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BUSINESS REPORT

IN ASSOCIATION WITH ROSSIYSKAYA GAZETA, RUSSIA

WEDNESDAY, JUNE 13, 2012

Economy Plan to lift Russia's ranking in World Bank's Ease of Doing Business Index from 120 in 2011 to 20 in 2018

Vladimir Putin has vowed to vault Russia 100 places up in the World Bank’s Ease of Doing Business table. Will he keep his promise? ALEXEI KVASOV VEDOMOSTI

Vladimir Putin has set spectacularly ambitious targets for modernizing the Russian economy. In a prophetic tone, he has vowed to vault Russia from 120th to 20th place in the World Bank’s Ease of Doing Business rankings by the end of his third presidential term in 2018. Buoyed by the first quarter growth, Putin unveiled a multi-faceted plan to transform the Russian business landscape within hours of his taking office on May 7. The plan includes creating and modernizing 25 million high-productivity jobs by 2020, hiking investment to no less than 25 percent of GDP by 2015, boosting labour productivity to a level one-and-half times greater than that of 2011 and raising average life expectancy by 2018 to 74 years from the current 70. The core of his mission is to package Russia as the promised land by lifting Russia's position in the Doing Business Index from 120 in 2011 to 50 in 2015 and 20 in 2018. Putin’s declaration shows that almost 10 years since the International Finance Corporation launched the Doing Business report, the Russian government is finally taking its assessments seriously. Both the creator of the report, Simeon Djankov, the Bulgarian Minister of Finance, and the World

Bank, which strongly supports it, believe the report has largely achieved its goals of highlighting red tape and promoting reform. Russia has been very slow to address these issues, but now the country is preparing to head off in the right direction. Is it realistic for the country to move up 100 places in the IFC ranking in such a short time? When speaking about Russia, it is important to keep in mind several facts. First, when the 2007 report (representing data from 2005-2006) was released containing the first consolidated rankings, Russia appeared in the 96th place, so it isn’t unreasonable to think Russia could return to the top 100. Additionally, in certain areas, Russia’s position is already now significantly higher than its general 120th place ranking. In terms of the effectiveness of procedures related to financial insolvency, Russia holds the 60th place; in terms of property registration, it occupies 45th place; and in fulfillment of contracts Russia has risen to 13th in the world. Then, there are large regional variations in the ease of businesses conditions in Russia. In 2009, the World Bank tried to assess the regulation of entrepreneurship in 10 Russian cities across four indicators: company creation, receipt of construction permits, property registration and foreign trade operations. In that year, Russia, which was represented by Moscow, came in the 120th out of 181 in the general rating, just like

ILIA VARLAMOV

Putin dreams a big leap forward

Vladimir Putin climbs a wall during his visit to a youth camp last year.

today. Moscow got saddled with the dubious the distinction of being the most difficult place in the world in which to obtain construction permits.

If Russia were not represented by Moscow, the picture would have looked better. In all nine other cities, approval procedures were better than in the capital. In

Trade It can boost combined GDP of Belarus, Kazakhstan, Russia by $900 bn

Superjet’s fate hangs in balance Since Sukhoi Superjet 100 crashed in Indonesia, experts are asking whether the disaster is bad news for the Russian aviation industry.

A win-win journey

ALEXANDER GABUEV RIBR

When Russia, Belarus and Kazakhstan announced the establishment of a customs union in October 2007, many analysts perceived this new association of former Soviet Union states as yet another political manoeuvre by Moscow to flex its muscles in the region. It is no secret that Russian leader Vladimir Putin, who once called the disintegration of the Soviet Union“the main geopolitical catastrophe of the 20th century”, pines for the Soviet glory and wishes to restore Moscow’s prestige among its close neighbours. However, as soon as the customs union became operational in 2010, it proved to be more about economics and pragmatism than about politics. According to the Eurasian Development Bank, the union’s economic integration holds potential benefits equivalent to 14% of GDP for Belarus, 3.5% of GDP for Kazakhstan and 2% of GDP for Russia between 2011 and 2030. In monetary terms, the GDP of the three countries should grow by $900 billion over the next 19 years. The customs union will benefit not only Russia, Be-

larus and Kazakhstan, but also Asian companies. Producers, whose goods are transported from China to Europe, will be the first ones

The union will provide access to a single market with 173 million potential consumers. to enjoy the advantages of the customs union.The development of transport infrastructure in Kazakhstan, Russia and Belarus offers exciting overland transport opportunities – either by road or by rail. Astana is now financing

the construction of a highway connecting western China and Eastern Europe. This route will substantially cut transit time. Thanks to the customs union framework, exporters will only have to cross two borders instead of four to transport a container to Poland. Furthermore, customs duties have been slashed – instead of paying all three countries, a company will have to pay a single customs tariff. Secondly, the creation of the customs union may be beneficial to companies catering to former Soviet Union markets. They will gain access to a single market with 173 million potential con-

sumers instead of three separate ones. After the Eurasian Economic Union replaces the customs union in 2015 - Moscow, Minsk and Astana signed the relevant agreement in 2011 - producers will not have to resolve legislative problems and compare legal intricacies in Russia, Belarus and Kazakhstan. A major advantage for business structures is that they will be able to get their subsidiaries registered in the most lenient tax area of the customs union – Kazakhstan. Moreover, the companies will enjoy the same benefits in the markets of Russia and Kazakhstan as residents of those countries.

Russia set to ratify WTO documents by July 23 The Russian government has approved the agreements for the country's accession to the World Trade Organisation (WTO) and sent them to the State Duma, the Russian parliament's lower chamber, for ratification. All the necessary documents required to become a full WTO member must be ratified by the Russian government, parliament and president by July 23, 2012. Russia spent enormous diplomatic capital for 18 years to enter the WTO, completing its accession in December last year. The State Duma will examine the required documents at its meeting on July 4. RIA Novosti

Putin clears visa-free travel for APEC summit Russia’s President Vladimir Putin has signed a decree abolishing visas for businessmen and officials, who are scheduled to attend the Asia-Pacific Economic Cooperation (APEC) forum in Vladivostok in September, the Kremlin's press service reported. The APEC forum will bring together delegations from 21 countries to discuss a slew of measures for boosting the economic growth in the region. The APEC countries are home to 40% of the world population and account for nearly 54% of the global GDP. Russia has been an APEC forum member since 1998. RIA Novosti

Multi-role transport plane contract inked India’s Hindustan Aeronautics Limited (HAL) and Russia’s United Aircraft Corporation (UAC) have signed a contract to produce 205 multi-role transport aircraft (MTA). The 15-20 tonne-class aircraft will be supplied to the Russian Air Force (100 planes) and the Indian Air Force (45 aircraft). The remaining 60 will be exported to third parties, the report said. Multirole Transport Aircraft Ltd (MTAL), a Russian firm, will also join this ambitious RussianIndian venture.The tripartite contract was based on a Russian-Indian inter-government agreement for joint design, development and production of the aircraft on 50:50 cost-sharing basis by the joint venture partners. RIBR

Disaster WIll it affect sales?

Customs Union weaves a new web of prosperity Integration between Russia, Belarus and Kazakhstan is set to attract more investors and unleash economic prosperity in the region.

Moscow, the collection of all documents for construction on an average takes 704 days, but in Rostov-on-Don, it takes 194, which is closer to the average of 162 days

for countries in the Organization for Economic Cooperation and Development (O.E.C.D.). In Moscow, the number of procedures and approvals for starting construction is the largest in the world at 54; Perm, Kazan, and Rostov require 24, 23 and 22, respectively. Among O.E.C.D. countries, there are 15 such required procedures and approvals. For all its flaws, the rating is a useful tool for improving the effectiveness of state regulation. What the government needs to keep in mind is that this goal should be pursued systematically on all fronts rather than through half-measures in one area at a time. The latest scientific research shows that if a country, in the process of competing for a higher evaluation, reduces the registration period for a new business by 10 days, it can count on an increase of 0.36 percentage points in GDP growth. Other experts see a strong correlation between a consistently high ranking and the state of the business climate and the depth and quality of measures for regulating the business environment. Russia, after all, has had success with symbolic national projects. Given Russia’s traditionally small institutional infrastructure, associated external effects by themselves are so significant that they can exert substantial influence on the country’s development. A rating can be greatly improved once, but it is only possible to stay on top through tenacity and untiring incremental efforts.

NEWS IN BRIEF

The deal boosted inter-union trade by over 38% last year, the benefits for foreign countries will become obvious over the next two or three years.

caused by the pilot's mistake: the pilot Alexander Yablonstev performed a dangerous maneuver neglecting the plane navigator's alert. Still the crash will not become a decisive factor for the ALEKSEY EKIMOVSKY RIBR buyers to terminate contracts The probe into the May 9 di- in the long term, says Boris saster had hardly begun when Bychkov from the Airclaims Indonesia’s Kartika Airlines CIS. “Public opinion may said it might postpone indefi- produce an impact. I can’t nitely its order for 30 Sukhoi rule out that customers might aircraft. Kartika was the first want additional discounts.” company in Southeast Asia to “Airbus also had problems buy the Superjet; it placed a during trial flights,” recalls $951 million order in July Bychkov. “The A320 had a 2010, with the first deliveries crash,and there were troubles with the A380. Boeing had a expected in September. Presently, hard contracts fire on board a Boeing-787 are still in place for the deliv- during trials, before the plane ery of 168 jets to Russian and was supplied to Japan. The foreign air carriers and there contracts remained in place.” Ruslan Gusarov, editor-inare agreements of intent to buy about 130 superjets from chief of Avia.ru, however, carriers in Spain, the US and points out that there have been crashes that effectively Thailand. “You involuntarily pay at- ended new projects.“Take the tention to the possible causes Tu-144 crash in Le Bourget. of the crash – engine failure, The plane never regained the faults in the navigation and trust of foreign buyers.” For its part, Sukhoi Civil control systems....This is a clear signal that they will be Aircraft will be doing its best seeking new discounts and to deliver the contracted concessions from the supplier. planes.“The Sukhoi brand is This is a normal situation for famous not only for its civil the market, especially the aircraft, but also military Asian market, where you products,”says OlgaKayukoshould benefit from your va from the United Aircraft business partner’s mistakes,” Corporation.“It is backed by says Ruslan Syroedov, an ex- a 70-year reputation. The Sukhoi Superjet 100 brand pert in lease operations. Meanwhile, according to a has excellent prospects and source close to the investiga- will be able to find a firm foottion, the crash has been ing in the market.”

Kudankulam I to start producing power soon The trial run of the first unit (1,000 MW) of the Kudankulam nuclear plant, that entails loading the reactor with fuel (enriched uranium), is expected to be held soon.The trial run would go on for 15 days, and in stages, the reactor would reach criticality, Minister of State in the Prime Minister's OfficeV. Narayanasamy has said. “In all probability, we can start getting power in June itself,” he said.The work is proceeding rapidly on the second unit (also of 1,000 MW), and it could be commissioned in the next few months, he said. A formal function is likley to be organised to inaugurate the project. RIBR

Vikramaditya begins trials in White Sea

WWW.SOLID-MSK.RU

India's Russian-built aircraft carrier Vikramaditya (also known as Admiral Gorshkov) began sea trials June 8 in the White Sea. India had the ship refurbished at the Sevmash shipyard in northern Russia.The aircraft carrier was originally scheduled to begin the trials May 25. The trial will last 120 days. A mixed Russian-Indian crew is aboard the vessel, but the Indian sailors will mainly act as observers. The Russian commander of the ship is Captain First Rank Igor Ryabko. After initial sea trials, the ship will sail to the Barents Sea for exercises with military aircraft.TheVikramaditya is a Soviet-made Project 1143.4 class aircraft carrier. It was sold to India in 2004 but will be delivered only in December 2012. The refurbishing of Gorshkov has cost India around $2.3-billion. RIBR


BUSINESS REPORT

Business

in association with rossiyskaya gazeta, russia Wednesday, june 13, 2012

opinion

Trend High labour and real estate costs are pushing many Moscow-based companies outside the capital

The great white-collar exodus While Russians once dreamed of living in Moscow, today more executives are migrating to regions in search of a better life. Maria Portnyagina

press photo

ogonyok magazine

Tatyana Gladysheva, a Muscovite, now loves her life in a small town, where her employer’s factory was relocated.

mobility at the level of supervisors is growing each year. “Many companies are leaving Moscow to save on administrative costs, and the employees are forced to mi-

The traditional rule "the closer to Moscow the better" is becoming obsolete. grate along with the business,”said Natalya Grishakova, a department head at Malakut HR Research and Solutions. “The process of industrial

relocate some of their divisions outside the city, and have new vacancies. Third, there is the reassignment of Moscow-based executives to regional subsidiaries to boost performance and do onsite employee training. “Companies benefit from moving their offices out of M o s c o w,” s ay s Ye l e n a Chernenko.“That’s because it’s better to have management located nearby the production facilities, so that the supervisors have at least some understanding of what they are supervising: it’s sufficient to leave just a showroom in the capital, a place where customers can see

companies moving out of Moscow began a long time ago, and it makes sense to relocate the administrative divisions closer to the production units,”says expertYelena Chernenko, director of the Consulting Center at the Russian Academy of the National Economy and State Service.“To achieve effective management in the regions, you need qualified managers, so Moscow’s oversaturation with executive personnel is gradually declining.” There are businesses that themselves move and bring their employees with them. Also, there are some Moscow-based companies that

samples of the products, and that can be a staging ground for participating in industry shows.” Nearly all major and medium-sized Moscow companies

Relocation of companies from Moscow also makes the regions more attractive. have relocated some divisions outside the capital. In Tver alone, with a population of just over 400,000, 14 call centers of Moscow-based companies have been opened,

elena krovvidi ribr

From the 1998 financial crisis through the relative growth and stability of 2000s and the recent recession that gripped the world, the Russian pharma market has been through thick and thin, and is set to grow, says Sandeep Nasa of Unique Pharmaceutical Laboratories. Having studied and worked in the Indian pharmaceutical industry for a while before moving to Russia, Nasa, the company's LLC general director in Russia, Ukraine & CIS countries, is intimately familiar with the peculiarities of both Indian and Russian pharma markets. In Russia the medicines distribution system is more centralised than in India, where every state has its own system, which makes distribution in Russia easier to a certain extent, says Nasa. He started working in Russia in 1995 as director of the Unique's division in 1998, just a month

ahead of the severe financial crisis that shook Russia.“Of course, it was a tough time, with Russian ruble devaluating, with empty stores and people who lost their life-long savings overnight,” he recalls of those grim days. But selling pharma products is not exactly a piece of cake in the Russia of 2000s. “Some Indians still have this image of Russia as a country where there’s deficit of goods and people don’t have much choice what to buy,”says Nasa. “You see there was this time when a person went to the pharmacy and asked for a medicine and it was given to the customer through a window. Nowadays customers attentively read the labels, they can check all the necessary information on the chemical content of a medicine.”On the contrary, Nasa points out, one has to work really hard to promote and sell one’s product to Russians because,with a wide array of goods in the market, one has to be competitive to make it big here. He has a few

words of advice for Indians wishing to engage in the pharma industry in Russia."Be patient," he says, adding that Russia is not the place where things are done quickly. “You have to think in a long-term perspective in Russia,” cautions Nasa. “If you set an enterprise in Russia, don’t expect immediate profit,in some cases it just won’t happen in the next 2 or 3 years, you’ll have to wait.” Nasa believes that the Russian government is going to pour more money in health sphere in the near time. The Russian government is steadily hiking spending on the medical sector. However, it hasn’t yet reached the level like that in the UK when cuts are needed. So the tendency for the years to come is the government’s support of the pharma industry, which in turn is going to attract more interest from foreign investors. A natural optimist, Nasa says that Indian entrepreneurs entering the Russian

shutterstock/legion-media

industry is booming, middle class is growing

Specially for RIBR

T

he reaction to the new Russian government has ranged from neutral to negative. Perennial hopes that Russia would finally launch a radical and rapid package of economic reform and political liberalisation failed yet again to materialise – but this was no real surprise. The Kremlin doesn’t do anything radical. Business leaders praised the stability that the new cabinet brings. For most existing investors, continuity is important. They have learned how to operate in this environment and don’t want radical changes. Nevertheless, a couple of appointments have attracted upbeat commentary. The promotion of former presidential economic advisor Arkady Dvorkovich to the post of deputy prime minister for industrial and energy policy is seen as a big step forward for the liberal camp, as Dvorkovich, like his former boss German Gref, only talks sense. One surprise was the appointment of Alexander Novak to oversee the energy portfolio. At the same time, the move of Igor Sechin, who formerly oversaw the energy portfolio, from the government to Rosneftgaz, the holding company that owns the state’s stake in oil major Rosneft, has led some to speculate that Sechin will de facto be in charge of energy. However, all this talk of

Business praised the stability the new cabinet brings. For investors, continuity is important. icy will be about collecting taxes from the natural resource sector. This theory is bolstered by the appointment of Andrei Belousov as minister for economic development. A wellrespected economist, Belousov is close to Putin and supports the president’s preference for big state spending. In other words, the plan seems to be to make money off oil to spend on big state initiatives. Overall, observers can expect more of the last decade. Steady progress toward reform, but nothing to make banner headlines and plenty of mistakes in implementation.

SCO poised to play bigger Afghan role The 12th SCO summit in Beijing saw India seeking a bigger role and Afghanistan inching to the centre of the regional body's agenda.

Vital statistics

press photo

Indian companies, take note: Russian Pharma

each of which can employ over 1,000 people.“This is one of the most widespread types of business migration to the regions,” said Natalya Zubarevich from the Independent Institute for Social Policy.“The process makes obvious sense: labor costs and office rentals are cheaper outside of Moscow. The result is that our call centers are in Tver and our ‘offshore’ programming is done in Nizhny Novgorod orVoronezh.” The relocation of companies from the capital to the regions also makes the regions more attractive. Says Gladysheva: "A lot of jobs have opened up, people are staying in their jobs, there are new prospects for career growth, and the communications and road infrastructure have improved.” There’s another trump card that enhances the attractiveness of the Moscow suburbs: easier housing solutions. “When we had our office in Moscow, a lot of our executives and managers were renting,”says Oxana Rogova, an employee of the kitchen furnishings company Blum. “After 2007, when we moved to the Domodedovo district, they could buy their own apartments in the Moscow suburbs.” Experts predict that for major holding companies, investing in their own executives’ mobility will pay off handsomely. “That’s why white-collar employees from major companies are running around the country like gypsies,”says Natalya Zubarevich.“They will be doing onsite personnel training as long as the regions still experience a shortage of skilled employees.”

power is to miss the point of Vladimir Putin’s government. In BorisYeltsin’s day, running the Kremlin was all about power, but under Putin, Russian politics is increasingly about policy. Power still counts for a lot, it makes more sense to look at what sort of policy changes the new government will pursue to get a sense of where Russia is heading. Take the Dvorkovich-Novak-Sechin triangle. Sechin will clearly be responsible for operational issues pertaining to developing the sector as Novak is not an oil man, but comes from the finance ministry. Put together, what this means is that the energy pol-

Geopolitics India strongly pitches for full membership

Interview sandeep NASA

Think long-term to make it big

Ben Aris

Sandeep Nasa, Unique Pharmaceutical Laboratories.

pharma market should be encouraged by recent trends. The Russian pharma industry is showing double digit growth, the middle class is growing, and the customers are becoming more demanding. The pharma entrepreneur feels that there are no particular difficulties in conducting pharma business in Russia. "There is some bureaucratic hurdle but if you understand the market properly it can be overcome”.Product registration can take two to three years but then in India it also

The number of foreign drugs in the Russian pharma market amounts to 70%, but Russia's Ministry of Industry and Trade sets an ambitious goal to increase domestic drug production up to 40%. After Russia's official accession to the WTO, the customs duties imposed on medicines are expected to drop (from 15% to 5-6.5%).

takes time. As for sizable tax holidays in some Indian states, in Russia the situation is different but there are certain tax holidays there as well. Taking a long-range view, Nasa underlines that the rapid growth of the pharma industry in Russia is aimed at increasing the share of the Russian medicines in the market. Nasa advises would-be entrepreneurs not to neglect the regions as Moscow and Saint-Petersburg accounts for only about 30% share of the market, with the region cornering a hefty 70% share.

Manish chand

specially for riBR

The leaders of the six-nation Shanghai Cooperation Organisation ended their 12th summit in Beijing on June 7 with an ambitious mid-term plan mapping the mid-term future of this influential organistion over the next decade.The summit culminated in the signing of ten pacts, including an all-encompassing declaration on “Building a Region with Lasting Peace and Common Prosperity,” and a revised SCO strategy for enhanced counter-terror cooperation. The expansion of the grouping loomed large on the agenda of the two-day summit, with the SCO granting Afghanistan an observer status and accepting Turkey as a dialogue partner. However, the observers like India wanting to get inside the SCO tent will have to wait for some more time as the procedures for admitting new members are elaborate and rigorous. At the summit, India’s External Affairs Min-

Photoshot/Vostock-photo

It’s 9:00 a.m. rush hour, but Tatyana Gladysheva is not rattled as she used to be in Moscow. It now takes her only five minutes to get to work.And in the evening, she goes for a stroll in the woods to get some fresh air. Indeed, life has changed dramatically for Gladysheva ever since she shifted to the Vladimir region three years ago after her employer, the Bolshevik Candy Factory, relocated from Moscow,and she moved with it. With Gladysheva’s professional skills,she could have remained in Moscow and found work at another company, but she opted for a new kind of life. “And I don’t regret it! Of course, senior management helped: they offered me an interesting position, plus they provided housing, plus travel expenses in case I want to visit Moscow,”says Gladysheva. She is not a freak exception. Human resources analysts say that a new trend is shaping up: the flow of office employees beyond the Moscow Beltway.The traditional golden rule of white-collar employment,“the closer to Moscow, the better,”is rapidly becoming obsolete. In 2006, according to surveys done by the recruiting portal Superjob.ru, only 15% of Muscovites would have been willing to move to a new city for a new job; but in May 2012, 24 % of upper and middle management people say they wouldn’t mind moving. This

Putin’s new cabinet : More of the same

SCO leaders held their 12th summit on June 6-7.

ister S.M. Krishna made a strong pitch for “larger and more constructive role” in the SCO as a full-fledged member and highlighted myriad strengths India could bring to this Central Asia-focused grouping. Russia has vigorously backed India’s membership and feels that India’s presence could be a game-changer for the SCO. China has welcomed New Delhi’s likely inclusion, but made it clear that the prospective members will have to work harder to get in. Above all, the Beijing summit saw Afghanistan climbing on top of the agenda. Rus-

sian PresidentVladimir Putin and his Chinese President Hu Jintao also held separate bilateral talks with Afghan President Hamid Karzai and offered greater security and economic assistance to Afghanistan. Karzai sought more funds and exhorted the SCO leaders to be more proactive in the wake of the withdrawal of the US-led Nato forces from his country. India, which has pledged $2 billion for reconstruction of Afghanistan, welcomed the SCO’s role as“a promising alternative regional platform to discuss the rapidly changing Afghan situation.” The dangerous mix of Islamist militant networks and narcotics trade in the region are key factors driving the SCO to take a larger role in stabilising Afghanistan. As the SCO enters the second decade amid a mutating international order, the world will be watching how its expansion will affect the regional dynamics and provide a counterpoint to the West-dictated narratives on key international issues. Manish Chand is Senior Editor with IANS and a New Delhi-based writer on international affairs.


BUSINESS REPORT

Space

in association with rossiyskaya gazeta, russia Wednesday, june 13, 2012

High-tech Siberian city has bounced back from the nightmare 90s; graduates from top aviation universities are trooping in large numbers

Glonass spurs rebirth of space hub The Glonass has infused a new life and vitality into the Siberian city Zheleznogorsk, which is now attracting droves of young specialists. elena shipilova

Soviet romanticism “In the 1960s, the whole USSR dreamed of space! It was an honour to work in the industry,” says Vladimir Khalimanovich, director of the Industry Centre of the M.F. Reshetnev Information Satellite Systems company (ISS). He came to Zheleznogorsk 47 years ago from Kazan when only the best and the brightest were recruited to closed cities, home to secret military establishments. Life in such a city meant living with a few restrictions: if you wanted to invite relatives or friends to visit, you had to get special permission from the security

The Russian GLONASS satellite navigation systems are giving a tough competition to the American GPS systems.

service. But its attractions outweighed many irritations: Zheleznogorsk, for example, received centralised

The city only revived after the Russian government began investing in Glonass navigation system. supplies of various goods, which it was impossible to obtain in ordinary cities in the USSR. In the 1990s, the city fell on hard times. The centralised supplies of foodstuffs ceased, and people were

tough competition to the American GPS. The state now provides two-thirds of 20 billion roubles that make up the ISS’s annual turnover, with the rest coming from commercial orders.

plunged literally overnight into brutal realities of capitalism. Like the majority of Russian enterprises, ISS, around which the city’s life revolved, lost the lion’s share of its financing. Subsequently, the factory’s workforce of more than 8,000 people was almost halved, triggering an exodus to big cities. The engineers were only able to breathe easily at the start of the new century, when the government began to invest funds in the creation of the GLONASS satellite navigation system as a part of the space programme. A year ago, the system’s 24 satellites became operational, giving a

Realities of capitalism Unfortunately, in those days, the ISS got so caught up with its internal issues that the Russians were almost 20 years behind, and the Americans took over the lead in building satellite systems, once considered the forte of the Soviet Union. It was only in 2008 that the ISS started getting international orders. First, the Israeli op-

erator Space-Communication Ltd ordered the AMOS5 satellite, then in 2009, the Indonesian company PT Telekomunikasi Indonesia Tbk bought the Telcom-3 telecommunications system, and later contracts were signed with Ukraine and Kazakhstan.“Every year, we take part in four or five tenders, of which we win one. One international contract per year is enough for us. That’s all we can handle at the moment,” says Khalimanovich. Today, about 40 satellites are in production, including secret military systems, Glonass satellites, and telecommunications

Skolkovo is upbeat about Russia's prospects

What prevents Russia from hiking its share of the world space markets? The state financing of space activities in Russia has more than trebled over the last five years and is growing. However, there is virtually no private sector in the industry, whereas the global trend is an increasingly confident involvement of the private sector in space exploration. In this area, Russia should not hesitate to form alliances with leading world producers.

Do you think that people will prefer to holiday in orbit rather on sandy beaches? The case of Virgin Galactic, which has received payments from several hundred people for a future sub-orbital flight, shows that the space tourism market has a future. Many are prepared to pay hundreds of thousands of dollars to experience weightlessness and see the Earth from outside. When technologies become fairly safe and cheap, such travel could become fashionable. Russia is only planning to enter that market, but we have other promising projects.The Glonass system was

dentally, the ISS has retained the original Soviet training system for young specialists. After their fourth year in an institute, students come to the company and work for two years in various roles and gain experience, and

finally put together last year. This is the second navigation system in the world.The first (GPS) was made by the Americans. The Skolkovo Foundation today supports several navigation-related projects. This is the path towards the commercialisation of Glonass. Any domestic “breakthrough products” on the way? Russian energy and engine technologies like rocket engines and space nuclear plants have a good chance. I do not rule some less spectacular but important technical solutions in the field of small space platforms and elements of on-board service systems. The members of the Skolkovo project are working on such projects. Who else is supporting private initiatives? Indeed, other development institutions began to support the commercial industry before we did. They include the Russian Venture Company and Rosnano.Vnesheconombank is actively investing in major projects. Are Russian businesses lukewarm about space industry? We have hardly any law on commercial space activities. Private interests simply do not understand what rules to play by and businessmen are

olga ivanova riBR

kommersant

Has the role of outer space in the global arena increased? Indeed, the world economy is becoming more dependent on the intensity of space activities. The market for space technology production and services is around $300 and 400 billion a year. It has several segments, the biggest being satellite communications and telecommunications (over $100 billion), navigation and distance Earth sensing. Russia’s share in these segments is less than one per cent. In the production of satellites, our share is 7–10%. Our share is traditionally high – 33–40% – in orbiting payloads, but that segment is small, about $3 billion a year.

It was only in 2008 that the ISS started getting international orders. One contract per year is enough.

only after that do they defend their diploma.“ISS is an excellent place for training staff. If we could, we would buy up most of its specialists,” says the manager of a Moscow company. The glory days of the past are still a long way, but the “new blood” has started to breathe new life into the city. A new housing estate has been built, where employees can buy a flat through a preferential mortgage system. “The company covers half the interest,” says ISS staff Kristina Uspenskaya. But people rue the dearth of cafes, cinemas and restaurants in this city of 100,000 people.

A new lunar race has emerged. Russia, India, US and other major space powers are eying the first manned flight to the moon.

The chief of the Space Technology at

riBr

starting out is $1,000, while a graduate from a technical university can only hope to earn half that much. Inci-

and geodesy satellites for Russian operators, the Russian Satellite Communications Company, the federal state unitary enterprise and Gazprom Space Systems. The staff numbers have bounced back, with the place becoming a magnet for young specialists. In 2005, there were 5,000 people working at the ISS, but now there are 8,500. Graduates from the aviation universities in Kazan, Tomsk and even Moscow are again being drawn to Zheleznogorsk, but this time it’s not romanticism that’s attracting them but money. The fact is that the pay here for an engineer just

Moon sparks a new power play

Battle hots up for share of space pie Does the private sector account for the US’ dominance in world space activities? If one combines the US’civilian and military budgets, the sum will exceed the total spending by the rest of the world on space activities. The US policy adheres to a strict“division of responsibility”: the study of the solar system, including planets and asteroids, is the business of the state, whereas developing near-Earth space is the domain of private companies.The giant contractors of the US space agency, be it Boeing, Lockheed Martin or Orbital, are all private enterprises .They ensure America’s technological lead.

Vladimir Khalimanovich, ISS Industry Centre director.

Vision Russia, India team up in Chandrayaan 2 mission

Interview Sergei Zhukov

elena shipilova

It costs approximately $150 million to build one satellite, plus $50 million– the launch cost plus 20% – for insurance. One small error means blowing up millions of dollars into space, literally. A huge number of tests are, therefore, done at each stage of construction. One of the most spectacular is the trial unfurling of the wings, i.e. the solar batteries of the finished satellite. “The preparations can take many days. Operations begin only when the staff has checked everything ten times and put signatures on various documents and the client’s representatives have switched on their video cameras for the minutes,” says Sergei Apenko, chief designer for electrical testing and electrical design. And so the system is launched.

Profile

Who is Zhukov? AGE: 55 education: PhD in engineering sciences

Sergei Zhukov is Executive Director of the space technologies and telecommunications cluster at the Skolkovo Innovation Center. He was born on September 8, 1956 in the city of Zhezkazgan, Kazakhstan. In 1979, Zhukov graudated from the Bauman Moscow State Technical University with dis-

afraid to invest in the sector. There are many restrictions on obtaining licences for space activities. Is Skolkovo helping attract private capital into space exploration? Our strategic goal is to attract scientists, engineers, industrialists and entrepreneurs from various countries. Do you think that we can mine minerals on the Moon?

tinction majoring in "nuclear power systems". Zhukov has PhD in engineering sciences. Zhukov was in-charge of the astrophysics and radiobiology experiments on board the Mir orbital space station. He took part in foundation of the Federal State Unitary Enterprise "Russian technologies" in 1997 and "Vostochny" spaceport in 2007. Zhukov is test pilot, member of Russian Space Academy and President of the Moscow space club public association.

So far, this is sci-fi stuff but I do not rule out that it might happen in a few decades. There is water, manganese and aluminium on the Moon and asteroids that are fit for making fuel and structural elements of spaceships and long-term stations. American business has plans to develop rare earth elements and deliver them to Earth.The world space business is developing rapidly and we shall just have to wait for the outcome.

The race for lunar exploration has acquired a new momentum. Leading space powers, including Russia, the US, India, China and the European countries, are harnessing their best talents and technologies to score new milestones in this ongoing journey. Russia has its Luna Glob (currently split into two separate orbital and landing missions) and Luna Resurs, which is being done in collaboration with India’s Chandrayaan 2 mission. Currently, there are three NASA missions orbiting the Moon (GRAIL, ARTEMIS and LRO), with the next American lunar mission LADEE (Lunar Atmosphere and Dust Environment Explorer) scheduled for launch in May 2013. And then there is the Chinese Chang’e 3, which incorporates a lander and a rover. Europe is lagging behind the leaders, as there are no missions presently under development. The private sector may join the space sweepstakes as the Lunar Google X Prize is announced for the team to send a robotic rover to the Moon before the end of 2015. The first stage of the Russian new lunar programme will begin in 2015, with the launch of the Luna-Resurs and Luna-Glob probes. Both are similar in design and will study south and north poles of the moon respectively.

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In the depths of the Siberian taiga, on the bank of the river Yenisei stands the closed city of Zheleznogorsk, surrounded by a barbed wire fence.You can’t just go and live there if you want to, and the local residents are only allowed to travel home if they have a pass, and even then they have to undergo a full check first. Once inside the city, it’s like travelling back in time to the USSR of the 1950s and 1960s: there are wide avenues flanked by five-storey blocks of flats painted in different colours. In the centre stands the Rodina [Motherland] cinema, and the main entrance to the factory, which built the famous Kosmos and Molniya satellites, the most powerful of their time.

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ruslan sukhushin

A $200 million gamble!

The idea of going to the “seventh continent” is still alive.

After 2020, a new stage is scheduled with two bigger rovers planned for delivery. Their missions may last as long as five years, with rovers scouting the area as far as 30 km far from their landing spots.The data obtained will be used along with high-precision topographic maps of the Moon while the data on

The Moon is once again turning into an arena for political and possibly even cultural rivalry. its composition will help understand the question of the Moon’s creation, its inner structure, and its response to the gravitational pull of the Earth. Eventually, scientists hope to find the evidence on the size and composition of the Moon’s core, and the history of its crust. An accurate gravitational map would also help to study hidden mass concentrations

that distort gravitational fields. The data provides insight into the history of the Moon – apart from giving details on the Moon’s surface, which are crucial for further exploration of the body. While actual activities on the lunar base building might seem dormant, the idea of going to the“seventh continent”is still alive. The missions, set to materialise before the 2020s, are expected to contribute to the preparation for a manned Moon flight by 2025 or later. It may seem like a new Moon race, even though it is far less heated than its predecessor back in 1960s. The Moon once again is turning into an arena for political and possibly even cultural rivalry. While old space powers – namely the US, Europe, and Russia – talk of long-term goals for a lunar base and thorough preparation for a lunar human flight, new players on the field like China or Iran are going to struggle to find their way.


BUSINESS REPORT

Sport

in association with rossiyskaya gazeta, russia Wednesday, JUNE 13, 2012

Football Veteran coach Dick Advocaat eyes the final, says team is on an upswing

Basketball High hopes for Russia at London Olympics

Russia flies high, moves AK-47 never misses a shot! closer to Euro glory Russia seems confident about its chances at Euro 2012. Coach Dick Advocaat has his eyes firmly set on making it to the finals. tino kunzel

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Russian star srtiker Andrey Arshavin (left) in full flow against Germany's Philipp Lahm.

football, which was exhilarating to watch when the Russians were in form. The team around Zenit St Petersburg superstar Andrei Arshavin was all but out of the 2008 tournament until Croatia miraculously gave the Russians some help by beating England in the final match – the day of qualification that secured Russia’s passage and kept England home. Such fortunes made believers out of the Russians, who now considered Hiddink to be their lucky rabbit’s foot. In 2008, the Russians improved with each passing game and defeated the favourite Netherlands in the quarter finals 3-1 after extra time. The hype soon followed. Russia delivered a better brand of“Dutch”football – fleet of foot, imagina-

tive and full of pressing. A stunned Europe described the Russians as the discovery of the tournament. Back home, hundreds of thousands took to the streets in

We'll see if Arshavin generation's experience prevail over youthful energy of other teams. metropolitan and rural areas at around midnight, delirious with joy. Two days after defeating the Dutch, the Russians were outmatched by Spain, losing 3-0 in the semi-final. A sobering result to be certain, but the Russian faithfuls were forgiving after experiencing such brilliance on the pitch. The team built off its

strong European showing in the World Cup qualifying campaign that followed shortly thereafter. Everything seemed to be on track, until a home loss to Germany in the autumn of 2009 derailed the Russians. The hype died as quickly as it had started. And all of a sudden, Hiddink wanted to spend more time at home than in Russia. Shortly thereafter, the two parted ways, paving the way for Advocaat to take over. Advocaat was no stranger to success in Russia after leading Zenit St Petersburg to glory in the domestic campaign and in the UEFA Cup as well and even dispatched Bayern Munich 4-0 in the semi-final. Advocaat de-emotionalised international football. The only measure of his success would be whether or not

Pavel Petrovsky riBr

Russia’s hopes for reviving basketball glory rest on the shoulders of the 31-year-old Andrei Kirilenko, better known as AK-47 for his finesse and precision in the game. He is now bracing for the tough fight at the London Olympics,and is upbeat about putting Russia back on the global basketball map.“In my opinion, Russia is strong enough to make it to London and to fight for the medals there,” he says confidently. Clearly, Kirilenko’s formidable skills are Russia’s best bet at the London show. The history of Russia’s national team is inseparably linked to the career of Kirilenko. He was born on February 18, 1981 in Izhevsk, but now he holds the double citizenship of Russia and the US. Kirilenko became the youngest player in the history of Russian basketball championships – he played his first game for Spartak St. Petersburg at the age of 15. After spending two years with Spartak (1996-1998),Kirilenko played for CSKA Moscow (1998-2001). In 1999, he became the first Russian to be picked in the first round of an NBA draft. He was selected by the Utah Jazz. In 2007, he helped the Russian national team beat Spain in the EuroBasket 2007 final and earned MVP honors. At the 2008 Beijing Olympics, Kirilenko earned the right to carry the Russian flag at the opening ceremony of the Games.“Being in the mind of the whole country, representing a Russian team full of

stars is a great feeling. I felt touched, amazed and inspired,”recalls the Russian basketball star. After the Beijing Olympics, Kirilenko left for the NBA. He played in the US until the last season, when he had to get back home because of the lockout. Since 2011, Kirilenko has been with CSKA Moscow. Kirilenko’s flair and optimism are reminiscent of glory days of the Soviet Union’s basketball prowess.The Soviet Olympic basketball team defeated the U.S.in a last-second win in Munich in 1972, and at the 1988 Seoul games, the Soviet team led by Alexander Gomelski defeated the U.S. machine in the semifinals.The Soviet Union team won eight European championship titles in a row from 1957 to 1971. While the Russian national team is heir to the Soviet basketball glory, it has yet to produce any outstanding results.The Russians won the silver at the world championships in 1994 and 1998 and won their first gold – at the European champion-

itar-tass

Russia is excited about its prospects at Euro 2012. The buzz has only got louder after a dazzling friendly 3-1 win against Italy in Zurich on June 1, marking the first post-Soviet win over Rome. The Euro 2008 semi-finalists are now itching for more. Russia’s ace coach Dick Advocaat can barely hide his sense of triumph.“We are on an upswing. We are improving from game to game,”said a jubilant Advocaat. The Euro 2008 semi-finalists have set the bar high.Advocaat made an ambitious announcement in Moscow that the goal for Euro 2012 is to make it to the finals. Reaching that goal would not be that far-fetched. Russia did come third in the 2008 tournament, after all. However, making it to the finals would not only mean living up to its billing as a top favourite in a group with Poland, Greece and the Czech Republic, but also getting through traditional powerhouses like Germany and Spain. The road to the finals may not be very long, but it sure isn't paved with roses. Experts consider that a long shot at best for the Russians. Not even the legendary trainer like Advocaat can make that big difference in the eyes of the odds makers. T h e D u t ch m a n t o o k charge two years ago after fellow countryman Guus Hiddink orchestrated a fresh brand of attacking

his team qualified for the Euros. The campaign was a roaring success as Russia won its group with Ireland, Armenia and Slovakia easily. Russia scored 17 goals in 10 matches, exactly half as many goals as Germany in its group. Both the coaching staff and team alike became increasingly annoyed at the criticism directed at the team’s minimalistic ways. Instead of euphoria before the Euros, “selfish” and “moody” were the terms bandied about and team performances were said to be influenced by emotion. The veteran coach then continued handling things in his own unique way. He did not present his preliminary roster for the Euros himself, but simply turned it into the Russian Football Federation. T h e ro s t e r h a s h a rd ly changed since 2008 except for Zenit duo Aleksandr Kerzhakov and Igor Denisov. Four of the five players that started playing abroad after the Euro 2008 have since returned to Russia. Arshavin (31/Arsenal), Roman Pavlyuchenko (30/Tottenham Hotspur),Yury Zhirkov (28/ Chelsea) and Diniyar Bilyaletdinov (27/Everton) were all relegated to the bench with their English clubs, while Pavel Pogrebnyak (28) has recently moved fromVfB Stuttgart to Premier League outfit Fulham. The average age of the Russian team is approximately 28.34 years old, which is just slihgtly younger than that of the Irish squad (28.35) and much older than the youngest team Germany (24.52). The Euros will show if Arshavin generation's experience prevails over youthful energy of other teams.

Andrei Kirilenko, better known as AK-47, is confident of reviving the Soviet basketball glory at London Olympics.

ships – only in 2007. The Russians easily beat Iran in the first game of the 2008 Beijing Olympic tournament, but were then defeated by Croatia, Lithuania, Australia and Argentina. Russia finished fifth and did not make it to the next round. Russia's fortunes could, however, change dramatically at the London Olympics if Kirilenko’s confidence is anything to go by.

Culture With Russia's economy growing and greater bilateral trade, more career opportunities await Indian students as translators, teachers

Introducing Mumbai to perks of learning Russian Indians are rediscovering the pleasures and profits of learning Russian, with the University of Mumbai showing the way. ajay kamalakaran specially for ribr

When Russian language scholar Laxmi Mikaelyan joined the faculty of the department of Russian at the University of Mumbai in 1998, she was shocked to see that just one student had enrolled for the course. Those were the days when the Russian economy tanked after the country defaulted on its debt and the rouble crashed. “The demand for Russian had fallen for various reasons such as the collapse of the Soviet Union,” says Mikaelyan, a doctorate in philology from the Academy of Sciences in Moscow.“Interest in Russian is now picking up as many people realise that it is the link language between all the former republics of the USSR.” At the end of the present academic year, over 30 stu-

dents have obtained certificates, diplomas and degrees from the university. From part-time weekend courses that begin from the basics to a Master of Arts programme covering topics such as literature, lexicology and translation, the university has several options for those looking for proficiency in Russian. “The five-year integrated programme in Russian offered by the department is a full time Bachelors plus Masters course which makes you good in Russian,” says Mikaelyan, the head of the department.“It is a ‘loaded’ course, so to say: it gives about 600 contact hours annually in Russian!” The Russian government is also looking at actively promoting the language through the university.“The Russian Consulate in Mumbai announced a one-month scholarship for two of our full-time students in either Moscow or St Petersburg that will commence next year,”says Mikaelyan. Russian is at a distinct dis-

Dhanashree Ojale, Russian language student.

advantage in India’s financial capital as there are no schools offering the language as a third option. Several schools in the city offer French and German and many others even offer Japanese.“We actually take them from zero level to where they can read the original works of great masters like Chekh ov, To l s t oy a n d D o s toyevsky,” says Mikaelyan. The courses at the university go beyond pure academics

and students are encouraged to take part in programmes organised by the Russian Centre for Science and Culture in Mumbai.“We try to give them a window to Russia,”Mikaelyan adds.“Classroom interaction in Russian plus language practiced outside - among the students, or with the teachers, or with native speakers of Russian ensure excellent fluency in the first few years of this programme."

The part-time students have varied reasons for learning the language: some professionals and businessmen are looking at the large Russian market, others want to get an understanding of “enigmatic Russia” as one student put it. Another student, who didn’t want to be named, admitted that he needed Russian for the dating sites that he uses. Full-time students like Vivek Chandanshiv are looking for a career in the Russian language.“I’d like to either be a translator or a teacher,”says Chandanshiv, who wants to travel on the Trans-Siberian Railway and explore the beauty and splendour of Russia. His classmate Dhanashree Ojale swears by the works of Maxim Gorky.“The grammar is confusing and intricate but I love the language,” says Ojale, who is fascinated by St. Petersburg. Both students have been short-listed for the scholarship in Russia and completed 1500 academic hours over three years

to earn their Bachelors degree in the language. The university screens Russian and old Soviet films for the students and also encourages them to use Russian social networking sites. Although a few Russians come every year as visiting lecturers at the university, Mikaelyan is eager for greater interaction between the University of Mumbai and Russian universities.“There has been a memorandum of understanding between the University of Mumbai and St Petersburg State University on academic exchanges, which should commence soon,” says Mikaelyan. She feels that the Russian expat community in the city and the academia in Russia can help students learn the Russian language and culture. Promoting language overseas is also a part of the Russian government’s strategy of enhancing its soft power. This year, the University of Mumbai held a “Day of the Russian Language”, where the Russian Consul General

Europeans To buy Iran’s and oil, Indians or not–todivided buy, that’s or united the by question… DNA? Rakesh M.K. Krishnan Bhadrakumar Simha

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Laxmi Mikaelyan PhD in philology, Academy of Sciences in Moscow

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The demand for the Russian language had fallen after the collapse of the Soviet Union. But now interest is picking up as many people realise that it is the link language between all the former republics of the USSR.

Aleksey Novikov spoke of plans to open a Russian language school in the city. Novikov called on the university to support the first

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initiative of this kind in India’s financial hub.“The possibilities for the Russian language are endless,” says Naresh Srivastav, an alumnus of the university, whose business dealings with Russia cover hospitality and pharmaceuticals. Specialised vocational training by the university and dedicated schools, says Srivastav, can fill in many vacancies for businesses that are catering to Russians in India. The university is expecting a sharp rise in enrolments for the 5-year integrated Russian course in the new academic year. While Russian may still not have the allure of French or German in Mumbai, the opportunities generated by Russia’s growing economy should encourage more young people to specialise in Russian language studies. “Career opportunities knock on the doors of people who take the best out of the integrated programme and gain the competitive edge,”says a confident Mikaelyan.

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