Government Support for New Technology

Recently, the Russian government has been mading a concerted effort to develop the conditions necessary to become an important global force in the ICT sector. Russia has done much over the past few years to make outsourcing and software development key priorities. Much publicized recent meetings between Russian President Dimity Medvedev and industry leaders in Silicon Valley in 2010, and recent talks at Davos, were but the most visible manifestations of Russia’s intended move from a raw materials supplier into a high-tech, intellectual hub where innovation thrives.

In 2010, the Russian IT market was valued at an estimated $20 billion, including IT services, software exports and the domestic market. This is a 20 percent increase from $16.3 billion in 2007, according to International Data Corporation a prominent international IT analytics firm. Yet this figure still lags far behind India’s figure of $76 billion, or China’s $35.76 billion for 2010.

Government Programs

Information technologies have been acknowledged as being one of the key priorities for Russia’s development. As part of a long-term socioeconomic development framework, the government has set a number of ambitious productivity and innovation goals, which it hopes to meet by 2020.

The framework envisages:

  • a nearly five-fold increase by 2020 in the share of enterprises involved in technical innovations (an increase from 5.5% in 2007 to 25-30% in 2020);
  • more than doubling R&D spending as a proportion of GDP, from 1.1% to 2.5-3%;
  • increasing the proportion of high-tech sectors in GDP from 10.5% to 17-20%;
  • increasing the share of Russian high-tech exports in world high-tech exports seven-fold, from 0.3% to 2% by 2020.

Part of the presidential commission on modernization includes the Russian Government “technoparks” program with budget allocations of 85 billion rubles ($2.9 billion) for the Skolkovo innovation and development project over the next three years. A Special Economic Zones (SEZs) project was first announced in 2005, but has recently been extend to 2014.

The Communications and Press Ministry is currently developing a program that partly overlaps with that of the presidential commission. Its ten-year “Information Society” program oversees the development of a host of state-sponsored high-tech projects and places great emphasis on research and development, and the free movement of both goods and services.

At the end of 2011, Russia’s Prime Minister Vladimir Putin signed a 25-point government directive outlining specific steps the government must take in order to move off proprietary software and onto free and/or open source alternatives like Linux. The government order affects all federal agencies. The Russian government has been moving towards the increased use of free software over the past few years. In 2008, the government ordered schools to use free software packages on all of their computers. Those schools wishing to use proprietary software are now required to pay for it out of their own budgets.

Incentives

Russian software development companies involved in export are expected to receive an unprecedented 10-year grace period before they are required to make mandatory social insurance contributions in place of the standard unified social tax. To support the innovation activity of existing enterprises, the government is also considering the introduction of tax benefits for innovators, export support and the insurance of export contracts. This is significant because the IT industry is a labor-intensive business with considerably higher direct labor costs than other businesses.

For further information on the measures that the Russian Government has recently taken to ease the tax burden placed on business, please see the section on Taxation Information.

Human Capital

According to the latest figures, Russia employs just over 1 million IT specialists, accounting for 1.34 percent of the country’s labor force. This number is expected to increase as the result of government initiatives to move towards a more information and service based economy.

In recent years a system of state support for programs of fundamental, exploratory and applied research at universities and other scientific institutes within the educational system has been developed based on the principles of competition. This means that the methods used to plan and finance scientific, technical and innovative activity is tied directly to the nature of the research and its anticipated outcomes.

The Russian Ministry of Education is actively fostering the conditions necessary to support all stages of the scientific, technical and innovation cycles, from fundamental and exploratory research through to development and the output of finished product.

In June of last year, the Massachusetts Institute of Technology (MIT) signed an agreement with the Skolkovo Foundation to assess opportunities for education and research with Russia’s top universities and research institutes. In addition, business incubators are to be established in former scientific and educational institutions with presidential approval of a law permitting higher educational establishments to set up economic entities.

High Profile Partners

The government has been on a drive to attract international corporate partners to set up R&D centers in Russia, helping it achieve its goals becoming a world leader in information technology and software development. Intel, Boeing, Nokia and Philips have all either signed deals with the government or expressed interest in opening branches in Russia. US-based Cisco has identified a five phase collaborative approach over the next decade through which it will stage a $1 billion investment in the country. The result is that an unprecedented amount of new information technology will be developed in Russia driving demand for qualified programmers as well as releasing programmers trained by the various corporations into the workforce.

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