Advisor to the President of the Russian Federation and Member of the INSOR Board of Trustees Leonid Reiman spoke to participants of the General Assembly of the Association of Computer and IT Companies. The event took place at the Institute of Contemporary Development.

Leonid Reiman’s remarks focused on the situation on the Russian IT market and the measures which need to be adopted by the state to support Russian hi-tech companies. He noted that the Russian IT industry largely developed on its own – using its own intellectual, financial and organizational resources. “In recent years the government has adopted several measures toward supporting the IT sector. Unfortunately, not all of the planned measures have been implemented or implemented in full. At the same time, the issue of state support of the IT sector during a time of global crisis becomes evermore critical,” he stated.

It is already apparent that even large IT companies are facing a serious slowdown in development. This is first and foremost tied to the expected cuts in IT budgets of companies working in the real sector of the economy as well as at banks and financial institutions. If this slowdown is not likely to greatly affect 2008, without targeted state support growth rates will at least be halved in 2009. The sharp decline in the volume of orders will likely lead to a massive layoff of workers followed by a departure of these specialists to more attractive markets abroad.

In his remarks, Leonid Reiman suggested that state support for the IT sector should be focused on the following areas.

1. Over the past two years there have been a number of amendments proposed for the Tax Code which suggest establishing a flat tax for IT companies focused on external markets. It is necessary to move forward with efforts to implement a special tax regime. Furthermore, this should be aimed not only at companies oriented toward foreign markets but also for those working in the domestic market.

2. The Russian President and Cabinet have taken steps to provide funds for companies from state banks. Given the financial instability on the IT market, it would be prudent to use this mechanism here as well. To implement such actions it is necessary to analyze the needs of financial needs of IT companies and then present the results to the presidential administration.

3. Protectionist measures need to be adopted to support Russian IT companies, at least during this period of crisis. This should include state contracts and support of Russian software developers oriented toward Russian markets.

According to Mr. Reiman, these measures should help the IT market develop dynamically over the long term. He also noted that the crisis should allow Russian businesses to adequately assess the role of IT in business management. Hi-tech solutions should become a central part of all business processes. IT should be seen as an instrument for transitioning to a more effective business model.