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. Last Updated: 07/27/2016

Reiman Unveils 2 New Agencies

bloombergReiman said the IT export development agency would be formed this year.
The government will create a new federal agency exclusively dedicated to promoting information technology exports, IT and Communications Minister Leonid Reiman announced Monday.

President Vladimir Putin has ordered Prime Minister Mikhail Fradkov to disband the ministry's Federal Information Technology Agency, which currently oversees IT. Two new government bodies -- Federal IT Export Development Agency and the Federal Information Systems Agency -- are to be created in its place to deal with foreign and domestic markets, respectively, Reiman said, news agencies reported.

"The IT sector has enormous potential because Russia has good science education and highly qualified programmers," Itar-Tass quoted him as saying Monday.

Industry watchers hailed the creation of a state export-focused body as a positive move for Russian software companies and a further sign of the sector's growing importance to the government. But they warned that making the agency too bureaucratic or biased towards big business could jeopardize the new initiative.

"Growing IT exports means creating high-skilled jobs, preventing brain drain, providing increased revenues for the state ... there is no downside," Valentin Makarov, president of Russoft software developers association, said Monday.

IT products and services exports grew from $730 million in 2004, to $970 million in 2005 and are poised to reach $1.3 billion this year, according to Russoft's estimates.

The expansion of IT exports is slowing, Makarov said, and the industry needs a boost from the government to become globally competitive.

Reiman said the new Federal IT Export Development Agency is to be formed by the end of this year, RIA-Novosti reported Monday. According to Reiman, IT exports are expected to reach $1.8 billion by 2007.

While IT already provides the country's largest export base outside of oil, steel and other commodities, Russia's IT revenues pale in comparison to the $12 billion that India garners from IT exports, Makarov said. State support was a key ingredient in the success of technology sectors in India and in many smaller countries, including Finland and Israel, he said.

"In other sectors, large players are very visible," said Sergei Gorbuntsov, IT analyst with J'son & Partners research company. Russia's fledgling software sector, however, is mainly composed of small and mid-size companies, which have neither the resources nor the expertise to become well-known brands outside of the country, Gorbuntsov said Monday.

Teaching Russian companies modern marketing techniques, reimbursing them for participating in international IT expos and funding industry research to make the market easier to understand are areas the industry needs to develop, market watchers said.

"The new agency could take on this role," Makarov said.

There is a danger, however, that the new body will become too bureaucratic, he said. The agency could also become too focused on big business, Makarov said, and lose sight of smaller companies, which make up the crux of the IT sector.

But if it does its job well, the agency would boost the visibility of Russian software abroad, Gorbuntsov of J'son & Partners said. "Its creation signals the importance of IT development to the government," he said.