Thursday, April 6, 2023

"How Russia killed its tech industry"

"Putin: Leader in artificial intelligence will rule world"
—Associated Press, September 1, 2017  

From MIT's Technology Review, April 4:

The invasion of Ukraine supercharged the decline of the country’s already struggling tech sector—and undercut its biggest success story, Yandex.

Seven days after the invasion of Ukraine, Vladimir Belugin packed up his and his family’s belongings, canceled the lease on his apartment in Moscow, withdrew his kids from kindergarten, and started a new life outside of Russia. Not long after that, he resigned from his position as chief commercial officer for search at Yandex, Russia’s equivalent to Google and the country’s largest technology company. The war meant that everything would change in Russia, both for him and for his company, Belugin said from his new home in Cyprus: “You have to accept the new rules of having no rules at all in Russia.”

Belugin was far from the only tech worker to leave. In the months after the invasion began, Russia saw a mass exodus of IT workers. According to government figures, about 100,000 IT specialists left Russia in 2022, or some 10% of the tech workforce—a number that is likely an underestimate. Alongside those exits, more than 1,000 foreign firms curtailed their operations in the country, driven in part by the broadest sanctions ever to be imposed on a major economy.

It has now been over a year since the full-scale invasion of Ukraine began, with more than 8,300 recorded civilian deaths and counting. The tech workers who left everything behind to flee Russia warn that the country is well on its way to becoming a village: cut off from the global tech industry, research, funding, scientific exchanges, and critical components. Meanwhile, one of its biggest tech successes, Yandex, has begun fragmenting, selling off lucrative businesses to VKontakte (VK), a competitor controlled by state-owned companies.

“It felt like my country was stolen from me,” says Igor, an executive at VK who has family in Russia and asked that his name be changed so he could talk openly. When the war began, he says, he felt as if 20 years of Russia’s future had been taken away in a heartbeat.

In Russia, technology was one of the few sectors where people felt they could succeed on merit instead of connections. The industry also maintained a spirit of openness: Russian entrepreneurs won international funding and made deals all over the world. For a time, the Kremlin seemed to embrace this openness too, inviting international companies to invest in Russia.

But cracks in Russia’s tech industry started appearing well before the war. For more than a decade, the government has attempted to put Russia’s internet and its most powerful tech companies in a tight grip, threatening an industry that once promised to bring the country into the future. Experts MIT Technology Review spoke with say Russia’s war against Ukraine only accelerated the damage that was already being done, further pushing the country’s biggest tech companies into isolation and chaos and corralling its citizens into its tightly controlled domestic internet, where news comes from official government sources and free speech is severely curtailed.

“The Russian leadership chose a completely different path of development for the country,” says Ruben Enikolopov, assistant professor at the Barcelona School of Economics and former rector of Russia’s New Economic School. Isolation became a strategic choice, he says.

The tech industry was not Russia’s biggest, but it was one of the main drivers of the economy, says Enikolopov. Between 2015 and 2021, the IT sector in Russia was responsible for more than a third of the growth in the country’s GDP, reaching 3.7 trillion rubles ($47.8 billion) in 2021. Even though that constituted just 3.2% of total GDP, Enikolopov says that as the tech industry falls behind, Russia’s economy will stagnate. “I think this is probably one of the biggest blows to future economic growth in Russia,” he says....

....MUCH MORE
Some possibly related prior posts:

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