Skolkovo: Russia’s Silicon Valley or hollow real estate project?

Many Western journalists see it as a Russian Silicon Valley, but to date the Skolkovo innovation city has been less silicon and more shiny new buildings and federal roubles. It still tells us a lot a about politics and economics in Russia today, argues Imogen Wade

Skolkovo, Russia’s newest and most Western-oriented centre of innovation, has received much media attention from Russia and abroad.

Some coverage, like that in the Irish Times and Wall Street Journal has been full of praise, boldly proclaiming that Skolkovo will be Russia’s ‘window on the world of technology’, as  St Petersburg – built on a swamp land by Peter the Great in the 18th century –  was once Russia’s ‘window on Europe’. Others  hint at troubles ahead for Skolkovo tied to Putin taking over as president again in 2012.

Many more are more dubious of Skolkovo’s chances of success. The leading Russian economics magazine  Kommersant Dyengi published a controversial article in September 2012 which argued that Skolkovo had become nothing more than a real estate project. A survey of educated Russians in 2011 found that people were largely sceptical that Skolkovo could be successful given Russia’s corruption, bureaucracy and unstable political and economic climate. 

What is Skolkovo?

Launched in 2010, Skolkovo is the most high-profile and newest manifestation of a policy shift in Russia towards economic diversification, innovation-based growth and modernisation that began around 2002. Situated about 20km from Moscow city on farmland once used for growing cucumbers, Skolkovo aims to be a physical and virtual ‘cluster’ of firms, researchers and graduate students promoting technological innovations and providing high quality infrastructure, human capital and a corporate environment that will encourage technological innovations. All activities relate to one of five pre-determined themes, which are also Russia’s strategic science priorities: IT, biomedical sciences, energy-efficiency, space, and nuclear technologies.

Skolkovo sees itself as an ‘ecosystem’ of innovation made up of::

• The innovation city itself which provides office and residential space for scientists, researchers and entrepreneurs to live, work and interact on a site designed by leading French architects (whose construction began in 2012);
• Innovation Centre with a technology park (‘technopark’), infrastructure and support for start-ups and the Research & Development centres of major multinational and Russian companies;
• The Skolkovo Institute of Science and Technology (SkTech), a centre for graduate education with 1200 students;
• Virtual Skolkovo replicating the services Skolkovo provides across Russia both virtually and physically.

According to Conor Lenihan, Vice President for International Partnership Development of the Skolkovo Foundation which governs the project, its mission is four-fold:

• To diversify the Russian economy through innovation and entrepreneurship;
• To integrate Russian science and technology into the global economy;
• To develop human capital through world-class research; and
  
• To nurture competitive knowledge-based companies.

But the Silicon Valley tag is misleading. Skolkovo is not in fact modelled on Silicon Valley, despite media claims. Silicon Valley in California emerged spontaneously ‘bottom-up’ whereas Russia’s Skolkovo is a top-down innovation enclave directed and governed by an authoritarian political system. It is an enclave because start-up firms based in Skolkovo are exempt from VAT, profit tax, unified social tax and customs duties, while foreign researchers and employees of Skolkovo’s firms enjoy fast track visa assistance to enter Russia.

Skolkovo has also received colossal funding from the federal budget: approximately 3.9 million roubles in 2010 (GBP84m or USD132m: source). The most recent source says that it will definitely get a further 85 billion roubles from the state budget up to 2015 (approximately GBP1.8bn or USD2.8bn). The colossal size of such sums explains many people’s scepticism about whether the money will be well spent or will  simply disappear into construction and ‘project management’.

Modernisation and regime survival

Skolkovo sheds light on two long-standing issues: regime survival and whether Russia should look East or West for modernisation and development.

The regime in Russia has undoubtedly been facing some tough challenges since 2008. Skolkovo highlights how  it is trying to survive and maintain its power. Questions of diversification, modernisation and reform have long been near the top of politicians’ and economists’ agendas and Putin and Medvedev have proposed different ways of tackling this problem, with Putin in favour of gradual changes, and Medvedev backing more drastic reforms to diversify the economy and modernise the society and the political system.

Both Putin and Medvedev have committed their support to Skolkovo, seeing it as a way to foster growth driven by innovation. However, with Putin now in his third term as president, and growing signs that the Putin-Medvedev tandem of power is dead, it will be interesting to watch developments at Skolkovo to see whether it continues to get the same scale of top-level political support.

Skolkovo is also a test case in the long-standing historical debate about whether Russia should turn  West or East in its political and cultural development. Skolkovo appears to be a Western-oriented innovation centre, as shown for example in its partnership with Massachusetts Institute of Technology and active recruitment of staff, students and companies from Europe and North America. Such openness is one major difference between Skolkovo and the former closed Soviet science towns (naukogrady) built from the 1950s, often in remote and isolated areas. The Soviet state created such science towns explicitly to foster Soviet technological prowess in ideologically and geopolitically important branches of science and technology.

But could Skolkovo turn to the East in a bid to maximise Russia’s trade and economic cooperation with Asian countries? Last year, Skolkovo announced that it would seek to open another similar innovation city in Vladivostok. Such a move may reflect the deteriorating political and economic relationship between Russia and many Western countries and Russia’s feelings of rejection by the West. It is  currently too early to tell in which direction Skolkovo, and indeed Russia, will proceed.

Potemkin village or catalyst for change?

Will Skolkovo become a Potemkin village, an empty shell of high tech, shiny, modern appearances? Or can it be a catalyst for deeper transformation? The extent to which it succeeds in fostering innovation will be influenced by Russia’s culture and institutional context. It depends on three main factors.

First, Skolkovo must help create and strengthen a functioning ‘system of innovation’ where public and private actors interact, exchange knowledge and learn from technologies imported from other countries and multinational firms. It should also encourage the creation of  new small firms that create new technologies and act as specialised suppliers for other firms across the country and abroad.  These kinds of firms have been known indirectly to trigger economic growth in other countries.

Second, Skolkovo will have to be a catalyst for greater domestic demand for innovation. The absence of such demand  continues to be a major obstacle to the growth of innovation in Russia. The recent announcement that the Russian army is to make soldiers wear socks instead of footwraps (portyanki) is potentially good news for the sock industry – but will we see Skolkovo firms start making hi-tech socks?

Third, the innovation city will have to avoid the predators in the Russian state. These corrupt officials, often lower-level bureaucrats, can make large individual gains at the expense of public money and so stand to gain much from their official positions.

Imogen Wade is a PhD candidate at UCL-SSEES. Her research interests include governance, innovation and regional development. Her thesis looks at how technological innovation is governed in Russia, focusing on the roles of science cities and science parks.

Together with Professor Slavo Radošević (UCL-SSEES), she organised a workshop ‘Russia’s Skolkovo in Comparative and Historical Context’ at UCL-SSEES on Wednesday June 13 2012. A summary of this workshop and podcasts from the event can be accessed here. A briefing paper based on the workshop is forthcoming.

Note: This article gives the views of the author(s), and not the position of the SSEES Research blog, nor of the School of Slavonic and East European Studies, nor of UCL.