Rosnanotech: Good or Evil for Russian Economy?

Within the last few years Russia’s leadership has targeted its efforts at transforming Russia into a “hi-technological state”, which is possible only under a complete mobilization of the intellectual resource of the country and active introduction of innovation into economy. One of the priorities of this policy are nano-technologies.  

This industry has been hailed as one the fastest growing in the history of mankind, also the most commercially attractive and promising. Back in 2006 an overall of $50b of nano-products was manufactured and sold in the world. However, according to the forecasts of The US National Science Foundation, this market can reach $1b before 2015, and the demand for qualified specialist in nano-technnologies will hit 2m people. It’s widely expected that the world market of nano-technologies within the next 10 years will surpass the electronics market by 20% and that of medical technologies by 100%. Analysts say the average growth of that market is 40%. Within 3 to 5 years this market will be drastically rearranged and resettled by 2015.  


The recognition of the actual progress of the research in nano-technologies was followed suit by a quick hike of investment in this sector within the last decade. Currently this kind of research is exercised by 51 countries, of which number 14, including Russia, appear as leaders. The longest “nano-tech” experience is entertained by Japan, US, Germany.


In Japan  the main law on science and technology was adopted back in 1995 (the so called law №130), according to which the state financing of research and development was radically increased. This covered also financing of nano-technologies. Up till 2003 Japan was a clear leader in the amount of budgetary support of nano-science, but in 2003 this position was taken by US, which went $364m beyond Japan. Within 1997 to 2008 Japan’s state financing will total $6.6b out of which $3b will be invested in the last 4 years. Apart from the state, the financing of the nano-technologies is being practiced by private business, including such greatest corporations as Hitachi (total annual financing $280m), NEC (approximately $15m per year), Toshiba (approximately $20m).


The idea of creation of special state body in charge of development of nano-technologies appeared in US as far back as in 1996. In practice in was realized in 2000 when it was announced that the state program of nano development «The National Nanotechnology Initiative» (NNI) had started operation. Today the money, allocated by the state to the development of nano-technologies, is redistributed by targeted programs of US federal agencies under the auspices of the National Council for Science and Technologies while NNI coordinates the processes of scientific inter-branch and inter-departmental character.  The budget’s financing of NNI during the period of its operation increased more than 200%: in 2001 the budget of NNI amounted $0.46b, in 2008 plans are to allocate $1.4b.


In Germany, which goes third in the market of nano-technologies, the national program “Suppport of Competence Centers for Nano-technologies” has been underway since 1998. During this interim its budget has grown by 250%, so that the state financing of nano-developments reached $563m in 2006.

Obviously, Russia is a clear outsider against this list of technologically advanced countries who take up development of nano-technologies. Up till 2007 no state policy had been applied to this strategically important area of nano-technologies, which was evident from the absence of any federal program, no definite targeting at industrial application of the developments, unready state of the industrial sectors to embrace the achievements of nano-technologies, deficient financing system.

The targeted financing of nano-technologies out of state budget started back in 2005, when the direction “Industry of Nano-systems and Materials” came up as a priority. However, the dimensions of financing extended to Russian’s nano-developments up till today, constituted only a small percentage in comparison with the leading countries of the world, which led to the country’s largely lagging behind in the market of nano-products (table 1). Also, it’s noteworthy that the world’s financing of nano-research is heavily assisted by private organizations (approximately 50%, against the state’s another 50%). We see a complete indifference displayed by Russian private business to the national nano-industry.

Table 1. World Shares of State Financing of Nano-technologies 1997–2005, $m per year.

¹ Others: Australia, Korea, Canada, Taiwan, China, Russia, Singapore, Eastern Europe.

Source: [www.perst.isssph.kiae.ru/Inform/perst.htm – Express-bulletin «PersT» (Perspective Technologies – Nano-structures, superconductors, fullerenes)].


Including private structures, Russia’s share in the world’s amount of financing of nano-technologies totaled as little as 0.9% in 2006.

Financial problems of the market are directly related to another acute problem of Russia’s nano-technological development, namely, the underdevelopment of the domestic nano-product market.  

Currently fundamental research and development of nano-technologies are being conducted by more than 150 scientific organizations with a total number of 20 000 employees, engaged in 250 projects in the sphere of nano-technologies. By their scientific and technological level several developments of Russian researches are significant at the world scale. For example, a number of companies and research institutes in Russia are successful in nano-disperse metal components, oxidants and catalysts, which make it possible to expand the regulation limits solid rocket fuel and special fuel combustion. In the field of heterostructural optic electronics nano-dimensional layers have been used for the first time to create high performance lasers. That achievement belongs to Russian nano-technologists. Another unique development is that of biosensitive nano-constructions which can be applied as signalers in optical biosensors, portable express-analyzers of liquids in clinical diagnostics, as carriers of genetic material, as biologically active compounds and reactive centers in genetic and neuron-gripping therapy.  

These are not the only examples of Russian scientists’ achievements. But commercial realization of the achieved results is their common problem. By the end of 2006 Russia had registered only 12 patents related to nano-technologies, which constitutes as little as 0.1% of the general number of patents issued in the latest decade universally. The greatest share of the patents (64%) in nano-technologies belongs to US. The second position is taken by Germany which registered 773 patents during the same period.

The number of registered patents is only one facets of the commercial problem attacking the scientific achievements in nano-technologies. Another facet concerns their industrial application. According to Russian State Statistics Committee, the number of companies producing innovative products reached 2,402 items, or 9.3% of the total number organizations in 2005. For example, the same index in US is 50%. On the one hand this may be due to a weak state support of innovation in the organizations of industrial production. In 2005 the state financed not more than 4.4% of technological innovations, while nearly 80% were the proper resources of the industrial companies.

Another reason is the absence of active protectionist policy of the state. Such policy could be practiced by introduction of requirements and regulations ensuring economic effect of application of nano-technologies and nano-materials in the domestic market.  

It is clear out of all above mentioned that, whatever our previous experience in the world market of innovation projects (for example, nano-structured steel), Russia faces a serious task of getting, as quickly as possible, a proper share of the nano-technological market. To accomplish this task, a powerful state policy in nano-industry is need, as well as a highly developed innovation infrastructure in nano-technologies and a well-functioning link “research-business”.

One of the most important steps in that direction is the establishment of the Russian Corporation of Nanotechnologies (Rosnanotech) in 2007. The chief mission of that institution is implementation of the state policy targeted at Russia’s joining the number of the world leaders in nano-technologies. The objectives of Rosnanotech are formulated parting from the above mission: the institution is to ensure commercialization of the nano developments and coordination of innovation in nano industry. The budget of this activity is 200b rubles, or $5.3b, to be invested before 2015.  

Let’s try to make one very important issue: is a state corporation good or evil for Russian economy? World practice shows that in this or that way state corporations operate in many countries of the world: US, Great Britain, Canada, China, India, Norway etc. They are established in spheres which are important for the state and which are not regulated by market. The key objective of such development institutes is to accelerate innovation in “retarded” sphere.  

From this point of view the idea of establishing a state corporation in nano-technologies is quite consequent. The above data show that in such a strategically important and fast developing sphere as nano-technologies, Russia suffers a stagnation which calls for an active intervention on the state’s behalf. The new corporation should be a locomotive of the sectoral development. The slogan of such structures should be: Our money – your knowledge! That is, such a vital resource as money, of which the state corporations are not in need, should be invested in such a resource as knowledge, possessed by various scientific research institutes. At a more global scale, the establishment of state corporations is the state’s attempt to turn the economy to an innovative development and to give Russia a status of hi-tech power, rather than that of a raw materials provider.  

However, any medal has two sides. Alongside with the positive aspects of the establishment of state corporations, we believe, there are a number of negative ones. They are chiefly related to the imperfection of its organizational and legal form. Specifically, we mean the following.

First, it’s the still unregulated property issue. Formally it’s deemed private, while in fact it’s state property. At their establishment the state corporations are given state property, which will be returned to the state after the specific corporation stops its functioning. However, due to excessive powers given to the state corporations over their property and money, and too formalized accountability, there are fears that the resources given over to them will ever come back to the state. A vivid example was the liquidation of the state investment corporation Gosinkor.

Second, the world practice in the establishment of development institutes is to pursue public benefit. To the contrary, Russian experience shows that non-commercial organizations (state corporations) have an entirely commercial purpose, which is to make profits. State corporations act as managers engaged in investing money in commercialization of research, in that way doing quite commercial work.

Finally, the wide powers which are extended to the state corporations, coupled with the weak control on behalf of the state, can and actually do lead to heavy embezzlement. It can be related to the allocations on specific economically ineffective projects, when they are selected either due to inadequate competence, or to the deficient conscientiousness of the selecting bodies, as well as inflated administrative expenses (realty, foreign business trips, cars, wages etc.). All of which indicates a necessity to turn back to the issue of control over the state corporations and stricter definition of their legal status.

Another issue of importance is the threat of monopolization, limitation of private initiative, consequently, a slow-down of the country’s economic growth. Many companies (especially small ones) will have to leave the market, dominated by such a giant and its satellite organizations. Such an approach will eliminate competition and small business, whose share already is as little as slightly more than 12% of the GDP (unlike, for example, Great Britain (49%) or Japan (78%)), which in its turn may negatively tell on the economic development of the country as a whole.

Therefore, we can give a definite answer, whether the state corporations are good or evil for the Russian economy. Obviously, the very fact of their appearance indicates an insufficiency of the market and its incapacity to tackle this or that issue. In this situation the state has to intervene into the economy to escape losing grounds on any of the markets. The question is which should the form of that intervention. One of the options is the legal regulation; another is the establishment of state corporations. But in both cases one can see, that the state’s participation should qualified and clever enough to avoid harming the economy rather than curing it. And in that respect the current state corporations are more alarming than reassuring. Time alone will show the further course of their developments.

Ekimova Natalia ,
06.08.2008. Views: 1409

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