IT Parks: Placebo or Panacea
Probably the biggest event for the industry of Information Technology in Russia this year was the government’s decision to set up five IT parks in the country.
Oct 05, 2005
Probably the biggest event for the industry of Information Technology in Russia this year was the government’s decision to set up five IT parks in the country. Though met with some skepticism at home, the idea of gathering different IT companies in one space has prospered for more than 40 years, stimulating industry growth in the U.S., India, Finland, and elsewhere. How has it worked abroad and what could it potentially do for Russia?
An IT park is a territory with adequate infrastructure on which a concentration of companies in the technology sphere work side by side. IT parks come in two types: "incubator" projects, suitable for start-up firms, and large business-center style constructions housing recognizable market players. The first type especially relies on the nearby presence of a higher education establishment, where new ideas for projects that could turn commercially viable, originate.
An ideal model for IT parks connects the research facilities with the production process, placing together all the links in the chain that take a scientific idea and make it into a commercial product. Aside from universities and companies, parks rely on support from the local authorities and beneficial federal legislation.
After 30 years of slowly developing the space into a science park, the territory grew to be known as Silicon Valley. More than 160 IT parks operate in the U.S. today.
In Europe IT parks appeared only in the early ’70s. Some of the first were the research park in Edinburgh, ran by the Heriot-Watt university, the science part on the grounds of Trinity College in Cambridge, the Louvain la Neuve in Belgium, and a zone for scientific and technological innovations and production (ZIRST) in Grenoble, France.
Sophia Antipolis appeared more than 30 years ago, and in the last 10 years alone has created more than 10,500 jobs.
The IT park occupies 2 hectares of space, where offices of about 1,000 European and American firms are located, including the headquarters of the European Telecommunications Standards Institute.
Although the main support for the French project has come from the European Union, rather than French government itself, more than 400 million francs were pumped into the park in the ’70s to start it up, with a similar amount invested since in expansion and the building of residential quarters. The private sector has contributed about 300 million francs to set up construction facilities and purchase equipment.
The other star on the global map of IT parks is Bangalore in India, which developed as a result of massive investment from the government to kick-start a local IT outsourcing industry. Currently, India runs three kinds of IT parks: software technology parks, export processing zones, and export-oriented units.
The Bangalore project began work in 1984 after sealing a contract with U.S. firm Texas Instruments. Today, the park accommodates more than 80,000 IT specialists, working in close contact with a network of about 55 universities and colleges.
Even if India has only 13 IT parks in the whole country, the volume of the sector is enormous, making the country the global leader in IT outsourcing. India’s parks employ nearly half a million people working in 1,300 companies altogether.
Other countries demonstrating a high tempo of development, such as China and the Philippines, have also latched onto the IT park idea. China has a long-term IT park program that is supported by the government. The crux of the support lies in tax breaks for companies working in China’s 50 parks; for the first few years the tax rate may be set at zero.
A leader among Far Eastern countries in technological regard, Japan was one of the first to initiate an IT park scheme in the region. In 1983 Japan’s government passed a special law that supported a development of domestic IT parks by building new towns.
According to the Japanese model, the new towns, or technopolises, have been set up in 19 special zones spread evenly between the country’s four islands. Each techno-polis must be no more than 30 minutes ride on public transport from its "parent-city" that has a population of at least 200,000. And each polis is no bigger than 500 square miles in size.
The brightest example of a Japanese IT park may be the town of Tsukuba, 35 kilometers from Tokyo. It houses 11,500 people, working in 50 governmental research institutes and two universities.
Thirty of the country’s 98 state research facilities are found in Tsukuba, although the private sector is not as strongly represented there.
Examples closer to home show that Finland, which with a population of 5 million — almost that of St. Petersburg — has about 20 IT parks. Next year, even Cyprus plans its own IT park. The island country has met with strong industrial competition from Asian producers, pushing Cyprus to push ahead with the project in record time.
Technical and financial feasibility studies for the park will complete this year, while meeting with investors and design and planning will begin in 2006. The government has agreed to sponsor all infrastructure works, leaving the rest of the expenditure to be covered by local authorities and businesses.
The town near Novosibirsk, for example, combined 40 research and education facilities. After the perestroika era financing for the towns was severely reduced, with only recently some attempts made to reverse the situation.
This year the Russian government has finally addressed the need to stimulate the domestic IT industry since President Vladimir Putin’s January speech in Novosibirsk promised several key reforms.
The president’s visit to Bangalore the previous December had not been in vain, it seems.
The first step in the process has been to set up a law for Special Economic Zones, worked out by the Economy and Trade Ministry. The law has been updated from an earlier draft of 2003 to provide beneficial tax conditions and ease of customs duties, among other benefits, for companies operating in the special economic zones. The zones will divide into manufacturing and research centers.
The second step has been to designate five cities as homes to specialized IT parks: Novosibirsk, Nizhny Novgorod, the Moscow region’s towns of Dubna and Chernogolovka, and St. Petersburg. The five will act as pilot projects for further development of the IT park model in the country.
In addition a $100 million state venture fund will be set up to generate investments into the IT industry, Milovantsev said after a round table on the IT parks project in St. Petersburg.
As a result of the IT park project, the Ministry for IT and Telecoms expects the value of the IT sector in Russia to reach 1 trillion rubles ($35 billion) by 2010. Should the program not be successful, the annual growth of Russia’s IT outsourcing market could drop to 11 percent from 2007, which would damage domestic companies’ competitiveness on the global market, representative of the ministry said.
An IT park is a territory with adequate infrastructure on which a concentration of companies in the technology sphere work side by side. IT parks come in two types: "incubator" projects, suitable for start-up firms, and large business-center style constructions housing recognizable market players. The first type especially relies on the nearby presence of a higher education establishment, where new ideas for projects that could turn commercially viable, originate.
An ideal model for IT parks connects the research facilities with the production process, placing together all the links in the chain that take a scientific idea and make it into a commercial product. Aside from universities and companies, parks rely on support from the local authorities and beneficial federal legislation.
THE WORD FROM ABROAD
The most prominent IT parks in the world today include India’s Bangalore and the French Sophia Antipolis project. However, the world’s first park originated in the U.S., literally in a green field. In the early ’50s, Stanford University in California started to rent space in its "back yard" to technology companies, which worked on state and military orders.After 30 years of slowly developing the space into a science park, the territory grew to be known as Silicon Valley. More than 160 IT parks operate in the U.S. today.
In Europe IT parks appeared only in the early ’70s. Some of the first were the research park in Edinburgh, ran by the Heriot-Watt university, the science part on the grounds of Trinity College in Cambridge, the Louvain la Neuve in Belgium, and a zone for scientific and technological innovations and production (ZIRST) in Grenoble, France.
Sophia Antipolis appeared more than 30 years ago, and in the last 10 years alone has created more than 10,500 jobs.
The IT park occupies 2 hectares of space, where offices of about 1,000 European and American firms are located, including the headquarters of the European Telecommunications Standards Institute.
Although the main support for the French project has come from the European Union, rather than French government itself, more than 400 million francs were pumped into the park in the ’70s to start it up, with a similar amount invested since in expansion and the building of residential quarters. The private sector has contributed about 300 million francs to set up construction facilities and purchase equipment.
The other star on the global map of IT parks is Bangalore in India, which developed as a result of massive investment from the government to kick-start a local IT outsourcing industry. Currently, India runs three kinds of IT parks: software technology parks, export processing zones, and export-oriented units.
The Bangalore project began work in 1984 after sealing a contract with U.S. firm Texas Instruments. Today, the park accommodates more than 80,000 IT specialists, working in close contact with a network of about 55 universities and colleges.
Even if India has only 13 IT parks in the whole country, the volume of the sector is enormous, making the country the global leader in IT outsourcing. India’s parks employ nearly half a million people working in 1,300 companies altogether.
Other countries demonstrating a high tempo of development, such as China and the Philippines, have also latched onto the IT park idea. China has a long-term IT park program that is supported by the government. The crux of the support lies in tax breaks for companies working in China’s 50 parks; for the first few years the tax rate may be set at zero.
A leader among Far Eastern countries in technological regard, Japan was one of the first to initiate an IT park scheme in the region. In 1983 Japan’s government passed a special law that supported a development of domestic IT parks by building new towns.
According to the Japanese model, the new towns, or technopolises, have been set up in 19 special zones spread evenly between the country’s four islands. Each techno-polis must be no more than 30 minutes ride on public transport from its "parent-city" that has a population of at least 200,000. And each polis is no bigger than 500 square miles in size.
The brightest example of a Japanese IT park may be the town of Tsukuba, 35 kilometers from Tokyo. It houses 11,500 people, working in 50 governmental research institutes and two universities.
Thirty of the country’s 98 state research facilities are found in Tsukuba, although the private sector is not as strongly represented there.
Examples closer to home show that Finland, which with a population of 5 million — almost that of St. Petersburg — has about 20 IT parks. Next year, even Cyprus plans its own IT park. The island country has met with strong industrial competition from Asian producers, pushing Cyprus to push ahead with the project in record time.
Technical and financial feasibility studies for the park will complete this year, while meeting with investors and design and planning will begin in 2006. The government has agreed to sponsor all infrastructure works, leaving the rest of the expenditure to be covered by local authorities and businesses.
FORGOTTEN TOWNS
As much as it seems that Russia is lagging behind in the construction of IT parks, examples of earlier progress at once inspire and frustrate. In the ’50s the Soviet government had supported the building of three academic towns: near Novosibirsk, Yekaterinburg, and Vladivastok. All three were research towns with all the infrastructure and financial backing necessary.The town near Novosibirsk, for example, combined 40 research and education facilities. After the perestroika era financing for the towns was severely reduced, with only recently some attempts made to reverse the situation.
This year the Russian government has finally addressed the need to stimulate the domestic IT industry since President Vladimir Putin’s January speech in Novosibirsk promised several key reforms.
The president’s visit to Bangalore the previous December had not been in vain, it seems.
The first step in the process has been to set up a law for Special Economic Zones, worked out by the Economy and Trade Ministry. The law has been updated from an earlier draft of 2003 to provide beneficial tax conditions and ease of customs duties, among other benefits, for companies operating in the special economic zones. The zones will divide into manufacturing and research centers.
The second step has been to designate five cities as homes to specialized IT parks: Novosibirsk, Nizhny Novgorod, the Moscow region’s towns of Dubna and Chernogolovka, and St. Petersburg. The five will act as pilot projects for further development of the IT park model in the country.
WHO WILL PAY?
The IT parks program has been estimated by the government to cost about 123 billion rubles ($4.3 billion). Of this, about 20 billion rubles, or 16 percent, will come from the federal budget, a further 15 billion rubles, or 12 percent is expected from private Russian investors, and the other 88 billion, or 72 percent, will come from "non-budget sources," the Deputy Minister for IT and Telecoms, Dmitry Milovantsev, said in August.In addition a $100 million state venture fund will be set up to generate investments into the IT industry, Milovantsev said after a round table on the IT parks project in St. Petersburg.
As a result of the IT park project, the Ministry for IT and Telecoms expects the value of the IT sector in Russia to reach 1 trillion rubles ($35 billion) by 2010. Should the program not be successful, the annual growth of Russia’s IT outsourcing market could drop to 11 percent from 2007, which would damage domestic companies’ competitiveness on the global market, representative of the ministry said.