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Skolkovo: The new City of the Sun
20.01.2011 12:10

Skolkovo, a five-hundred-year-old village near Moscow, has recently made an incredible career. No longer a drowsy village hidden in the woods two kilometers from the capital, it is now a newly-emerging innovation center, a cutting-edge research and technology hub built to foster research and commercialize innovations, with a great mission and a bright future. The project immediately got nicknamed the City of the Sun after Tommaso Campanella’s famous utopia.

Skolkovo’s first owner, Grigory Fyodorov, nicknamed the Second, who bought this village in the second half of the 16th century from the royal family, could not even dream of such a bright future for his quiet patrimonial estate, a ‘skolk’ (the Russian for ‘fragment’) of Russia’s vast expanse. In the 21st century, the life of this green and picturesque village was changed overnight by a turn of Fortune's wheel.

As the project sponsors were looking for the best place to build a Russian Silicon Valley, they considered ambitious economic and academic ‘heavyweights’ in the west and east of the country such as Tomsk, Novosibirsk, St. Petersburg, Obninsk, and Dubna. But the lucky ticket was won by Skolkovo, which has never dreamed of any glory. Whatever the pros and cons to the choice, the decision was made by an act of political will: “We will build an innovation hub in Skolkovo,” President Medvedev said drawing the line under the debate.

Now everyone in Russia and even many outside the country have heard of Skolkovo, because the science town project will involve foreign investors. Branches and laboratories of leading Russian universities and companies will operate in the new technology hub, and foreign and transnational giants will set up shop here. This new science town has been conceived as an international hub in the first place, expecting the best experts from around the world to come to work there. It seems that the finale of Beethoven’s Ninth Symphony (“Be embraced, millions!”) would be a good anthem for the new Russian science town.

Skolkovo is an open source project. It has a clear mission to create an innovative environment. At the same time, there is also a very flexible strategy to be drafted and adjusted by outstanding scientists, engineers and business executives involved in the project rather than by government officials.

Construction of Skolkovo is due to begin in the second half of 2011. The construction team comprised of creative professionals promised to complete it in five to seven years. They say that public curiosity inspired by the idea has in fact already jump-started the project. The initial decisions have been made and primary documents have been adopted. Work is now underway to get the land legally registered for the project and a business plan is also in the pipes. The government is deliberating on a special legal status for the Russian Silicon Valley. Starting next year, the Skolkovo project will be included as a separate item in the federal expenditures: in the first 2.5 years, federal allocations for the innovation hub’s development may reach 60 billion rubles ($2bn). The participants of the project may be exempt from income tax, VAT and other financial duties.

The future high-tech hub is planned as a relatively small town, formally under the Moscow government’s control but having a pass entry system, a separate administration, a special legal status, a special law-enforcement system, and various tax and customs preferences. All this bears little resemblance to the U.S. Silicon Valley, rather looking like a scaled-down version of Hong Kong, albeit Russian-style.

The project will be managed by a team of outstanding scientists and business executives: top business leaders, distinguished scientists, and Nobel prize winners have been invited. This remarkable team will be supervised by Dmitry Medvedev himself.

Viktor Vekselberg, head of Renova Group, has been chosen to manage the Skolkovo project. The working group for the Russian Silicon Valley’s construction is headed by First Deputy Chief of Staff of the Presidential Executive Office Vladislav Surkov. A scientific council has been formed, which will include Russian and foreign scientists, engineers and experts. The council will be chaired by Russian Nobel prize winning physicist Jaures Alferov and Stanford University’s Roger Kornberg. Alferov was also appointed the science town supervisor.

Dr. Alferov, a member of the Russian Academy of Sciences, is a truly remarkable scientist, winner of the 2000 Nobel Prize in physics. He headed the St. Petersburg Physical Technical institute for 20 years (until 2006). In the early 2000s, he opened a Russian Academy of Sciences’ nanotechnology research and education center at the institute.

Craig Barrett, former chairman of Intel, has agreed to co-chair the Supervisory Board of the project, and Roger Kornberg, structural biologist at Stanford University and Nobel Prize winner (his candidacy was proposed by Alferov) agreed to co-chair the scientific council. The American biochemist’s studies produced a number of fundamental discoveries on operating principles of copying of genetic information in cells; his works will certainly benefit Russian biomedical research which is one of the major drivers of Russia’s economic modernization.

Nokia chief executive Olli-Pekka Kallasvuo said at last summer’s meeting with Dmitry Medvedev that the company would like to participate in the Skolkovo project. Nokia would also like to open a coordination center for software development projects there. Medvedev reacted very positively to the Finnish initiative. Later, Germany’s Siemens said it was joining the Skolkovo project, after signing the relevant documents. Siemens intends to establish a biology and energy efficiency research centre there.

Switzerland extended the Skolkovo partners’ lineup on September 7, 2010, when a memorandum of cooperation was signed between Swiss Technopark Zurich, which operates at the Swiss Federal Institute of Technology Zurich (ETH), and the Skolkovo Foundation. The Swiss company will help build a system within the Skolkovo center to commercialize new technologies. And on the first day of November, Skolkovo Foundation President Viktor Vekselberg and Microsoft chief executive Steve Ballmer signed a cooperation agreement.

Importantly, Russia’s emerging analogue of the Silicon Valley was not named the Skolkovo valley; it is referred to as a science town. This was done for a reason. A valley is usually big, while Skolkovo has a smaller area (about 4 sq. km); and the area allocated for technology projects is only 3 sq. km. For comparison: the Silicon Valley occupies about 700 sq. km; China’s Shenzhen Hi-Tech Industrial Park more than 300 sq. km, and the Indian band in Bangalore, 500 sq. km. A large area has obvious advantages: it certainly enables companies to build larger premises as they grow, without having to open branches or move to another place.

Skolkovo seems like a tiny facility by comparison. However, it must be noted that the Moscow Region with its huge financial resources, intellectual potential, research and academic institutions is a perfect infrastructure and environment for Skolkovo, its ‘nutrient broth.’ The innovation hub will not entirely focus on IT like Silicon Valley; the idea is to emphasize applied research. The innovation town will have five zones, each focusing on a different area of research: IT, nuclear, biomedical technologies, energy, and space research.

The Skolkovo project envisages a significant government involvement in its implementation. The government will help ease various requirements and regulations, provide financial assistance, and have a voice in project selection. The total funding value of the project is $4-6 billion. In 2010, more than 4 billion rubles was invested to support the selected projects and to design the science town. The federal government will provide financing for the local infrastructure development. It will also help with project specifications for non-commercial sites, as well as with the scientific infrastructure. The other projects will be commercial and will have co-financing plans.

Experts are well aware that innovation is an inherently risky business. “Not all venture projects get successfully implemented; investors call this ‘a valley of death’. So, we will have to work in the ‘valley of death’, Viktor Vekselberg warns.

I might as well clarify the dark metaphor here: with reference to venture or innovative business, a ‘valley of death’ means a place where most technology ideas end – the initial phase of the project when there is no demo product sample available yet. Newly invented technology is all there is and it requires huge investment. Capital risk is high at this stage. It is common knowledge however that fortune favors the daring.

So what has kindled this flame? Why did Russia get enthusiastic about the innovation hub idea in the first place? Is it trying to race more advanced economies again? But it already has excellent research centers. Certainly, Skolkovo does not depreciate them; moreover, the ‘newcomer’ will be integrated with all of them. But, as Vladislav Surkov put it, our goal is not to renovate the old house we have inherited from the Soviet Union and make it Western-style. We want to build a new house. But to do that, one often has to go out into the wild and start building from the ground up.

President Dmitry Medvedev unveiled a plan to build a cutting edge technology hub to develop and commercialize innovations in February 2011. He explained then that the centre will be a prototype of a town of the future and the biggest testing ground for the new economic policy. Drafting the new policy requires innovative thinking, creative ideas, and high technologies.

The resource-based economy will not be able to sustain Russia for long, despite all the mineral wealth the country has. We must save something for future generations too. “What we have in our heads is much more valuable than what can be found in the soil: Russia has a lot of talented people, and this is its main resource,” Surkov said. “To maintain a strong international position and be respected, Russia needs to move to the next step of civilization, a higher level of technological development, where the economy relies primarily on intellectual advantages, knowledge, and the ability to invent new technologies. This is an issue of political influence too,” Surkov added.

Some even say that one such center in Skolkovo will not be enough, and that Russia should launch several projects of the kind because it is a large country which needs large projects, such as Skolkovo, proportional to the country’s dimensions, for stable development.

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