway in the region to open representative offices of the Bortnik Fund and the Rosnano corporation. Government officials are currently trying to use their website to organize all the innovation proposals that seem fairly promising. They are focusing on 142 projects, and, according to Maksim Godovy, that number will be up to 500 by the end of the year.

But it turns out that not even those who are in the business of developing new technology appreciate the government officials' feverish work to create high-tech companies. Some of them didn't even know what the regional authorities were doing. Vladimir Shur, the director of the Modern Nanotechnology shared-access center, told RusBusinessNews that all of his efforts are focused right now on creating a nanotechnology center. The project, which will cost 1.5 billion rubles, is being planned jointly with the Rosnano corporation, the Russian Academy of Sciences, Ural Federal University, and private companies. "If it works out, this will be the first serious infrastructure project in the region that's aimed at commercializing new ideas right up to the sale of finished products," notes the scientist. "We're supposed to make our application to Rosnano in October, so I just don't have time to worry about some future infrastructure hub for small and medium businesses."

Andrei Dobrachev, the director of executive management for the Urals Forestry Technology Park, claims that he has heard of this regional initiative, but that his innovative business is surviving on the money in its pockets, and not on government handouts. This expert thinks that the government forgot to finish the job last year when it started allowing colleges to set up small businesses to sell their "know-how." Without any financial reinforcement of their activities, small businesses couldn't make any money by taking advantage of federal law no. 217, so the results were idiotic. Russian investors simply refused to buy the scientists' patents, because they didn't trust the academics. "First show me how this will work," the investor says to the inventor, "and provide some services and then maybe I'll buy it. But if not, I'll just go abroad because I can find everything I need there."

Technology is being lost because of the lack of both financing and a workable system for converting ideas into finished products. For example, scientists from Ural State Forestry Engineering University, which has a technology park, have been working on a piece of multi-purpose forestry equipment for over ten years, a machine that would significantly improve the speed at which raw materials could be processed. While they were ironing out the final kinks in their machine, they discovered that a group of Germans had already finished a similar piece of equipment. There will probably be a market demand for it, since it could really revolutionize the forestry industry. So now the scientists in the Urals are reduced to trying to persuade the Germans to install a few of the Russian components in their machines.

The technology park did not feel that it received any regional support even after the creation of the center for infrastructure. Andrei Dobrachev says that he met with Maksim Godovykh and asked him, "What should we do to get financing for the technology park?" The scientist claims the government official recommended that he go out and win some grant money. The forestry technology park already had a 150,000-ruble grant. But Andrei Dobrachev thinks that that money will only be enough to help students with some of their scientific work, while the technology park is trying to implement international projects. "We need millions and tens of millions of rubles to get technological progress moving," he claims.

Ilyas Paderin, the director of the Urals Technology Transfer Center, is skeptical about the creation of an infrastructure hub. "I'm afraid everything is going to turn out the way it always does in Russia. Even if they manage to gather all these ideas together, then what? It'll just be a big mess. Actually, it already is. Government officials prowl around on the Internet, find some garbage, and then run crash tests to decide which proposals have commercial potential and which don't. A car you can test in five minutes, but serious development requires trials, expert evaluations, and recognition in the scientific world. No one puts anything really serious on the Internet."

This expert argues that the system being created to support innovative projects does not take into account the opinions of investors, scientists, and consulting firms, the very people who really do know what they're talking about. Ilyas Paderin thinks the infrastructure that's needed to support innovation is already there. All that's still needed to facilitate the entrepreneur's path to commercial success is to merge the efforts of all of the individual infrastructure components. But instead of this painstaking work, we see only the ambitions of government officials who have no real experience in these matters, but who have decided to tear down years of previous efforts and build something new. All of which is reminiscent of a Bolshevik cavalry charge - first demolish everything and then... 

Ilyas Paderin is convinced that nothing needs to be torn down. If the government wants to create synergy, it should function as a center for coordination, not as an arbitrator or a major player on the market. But he thinks that precisely the opposite is happening in the Sverdlovsk region. Aleksandr Misharin's team has come to power and is determined to grab all the resources for itself.

Despite the unflattering testimony from scientists and businessmen about that administration's attempts to build an innovative infrastructure, government officials are optimistic about the future. They think that if all these dreams are realized, then the number of small and medium businesses as a percentage of all the businesses in the region can be increased from 31% to 40%, and the percentage of innovative businesses, from 2% to 15%. But if you ask the experts, they just shrug.

Vladimir Terletsky