What is it about President Medvedev’s attempts to set up a “technology city” at Skolkovo that drives some western journalists over the edge? It seems to be more than just the typical desire – again, on the part of some sources – to see Russia fail at everything it tries; these sources seem to be trying for self-fulfilling prophesy.
Journalists are generally idiots and masters at getting the simplest thing wrong; journalists writing about Russia are usually especially idiotic and ill-informed, although no more so in the west than anywhere else. Still, a stopped clock can be right twice a day, and even if I wouldn’t agree with the western media’s reasons (whatever they are) for not rating Skolkovo’s chances of success too highly, I’d probably say they’re right if indeed they are predicting this project will go nowhere. Skolkovo, from what I can make out, is an enterprise zone the Russians want to attract the IT giants of the world to set up shop in through use of various incentives such as low taxes, lifted visa restrictions, infrastructure, etc. Dubai ran a similar programme called Internet City while I was there in 2003-2006 and it seemed to be fairly successful. At least, all the right corporate signage was loftily displayed on the buildings. The incentives Dubai offered were sponsor-free business and the ability to get a residency visa for staff based in the offices. These were clear incentives, and they worked.
In theory, Russia could easily do the same. But I am skeptical. Why? Because Russia could easily do the same across the entire country, yet hasn’t. There are probably a lot of reasons for this, but one is that the stifling bureaucracy which puts the investors off in the first place and makes the building of an enterprise zone necessary is hugely profitable for many thousands of people: bureaucracy places the obstacles in your way, bribery gets you around them, making the paper-pushers rich. Take away the bureaucracy and there’s no need for bribery, and people can’t supplement their income by virtue of their access to a certain stamp. Yes, the Russian government could in theory do away with the bureaucracy in the enterprise zone, but in my experience pushing bureaucracy away in Russia is like moving water around in a bath. Clear some away, and more rushes in to fill the void. In my entire time in Russia – almost four years – I never saw any reduction in the level of bureaucracy I had to deal with in work or otherwise. A lot of it changed, in fact most of it changed, almost every month. And a lot of it increased. But in no area, as far as I can remember, did it decrease. I don’t think Russians could break the iron embrace of bureaucracy and corruption even if they wanted to, and I’m sure there were a few – let’s take Medvedev at his word, even – that do. For a start, the edicts from Moscow get somewhat mangled, incorrectly interpretted, and sometimes completely ignored out in the provinces. When I was in Sakhalin we suddenly found the immigration process had changed completely overnight due to a bollocking from Moscow being handed down to the local immigration department who had stuck with the old process for almost a year after the new one was issued. Fortunately, Skolkovo is in Moscow so this effect should be diluted somewhat, but the temptation for some government department or office somewhere to stick its snout into a trough which nobody else has yet been able to eat from will be strong, and it would not surprise me if this happened and it was a year or more before the national government found out and did something about it.
Examples! Examples! I hear you cry! Tell us about your experience with government departments in Sakhalin! Okay, I will.
In one of the years I was in Sakhalin I was involved with the construction of an accommodation block, which could house about 100 people. During the design stage, the Russian design institute drew up its plans and architectural drawings and submitted them to the local authorities for approval, which takes the form of a construction permit. This process in itself is lengthy and painful, but that’s not the point of my post. Naturally, the design institute had done everything it could to make head-or-tail of the Russian regulations regarding fire safety and put forward what it thought was a compliant design. Unsurprisingly, this was deemed not to be so by the concerned fire safety authority and changes to the design were recommended and subsequently implemented. The amended design was resubmitted, and the fire safety authority stamped its approval on the design and thus (from a fire safety point of view) was approved for construction.
Fast forward two years, and the building is almost complete. People were getting ready to move in and the builders were only really waiting for the snow to melt to complete the rest of the works. However, before people could move in the fire safety authority had to give its approval. For this they charge a small fee. Unfortunately, they will not consider any building that has not already been inspected and approved by a certain private company (almost certainly owned by a relative or friend of somebody in the fire safety authority), and the fee they charge is far from small. I mentioned this “pre-approving” in a post last year about the costs of building a warehouse in Moscow, and it is a common occurrence in the process of getting approval for lots of things in Russia. So we went ahead and arranged for this private company to come and inspect our new building’s fire safety systems. And would you believe it? Nope, all wrong. Totally wrong. That, that, this, that, and that: all wrong. But it was built exactly as per the design approved by the fire department. This didn’t matter one jot, apparently. As far as the inspector was concerned, that we had an approved design meant nothing. I believe the rough words were “I don’t know who signed that, but it wasn’t me and I say it’s wrong.” In normal countries these are grounds for a lawsuit. In Russia, they are grounds for “negotiations”. The fire safety authority itself was not in the least bit interested that they had approved a design which was now being rejected by their favoured company, and would probably have been mighty surprised if it hadn’t been. Retrofitting fire safety systems into a completed building would cost about the same as pulling it down and starting again, so the process began of discussing “what could be done” in order to achieve the approval from the private company. On this, they were most helpful. You can do this, change that, pay us this, and the rest goes away. And so we did.
I am sure the story above will be familiar to anyone who has tried to do business in Russia. Unfortunately, very few people who have are writing blogs. And even fewer people who write blogs about Russia have done business there. The bloggers who write about Russia generally do a very good job (when they’re not writing about media coverage of Russia, which usually involves stating the obvious), far better on almost every issue than what I do on here. But my experience of working firstly in running a business, and then involved in construction in Russia, is probably the reason why I don’t share a lot of bloggers’ optimism over Russia’s economic future or their specific development plans. If they could have, they would have.