On March 23, 2010 Prime Minister Vladimir Putin attended an innovation forum for small and medium-sized enterprises, hosted by the public organisation Opora Rossii. One of the forum participants, representing the Generalny Direktor professional business magazine, asked the prime minister for an interview. The following are Vladimir Putin's written answers to the magazine's questions. 

Question: Some people believe that small businesses lack adequate protection, and that the national credit policy and electricity and gas pricing policy virtually overlook its interests. What is the government doing to make small companies stronger? Are there any plans to establish a special state agency that would support small businesses?

Vladimir Putin: The government annually introduces special measures for supporting small and medium businesses.

A new version of the law on supporting entrepreneurial activity was passed in 2007.

Laws on reducing the number of checks, abolishing the so-called extra-procedural powers of police divisions and introducing the notification procedure for opening new businesses in 20 most important business areas were passed in 2008.

In 2009, we allowed the regions to introduce tax breaks for small businesses and drastically increased the range of companies that can use the simplified taxation system. We have also allowed many self-employed businesspeople to forgo the use of cash registers.

This year there are plans to expand the use of the tax patent system and to allow small businesses to purchase the state and municipal property they are leasing.

It has been decided to reduce the fee for connection to the energy grid for small-capacity facilities.

The Vnesheconombank's loan programme to support small and medium businesses will amount to 100 billion roubles this year.

Small and medium businesses also receive additional direct budgetary support each year. Ten billion roubles have already been allocated for this purpose in 2010. We also plan to add another six billion roubles from the Anti-Crisis Fund.

I am confident that these measures are already yielding tangible results. In the future, small and medium businesses will continue to make an increasing contribution to Russia's development and its economic diversification and renovation. Apart from traditional spheres of activity, this implies high-tech sectors, including engineering, science and telecommunications.

As far as a special state agency for entrepreneurial activity is concerned, our previous experience in this field can hardly be called successful. The Ministry of Economic Development is currently responsible for this area. I can assure you that this influential department protects the interests of businessmen in a tough and effective manner.

Question: Some say that regional officials ignore the federal government's decisions. What is the most effective leverage for monitoring the implementation of federal decisions that the government is going to introduce?

Vladimir Putin: We should not forget that Russia is a federative state, and that every tier of state power enjoys a certain level of independence.

This is a tremendous advantage of our country. Healthy territorial competition and local initiative are effective institutions of modernisation. It is hardly surprising that many countries with an advanced high-tech sector, including the United States, Germany and Switzerland, have substantial territorial independence.

On the other hand, we now have enough effective mechanisms facilitating compliance with the law and coordinated work at all levels of state administration.

We have prosecutors' offices and financial control mechanisms. A system for assessing the effectiveness of state power bodies and of local governments is in operation. As a last resort, the president of Russia has the right to voice his distrust in a regional leader.

At the same time, I would like to stress that federal control is not and cannot be comprehensive.

Regional administrations should assume responsibility before citizens. The people assess the performance of government bodies through elections of legislatures and through partisan preferences. I believe that this feedback mechanism is no less effective than any control from above.

Question: Innovations have been in the focus of public discussion of late. Russia already has a substantial number of technology parks, research centres and business incubators. Substantial investments are being made, but the results so far have been unimpressive. Some analysts believe it is premature to finance innovation and suggest instead that we should focus on modernisation of industry and infrastructure as a way to develop those economic sectors that will later generate demand for innovation. Do you think they are right?

Vladimir Putin: The goals you mentioned are not mutually exclusive. Moreover, they should not be separated in time - first improving infrastructure and education, then modernising industry and only after that beginning to think about technology parks and business incubators.

Our development policy is an integrated process, where all components are interrelated, so all our actions should be balanced.

I'm sure you will agree that economic leadership in "traditional" sectors such as fuel and energy, construction, trade, transport or farming is unattainable without higher labour productivity, new energy-saving technologies and innovative materials and solutions.

The same holds true for social services, healthcare and education. It would be unwise to invest in repairs of hospitals and schools but put off the introduction of modern treatment and teaching methodologies "till tomorrow."

All businesses, whether they are engaged in innovative activity or not equally depend on a favourable investment climate, a healthy competitive environment and access to long-term credit resources for growth.

It is also hard to agree that the recently established development institutions show unimpressive results.

There are examples of effective operation of special economic zones in Lipetsk, Tatarstan and Tomsk, and industrial parks in the Kaluga Region and Novosibirsk.

The problem is that these and other projects will take longer to reach their full capacity.

Question: What forecasts could you cite concerning growth in the number of innovation businesses in Russia as a result of introducing stimulating policies, including tax incentives?

Vladimir Putin: First of all, I would like to cite a few figures. Innovation products account for a mere 5% of Russia's economy, and less than 10% of Russian companies introduce technological innovations.

There are many reasons for that. In the past we had practically no economic incentives to introduce innovations. There was no healthy competitive environment in place, which would prod companies to renewal. The national innovation infrastructure is meagre. The shortage of long-term financing available was also a discouraging factor.

The number of innovation companies should certainly grow. Even a small result which would help strengthen Russia's foothold in markets for innovation products and services would justify the effort.

The government will soon submit a package of bills aimed at stimulating innovation to parliament.

One of the key stimulating policies will be to exempt new energy efficient equipment from property tax for three years.

Another plan is to streamline the accounting practices for R&D expenses and depreciation policies. This would make the simplified taxation system applicable to small innovation companies established by universities and research centres.

And, what's most important, decisions will be passed to compensate the growth of fiscal burden on the payroll fund of IT companies, residents of technology innovation special zones and mass media. Their compulsory insurance premium will be raised gradually over time, rather than as a single step.

We are also working on changing the tax authorities' interaction principles with taxpayers. Businesses should be assisted in using their benefits wisely, rather than punished for small mistakes.

Our stimulating policies are certainly not limited to building a "friendlier" tax system. However, changes in tax administration are important, because it should not create problems for importers and exporters of high added-value products.

We will also gently encourage businesses to introduce new technologies by tightening technical regulations, introducing modern environmental safety and energy-saving standards.

Question: Given that the term innovation has no legal definition today, what do we mean by innovation, innovation business or innovation activity? As it is, there are multiple interpretations. How do you define it?

Vladimir Putin: I do not think we should invent our own definition, because there is a globally accepted interpretation of the terms. Innovation internationally means introducing an improved product or service, with introducing being the essential part of the definition.

It follows that one of our key goals is to create a stimulating environment for turning new knowledge and technology into a product that enjoys demand in the economy, society or individuals.

To meet this goal, we have established a whole range of development institutions, from special economic zones to the national Investment Fund. We must open the way for a comprehensive introduction of innovation in all areas of life - the government system, industrial production and social services. It is key to our future, our competitive viability tomorrow.

Question: What is the general strategy for the country's development? What should everyone, including officials, businesspeople, hired employees and ordinary Russian citizens strive to accomplish? What kind of an economy should Russia eventually create?

Vladimir Putin: I think all of us have one and the same goal, which is to live in a country with substantial capabilities and high social standards. All of us want to be rightfully proud of our country.

I believe that responsibility is the key to accomplishing this objective. Each of us should assume responsibility for his or her home, backyard, job or business, for the state of regional and national affairs. The people should take their destiny into their own hands and elect a responsible government.

For its part, the government will consistently expand private initiative opportunities in the sphere of entrepreneurial activity and the implementation of various social and humanitarian projects.

Responsibility will not emerge where there is no place for it.