Forget Skolkovo Vally – Cut the Red Tape

Writing in the Moscow Times, economist Vladislav Inozemtsev has a bold and simple idea to modernize the Russian economy – and it doesn’t involve a top-down approach to force through an innovation center in the Skolkovo valley.  The economy can’t diversify without private and foreign Russian companies increasing capacity, thus requiring the import of mass quantities of industrial machinery – a process severely hampered by meaningless bureaucratic red tape.

The main obstacle has been the need to certify equipment and adapt it to Russian technical standards. In most cases, the official review of a project’s documentation — checking the industrial safety of technical devices, buildings and structures — takes months on end to complete and eats up a significant part of investors’ energy and resources. It is also necessary to translate large numbers of documents, working with suppliers to change specific assemblages and mechanisms to obtain Russian certification. Even during the economically difficult year of 2008-09, Russia imported $159.9 billion in industrial equipment. At 52.2 percent, this became not only the leading but the main category of Russian imports.

Of those imports, 62.2 percent, or $99.4 billion, came from countriesof the European Union — primarily Germany. About 17 percent, or $27.2billion, came from China. Of that total, 45 percent were produced byEuropean companies that have operations in China, and 35 percent wereproduced by Chinese firms for export to Europe. This shows that morethan 75 percent of Russia’s industrial equipment imports were de factocertified for standards of the European Union, and European standardsare almost all more demanding than those in Russia — that is, when suchstandards even exist in Russia. The obvious question is: Why should thatequipment have to jump through countless bureaucratic hoops — a processthat is becoming increasingly difficult and expensive — to obtainRussian certification and approval?

The solution could be as simple as it would be effective: Cancel theonerous requirements for Russian certificates and approvals forequipment made in the European Union or according to EU standards andfor construction work performed by EU-based companies.