Investment into intelligence
<img class="imgl" alt="" src="http://www.belarus-magazine.by/belen/data/upimages/2009/0001-009-488.jpg">[b]People in Belarus are already speaking of the High-Tech Park as a successful ‘factory of intelligence’, which continues to grow and develop rapidly. Over 140 companies and firms are now resident at the High-Tech Park, employing 16,000 experts, making products claiming worldwide demand. The Park is clear proof that investments into intelligence can be profitable, creating the perfect environment for the further development of highly remunerative IT business.[/b]
The nine-storey building at the High-Tech Park is located on Academician Kuprevich Street, housing a number of companies, as well as the Administration of the High-Tech Park. The interior of the former Institute of Physics has its own minimalistic style: well-fitting the work of those within. The daughter of an academic friend agrees heartily. A linguist by education, she is currently employed as a business analyst at the High-Tech Park, supervising a project. She believes that opportunities are being fully grasped.
Next year, the High-Tech Park will mark its 10th anniversary. It’s not been long since the signing by the President of a decree to create the site, on September 22nd, 2005.
Speaking to Valery Tsepkalo, the Director of the Park’s Administration and a Candidate of Legal Sciences, we asked not about plans to celebrate the anniversary, since the Park only began work in June, 2006. Rather, we talked about the extent to which the High-Tech Park shapes the Belarusian economy, and whether it has helped raise our competitiveness. It’s fascinating to hear about the advantages of the Park, which draw investments from domestic and foreign companies. Belarus was once the ‘assembly shop’ of the Soviet Union, and continues to produce highly-trained staff. Our IT educational system is unique.
[Belarus also boasts special legislation and concessionary terms for those operating at the High-Tech Park. In fact, Belarus’ ex-territorial principle of registration is unique within the CIS, offering special terms to all company-residents regardless of where their offices are located. Those in Brest, Gomel and Mogilev have access to the educational, research, professional and infrastructural potential of the whole system of the Park.
Mr. Tsepkalo emphasises that, on a trip to the London Stock Exchange, he was happy to hear from a foreign colleague that the Belarusian High-Tech Park is known to all those working in the IT sphere. His face lights up at the recollection. After all, the Park is his brainchild. He has every reason to hope that the Park’s residents will see success not only in Belarus but in the wider world.
Some feel safe only when following tried and tested formulae but you took another path in conceiving the High-Tech Park. What inspired you?
During my time as an ambassador in the USA, I visited Silicon Valley, which specialises in information and communication technologies, making IT hardware and software and designing microchips. I lectured and met some of our successful Belarusians working at international corporations or starting their own businesses. I couldn’t help but wonder why this was happening overseas rather than in my country. Why was it necessary to go abroad in order to achieve something?
I realised that those achieving success in another country could surely be even more successful at home, under the appropriate conditions. As I’ve already said, those meetings inspired me to create the High-Tech Park in Belarus. It took several years to implement the idea, to which I gave a great deal of thought. I wrote By the Road of Dragon States, detailing development in Singapore, Malaysia and South Korea: countries whose economies have overtaken many of those in Western Europe.
The Belarusian High-Tech Park is one of the largest IT-clusters in Central and Eastern Europe. As its head, how do you estimate its work and main achievements? Which are the most successful residents and do you have many customers?
Our customers are primarily from developed countries, actively implementing information-communication technologies within state bodies and enterprises. Those buying Belarusian software hail from 52 countries, including the USA, Germany, the UK and Russia. Among our partners are Korea, Singapore and the Republic of South Africa. In truth, customers can come from any country, since IT is used universally.
As regards the level of the High-Tech Park, figures best illustrate our success. In 2005, in total, Belarusian software enterprises — owned by the state and privately — earned nearly $14m. In creating the High-Tech Park, we sought to see this rise to $300-350m (from exports) within 10-15 years. At the time, it seemed a huge figure, proceeding from the fact that this rivalled the value added created by BelAZ [the Belarusian Automobile Works — which supplies heavy-duty dump trucks to world markets] during its best years. Its contribution to the GDP was almost $300m. We now rival and surpass this figure, with the Park having earned almost $500m in 2013, after just eight years of work: a rise of more than 30-fold since 2005. Our contribution to GDP is comparable with that of our giants combined: Minsk Automobile Works, the Belarusian Automobile Works and Minsk Tractor Works. This is despite their many years of operation and the huge public funds invested. We only import about $3-4m of components and all that we export is pure added value. We’ve created a mature, established computer programming industry in Belarus and are earning independently. In order to start up the Park, we asked the President for a commercial credit — equivalent to $300,000. We returned it with interest within two years.
Were you afraid at the beginning?
Certainly, as there were certain risks. We lacked experience but we wanted to create something new and interesting.
As a diplomat, you must enjoy some well-established connections. Did this help you in knowing which direction to take?
Certainly, my time as a diplomat helped me in making external partnerships: attracting foreign companies and investors into Belarus. We had reserves to call upon. However, it has taken time to develop our programmers and heads of Park company-residents: intellectually and organisationally. It’s been a cumulative success, thanks to all those involved. We can certainly speak of success, as we’ve seen steady growth; measured in percentage terms, we’ve grown by 40-50 percent annually. This is perhaps more than any other branch in the Belarusian national economy. Globally, average growth in the IT industry doesn’t exceed 5-7 percent. Our industry is export-oriented, which has inspired rapid growth: far more so than if we were relying on home sales. We see the whole world as our market, which is a serious competitive advantage. It expands our horizons and allows us to embrace new technologies, forms of business management and staff motivation. We began by using outsourcing as a good way of transferring technologies. This helped us to understand world trends and to follow the dominant technologies of today and those emerging for the future. Our next stage will be to set up joint laboratories with universities abroad, allowing our students to learn about the latest technologies. Naturally, we’ll continue to produce our own products, taking risks in development and promotion.
Would you call the High-Tech Park a transnational corporation?
Its structure is simple: an Administration and company-residents. The Administration exists as a state institution without budgetary financing, paid for by our companies (which contribute one percent of their earnings). Our largest companies are already transnational corporations, which have outgrown the limits of their national borders. EPAM Systems, for example, has representations in 12 countries.
What can you tell us about your experts and company-residents?
About 16,000 programmers work at the Park, their number annually increasing by nearly 2,000. We have 140 company-residents and are now no longer making such efforts to attract more. Instead, we’re focusing on developing our existing companies and finding more opportunities for them. Of course, we have different companies both in the number of employed specialists and undertaken projects.
Are you still open to Belarusian companies?
Certainly. We have a principle of ex-territoriality: a branch principle. Like any other branch of the economy, we aren’t limited to a single territory. It’s especially true of information technology. Where it may be desirable for a petrochemical cluster to be located in one place, it’s not relevant for IT companies, who can spread across the country and worldwide. Think of Microsoft, Apple and Google. Each has offices across the USA and abroad. Employees need only insert a personal card into their computer and input a password to gain access to the system and social network of the company: all its tools and knowledge.
Work can be monitored centrally, so it doesn`t matter where staff are located. Our companies also have an internal portal with access codes. Our network allows managerial heads to keep track of all information, so we have companies located in Brest, Gomel and other cities. Saying this, 90 percent are located in the capital — in Minsk.
Why has the High-Tech Park decided to develop information technologies rather than, for example, bio or nano-technologies?
The IT sphere can be entered with little more than a computer costing $1,500 and your knowledge. That’s all! Other branches require huge investment. For example, Biocluster in Singapore has cost nearly $500m to set up, from state investment. They also spend $200m annually on purchasing the latest equipment, reagents and mediums. Nanotechnologies and laser technologies also require huge financial investment.
Who would give us this money? If the state did so, as in Skolkovo, what would be its economic return? In creating the Park, we never relied on budgetary financing. We began with nothing — just a table, chair and computer. We were focusing on earning money independently, so we choose only those projects with a quick financial return. Naturally, we conduct scientific research and promote developments — but only with commercial results in mind, so that investments can be recouped via profit. This is the basic difference between the High-Tech Park and the Academy of Sciences; the latter focuses on scientific research for its own sake rather than for commercial profit.
The second reason that we chose the IT field is that it’s easier to be competitive at a global level in this sphere. A small country like Belarus needs to concentrate its efforts in one direction, or just a small number — rather than trying to embrace everything at once. It’s then easier to gain a ‘cumulative’ effect. Once you have a certain number of programming engineers, you can begin developing your own software — such as Viber or the World of Tanks: well-known today all over the world.
Which principles guide the High-Tech Park’s development?
We’re following two directions. The first is outsourcing: the development of computer programs by order for clients abroad. This has helped us learn how to work with foreign customers, fulfilling their requirements and understanding their mentality. We’ve gained knowledge of working on foreign markets. It’s a ‘safe’ bet, with fewer market risks or fluctuations, allowing the Park to grow significantly. However, the profits are modest. The second direction is the creation of our own software, which is far more financially risky, with greater organisational expenses and no guarantee of success. We have to develop each product and promote it on the world market. However, success brings far greater profit than outsourcing. For successful development, the High-Tech Park needs both models; they naturally complement each other, helping balance fluctuations on the world market.
We know that Belarusian programmers are happy to fulfil outsourcing orders for foreign companies but which High-Tech Park projects are brand-named, focused on domestic and foreign markets?
For a long time, our enterprises failed to make use of IT, using old methods. People were fearful of computers. However, when export-focused IT began to develop, fulfilling orders from foreign enterprises, we realised the necessity of working in a new way. Our enterprises began to direct attention towards modern technologies of management, which are inconceivable without IT. Such branches as the automobile industry, petrochemistry and banks began to use information technologies.
High-Tech Park clients include the Bank of America, Citibank, UBS and Sberbank. Among traditional branch enterprises are Siemens, Philips, Samsung, Coca-Cola and Colgate. We have Delta Air Lines, Aeroflot and Aero Mexico and, on the petro-chemical side, Chevron, Royal Dutch Shell and British Petroleum. Our Belarusian clients are Belorusneft, Belneftekhim, Belarusian Automobile Works, Gomselmash, Minsk Tractor Works and Keramin. The latter was one of the first Belarusian enterprises to implement modern systems of control in manufacture and sale.
Do you have enough experts at the High-Tech Park? And how do Park residents liaise with Belarusian educational institutions?
Unfortunately, we lack enough experts, especially since demand for them is growing constantly. It’s clear that programmers are essential to the successful work of IT companies — on the external and domestic market. Our Park residents appreciate this, so are eager to invest in supporting university laboratories. We’ve opened six departments of the Belarusian State University and the Belarusian State University of Informatics and Radioelectronics at the High-Tech Park, and we hold an annual ‘Day of Knowledge’ for senior pupils. In this way, we’re trying to guide them towards the IT professions.
Is our system of education adequately training today’s IT experts and which of our higher educational institutions is best adapted to the modern day world?
Most of our universities rely on budgetary funding. Sadly, there’s a serious problem: teachers are aging. It’s a situation we’ve noted for the past 7-8 years. Universities cannot stop the most talented people from resigning. Where Chinese universities may have six people applying for each position of IT professor, we may not even have one applicant. We’ve partially solved the problem by creating joint scientific-practical laboratories at various higher educational institutions countrywide. Meanwhile, employees of company-residents give lectures free of charge.
In their first two-three years of study, students at the Belarusian State University of Informatics and Radioelectronics acquire basic skills in programming. We still have teachers for this purpose. However, universities almost never offer practical experience. We rely on our laboratories for this; students choose those most suitable to receive practical knowledge.
The same problem is seen at universities in Ukraine and Russia. They teach what they know, instead of what’s required on the labour market.
Do you intend to create a professional system of staff training?
We already have a training centre and we may transform it into an academy or institute, teaching those technologies which are in demand. We want to provide a high level of teaching but it won’t be cheap for students.
Does the High-Tech Park have a database of experts working abroad and, if so, do you co-operate with them?
No, we don’t keep such data. However, programmers aren’t leaving our country in any greater numbers than they are leaving other branches. There’s no reason for our experts to emigrate if they’re paid the same salary as they’d earn in Moscow or Berlin.
Do foreign experts come to us?
Yes. Pleasingly, Russians, Ukrainians, Frenchmen and Germans work here. It is possible to achieve success in our country. Other nations have noticed this and are keen to reproduce our success, creating an environment able to develop information technologies. All the CIS countries, without exception, are taking this path. We’ve been advising Ukraine, Georgia, Armenia, Kazakhstan and Azerbaijan. They are eager to create their own innovative infrastructures, similar to the High-Tech Park. All understand that the future of their country is connected with creating an ‘economy of knowledge’.
In one interview you mentioned that you had found your work at the Park psychologically challenging, as well as extremely fulfilling. Do you believe that we spend our whole lives ‘growing’ and fulfilling our potential and, if so, what aspirations remain for you?
The High-Tech Park, as a national project, is huge, so there are many opportunities. We’ll continue seeking paths of development; I’m sure that many interesting projects lie ahead.
What are your personal plans?
I’m most focused on the High-Tech Park but I also write at the weekends. I’ve published several books, of which I’m proud. I’m now working on a book detailing the history of people’s relationship with property. I think that the possession of property influences our mentality, character and psychology: even our intelligence. Erich Fromm’s To Have or To Be contrasts possession with being. Of course, ownership of a car or handbag is different to business ownership. The modernisation of Japan, Singapore, Korea and China has been based on private ownership: fostering a personal interest in a country’s success. In having a personal business share in enterprises, we have a vested interest in their achievements.
Interviewed by Valentina Zhdanovich
and Ivan Zhdanovich