Tatarstan’s economic strategy calls for high technology and innovation to become the bedrock of future industrial development, and small and medium-sized enterprises are expected to drive the sector. Since 2001, the share of high technology and innovative production in the republic’s gross regional product (GRP) has grown nearly fourfold, rising from 3.5% to 13%.

To encourage further growth, the government has adopted a three-pronged approach. Its Investment and Venture Fund, capitalised to $200m, finances high-tech ventures and research and development activities. Its Stabilisation Pledge and Insurance Fund underwrites commercial bank loans to SMEs. And most important of all is its programme to establish 14 technology parks across the republic. Some, such as Idea Technopark in Kazan, are already up and running. Unlike most technology parks in Russia, Idea operates on a fully commercial basis.

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“Our objective is to commercialise innovative ideas by setting up and developing small enterprises,” says Sergey Yushko, Idea’s general manager.

Business incubation

Idea’s business incubator aims to bring technological concepts through early research and development to the pre-production stage. It provides projects with start-up infrastructure, consulting services, project management and finance, in return for which Idea takes a 10%-51% stake in a micro joint venture with the project team. Projects that reach the pre-production stage successfully are transferred to the adjacent Innovation-Technology Centre (ITC), where they continue to enjoy cheap use of the site’s facilities for three more years before becoming fully fledged independent businesses.

The ITC is also open to innovative and high-tech businesses from elsewhere, including local subsidiaries of international firms, with the aim of creating a dynamic knowledge-based enterprise cluster. Idea finances its investment in the business incubator and ITC from commercial rents for office space in its adjoining business park, which is also geared towards attracting high-tech companies and related services.

State support

Housed beside Kazan’s Idea Technology Park, the Entrepreneurship Development Agency (EDA) is a state agency created specifically to cater to the needs of SMEs. “Our purpose is to detect problems faced by small businesses, develop concepts of state support and disseminate information, including through two television programmes,” says the agency’s head, Gulnara Sergeeva.

Bureaucracy remains a hurdle for SMEs, Ms Sergeeva acknowledges. “First, our banks set very strict criteria and it’s hard to get a loan. Second, businesses often have too few assets to secure loans. Third, our vocational schools have declined and small businesses often cannot afford to invest in training to close the skills gap. And fourth, inspections: there are more than 40 state agencies [that scrutinise SMEs] at federal and republic level, some with overlapping functions.”

A federal law to improve the situation is expected to go before the Duma, the legislative assembly, this autumn.

Micro funding

The EDA also aims to attract micro FDI. Ms Sergeeva says that neighbouring Samara province benefits from a micro-credit network established by US non-profit agency Finca. Loans average $2000, 99% of which are repaid on time, and the programme covers all its costs. Efforts are under way to persuade Finca and similar organisations to create micro-credit networks across Tatarstan.

The government itself has funded micro-credit amounting to Rbs3m ($90,000) for up to three years at rates of 8%-10% – below typical bank lending rates – to stimulate growth in small industrial and agricultural enterprises.

The future strategy is to promote the interaction of large and small businesses, creating satellite SMEs around major industrial enterprises to drive mutually beneficial innovation and growth. By 2010, Tatarstan aims to have 30% of GRP sourced from SMEs, even though overall GRP growth is forecast to be high.

Evidence from the past four years, during which the SME share has grown from 13% to 17% of GRP, shows that such an ambitious target is within Tatarstan’s grasp.