Bridges and Roads to the Future.

Nowadays a new industry is developing in the world which will become a leading force – it is the knowledge economy.

Vladimir Kvint, Foreign member of the Russian Academy of Science, Chair of the Financial strategy department at Lomonosov Moscow State University's Moscow School of Economics, Doctor of Economics, Professor of LaSalle University, Member of the Breton Woods Committee, one of the most famous Russian economists, is giving especially for readers of the newspaper of the Federal Assembly of the Russian Federation “Parlamentskaya gazeta”, next year 2010 Forecast for the Development of the Russian economy and several advances in development strategy.

- What’s expected to happen with developing markets next year?

The World’s economy has mostly recovered. Crisis has finished and positive results are expected for the next year. Global output will grow, and will be within the “green zone” as financiers say.

Countries with emerging markets have their own features. Firstly, there are some of them such as China and India which already had high positive growth rate in 2009. For China it’s close to 10 percent, for India, plus 6 percent. Next year the Indian domestic product will grow approximately by 7 percent and China is likely to achieve a similar growth rate. Small countries of the global emerging market are even more efficient. I will explain why. Nowadays a new industry is developing in the world, which in XXI century will become a leading branch of many countries’ economies. It is the knowledge economy – when knowledge becomes a productive resource. There are great concerns in Russia on this matter, but other countries are doing it.

Recently I have visited the Ministry of Economy of South Korea with the Governor of Primorsky Region, Sergey Darkin. The Minister hosted us. But when I went out and read the visiting card, I realized that I had not met with the Minister of Economy – already Korea does not have such a ministry, but I had met with the Minister of Knowledge Economy. That is because Korea is one of the few countries in the world that technologically lives in the XXI century, as do Taiwan and Singapore. The knowledge industry of European countries such as Hungary and Czech is very close to becoming an important branch of their national economies. These countries also refer to countries with emerging markets, but technologically they are far ahead of India and China.

Russia states are in a more grave condition in this regard. Government has not rebuilt its overall structure of its economy. As before, the main interest is natural sources. And when global production had reduced, the demand for natural resources declined also in most countries; so Russia has been set back. I think that this year the reduction in national output will be close to 9 percent. Next year Russia will experience a little economic growth. But it will not bring to us any particular benefit as the country will try to return to its habitual role as producer of resources.

I often visit the Far East. The most negative impression was produced by that concerns around the timber – Russia sells to China its raw unprocessed timber. Even most of the non civilized African countries try to sell processed timber, converted to squared beams etc.

Next year the Russian Academy of Science will face a budget reduction, as there will be no funding growth for science at all. The Academy of Science is one of the few achievements that remain from the time of Peter I who created it. The budget of Academy is equal to the budget of the average American university. At the same time we establish claims on technological breakthrough. Who will achieve such breakthroughs?

I am trying to create an insight with my students as to how banks help the technological breakthrough. If there are any motivation for banks to fund scientific and technologic developments. We have found out that less than 8 percent of Russian enterprises use any kind of innovation at all. Renewal of equipment is on average approximately 2,5 percent annually. That means that it requires 50 years to fully replace existing equipment.

So these are the main reasons why emerging markets will develop in different ways. As before such countries like Russia and Nigeria and partly Kazakhstan and Indonesia will be orientated towards resources production. Others will strengthen their roles as industrial zones for developed countries: Brasilia, Ukraine, Bulgaria and many countries of Africa and Asia. And finally there is a third group of countries – countries that try to become a scientific and technological outsourcing for developed countries. They try to improve ideas and sell it throughout the world. First of all Taiwan – world leader in semiconductor production: 80 percent of innovations in this sphere comes from there, 80 percent of scanners are produced there or in economic zones of continental China using its technologies. That’s why I support the collaboration and integration of the Russian Far East with not only China, but firstly with countries from which Russia could obtain technologies: South Korea, Taiwan, and Singapore. South Korea has been ahead of the USA in the field of technologies for 15-17 years. This is a unique country for cooperation with Russia on the Far East.

- But what is hampering the development of relationships with South Korea?

There is absence of understanding concerning the importance of these relations and associated support. Government can do much through supportive arrangements. It can provide cheap credit. Developed countries trying to organize technological breakthrough provide money at 0 % or 0,25% rates of interest . There is even free funding available. For example, techno parks. I have being working with leaders of Taiwan from 1997 till 2001. A Techno park was established there not far from Taipai. Government had invested 2,1 billions of dollars, had built 2 high-rise buildings in the green zone. Both are very simple. They consist of typical facilities consisting of 5-7 rooms plus chamber and meeting room in each. The Park Administration provides a tender amongst scientists at the age not more than 35 years who aspire to obtain these facilities for 2 years without any payments. The Administration analyzes the applications as to who has greatest probability to succeed in 2 years developing new technology or industrial standards, so as to decide whom best to access these facilities. If you create industrial standards that are purchased by industry, you start to pay off the 2 years rent but only after 5 years from gaining first profit. For example, you leave them in this year. And you gain first profit after 5 years from leaving, so you will pay for rent only after a further 5 years. And if your business finished with failure – you would have no debt – zero. It means that you as young technologist are fully protected. So this way one provides technological breakthrough.

As strategist what actions would you recommend for the next year?

Russian President and Vice-president provide the correct policies. But regarding their implementation, at the ground floor, there are no actions targeted at technological breakthrough. This is due to the absence of real motivation. That is why venture capital funding companies with high risk need to be set free from taxes for the sum of investments. It necessary then to obligate banks to become credit venture companies with low interest rates or either free money using funds provided by the government. Government should fund such techno parks as in Taiwan.

Why can a small country like Taiwan, with a population of 25 million let itself fund 2,1 billions to create a techno park, and why we cannot? As you know, once before, Nikita Khrushchev had developed a real scientific park – Novosibirsk AcademGorodok (Academic Town). That is a domestic example of creating the mechanism of technological breakthrough.

I have being teaching for 20 years in the USA. I had Chinese students in almost every student group; these students came to America being financially supported by the Chinese government with an obligation to return to China. Almost all of them returned to their motherland. I have never had students who came at the expense of Russian government. There were a few Russians – children of rich parents. Some of them came back. But Russia has to direct thousands of youngsters to study abroad in leading technological universities at the expense of the government budget.

Secondly, government is right in supporting socially unprotected part of its population. In this meaning Russia acts much more than other countries because of high percentage of such population. Without Vladimir Putin’s policy on this matter now, most of the population could have dropped below the poverty line. The Government had prevented a real social explosion during the crisis by adjusting pensions and wages of lower-paid workers. But it needs to go further. It needs to support a population with a healthy life-style. It is necessary for Russia as a country that is the absolute leader amongst the leading countries of the world on expected of longevity a life. Because you know, during all 1990thyears the leader on population reduction in the world was … Bulgaria.

Thirdly, next year is a year of basic decisions in the sphere of two national priorities: preparations for the Summit of the countries of Asian-Pacific region in Vladivostok and preparations for the Olympic Games. Within next year both these technological breaks should be carried out. The building of five-star hotels in Vladivostok should begin; Olympic objects should rise from the earth. But, unfortunately, I have an impression that architectural and town-planning decisions related to Sochi are designed to meet very tight budget constraints. That is because of development funding mainly supported at the expenses of oligarchs, and budget money having already disappeared somehow.

There is another problem In Vladivostok. Mass-media without grounds criticise building of bridges to Russiky Island. They do not understand that these bridges are the way to the future. Why? It is impossible to restore Vladivostok till the Summit. The area of Russiky Island is a rather greater than Vladivostok’s area. And it creates opportunities to develop its territory. It can be divided by zones into four parts. A Federal university which will be created on the areas where the Summit will take place. A recreational zone where it will be possible to attract tourists from all the Far East, especially creating park of the wild nature, rebuilding the stock of such animals, as an Ussuriisk tiger, a snow leopard. Also it is planned to create a Technopark and a residential zone on the island. And Vladivostok requires hotels to be built and needs reconstruction of its city buildings. But full-scale reconstruction will take years.

And, finally, the fourth priority is a Federal program of roads construction. I travelled in Argentina, Brazil, Panama and Canada by the same road. It is the Pan-American road that was built before war and connects the most northern areas of Canada to the most southern areas of Argentina. It is laid through two continents and is maintained in good condition and in some areas in magnificent condition. Russia needs such a road to the future.

No comments: