Dec2011, Russia&India Business Report by RBTH

BUSINESS REPORT WEDNESDAY, DECEMBER 14, 2011

50th Anniversary of Manned Space Flight

IN ASSOCIATION WITH ROSSIYSKAYA GAZETA, RUSSIA

Elections The ruling United Russia manages a convincing majority, but the new flux opens a new chapter in Russian politics

Is Duma vote a sign of change?

Petronet to firm up LNG deal with Gazprom soon India's Petronet LNG Ltd will finalise a pact soon for sourcing liquefied natural gas (LNG) from Russia under a pact with energy giant Gazprom. India's Oil Minister S. Jaipal Reddy held bilateral talks with Russian Energy Minister Sergey Shmatko in Doha on the sidelines of the World Petroleum Congress. OVL, Reddy said, showed keen interest in participating in the Sakhalin-3 and other fields.In June, Gazprom had signed a preliminary deal with Petronet for the supply of 2.5 million tonnes of LNG annually. India is the world's eighthlargest importer of LNG. RIBR

Mass protests contesting the Duma poll results are a wake-up call. What does it mean for Vladimir Putin's presidential prospects? IGOR ROMANOV RIBR

Matrix to enter Russia, foucs on IP telephony

REUTERS/VOSTOCK-PHOTO (2)

The United Russia may have won enough seats to push the government-sponsored bills through the State Duma (parliament), but its days of complacency seem to be over. Days after the election results were announced, tens of thousands of Russians turned out in cities across the country on Dec 10 in mass peaceful protest over recent polls they claim were rigged in favor of the ruling party. The biggest rally in Moscow since 1993 gathered, according to police estimates, around 25,000 people. Organisers said it was closer to 40,000. Another protest has been called for Dec 24. Russian President Dmitry Medvedev has ordered a probe into alleged vote rigging. Both he and Russian Prime Minister Valdimir Putin put up a brave face and stressed that citizens have the right to assemble publicly to express their political views as long as they abide by the law. The Dec 4 vote will clearly have consequences that reach beyond law making. The Duma vote seems to have polarised the Russian society, with Putin and supporters describing the outcome as a“real”reflection of the mood in the country while many Russians say they feel the vote was essentially unfair. The real test of the United

Slide Show at www.indrus.in

Mass rallies swept Russia (right) after the Duma vote. Will Putin make it in the 2012 presidential elections?

Russia's strength, analysts say, would be the March presidential election. The Duma elections have been widely touted as a referendum on Putin's future, given his decision to return to the Kremlin next year. Earlier, the Federation Council, Russia's upper house of Parliament, approved March 4 as the date for the 2012 presidential elections, signaling the beginning of the new election campaign. Experts say that the calls for the Duma re-elections hardly have a chance to be realised.The three parliamentary “opposition”parties (the Communists, the left-wing Just Russia, and nationalist Liberal Democratic Party)

only showed token support for the Dec 10 rally and did not support calls to give up their Duma mandates. Some analysts feel that the loosening of the tight grip that United Russia had on the previous Duma, where it counted 315 deputies (now 238 in 450-seat parliament), could trigger liberal reforms and a few showcase examples in the tepid fight against corruption. "It's good news because it will hopefully give the message to the leadership that it will have to change to continue to be successful," said Jochen Wermuth, chief investment offic e r a t We r m u t h A s s e t Management. Some changes would have to appeal to the

47 million-strong Internetusing middle class who hardly have any representation in the new Duma, he said. “To not lose these people who want to modernise the country, the Russian authorities will have to start implementing reforms that will make them happy — independent judges, rule of law, fighting corruption,” said Wermuth. "Government economic policies will change to reflect the alignment of new forces in the State Duma,” said Yevgeny Gontmakher, an eminent sociologist. “The growing influence of the opposition parties, while not decisive, will force the authorities to change their be-

haviour." The swollen ranks of the leftist forces in the Duma could “induce extra populist steps on the part of the country's leadership to move the needle of public opinion,” said VTB Capital in a note to investors. "The natural instinct for Putin will be to pump more money into the economy," adds Tim Ash, head of emerging markets research at Royal Bank of Scotland in London. The most plausible interpretation of the success of the Communist Party and A Just Russia is growing frustration with United Russia, according to both Alfa Bank and Wermuth. "We do not see this as nostalgia for the Soviet times, but rather as an

indication of protest voting," Alfa Bank chief economist Natalia Orlova and analyst Dmitry Dolgin wrote in a note to investors. But in terms of Duma operations, United Russia's majority will provide enough support for Putin as the likely next president and Medvedev as the likely next prime minister. "It will allow us to work calmly and rhythmically," Putin said soon after the election results became known. United Russia's faction will still be able on its own to confirm prime ministers, express votes of no confidence in the Cabinet, appoint and remove Central Bank heads and pass any legislation.

INTERVIEW VSEVOLOD ROZANOV

THROUGH QUALITY, PRICE AND INNOVATION"

You talk about innovation as the heart of MTS’s strategy. How does the company balance creating value for its customers with creating value for its shareholders? True to its long-term commitment in India, SSTL has invested over $2.5 billion in expanding its telecom network. Our focus is not only on numbers, but also the quality of the customer base. India is probably the most competitive telecom market in the world with compara-

How do you see the data segment of the market evolving over the next five years? We had pre-empted intense competition in the voice business and hence, steered our strategy to focus on data. Even if you look at Telecom Regulatory Authority of India’s October 2011 report, the broadband penetration in India stands at just 1% as against the wireless teledensity of 72%. The National Broadband Plan envisages

Yuri Milner, a top Russian entrepreneur and venture capitalist known for his conquests in the US’ Silicon Valley, is in talks over acquiring a slew of Indian Internet companies. According to some Indian media reports, Milner is looking to invest $100-200 million. Milner’s investment company Digital SkyTechnologies (DST) Global has approached the Flipkart online retailer and Just Dial, which processes around 100 million phone enquiries and 80 million online enquiries annually. DST opened its Asia office in Hong Kong earlier this year. It also invested in Chinese e-commerce leader 360buy.com and b2b giant Alibaba Group.RIBR

Patil rides T-90 tank in Rajasthan desert

When MTS India started its operations, not only was it a late entrant, but also a late CDMAentrant.Howdoesitfeel to have turned the under-dog into the innovator? With its entry in 2008, MTS created a buzz with “One Million Free Minutes”for its customers. Since then, the company has built on its promise of innovation by introducing a series of firsts. With 12-14 telecom operators fighting for market share, there was very little room for a newcomer like us. We had to act quickly, and hence, took the strategic decision to focus on data, a vastly untapped market. In November 2009,we launched our high speed mobile broadband services brand, MBlaze. In just two years, we have become one of the country’s top-three data players.Along the way, we have introduced

tively lower average revenue per user (ARPU), and, therefore, it becomes important that we rationalise our investments. We understand that the Indian consumer is not looking for a choice between value and quality. Here, the customer wants quality with choice, and as service providers, we need to be on our feet at all times to think out of the box. Our focus remains to create value for customers through quality, price and innovation propositions that create long-term value for all stakeholders.

Yuri Milner eyes Indian online companies

Russian state arms trader Rosoboronexport will increase arms exports by 11% year-onyear to $9.7 billion in 2011, Viktor Komardin, a deputy head of the company said. “The figure will rise by about $1 billion compared to 2010,” said Komardin, who headed Russian delegation to the LIMA2011 arms show in Malaysia. At the show, a preliminary agreement on the delivery of six Su-30MK2 fighters worth at least $500 million to Indonesia was struck.The company had struck $9.5-billion worth of contracts last year.“This year, we have signed more,”Komardin said. RIA Novosti

"WE FOCUS ON CREATING VALUE FOR CUSTOMERS

numerous innovations such as prepaid broadband and free national roaming for all MBlaze customers. Recently, MTS took the mobile broadband experience to a whole new level by becoming the first telecom operator in the country to launch highspeed data (HSD) services on two national highways: Delhi-Jaipur and Chennai-Bengaluru. Our efforts have been honoured by awards like ‘Most Innovative Mobile Broadband Product’ and ‘Fastest Growing CDMA Operator’.

Matrix Comsec (India), a VoIP equipment manufacturer that accounts for 30% of the market share in certain product categories, is coming to Russia. The exclusive distributor of its products within Russia will be Digital Angel, with whom the company has a five-year contract. Gateways for IP telephony and user terminals will be main products the company will be selling in Russia, says Dave Parth, Matrix’s international sales manager. The company will focus on the SMB segment as competition in Russia’s big business and public sectors is very high and is already divided between big players. RIBR

Russian arms major to raise exports by 11%

MTS blazes a new trail in mobile broadband: CEO Vsevolod Rozanov, CEO and president of Sistema Shyam TeleServices Ltd (SSTL), shares his company’s strategy and bets big on the magic of mobile broadband.

NEWS IN BRIEF

Bollywood actress Neha Dhupia poses with Vsedvolod Rozanov during the launch of MTS mobile services in Bangalore.

160 million broadband connections including 60 million wireless broadband connections by the year 2014. Hence, there is a huge opportunity for the growth and proliferation of HSD services in India. With wireline penetration at just 3% of population, and on decline, mobile broadband is best positioned to satisfy the growing internet demand. We offer HSD services in over 200 Indian cities including the top five metros. The company is rapidly expanding its HSD network, and currently addresses over 92% of data potential across India. In MBlaze, we have one of the strongest data brands in the country. Where do smartphones fit in this strategy?

India’s low wireline and PC penetration means that smartphones and tablets will drive data growth. MTS is creating a strong portfolio of these devices to offer the customers a complete package with access and high-speed. We recently launched MTS Pulse, an Android powered smartphone that users can get for free with no upfront payment. We are looking to take the Android platform to the masses. We recently launched two Android smartphones – MTS Livewire and MTS MTag 3.1, both priced below rupees 5000. We will add some of the best available smartphones and tablets to our portfolio. What's your reaction to India's New Telecom Policy? The policy puts strong focus

to make broadband accessible to and affordable for all by 2015. This is a great step for us as we are already datacentric. We look forward to the formulation of supporting policies so that more spectrum can be released.We believe policy guidelines on issues like delinking of spectrum and telecom license, allowing for spectrum trading, pooling and sharing along with new M&A guidelines, would be equally significant. One needs to understand how NTP 2011 looks after the interest of the CDMA operators and their customers. So if I could have one wish, MTS would ask for further clarity on M&A guidelines and spectrum updates. Prepared by Aanchal Anand

AFP/EASTNEWS

Pratibha Patil became the first Indian president to ride in a battle tank when she boarded a T-90 in the desert terrain of Rajasthan to witness an army war game underway. Dressed in a black uniform worn by the personnel of the tank regiments, the 76-year-old president entered the exercise 'Sudarshan Shakti' here riding in the main battle tank with Army Chief GeneralV. K. Singh. Patil's ride of nearly 500 metres lasted for about 15 minutes. She was then taken in a Mi-17 transport helicopter near the venue before riding in the tank. In 2009, Patil had become the first Indian woman head of a state to fly in a frontline Sukhoi-30 MKI fighter jet aircraft from an IAF base in Pune. Patil was the second Indian president to fly in a fighter aircraft after A.P.J Abdul Kalam in 2006. RIA Novosti

BUSINESS REPORT

Politics

in association with rossiyskaya gazeta, russia Wednesday, DECEMBER 14, 2011

Diplomacy Economic integration, boosting connectivity, food security and promoting innovations will top agenda of Vladivostok summit

In hot seat: Russia firms up plans for 2012 APEC summit Eying its integration into the Asia-Pacific community, Russia is firming up big plans to host APEC summit in Vladivostok next year.

biography

Igor Ivanov

igor ivanov

Specially for RIBR

NAtIONALITY: russian AGE: 66 CIVIL STATUS: married, has a daughter

AFP/eastnews

Some might find the question of whether or not Russia is an Asian country somewhat rhetorical and contrived. One look at the map, however, is enough to find out that Russia has the continent’s largest landmass with an eastern seaboard occupying a sizeable chunk of Asia’s Pacific coast. Asia is home to Russia’s largest trade and economic partners, most importantly China, which has recently advanced to the top spot in terms of total trade turnover with Russia. Russia is a member of major Asian multilateral organisations, including the 21-nation Asia-Pacific Economic Cooperation (APEC) forum. Nonetheless, many in Asia still consider Russia to be a “not quite Asian” country. Perhaps, this is because ethnically, religiously, culturally, and politically, Russia has traditionally gravitated more towards Europe than Asia. Or it’s because the bulk of the Russian population lives in the western part of the country. But most importantly, Russia has largely remained on the sidelines of the emerging Asia-Pacific community, despite its relentless efforts to take a rightful place in it. Russia’s potential as an

Shifting geographies of power: Leaders of APEC countries at the 2011 summit in Honolulu.

Asian power remains largely unrealised. This can be attributed primarily to the fact that Russia is too slow and at times inconsistent in rebuilding the economy of its eastern regions, and doesn’t create the required incentives for foreign investment, or Russian investment for that matter. The Asian part of Russia faces acute unresolved issues in infrastructure, stimulating small businesses, and managing migration pro-

The summit will help explore Russia's prospects for integration in AsiaPacific community. It will be a unique opportunity to promote innovation agenda for Russia in the ATR region.

but a source of commodities from which to pump the resources they need––preferably on the most preferential terms. Still others believe that developing relations with Russia can be postponed until better times because the priorities of Asian policy lie elsewhere at the moment. Against this backdrop, Russia’s forthcoming chairmanship of APEC in 2012 presents a unique opportunity to take a new look at Russia’s

cesses. In international affairs involving the region, we don’t always manage to grasp the logic of our Asian neighbours, which occasionally results in unfortunate miscalculations. That said, our Asian neighbours are not quite beyond reproach either. It looks like for some of them, the Cold War never ended, as they continue building their Russia policy on principles dating back half a century. Others view Russia as nothing

Igor S. Ivanov is President of the Russian Council on International Affairs. Previously, he served as Minister of Foreign Affairs from 1998 to 2004 and Secretary of the Security Council of Russia from 2004 to 2007. Ivanov holds the rank of Ambassador Extraordinary and Plenipotentiary. He took part in several UN General Assembly sessions. He also served as Russia's ambassador to Spain.

prospects for integration into the Asian-Pacific community as a part of integration processes emerging within this region. The Russian leadership attaches the utmost importance to its ch a i r m a n s h i p. R e c e n t months have seen meticulous preparatory work to flesh out the chairmanship’s agenda with real content. Not only ministries, but also many regions and the expert community are taking an active part in this work. Con-

siderable funds have been invested in preparing facilities to host events. We believe that Russia’s chairmanship of APEC should be the starting point for developing multilateral cooperation in the Asia-Pacific region on a whole range of issues that are key to our country’s future. First of all, there is the liberalisation of trade and investment and regional economic integration. Certain steps in this direction have been taken this year under the US chairmanship, and we are ready to move forward on this path towards free trade and investment in the region. Whereas the recent summit in Honolulu mainly discussed the current issues of trade liberalisation; next year, it would make sense to focus on the long-term outlook for integration of APEC economies, including taking into account CIS integration initiatives carried out by Russia, and on preventing financial and economic crises in the region and globally. It is APEC countries, which today account for the bulk of the global economy, that have a special responsibility for optimizing global mechanisms for regulating economic development. Strengthening food supply security is another priority for 2012.This issue will likely become central to the global policy of the 21st century, and the APEC’s role in this can’t be overestimated. However, multilateral cooperation among the region’s countries is only just the beginning in this area. We lack a coordinated regional approach to food supply security risk management. The time has clearly come to deal with matters like reducing food price volatility, cutting losses resulting from transportation of agricultural products within the region, and coordinating national

efforts to improve yields of basic crops. Obviously, the food issues are closely linked with environmental issues and preserving APEC’s biodiversity. Another priority of Russia is developing the region’s transportation and logistical capacity. By virtue of its geographic location, Russia is a country of transit between Asia and Europe, but our intercontinental transport corridor capabilities are still far from fully utilised. We need to accomplish a great deal domestically in this area, but the international dimension is no less important. Cutting costs and wait times at border crossings and implementing major infrastructure projects such as upgrades of ports, airports, and transport corridors through privatepublic partnerships should be discussed both during the year and at the Vladivostok summit. Finally, the APEC summit in Vladivostok also represents an opportunity to promote an innovation agenda for Russia and the entire APEC region. How do we ensure the most effective forms of interaction between science, business, and government to promote new technologies? How can we bring cooperation among innovation centers, universities, research institutions, science towns, and territories active in innovations to a new level? How can we increase geographic mobility for scientists, educators, and innovators? How do we ensure protection of intellectual property rights in the region and reduce the turnover of counterfeit goods? What needs to be done to harmonise education systems? These questions are becoming increasingly important not only for Russia, but also our neighbors in the Asian continent.

Diplomacy It's time to conduct a post-mortem to make special and privileged partnership immune to vagaries in political weather and market fluctuations

Let the sun shine brighter on all-weather friendship

As India and Russia hold the 12th summit, it's time to reflect and iron out irritants to propel bilateral ties into a higher trajectory. Sergei Strokan ribr

It's a year since the last Russian-India summit, when New Delhi played host to Russian President Dmitry Medvedev. The sun of bilateral cooperation is still shining generously on the two nations and, during the meeting in Moscow, the parties will again reap a big crop of trade and economic agreements and make loud political statements about their common positions on the 21st century threats and challenges. Even so, there are

spots even on the sun and politicians and experts in the two capitals who want the good weather to prevail in Russian-Indian relations in the future would do well to consider them today. This was mentioned in a halfwhisper on the fringes of the Russian-Indian Forum on Trade and Investments, which was held with much fanfare in Moscow in November this year. “The launch of the first unit at the Kudankulam nuclear plant in India, which is being built by Russia’s Atomstroyexport, is scheduled for the end of this year and that of the second – just six months later,” Russian vice premier Sergei Ivanov told at the Forum.“Work on the

WEBSITE of the embassy of the Russian Federation in India www.rusembassy.in

in the front as it is staking out a claim in the vast Indian market, which is larger than the combined EU market. Yet the most startling statement came from the chief opposition Bharatiya Janata party, which demanded that the government“resolve the Kudankulam issue promptly”. Thus, while previously there was a total consensus within the Indian political elite on cooperation with

Russia, today we see attempts to make it hostage to internal politics. The row over the Kudankulam plant coincided with a major setback for Moscow in military-technical cooperation with India, the bedrock of bilateral ties. In November this year, Moscow lost a major tender to deliver MI28N“Night Hunter”helicopter gunships to India to the American Apache H-24 he-

licopters. In April, Russia's MIG-35 lost out to the French manufacturers of Rafale and Eurofighter Typhoon fighter planes in the biggest arms tender of this century. This time round, India sent to the Russian embassy in Delhi a letter listing 20 points by which the Russian MI-28N“Night Hunter”helicopter did not measure up to the Indian requirements. One other reason for the

Russian defeat was India’s wish to not to depend on Russia alone for 80% of its arms, as has been the case over past decades. In general, there seems to be a new turbulence in the bilateral relations. Needless to say, the officials of the two countries are reluctant to talk about the problems. This is not surprising as nobody wants to mar the pretty picture for the upcoming

Nuclear energy, defence will be highlights of talks: Envoy India and Russia are inching closer to signing a pact for two more reactors at Kudankulam, says Russia’s Ambassador Alexander Kadakin. Olga petrova ribr

As Prime Minister Manmohan Singh heads to Moscow for annual summit with Russian President Dmitry M e dv e d e v o n D e c 1 5 , Kadakin said that Russia will be with India "rain or shine". The envoy, a veteran India hand, underlined that after 10 years of "strategic" ties, the two time-tested partners had redefined their

embassy of russia in india

Prime Minister Manmohan Singh, President of Russia Dmitry Medvedev at 2010 summit in New Delhi.

terms of the contract for building the third and fourth Kudankulam units is nearing completion,” he went on, noting that Moscow today sees India as“the main customer for our peaceful nuclear equipment and technologies.” Meanwhile, the timeframe for the Russian-assisted construction of Kudankulam nuclear plant in Tamil Nadu was in danger of being disrupted due to protests led by activists who fear that in the wake of the Fukushima accident in Japan, a similar tragedy might happen in India. The Kudankulam crisis has put the Indian leadership in a tricky position on the eve of Prime Minister Manmohan Singh's visit to Moscow. Until recently, the Kudankulam nuclear plant was a symbol of the“privileged strategic partnership” between Russia and India.The thirdgeneration reactor project being implemented by Atomstroyexport meets all the modern requirements on the safety of nuclear power plants and has several levels of protection, as Russia has repeatedly stressed. However, the Indian media outlets, citing anonymous sources, have alleged that Russia supplied“inferior equipment to India”.It is not unlikely that this was done at the instigation of the US and France, Russia’s key competitors in the Indian nuclear market. Above all, it seems the US is

Alexander Kadakin, Ambassador of Russia to India.

relations as a “special and privileged”diplomatic partnership. "This time it is business... official visit...it will be energy sector, military field, and

economic sector," Kadakin said when asked about the areas in which the agreements would be signed. Alluding to Medvedev’s visit to India in December last year, which saw the signing of "an unprecedented" 33 agreements, the envoy said though the number of agreements will be less this time round, the quality of the pacts would be of greater long-term significance. “2010 was unprecedented. India was the only country that both the Russian president and prime minister visited in one year. It is Himalayan relations," he said. Despite recent protests by

he said.“We have the roadmap that Russian Prime Minister Vladimir Putin signed last March, under which 14 to 16 power units w i t h 1 g i g a by t e s a r e planned.We are implementing this roadmap,”he said. T h e e n v o y, h o w e v e r, locals over the Russia-as- stressed that Russia exsisted Kudankulam nuclear pected that the Indian nupower plant in Tamil Nadu, clear liability law will not the envoy struck an upbeat apply to Kudankulam's note, saying “nuclear ener- units III and IV as they were gy and cooperation in ener- not applicable to Kudankugy sector will be the major lam I and II. highlight of the forthcom- In an important step, the ing visit.” “Talks are in envoy disclosed that Russia progress and at a very ac- was awaiting India's reply to tive stage about Units III its proposal for finding a way and IV. Let us expect they out of tough Nuclear Supplicomplete it,” Kadakin said ers Group rules on transfer in reply to a question at a of enrichment and repropress conference in New cessing (ENR) equipment Delhi on Dec 7.“We expect and technology. The two that our nuclear coopera- sides are expected to sign tion, in spite of all odds and further agreements on joint all your internal problems, development of the fifth genwill continue and we are eration fighter aircraft and ready to assist India in this,” multirole transport aircraft.

in The Economic Times Every second Wednesday since February 2012

meeting between Manmohan Singh and Medvedev in Moscow. Yet now is the time to assess the long-term consequences of mutual disappointments. If they accumulate, they may strip the decades-old special partnership of its former halo.There is still time to conduct a postmortem and make these relations immune to vagaries in political weather and market fluctuations.

www.indrus.in

BUSINESS REPORT

Technology

in association with rossiyskaya gazeta, russia Wednesday, DECEMBER 14 2011

opinion

Innovation Top global companies keen to set up base

Skolkovo: An ecosystem of new ideas, technologies ribr

Skolkovo promises to become the locomotive of the Russian economy. It will certainly take some time before the Skolkovo “Innovation City”(Innograd) becomes a forge of new technologies, as its architects promise. And that’s understandable, considering that their stated goals to become the foundation of the Russian economy are herculean in scope and the amount of effort required to realise them. However, collaboration with high-tech companies has already begun. Skolkovo’s ambitious managers have set out to create a series of centers that would allow foreign companies to conduct cutting-edge research. Says Roman Romanovsky, Skolkovo’s Operating Director for Key Partners, “Our main task now is to create the most comfortable conditions and environment. Innovation centers are usually thought to be exclusively aimed at start-ups, but that’s not the case. Nor are we committed only to corporate research. We seek to make the circulation of ideas at Skolkovo constant, so that everyone can find what they come here for. Major companies would get young talent; start-ups would meet investors and investors would get promising new ideas, and so on.” This approach has caught on: many foreign companies have already expressed a de-

The Germans are upbeat For example, Siemens has signed a document providing for the phased development of its center. By 2015, it

safe to assume that it’s related to radioisotope diagnosis, since Siemens is the world’s leading producer of related equipment. Incidentally, the first grant of more than 3 million euros has already been given for the research project.

The Finnish experience Nokia has a somewhat different vision of its partnership with the Foundation, with a focus on inventing and introducing inline proA series of centres would allow foreign duction of everyday devices. “Mr. Vekselberg and we companies to signed an agreement condo cutting-edge firming the specific stages of the center’s development,” research. says Nokia representative Tatiana Oberemova. “The center will develop powerful Ericsson to invest in mobile computing systems and offer solutions in the smart meters that of nanotechnology. would save energy. field Nokia’s investments in the Nokia to focus on center amount to a doubledigit number in the millions mobile computing. of euros, which is the stanwill have a staff of 150. Some dard budget for Nokia’s reof the projects may be fi- search and development cennanced entirely by the Ger- ters.” man company.The total sum The project was planned to of joint investments will be develop at a dizzying pace: about 60 million euros, with the construction contract 40 million to be put up by was signed in June this year, Siemens and 20 million by and was due to be completed Skolkovo Foundation grants. in December. It is unlikely “For us, the Innograd is in- that the schedule will be met, teresting as a pilot project but some details of the partthat will transform Russia’s nership between the Infuture. It’s no coincidence nograd and the Finnish corthat Siemens AG CEO Peter p o r a t i o n a r e a l r e a d y Löscher is a member of the emerging. First of all, the Skolkovo Foundation Board. main areas of research will The scientific cooperation be identified, most likely covers a wide range of areas, broadband sensor systems including nuclear medicine,” for the main Nokia platforms said Alexander Averyanov, and mass production of modhead of the Siemens project ern electronic devices using at Skolkovo. So far, the com- nanotechnologies. At the pany has not disclosed de- second stage, the center will tails of the project, but it’s open its laboratories and the

billion dollars have been invested by the state in innovation projects in 2011, says The National Association of Innovations.

% of innovation projects are made by young people. 9% Russian graduates want to be researchers.

% of the projects relate to IT, 5% - telecom and space, 4% - nuclear, 13% - the rest.

third stage will entail largescale research and commercialisation projects involving Russian and foreign companies. Swedish neighbours Ericsson sees Skolkovo as an excellent platform for research in the sphere of telecommunications, cloud and telematics technologies. But the first research effort will be smart power supply networks whose main goal is to save energy. Smart meters installed with end users will

An open invite to Indian firms Russia is interested in cooperation with Indian companies and investors in the "Skolkovo" project, said Deputy PM Sergei Ivanov at a meeting of the bileteral Intergovernmental Commission in Moscow in November. "We are very interested in cooperation with the Indian high-tech companies and investors in this project," he said. Ivanov stressed that the Skolkovo innovation hub provides a zero rate of tax on income, property, institutions, land, and a simplified procedure for entry into Russia.

constantly provide information to distribution companies (for example, via Ethernet lines or through networks of cell-phone operators with the help of built-in SIM cards), allowing them (and consumers) to monitor consumption patterns more closely. “There used to be a lot of talk about the need to develop our economy, noncommodity exports, and now we have a place, an ecosystem where this can be accomplished,” says Mikhail Podoprygalov, Ericsson vice-

Interview Kandeh Yumkella

president for work with government agencies.“Skolkovo provides an ecosystem, and that’s an important cornerstone. I’m not the only one who could say that some things could have been done better and differently. But you have to understand that given the ambitious task Skolkovo is tackling and its vast range of goals, it is hard to say what’s justified and what isn’t.” “This is really Skolkovo’s main problem,” echoesTimofei Shatskikh, a financial analyst with RBK.“Until the first project is implemented, in the minds of most Russians, not to mention domestic investors, the Innograd will remain just another ambitious government idea. People don’t see Skolkovo as a scientific institution, but rather as a political one aimed at projecting a positive image. Even the Foundation’s established partners h i p s w i t h We s t e r n companies cannot dissuade them from this. Until the first scientific idea that germinated within the walls of Skolkovo is presented, that opinion won’t change. But the creation of several research and development centers may rectify the situation. Then you can at least argue that the generation of new ideas will happen serially.”

Tech MIT, US institutes top clients for Russian scientists

Marketing research and selling scientists

Get ready for green transformation

With the surging demand for young Russian scientists in the West, Russia has evolved its own strategies to market them.

UNIDO: Russia could create millions of jobs by investing in clean-energy technology

mikhail borishpolsky

What is UNIDO's main focus in developing countries? We focus on a niche area of industrial development – pollution management and green industries. In today’s context of climate change and resource efficiency in an overpopulated world, these areas are important to increase production and consumption. While market forces are important, industrialisation does not occur by accident. From Singapore to the EU, it’s been determined by the leaders.We want governments to mobilise their private sectors to engage in a green transformation. How do you envisage this green transformation? Experts call it a third industrialisation based on green growth. Strong public-private partnerships in green

industries are needed, where the state hedges some investment risk while allowing market forces to operate. Governments must plan carefully for 10 to 20 years ahead because the scale of investments is huge. The private sector will not risk capital in green businesses if the government isn’t clear about what path it will be taking.

and lower Volga basin. We’re also promoting the production of energy-efficient refrigeration and air-conditioning systems via technology transfer.

Public-private partnerships in green industries, along with market forces, are needed.

UNIDO is pushing a $1.5 mn project for improving water quality in the Volga basin in Russia.

How are UNIDO’s plans being realised in Russia? We’re pushing many projects in Russia focused on green energy and cleanup production. These include a centre for the disposal of hazardous consumer products and industrial waste in Tatarstan and a $1.5 million project to improve water quality and reduce the impact of industrial activities in the middle

building codes and use public money to build new insulation, they could create millions of jobs. Mayors – like Michael Bloomberg of New York City – will tell you one of their biggest challenges was figuring out ways to keep skyscrapers hot and cool. They have been thinking about incentives for owners and tenants to be energy efficient.We’re pitching these

What specific green technologies would you recommend for Russia? If Russian authorities were to adopt new municipal

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ribr

In an interview with RIBR, Dr Kandeh Yumkella, the head of the United Nations Industrial Development Organisation (UNIDO) gives some tips on sustainability.

’m often asked to summarise the core mission of Skolkovo. This requires only two words: changing culture. Skolkovo is changing the academic culture in Russia by building an entirely new grad-level science institute, together with MIT. We believe it will be the first such institute in the world, which comprehensively integrates education, research, innovation and entrepreneurship. You may not choose to start your own company upon graduation, but you certainly will know how to. Skolkovo is changing corporate culture. We’re educating large Russian corporations about the value of conducting contract research, how to interface and partner with the VC community, and in general how to embrace innovation as central to their success, if not survival. Skolkovo is also changing entrepreneurial culture. It’s easy to forget that not long ago, private enterprise in Russia was either illegal or strongly discouraged. It will take time to overcome this legacy and to let the innately-creative Russian spirit flourish. Skolkovo is an accelerator in this transformation. By providing support, financing and preferences to startups, we hope to level the playing field somewhat against stronger players. Our role is also to provide “moral support”to nervous young entrepreneurs wanting to chase their dreams. Finally, we are clearly aiming to change the cultural understanding of wealth creation. Russia has been long dominated by physical production: oil, gas, metals, timber, and so on. An exclusive focus on material output dominated the Soviet era with its famous 5-year plans. Even today, virtually, all the top Russian business people m a d e t h e i r fo rt u n e s through natural resources. Unsurprisingly, most Russians view wealth creation in physical terms.

Billionaire Viktor Vekselberg, president of the Skolkovo Foundation.

Fact Sheet

COO of Skolkovo foundation

But for Russia to compete in the global knowledge economy, it needs to shift gears, and Skolkovo is the new transmission. We do this by educating about intellectual property - by assisting entrepreneurs and startups to create, defend and commercialise their IP; by (hopefully) providing early and highly-visible successes in monetising Russian IP on the world stage; and finally by creating entirelynew IP legal frameworks, which can be applied across Russia. In short, our task is to create efficient mechanisms to transmit Russia’s scientific and intellectual horsepower into competitive knowledgebased products and services in global demand. Is changing culture and mindset easy? The upside, however, is if you are successful, your impact will be significant. Large countries are like battleships. Get them turning even a few degrees in the right direction,and you’ve changed their course. Skolkovo enjoys many advantages .The first is Russia’s rich scientific and technical resources. My previous assignment involved building a similar innovation city for the small emirate of Abu Dhabi, with only 400,000 citizens and virtually no scientific resources. In the global race towards a knowledge economy, Russia is already well-positioned. Second, we’ve learned from others. Starting later, Russia has the second mover advantage.We have studied innovation successes and failures alike, and have woven those into our model. Third, and in a break with the Russian tradition, Skolkovo is an entirely open platform for global cooperation in R&D. Closed science cities of the past served their purpose, but the sheer speed and scale of global interconnectivity dictate openness and collaboration. The world may not be flat, but it’s definitely becoming more elongated. So why do we do it? I could give you lots of reasons, but perhaps Steve Jobs said it best:“Here’s to the crazy ones. Because the people who are crazy enough to think they can change the world are usually the ones who do.”

Kandeh Yumkella, Director-General, UNIDO.

ideas to wealthy Russians as new business opportunities. The message I brought to the Nevsky Ecological Congress in St Petersburg this year was that Russia has always been a leader in science, but there has not been enough mobilisation for it to lead the green revolution. Russian scientists who can lead this research are out there. What are Russia's challenges in the area of green growth? When Russia went through rapid industrialisation, sustainability was not an issue. There are now places where accumulated pollution has killed ecosystems, and contaminated heavy-metal production sites where pollution is seeping into waterways. The good news is that the technologies to deal with these problems exist. The Japanese faced the same situation 30 years

ago. Now the Japanese are leaders in many green technologies. How do you promote energy efficiency while stimulating economic growth? Japan and Denmark have shown you can grow GDP continuously while cutting energy use – the new government in Denmark is pitching green technologies as a way to stimulate economic growth. But I don’t think this mentality has gained a foothold in Russia yet. The government has set up an energy-efficiency programme, and I have heard people ask: “What for? We have lots of energy!”The answer is that there is a high demand for that energy – what you don’t waste, you can sell to other countries. Prepared by Arten Zagorodnov

Brokerage services (to sell research) and scientists themselves remain underdeveloped in Russia. In the West, technology brokers form an entire market, which news agencies last year estimated at $500,000 in the US alone. In Russia, tech transfer – a service of searching for developers of in-demand technologies or creators of inventions and discoveries – happens in two ways. First, leading American tech transfer agencies – the University of Chester Tech Transfer, European Technical Science Association, East Bay Tech Transfer and Griffin, as well as the European Union Tech Transfer – operate in Moscow, St. Petersburg and Novosibirsk.These companies have no branches, meaning their work is conducted either directly via head offices, or via brokers, who work for a minimum interest-based fee.Tech transfer looks a lot like staff recruitment: a customer (a university, corporation or government agency) places

sergey pyatakov_ria novosti

Alexandre vostrov

sire to open research centers at the Innograd. So far, they have primarily come out with statements of intent, but some concrete agreements have already been signed.

Steven Geiger

kommersant

Skolkovo, the Innovation City, aims to transform Russia's future by becoming a hub of cutting-edge technologies and ideas.

It's all about changing culture and mindset

Skolkovo Center and Bauman Moscow State Technical University will create a business incubator.

an order for a specialist with a certain reputation and skills, or even a specific person, and the tech transfer broker receives a fee equal to one or two monthly salaries of the hired specialist.“The most frequent customers are American technology institutes fulfilling complex orders for industrial corporations. Demand is especially high for graduates of Bauman Moscow State Technical University and Moscow State University’s science faculties,”says John Neiper, Eastern European Manager for Griffin.“The leading tech transfer customer is the Massachusetts Institute of Technology. We fulfill six to ten orders of this kind annually, with an annual contract av-

eraging $100,000-200,000," he said. Incidentally, 15 years ago, Russia filled upto 150200 tech transfer orders annually in the natural sciences alone. The second way involves Russian corporations working in partnership with the West and hunting for young Russian graduate scientists to work abroad. The construction sector leads the way.“Now graduates of the Moscow Architectural and Construction Institute capable of designing miles-long bridges can compete for annual contracts of upto $200,000 and work for a Western partner company rather than our company,” said Ilya Ruzhansky, deputy director of Mostovik.

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IN ASSOCIATION WITH ROSSIYSKAYA GAZETA, RUSSIA

REUTERS/VOSTOCK-PHOTO

WEDNESDAY, DECEMBER 14, 2011

VITALY ANKOV_RIA NOVOSTI

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An aerial view of Vladivostok's historic center and the picturesque Golden Horn Bay (left). The builders of the bridge to the Russky Island have recently completed a milestone with the total length of the opposed cantilever sections of the main steel stiffening girder being now 564 meters.

Region A European city in the Asian landmass, it's a paradise for adventure-seekers with its hilly terrains, islands and stunning views of the Pacific Ocean

Vladivostok: Lording over the East Vladivostok reminds one of San Francisco with its stunning rollercoaster hills and the dreamy blue Pacific Ocean, but remains a quintessential Russian city. AJAY KAMALAKARAN RIBR

A spectacular setting of hills and peninsulas, bays and outlying islands, a thriving student life, combined with buzzing oriental markets and a distinctly European feel in an Asian landmass make Vladivostok one of the greatest cities in Russia. With its trams, hilly terrain and stunning views of the Pacific Ocean, the ‘Lord of the East’, founded in 1860, is redolent of San Francisco. The city, however, has a quintessential Russian feel

with central Vladivostok boasting of a collection of colourful, elegant and grandiose pre-civil war buildings. Architecture-lovers can spend hours in the Svetlanskyaya and Aleutskaya streets, home to many buildings designed in Czarist Russia and symbol of an era when aesthetics mattered. Yul Brynner lived in house number 15 on Aleutskaya Street. The grand four-floor mansion has been restored to its original glory, although there is no museum in honour of the legendary actor. Residents of the city grudgingly admit that the star of the ‘King & I’ and other Hollywood classics was actually not born in the city, but across the Tatar Straits on Sakhalin Island. Right in the heart of Svet-

lanskaya Street is the Arsenev Regional Museum, named after the great ethnographer, explorer and writer Vladimir Arsenev, who wrote ‘Along the Ussury Land’.The museum has a rare collection of photographs dating back to the founding of the city. There is an interesting collection of civil war photographs and some with the insignia of the ‘Far Eastern Republic’, a country which existed for two years before being annexed into the Soviet Union. The Arsenev Museum also has a small but nice natural history section, with an exhibit of an Amur Tiger and Brown Bear in mortal combat. Also in the city centre is Vladivostok’s answer to Moscow’s Arbat: The Admi-

ral Fokin Street. The city’s Arbat is full of shops, cafes and fountains and goes one up on its Moscow cousin as it leads straight to the sea. For those of you looking for a quintessential Far Eastern Russian meal, the Izbushka (log cabin) cafe is an ideal place to enjoy some Ukha (fish soup), while listening to folk songs from the region. Patrons can choose a ‘dacha’ room or ‘forest’ room for more privacy. The Admiral Fokin Street is also the best place to enjoy public celebration, be it the New Year, when reindeer and Ded Moroz (Grandfather Frost) roam the area or the May Day festivities, when rock bands celebrate the near arrival of the Primorye summer. Vladivostok exudes youth-

ful energy, largely in part due to many institutions of higher learning in the city. The university students are used to exotic visitors but are friendly enough to invite them for evening parties. The best way to get to the Far Eastern Technical State University is to take the funicular (one of only two in Russia). The ride to the top of the 100-metre high hill lasts just over a minute, but there are absolutely stunning views on top. Besides providing a visitor a chance to inspect some ships belonging to the Russian Pacific Fleet, the hill-top provides a lovely view of the railway station, a heritage building construction built in 1912, the regional administration building and a gigantic monument dedicated

Getting ready for the Big Day: APEC summit 2012 Vladivostok is now facing a new wave of construction ahead of the Asia-Pacific Economic Cooperation Forum it will host in 2012. The city today looks like an enormous construction site, with cranes rising above dug-up streets, as workers upgrade transportation infrastructure and build a new campus for Far East Federal University on Russky Island, which will host the summit. The role of host city for the summit will result in a huge breakthrough in the development of Vladivostok and the surrounding Primorye region. Among the major benefits are two huge bridges that Vladivostok will get by 2012 and that will ease movement around the city. One of the bridges will stretch across the Eastern Bosporus Strait to connect the continental part of the city to Russky Island, about 800 meters to the south. It will be the longest cablestayed bridge in the world, with a main span length of 1,900 meters. The other bridge will connect the city center to Cape Churkin lying across Zolotoi Rog, or Golden Horn, one of the city's biggest bays.

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Raj Kapoor, Gandhi, veggie.... Raj Kapoor, Mahatam Gandhi and vegetarian food – Indians are sure to feel at home in Vladivostok. The Indian Consulate in Verkneportavaya Street takes care of Indian citizens in the vast Russian Far East and issues an increasing number of visas to Russians. The city also has a RussiaIndia Friendship Association, which organises cultural programmes. This year, the Arsenev Museum marked Mahatma Gandhi’s birthday with a roundtable meeting on the philosophy of non-violence. India’s connections to the city go back to the Soviet Union, when Indian ships were occasionally allowed into the city’s harbour. Many 50-something

seems to be the norm. The best beaches nearVladivostok are on the Popov and Russky islands. There are regular ferries to both islands from the city’s ferry station. While Popov Island has a few guesthouses and is a more popular tourist destination, Russky Island, once closed to foreigners, is a hub of activity as it prepares to host the 2012 APEC Summit.The city was closed to foreigners for over five decades, but the Russian government is now trying to pitch the city as a gateway to the Asia-Pacific Region. The city is closer to Seoul, Tokyo, Beijing, Shanghai and Pyongyang, than it is to Moscow, making it an ideal entry point for Asian businesses to enter Russia. Several countries, including Australia and India, have consulates in the city, which is poised to be an economic hub linking Europe with the Asia-Pacific. Trade and commerce aside, given the city’s historic landmarks, natural beauty and cultural activity, it is no surprise that Vladivostok is one of the most sought after cities for adventure-seeking travelers. Ajay Kamalakaran was the editor of The Sakhalin Times from 2003-2007.

An ode to the great Russian Far Eastern winters Ajay Kamalakaran believes that minus 50 degrees Celsius and ice on the sidewalks are not a cause for concern. Indian can easily fall in love with snow.

residents of the city proudly talk about how the Soviet Pacific Fleet was on call to defend India during the 1971 India-Pakistan war, when the US sent its 7th Fleet to the Bay of Bengal. The Hare Krishna Cafe remains a favourite among vegetarians and for those with a taste for North Indian curries and kebabs. There is an Indian restaurant called Bombay-1 that caters to the Indian palate’s craving for spicy food. And like in other parts of Russia, legendary romantic actor Raj Kapoor is popular among the older generation, while the late-20 somethings are fans of Mithun Chakraborty, famous here for his film Disco Dancer.

FACTS ABOUT THE CITY

Russia's biggest port on the Pacific Ocean, population - 616,884. The terminus of the Trans-Siberian RR and the Northern Sea Route, the chief base of the Russian navy in the Pacific, and a base for fishing and whaling fleets. Distance from Moscow - 9250 km. The annual temperature is +5°C (average temperature in January is -14°C, in August is +24°C).

The city's location makes Vladivostok a strategic transportation hub in the Far East for international cargo shipments. The port handles cargoes primarily from South Korea, China, Japan, Taiwan, Thailand and Vietnam.

The city is the chief cultural center in the Russian Far East. Among its many educational institutions are the Far Eastern branch of the Russian Academy of Sciences and the Far Eastern University. Main industries: car and equipment construction, shipbuilding, fishing, food production and timber processing.

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to ‘the Fighters for Soviet Power in the Far East’. All three sites are worth visiting on their own at sea level. Most visitors enter the city via the great Trans Siberian Railways, which terminates in the city.The square housing the monument to the fighters holds a weekly market on Fridays, where indigenous and local handicrafts can be purchased. Vladivostok is surrounded by 16 imposing forts, most of which were built to protect against potential Japanese invasions. The best night views of the city can be seen from fort number 7, which is about 15 kilometres to the north of the city. While the fort is officially closed at night, that doesn’t stop Russian students and youth from getting up there for absolutely dazzling views of the city, the Golden Horn Harbour and the Amur Gulf. For those that want a room with a sea view, the city has plenty of options including the Amursky Zaliv Hotel, which is perched atop a cliff and the Primorye Hotel, tucked away in a peaceful street. This writer prefers theVladivostok Hotel, an institution in the city, which was once the most prestigious hotel in the Soviet Far East. The rooms have a great view of the Amur Gulf and the government-run hotel is within walking distance of both the railway station and the Admiral Folkin Street. No visit to Vladivostok is complete without a visit to nearby scenic places. The Shamora Bay, which has played host to some of the biggest parties in the region, has some gigantic cliffs with breathtaking views of the sea. While Shamora is a good place to have a pre-sunset picnic, the evenings are also well-spent in the sanatorium, which is adjacent to the Russian Academy of Science. The main building in the sanatorium resembles one of the great palaces of St Petersburg. Both sites are on the same line of an electrichka (electric train), in which ticketless travel

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