MOSCOW, SEPTEMBER 2011

1. RUSSIAN INNOVATION STRATEGY - 2020 MOSCOW, SEPTEMBER2011

2. INNOVATION: RUSSIA AT THE CROSSROADS RUSSIA’S STRATEGIC GOALS INNOVATION-DRIVEN SOCIETY-ORIENTED DEVELOPMENT Increasing prosperity of Russian citizens • Securing Russia’s role as one of the global leaders STRUCTURAL WEAKNESSES of Russia’s innovation system exacerbated by the 2008-2009 global crisis GLOBAL CHALLENGES • RISKS: • loss of scientific and technological potential • loss of geopolitical standing • perpetuation of resource-dependent economy • slow economic growth 2

3. INNOVATION POLICY IN THE 2000s • increasing the innovation activity of business • boosting the competition in order to stimulate innovation • making the R&D spending more efficient ACHIEVEMENTS STILL TO BE DONE • federal funding for fundamental and applied research increased • a national system of development institutions is being built • programs to boosts research at the leading universities • National Research Centers are being formed • создается инфраструктура поддержки инновационной деятельности • “innovation oasis” at Skolkovo is being built • innovation strategies for large SOEs Russia is having trouble realizing even the conservative scenario of the 2006-2015 Science and Innovation Strategy • KEY TASKS: • radically boosting the effectiveness and efficiency of innovation policy • focusing on priority goals innovation policy – a strategic priority 3

4. RUSSIA’S INNOVATION SECTOR • one of Russia’s key competitive advantages • quality of education and educational institutions is falling • insufficient funding • the government itself is not an active innovator • unable to foster a climate for innovation Human capital Russian business Government • lowinnovation activity and readiness to absorb innovation • lowR&D expenditures • tends to rely on importing ready-made technologies • significant expenditures per researcher in absolute terms, high number of researchers • outstanding achievements of individual researchers • hundreds of units Innovation and R&D infrastructure Science • Russia is lagging behind in relative terms • Russia in general loosing her standing in global science • low efficiency, low effectiveness 4

5. THE GOALS 2020: INNOVATION – KEY DRIVER OF ECONOMIC GROWTH IN RUSSIA BUILDING UP HUMAN CAPITAL RADICALLY INCREASING THE INNOVATION ACTIVITY OF BUSINESSES MAKING THE STATE MORE INNOVATIVE, CREATING A CLIMATE FOR INNOVATION • PRINCIPLES • The state focuses on compensating for the “market failures” • Technological priorities are designated jointly with business and science communities • Allocation of federal funding and evaluation of the results are as transparent as possible • Results are measured against global benchmarks • Competition in the research sector is encouraged BUILDING AN EFFICIENT, DINAMIC R&D SECTOR, COMMERCIALIZATION OF R&D RESULTS MAKING RUSSIA’S ECONOMY AND INNOVATION SYSTEM MORE OPEN, INTEGRATING RUSSIA INTO THE GLOBAL INNOVATION SYSTEM 5

6. RUSSIA-2020: KEY INDICATORS 6

7. Large-scale modernization of fundamental science and R&D sectors • Focus on potential break-through fields • Radical growth of demand of research and engineering personnel • Building a comprehensive innovation system • Reclaiming leadership in global science STRATEGICAL OPTIONS FOR RUSSIA Most attractive option Most investment-intensive option Highest risks Option 3. Leadership in the key technology and research fields • Technologies are mostly imported • No large-scale effort to promote innovation • Focus on macroeconomic stability • Low investment in science, innovation, and human capital High competition between numerous countries pursuing this strategy Slow growth of domestic technological potential Option 2. Catch-up development, build-up of domestic technological potential in a limited number of niches Option 1. Steady-state scenario Russia increasingly lags behind not only the West, but also the newly industrialized countries 7

8. “MIXED” STRATEGY The state’s tasks: Designating priorities • Leadership in segments where Russia has competitive advantages • Catch-up development in the majority of industries and sectors • Rebuilding Russia’s capabilities in engineering and technology Optimal choice– MIXED STRATEGY Providing incentives for a large-scale modernization Investing in human capital 8

9. INNOVATIVE CITIZEN • Fostering and expanding theINNOVATIVE CAPACITY OF RUSSIA’S CITIZENS • - arguably, as important as the sum total of all the other goals of the Strategy Modernizing education • Next-generation school curricula and standards • New generation of educators and education administrators, new infrastructure for teacher/professor training and retraining • Effective models of teacher/professor compensation and quality assessment • New model of financing education at all levels Teaching skills necessary for innovation-oriented entrepreneurship Supporting programs to involve schoolchildren and teenagers in innovation and research Fostering the culture of innovation, increasing the prestige of innovation activity and innovators in society • Media, non-fiction literature, web-based resources, next-generation science & technology museums 9

10. INNOVATIVE BUSINESS Boosting the INNOVATION ACTIVITY OF RUSSIAN BUSINESS Creating favorable business environment for innovation • Fostering competition as a way of motivating companies to innovate • Improving regulation of individual markets and industries • Improving technical regulation • Stimulating commercialization of intellectual property that resulted from federal funding • Improving the tax regime for innovation • Improving the investment climate • Attracting highly skilled workers Providing stimulus for innovation • Innovation strategies for large state-owned corporations • Grants and subsidies for companies in the priority areas • Fiscal stimulus for corporate R&D and new equipment acquisition • Support for new high-tech enterprises, especially at the early stages 10

11. INNOVATIVE STATE Innovation in public administration and public services • Technological innovations in public administration, including the “electronic government” • Developing a new cadre of highly-skilled civil servants • Increasing the state’s openness to the outside world: English-language web-cites for governmental bureaus; English translations of all the key documents and laws; making sure that civil servants are able to communicate in English Innovation in infrastructure, utilities, and social services • Innovation strategies for education, health services, culture, social services, residential construction industry and utilities, agriculture • Removing regulatory barriers to innovation Public procurement as a driver for innovation • New public procurement and contracting processes and practices • Pilot innovation procurement plans 11

12. RESEARCH FOR INNOVATION(1) Strategic goal Globally competitive research sector –foundation for innovation-driven economy Russia rejoins the ranks of leading global research powers Structural modernization of research sector • Stage II: • Increasing autonomy of research units and groups • Establishing and supporting the competence centers (National Research Centers, National Research Universities) • Fostering research at the universities • Providing state-of-the-art equipment and research tools • Stage I: • Comprehensive audit of research capabilities, restructuring • Growth of new organization on the basis of most productive research units 12

13. RESEARCH FOR INNOVATION (2) Training, attracting, and retaining new generation of researchers and R&D managers Making federal research funding more efficient • Improving the competitive funding mechanisms in fundamental and applied research • Expanding the share of funding allocated through competitive mechanisms, introducing new grant formats and better methods of project evaluation • Reducing administrative burden in research, streamlining funding procedures Designating priority fields in science and technology • Designation of priority fields – key instrument of science policy Fostering the growth of private research sector 13

14. INNOVATION INFRASTRUCTURE Introducing new mechanisms for financing innovation projects • Securing sufficient and growing supply of innovation projects • Expanding subsidized credit for innovation projects through the Russian Development Bank and Vneshekonombank • Setting up funds for direct investment in innovation projects (with Vneshekonombank) • Improving coordination between the national development institutions and federal agencies • Adjusting legal framework for the development of venture funds and businesses financed through venture funds Developing the innovation infrastructure • Making innovation infrastructure market-oriented (including privatization) • Supporting the Special Economic Zones with focus on R&D and commercialization of research • Making the innovation infrastructure more efficient • Building the Skolkovo innovation center • Creating a register of state-funded innovation infrastructure 14

15. JOINING THE GLOBAL INNOVATION SYSTEM Supporting Russian hi-tech companies in the international markets • Providing political and diplomatic support • Export support, reducing the regulatory barriers for export Attracting hi-tech companies and R&D centers to Russia • Skolkovo, science cities, innovative regions and clusters • Individualized support for large investors, marketing Russia • Improving investment climate Boosting international science and technology cooperation • Supporting cooperation between individual researchers and companies, expanding intergovernmental agreements • Reducing administrative barriers for international cooperation in science and technology 15

16. INNOVATIVE REGIONS innovation activity – key criteria of success for regional authorities Boosting innovation policy at the regional level • Regional programs for enhancing competition, supporting SMEs • Supporting innovative businesses at the regional level • Building the innovation infrastructure • In the most advanced regions – setting up innovation centers (R&D and innovation infrastructure) Supporting innovation clusters • Creating specialized cluster development centers • Assisting the enterprises in acquiring the necessary skills in commercialization of R&D results, cooperation with researchers, improving the quality of management and marketing • Improving the quality of local education and applied research • Competitively allocated subsidies for developing the innovation clusters 16

17. IMPLEMENTING THE STRATEGY strategic management of innovation-driven development • “FIRST LEVEL” : • Concept of Long-Term Development of the Russian Federation for the Period up to the year 2020 • Innovative Development Strategy for the Period up to 2020 (this document) Regularly adjusted • 2.“SECOND LEVEL”: • state programs • Development of education, R&D sector, information society, support of innovation activity • sub-programs • Development of hi-tech sectors of the economy • 3. “THIRD LEVEL” : • regional innovation development strategies 17

18. FINANCING INNOVATION-DRIVEN DEVELOPMENT Gradually bringing the volume of federal funding for R&D, education, and innovation support up to the average level for OECD countries (as a share of GDP) Radically improving the efficiency of federal funding for research and higher education Significantly increasing support for innovative activities at individual enterprises and related goals • Supporting the SMEs • Training civil servants • Fund for supporting the development of small enterprises in R&D and engineering • Funding for the Russian Technological Development Fund; innovative projects on the priority fields initiated by private enterprises; Skolkovo center; R&D Special Economic Zones and technoparks Providing Additional support for Russia’s innovative regions 18

19. Thank you for your attention!