Archive for December, 2009

Ukraine Online

Monday, December 21st, 2009

When the village of Syn’kiv in Western Ukraine first got a computer with web access in 2003, the local priest encouraged people to come out for the grand opening of the library’s Internet center. It had been paid for by the U.S. Embassy in Kiev, and the web access, which was free, was a novelty for this hamlet of 1,100 people.

Since then, however, the residents of Syn’kiv, a town known for its early tomatoes, have used the web to find out more precise local weather forecasts as well as the breeds of tomato best suited for the area and how to grow and fertilize them. In the last six years, this knowledge has helped Syn’kiv double its tomato crop.

Syn’kiv was part of a larger U.S. Embassy push to hook Ukraine, which has one of the lowest Internet penetration rates in Europe, to the web.

(Lately, American embassies in the region have been promoting the web as a tool of democracy. In Azerbaijan, for example, the embassy sponsors a project that shows Azeri youth how to be citizen journalists through YouTube. But locals are finding they don’t exactly have online freedom of speech: Two bloggers, who held a mock government press conference with a person in a donkey costume, are now in jail.)

In Ukraine, the U.S. Embassy managed to get over 140 local libraries online, and now they have help from the Bill and Melinda Gates Foundation, which last year committed over $25 million to wire up 1,100 more in a project called Bibliomist, or Book Bridge. The project is currently in the rollout stage and, last month, nearly two hundred Ukrainian libraries applied to get their own Internet centers.

Books and more online

Each winning library, those that are ready and have the local authorities’ support (because they are, after all, footing future maintenance bills), will get up to 15 up-to-date computers, training for its staff, and networking equipment that will allow as many as seven local branches to use the same connection. Microsoft (MSFT) is also donating over $4 million worth of software. (Conveniently, all the donated computers are required to run on the Windows Vista operating system.)

“In Ukraine, libraries are seen as cultural institutions,” says Colin Guard, who runs Bibliomist through IREX, an international education non-profit. “They are seen as warehouses where culture is kept but little is known about the other services a library can provide to improve the quality of life, like finding jobs or answering healthcare questions.”

The hope, Guard says, is to encourage people to use the wealth of information on the Internet to improve governance, improve business and lifestyle, and thereby jumpstart development. So far, the lucky plugged-in libraries have taken a series of initiatives, like posting government regulations and budgets online, or helping blind journalists improve their work.

Sometimes, however, the real victories are in the individual discoveries that Ukrainians make online, like the doctor from Kirovograd who used his library’s Internet connection to diagnose his patient with a rare genetic disorder called Brugada Symptom that he hadn’t been able to find in any Russian or Ukrainian textbooks. The patient survived.

Ukraine online: you’ve got crop reports! [Fortune]

Nano-Potemkin Village

Wednesday, December 9th, 2009

Earlier this fall, inside the sprawling Moscow Expo Center, hundreds of scientists gathered at the second annual International Nanotechnology Forum to mumble through dense presentations with antediluvian graphics and pace the halls, which were plastered with posters exploring nanopowders and silicomolybdic acid-diamine self-assembling ensembles.

But this was no ordinary scientific conference. For starters, there were the attendees, of which there were about 10,000, including hundreds of journalists, raging into their BlackBerrys and sprinting between press briefings. Then there were the TV crews and the professional cameramen archiving those scientific presentations for posterity. There were awards for international scientists. Siemens was there; Samsung and IBM were there. Even Russian President Dmitry Medvedev was there.

This, you see, was a Kremlin production.

Medvedev came to reassure all involved that he and the Russian state were still invested in making Russia the world leader in, of all things, nanotechnology. “I hope we will be able to make nanotechnology, the nano industry, one of the most powerful sectors of the Russian economy,” he said. The financial crisis, which has hit Russia especially hard, was but an opportunity, the president said, “to renew the Russian economy,” which has for too long coasted on the extraction of the earth’s riches.

Sure, modernization has long been Medvedev’s calling card, and getting away from fossil fuels is certainly a laudable idea, but nanotech? Really? Why, of all things, would the Russians focus on that as their ticket to a 21st century economy?

Historians Yuri Lotman and Boris Uspensky once noted that Russia does not do gradual change well. Rather, its leaders have long approached reform as a one-two break with the past, an approach that often has the reverse effect: In cleaning the slate, Russia too often simply locks in what’s already there.

And that’s what happened here. Like all such reforms, the nanotech initiative – diversifying the economy through some sort of futuristic magic bullet—was cooked up somewhere at the top. Why nanotech? Because, back when the idea was being entertained, sometime in late 2006, says an analyst familiar with the project, “nanotechnology was just the flavor of the month.”

But this being modern, corporatist Russia, the Kremlin did not stop at a directive praising the virtues of everything nano, nor did it take the route of incremental reform that encourages innovation through nudging incentives. Instead, it created a behemoth: a goskorporatsia—an opaque and controversial state-owned entity invented during the Putin era to squirrel away government money—called Rosnanotech.

Upon its formation in April 2007, Rosnanotech was given a budget of $5 billion and charged with developing a domestic nanotech industry capable of export and competition with the West. Around that time, the world nanotech market was $147 billion and predicted to grow to more than $3 trillion in the next eight years. To do this, Rosnanotech hired a professional, suited cadre trained in the liturgy of business plans and debt financing and set about growing a nanoindustry from absolute scratch.

Rosnanotech has become, essentially, a state-owned, state-funded venture capital fund. Scientists with a nanotech proposal apply to the company, which uses an international expert panel to weed out those projects worth investing in, in which Rosnanotech then acquires a minority stake. (According to Rosnanotech’s charter, its participation cannot exceed a 50-percent-minus-one share.) The company then ushers the project along the road to mass production—the goal is revenue of $8.5 million by the fifth year—by helping the project find private investors and properly structure their debt; dealing with Russian bureaucracy; finding and retooling production facilities, all with the plan of an early exit. “Our goal is not to maximize our investments,” says project office director Mikhail Chuchkevich. “And we are prepared to exit earlier, a lot earlier than other venture capital funds. We’d rather reinvest the money faster and create another project.”

To date, more than 1,200 proposals have been submitted, and of those 36—ranging from ventures in nanosprings to nanoink—are at various stages of implementation.

And there are bigger plans yet in store. Later this fall, Rosnanotech plans to open a stock exchange to connect fledgling companies with investors. By 2015, the new chair of Rosnanotech, the controversial and perennially embattled Anatoly Chubais, hopes to see the annual production in the Russian nanotech sector boom to about $30 billion, having repaid about $5 billion into the Kremlin’s treasury.

It sounds, at first, like an excellent idea: using government money to get new businesses off the ground, using primarily private funds, while simultaneously weaning the country off of petroleum.

But there are, of course, huge—and quite likely fatal—hurdles in the way of achieving such astronomical projections.

First, there are the money problems. Some of Rosnanotech’s budget, observers note, came from the forced sale of the assets of Yukos, Mikhail Khodorkovsky’s oil company seized in 2003. (The money, apparently, needed pockets.) And because it is a government corporation, notes Troika Dialog tech analyst Anna Lepetukhina, the money doesn’t always get where it’s supposed to go. “There’s a question of the allocation of resources and it’s not totally clear how it happens or who gets the money,” she says. “All of a sudden, oops, it’s gone.”

And then there’s the crisis, which has pushed Russia’s official unemployment rate to nearly 8 percent and opened up a yawning budget deficit. And so, in February, around the time of the peak of the crisis, Rosnanotech had to give $3 billion—more than half of its budget—back to the Kremlin.

What’s left is not nearly enough money to fund the necessary (and very expensive) research and development, because there is not much of a foundation left to build on. Nor are there people left to build this industry. The effect of brain drain is not to be underestimated. In the first decade after the collapse of the Soviet Union, more than half a million scientists and engineers left Russia for greener pastures. Yet there aren’t many saplings waiting to replace them. A recent study showed that 60 percent of engineering students in Russian universities had failed their college entrance exams. Medvedev has announced another government initiative to fund scientific research at cash-strapped institutions, but, again, much of the allocated money is simply disappearing en route to the lab.

As a result, many of the proposals flooding into Rosnanotech at the rate of 45 a month are utter nonsense, according to a private investor working with the company. “Russia is a country of dreamers,” he said.

Chuchkevich, the projects manager, acknowledged that this was a problem. “Our work is really interesting, just like it is at any venture fund,” he told me at the Rosnanotech headquarters. “We get proposals that promise to overturn all current notions of transportation. Others say they will get energy from the air or the magnetic field of the earth. One proposed using the nanostructure of water to cure illnesses. But,” he added, “we’ll talk to anyone that comes to us.”

Then there is the fact that Russia’s infrastructure continues to rust, along with Russia’s historic inability to compete on par with Western high-tech companies—mostly because it doesn’t have a modern high-tech industry. While the Russian government parades around the nano-initiative, it still starts from scratch: Chubais himself acknowledges that the sector is now no bigger than $150 million. Meanwhile, the West, which has established centers of technological innovation, continues to surge past Russia.

And yet Chubais hopes that the Russian nanotech industry will increase 200-fold in the next six years, a break-neck prognosis that looks delusional at best, considering all the very, very real challenges he faces.

Indeed, most industry watchers and observers of Russian politics agree that, given the obstacles and given the Kremlin’s lackluster track record, Rosnanotech and the Nanotechology Forum are little more than an elaborate a PR stunt designed to make the Kremlin appear to be forward-thinking and reform-oriented while shunting wads of cash to its friends. (Or, put more bluntly by another analyst, “It’s just bullshit.”) Meanwhile, all the problems of the past—corruption, dependence on oil, crumbling infrastructure, terminal brain drain—that this nano-initiative was supposed to fix have grown noticeably worse during Medvedev’s short tenure. The only difference now is that Russia has a self-assembling, decorative nano-Potemkin Village.

Nano-Potemkin Village [The Big Money]

Mr. Fix-It

Sunday, December 6th, 2009

On Thursday, Russian Prime Minister Vladimir Putin appeared in his eighth annual televised séance with the Russian public. More than 2 million questions poured in by phone, e-mail, or text message, and, for a record four hours, Putin fielded some 80 of them from Russians across the country. All told, it was an odd spectacle. For one thing, Putin looked uncharacteristically weary, as if he was tired of putting on his populist hat and hearing the umpteenth pensioner complaining about a bad apartment — something he’s normally very good at.

It also made for a striking contrast with President Dmitry Medvedev’s state of the nation address to the Russian political elite a month ago. Granted, it was for a different audience, but Medvedev, in calling for urgent modernization, struck a very negative tone: Russia was behind; Russia was backward; Russia needed to modernize or drown in the riptides of history. Stop whining, he said; start doing.

Putin’s address, on the other hand, resembled an extended episode of the Oprah Winfrey Show. He kicked off by answering some T-ball questions from the anchors about how well Russia had weathered the financial crisis. “With a big dose of certainty, we can say that the peak of the crisis has been overcome,” Putin said, to the anchors’ seeming relief.

And then to the mailbox. Even for what was obviously a scripted event, the range of questions was stunning. Once the weariness wore off, Putin covered everything from industrial accidents to Russia’s lack of aeronautical engineers, the World Cup, legless veterans, pensions, birthday greetings, Stalin’s legacy, the gaudy nouveaux riches, and Russian rap. (There was even what seemed like a surprise question on imprisoned Yukos oil tycoon Mikhail Khodorkovsky, which seemed to blindside Putin — though he probably had to agree to have it asked — before sending him into a controlled but apoplectic rage about contract killings and the Western bankers who, Putin claimed, brought about Yukos’s bankruptcy.)

The vast majority of questions, however, were highly specific and highly personal. My great aunt is a veteran of World War II; how come she can’t get an apartment? I lost my husband in an industrial accident and was hired as a replacement; what if they fire me? My niece works at a day-care center and gets paid too little for the number of kids she supervises; how can she live on such a small salary? My pension finally went up; thank you very much, Vladimir Vladimirovich.

In his answers to these requests, Putin sounded a bit like a genie. Someone writes in, “I am a diabetic but haven’t been able to get free medicine for more than a year.” Putin: “What region is this?” Irkutsk oblast, Angarsk. Putin: “We’re going to see what’s going on in Irkutsk oblast, and in Angarsk in particular. This I promise you.” A caller brings Putin’s attention to the poverty of an old woman living by the railroad tracks where the Nevsky Express train was blown up last week. Putin: “To her very modest pension — I think just 4,500 rubles [$150] a month — will be added an equal amount…. They will restore her home … and look into the possibility of moving her closer to her relatives.” A young man named Nikita studying aeronautical engineering volunteers to go build planes in the remote Russian Far East at the Sukhoi Superjet complex. Putin: “I support Nikita’s choice, and if you’re not against it, I will definitely talk to the CEO so that he can help you get over there.”

But there were more than 2 million requests, and about two-thirds were highly specific — a daunting workload for even the most powerful of genies. More than that, though, the piling on of personal, domestic troubles underscored one of the fundamental things holding Russia back and one of the things Medvedev addressed in his state of the nation address: a lack of working institutions that address citizens’ basic needs. To receive social services, solve a grievance, or even seek compensation for an injury in Russia, people normally work through personal connections or understandings, which is exactly why corruption is so firmly woven into the fabric of Russian life. There are simply no working institutions — impersonal and effective — that can do something better than a bribe can. And if you’ve exhausted all your options or didn’t have many options to begin with, you turn to the top, to the traditional figure of the Tsar-Father to intercede with the wicked authorities — or with wicked fate. Putin’s annual performances as this mystical wand-waver, as crucial as they are to his image and his ratings, only perpetuate the very thing Medvedev is purportedly trying to fight.

Another telling phenomenon was on display in Putin’s TV appearance: Whenever possible, he blamed the regional governors. The woman whose niece doesn’t make enough working in day care? “I think I understood correctly that you’re from Krasnoyarsk,” Putin said, acknowledging that the young woman’s salary was impossible to live on. “Krasnoyarsk has a relatively young and energetic governor. He and I will absolutely discuss this problem. If this hasn’t happened yet in Krasnoyarsk, it’s about time it got started.” This kind of ominous threat came down over and over again — usually when Putin couldn’t find a good answer — and one could imagine governors across Russia gulping uneasily in front of their TVs.

What it indicates, though, is not Putin’s authoritarian aggression, but the fact that Russians no longer have any means of directly addressing their own officials. After Putin abolished the direct election of regional governors in 2004 in favor of their appointment by the Kremlin, it undid any sense of accountability to the electorate. Now the governors are responsible to the Kremlin, which, through venues like the Putin phone-a-thon, can then tell the governors what’s going on under their very noses. “In the West, there’s a sense of public opinion,” says political observer and former cabinet member Evgeny Gontmakher. “There’s the mass media, elections. Here it’s all atrophied, and I guess you can see this as a kind of ersatz form of feedback.” But, Gontmakher warns, the phone-a-thon is no substitute for a real discussion. “The people asking the questions can’t respond to the answers they get. It’s one-sided; it’s rehearsed.”

And let’s not forget the most important thing: In their appeals to Putin, the public seemed to forget that he was no longer president, and hasn’t been for a while. Why wasn’t Medvedev doing this?

“This is Putin’s trademark genre,” says Gleb Pavlovsky, who chairs the Foundation for Effective Politics, a think tank linked closely to the Kremlin. “It was discovered early on, by accident, and it’s the genre in which Putin feels most like himself and in which people most like to see him. And he needs to keep his audience.”

But the phone-a-thon was more than just about differences of style between the tech-savvy, übercorporate Medvedev and the hucksterish patriarch Putin. The four-hour slog came, incidentally, after Putin’s approval rating sank to its lowest level since March. And, though he is still well ahead of Medvedev, Putin needs to make sure he doesn’t disappear from popular consciousness.

“In a certain sense, it’s theater,” Pavlovsky says, “but theater with colossal political consequences. If Putin loses his audience, the tandem would become unbalanced…. This is Putin’s strategic weapon, that in a difficult situation he can turn to the country. This is his main strength, and this is why the apparatus is scared of him, because he still has that card.”

Mr. Fix-It [Foreign Policy]

What on earth is happening with “Russia’s GPS”?

Tuesday, December 1st, 2009

Late last month Moscow celebrated the birthday of Father Frost, the Russian iteration of Santa Claus, with a new-fangled announcement: Father Frost’s retinue would move through the holiday skies aided by Glonass, the Russian answer to GPS.

Eagerly waiting children could track his movement online, while he could simultaneously improve his gift-giving efficiency. “Now Father Frost can be sure,” his press release said. “He can monitor his helpers through the Internet, even when he himself leaves for another city.”

It is unclear, however, how well Glonass will be able to aid Team Frost. The Glonass network (much like America’s Global Positioning System, a Cold War defense and missile-tracking system that was eventually opened to civilian use) was envisioned as an equal competitor to its U.S. counterpart.

But Glossnass recently has suffered some technical setbacks.

Here’s why: For complete coverage of the earth’s surface, Glonass, which stands for Global Navigation Satellite System, requires 24 satellites evenly distributed among three orbital planes. This includes three in-orbit spares – one per plane – in case anything goes wrong.

Russian “birds” fall flat

Currently, however, there are only 19 in orbit and just 15 of them are operational. (Three broke down just around the time of the war in Ossetia, in 2008, and, last week, the Russian space agency announced it was taking yet another satellite out of commission for technical reasons.) And because 18 operational satellites are needed for 100% coverage of Russian territory, the current Glonass configuration falls just short of that milestone, too, providing spotty coverage even at home. Coverage around the world is still more fractured and unreliable.

This, of course, makes it hard for Glonass to compete with the GPS system, which is fully operational and has nearly spotless coverage almost everywhere in the world.

In the system’s early years — when the Soviet space mission and the Cold War arms race were in full throttle — almost 50 satellites of various quality and life-span were lobbed into space. By the time the Soviet Union collapsed, however, there were still only 12 functional satellites in orbit.

The system was briefly operational in the mid-1990s, but quickly fell into disrepair as the Russian economy spun out of control and budget revenues plummeted. Meanwhile, the GPS system, developed for American military use, was made available to the public free of charge in 1993, without any major setbacks.

Then in 2001, a young and energetic new president, Vladimir Putin, sought to revive Glonass.

Putin’s pet project?

The project’s rebirth came just as the consumer GPS market was taking off and was tinged with both geopolitical and nationalistic considerations, not all of which made sense. On one hand, it was perfectly rational for Russia to not want to rely on the United States – an wary ally at best — for its military navigation systems.

And Russia was not the only country trying to wean itself off its American satellite dependency. At the time, China and Europe were working on similar GPS analogs. Europe later froze the development of its system, Galileo, because it didn’t seem profitable, but China and Russia, two countries capable of pouring vast sums of money into giant state ventures, plowed ahead.

Putin made Glonass his pet project, insisting that he wanted a system that could compete with GPS on an equal footing. For this he brought out the big guns. Legislative projects were launched that would require all government vehicles to have Glonass compatible systems. Parliament proposed tariffs on imports of GPS devices to encourage Glonass’s development at home.

And, in the oil-boom years, money was no object: The Kremlin allocated almost half a billion dollars to Glonass in 2006-2007, and, in 2008, Putin pledged even more. That year, he alloted an additional $2.6 billion, promising two big three-satellite launches in September and December 2009.

And then reality intervened.

In addition to those dud satellites whirling around space, the three satellites scheduled to be launched in September were found to have an unspecified “malfunction.” Still, Putin, now prime minister, came out on September 28 and publicly charged one of his deputies to make sure all six made it into space “by the end of this year.” But, less than a month later, the three satellites scheduled to be launched in December went back to the manufacturer. It is now December, and not one of the six satellites scheduled to be launched before the new year will make it up there on time.

And so Glonass hobbles on with 15 satellites, a full nine satellites short of the number needed for 100% worldwide coverage. This, of course, has forced a subtle shift in the Kremlin’s rhetoric. While Putin and current President Dmitry Medvedev continue to insist on an impeccable satellite navigation system in the near future, the point now, they say, is to compliment, rather than compete with, the GPS system. Two systems, they argue, are better than one. “Undoubtedly, GPS provides much better service,” says Sergey Filipov, a spokesman for Sitronics, which partners with the government in developing microchips for Glonass-reading devices. “We’re not trying to compete. The thinking is that it should be a double system.”

Experts suggest that this is in fact the case: the more satellites are in view of a navigation device equipped to read both GPS and Glonass signals, the more accurately it can pinpoint location and avoid blocks like trees or skyscrapers.

And Russia’s navigation project received a shot in the arm recently when India joined the project and agreed to pay for one satellite launch.

Where are the cool phones and gadgets?

But Glonass still faces an uphill battle. Not only are there too few satellites to provide reliable service, but Glonass devices are still in the earliest stages of development. In a country full of the most elaborately conspicuous cell phones, there are no mobile devices with Glonass readers.

The Glonass handheld market is equally underdeveloped. They are not user-friendly, and are bulky and far more expensive than their GPS counterparts.

Nor are foreign satellite navigation companies jumping into the Glonass market. Some make specialized agricultural equipment that can read both GPS and Glonass signals, but Garmin, (GRMN) the largest producer of consumer GPS devices, still does not make a dual-signal device. “Since Glonass isn’t fully functional yet, it’s too early to say if our current production handhelds will be compatible,” says a company spokesman. (Garmin controls some 60% of the North American market.)

“Will the system be realized, or not? That’s the big question,” says Anna Lepetukhina, a technology analyst with Troika Dialog. “Sooner or later, we’ll see it used more in the military-industrial sector. Will we see a large consumer market for Glonass? Probably not.”

But this has not stopped Putin from trumpeting whatever small successes Glonass offers. According to one of Putin’s deputies, Glonass has made police work easier and has even helped Russian police departments save on gas because police chiefs can keep a close eye on their ranks. Now, Putin joked, officers “have to visit their girlfriends on the bus now and not in official cars.”

What on earth is happening with “Russia’s GPS”? [Fortune]