PHLburg Technologies, Inc.

Taking Stock of Russian Science

February 18, 2005 

By Darya Petrova
Nevskoye Vremya

Interaction between scientists and private capital: a crying need

The quality and potential of Russian science, even now with fewer and fewer scientists around, remain very high. However, in a market economy, quality is not enough - science must also be efficient. The urgency of this problem was again confirmed in a speech by the RF President at a joint session of the Security Council, RF State Council Presidium and Council for Science and High Technologies. In particular, the President said: “While we have 10% of all the scientists of the world, we produce as little as 1% of the science-intensive products on the world market.”

Making an inventory of Russian science – that was the way Mr. Bortnik, General Director of the Foundation for the promotion of small science and engineering businesses, defined the goal facing Technology Transfer Centers (TTC). He was speaking at a February forum at Obninsk and said that the primary task for TTC would be to sort out the available developments to select those that could be commercialized. It looks like it will be exactly those TTC that will play the role of intermediaries between business and science at this stage.

Why this lack of understanding between business and science?

As they review promising technology projects developed by Russian scientists, both international and Russian investors often demand a business plan, a marketing study – in general, all the information required by the investor. The scientists are naturally unable to provide complete information of that kind themselves, this being beyond their competence. Therefore the need for a science-business intermediary is urgent indeed.

According to Mikhail Lazarev, a known Russian entrepreneur and politician, “orientation toward the state is deeply rooted in our scientists’ mentality. That is why they are unable to interact with business. I think that all of them, starting from science undergraduates, have to be instructed in the ways science and business should interact. All the more so since there are currently many entrepreneurs who used to be scientists and thus can demonstrate the mechanisms of such cooperation to young scientists.”

Mr. Godick, Director of PHLburg Technologies, representing the interests of international investors in Russia, commented on the problems facing the Russian Government in this way: “Russia has to select the scientific directions that are capable of developing breakthrough technologies, those that can change the world. Achievement of world leadership in cutting-edge scientific areas is more reasonable than mediocre achievements in all of them at the same time”.

The integration of science, business and education is called upon to solve two basic problems of the scientific community: shortage of funds and lack of young specialists. The function of the state must also change. While the directive-and-administrative state system was in place, the state was the only customer and source of financing. Now the basic function of the state should be to lobby the interests of Russian science.

In V.V. Putin’s words, “to promote demand for Russia’s scientific products, the state needs to provide a minimum of financial funds and a maximum of proper conditions for the development of an innovations market. And the primary need is for clear-cut regulations governing the market of ideas and an infrastructure for innovations. Also needed are: a legal basis for commercialization of scientific developments and IP protection, an accessible patenting system and science management.”

In the near future, science officials will be “patching up the holes” in the Russian legislation in order to provide an adequate legal basis for innovative activities. The Ministry of science and education is working on drafts of Federal laws “On Amendments and Additions to RF Legal Acts in order to Stimulate Innovations Activity and Introduce Science-intensive Technologies in Production”, “On Technology Transfer”, “On Amendments and Additions to the RF Tax Code Aimed at Providing Incentives for Innovations Activity”.

The names of the laws speak for themselves. Of special significance is the draft law on the Tax Code amendments. If innovations enterprises really get serious tax breaks, it will be a substantial step towards attracting private capital to this area.

With the coming of private funding to science, also comes market competition that demands flexibility of the scientists. The older scientists are too tied to their research fields and projects. They find it difficult to adapt to the market. All hopes are for new generations which can be attracted to science by a combination business structures’ activities and opportunity to earn good money.

This article was originally published in Nevskoye Vremya,