The KASKOL group of companies is one of the largest privately owned defense and high-tech industries in Russia.

The KASKOL group incorporates over 20 companies and leading edge high-tech enterprises. They operate in the aircraft-building industry and in the field of information management technology. The Holding includes well-known industrial enterprises of the former USSR, as well as comparatively young firms. Today KASKOL holds equity stakes and participate through boards of directors in the management the following enterprises:

• Nizhhy Novgorod-based Aircraft Building Plant Sokol (production and upgrading of MiG-31 and MiG-29UB and civil aircraft)

• Gidromash Corporation (leader in production of hydraulics and chassis for aerospace industry in Russia)

• Rosvertol Corporation (production of helicopters in the Mikoyan family - Mi-26, Mi-28, Mi-35)

• Iceberg Central Design Bureau (ice class and nuclear powered shipbuilding)

• Lasurit Central Design Bureau (submarines and submersibles)

• Gorky Machine-building plant (equipment for nuclear power generation)

• Volga-Dnepr Airlines (the world leader on the market of super-heavy and out-of-gauge air cargo shipment)

The Group incorporates the following corporations:

• Rostekhimport - comprehensive equipment of aerospace and general engineering industry with automated systems for project and technical design. Customers include the Irkutsk-based aircraft production association, Aircraft Building Plant Sokol, Komsomolsk-on-Amur-based APO, Ufimsk-based MPO, Moscow-based MPO "Saliut," Lukhovitsy-based Machine-Building Plant, Ministry of Railway Transport, Chernyshev Plant, the Plant "Red October."

• Alpha Integrator - exclusive business partner, supplier of the ''BAAN" Corporation's products in Russia and the CIS. In December 1998 Alpha Integrator was entitled to bear the name "Alpha Integrator Company doing business as BAAN Eurasia". It offers software, corporate planning, accounting and control of financial and commodity flows, and management of production and investment projects. It provides customized services for management information systems.

• Vostokvneshtorg - firm specializing in foreign economic and investment activities. Importer from Vietnam, Indonesia, India, China, Laos, Mongolia, Bangladesh and Pakistan.

Sergei Nedoroslev is in charge of the Holding's activities. He was born in the town of Barnaul, Altai region. In 1985 he graduated from Altai State University with a degree in physics. He did post-graduate studies at the Moscow Institute of electronics, and wrote his thesis on "Technology of Semi-Conductors Production and Semi-Conductor-based Devices". In 1988, together with two partners, he set up the first private company in the Altai region, specializing in development of software. Nedoroslev is a member of the Board of Trustees of the Moscow School of Political Studies. He is a member of the non-profit partnership of managers and entrepreneurs "Club 2015". This is an informal association of Russian professional managers and entrepreneurs from various fields, set up in 1999.

What is your opinion of the progress made by Russian defense industry in 2000?

Summing up last year's performance, I should say nothing whatsoever has changed. The long-expected restructuring of the industry has not materialized. Plainly, the delay in restructuring and adjusting the industry to the global political and economic realties will lead to lower operational efficiency. First and foremost, this is negative from the perspective of the state, the biggest owner of defense assets. Today nobody doubts the urgency to implement radical measures to improve this position.

Aircraft building is especially vulnerable. No headway has been made in creating a single vertically integrated holding to service light military aviation. Without this we are missing the most promising solution for sustaining technical and combat readiness, and also for developing new models of hardware. One thing that proves is that candidates for mergers and integration are still missing, too busy with their own in-house reorganization. Only fully structured companies are mature for integration. I guess that once this transition period is left behind, we will see very different dynamics of development. Only then can we expect to harness the tremendous potential of the Russian military aircraft industry. Among the positive trends, I can pinpoint small, but highly proactive companies which have emerged recently. They employ state of the art management technology and skillful personnel.

The headaches of the helicopter building industry are similar to those of the fixed-wing aircraft industry. There is still no sign of the necessary vertical integration. No positive dynamics of development, no end to discussions of who will take over the Mil Moscow helicopter plant. All production units have disintegrated at Mil. They have failed to pursue a single production and marketing plan for the trademark "Mil", to say nothing of financial and organizational coordination. I strongly believe an integrated structure should be put in place for "Mil" to retain its trademark. Again, we are under time pressure. In view of the tough outside competition, we need to hurry before the window of opportunity closes for us. Absence of a uniform, transparent and predicable management structure hampers implementation of international projects. The prospects are large here. One is to create a heavy helicopter for Europe based on Russia's hands-on expertise. Another promising program is to promote the Mi-38. But these projects stuck because Europeans can't decide with whom to do business in Russia.

The Kamov Corporation, an active bidder in many international tenders, is an example of more successful international marketing and sales.

Ibelieve the fundamental bottleneck for the aerospace industry is the absence of teams of managers with the technical, mental, educational and economic capabilities to run effective marketing plans and international ventures. Such teams are virtually non-existent in Russian aerospace industry at present. Instead you find employees with rudimentary expertise engaged in strategic planning, marketing and sales, a situation in which this leads to no products sold, no clear-cut understanding of our market position. Instead there is an old style method to push equipment developed and made under the USSR MAP (Ministry of Aviation Industry) programs, by very smart people who worked out the projects for many years. However, to implement this successfully, we need to tie project management to today's demand. We must have a transparent organizational structure that can command the confidence of partners, customers and investors. Projects financed by MAP were science intensive, therefore huge investments are required to upgrade them to the appropriate market oriented level. It is virtually not feasible to set up these investments from state funds. An alternative is to seek and build functionally complete teams, which will carry out these projects.

Frankly speaking, we are lagging far behind in understanding the science of management. Should no changes happen this year; we will be thrown 5 years back. One year today costs 5 in future.

What is to be done to reverse the situation?

The high-tech complex so far retains considerable human resources, but they are poorly structured to meet today's tasks. Powerful science and technical capabilities do not contribute effectively to a final product capable of generating income.

Should the efficiency of defense industry management not improve radically, we will lose whatever industry we have. This is the worst possible scenario, but this threat exists. Today, when Russia's overall budget equals that of one large American state, our government is in no position to pay for highly professional managers to manage big-sized and highly integrated companies. Self-starters are in short supply. One possible solution is to contract the services of professional teams of managers to divide their areas of competence.

For my part, let me say, the strategy of high-tech industries we need should project our ambition to win and retain world market position, not to limit ourselves to a part of domestic market.

Take a look at the current position in military and civil aircraft building, and compare sales of combat and civil aircraft. Our combat aircraft have always been produced to fight the machines of a would-be enemy. They have always been promoted under conditions of tough competition for the customer. The civil aircraft have always been limited by an internal market in Russia. Prevailing low prices and cheap labor costs, for example, have not motivated us to produce efficient engines with a longer service life, to compete at the international market.

Today, to win a world market share through integration and cooperation is the only rationale for our development. The activity of the European-Russian Aviation Corporation, which maintains cooperation between the Russian aerospace enterprises and Airbus Industrie, is a good example.

The mutual benefits of such an approach are easy to discern: we gain access to state of the art technologies of marketing, sales and production management which have made tremendous headway in the West over last 50 years: at the same time, we have an opportunity to capitalize on the fundamental potential we have accumulated in our country. Russia has one more advantage over the West - this is our intellectual resource, a sizable number of high-class specialists who are not involved now in the large-scale projects. If we combine state of the art western management technologies and our technical design and production capacities, what a tremendous outcome we can achieve! What we need is to get down to calculations, conduct in-depth analysis and formulate clear-cut objectives. That is exactly what we do at KASKOL. We have a good idea, and we are ready to hit the road. There is one warning - it is not worth effort to try to win in all market segments of aerospace manufacturing.

What is your attitude towards November changes in arms export system?

I think merger and integration are the paths to follow. One unified company, an end to competition of two major powers on the international market. It is appalling that two companies in the hands of one owner, the Russian state, were competing in the market. Now it is possible to carry on with one channel marketing, pricing and other policies. Military-technical cooperation (MTC) by definition will always remain under government patronage, since MTC is an enabler in the process of promoting very complex and politically sensitive weapon systems in the market place.

Everything that is developed in the weapons business is the subject of keen state interest in any country. The state is motivated to ensure growth of sales, not only to gain political dividends or profits, but to expand the tax-base, create new jobs and so on. Only purposeful marketing policy and customer driven efforts will help us implement such objectives.

To recap, I want to say that today Russia, as before, possesses all the required resources to command credibility in the global hi-tech market, and participate in international cooperation. Every one of us is in charge of Russia's world position.