10 threatsfor innovations in Russia
Ilya PonomarevState Duma – Russia Parliament
St. Petersburg, October 1st, 2009 г.
10. Inconvenient legislation Incompatible with usual approach legal acts:
VC regulations No LLP form VC funds in Russia are regulated as mutual
funds Corporate legislation Technology transfer act
Acts where bad wording leaves room for unfavorable misinterpretation Software VAT exemption act Privacy protection act
Legislation that requires amendments in new economy environment Civil Code
Internet crime liability definition IP rights protection
State procurement act Bankruptcy regulations e-Payment systems Miscellaneous industry-specific acts (telecom,
advertisement, mass-media, …)
9. Corruption
Inequality between large corporations and start-ups when dealing with state agencies Getting approvals Response time Police abuse Access to contracts
Widening gap between society and the government makes civil agreements invalid
8. International competition
Low productivity in Russian economy drives up costs even for effective businesses Higher wages decrease
competitiveness Brain drain Russian authorities do not
help national producers to compete internationally No offset deals No technology brokers (or
export support agencies)
7. Bad Russia’s image
Russia is not associated with quality products, even less with technology intensive products
Russia is perceived as an unreliable and unpredictable partner
Civil society and democratic institutions crisis, decreased trust in national leadership scares investors
6. Infrastructure
Lack and expensiveness of modern business infrastructure Office premises Telecom Financial instruments
Debt financing is expensive and hard to negotiate
Excessive concentration of business activity in Moscow, colonial policies towards other regions
Low quality of life Housing and utilities deterioration Soviet education system collapse Urban planning traditions of the past
outlived themselves
5. Inadequate institutions
No unified management of economy modernization at the executive level
Poor investments environment No traditional exits
No technology IPOs No strategic investors
VC funding is undeveloped State institutions (Rusnano, RVC)
cannot replace working market Gap between universities, R&D
and businesses State funding has not reached the
point of influencing or just supporting innovation businesses
4. Resistance of the elites
Russian elites do not have long-term plans in Russia They tend to diversify outside
Russia They want to live in Western
consumer society, but get their easy dollars in Russian regions
Personal wealth is fully dependent on natural resources
Any type of social innovation threatens stability of existing “sovereign” political and governing system
3. Business climate
Outrageous court and police system
Unsecure situation with private property protection Investing in Russian assets
looks risky Customs Tax collectors either do not
know specifics of hi-tech businesses, or consciously abuse innovators
Extremely long time to get required decisions and approvals from any state agency
2. Structure of Russian economy At the current economy conditions
hi-tech businesses present higher risks with at least uncertain return, compared to natural resources and other “traditional” enterprises
Chosen way to privatize created large “cash cow” corporations with low debt and virtually unlimited resources, creating unfair competition with any new companies and demotivating managers to improve productivity
Tax code favors industries with higher revenues and lower added value
Limited demand for Russian-made technologies
1. Deficit of human resources
No entrepreneurs, even less – serial experienced entrepreneurs
No success stories to follow No adequate business
schools No professors with first-hand
experience Lack of international business
experience and proper connections Language barrier
Demographic crisis
…But we are still the smartest,
so we’d definitely make it!
…But we are still the smartest,
so we’d definitely make it!