Moscow/Bonn – In the Siberian city of Krasnoyarsk, a high-tech cluster is being created along the lines of Silicon Valley. Belarusian Minsk also wants to become the new IT Mecca. Well-known international corporations have already expressed interest.

By Hans-Jürgen Wittmann and Kathleen Beger

At the end of January, the Siberian city of Krasnoyarsk lies under a metre-thick layer of snow and ice. The thermometer sometimes drops to minus 27 degrees Celsius. But if you are looking for icy silence, you are in the wrong place: a digital valley is being built in the metropolis on the Yenisey – a prestige project for the whole of Siberia. Even the beginning of the project was special: instead of signing a contract on paper as usual, the founding fathers of the development company Yenisey Sibir and 30 other Russian IT companies left their digital handprint on a screen.

An arena for virtual reality is emerging in the digital valley

An office building is already in place, which houses a data processing centre. The rest of the site is a construction site: the Nowoostrowski residential complex, for example, is being built there, which will accommodate IT specialists from 2021. Preparations for the construction of the 36 million euro Renowazia Technopark, the heart of the project, are also gathering pace. In 2021, the VR Arena, a cyber platform for virtual reality, and by 2023 the digital business centre Liner are to be built for a total of 27.6 million euros.

The model for the digital valley is Silicon Valley in the US state of California. The Siberian high-tech cluster is part of the investment project Yeniseyskaya Sibir, which is worth around 28 billion euros. With this project the Russian government wants to modernise the economy of the Krasnoyarsk region and the republics of Khakassia and Tuva.

The focus is on infrastructure and industrial projects

The digital valley should further accelerate the development of information technologies in the regions. Krasnoyarsk could thus soon become a sought-after centre for IT companies. And ensure that the entire region makes greater use of digital technologies and that modern information technologies find their way into companies. The development company offers favourable conditions for companies and IT specialists willing to settle here.

More than 40 companies have already expressed interest in the digital valley. In addition to the Chinese IT giant Huawei, Russian software companies such as Maxsoft, Atom and Social Network have also set up their
Commitment promised. A German group, SAP, is also participating in the project and is supporting the training of IT specialists in the cluster. In a Next-Gen Lab, teachers and students of the Siberian Federal University will be given access to SAP solutions to conduct research and develop solutions on topics such as machine learning, Big Data, Internet of Things (IoT) and smart cities.

Belarus – a digital whiz kid

It is not only Krasnoyarsk, which is about 6,000 kilometres away from Germany, that is developing into the next Silicon Valley. There is also a lot going on right at the gates of the European Union, namely in Minsk in Belarus. The capital is well on the way to becoming the new IT Mecca. The high-tech park HTP was already established in the former Soviet Republic in 2005.

With this, Belarus wants to promote companies throughout the country that develop technologies for artificial intelligence, autonomous vehicle control, block chain, crypto currencies and mining, as well as products in the fields of medicine and biotechnology and e-sports. At the end of December 2019, 752 IT companies were represented in the high-tech park. Most of them are based in the Minsk region, some come from cities such as Brest, Gomel and Grodno. Last year alone, more companies have settled in the high-tech park than ever before.

President Lukashenka attracts investors with tax breaks

This development was made possible by the so-called Decree No. 8, which President Alyaksandr Lukashenka issued in December 2017. It attracts residents of the high-tech park with favourable ancillary wage costs, a reduced income tax rate of nine percent and exemption from turnover and profit tax. This seems to be working: Recently, more and more young specialists have become self-employed and founded start-ups.

In-house production instead of outsourcing

No wonder, then, that the information and communication technology sector now accounts for 20 per cent of exports of services – with a total value of around 1.8 billion euros in 2019. It already contributes 5.5 per cent to the creation of gross domestic product.

Experts expect this share to more than double in the next five to ten years. After all, there are signs of a trend reversal: While Belarus was once known primarily for IT outsourcing, more and more own products are now being created in the country. For example, online games such as World of Tanks and apps such as MSQRD, Eightydays or Flo have their origins here. The country is therefore interesting for foreign investors in many ways.

“In Minsk there is a good mix of experienced and young professionals.”

Stephan Hoffmann, managing partner of the North IT Group

One person who has dared to take this step and founded a company in Belarus is Stephan Hoffmann, managing partner of the North IT Group. For him the advantages are obvious: tax benefits, low wage and ancillary wage costs, concentrated know-how. “In Minsk there is a good mix of experienced and young professionals,” says Hoffmann.

He also views the procedure for setting up a company and joining the high-tech park as positive. However, he sees a need for improvement in the area of accounting, as it is very complex and generates high costs. According to Hoffmann, Germany could also benefit from concepts such as the high-tech park: “Especially for the structurally weak Central German regions, the model would be an opportunity to attract young skilled workers from Germany and abroad and give the start-up scene a new impetus.

This article was first published in GTAI magazine Markets International 3/2020.