Russian gov't to support country's outsourcing efforts

Leonid Reiman, the Minister for Information Technologies and Communications (MinInformSvyazi) announced a new governmental initiative to support Russian software outsourcing companies.

Reiman expects Russian IT exports to increase by 80 percent reaching US$1.8 billion in 2006. According to the minister, the country's total IT market volume in 2006 will amount $13-14 billion compared to $11 billion in 2005.

As part of the ongoing effort of accelerating the Russian IT industry development, the ITC-ministry presented its plans to create a dedicated authority -- Federal Agency for IT Exports Development.

The initiative was first proposed in Reiman’s letter to the Russian president Vladimir Putin, on which Putin issued a resolution in support.

According to Reiman, the agency will analyze the exporting potentials, provide marketing support and conduct PR-activities. The agency is likely to employ about 50-70 people and its budget will mainly consist of employee’s salaries. Still the financing of the agency’s programs is to be discussed with the Ministry of Finance.

Though no particular supporting tools for Russian companies has been offered yet, it’s evident that industry associations will assist the agency in elaborating these tools.

"The instruments we are talking about have to be worked out with active support of industry associations such as Russoft and AP KIT," said Reiman adding, "I hope in the future the associations will play the key role in the market development."

The executives for the two agencies have not been appointed yet, as Reiman explained the issue wasn’t even discussed. Soon the documents on the new agencies will pass to the Russian Government for official approval. The ITC-ministry expects the agencies to be created by the end of 2006.

The new Reiman’s initiatives come after he accomplished the previous Putin’s tasks to develop measures for IT industry development. Putin paid significant attention to the Russian IT sector after his tour to Bangalore, India in late 2004.

On March 16, the Russian prime-mister Mikhail Fradkov signed the governmental order to launch the federal program for techno-parks creation to concentrate IT companies there. The government chose Saint Petersburg, the Republic of Tatarstan and the regions of Moscow, Novosibirsk, Nizhny Novgorod, Tyumen and Kaluga as launching pads for the program. Some of them have already been officially inaugurated. The federal budget will finance the further development of techno-parks infrastructure investing 1.4 billion rubles (about US$52 million) in 2007.

On July 27, 2006 the Russian president approved the law introducing amendments to the Tax Code of Russia. Still after parliamentary discussion the amendments fell short of optimistic expectations. Instead of imposing a special taxation scheme for IT-companies (a 6 percent income tax and the abolishment of most taxes), the Parliament introduced nothing but a better way of calculating the unified social tax.

Usually taxpayers benefit from the lower tax rate of 10 percent instead of 26 percent, as soon as employee’s annual salary fund exceeds 280.000 rubles per head, while IT-companies under the new amendments can apply this tax rate after a 75.000 rubles fund. Still the salary fund’s level for applying the most favorable 2 percent tax rate remained at the level of 600.000 rubles.