Transcript of the beginning of the meeting:

Vladimir Putin: Mr Tolokonsky, we have talked about the economic and social situation in the Novosibirsk Region in sufficient detail, particularly about housing rents and utilities fees.

Although you have described everything to me in great detail, we should take advantage of the present opportunity to specifically address any problems you deem it necessary. Let's talk.

Viktor Tolokonsky: Thank you, Mr Putin.

The downturn slowed rather than reversed growth for us. We enjoyed rapid growth in the economy and all areas of life before the downturn. However, the gross regional product shrank by 4.5% and industrial output by 7% last year. Though this was less than the national average, it was a noticeable drop in a region that saw annual growth of about 10% for years.

We had to rethink all of our administrative mechanisms. The programme we adopted was not just an anti-crisis programme, but a reform of all our policies for stimulating economic growth, including our investment and innovation policies. And economic growth resumed by the end of the year. I believe we had economic growth in every sector-mining, industry and energy-at 8% to 9% during the first quarter of this year.

Vladimir Putin: So you expect this growth to continue through 2010?

Viktor Tolokonsky: Growth might decrease a bit because of a higher starting point than in the first quarter. Our preliminary target was 3%, but now decided to try to reach 2008 levels, for which we need roughly 7% growth throughout the year. This is possible, judging by the first quarter.

More importantly, we have revised many of our approaches and mechanisms for governing. All ten projects we presented at this conference are linked to a goal-oriented system of government support for developmental priorities. This includes building an industrial park, the first facilities of which are already finished. It is funded jointly by the federal and regional governments and private investors, who have come into the project on their own initiative. These are not enterprising developers trying to make money by renting or selling real estate, but the innovation companies themselves, which plan to remain in the industrial park whose construction they are funding. They have pooled their resources for the construction of a large building for there own use. The work continues.

I think we will build more than 60,000 square metres of facilities in the total area through this project. And this will be more than just a business centre, even though sometimes a series of offices is called an industrial park. The first building, which was recently completed, will offer fifteen cutting-edge industrial technologies giving innovators access to all the necessary industrial, design and R&D facilities on location, at low costs. They will avoid major companies' overhead, thanks to the preferential terms small businesses enjoy for rents, service fees and other expenditures.

As for the development of agribusinesses, we have done much to upgrade farm machinery through an ambitious programme. We have spent 12 billion roubles to purchase new equipment these last three years. This was one of our main efforts to stimulate agribusinesses, and besides these incentives implemented through the National Projects by government resolution, we have subsidised another 30% of the cost of new equipment. It works like this: farmers get a loan, without providing collateral and subsidised by the federal government, for leasing new farm equipment, and we gradually reimburse their loan throughout the term of the lease by up to 30%. This is a major incentive. A similar project has been presented at the conference now.

We intend to build an entirely mechanised cattle farm with pedigree stock to increase gross milk yield by 100 to 110 thousand tonnes in two years. Regional milk yield is currently a mere 850,000 tonnes, 500,000 tonnes of which is accounted for by larger farms. Now, we want to increase that by 100,000 tonnes. We have a dozen dairy processing plants, and we will soon open another, innovative facility to process all this milk.

Vladimir Putin: What is the minimum number of animals to make a farm profitable?

Viktor Tolokonsky: We have set the threshold at fifty cows because, as you said at the conference today, the primary objective is not milk yields but maintaining the rural way of life.

Vladimir Putin: Fifty? That's nothing to write home about.

Viktor Tolokonsky: Some farms have 1,200 head each, and more are under construction. Still, many villages cannot accommodate large farms, and able-bodied young farmers do not want to leave such villages for major farms or the city. So we set the number at 200 head for a standard cattle farm, while combined farms can have up to a thousand head. But I specifically set the standard for a family farm at 50 head of cattle.

Vladimir Putin: They will be hard put with a mere fifty cows.

Viktor Tolokonsky: Possibly. However, we want to diversify farms. Let some have a thousand cows, and others two hundred or slightly fewer. We have a far-reaching programme to promote small businesses. This is essential for us, because the region has only about ten major industrial plants. We are focusing on high-tech industry, but a typical local plant employs 500, and its production makes a billion or billion and a half roubles. So there were worse dangers during the recession than industrial companies coming to a standstill. There were no work stoppages and no job losses, though we have two or three single-industry towns. They survived and are no cause for concern. The decline of small businesses was a greater danger. This really made us apprehensive, so we established a target fund.

Vladimir Putin: However, you should continue promoting employment in vulnerable localities.

Viktor Tolokonsky: We are. More than that, we intend to study this issue more thoroughly. Even if we make good progress, and I am confident that we will, we still have to acknowledge that there are redundant positions in the majority of economic and social sectors. We need to create new jobs and shift employees from inefficient companies.

Vladimir Putin: The labour market should also be restructured.

Viktor Tolokonsky: We are ready for this. During yesterday's conference, we said that students need greater incentives to study mathematics, natural science and engineering. The region has a career promotion centre and a small business promotion fund. True, we had relevant targeted programmes before, some of them for rural localities, but they all were small-scale and could not do much for such a vast region as this. Now, we have shifted to a new format: we have established a fund with money from the regional budget. The Ministry of Economic Development is giving it major support through a special programme. So we can afford to help small businesses with guarantees for 70% of their loans plus interest. Our guarantees amount to 1.7 billion roubles even now.

Vladimir Putin: That's excellent!