The session “Challenges of the Digital Economy: The Role of Sociocultural Factors and Infrastructure in Business Growth” was held on the first day of the Sochi-2017 Russian Investment Forum. The event took place in partnership with the All-Russia Public Organization “Delovaya Rossiya”. The speakers touched upon the conceptual framework of this subject and also discussed the challenges that the digital economy poses to modern society, primarily in Russia.

Deputy Director of the Presidential Experts’ Directorate Leonid Osipov noted that the Russian Government is currently working jointly with the Presidential Administration on a digital economy development programme based on instructions from Russian President Vladimir Putin. They have tentatively drafted a model that consists of three main levels. The first level is markets and sectors. This refers to specific enterprises in sectors of the economy at which digital technologies are being introduced, digital platforms are being used and the business models are changing dramatically. These include the sections that are traditionally regulated by the government: education, healthcare, the military-industrial complex and the actual institution of public administration.

The second level deals with cross-cutting technologies. Such technologies are utilized by enterprises in the first level when transitioning to a digital economy. This involves work with a large volume of data, neurotechnologies, artificial intelligence, quantum technologies and various new production technologies – the industrial internet, robotics and sensors along with wireless data and virtual reality technologies.

The third level is regulatory control. “This is where the conditions are developed to create companies that are national or global champions. They develop and introduce cross-cutting technologies, which in turn create new markets. The third level is the foundation for the first and second levels”, Osipov said.

The speaker added that the third level consists of five parts: regulatory control of legislation, digital infrastructure, research and development, personnel training and a control system.

According to preliminary data, the programme should be developed by June 2017 and implemented by 2025.

All-Russia Public Organization “Delovaya Rossiya” President Alexei Repik spoke about how these plans may change existing business processes. He noted that members of the digital economy dominate the top ten most valuable companies in the world.

“Assessments by investors, markets and people of the future clearly indicate that we will be living in a new world where the digital economy will be the determining factor for generating added value”, he added.

At the same time, Repik noted that most of these companies are not in the top ten “in terms of revenue”.

“The basis or foundation is currently being formed for the new world and the new economy in which we will live going forward whether or not we want it or agree with it. The rules of the game are currently being established along with a kind of contract – a ‘marriage agreement’ – between the existing economy and the economy of the future. New companies have the feeling that they will fully change the world and everyone will live differently. Meanwhile, representatives of classic business say that this is wonderful, but for now we still need to feed personnel and generate income. Thus, traditional companies are cruising along the rails like trolleys or trams and are very cautiously backing away from their horizons”, Repik said.

ADV Chairman of the Board of Directors Dmitry Korobkov noted three trends. First, the digital economy is an economy of platforms where people meet up to conclude a specific transaction. ‘Uberization’ is washing away all the intermediaries and agent functions.
The second trend is a shared economy. Now it’s not entirely necessary to own something; renting is sufficient. The need to purchase a bunch of things will no longer exist.

The third trend is the transition of more and more needs to a digital platform.

This all poses enormous challenges. There are also two extremely important objectives for business, including in Russia. The first is to support education and knowledge among people about technologies and about how to interact with them. The second is support for start-ups, which can help to alter companies.

Deputy Minister of Telecom and Mass Communications of the Russian Federation Alexei Sokolov shared some statistics with the audience.

The volume of the Runet economy surpassed RUB 1.5 trillion in 2016, which is 3% of the country’s GDP. The share of internet-dependent sectors of the economy exceeded 19% in 2016, or RUB 10 trillion. The Runet audience reached 86 million people with mobile devices accounting for more than 60% of internet connections.

The ministry faces two major challenges – creating the necessary infrastructure and ensuring the security and smooth operation of the internet in Russian territory.

The problem of creating communications infrastructure is being resolved. A project to eliminate the digital divide has been under way since 2014.

As regards personal data protection, the deputy minister noted that Russia currently has one of the most advanced laws in the world.

“Nobody is planning to tighten the existing standards or adjust them somehow. There are simply new entities emerging which need to be studied jointly with the expert community in order to understand how to guarantee the interests of our citizens without disrupting the existing business processes”, Sokolov stressed.

The expert also addressed the issue of identifying users.

“We have launched a pilot project to introduce biometric identification methods in order to receive a number of public services and improve bank transactions with an understanding that the solutions we select may be in demand among other market participants and scaled into other business processes”, he said.

Sokolov also touched upon the subject of replacing imports of digital products. He noted that in 2016 the volume of software exports, including custom-made services, surpassed USD 7 billion. They have more than doubled over five years.

“We believe that the experience of Russian software plays a key role in the Russian economic programme because the best import substitution policy is to manufacture a quality product that is not only capable of displacing analogues from our own market, but from foreign markets as well”, Sokolov said.

Deputy Minister of Energy of the Russian Federation Anton Inyutsyn noted that energy is one of the key consumers of the digital economy and an industry that not only generates orders, but also invests heavily in creating infrastructure. He added that more than 10 million people reside in settlements with fewer than 500 people.  

“We want to come up with a comprehensive idea or roadmap that would make it possible to more actively introduce the regions to technologies that would create a fundamentally new standard of the quality of life in such populated areas: from energy to education, healthcare and logistical infrastructure. In our view, this would help to create modular technologies for which there is great demand in our country”, Inyutsyn said.

Agency for Strategic Initiatives (ASI) CEO Svetlana Chupsheva said that the UK and South Korea are leaders in the digital economy. The contribution of the digital economies to their economies is as high as 10%. She said Russia has all the opportunities to increase its share. A new system of education is being developed with the ability for independent study and tracking knowledge. A pilot project has been launched in the healthcare industry to develop telemedicine in a number of areas. Digital technologies are coming to the rehabilitation system. ASI is implementing a project to create children’s technoparks in all regions of the Russian Federation. At present, there are roughly 30 platforms where IT and digital technology skills are imparted on young people aged 8 to 18.

Visionary, investor, composer and founder of GRUPPA KOMPANIY FAMILIA Alexander Shulgin noted that the new generation is ready to accept the challenge of the digital economy in the form of self-employment. But engagement processes need to be developed for this purpose.

Acting Governor of Novgorod Region Andrei Nikitin also spoke about the growth in the digital divide in the regions. He stressed that the time has come to create a step-by-step action plan for each region for the next 2–3 years in order to resolve this problem; otherwise, the gap will expand even further.

In response, Svetlana Chupsheva promised that uniform standards would be formed for each Russian region by the end of the year.

EY Country Managing Partner for Russia Alexander Ivlev noted the problem of employment in the population. He confirmed that society is moving away from a free enterprise economy towards a robot-based economy. Manufacturing has currently been robotized at a level of almost 95%. Nobody knows what to do with people.

For his part, Alexander Shulgin suggested utilizing gamification processes to resolve the problem.

Deputy Director General of the Analytical Center for the Government of the Russian Federation Vasily Pushkin said that “the government is a serious inhibitor to the development of the digital economy”.

The government requires paper confirmation of all business processes, including digital ones. “A serious challenge is to alter the principles of working with data as such. Government legislation does not have sufficient standards to describe work with data, the exchange of data, data sharing and the use of data. This not only applies to data storage and processing, but the life cycle of data and a digital archive. All the things that the government currently identifies as basic requirements for company reporting and the confirmation of transactions… The development and establishment of Russian platforms that could confirm these transactions. Government services are not enough”, Pushkin said.  

Pushkin stressed that the government authorities need to adjust to a new kind of control and supervisory activities.