30 june 2010

Prime Minister Vladimir Putin attends the international forum Engineering Technologies-2010 in Moscow

Vladimir Putin

At the opening of the international forum Engineering Technologies-2010

“Support for the engineering industry was one of the priorities of the anti-crisis measures adopted by the Russian government in late 2008 and 2009. In addition to targeted assistance to specific companies – large companies we consider strategically important for the Russian economy – we also worked to stimulate demand for specific products such as vehicles and agricultural machinery… All these measures have helped Russia’s engineering industry get through the crisis essentially unscathed.”

Mr Putin said heavy industry had passed through the crisis very quickly. "From early 2010 until now, auto and machine manufacturing had increased 19%, trucks and heavy vehicle production is up 22.5% and the production of energy equipment by over 30%." The prime minister added that support for heavy industry was one of the top-priority anti-crisis measures taken by the government.

Vladimir Putin expressed confidence in the competitiveness of Russian products, such as aircraft. "We are sure that the Russian aircraft industry will finds its place on the global market," he stressed.

Mr Putin said Russian industry needs prospective international partners, and the government is trying to attract them. "Investors enjoy most favourable conditions here, including convenient logistics, the necessary communications systems, and, in some cases, serious tax and customs benefits offered by both the federal and regional authorities," Vladimir Putin said. In addition, the prime minister promised to reduce the percent of products requiring certification for the the Russian domestic market to 15%.

Vladimir Putin's opening address:

Good afternoon, ladies and gentlemen.

This is not a political event, but it is nevertheless important by virtue of its scale and its in-depth approach to the issues that have brought us here today. This is the largest and the most representative gathering the industry has ever seen, involving 300 companies from 29 Russian regions and 19 foreign companies.

This forum encompasses nearly all the engineering segments and highlights cutting-edge technology and innovative products developed for military as well as civilian purposes. This forum has generated a lot of interest from potential investors who are eager to get involved in large and promising projects. The Russian market is primed for a major breakthrough, for healthy economic growth and modernisation.

We are convinced that Russia needs a strong and competitive engineering industry. The industry currently employs over 4 million people at more than 7,500 companies. Support for the engineering industry was one of the priorities of the anti-crisis measures adopted by the Russian government in late 2008 and 2009. In addition to targeted assistance to specific companies - large companies we consider strategically important for the national economy - we also worked to stimulate demand for specific products such as vehicles and agricultural machinery. Infrastructure projects have also created additional demand for road construction machinery as well as energy and transport equipment.

All these measures have helped Russia's engineering industry get through the crisis essentially unscathed. Engineering companies have experienced some losses, of course. All companies have, both in Russian and around the world. Still, Russian companies managed to avoid critical losses.  It is important to note that the government provided assistance to both Russian and foreign companies. For example, in the auto industry we provided assistance to the assembly plants of foreign automakers in addition to Russian automakers.

The engineering industry is now rapidly recovering. The production of machinery and equipment grew 19% in the first half of this year; vehicle production went up 22.5%, while power generation equipment went up over 30%. Not a single important technology development project was cancelled during the recession.

Just a few days ago the SaM146 engine, which powers the Sukhoi Superjet 100 aircraft, received European certification. I recently visited Saturn, one of Russia's leading engine makers, where we discussed the need to promote this engine. On June 23, they received an international certificate. Customers will begin receiving their Sukhoi Superjets by the end of this year.

We are confident that Russia's aircraft industry will find a niche on the global market, and we have high hopes for the industry. We are fully aware of the current situation on the international aircraft manufacturing markets, how intense the competition is, and that most of the niches have already been filled. But we are convinced that Russia has potential in such segments as long-distance airliners and special aviation equipment, combat aircraft - a niche we certainly have a competitive edge in - and transport aircraft. In fact, some of the transport models are built only in Russia.

We believe that our future in the transport segment lies in cooperation with our Ukrainian partners. I am referring to the joint project to promote the Antonov family of aircraft.

Russia is also implementing long-term programmes in nuclear power engineering and building ships, complex naval equipment, and spacecraft. We invest in R&D, in academic projects, and in the training of engineering and technical personnel.

Profound structural changes are now underway in the national engineering industry, including the defence industry. Strong and competitive clusters are being established, and the regulatory framework for the sector is undergoing improvements.

Last year, we reduced the number of mandatory certification requirements. Previously, as much as 80% - let me repeat, 80% - of engineering products in Russia required a certificate, and obtaining one was a lengthy and costly procedure. Now the list of products has been cut by half.

But we are not stopping there. We understand that more must be done. Ideally, no more than 15% of Russian engineering products should be subject to mandatory certification.

Dozens of new technical regulations for specific products have either been adopted or are in the works. In most cases, they have been harmonised with similar EU requirements. This is incredibly complex and time-consuming work carried out by professionals. This work often goes unnoticed, but it is what creates the regulatory framework that is necessary to facilitate the industry's growth in Russia.

Finally, Russia is setting up more and more sites for innovative production facilities, such as special economic zones, industrial parks, and regional industrial hubs like the ones in Kaluga, Lipetsk, Tomsk, Tatarstan, and other regions. These projects are gaining momentum; many of them are already entering the commercial production phase.

Investors enjoy many benefits in these locations, including convenient logistics, all the necessary infrastructure and communications, as well as tax breaks and preferential customs duties granted by federal and regional authorities.

The future of Russian engineering cannot be considered independent of global trends. We need effective models of technological and industrial cooperation, and we need to attract promising foreign partners who can generate new ideas and share their experience of founding high-tech companies.

Foreign companies are enjoying success in Russia, both independently and through joint ventures. These include Siemens, Volkswagen, Renault, Fiat, Peugeot Citroen, Hyundai, Magna, Toyota and other auto giants.

There are representatives of foreign engineering firms in this audience. We are especially interested in your opinion of the industry's progress in Russia. We are also interested in your experience and your views on other factors that may be holding the industry back.

I expect that we will have an opportunity to discuss this all in greater detail. I wish you all success, and I thank you for your attendance.

Thank you very much.


Prime Minister Vladimir Putin's remarks during an exchange of opinion at the plenary meeting to discuss the technical and technological modernisation of Russian industry:

Vladimir Putin (in response to remarks by Dr Frank Schauff, CEO of the Association of European Businesses in the Russian Federation): I would like to start with so-called technology transfers. This is a very odd phrase. Just what is a technology transfer? No one in the world we live in would just give anything away for free, with the exception of humanitarian aid, of course, where it is needed. Everything else has a cost. Cutting-edge technology is a commodity, one that our partners want to market and sell, and we are ready to buy it for good money. If they don't want to sell, then they don't have to. But we say: we need excellent products, and we are interested in acquiring them. You want to sell at as high a price as possible, but that is something for the negotiating table. Number one.

Number two: some technologies are provided as contributions in joint ventures. This means that a company which contributes these technologies is a partner and it should ultimately make profit from joint activities. This, too, should be taken into consideration.

Number three: I want to say that the Russian law fully protects intellectual property. And so I want to ask if there really is anyone who has suffered because of a technology transfer. Show me at least one person who thinks he has been robbed.

You should not allege that Russians are out to do what the character from one of our famous literary works does: snatch a juicy morsel from the boss' kitchen and then quietly gobble it up in bed, hiding under the blanket. Russia never pursues such policies.

I understand your apprehensions, because I know that in some countries people try to copy something and then use it for themselves. But we never do this. We use the technology we purchase officially or receive through partnerships for the common good, for the sake of global economic growth and the development of the relevant industries. Of course, we don't ignore the interests of our own national economy and industries. This is only natural, and I assure you that we are alike in this sense.

Yes, sometimes things do not go according to plan. And yes, sometimes there are problems with criminal elements or persons who seek to use some industrial method to gain an unfair competitive advantage. Such companies and persons do exist, but we will work with you to oppose them. Of this you should have no doubt: it is the bedrock of our strategy for industrial development. This is the first aspect of so-called technology transfers.

Mr Frank has also said a few words here about immigration policy. But these issues are settled internationally, on a reciprocal basis. We have always worked according to this principle, and we will continue to do so. We are open to a system based on visa-free travel: we are ready. If you look up my public remarks over the last several years, you will see that I have often said that ‘we still have much to do, because we need to strengthen our borders.' We still need to strengthen our borders today, but have made significant progress in this area, and now I daresay we are ready - from a technical standpoint, that is - to shift to a system based on visa-free travel with a unified Europe. However, unified Europe has not come to an accord on the matter. We are in no hurry to press the issue, because we realise full well that this is a complex process involving 27 countries and a huge number of opinions. I know how hard it is to come to a consensus in the European Union. But we have set off down this road.

What have we done to anticipate the needs of those who have gathered here today, both Russians and our partners? We have decided - Mr Frank has just mentioned it - not to extend the foreign workforce quota to highly skilled professionals. I think this is a significant step towards removing barriers to the movement of a highly skilled workforce. We will continue in this direction. And naturally our final goal is to remove all barriers to the movement of people throughout Europe and Eurasia. The ultimate goal is for Russia and the European Union to transition to visa-free travel.

Vladimir Putin (in response to a question on technical regulations and the possible expansion of the government's vehicle scrappage programme to trucks): This is a possibility. As I said during my introductory remarks, we are all evidently coming out of the recession. At any rate, I hope we are. The fact that industrial production is growing speaks for itself.

We are in the Moscow Region now. It is a constituent entity of the Russian Federation. The governor of this region has just told me that monthly tax revenues for the first five months of this year - sorry, not monthly but daily revenues - are twice what they were during the same five months last year. This is a sure sign that production is recovering. In this situation, we agree with our partners in the G20 and G8 that antirecessionary measures should be gradually wound down to avoid creating so-called economic bubbles. When there is a lot of money being thrown around and production has increased significantly, but goods cannot find consumers on the market, it means that demand is insufficient to sell all these products. And this leads to one problem after another, starting in the financial sector. This situation must be handled with the utmost care, so we need to gradually phase out our antirecessionary measures that artificially pump government money into particular companies and even entire sectors of the economy.

Nevertheless, we see that some industries, for example heavy machinery manufacturing and truck production, still need support. We have seen how effective government measures to purchase used cars can be. And we know that some of our colleagues want to have the programme extended to trucks. This, however, requires extra spending, though this spending would be limited, because our budget expenditures are also limited. A significant portion of the budget goes to social problems and supporting the real economy, including manufacturing. The question is which tools are most effective.

I am not ruling out this possibility. However, I cannot say yet that we will necessarily expand the programme, and I cannot specify any deadlines. Nevertheless, we are thinking the possibility over.

Vladimir Putin (in response to statements by Siemens CEO Peter Loescher on reciprocal projects): We have acquired tremendous experience in working together, and our cooperation has reached into more and more areas over the last decade, including medical technology, nuclear energy, heavy machinery manufacturing, and much else. Mr Loescher has mentioned the possibility of entering into the markets of third party countries. Even among the professionals present today, I don't think everyone knows what Mr Loescher and I know: we plan to contract out between 20% and 25%, and sometimes even 30%, of Russian international nuclear power plant projects to Siemens. Siemens will take over the aspects of such projects in which it is an indisputable world leader, while Russian nuclear scientists will continue to control the aspects of such projects in which they are indisputable world leaders. This will allow us to combine our efforts to deliver the best product in the world in this energy sector. Without a doubt, this will benefit the international energy industry, our partners, Russian companies and our clients. This will also move forward technological progress. This is a good example of work together. I very much hope we will have many more such arrangements in the future.

Vladimir Putin (in response to statements by Nicolas Zalonis, senior vice-president of Finmeccanica): Our distinguished colleague from Finmeccanica has mentioned the possibility of establishing engineering centres in Russia. Such centres already exist in Russia. Boeing established one several years ago. Just look at the vast scope of Boeing's high-tech research in Moscow, and how extensively the company is applying its cutting-edge products. Here is one Boeing representative sitting and nodding his head (Laughter).

Nothing prevents us from continuing down this road, especially if we combine our efforts with our European partners, including Finmeccanica. Because I know that Prime Minister Berlusconi supports such arrangements. The work will have guaranteed support from both governments.

Cooperation with Finmeccanica in electronics, aviation and railway transport is very important to us. We are involved in excellent, truly ambitious joint projects, and much excellent, ambitious work.

When our distinguished colleague from Renault Mr Esteve was speaking (Christian Esteve, senior vice-president of Renault and member of the AvtoVAZ board of directors), I remembered the difficulties we faced together at the beginning of last year, or rather at the end of last year and the beginning of this year.

I want to say this by way of conclusion: I remember how we came together to address those problems. Renault got involved in AvtoVAZ when the market was at a high point, and paid good money to do so, after which the market collapsed. It seemed as if Renault had been had, because there were questions as to whether AvtoVAZ should receive support, and any support needed to be agreed to by all shareholders, which required solidarity. What did we do? We gave the company a sizeable loan of 25 billion roubles without restructuring its registered capital or demanding extra investment from Renault, which had come in at a high point in the market. We preserved Renault's stock.

And we did this with not just one company, but with the entire manufacturing industry. And not just with manufacturing, but with the entire Russian economy, starting with the banking system. We gave an unprecedented amount of support to Russian banking. And as I said in my introductory remarks, we never discriminated between Russian and international capital.

All banks with foreign capital - from 100% foreign on down - were entitled to the same support from the government and the Central Bank of Russia as banks with 100% Russian capital. Incidentally, not all countries treated our financial institutions the same way; on the contrary, they were deprived of government support. I am just calling the attention of the business community to this issue to make the situation clear. This withholding of support has not sent us into hysterics. We see it simply as growing pains, as a problem of rapprochement and increasing mutual understanding. If such a situation occurs again, we expect greater maturity and readiness to help each other. Then it will be easier to cope with downturns.

And now we have great hopes that we will be able to make further progress together with Renault and implement all our joint plans, particularly the plans we are currently discussing to build a new platform to launch no fewer than five new vehicles. You cannot doubt the continued support of the government of the Russian Federation. I have mentioned this already. If you want or need to increase your stock, we are ready to meet you halfway. We are willing even to exchange some shares with the French government, which has a tiny share in Renault. We discussed this matter quite recently. This would be very special and powerful relationship. We are not going to force anybody into anything, and this depends solely on our partners' goodwill. But it is possible.

And, finally, the conclusion. We have always been rightfully proud and will continue to be proud of our basic science. It is often said that there are still many problems in specialised research, but I have no doubt that the accumulated knowledge of fundamental science will filter into our specialised research. And here, of course, we are interested in working with our foreign partners.

Academician Velikhov (Yevgeny Velikhov, the president of the Kurchatov Institute nuclear research centre) has just discussed our obvious achievements in this area, in Russian specialised research. He said that it is possible to make a three-dimensional model of anything you like. This is very pleasing to hear. There are limitations, however: whatever three-dimensional model you could make of a human head, the model would still differ significantly from the original. This closely depends on whoever is carrying out this or another task. We can make a model of Mr Velikhov's head, but it will obviously be inferior to the original. He [Mr Velikhov] says ‘for now.' Well, in any case, at least for a long time. Success is in your hands. I wish you luck. Thank you very much.