Mr. LEONID REIMAN Minister for Communications and Informatization

Interview with

Minister for Communications and Informatization
Moscow, July 5th, 2002

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You have launched a program called Electronic Russia (E-Russia) 2002-2010. How do you expect this program to impact the telecom and Internet sectors?

The Ministry for Communications and Informatization and the Ministry of Economic Development and Trade elaborated the Electronic Russia program last year. The Government of the Russian Federation scrutinised it and approved it this year. The program was ordered by several public institutions, including the Ministry of Education, and is coordinated by the Ministry for Communications and Informatization. It is a very comprehensive program, and I will summarise its three main priorities:

· One of the top priorities of this program is to raise the efficiency of the economy and improve the management of the State's functions as set out by President Vladimir Putin in his message regarding the observation of the principles of the new economy. We are convinced that these tasks can only be handled by a large-scale implementation of information technologies into all the spheres of our life.

· Another priority is to create technological bases for the development of the Russian civil society. The President is also addressing this question and a number of civil forums have recently been run. As for the further development of the society as a whole, we believe that one of the major tasks is to ensure that all Russian citizens have access to information resources. There are many aspects to this question, but nevertheless it is one of the major priorities of the program.

· The third priority that I would also like to stress is the question of personnel training. Russia has always had an efficient education system, and the international community acknowledges this fact. This is one reason why many Russian software engineers work in western companies. First of all, we would like this intellectual potential to expand in future generations and replenish that of previous generations, and this requires good education. Secondly, we would like these talented software engineers to work in Russia rather than in other countries. This does not mean that they cannot solve tasks for international companies, but we would like these tasks to be solved from some IT centres located in Russia. We already have good examples of major international corporations, which have set up research and development centres, as well as software development centres, in Russia.

Another important task is to train the users because the first and second tasks must be supported by the population's interest in information resources. To stimulate this interest, it is necessary to provide the population with relevant qualifications.

This is an ambitious program, which will help to boost the Internet use in the country. How will this program be financed? Will you also look at foreign investors to support it?

Funding is always one of the most crucial and complex aspects of any program. The program will be financed out of several sources. The first source is state support and already this year considerable funds were allocated to finance the first events of the program: organisation of contests, research work, etc. More funds have already been planned for next year's budget to support the program. The second source is business, both domestic and foreign investors. And we believe that this combination will allow us to reach the program's objectives.

Demand for telecom services, albeit in mobile telephony, Internet or other areas, is growing fast. Which major actions are you undertaking to help develop and modernize the telecom infrastructure?

There are several lines of action for us. Legislation is the first line as the Communications Law from 1995 is outdated. When it was adopted in 1995, it was very progressive, but seven years have passed and now different aspects have to be considered and legislated. This is why we are currently working on a new version of the law. The draft was elaborated last year by Russian scientists with the participation of Russian businessmen operating in this market, as well as the Ministry for Communications and Informatization and a large number of foreign experts. The government has already approved the draft. In the autumn session, the draft will be scrutinised by State Duma deputies, and we are ready to take into consideration their findings. This draft has an unusual structure for the Russian legal system, but it corresponds to a great extent to the European Commission's recommendations. The European Commission and the International Telecommunication Union have already approved it.

I would also like to point out that in this law we consider the issues of countrywide universal servicing. The mechanisms for this are applied worldwide to certain degrees depending on the countries, but at the same time it is a completely new mechanism for Russia. We hope that the introduction of these mechanisms will allow us to settle problems related to the unbalanced infrastructure development in the Russian regions.

We are also working on a number of economic and political programs. For example, under a political program we work with governors to convince them to allocate funds out of local budgets to improve the economically most complex, but underdeveloped infrastructure segments, as well as socially relevant segments. The Federal Purpose-Oriented Program "Countryside Development" is a good example of an economic program. There is a section on Countryside Communication Development in this program, to which funds are allocated from the Federal budget to develop infrastructure in rural areas, which is important because larger investments are needed in the countryside, although the solvency there is much lower than in urban areas.

How do you see the future of the Svyazinvest Group and the regional consolidation that will take place? Will the new system help to attract investments?

Absolutely, we put strong hopes in this and so far the reorganisation program of Svyazinvest, and the attitude of international financial institutions and investors to this reorganisation, meet our expectations.

Whilst studying the history and results of reorganisation of telecommunications companies in different countries, we came to the conclusion that the most appropriate for Russia will be the examples of the USA in the seventies or Brazil in 1996. These countries created several major companies to compete on the market, and we have thus opted for this solution. We should also add that this program was elaborated with the participation of foreign advisors.

International investment institutions are very positive about this program. Last year, the market capital of Svyazinvest companies more than doubled in anticipation of this reorganisation. The aforementioned international financial institutions are shareholders of the Svyazinvest Group of companies, which further shows their positive attitude to the current development.

According to a recent study by Morgan Stanley, one of the challenges to Russia's IT and communications sector is a lack of Venture Capital funding. How is the Ministry looking to attract Venture Capitalists to Russia?

International investors place in the foreground business transparency, companies' transparency, their accountability and accordance to the IAS (International Accounting Standards). The majority of companies have their international auditing conducted by international companies.

Another important issue for investors is liquidity, and telecom companies are to a certain extent ahead of other sectors of the Russian economy. Companies such as MTS and Vimpelcom have gone public. And other companies such as Svyazinvest have already issued ADRs (American Depository Receipts) on different levels.

One of the most important aspects in attracting investors is that the companies are in line with the norms and rights of the international business community. Another aspect is the companies' growth rates, which are very attractive in Russia. You are, probably, aware of the fact that in 2001 the growth of the number of mobile telephones in Russia made up 231%.

Russia is likely to join the World Trade Organisation. How will this impact Russia's telecommunications sector?

First of all, the telecommunications sector is already rather liberalised and competitive. Almost all the companies operating in the Russian telecommunications market, including those companies with state ownership, which account for roughly 10% of the total number of companies, already work in a competitive environment. Once Russia joins the World Trade Organisation, we expect this market to further activate: this will bring a growth of investment to these companies and increase joint projects with large international strategic partners and financial institutions to launch new technologies on this market.

Regarding the IT sector, we would of course like to see a growth in Russia's presence on the international market and an increase of Russia's share in world labour sharing. During the recent summit between President Bush and President Putin, a roundtable on IT was organised with the participation of American and Russian IT companies. Two main lines of cooperation were agreed upon. The first line is from the United States to Russia: placing orders for software products, developing hardware R&D centres and investing into companies with which these American corporations work. The second line is from Russia to the United States: the execution of these orders by Russian companies on the international market and the participation in different R&D work. We would like this summit to be held on a regular basis, and suggested to our American colleagues to hold a second roundtable this autumn, which is now under discussion.

Modern ways to communicate has become a crucial element of modern business and key politicians have helped to develop this, for example Al Gore in the United States. Do you see yourself as the Russian Al Gore? And what is the legacy you would like to leave behind in Russia?

The role played by a person in history can only be assessed after a certain amount of time has passed. I therefore do not claim any particular role, but I would like the Internet in Russia to develop rapidly as an open communication environment and information source, and this is why we have launched several programs to improve this.

First of all, these programs relate to the 'informatization' and 'internetization' of the education system. This means bringing computers with Internet access into schools, institutes, universities and all other educational establishments. We actively cooperate with the Ministry of Education and the Russian Academy of Sciences to achieve this.

Secondly, it is access to Internet resources for all sectors of society, including those people who would be happy to enjoy all the possibilities offered by the Internet, but cannot afford to buy a PC and get connected to the Internet. For these people, we try to organise public points of access. There are many post offices in the country, and we are now equipping them with points of public Internet access where any person can come and get the capability to use the Internet and correspond by e-mail for a token fee. We launched this program a year ago and it is a great success. I spoke about this program at the World Conference on Development in Istanbul, after which the program was included in the final document of the WCD as an interesting experience that deserves the attention of other countries.

What would be your final message to our readers, bearing in mind that they are international investors looking for new opportunities?

Russia is developing quickly nowadays. Looking at modern technologies, Russia is a leader in the field. Our task is to make these 'state of the art' technologies available to the whole Russian population. From this point of view, cooperation with international financial institutions, investors and corporations will be beneficial and profitable.

As the head of the Communication Administration in Russia and as the person responsible for telecommunications, informatization and the posts, the ministry's staff and myself will do our best to make most profitable the conditions for the development of business in these three segments in Russia.

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