Mon, Mar 14, 2011 page11

• Russia sees its intellectual power as engine of growth

  • AFP, MOSCOW
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  US-Russia trade has yet to live up to the reset in political ties, but US firms believe Russia’s human resources can soon do for high-tech engineering what India did to the IT sector two decades ago.

  US Vice President Joe Biden last week lamented on a visit to Moscow that annual trade between the two countries was equivalent to just a few days of commerce with neighbors Canada and Mexico.

  However, executives at some of North America’s biggest companies are grasping onto a vision of a 24-hour production cycle in which Russian engineers zip their drafts to board room executives in Europe and the US.

  The US aerospace and defense behemoth Boeing Co now has a US$27 billion plan in place to purchase Russian parts and research and development services — with much of the focus placed on the latter.

  “Russia has the opportunity no smaller than India had 25 years ago to help the world develop engineering,” Boeing Russia president Sergei Kravchenko said.

  “We know this can be done because India did it with IT,” he told a Moscow investment forum in which Biden delivered the closing address.

  Boeing’s plans nicely complement Russian President Dmitry Medvedev’s ambition of powering Russian growth through research and innovation.

  The US firm has a place in the suburban Moscow Skolkovo project that forms the hub of Medvedev’s dream of an innovation-based future and speaks highly of Russia’s continued ability to produce fresh talent.

  Not everyone is ready to place quite such a large bet on a country whose business climate is still frosty and whose customs laws — for now at least — are often subject to political whim.

  However, even companies with roots closer to the minerals and other resources that have provided much of the country’s wealth since the Soviet era said what they really wanted to tap was Russia’s brainpower.

  “Far beyond oil and gas, the real potential in Russia is human capital,” Dow Chemical Co’s Russia general manager Marco Blagovic said.

  Biden spent much of this week’s two-day visit pushing a trade agenda that could finally make Russia into a meaningful business partner for the US.

  US statistics paint a grim picture showing trade between the two sides reaching just US$31.7 billion last year — less than 4 percent of Russia’s total.

  “The value of the goods that cross the United States’ border with Canada and Mexico every few days exceeds the annual value of our trade with Russia,” Biden said. “We’ve got to do better. We’ve got to do better.”

  Russia’s current engineering advantage is twofold: Its massive pool of workers was not only trained by some of the world’s most qualified Soviet-era professors, but also costs employers a fraction of their Western counterparts.

  “Closer cooperation will allow American companies to benefit from greater access to Russia’s deep pool of talent of engineers, mathematicians and computer scientists,” Biden said.

  However, its profound drawbacks include an alien corporate culture whose uncompetitive practices once suited Communist Party bosses, but seem incomprehensible to Western partners expecting firm schedules and sharp ideas.

  Trade should theoretically swell once Russia joins the WTO after 17 years of trying and brings down its barriers to foreign technologies and know-how.

  Global firms are eagerly awaiting that day because it would allow them to cash in on the enormous construction boom sweeping Russia ahead of the 2014 Winter Olympic Games in Sochi and the 2018 World Cup.

  “Russia has a huge need to grow infrastructure and modernize, and this creates opportunities for many countries,” Dow’s Blagovic said.

  Yet executives said the long-term benefits of international companies coming to Russia might far outweigh the immediate gains.

  The big hope is that Russian companies — experienced in building such high-tech equipment as unconventional pipes and advanced military hardware — would simply become indispensable once supported by Western business savvy.

  The level of technological innovation would then work its way down the ladder to more everyday items, such as appliances and cars.
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