Russia looks to make IT its 'next natural resource'

LONDON -- In an effort to jump-start its economy and diminish its dependence on natural resources like oil, Russia has made local IT development one of its top priorities, with plans for infrastructure growth, regional "technoparks," and industry-friendly legislation.

"IT is Russia's next natural resource," Leonid Reiman, Russia's Minister of Information Technology and Communications (ICT), said at the Russian Economic Forum in London on Tuesday.

The pillars of this burgeoning IT economy are Russia's strong education base and thriving software development community. But the country still faces significant challenges, among them, spotty infrastructure development, limited funds, and crime.

The country is hoping to jump these hurdles and has set aside $650 million to invest in hi-tech initiatives such as its e-Russia program, which covers e-government and services such as putting medical records online. As part of e-Russia, the government also intends to extend the country's telecommunication infrastructure and provide Internet access to remote communities.

Telecom is the country's fastest growing sector, and by the end of this month the government expects 100 percent of the Russian Federation to be covered by a GSM (Global System for Mobile Communications) network. However, there are still 46,000 communities that lack a single fixed line. "We need to address this unbalance," Reiman said.

To do this, the government is putting a universal service guarantee into law and establishing a service fund, as well as enticing local operators to take on the initial financial burden of spreading phone access, with the promise that they will be rewarded by market growth later on.

Much of the country's plans are couched in the spread of democracy, and the importance in providing citizens with increased information, through telephone and Internet access. "There is an obvious high correlation between the improvement of democratic institutions and the progress of telecommunications in Russia," Reiman said.

The government is pointing to the growth in mobile phone use to underscore the nation's IT appetite and encourage investors. Mobile phone use has grown from just 3.4 million users in 2000 to around 82 million users last month, giving Russia a national penetration rate of 57 percent, according to Reiman. In Moscow and St. Petersburg the penetration is over 100 percent.

But ICT infrastructure and access is just one part of the country's plans. Russia is looking to turn technology into the "flagship industry of its modernized economy," according to Reiman. The industry is already growing at 20 percent to 25 percent a year, outpacing every other sector, he said.

To spur further growth, the country hopes to develop regional, government-sponsored IT research and development centers, or "technoparks," similar to areas in Bangalore in India.

The technoparks will be geared at developing areas of technical expertise and software is a major part of this plan, given the country's strong base of local programmers. Software exports are already growing at 40 percent to 50 percent annually, and by 2010, the government hopes that Russian programmers' contributions will make up 7 percent of global software exports, and a $40 billion market.