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Can A Russian Silicon Valley Rise From The Dust?

Part of a lavish business school campus under construction at Skolkovo
Part of a lavish business school campus under construction at Skolkovo
SKOLKOVO, Russia -- Dmitry Medvedev is paying his first-ever visit to California, where he will tour the cradle of America's high-tech industry.

As he meets with executives of Google, Microsoft, Intel, and Apple, the Russian president's thoughts will likely be on a vacant plot outside Moscow where he hopes Russia will soon create its own 21st-century hub of innovation.

Meet Skolkovo, Russia's answer to Silicon Valley.

The country has inherited a rich scientific base from Soviet times, but it has had trouble drawing foreign investment and commercializing homegrown scientific innovations.

Advocates believe Skolkovo can change that.

"The problem in our country is not coming up with innovations. We have many interesting inventions and projects," says Robert Shlegel, a State Duma deputy with the ruling United Russia party. "Unfortunately, we don't know how to sell them, find companies, and work with innovative business sectors around the world."

California Governor Arnold Schwarzenegger (left) with visiting Russian President Dmitry Medvedev
Skolkovo won its first foreign investment last month -- $250 million from a private U.S. equity group -- and Medvedev will no doubt actively promote his pet project while touring Silicon Valley.

Curb The Brain Drain

Skolkovo has powerful backers. These include influential Kremlin spin doctor Vladislav Surkov and Russian billionaire Viktor Vekselberg, who has been appointed to head the fund in charge of managing the burgeoning tech town.

Supporters believe creating a Russian high-tech preserve will help the country diversify its economy away from oil and gas. They hope it will also help curb the brain drain and entice some of the brightest Russian minds back home.

And similar projects, they say, have been successful in China.

But Skolkovo has many opponents.

Russia already has several special state-sponsored science parks near Moscow and in Siberia, but none of them has really taken off.

Critics say such projects can only bear fruit if the government gets out of the way and let entrepreneurs flourish unhindered.

Flawed From The Start

Vladimir Babkin, an expert at the State Duma's committee for science and technology, says the Skolkovo-Silicon Valley analogy is flawed from the very start.

"The Silicon Valley in California was created on the basis of universities," he says. "It was a bottom-up growth. In Russia, it's top down, and the goals are unclear."

Many say the government's plans to make Skolkovo a profitable venture are also unrealistic.

"Using science to try and make profits or boost the country's budget is wrong," says Sergei Levchenko, a Communist Party deputy and a member of one of the presidential working groups on modernization. "I am categorically opposed to such an approach. Science must serve the government in a different manner. It must invent, it must open new horizons."

Fields of the Nemchinovka agricultural institute in Skolkovo
Opponents say revamping one of Russia's existing science parks would make more economic sense than creating an expensive new complex from scratch. In addition, the government may have to spend millions of dollars to relocate a state agricultural center that uses large swathes of land in Skolkovo.

The scientific-agricultural institute has employees and provides the whole of central Russian with seeds.

"If the government decides that our center must continue working, it will have to ensure its survival," says Viktor Shtyrkhunov, who heads the structure. "This means an identical base much be set up elsewhere. We estimate this will cost several billion rubles. We've already sent them our suggestions."

'Preliminary Sum'

Skolkovo, some 20 kilometers west of central Moscow, does not have much to show yet. It is a sleepy, rural area surrounded by pine forests and sprinkled with holiday cottages belonging to wealthy Russians. But things should quickly change here as the government starts pumping some of the vast sums it has allocated to the planned science park. Some $500 million have been budgeted for next year alone, and the Finance Ministry says this is just a "preliminary sum."

A lavish business school campus is already being built nearby, complete with conference rooms and hotels. Upmarket housing for professors is also planned close to the campus.

Local residents are of two minds about Medvedev's mega-project.

"It will be good it they attract people and invest money," one man says. "I think they will find young Russian professionals who will gladly stay. I believe it can work, but control is needed."

Anonther resident has serious reservations, saying, "I guess we need scientific zones, but how effective will they be? I'm afraid that in our country things are not always effective. Maybe foreign scientists would be able to achieve something, but our bureaucrats always ruin everything."

Some residents are concerned that the arrival of well-paid engineers and scientists will drive local costs up and price them out of the area. There are also fears that the project will involve massive corruption and bribery.

Vague And Opaque

The complex will have its own police force, customs and tax inspection authorities, and companies investing in the project will enjoy substantial tax breaks.

Deputy Vladimir Babkin says the Skolkovo draft laws submitted to parliament contain many vague areas and say the structure appointed to manage the park is equally opaque.

"We must rebuild a high-tech industry, because this is the main client for new innovations. But there's not a single word about that," Babkin says. "The draft legislation provides details such as the fact that the fund will oversee sewage and water and heat supply, but it says nothing about the most important issue: how the profits will be distributed."

Russian press reports say a company that owns much of the land in and around Skolkovo is co-owned by Olga Shuvalova, the wife of First Deputy Prime Minister Igor Shuvalov.

Critics say the Shuvalovs and other influential Russians owning plots in the area are counting on the Skolkovo project to increase the value of their land.

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