The 16th meeting of the body – created in May last year – was devoted to finding a solution on how to bring the Russian military industry up to today’s standards and make it serve the purpose of the modernization of Russia’s economy. Describing the overall situation, Medvedev was quite unhappy with how the development of this important sector of the economy is progressing.

Unfortunately, he pointed out, currently defense industry production mainly remains small-scale. “We are falling behind of industrially-developed countries in what refers to productivity of labor, organization of production and quality control…and the ability to quickly respond to market challenges,” the president said. Some Russian research institutes and design bureaus keep optimizing Soviet developments, he added.

Medvedev insists that the military industry should set working on innovative projects as a priority for development. It should not be just a consumer, but also a generator of new ideas, he said, adding that Russia has quite good potential for that.

“Only this way can we remain competitive in military and technological sectors and provide for the modernization of the economy as well as proper level of national security,” the president stressed.

He noted that huge sums of money have already been spent and will be allocated in the coming years to modernize the defense industry. On Tuesday, the country’s defense ministry announced that over US$600 billion will be spent to re-equip its armed forces with cutting-edge weaponry.

“I would like the invested money to finally stimulate the innovative activities in one of the key sectors of Russia’s economy and create a respective cumulative effect,” he said.

According to the president, there must be a constant dialogue between civil and military structures so that the technologies developed in one sphere could also be applied at the other. Defense industry developments in medicine, IT, space and nuclear research should not end up being used for military purposes only, but should “fit well into the logic of the economic development.”

Russia to create analog of DARPA

Speaking at the commission’s gathering, Dmitry Medvedev also urged the establishment of an agency similar to those functioning in the West, for instance – the American Defense Advanced Research Projects Agency (DARPA). The US agency is responsible for the development of new technology for the military.

“Russia does not have a structure that could order innovative research and development for the interests of the defense and security, including perspective, though rather risky developments,” the president said. “I believe we should think of organizing such a structure in our country and discuss what it should be like and what its organizational principles would be.”

Following Wednesday’s meeting, Deputy Prime Minister Sergey Ivanov told journalists that the new structure will not be a new federal body of executive power.

"No special federal executive authority will be established, this is for certain, but there must be someone in position to distribute cash to fund fundamental science and research," Ivanov said, reports Itar-Tass.

According to the official, the president has given instructions to research the matter. “Two month will be enough to come up with proposals,” Ivanov added.

Know-how and staff outflow stunt development

Addressing the commission, Medvedev also observed that many developments that were initially supposed to serve military purposes – such as the Internet and GPS – later became available on the open market.

Defense Minister Anatoly Serdyukov, for his part, noted that Russia also has some achievements to boast about and that innovative defense industry developments are now used in different areas of life, including countering terrorism, providing security on transport and dealing with the aftermaths of natural disasters. Among those are, for instance, the Global Navigation Satellite System GLONASS, over 60 immuno-biological drugs and mobile hospitals.

However, the minister said there are a number of problems that hamper the development of innovation technologies in Russia. One of the obstacles are the absence of an efficient exchange system between organizations. Also, “the low efficiency of intellectual property rights protection results in the uncontrolled transfer of innovative technologies abroad”.

Among other problems named are outdated manufacturing equipment and the lack of professionals because of "the imperfect system of scientific staff training, ageing specialists in key technologies, the lack of highly skilled workers and their outflow abroad," Serdyukov said.

To tackle the problems, Serdyukov suggested that the Defense Ministry should cooperate with other federal executive authorities, the Russian Academy of Sciences and state corporations.

Vladimir Verba, CEO at Vega, agreed that the lack of professional staff is indeed a big problem. However, as a result of the company’s close cooperation with universities and attractive working conditions, including a program providing employees with housing – young specialists account for almost a third of Vega’s staff. The concern was created in May 2009 and integrates 20 firms producing radio equipment for the aircraft industry.

The company’s head is confident that “the defense industry should become the engine of Russia’s progress”.

“We really do need technological modernization and innovative development in order to be able to manufacture high-standard products,” Verba said.

He accepted that today the quality of some products in the Russian defense industry is criticized by the Defense Ministry. According to Verba, “We…do realize the customers’ demands are fair when it comes to creating the creation of technologies and weaponry for the armed forces”. Therefore, importing some kinds of weaponry is a “coercive measure”. As one of the solutions, he suggested creating joint ventures.

“Russia has lost a lot in terms of scientific research, in terms of the world class military designs during the end of the Soviet era because Russia did not take part in the information revolution, whereas the western countries did. And also Russia lost a decade and even more after the collapse of the USSR,” he said.

“In order to compensate for that, in order to overcome the fact that the current Russian weaponry is adequate for developing countries but not quite OK if we are comparing with the United States or with the most advanced in military terms as in countries of the European Union such as the United Kingdom, France and Italy, Russia has to import,” said Suslov.