Silicon madness of Ukraine

This word is so enigmatic that it drives minds of business people and government officials crazy across the globe. Everyone wants to have a piece of it - if not a valley, then maybe a rout, a town, or a roundabout. The billions of money units and zillions of brain cells are spent on bringing the wonderful plans into life, either successfully or unsuccessfully. And all this because it worked in one place on the planet, in sunny California, and worked pretty well. The main thing majority of devoted followers are forgetting is that it happened without exciting government programmes and state funds. Silicon is the magic word.

Ukraine is jumping on this bang wagon later rather than sooner, and with the idea that seems to be equally exciting and horrendous.  Last week one of Vice Prime ministers has revealed the idea of creating Silicon valley outside the capital city of Kyiv - technological park with offices, universities and research institutes, as well as accommodation on 140 hectares of virgin land. It should become magic place where cool ideas could be married with sound business plans and generous funding. I say 'astounding'. Especially as there are no signs of high intellectual activities or any technology-related economic activities in the surrounding and you will be building expensive hi-tech-toy complex with no doubt significant sum of state money.

And I can understand his ambition - it's cool idea. You look at Skolkovo in Russia and your hands are getting itchy to try to do a similar miracle, albeit with less billions available due to lack of natural gas and oil reserves in Ukraine (though if you read not only official news your excitement about Russian silicon village is evaporating quite quickly). Also I can understand him personally - it's difficult to forget all these exciting technology-related conversations which he no doubt has around family dinner table, since his wife is one of the most famous and influential venture capital funders in Ukraine. But wait a minute, is it the reason to splash budget money on the project which has no basic grounding and cost-benefit analysis? I believe not.

I am not an expert in establishing and funding high-tech and innovative businesses. But I am expert in spatial aspects of socio-economic development and thus aware of fundamental rules which underpin success or lack of it in business location decisions. Basic textbooks will tell you that putting high-tech incubator in the middle of nowhere, even if this nowhere is only 20-30 kilometers away from the capital city, but without any major roads connecting it to the metropolis and without basic infrastructure to sustain it, is waste of money. Unless business sees it as an opportunity and ready to locate there, and there should be good reason for this (why would they do it now?). Ukrainian decision makers are traditionally ignorant of spatial organisation of economic activities and for the last 20 years didn't manage to figure out what policies are needed in order to improve competitiveness of certain territory. This silicon madness is just another proof of such total lack of understanding.

So instead of spoiling agriculture paradise of Kyiv region why not to invest some money in existing intellectual hot spots - such as Kyiv and Lviv Polytechnics, Kharkiv with its amazing cluster of highly competitive inventive institutes which have big portfolio for commercialisation. Why don't you build technopark on the campus (or very near) of university with high-class graduates and inventive staff? Why not to build your innovative cluster (if you need to call it that!) on top of existing essential infrastructure - knowledge/skills and municipal infrastructure - and instead bank it all for another white elephant?

The news about Kyiv silicon valley came almost simultaneously with another exciting news - Ukraine is number 152 in World Bank Doing Business Report, 3 places down from marvelous record of last year So, you would be absolutely right to ask why the country which has one of the worst investment and regulatory environments in the world is busy not with improving the basic conditions for local and foreign companies, but engages in ambitious, expensive and by all means looking useless projects? Well, the simple answer would be as it's easier to gain political and popular support by pushing through large project rather than by meticulous work that doesn't grab first pages of the broadsheets. And that's what politicians are really interested in.The more difficult answer would be the complete lack of vision and understanding what the country needs for successful economic breakthrough and shift from resource-based low-value-added economy to competitive economy that is built on brains and skills of its 46 million population. And this is really bad news, if your country's leadership has no clue where to go next...

So for those who are excited about Ukrainian silicon plan I would advise to go and read success story of Israel - the start-up nation - who from humble desert agriculture producer turned into one of the most innovative economies of the world, that produces highest share of knowledge-intensive products and services. I would also urge them to go back to Ukrainian power houses of ideas, which are many but dispersed and completely lack any business spirit or risk-taking ambitions. Which should be seen as an opportunity, not a barrier.

Or simply go and see what's people presenting at IDCEE - Kyiv based event for investors interested in Internet businesses across CEE - which is initiated by above mentioned venture capitalist (and where above mentioned official is keynote speaker) and see where good ideas are located across the country. I am sure you will notice interesting spatial pattern. And then just follow these businesses, create beneficial conditions for them to thrive and grow into big companies. Don't make them relocate to distant glass and steel castles surrounded by beautiful countryside which might soon turn into dilapidated dream factories.

Relevant posts (in Ukrainian):
1. Про ступені і про дослідників в Україні
2. Проект Х для Росії - прогрес у Сколково
3. Наука і бізнес - наближення
4. Ще одна Силіконова долина?

P.S.: Picture from http://gamespics.com/wp-content/uploads/2011/03/idea-lamp.jpg