Money Growing: Clusters of Scientific Thought

Russia has already witnessed the emergence of cities and towns with developed production facilities, including Soviet-era R&D centers (“science towns”). In the wake of development of high end technologies and the market of real estate those localities are gradually transforming into the industrial clusters of new generation. One of the first of such towns is Obninsk in Kaluga Region.

“A cluster is a group of geographically localized interconnected companies, such as suppliers of hardware, specialized services, community services companies, R&D institutes, institutes of higher learning and other entities, supplementing each other and enhancing competitiveness of individual companies and the cluster as a whole," says Konstantin Kovalyov, managing partner at the company Blackwood. Obninsk is a good example of such a cluster, being an industrially developed town with strong research potential, he says.

“Obninsk is a federal center of atomic energy, hence, good prospects for development of a high-tech industrial cluster, given high concentration of skilled workforce in the area," adds Vladimir Zhuravlyov, head of commercial real estate and investment at NAI Global.

What Is a High-Tech Cluster?

The concept of an industrial cluster emerged in Russia only recently. "The majority of modern industrial clusters have been formed on the basis of Soviet-era city-forming enterprises and industrial giants, where new production facilities have been launched," Vladimir Zhuravlyov explains. He says that namely old Soviet-built "science town" are the best sites for development of modern production companies. "Today practically every production company operates on old Soviet-era sites or runs facilities on several sites at a time. The creation of an absolutely new industrial cluster surrounded with housing and community facilities is very costly and hardly effective in market conditions," the expert explains.

Konstantin Kovalyov says the emergence of industrial clusters was prompted by the plans to unite production enterprises on a territorial basis and create conditions for further scientific research. "A cluster makes it possible to use resources of partner companies jointly, so that they do not have to keep some of those resources on their balance. Today this is the best method of making business, as it boosts competitiveness of those enterprises. This is the main reason for their creation,", says Andrei Bushin, head of commercial real estate and development at Miel Nedvizhimost.

"Clusters have become especially popular in Russia lately. By creating industrial clusters it is possible to increase output considerably," Roman Sokov, head of consulting at Becar Commercial Property Moscow, agrees.. Cluster projects have government backing.

For example, the Ministry for Information and Communication, has pledged support to high-tech industrial clusters. "Enterprises and organizations within the cluster cooperate and compete with each other, i.e. they exchange workforce, innovation, know-how and use their infrastructure and marketing potential jointly," the expert explains.

Konstantin Kovalyov says that the first step towards building a network of industrial clusters is the creation of technology parks, comprising production facilities, research organizations and residential properties. “Today Russia has some 80 technology parks focusing on simultaneous development of businesses and scientific research. Most of these have developed on the sites of the Soviet-era science towns, scientific research centers and industrial facilities, with excessive infrastructure, research labs and highly skilled workforce," the expert explains.

Andrei Bushin notes that in a sense a technology park is the most common type of an industrial cluster comprising a variety of related enterprises. "Ideally [a cluster] is a complex comprising not only production enterprises proper but also universities and research institutes, offices and industrial properties, as well as engineering, transport, community and residential infrastructure. That is why the development of technology parks boosts the development of the property market in general," the expert says.

However, Zhuravlyov notes that different types of industrial clusters – other than technology parks – also have good prospects. "The program for development of technology parks is applicable only to cities and regions with considerable scientific research potential where high-end technologies may be developed. Industrial clusters are less dependent on such territories, however, they, too, need existing infrastructure and workforces employed by older enterprises. In particular, a cluster may be formed around a weaving mill or an aluminum plant, but for the time being such zones do not necessarily enjoy government support.

Model Town

The city of Obninsk in Kaluga Region is believed to be an indicative example of an industrial cluster. "Science towns, such as Dubna, Obninsk and Korolyov are believed to have better prospects than other, larger localities. Given the scientific potential of the city housing over a dozen of research institutes, the Obninsk zone has considerable development prospects," says Vladimir Zhuravlyov.

There are many highly skilled specialists living in the city and a large number of institutes of higher learning are operating. "There are 12 research institutes in Obninsk.

Over 1,000 doctors and candidates of science work there. A number of Obninsk-based research schools have won international acclaim," adds Roman Sokov.

The history of the city is practically the same as that of analogous Soviet-built science centers. In 1954, the world's first-ever nuclear power station was built there, which later was recognized the safest on the globe. "Throughout the 48 years of its operation in immediate proximity to Moscow the station has never seen any accidents. That was where Soviet researchers promoted peaceful use of nuclear energy and tested nuclear stations of new generation," Andrei Bushin says. Today the station is no used as an energy plant but at the same time it remains a site for comprehensive nuclear energy research.

Namely the construction of the plant was the key city-forming factor for Obninsk. The city was founded in 1946 on the site of a settlement that housed Shatsky orphanage Bodraya Zhizn, established in 1911. Construction of the plant was launched in 1946 by the Institute for Physics and Energy, which has been operating in the area as a state-run scientific center throughout all those years. "Jobs were created and population of the district grew. Therefore, it was necessary to build residential areas and additional infrastructure," says Andrei Bushin. Later experts in other fields joined physicists in Obninsk. Today, Obninsk-based R&D institutes focus on such fields as energy, radiology, pharmaceuticals, meteorology, etc.

Step Forward

Authorities in Obninsk and Kaluga Region take measures to speed up transformation of the city into a full-fledged industrial cluster. The regional administration actively promotes construction of technology parks in the area. "The reason for such an active development is that Kaluga is justly seen as Russia's brain potential. Besides, regardless of Kaluga's proximity to Moscow, the price of land there is considerably lower. Most importantly, local authorities are interested in technology park development and willingly allot plots for construction of major production and infrastructure facilities," says Roma Sokov.

For example, in northern Obninsk the government has allocated a site measuring over 500 ha for construction of Vorsino technology park. Another park is planned on a 120-ha territory in northern Kaluga, where a Volkswagen car-making plant has already been launched. One more facility is to be built in the southwest of Kaluga Region; two parks are planned in the south. However, first technology parks in the region were launched namely in Obninsk. The idea of transforming the Soviet-era science town into a technology park was first proposed in 2000, but later the plan underwent certain changes.

Ivan Daineko, head of the Obninsk technology park project, says that today the park is divided into two parts – the southern and northern. In the northern part of the city, on the site of the Obninsk State Technical Atomic Energy University, a research center will be built, comprising labs, offices, a medical institute, education and community facilities. The plan is to transform that site into a universal territory for implementation of innovative projects, development of new polymers and composite materials, measuring equipment and automated technological complexes. New homes and hostels for employees are also planned in the area. The building site measures 17 ha, but the plan is to extend the territory to 150 ha.

The southern part of the technology park is planned on a municipally-owned plot of land measuring 40 ha, adjoining the territory of the medical radiological scientific center of the Russian Academy of Medical Sciences. The future research center will focus on the development of biotechnologies. .

Several companies have already expressed interest in the project. 18 applications have been received from companies willing to launch their production facilities in Obninsk. All those applications have been accepted. "Those are, for the most part, Russian companies focusing on IT and biotechnologies. One application came from a Swiss firm, and one more from a joint Russian-French venture. Those companies will act as investors," Ivan Daineko reports.

The project for development of the Obninsk technology park has been approved by the Russian government and included in the government-sponsored plan envisaging the development of technology parks in Moscow Region, Novosibirsk, Nizhny Novgorod, Kaluga, Tyumen, Tatarstan and St. Petersburg.

The government hopes that as a result of those measures by 2010, the total volume of products and services produced by technology parks will exceed 100 billion rubles. But in order to attain these targets the government will have to splash out.

The development of the technology park in Obninsk will require spending 3.5 billion rubles from government budgets of various levels. In the beginning, those funds will be used for reworking the project and securing permissions from government bodies. In 2007, the work on elaboration of concepts of key properties and engineering facilities will be finalized, and construction will be launched in 2008. Daineko says that building works are to be finalized by 2010, but in reality the implementation of such an ambitious project may take at least 10 to 15 years. Besides, there are plans to expand the Obninsk park in near future.

Andrei Bushin notes that industrial clusters have considerable influence on the development of towns and regions as a whole, as they bring about an influx of population. "Obninsk is rapidly becoming one of the leading industrial clusters in this country. The project was presented at last year's international real estate forum MIPIM in Cannes," he adds.

Useful Connections

“The development of industrial cluster in the region boosts the development of all segments of real estate market, including industrial facilities, offices, warehouses, residential and retail properties. In fact, what we witness is the emergence of new cities," Konstantin Kovalyov says.

“As such properties emerge in the city, the volume not only of production facilities will grow but also of properties of different uses. In particular, industrial complexes will be surrounded by residential properties for employees and their families, hotels for business travellers, shops and leisure facilities," Roman Sokov agrees. Vladimir Zhuravlyov shares that point of view. “

The city features all components necessary for intensive development.. "To begin with, Obninsk is situated in immediate proximity to Moscow. Then, it has enormous scientific potential. Finally, there are highly skilled workforce which is growing stably thanks to universities and other institutes of higher learning operating in the city," Andrei Bushin says. Ilya Shershnev of Swiss Realty Group says that Obninsk has good chances to become a growth point for R&D centers, "but only as long as correct systemic action is taken".