FOCUS: Putin wants to digitalize economy to propel Russia’s devt, cybersecurity

By Yekaterina Yezhova

MOSCOW, Jul 17 (PRIME) -- Before urging a recent G20 summit to elaborate common digital economy rules, define the cybersecurity notion, and set rules of the game, President Vladimir Putin called on his government to break away from energy dependence with digital transformation by 2024. The move will need a balance in state control, while cybersecurity is at stake, as analysts said.

Russia must create an effective mechanism to promote the digital economy, abolish legal barriers, and launch tools to support local digital leaders, Putin told a council for strategic development and priority projects on July 5.

“On the basis of the accumulated technological potential, we’ll have to implement a difficult comprehensive project. It has no precedents by scale, importance, effect on the life of the country and every person,” the president said, comparing the digital economy initiative to the construction of railroads in the late 19th century and electrification of the country in the first half of the 20th century.

Roadmap

A 2018–2024 draft program for the digital economy, or economy of data, is initially a part of Putin’s decree issued in late 2016 and aims at creating conditions of launching and accelerating digitalization of everyday life and economy. Communications and Mass Media Minister Nikolai Nikiforov suggested starting with healthcare, state management, and “smart” cities.

Changes will also take place in other industries where priority projects will be implemented, Nikiforov said, adding that a current assessment of annual expenses under the plan amounts to some 100 billion rubles, but extra budget spending could follow.

The blueprint stresses the development of local computer and telecommunication equipment, and software, including antivirus programs for all foreign computers.

“Russia should strengthen its positon on the world market of services to process and store data, and the country’s share in this industry on the global scale should rise to 10% by 2024 from less than 1% at present,” the Russian Association for Electronic Communications (RAEC) said, quoting the program.

Up to 97% of the country’s households should have broadband Internet with a speed of at least 100 megabits per second by 2024, and all big cities with more than 1 million people should be covered with a future 5G mobile connection standard.

The share of households with access to the Internet spiked to 74.8% in 2016 from 48.4% in 2010, and an average connection speed is now at the level of France and Italy, Putin said, referring to federal statistics data.

The program also pays much attention to support of national leaders, which should comprise at least 10 high-tech companies by 2024.

Deputy Communications Minister Alexei Volin said, “It’s not a question today whether we will have the digital economy or not. We will certainly have it. The only question today is whether it is local or foreign. Our goal is to have the one of a local make. We have no doubt that Russia has a chance for a decent digital future.”

Oleg Shagov, head of the analytical department of investment company Solid, said that the digital economy “will change the face of the Russian stock market in the future,” while quotes of local Internet giants Yandex and Mail.Ru Group had already outperformed the market.

Yandex gained 52.2% since the beginning of 2017 to 1,898.50 rubles on July 13 in Moscow and its American depositary receipts went up 55.7% to $31.68 in New York. Mail.Ru Group’s global depositary receipts rocketed 47.6% to $27.16 in London.

The RAEC calculated input of the digital economy into the country’s gross domestic product at 2.8%, while Internet-dependent markets contribute 19% to the indicator.

The Runet, a Russian-speaking segment of the Internet, employs 2.5 million people, and infrastructure and software are estimated at 2 trillion rubles, while marketing and advertising at 171 billion rubles. Digital content is estimated at 63 billion rubles, and e-commerce at 1.2 trillion rubles. The experts think Internet penetration will amount to 80–90% in 2020.

“While developing the digital economy, its transboundary character should be kept in mind, along with international agreements and conventions, and how the local law will adapt to the world picture. We should remember that we won’t be able to shut ourselves off. This is why special attention should be paid to cybersecurity,” the association’s experts said.

The Agency for Strategic Initiatives’ spokesman Dmitry Peskov said earlier that digital economy should not be overregulated, because abuse of bans could force ordinary users to skirt rules instead of following them.

Cybersecurity

In order to implement the program, the government should guarantee sustainability and security of infrastructure, which is constantly threatened by hackers.

RAEC experts say that at least 40 million cybercriminals now work on the global scale, and the number of virus attacks rises 3% a month. In 2016, cyberattacks mainly targeted financial companies. Every month specialists detect almost 12 million new forms of malware. The number of such “discoveries” was higher in the last two years than in the previous decade.

According to local antivirus firm Kaspersky Lab, every fifth company in the world faced at least one incident of IT security in 2016 as a result of ransomware attacks. An average amount of claimed ransom spiked 266% in 2016.

Zerich Capital Management analyst Oleg Yakushev said that vulnerability of information systems is a global problem. “The reason is that U.S. developers leave loopholes for special services, which become known to hackers after information leaks…In such cases, development of the digital economy in Russia should certainly include elaboration of a system of effective protection of information, in the first place, personal data,” he said in a research note.

In 2016, the number of thefts from banking cards in Russia jumped 43% in 2016 to 107,000 cases, and total losses of banks and their clients stood at 2 billion rubles and could be 5 billion rubles if all attacks succeeded. In 2017, the number of thefts from cards could rise further by 30% to 135,000–140,000 cases, Yakushev said.

(59.8806 rubles – U.S. $1)

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