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12 October 2012

Billions will get lost in silicon forest

The Kotshyubynskiy forest might be felled to make room for building office centers and residential buildings behind a smokescreen of heated debates about a new-fangled silicon valley

The concept of Silicon Valley continues to wrack the brains of Ukrainian officials and politicians, who keep using it in their campaign rhetoric. A candidate for a seat in parliament, Valeriy Borysov, promises to build his own silicon valley in the Troyeshchyna District.

However, he is not a silicon pioneer of Kyiv, since the Kyiv State City Administration has long been considering the idea of building such an intellectual paradise in the Ukrainian capital. Indeed, recently the Deputy Head of the KSCA Ruslan Kramarenko stated that the Google corporation is ready and willing to sign a contract of cooperation with the Bionic Hill hi-tech park, which is slated to become Kyiv’s silicon valley, thereby once again emphasizing that the mythical Ukrainian Silicon Valley can lure in imaginary investors.

Nevertheless, taking into account world practice, it is doubtful that the KSCA can realistically manage to implement such a major project and the land in this so-called green zone may be developed in the foreseeable future. 

Earlier this year city hall allocated an area of 147 hectares of the Kotsyubynskiy forest in the Svyatoshyn district for the construction of a high-tech park for intellectual work and comfortable living conditions for its inhabitants.

The plans call for setting up business incubators, a university, hotels, a sports complex, a shopping and entertainment mall, residential buildings, schools and kindergartens, office spaces for Ukrainian and foreign companies working in the field of information technology, venture capital companies and branches of commercial banks.

The city officials promise to lease the first 15,000 square meters of office space by the year 2014. In addition to that, the KSCA promised to build a service road leading right to the hi-tech park, install the necessary engineering grids and launch special Bionic Hill bus transport routes from the neighboring subway stations Akademhorodok, Beresteiska and from downtown Kyiv.

This will be a paradise for IT specialists from all regions of Ukraine and the world. The plans call for creating 35,000 jobs that will be the main contributor to the city’s budget. According to Kramarenko’s optimistic prognosis after the construction of Bionic Hill, «Kyiv will have a good chance of becoming an ideal place for the location of offices of international IT companies and the center of innovation in Eastern Europe».

Ample US $1 bn is required to implement this project. But at the moment foreign investors are in no rush to invest money in the Bionic Hill project and all statements of readiness to become a partner in the project are accompanied by the proviso «it has the potential». It has not gone any further than the signing of memoranda.

At the same time, as the successful experience in the development of innovational complexes in European countries and the U.S. shows, all major hi-tech parks are located close to technical vocational schools whose graduates have the opportunity to find a job a stone’s throw from their alma mater and companies can hire highly qualified IT specialists.

In addition to that, privileged taxation, well-trained managerial teams and several anchor companies that assumed a long-term obligation and guarantee financial viability are typical features of the major hi-tech parks around the world.

The construction of a scientific center at Bionic Hill is only in the planning stage. So, in order to implement the project its initiators must not only attract investors and lessees, but also guarantee the potential of employees for career advancement in the scientific sphere. This means that initially land, premises and investments will guarantee the success of a hi-tech park. However, as experience shows such a calculation is inherently not foolproof.

While Ukraine already has experience in building hi-tech parks, their efficiency is quite low, warns Ivan Zimin of the IT-Solutions firm: «Ukrainian legislation of 2005 in no way stimulates the innovation segment, unlike European IT-incubators that enjoy tax privileges and in the first years of operation did not pay any taxes at all. In Ukraine such a scenario has already proven to be disastrous.»

Zimin is confident that unless the concept of hi-tech parks is not thoroughly devised, there is a high probability that Ukraine will follow in the footsteps of Russia. 2011 statistics showed that an overwhelming majority of hi-tech parks in Moscow degraded into banal business centers. Out of 27 hi-tech parks located in Moscow and the Moscow oblast, only four correspond to this concept. So, who is gonna fill those huge office spaces if today the demand for them is not so high and why an investor should inject into a doomed project?

The answer speaks is obvious. In the direct proximity from Kyiv in the green zone a district is being built with a huge concentration of office premises and highly developed infrastructure. The land will be allocated strictly for the purpose, of course, but in Ukraine the purpose is a very relative thing.


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