Denis Kovalevich, “The economy of Troitsk is absolutely irrelevant to what we do.'”

City Development through the Eyes of an Entrepreneur.

Spatial development is more than the opportunity to hop on the subway train just around the corner from where you live. Nobody has given a proper thought to the city economy, yet the General Plan is eating away at our salaries right now. How shall we create real jobs in the outskirts, why should one newly created job entail ten more in the town (instead of one as it currently stands)? What has to be done to settle the conflict between the old and new generations of residents, and what does the General Plan have to do with it? Ktogorod.ru spoke with Denis Kovalevich, CEO and one of the shareholders of the TechnoSpark Group of Companies.

Jobs and New Generation of Troitsk Residents

– How many job has TechnoSpark generated?

– There will be 400 by the end of this year. And if we look at the whole infrastructure, including outsourcer and freelancers that we work with, we’ll be speaking of 550-600 jobs. That said, three quarters of those involved in TechnoSpark have originally nothing to do with Troitsk. They are viewed by older generations of residents as newcomers. However they do become genuine residents.

– What is special about these jobs?

– They are high-tech. The term basically suggests that there are high-tech workplaces and as such they generate added value thanks to new technologies that are used in the process. A part of this added value in distributed among our and our suppliers’ employees in the form of salaries, who then give it back to the economy through buying goods and services and indirectly creating jobs in other sectors.

There is another type of jobs, even though they don’t create added value in a literal sense. For example, an employee’s job in a usual supermarket (in contrast to new trading technologies, such as Amazon that make both the trading and logistic processes cheaper).

Denis Kovalevich, "The economy of Troitsk is absolutely irrelevant to what we do.'"

– How are things with jobs in Troitsk? Why do they speak about it so much but yet there seems to be no efficient solution to see any new jobs here any time soon?

What people earn within the city is basically redistribution of the government money, and what comes through the commerce, services and various budgetary institutions, like schools or scientific research centers. However, there are no jobs in the city that generate added value. That’s why some of the people who live here are forced to go where such jobs exist. For instance, Moscow, and make objectively bigger money there.

The main advantage of having startups for the city is the new jobs. The problem with Troitsk (and its General Plan for that matter) is not that the city is turning into a residential area. The problem is that after the Soviet period the city didn’t manage to build the sector of high-tech jobs with high added value.

Disappointment of 2000s and Site in the Field

– How did it all come to this?

From 1991 to 1995 there were about 5,000 new businesses registered in Troitsk that covered 15,000 people in the working population. The vast majority of residents went into business. Now it’s unthinkable. At the beginning of the 1990s, my parents left the TRINITY (Troitsk Institute of Innovative and Thermonuclear Research), rented a basement in the 36th kilometer, leased vacuum units, loaded them with white ceramic tableware, sprayed it with golden titanium nitride and started selling the finished items. That was a hi-tech startup of the time. There were a few hundreds of such technology-based startups for sure.

How many of them still operate now? No more than a dozen. The boom was followed by depression. Since business is nothing like engineering, most engineers failed the entrepreneurial part. It is, I think, the most prevailing case for Troitsk over the last 30 years.

Denis Kovalevich, "The economy of Troitsk is absolutely irrelevant to what we do.'"

town– How did TechnoSpark come along in the south of  the city given the circumstances?

Over the course of a few years in the 1990s the number of real employees in research institutes showed a whopping drop from 12,000 to 2,000-3,000. Lots of labor force was released. And most of those people who opted for entrepreneurship failed to build sustainable businesses. Only a few dozens managed to survive. Currently there are no more than 10 tech companies in the city that were founded by people with the institute background, and they employ only a couple hundred people at the very most.

In 2003, Viktor Sidnev became the mayor and started thinking of what to do: entrepreneurship didn’t work, businesses closed up, everybody was commuting to Moscow, institutes had no prospects whatsoever. That was when the projects of the South and the North came about. The North was supposed to evolve around the university, and the South was all about platforms that would house all sorts of companies from window assembling firms with zero added value to TechnoSpark with the largest investment share in hi-tech in the last 30 years.

It was an extremely important step. As there was no place for new businesses to develop in the city at all. There was no way TechnoSpark could be placed within the city bounds that’s why it was put right in the middle of the field cut off from the rest. That’s where the whole idea about the southern city center in the new General Plan stems from.

Denis Kovalevich, "The economy of Troitsk is absolutely irrelevant to what we do.'"

– How does the city benefit from the appearance of new jobs with high added value?

– The economy of innovation-based cities where hi-tech startups come to life have an indicator called job multiplier. In Leuven (one of the leading educational centers of Belgium with a highly developed high-tech sector — ed. note) each job in a hi-tech startup entails  7 to 10 associated jobs elsewhere. Any structure that has high-tech jobs on board gives rise to nearby accessory suppliers, trade networks, catering and services, schools and kindergartens, medical facilities, etc.

These are the first circle of jobs, as TechnoSpark and Troitsk Engineering Center (TEC) demonstrate. The TEC founded by Evgeny Gorsky offered over 30 jobs to the city, which is to a large extent due to the presence of TechnoSpark as it is one of its main clients. The second circle of jobs includes suppliers and outsourcers.

Secondly. The average salary our employees earn this year stands at 90,000 rubles. These people free up some of their money after they have paid for their food and accommodation. And they go on and spend it. How does it work in Leuven?

Its residents don’t go to Brussels that is 20 kilometers away, just as Moscow in relation to Troitsk. They spend their earnings in Leuven where they find all the shops, restaurants, medical facilities and other services they might need. By doing so they provide funding to jobs in these areas.

Thirdly. Another thing that appears is what we call here in Russia the social sphere, which means schools, kindergartens, clinics and jobs associated with them.

And finally. The more profit the city makes, the more jobs it has that are supported by taxes, which implies the government structures.

Let me run over it once again. Such a structure gives rise to suppliers, trade networks and services, schools, kindergartens, medical facilities and public sector workers.

– How should it be taken into account in development plans and, most importantly, in the General Plan?

The General Plan is all about opening the city for jobs of the “second wave”. Today, Troitsk is failing to create jobs that are demanded by TechnoSpark and its companies. The economy structure of the city is absolutely irrelevant to what we’ve done and what we keep doing.

Denis Kovalevich, "The economy of Troitsk is absolutely irrelevant to what we do.'"

Maslow’s Hierarchy for General Plan and Food in the City

– What do you expect from the General Plan as an entrepreneur?

– TechnoSpark uses a sort of Maslow’s hierarchy in terms of the city development strategy. The bottom level of unsatisfied needs is the sewage plants just 10 meters away from our site. 400 high-tech jobs are located in a zone where it makes perfect sense to wear a gas mask 50 % of the time. Unfortunately, there’s no way the General Plan can fix it, it is an issue of investments from Moscow.

The second level is the ease of travel. It takes half an hour to get here from Troitsk. It’s easier to move to New Vatutinki or around Krasnaya Pakhra. That’s why it’s necessary to lay all sorts of roads to the southern part: not only large motorways but also bike lanes. If that fails to be done, what is going to happen with a site like TechnoSpark? It will be growing in the opposite direction, towards Krasnaya Pakhra or Bylovo.

The next tier [in Maslow’s hierarchy] is the space where people can eat, sleep and spend their free time. The southern part of the town hasn’t got a single café but one kebab stand. It is where many gravitate to for want of anything better.

– How come Troitsk has no food?

– Food comes to where jobs are, not where people sleep and eat in.

The lifestyle in 95% of Russian families suggests that people eat in both in the morning and in the evening. And lunch is taken at their place of work. That is why the first commercially successful restaurant will be located here. As for the format, there is a need of high-quality fast food. If nobody is going to open a café here in the next couple of years, we will do it ourselves. Even though we wouldn’t really like to get into it, we specialize in other things.

There’s no hotel anywhere around. Now [that we are launching the Center for Flexible Electronic] there are 50 foreign colleagues working at the same time and double the number of contractors from elsewhere. Normally it is about a few dozens of specialists who come from other places on a daily basis. We can sustainably fill up to two thirds of the hotel capacity with 100 rooms.

The fourth level is new jobs that could be created by our partners and companies that want to base next to TechnoSpark. For instance, our permanent contractor wants to move here. Where do we put them? The General Plan has no answer to that. Even though the answer is really simple: there should be a piece of land that is leased or sold only to developers that build spaces for rent rather than for sale. Instead, what we have here is a sand depot sitting right on the shore of the pond and a hogweed field on its opposite side.

– Is it a question of the General Plan impact?

– 100%. Can the city opt for the reasonable land purchase to repurpose it eventually? It can. Is it hard? Yes, it is extremely hard. It is a rather tricky management organization. Right now there are no options but residential building construction. The scheme is usual: it’s sold after it’s built. There’s no accommodation for rent, though there may be a demand for about a thousand apartments in the course of the next 10 years. It is a whole multistory complex.

If TechnoSpark continues to develop at the same pace, by 2025 there may be up to three thousand newly generated jobs here. But it can’t happen in the current situation. If we still find ourselves in the middle of sewage plants, sand depots, abandoned constructions, etc, in a matter of a couple of years we will exhaust all space capacity and choke up. So we will have to decide about the second site outside the town that will open new opportunities for us and our partners.

The city could well be benefiting from the number of jobs created by and associated with our activities, from food and trade.  It is an emerging point of economic growth. But this effect is too weak to get amplified. If the multiplier in Leuven is 7-10 jobs, Troitsk only gets a maximum of 1 or 2 as a result. That’s the difference.

 Denis Kovalevich, "The economy of Troitsk is absolutely irrelevant to what we do.'"

Economic Hoax and Confrontation with Residents

– The draft General Plan pretends to take it into account or really does care.

It is the first General Plan that has a real negotiation behind it. At least, when it comes to our sector. There have always been public consultations but there have never been anything that would concern entrepreneurs. Now is the first time they have appeared. There were real talks not only at the level of experts and residents but they also included owners of land, buildings and companies. It is a huge leap forward in terms of communication.

– Which of your suggestions were taken into consideration?

– On our initiative and that of the city mayor we were included in the work group for the development of the General Plan. We have had a number of meetings with the General Plan developers from the Genplan Institute of Moscow. Moreover, we have attracted some of the best specialists in the country, namely the Lengiprogor Institute, so they help us put our ideas in a shape of proper city-planning suggestions.

The first one – the transport accessibility issue – will be resolved. As for the second one, the draft version of the General Plan contains a section about the public area. The southern part is hailed the third city center. And it is all good. But it doesn’t solve the issues with the walking accessibility. Now, let’s see what is missing. It’s not clear what is going to be around the place. There is no sign of those who would be interested to run restaurants, hotels, rented accommodation and tech office facilities or industrial property. In this respect, the General Plan seems to be only catching up with the setback but it doesn’t create any spaces where the missing functions could evolve. They are mentioned in the text but the General Plan as a document isn’t meant to be a description of how to put it into life.

In Russia it is more like a collective “want”. And I don’t think we should really expect much from a very restricted tool. The General Plan should be based on the real economic estimation with zero illusions. That’s why it doesn’t make any sense to draw a city garden in the north. There isn’t a single economic prerequisite for it to appear there. For example, if the document claims that research institutes of Troitsk employ 5,000 people today, we can throw it away because this number is times bigger than what we have in reality. The General Plan can’t be based on an economic hoax.

– A document of such a caliber as the General Plan must be a product of public approval. New high-tech jobs are basically the town residents who can’t wait to see their town open up for them. There are those who stand against such plans, too. What are we to do?

– Nothing. It is a natural process. Any similar situation has only two scenarios. The first one: the town chokes up and hits economic stagnation. There are numerous examples of towns where the old generations managed to nip all the new beginnings their buds. Alternatively, the discourse held on to by conservatives will gradually fall out of date and the town will see a new economic formation.

Denis Kovalevich, "The economy of Troitsk is absolutely irrelevant to what we do.'"

Why does Troitsk need new city spaces?

Yury Perelygin, Head of the Lengiprogor Institute

What Was Done for Troitsk

Many cities today have active economic players that are not only concerned with their business but also the environment where their employees stay. TechnoSpark turned to us with a specific task of turning the territory around the headquarters into a thriving urban space so that highly qualified specialists that are already working or will be working there could have a place to go out and spend time. To make it happen, they had to suggest a number of changes to be introduced in the functional zoning as it is contained in the General Plan.

The plan is basically about how to integrate Troitsk into Big Moscow while preserving it as an independent town. That’s how the things stand. To keep the excessive pressure of the vast megalopolis at bay and at the same time enjoy the benefits of the Moscow city infrastructure reaching out to Troitsk.

We reviewed the early version of the developments offered by the Genplan Institute of Moscow and carried out a field study. After that we came up with a few zoning options that were partly approved by the developers. We also proposed some spatial development solutions in regard to public places of Troitsk.

 Denis Kovalevich, "The economy of Troitsk is absolutely irrelevant to what we do.'"

How Industrial Zones Turn into Public Centers

Such territories are common inside bigger cities. Take the Manometer factory for example, when it was relocated it brought up the issue of repurposing the former industrial area. That is how the well-known ARTPLAY came to life, which became a popular landmark in Moscow. Our organization has done a project for the Brest Fortress. That one was similar to Troitsk in scale. The main task was to turn the fortress into a public venue rather than just an isolated memorial.

How to Promote the Suggestions from Paper to Reality

Our work is broken down into several stages. First, we develop a master plan for the territory in question, considering all land plots and the infrastructure, and then we make a decision in regard to what and how can be changed. We may even end up changing the land plots themselves: we are in continuous negotiations with the owners about their zoning and rezoning to eventually create a convenient public landscape. Then everything is translated into money terms. We calculate the so-called investment lots: which funds (public or private) could be generated in the territory. Later, we put forward our organizational plan and the schedule. If it is approved by all stakeholders, we embark on drafting the layout and demarcation of the territory to convert all the suggestions to the level of regulatory city planning documentation.

Author: Interview taken by Lena Vereshchagina

*Photos and visualizations are provided by TechnoSpark

October 10, 2019