Clusters to be Protected from Crisis

Formation of clusters continues in St.Petersburg. In the difficult economic circumstances many companies prefer to join clusters in order to stay protected from external negative factors.

Industrial clusters are a relatively new form of industrialization. They consolidate companies and organizations of one segment within a specific territory. Today there are 9 industrial clusters in St. Petersburg, and a number of new ones are forming. The city authorities provide substantial support to their operation.

Complex Approach

The idea of industrial clusters was first discussed in the Smolny Palace (seat of Administration of St. Petersburg) at the beginning of 2000s, after a number of major foreign car manufacturers started working in the city and the neighboring Leningrad Region. In 2008, the government of St. Petersburg elaborated the Cluster Policy Concept, according to which from 8 to 15 industrial clusters were supposed to be built until 2020.
A representative of the Committee for Industrial Policy and Innovations noted that today the most important and fastest growing clusters in the city are automotive, power plant, shipbuilding, radioelectronic and pharmaceutical ones. The two latter are considered to be innovative and were assigned a special status by the Ministry of Economic Development of the Russian Federation. The following clusters are also developing in the city: IT, polymeric materials, machine tool building, high-tech and engineering.
Furthermore, the Cluster Development Center (CDC) was established on the basis of the "St. Petersburg" technopark last year. Its main goal is to enable effective collaboration of businesses, educational and research institutions, non-profit organizations and government agencies in order to implement joint cluster projects. This March, the CDC presented the organizational structure of the composite cluster, which included about 25 organizations. Its goal will be to provide high-tech composite products for the construction and housing and utility sectors.
This autumn, the new Prototyping Center for innovative companies will be opened on the premises of Ingria Business Incubator. It will let small businesses involved in IT development charter the necessary equipment at venue to work on their startups. The federal government allocates 39.3 mln rubles to this project.
According to the press office of the Committee for Industrial Policy and Innovations, today around 30 cluster initiatives with more than 500 participants are represented in the city. Their level of organizational development is diverse – from a pure idea to an elaborated cluster business model, obtaining financial and organizational support from the government.

Concerns of Establishment

Stanislav Fedchenko, acting head of the St. Petersburg Cluster Development Center, believes that cluster foundation and development requires great organizational efforts. "You would have to call a joint meeting for the cluster participants, create a management company, prepare the necessary documents. Then you hold regular meetings and implement cluster projects, coordinate participation in exhibitions, etc. This volume of administrative load is only affordable for big companies. But anyway, promotion of their own business will be more important to them than industry interests. Creation of clusters "from above", under governmental instructions, is not an option. Only those clusters are effective, where participants regularly meet, negotiate on joint projects, create production chains and implement new standards," said Fedchenko.
Andrey Kostikov, partner of consulting group "Center of Economic Developments", agrees. The expert believes that industrial clusters should be developing not just structurally, they must demonstrate effectiveness. "It is understandable that, launching a cluster, the government hopes to attract investment to a certain region. This is why organizations that are part of a cluster must be able to work in a competitive environment. Many modern businesses don't have problems with industrial marketing, but some "older" companies and research institutes still cannot adopt the new practices," thinks the expert.
Evgeny Ivanchenko, head of capital construction at Ulmart Development, also notes that the industrial clusters' market is on the formation stage in Russia. "To give a maximum rise to this sphere, government support is needed in the form of different subsidies and preferences, which will be based on private-public partnerships. This simple truth is clear for both parties. In 2015, the government allocated 2.5 bln rub. to support cluster development. The cluster approach has a great future developing the city's economy in St. Petersburg , as the city's economy is diverse, its transport infrastructure is well-developed and there are a lot of major industrial plants," he assures.

Power of Cooperation

The experts surveyed believe that companies, which have joined a cluster of just plan to do it, feel more stable during the economic crisis. According to Stanislav Fedchenko, cluster members have the same problems as the Russian business in general: growing prices for foreign materials and equipment, decreasing credit availability and investment volumes. But on the other side, in a complicated economic climate it is easier to look for solutions together, and cluster teamwork helps to lessen the negative effects and achieve competitive advantages – first of all, thanks to cluster and intercluster projects.
"During an economic crisis it is important for companies to stay stable. International best practices show that cluster members leave their markets 25% less often. But this is the foreign experience. I have to note that the clusters of St. Petersburg and NWFD have close connections with many foreign partners. Taking into consideration the complicated geopolitical situation, it will be harder for some companies to do business now. For example, it will be difficult for manufacturers of automotive parts, as some of the foreign car manufacturers leave the Russian market. On the contrary, Russian pharmaceutical companies, working in their own cluster, are likely to increase sales because their products can replace foreign ones," suggests Andrey Kostikov.
According to Evgeny Ivanchenko, the strained political relations with the West will actually impact economic cooperation. It is most likely that some foreign businesses will abandon the idea of entering the Russian market, he believes. But today the government takes whatever action is possible for imports phase-out, thus supporting national manufacturers, including the development of industrial clusters.