What the Russian papers say

Tax breaks for software developers wanted/ Market trends: Inflation of knowledge/ Russian government to raise import duties on cars/ Romania rewrites its history again/ Armor without glamor

Kommersant

Tax breaks for software developers wanted

Russia's largest software companies have asked President Dmitry Medvedev for tax breaks.

The State Duma has not yet adopted a bill envisaging compensation for companies' losses due to the new insurance fees that replaced the Unified Social Tax, software developers say. Russian software exports, which had been growing by an average of 35 percent a year for the past five years, stopped growing in 2009, for the first time ever, and made up $2.75 billion. As a result, Brazil took third place from Russia in software exports.

The Russoft and Russian Soft associations sent a joint letter to President Dmitry Medvedev. A year has passed since Russoft sent its first appeal to the president, the joint letter says. In that appeal, Russia's largest software developers and exporters asked for measures to ease the tax burden on the IT industry. The appeal said that the main concern was the replacement of the Unified Social Tax with insurance fees to non-budgetary funds which happened on January 1, 2010. In 2010 the total amount of insurance fees will approximately equal the Unified Social Tax (26 percent), but in 2011, it will grow to 34 percent. In their appeal to Dmitry Medvedev, software developers emphasized that the replacement of the Unified Social Tax would increase software exporters' expenses by 50 percent to 80 percent.

The Ministry of Communications and Mass Media, which oversees the IT industry, agrees there is a need to support software exporters and developers. Meanwhile, the ministry says that it submitted its proposals and feasibility studies to the Finance Ministry, the Economic Development Ministry and the Healthcare and Social Development Ministry as far back as October 2009.

Personnel costs can account for up to 80 percent of overall expenses of software and IT service exporters and developers whereas the average liability in other industries is about 13 percent. Dmitry Loshchinin, CEO of Luxoft, a software developer, says this business will become low profit, if not unprofitable, from 2011. According to Loshchinin, if swift measures are not taken, Russian companies will stop development work in Russia and focus on developing their businesses abroad.

Now, software developers are proposing setting up a self-regulatory organization Member companies will be eligible for special rates on social payments.

Software exporters are not the first segment to ask the government for tax breaks. Sistema financial corporation and RusNano have already asked Prime Minister Vladimir Putin to create favorable conditions for the development of Russian microelectronics, including tax exemptions. Their proposal suggested that the Russian market could be protected by replacing foreign-made components with domestically produced components.

Vedomosti

Market trends: Inflation of knowledge

Konstantin Simonov, head of Russia's National Energy Security Fund, discusses Russia's education system on the eve of Knowledge Day, September 1.

Tomorrow is Knowledge Day, an important holiday in our society. Only an educated and enlightened society can truly benefit from a democratic political system.

There is a subtle point here: on the one hand, all sections of the population should be involved in the learning process as much as possible, on the other, higher education should at least be competitive, because otherwise education will not be able to perform any role in social mobility.

It looks like Russians are becoming more educated. According to the 1989 census, only 64 of 1,000 people aged 20-24 had a college degree; in 2002 this number had risen to 118. Today's figures should be higher still. The number of students enrolled in undergraduate programs grew by 180 percent between 1993 and 2008, while the total number of college students grew by nearly 5 million. However, the chronic shortage of professionals on the labor market has made the authorities turn a blind eye to problems afflicting the country's higher education system.

This year, the number of applicants to college degree programs fell by 10 percent according to Education Ministry estimates. Minister Andrei Fursenko explains the trend by a "demographic gap" which will affect Russian society until 2020. The country will have to reduce the number of new universities, so on the upside, there is the chance that teaching quality can improve. On the downside, since government money is allocated in proportion to the number of students, universities will soon have to hunt for new students. This means that all school-leavers will go to college, as they will also stand a better chance of getting into the country's most prestigious universities. This approach leaves no hope that new students will have a great thirst for knowledge.

The university degree will devalue, but that is not all, the number of advanced degrees was growing by 10 -15 percent each year in the 1990s and 2000s, especially in humanities. Although this trend has stabilized in the past few years, an advanced degree no longer draws as much respect as before.

Government officials and business executives might as well start closer to home. Their infectious love of "wallpaper degrees" is spreading like an epidemic. Academics have in part discredited themselves by setting up a "thesis conveyer" to boost their meager incomes. As a result, certain officials indeed grow to believe that they are academics. Yes, they paid someone to write their theses for them, but only because they themselves were far too busy...

Izvestia

Russian government to raise import duties on cars

Import duties on foreign cars will continue to increase, Prime Minister Vladimir Putin said Monday. The authorities hope this will attract foreign manufacturers to the country, but analysts say they should first solve the problem of component parts.

In early August, First Deputy Prime Minister Igor Shuvalov said the government could discuss lowering the import duties on foreign cars within the Customs Union of Russia, Kazakhstan and Belarus, to facilitate its WTO accession. But Putin thinks the duties should be raised, albeit gradually.

The prime minister said the Russian automobile industry would continue to receive state support because without it the country will become a scrap yard for obsolete foreign equipment.

The import duties introduced early this year have produced marked results, cutting car imports by 43 percent in January-March, according to the Federal Customs Service.

Putin's statement was to be expected, said Oleg Datskiv, director for business development of the auto-dealer.ru portal. The level of domestic content per vehicle is still very small, he said.

In 2005, automakers and the Russian Ministry of Industry and Trade signed Resolution 166 that defines industrial car assembly in Russia. Foreign manufacturers promised to localize production within eight years by more than 50 percent, but the process is taking longer, Datskiv said.

Only three companies - Volkswagen in Kaluga, Hyundai in St.Petersburg (the plant is to start up in 2011) and Moscow-based Avtoframos - build vehicles with high domestic content. All other foreign producers use semi-knock down (SKD) component assembly. Domestic content can be boosted only if component producers ensuring the requisite quality of their production come to Russia.

The Russian market is not attractive to foreign component producers because low volume means low profits, said Yuly Matevosov, an analyst with investment company Aton. The Ministry of Industry and Trade plans to increase domestic content minimums for auto assembly from 30-60 percent in mid-September.

Domestic production can cut both ways, said Pyotr Klyuyev, an analyst with 2K Audit Business Consulting. Prices have been the Russian producers' main advantage before and after the crisis, but the foreign producers who have moved production to Russia are now competing with AvtoVAZ even in this respect.

It is largely because of the foreign cars being assembled at its Togliatti plant that AvtoVAZ is now ceding its market position to its foreign rivals.

Delovoi Vtornik

Romania rewrites its history again

NATO's headquarters in Brussels continues to prioritize mutual trust in relations between the alliance and Russia. Brussels' NATO-expansion policy implies that new members can join on a purely voluntary basis, and that none of the 27 NATO countries has any territorial claims against its neighbors.

In reality, it is the other way round. Estonian politicians regularly demand that Moscow return the Pytalovo District of Russia's Pskov Region. Bucharest also reminds Ukraine and Moldova that Bessarabia and Northern Bukovina were part of Romania from 1918 until 1940. Romania maintains that it had every right to occupy both regions in December 1917 when the Russian Empire was rapidly disintegrating. However, Russian and Romanian representatives signed an Entente-brokered agreement in Jassy (Iasi), Romania, on March 5, 1918.

Under the document, Romania pledged to withdraw its forces from Bessarabia within two months. Instead, the Romanian occupation lasted for over 20 years.

Romania, which joined NATO in 2004, promptly voiced territorial claims to Ukraine, as well as the right to control the continental shelf.

Former Ukrainian President Viktor Yushchenko pandered to Romania, hoping that Bucharest would support Kiev's NATO membership bid. Yushchenko had no misgivings about the fact that 80 percent of the continental shelf contained 100 billion cubic meters of natural gas and ten million metric tons of crude oil.

Moreover, Yushchenko agreed to allow the International Court of Justice (ICJ), the principal judicial body of the United Nations, to examine the future of Zmeiny Island. He assured Romanian President Traian Basescu that Ukraine would unfailingly abide by any ICJ decision.

After gaining control of the continental shelf, Romania granted hydrocarbon-production rights to Rompetrol Group N.V., a multinational oil company based in Amsterdam, the Netherlands.

The company subsequently leased the rights to the deposits to its U.S. friends for a period of 30 years, swelling the Romanian budget. Bucharest, inspired by this success, now voices claims to the small Maikan Island making it possible to control the Danube River.

The Ukrainian public is also concerned about Bucharest's possible decision to issue Romanian passports to Ukrainians who lived in Romania before 1940. Kiev sees this as a first step to resuming territorial claims to Northern Bukovina and Bessarabia.

Romania which initiates all these actions under NATO auspices assumes that Kiev will not want to sour relations with the alliance and the EU. But it appears that Bucharest underestimates the Ukrainian government's determination to defend its regional interests.

Ukrainian Foreign Minister Kostyantyn Hryshchenko recently told the people of Ukraine that his ministry was determined to defend national interests in its dialogue with Romania, which strives to rewrite the history of its relations with neighboring nations under NATO auspices.

Rossiiskaya Gazeta

Armor without glamor

Russia's top political leadership has set a target of renewing the inventory of combat equipment, including armor, by a third within five years. Meanwhile in tanks, a sector Russia dominated for 40 years, Russia is now second to NATO.

Between 2001 and 2010, 400 tanks, including upgrades, were manufactured and delivered to Russian troops. During the same period, NATO countries produced and adopted 4,500 of the newest vehicles. All NATO tanks are either the most recent models or previous modifications. Experts estimate their total service life will not exceed ten years. The older vehicles are either put on reserve, or undergo capital overhaul and in-depth modernization.

Only 4 percent of the tanks in Russia's ground forces have been turned out and upgraded in the past ten years. The rest were produced before 2000. In addition to the T-90 tanks the army has previous models in service, including the earliest samples of T-72 and T-80 and even the T-62s, production of which ceased in 1972. There are not only T-55s, but also T-34/85s in the arsenal.

Ninety years ago, on August 31, 1920, Russia's first domestically produced tank, "Freedom Fighter Comrade Lenin," rolled out of the Red Sormovo factory gates. It was a complete copy of the French Renault tank. Russian-designed tanks, developed by the Techburo of the Main Military Industry Department at the VSNKh (Supreme Council of the National Economy), did not appear until 1924. In 1944, 20 years later, the country's approach to tank building and the Soviet tank industry led the world. Soviet T-34 and IS-2 models came to symbolize victory in World War II. During the following forty years, right up to the mid-1980s, leading Western firms, including those in the United States and Germany, largely copied the ideas first applied in Soviet tanks.

Now, experts believe, the latest Abramses, Leopards, Leclercs and Challengers have far better fire control systems than Russian tanks, including the most up-to-date information management systems.

But, as Vladimir Domnin, chief designer at the Ural Transport Engineering Design Bureau, said, high-tech development in the West holds no secrets for Russia. Many of these ideas have been applied in practice and even tested on firing grounds. But the state defense order stopped mentioning such tanks from 2011 onwards. The newest armor has not been adopted en-masse in the forces. And this is beyond understanding both to those who design and manufacture tanks and to those who fight in them. Given Russia's vast expanse and long land borders, only its ground forces can realistically repel a potential aggressor, with armored units being their main striking force.

 

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MOSCOW, August 31 (RIA Novosti)