Agenda: Draft strategy for developing the IT industry to 2025, competition on the oil products market, and 14 other issues.
Introductory remarks by Dmitry Medvedev
Transcript of the beginning of the meeting:
Government meeting
Dmitry Medvedev: Colleagues, as you are aware, a terrorist attack in Volgograd on 21 October killed six and injured dozens of people, including children. I would like to express my deepest condolences to the families and friends of those who lost their lives in this heinous crime. Today, we will discuss the draft Government directive on providing relief to the injured and the surviving families. It provides for 23 million roubles from the Reserve Fund to pay lump-sum benefits to them. Of course, our common goal as a country and its citizens is to prevent such tragedies in the future. Law enforcement agencies should make every effort to deal with the terrorists, because, unfortunately, they continue to try to destabilise the country. Of course, they will never be able to accomplish this, and they will receive proper retribution.
Today, we will also look into the draft Strategy for Developing Information Technology in 2014-2020 and to 2025. This is a key industry which is very important for overall economic growth. In many ways, Russia’s future as a country and the country's economy in the short term depend on it. Innovative technology should ensure not only information security and effective public administration, but also high-quality education, healthcare, and social services.
Information technology is one of Russia’s fastest-growing industries. The Russian market outstripped average global growth over the past 10 years. This is a good indicator showing that our people like this innovative technology, and so we have good prospects for developing not only this technology, but also research, education, and everything else related to this new economic sphere. We have significant resources to further grow the IT sector by 10 or more percent a year.
Dmitry Medvedev: “Today, we will discuss the draft Government directive on providing relief to the injured and the surviving families. It provides for 23 million roubles from the Reserve Fund to pay lump-sum benefits to them.”
Overall, the IT sector is growing faster than GDP. Perhaps that’s the way it should be. Russia is one of the few countries that not only has its own IT sector but also a national internet search engine. Most countries use global products, while we are largely using our own, which is important not just in terms of prestige. It is simply an indicator of the industry’s level of development. Unfortunately, Russia’s share of global IT services is not significant. Growth is the result of domestic demand, which has largely come from the government. I believe that this was important especially early in the industry’s history, because the government was supposed to be the driver of the IT industry. The government has been the largest customer of IT equipment and technology, which benefits the public sector, helps to create an e-paperwork system and encourages government agencies to build modern databases and create services. We continue to computerise schools, universities, and science in general, and develop a network of electronic services.
The priorities of the strategy include forming a continuous chain of IT education (from schools to higher education institutions and post-graduate and research institutions), training skilled personnel who know the necessary languages, supporting research and creating new jobs. Clearly, we have already reached the stage in the IT industry development where government efforts alone are not enough.
We want businesses to develop the IT services market. We need to learn how to sell our IT products, including abroad (the most well-known brands do enjoy popularity, but there are not many of them) and, of course, to spur demand for these services. Then we will be able to achieve the goals that we set ourselves in the Development Strategy to 2020.
Today, we will also consider several other issues related to developing the energy and oil products market in Russia. Notably, the market for oil products is largely balanced, but many things still need our attention. The existing structure meets the needs of the Russian economy. Upstream and downstream operations are on the rise, exports are up, and output is increasing as well, but we should focus on upgrading the industry. I’m talking about renovating and building oil refineries, increasing the depth of processing and increasing output.
Competition should help speed up these processes. A real commodity market is taking shape in Russia. However, there are still many problems in terms of competition. Some of them are new, others we inherited from the Soviet era. This involves the location of oil refineries, which were built based on the very different priorities of a planned economy. This has affected the nature of the market. Clearly, the high cost of taking on new oil industry projects and the pricing of oil products pose a problem as well.
Let’s get to work and focus on IT first.
Report by Minister of Communications and Mass Media Nikolai Nikiforov
Nikolai Nikiforov (Minister of Communications and Mass Media): Mr Medvedev, colleagues, let me present the Strategy for Developing the IT Industry in 2014-2020 and to 2025. It has been developed together with federal executive agencies, as well as the Russian Academy of Sciences and the IT community. I would like to acknowledge the contributions made by the most active associations of software developers, such as Rusoft, the Software Manufacturers Association, and the Association of Computer and Information Technology Enterprises; such development institutes as the Russian Venture Company and the Skolkovo Foundation; and major Russian IT companies such as 1C, Lanit, Parallels, Elecard, and Yandex. Universities such as St Petersburg State University and the Urals State University played an active role in this work as well.
Nikolai Nikiforov: “Total exports stand at over $4 bln. These high figures cast our IT sector in a positive light – they mean our products are competitive in spite of the high level of competition in the global economy.”
In the strategy we make a clear distinction between the IT industry and the IT market. We differentiate between production, or the IT industry itself, and consumption, or the IT market. Today a major part of Russia’s demands in IT products is supplied by imports, which stand at almost 100% for equipment and 75% for software products. The only field that is almost entirely Russian is IT services, with the share of domestic business nearing 100%. In other words, we purchase equipment and software abroad and integrate and introduce it here ourselves. In 2012, Russia’s domestic IT market stood at 620 bln roubles. The share of Russian software manufacturers is small – about 30 bln roubles, or only 4%. Another 20%, or 120 bln, are IT services provided by Russian companies.
Along with the sales on the domestic market, our IT products are exported in large volumes. Total exports stand at over $4 bln. These high figures cast our IT sector in a positive light – they mean our products are competitive in spite of the high level of competition in the global economy.
The strategy aims to develop the IT industry, that is, to increase the volume of Russian-manufactured IT products, which could potentially be in demand on the global market. Implementation of the strategy is closely related to the ministry’s work in other fields. In particular, I would like to mention the large-scale programme for providing broadband internet access to Russian citizens.
Today Russia’s IT industry employs some 300,000 specialists, plus another 700,000 working at related enterprises. In terms of jobs, production and export figures, the IT sector can be compared to a number of other key sectors in Russia. The most successful companies deal in mass products and services, and are leaders in their respective segments. Such companies as ABBYY, Kaspersky Lab and others are well known on the world market. However, so far Russia contributes only one percent of global IT products, and none of our companies are in the world’s top 100. Even the largest Russian company is mid-sized in global terms. Yet, considering the level of technology and available experience in prospective fields, this can be changed.
Nikolai Nikiforov: “Today Russia’s IT industry employs some 300,000 specialists, plus another 700,000 working at related enterprises. In terms of jobs, production and export figures, the IT sector can be compared to a number of other key sectors in Russia.”
The pace of the IT industry’s future development will depend on the government’s ability to solve a number of issues. The first one is the shortage of qualified personnel. About 70% of the expenses in the IT business are wages for employees. The current education system does not always graduate students who can immediately start working at IT companies. Within the next five years, we expect only 150,000 university graduates qualified to work for the IT sector instead of the required 350,000. Research and development are also insufficient, the legal framework is inadequate and there is not enough coordination between government agencies rendering support for the IT industry.
What efforts are planned to be made? First, developing human capital in the IT industry. Enrolment in IT courses will be increased among students. The government will provide support for IT companies that are actively involved in staff retraining. Targeted support will be provided to the most talented school and university students in this area. In 2013 and 2014, professional standards will be developed for IT specialties. Immediately after, IT education standards will be adjusted. Comfortable living standards will be created for IT specialists. This can include targeted benefit programmes for IT specialists with support from IT companies and co-financing, reducing the wage threshold for foreign specialists working in Russia. We are offering a simplified procedure for registering highly skilled foreign IT specialists with a monthly salary of over 83,000 roubles, or over one million roubles per year, which currently applies to scientists, university professors and residents of special economic zones.
The second component is establishing a scientific foundation for research in the IT sector. Jointly with the Ministry of Education and Science, we have held a tender and now we are considering 130 applications from various regional universities for grants to establish centres for breakthrough IT research. Civilian and military research will be coordinated for a technology flow in the case of classified advanced R&D. Obviously, information technologies also have an important role to play there.
The third component is support for small IT businesses. This involves reducing from 30 to seven people the number of staff an IT company must have to qualify for a lower contribution rate for social programmes – from 30% to 14%. It is important for us to support small companies, IT start-ups. This involves completing the programmes to create technological parks, which provide a favourable environment for small businesses, an ecosystem of sorts, and which encourage the creation of new products and progress. For instance, the Ministry of Communications and Mass Media alone is going to create 20,000 jobs by 2015 under its programme. We are going to develop venture investment with the support of the existing state funds and development institutions.
The fourth component is increasing IT exports.
The fifth component is increasing the use of IT in the domestic economy. This includes import substitution in the defence industry and other sectors of the economy, and encouraging large customers to opt for outsourcing and enlist the services of IT companies.
The sixth component is ensuring infrastructure support for these measures, and this primarily means focusing on the development of broadband access.
We proceed from two scenarios. The baseline scenario does not involve rapid growth rates of the IT sector. By 2020, the IT sector will be worth 410 billion roubles. In the scenario that involves implementation of all the proposed measures with the support of other federal authorities, the industry will double from 270 to 620 billion roubles. This growth will be caused by the increased software sales in Russia and increased exports.
Under the second scenario, we will achieve other important indicators that will benefit both the state and the public. Over 700,000 high-performance jobs will be created. Venture investment will grow to 50 billion roubles. Over a half of IT products will be exported. And Russian companies will become fully competitive globally.
Thank you for your time.
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