Innovative cluster in Moscow. What for?

An innovative industrial cluster is to be set in Russia’s capital. At a recent conference of Moscow engineering industry professionals, Christina Volkonitskaya, Deputy Director of Science, Industrial Policy and Entrepreneurship Department of Moscow government, was presented to the audience as a supervisor of the project. Yet an ordinary person needs to be explained what all that is about.

Anton Denisov | RIAN

On May 14, the Ministry of Industry and Trade of the Russian Federation published a draft presidential executive order on establishing an innovative industrial cluster in Moscow. The idea was voiced by Moscow Mayor Sergei Sobyanin at a meeting with the Russian President and got presidential support.

Cluster as a term started to be used in the Russian industrial policy context since about 2012 when the Economic Development Ministry launched a program of promoting innovative territorial clusters. Of all the applications submitted, it selected 27 clusters which between 2013 and 2015 received financial support of RUR 5 bln ($150 mio).

Innovative territorial clusters were understood as a community of enterprises and organizations located within a set territory and characterized by existence of a common production chain, a coordination mechanism, and a synergetic effect.

Yet the clusters developed by local authorities have usually had a rather narrow specialization. Moscow authorities, for instance, referred to seven clusters, either fully or partially developed in the city. Those included innovative clusters in Zelenograd and Troitsk (with a special status awarded by the Economic Development Ministry), Yuzny medical technologies cluster, innovative production and construction cluster, composite cluster, Medical Industry, New Chemistry and Biotechnology cluster, and industrial outdoor cluster. The above seven clusters integrate 421 entities generating an aggregate annual revenue of over RUR 48 bln ($800 mio).

Now, Moscow authorities demonstrate much greater ambitions. They want their innovative industrial cluster to incorporate most if not all entities operating in the city and one way or another involved with industrial production and innovative developments. Executive summary to the executive order notes the number of participants in Moscow innovative system is 20,000. In line with the presidential executive order, the government of Moscow will have to set the cluster operator, Innovative Industrial Cluster of Moscow foundation.

Judging by what officials say, the foundation’s main purpose is promoting production links between Moscow enterprises and research laboratories so that the synergetic effect is ultimately produced. The Ministry of Industry and Trade believes the aim of the foundation is coordinating activities of the cluster participants.

According to Moscow Mayor Sobyanin, the cluster ‘will be the integrator of the overall infrastructure, helping in establishing links, creating an aggregated information system, so that authorities could know what sort of assistance and at what scale is required. It should produce an aggregate synergy of the available huge potential’.

Vechernyaya Moskva daily cites Alexei Fursin, Director of Science, Industrial Policy and Entrepreneurship Department of Moscow government, as saying the cluster ‘will ensure integration of not just information, but of all other means of supporting enterprises’.

The problem is acute in Moscow. The matter is, various scientific and innovation centers, departments, companies and other entities which are involved with advanced technologies development, operate all by themselves. Everyone would have targets of its own yet at times their goals may coincide”, Venera Shaidullina, senior lecturer of the Department of Legal Regulation of Economic Operations at the Financial University under the Government of the Russian Federation, explained to Invest Foresight. “That causes conflict of interests. Mayor Sobyanin approached the President with a proposal to set an innovative industrial cluster to represent the interests of all entities while and by ensuring optimization in all areas of all developments. That specifically relates to education, infrastructure development, innovations, industries. Joining efforts of various software specialists, researchers, engineers, program developers will therefore promote their active cooperation and allow launching grand projects. Jointly, they can design an AI operated vehicle, for example, and build a new infrastructure for ensuring safe traffic at the city roads”.

It is a common knowledge that free market is the best mechanism for finding partners and building production chains. The government’s means to stimulate cooperation of various companies are rather limited. It has also to be admitted that it is often more feasible to have innovative products manufactured in China. True, authorities can arrange ‘meeting points’ for businesses, at large exhibitions and business forums first of all. Besides, government makes investments in the national infrastructure. Yet, why an extra foundation is required for that?

If the Cluster Foundation is another way of providing advantages to businesses and if the cluster project brings about additional benefits for entrepreneurs, it should certainly be welcomed. Nevertheless, it is not fully clear what was the pressing reason for the authorities of Moscow to set a new bureaucratic organization. Especially since Moscow is a wealthy territory where industrial policy has become an industry based on a variety of municipal institutions of development.

Moscow’s Venture Investment Development Foundation, for instance, has extended RUR 380 mio ($10 mio) of investments over the past six years, whereas Moscow Foundation for Support of Industry and Entrepreneurship has facilitated over RUR 1 bln ($30 mio) of loans over five years. In Moscow, there are currently several technology parks which over five years have been granted subsidies of RUR 1.2 bln with further subsidies for acquiring industrial machinery reaching RUR 2.77 bln. In Moscow, there is a free economic zone, a variety of tax benefits, etc.

Invest Foresight approached various officials and experts. Still, their comments have not made the situation any clearer.

In case the new cluster is arranged, what status will it have?Alexei Golovchenko, Managing Partner at ENSO law firm, President of Legislation Development and Adaptation Institute, head of Regulation Impact Assessment Committee at Business Russia NGO, asks. “Will it become a special economic zone or a priority development area? Will it be granted a status of a special taxation residency? If there is no special taxation regulation, the efficiency of the overall undertaking is rather questionable”.

Sergei Demin, junior partner of Strategy and Operational Efficiency practice at NEO Center, notes that at the moment, there are numerous programs for supporting residents depending on the area of their operation. For businesses, it is often too hard to find their ways to or through those programs. According to Sergei Demin, the cluster will resolve the problem and improve residents’ performance by arranging and easing entrepreneurs’ access to government support measures. The cluster will also attract new residents thus stimulating investments from private sources.

By Konstantin Frumkin

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