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Cablegate: Dubna: High Hopes for Special Economic Zone

VZCZCXRO7773
PP RUEHHM RUEHLN RUEHMA RUEHPB RUEHPOD
DE RUEHMO #1148/01 0751504
ZNR UUUUU ZZH
P 161504Z MAR 07
FM AMEMBASSY MOSCOW
TO RUEHC/SECSTATE WASHDC PRIORITY 8326
RUCPDOC/DEPT OF COMMERCE WASHDC PRIORITY
INFO RUEAIIA/CIA WASHDC PRIORITY
RHEHAAA/WHITE HOUSE WASHDC
RUEHZN/EST COLLECTIVE

UNCLAS SECTION 01 OF 02 MOSCOW 001148

SIPDIS

SENSITIVE
SIPDIS

DEPARTMENT FOR EB/CIP/MA (GIBBS), EB/CBA (MERMOUD), EUR/RUS (GUHA),
OES/STAS (DR. ATKINSON), OES/STC (DAUGHARTY), EUR/ACE (YOUTH)

COMMERCE FOR UNDERSECRETARY CRESANTI AND (BISNIS) ELLEN HOUSE

E.O. 12958: N/A
TAGS: TSPL ECON EINT ETRD TNGD RS
SUBJECT: DUBNA: HIGH HOPES FOR SPECIAL ECONOMIC ZONE

1. (SBU) SUMMARY: EST and ECON officers March 1 visited the Special
Economic Zone (SEZ) in Dubna, home of the Joint Institute for
Nuclear Research (JINR). According to SEZ and JINR representatives,
government sources will spend $300 million over five years creating
the infrastructure for the SEZ, and administrators hope Russian and
foreign investors will contribute $2.8 billion. This is an
ambitious effort to develop and commercialize innovation technology,
and Dubna is hoping to capitalize on its history as a science city
to attract investors. END SUMMARY

2. (U) On March 1 ESToff and ECONoffs visited the Special Economic
Zone located in Dubna, site of the JINR. We met with Alexander Rats,
head of the Agency for Management of Special Economic Zones for the
Moscow Region; Aleksey Sissakian, Director of JINR; and Sergey
Dobromyslov, head of the Dubna University Department of Innovation
and Information Technology. In 2005 the GOR created Special
Economic Zones (SEZ) entitled to customs and VAT exemptions for
imported materials and to tax advantages, including five-year
exemptions from or reductions in local property and profits taxes.
Six SEZ with differing specialties, out of 30 regions applying for
designation, were selected in a competitive process. The Dubna SEZ
is dedicated to nuclear-physics technologies and information
technologies.

3. (U) JINR was established in 1956 as an international scientific
center for basic research in particle and nuclear physics. It
currently employs about 1,000 scientists and 2,000 engineers and
technicians. (NOTE: Located at the confluence of the Volga River
and the Moscow Canal, Dubna is an energy and transportation hub, as
well as a science center. An aircraft design and manufacturing
plant was created in Dubna in 1937. The 105th element in the Table
of Elements is dubnium, named after the institute where it was first
discovered in 1967. END NOTE) Our meeting took place at the
International University of Nature, Society and Man, which was
founded under the leadership of JINR in 1994. The university
building and plant are an impressive array of modern facilities,
unlike many Russian higher education structures which show their
decades of use and decay under Soviet rule.

4. (U) Rats told us that the impetus for founding the university was
to take advantage of the critical mass of scientists and researchers
at JINR. Of a population of 67,000 in Dubna, about 13,000 have
university degrees, including over 1,000 doctors of science. The
university has 6,000 students pursuing degrees in 38 separate fields
(called "faculties" in Russia), with almost 2,000 studying
information and computer technologies. Rats noted that Dubna
residents are computer-literate, and they have access to more than
5,000 computers for work and studies. One of the key goals of the
Putin administration is to increase the availability of computer
access to schools and regional populations. The SEZ representatives
told us that seventy per cent of the student body comes from other
regions of Russia. After completion of their studies, fifty-four
per cent of graduates find work in Dubna.

5. (U) According to Rats, the Agency for Management of Special
Economic Zones has budgeted $300 million for construction of
infrastructure in the Dubna SEZ over the next five years. Of the
total, 70 percent will come from the federal government and 30
percent from regional and local authorities. The agency is counting
on private investors to contribute seventy-five billion rubles
(approximately $2.8 billion).

6. (U) One of the first residents of the SEZ is Luxoft-Dubna, an
offshore programming and IT outsourcing company. [COMMENT: ESToff
visited the Luxoft facilities in Moscow in September with EEB
Special Representative Frank Mermoud and observed their extensive
facilities and bold management. Their chief operating officer
outlined his ambitious and so-far successful efforts to position the
company as an alternative outsource for more sophisticated IT work
than is currently performed in such locations as Bangalore. END
COMMENT) Another resident is Dubna Sistema Managing Company, a
subsidiary of AFK-Sistema, which specializes in plasma technology
and implements nanotechnology in new materials production. Rats
said there are now six Russian companies approved for resident
status and another six have filed registration papers for the Dubna
SEZ. Incipient construction, mostly of roads, is currently underway
on the site; as we observed, construction season includes winter in
Russia.

7. (U) The directors of the Dubna SEZ have impressive credentials.
Aleksey Norairovich Sissakian is the Director of the JINR and the
Bogoliubov Laboratory of Theoretical Physics, and a Professor at
Moscow State University. A Corresponding Member of the Russian
Academy of Sciences and a Member of the European Academy of Sciences

MOSCOW 00001148 002 OF 002


in Brussels, Sissakian is the author of 350 scientific papers and is
credited with three inventions. He is a modern Renaissance man,
having also published five volumes of poetry. Sergey Nikolaevich
Dobromyslov holds the chair of Sustainable Development of
Innovations at the Dubna University. In the 1990s, he worked in the
United States for Lockheed Martin in its heavy satellites program.
He has also worked on the Entelsat communications satellite project
with the European Space Agency.

8. (SBU) COMMENT: The Dubna SEZ has attracted a great wealth of
scientific knowledge and practical management experience to the
project. In addition, there is a substantial commitment of funds by
federal and local authorities to local infrastructure development.
Arrayed against this is the failure of the earlier program of Free
Economic Zones, which collapsed in corruption, inadequate
development and outright tax fraud. The new managers express
determination to learn from previous mistakes and to commit the
necessary financial and human resources. They are hopeful that the
special advantages of the JINR and the scientific environment will
help make the Dubna SEZ attractive to investors and a model for the
future development of innovation technology.

BURNS

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