Vladimir Putin's address:

Welcome! Good afternoon, esteemed colleagues and friends.

We are here to continue our discussion on developing the regions of Russia, which we began at a United Russia conference in Novosibirsk. At that time we discussed the possibilities for development in Siberia, and today we will discuss the development of the North Caucasus Federal District. In fact, the discussion is already underway; you have already begun.

The majority of people here at this meeting today call this region home. Your fathers and grandfathers and many previous generations have lived and worked here. Your children see their future in this region.

We love this region as do you, and are proud of its traditions, its diversity of languages and cultures.

I'd like to say that everyone who comes here has a feeling of respect for the Caucasus, for its natural grandeur, its unique local way of life, the wisdom and hospitality of its people, and, of course, for the opportunities for building something new offered by this rich, I would even say extremely rich, region.

The North Caucasus has seen much and suffered much. There are both heroic and tragic chapters in its history, including its recent history. One of the first acts passed by the parliament of the new Russia in 1991 was the law On the Rehabilitation of Persecuted Peoples. It was an act of historic justice, which finally repealed and condemned the illegal, criminal decisions of the past against the Chechen, Ingush, Karachai, Balkar and other Caucasus nations, as well as against the Cossacks. Simultaneously, changes were made to the national and local government, and Ingushetia and Karachai-Circassia were granted the status of equitable entities of the Russian Federation.

Nevertheless, the 1990s did not bring harmony or tranquility to the North Caucasus; the burden of problems inherited from the past was too heavy. It was a challenging time for all of Russia, which fully felt the impact of the Soviet Union's dissolution and suffered a severe economic crisis and a paralysis of government.

But the situation in the Caucasus was more difficult than elsewhere in the country. The region faced open aggression against the people of Russia, aggression incited by international terrorism, and by those who wanted to deal the final blow to an already weakened country, to destroy its territorial integrity and to create a bridgehead for the expansion and implementation of their self-serving plans. And for this they needed to create an atmosphere of fear and constant insecurity, to isolate the Caucasus economically, politically and culturally, not just from Russia but effectively from the rest of the world. Ethnic conflicts were allowed to smolder for years, poverty continued and young people were unable to study or find jobs, and thus became easy prey. We will certainly discuss this later, for not all of these problems have been resolved.

It is clear that an overwhelming majority of the people of the North Caucasus did not wish and do not wish for such a life for themselves or their children. And because of this, because of this above all else, the terrorists have been dealt a crushing blow, which is also thanks to the firm stand taken by the people of the North Caucasus.

We will always remember those who gave their lives in the fight for their country's unity, for peace in the North Caucasus: Russian service members, local police and members of local militias, religious and public leaders, journalists and ordinary civilians.

True, extremists continue to stage their terrorist attacks, but they have increasingly degenerated into ordinary criminals. Their political slogans are just a front for robbery and redistribution of property. But their time is almost past.

I'd like to stress once again: we will do our utmost to protect the life, the rights and the security of our citizens. We will never permit external interference in our internal affairs, or infringements on the territorial integrity and sovereignty of Russia.

But ladies and gentlemen, we have met here to discuss current projects and problems, especially problems.

Of course, the North Caucasus still faces many challenges, risks and unresolved issues. At the same time, it is impossible not to see the progress and the positive trends that have been gathering momentum in the region.

The North Caucasus economy has proved its resilience. The region's industry and agriculture have seen noticeable growth over the past 10 years. True, this is growth on a rather modest base, but it is obvious growth.

Hundreds of thousands of new small and medium-sized businesses employ 1.3 million people, 30% of the region's working population, in agriculture, trade and services. This is quite a number.

The North Caucasus is actively involved in national projects and other social programmes. Between 2005 and 2010, Gazprom allocated four billion roubles to build and maintain natural gas infrastructure in the region's towns and villages. Now access to natural gas infrastructure is 90%, which is higher than in many other regions of the Russian Federation.

Hundreds of schools, sports facilities, hospitals and clinics were renovated and reopened. I remember my first visit to the Chechen Republic in 2000 or late 1999. Schools were closed; classrooms were empty: no chairs, no desks. Everything had been destroyed, ransacked and broken. Students often stayed out of school. They didn't go to school at all in fact.

Again, the region is still facing many problems, but the situation has improved greatly.

Many republics, including Chechnya, have accomplished much on the challenging path of returning to civilian life. Chechnya's healthcare and education systems have been restored and put back on track. In the past two years, 127 kilometres of highways were built in Chechnya, while 53 schools and other educational establishments and 35 medical centres were commissioned, entirely thanks to federal support.

Housing, communications networks and utilities networks are being rebuilt in Chechnya. Here's an example that speaks for itself: in 2009 the airport in Grozny gained international airport status, which was inconceivable a few years ago.

In the past 10 years, the federal government has invested 800 billion roubles in the North Caucasus. In 2000, federal support amounted to 15 billion roubles; now the regional governments will receive some 180 billion roubles through subventions and inter-budgetary transfers. Allocations have grown twelvefold.

Three large-scale federal targeted programmes are underway in the North Caucasus Federal District. These are the South of Russia programme and the federal targeted programmes to strengthen the economies and social services in Chechnya and Ingushetia. A total of 20 billion roubles will be allotted for these programmes in 2010 alone.

As you can see, we are investing significant money and effort in the North Caucasus, which is allowing us to resolve acute social problems, gradually increase people's incomes and improving the region's infrastructure.

However, despite consistent economic growth and a well-funded budget, we have been unable to revamp the regional economy. Government investment and direct federal support, no matter how much, are not enough to ensure the region's sustainable development, create a comfortable business environment, bring new companies into the region and create new jobs.

Private investors, both Russian and international investors, often choose other regions over the Caucasus. Unfortunately, local companies lack sufficient managerial, financial and human resources to carry out long-term projects. Starting a business in the Caucasus is still a major, oftentimes irresolvable problem.

The main problem is that there has been almost no reduction in unemployment. A fifth of the region's population is jobless, with 50% and 30% of the able-bodied population of Ingushetia and Chechnya, respectively, unable to find a job.

Long-term unemployment is probably the region's most acute social and even psychological challenge. A jobless person, especially a young one, feels abandoned and loses hope. I believe that our effectiveness in addressing the problem of unemployment will be the yardstick by which we measure the success of our joint efforts in the North Caucasus.

Over the next 10 years, we must meet a critical objective: creating at least 400,000 new jobs in the North Caucasus. And we must do it together.

Ladies and gentlemen,

In the past months, federal and regional government bodies and experts have been working on a comprehensive strategy for the development of the North Caucasus. The strategy should outline development priorities for all levels of government, business and society, and then focus state and private investment on these priorities. In fact, this represents a full-fledged reinvention of the North Caucasus socio-economic area that will help it eliminate existing barriers and restrictions, bring the region into the country's social and economic mainstream and give the people living here the same opportunities as in any other Russian region.

We'll need to take advantage of the region's competitive edge, which I'm sure each republic has: Dagestan, Ingushetia, Kabardino-Balkaria, Karachai-Circassia, North Ossetia-Alania, the Chechen Republic and the Stavropol Territory.

It's also very important to show prospective investors successful projects in the North Caucasus, which will show them that the state guarantees investment security in the North Caucasus, protects investment against criminality, bureaucratic arbitrariness, racketeering and corruption, and ensures effective law enforcement.

Incidentally, regional and municipal leaders in Russia and particularly in the North Caucasus should see every investor as a family member, protecting and supporting them in every way. We need manual control here today, as in many other sensitive areas, and much depends on you in this respect.

The proposed strategy for the development of the North Caucasus will be submitted for public debate, which this conference is intended to spur. We have gathered here today to make some headway in this direction. We can succeed only if we rely on people's understanding and support.

What action will we take and where?

First, it is necessary to change the attitude to the North Caucasus and neighbouring regions, root out phobias and stereotypes, and improve the region's image in Russia and in the world at large. We should bear in mind that the Caucasus remains the target of a massive ideological expansion from abroad, one that is sometimes based on extremist and radical ideas. The Caucasus is a battlefield for people's hearts and minds. We must not lose here. We cannot allow ourselves to fall behind as passive observers.

The North Caucasus must be fully integrated into Russia's informational and cultural space. Federal radio and TV channels should have more programmes covering the North Caucasus, which should actively involve local journalists - there are enough talented people here, who understand the region's worthiness but are aware of its problems.

I want to make it clear that I do not think news reports should portray an overly rosy image of the North Caucasus. It is just the opposite - we need unbiased and honest reporting on local events.

But the most convincing and strongest arguments are the real, positive changes that have taken place, greater security, restored order in the government agencies, economic growth, a stronger social welfare and, importantly, the development of a functional civil society.

Today people in the North Caucasus sometimes simply cannot get through to government officials or find the understanding and support they deserve, often running up against a wall of indifference, officials who just look out for each other and corruption. This alienation between government and society is the cause of the notorious corruption, unfavourable business climate and a spread of extremist ideas.

To our supporters and the local chapters of the United Russia party, I say that we need continual and substantive dialogue with civil society and human rights organisations. Naturally, there are many people in these organisations that receive external financial support, but there are also people who sincerely empathise and genuinely want change for the better. We need to build relations with religious leaders, young people, the intellectual elite and businesses. Citizens must truly be able to interact with government officials; only then will they believe that the government understand their needs and can find ways to solve their problems. Once again: making tangible changes in people's public life and attitudes is one of United Russia's major political goals for the North Caucasus.

Our next priority is education and modern youth policy, which determines the future of North Caucasus region and the country as a whole. Given that the region has a favourable demographic situation and traditionally high birth rate, we must build more schools here so that no children have to go to school in shifts.

Over the past two years, 116 new schools have been built in the region, and another 50 will be built by the beginning of the 2010 and 2011 academic years. These schools should absolutely be equipped with modern equipment and study materials, and school and regional libraries should have internet access and regularly receive new textbooks and literature in Russian and the languages of the Caucasus.

Local libraries can become centres for communication, recreation and occupational guidance for young people. I believe that Ministry of Culture and Ministry of Educational together with North Caucasus regions should find effective ways to build up local libraries. In 2011, we will increase funding from the federal budget for libraries in North Caucasus threefold, from the current 30 million roubles to 100 million roubles.

Sadly, many prospective projects in the region are hindered by the lack of specialists, and many residents cannot get jobs because they lack proper qualifications.

We have to re-establish an effective system of professional training, and to address this problem we will work with major Russian companies that have plans to launch operations in the regions or are already here. They can build relationships with local technical and vocational schools and training colleges, assist in organising training classes and developing training and production facilities, and implement their own corporate education programmes aimed at increasing their local employees' skills.

For instance, last year the LUKoil company provided training courses for some 3,500 people employed at its facilities in the North Caucasus.

And to show how much our major corporations have put into professional training let me point out that LUKoil, Gazprom, RusHydro, the Federal Grid Company, the Interregional Distribution Grid Company, Transneft, Rosneft and Russian Railways intend to spend 6.1 billion roubles on corporate training and professional education. Much can be invested here.

Moreover, we will set aside an additional one billion roubles to build, expand and restore facilities for primary and secondary vocational education in the North Caucasus. This is additional funding. At the same time, I would like to impress something upon regional officials: you are directly responsible for primary and secondary vocational education and should address this issue in earnest, make adjustments based on the region's needs and make sure that we train the specialists we need.

The North Caucasus Federal District should get its own federal university - we have been discussing this lately and I believe it is a good idea. It will become the region's largest education and training centre. It should focus on training specialists in areas that will become hallmarks of the North Caucasus, including culture, ethnography, folklore, tourism and the services industry, as well as agriculture and manufacturing. The Ministry of Education has been instructed to work out all the details of establishing such a university and submit concrete proposals before the end of this year. And, of course, we will also work to build up other institutions of higher education, since the North Caucasus boasts many strong education institutions with good traditions and reputation. Moreover, talented students from the North Caucasus should have the opportunity to study at leading universities all across Russia.

Here we can use so-called targeted admissions programmes for institutions of higher education, but they need substantial improvement, with clear-cut criteria for selecting applicants and more transparent selection procedures to eliminate corruption and nepotism so that truly best students get the opportunity to study. Through these targeted admissions programmes, leading Russian universities will accept 1,300 students from the North Caucasus annually.

Naturally, we hope that these students return to their home regions after graduation. Local governments should create decent conditions for these professionals, help them settle down, get a mortgage and build a home. Only then will the North Caucasus stop losing its professionals, and even attract highly qualified professionals from other Russian regions and abroad.

The North Caucasus region should host as many Russian and international public, economic, cultural and sports forums as possible. They will bring real benefits, including breaking barriers that hamper normal personal and business interaction.

I believe that both the government and the United Russia party should focus on establishing new platforms for realising young people's initiatives and the region's business, social and cultural potential. This means a wide array of possibilities, from local clubs and academic contests to the All-Caucasus Youth Forum and the Caucasus Sports Games, which will be held for the first time in 2010.

The best projects presented by young people at the All-Caucasus Youth Forum will receive grants worth a total amount of 10 million roubles, and we plan to increase this amount to 100 million roubles next year.

Everyone who has ability, interesting ideas and is ready to build should know that they can always count on our assistance and support.

We should also actively involve young professionals into the government personnel reserve and employ them in federal and regional government agencies, to make them see that doors are truly open for those who have ability and have proven themselves.

We need to focus on training modern managers and entrepreneurs, to teach people how to formulate and implement their business plans properly and speak the same professional language as bankers and investors. We should help people start their own businesses. For example, at least 40% of grants given through small and medium-sized business development programmes are meant for young people.

All in all, we will continue supporting entrepreneurship in as many ways as we can, including through credit cooperatives, microfinance, guarantee funds and business incubators. Thus, we will not only encourage the creation of new companies, but also help entrepreneurs and, equally importantly, their employees come out of the shadows and establish legitimate businesses.

Traditions of entrepreneurialism and a desire to have one's own business are strong in the North Caucasus. I am convinced that if we take full advantage of this asset, we will reap the benefits.

Ladies and gentlemen,

I would like to touch on some other spheres that are crucial for peoples' quality of life.

One of the main healthcare issues in the North Caucasus is to strengthen primary care, to set up a sufficient number of medical and obstetric units furnished with all the necessary equipment, which will make qualified medical help as accessible for people as possible.

To achieve this we intend to take full advantage of regional programmes for modernising healthcare. Let me remind you that these programmes will begin in Russia in 2011. If the regions of the North Caucasus Federal District prepare quality programmes and meet all other conditions for receiving additional federal funding, which may be increased by 15 billion roubles as early as next year, they will be able to spend these funds on renovating out-patient clinics and hospitals to conform with modern healthcare standards.

We have already managed to almost halve infant mortality in the North Caucasus, but it still remains one of the region's most acute issues. That is why one of the priorities of the Healthcare national project in the North Caucasus is to provide better care for mothers and newborn infants, which will include the construction of the Republican children's hospital in Ingushetia.

We have much to build in the North Caucasus, including housing and social infrastructure.

These ambitious plans will mean that we need to increase the capabilities of the construction industry and closely related industries, especially since the production of basic construction materials such as bricks, reinforced concrete and other products still lags behind. That is why we consider it forward-looking to establish new production facilities for construction materials in Dagestan, Ingushetia and Chechnya. There is a lot of room in the market for their products.

Housing construction in this region has risen by 50% to 100% over the past ten years. The region commissioned 2.8 million square meters of housing last year. But we need to aim even higher: four to five million square meters of housing per year.

I would like to emphasise that the government will stick to its commitments to provide people with housing. In the North Caucasus and the rest of Russia all veterans of the Great Patriotic War and all active and retired service members who are currently on the municipal waiting lists will receive housing.

The Housing and Utilities Reform Fund has several projects under way in the district. It has already disbursed over 11 billion roubles (11.3 billion to be more exact) to the North Caucasus region. About 3,000 blocks of flats have been repaired and 340,000 residents have improved their housing conditions. I would encourage the regional authorities to use the opportunities offered by the Housing and Utilities Fund more actively.

I would single out the programmes intended to heal the wounds inflicted on the Caucasus over the previous years. We are shortly to complete the restoration of Grozny as a beautiful, modern and comfortable city. One of the priorities in this work is the development of housing and utilities, and the infrastructure to meet the needs of the rapidly growing city. It has its own programmes that I need not describe in detail because you know them well.

I have already had occasion to speak today about the special 32 billion-rouble programme of Ingushetia's socioeconomic development. There are ambitious plans for renovating the housing and utilities sector, the energy supply, and building transport, communication and social infrastructure. We have to completely relocate the people who have lost their homes due to landslides in the Malgobek District of Ingushetia.

Yet there are also objective problems: the programme being implemented in Ingushetia is the most ambitious ever, and our colleagues do not have the experience of preparing the documentation and dealing with other related matters. I think the Ministry of Regional Development should render constant methodological support to the Republic's authorities to ensure a quick return on the money allocated and to translate it into concrete projects.

The fourth area of our effort is to ensure effective economic growth in the North Caucasus. This is in fact the key task. The district today lags behind on the main social and economic indicators. We should narrow and eventually close this gap. If this is to be achieved, the economy of the North Caucasus should grow by an average 10% a year. I have mentioned this figure, but I think there are many experts among those present who are very good with figures, and we all understand that it is a complicated task, but it has to be tackled.

We welcome, of course, any projects that will contribute to the development of the North Caucasus. For our part, however, we plan to concentrate our support on areas that are natural for the federal district, have strong roots here and rely on a real basis, on local geographical, natural and human resources, and - especially important for us - areas capable of creating many new jobs.

In addition to the construction industry, agriculture, tourism, holiday resorts and the processing industry could be the pace-makers of the region's economy. One should add of course the development of infrastructure, the power industry and the fuel and energy complex. In the agro-industrial complex, as I have said, it is necessary to put in place an effective system of processing and marketing farm produce. Today farmers are often unable to sell their produce profitably and without incurring undue costs: the situation must be improved dramatically, stable sales must be ensured and the incomes of farmers and household-run farms which form the basis of the rural economy in the North Caucasus must be increased sharply.

Incidentally, Rosselkhozbank alone has issued more than 35 billion roubles in loans, and its programme to support agriculture in the Caucasus will continue.

The North Caucasus region has something to offer in such a promising area as tourism with a great variety of attractions: skiing, ethnographic, educational holidays and simply excellent conditions for a good family holiday. Last year the district's holiday resorts hosted 1,800,000 tourists. I think this is only the beginning, and there is still great untapped potential.

As a spearhead project we intend to form a ski resort cluster stretching from the Caspian to the Black Sea. Anyone for skiing? (Laughter.) It will comprise such places as Matlas in Dagestan, Mamoson in North Ossetia, Mt. Elbrus foothills in Kabardino-Balkaria, Arkhyz in Karachayevo-Circassia and Lago-Naki in Adygea. Officially this last skiing resort is part of the Southern Federal District, but it will fit into the integrated transport and energy infrastructure of this project. These resorts will be able to accommodate 100,000 tourists at any one time and will create 160,000 new jobs.

Let me stress that this is a very viable and absolutely realistic business idea. It has attracted serious interest amongst private companies, both Russian and foreign. It was substantively discussed at the recent St Petersburg International Economic Forum. To support this interest and launch the project as quickly as possible we will increase the authorised capital of the company Special Economic Zones by two billion roubles in 2010. The money will finance the necessary preparatory work for the project.

Finally, the region boasts a unique health resort, the Kavkazskie Mineralnye Vody, where we are now. We can and must restore its former glory and allure, and moreover, create a hi-tech national-scale holiday and health industry.

The next major priority is to include the North Caucasus region in the system of inter-regional and international economic ties, in major strategic projects and, of course, in the development of infrastructure.

Transit lorries are a serious problem for many North Caucasus cities. They pollute the environment and create problems for people in their daily life, so detour motorways need to be built in Nalchik, Stavropol, Vladikavkaz, Mozdok, Gudermes and Beslan.

Detours are already being built around Mozdok, Nalchik, Vladikavkaz and Stavropol, and a circular road around Beslan is due to be completed by 2015.

We are also actively modernising the Caucasus Federal Motorway. We are completing the Makhachkala-Botlikh Motorway and the Gimrin Tunnel. I am aware that there are many problems, technological problems, unfortunately, but we will follow it through because it is vital for the highland parts of Dagestan. The new Kislovodsk-Elbrus Motorway will form the basis of the tourist cluster.

Over the next few years all the main airports in the North Caucasus will be renovated: Magas in Ingushetia, Beslan in North Ossetia-Alania, the Shpakovskoye and Mineralnye Vody in Stavropol. A modern airport will be built in Nalchik.

Incidentally, the federal budget has allocated 485 million roubles in 2010 for the modernisation of three airports: Mineralnye Vody, Magas and Grozny.

We are ready to take advantage of cooperation in the transport sphere. We intend to pursue the Cherkessk-Sukhum Motorway project together with our Abkhaz partners.

On the whole we see a real prospect of integrating the North Caucasus into the international North-South transit corridor that will link Russia and Europe to the Persian Gulf and Central Asian countries. Under the project, Makhachkala may become one of Russia's leading commercial ports.

Major Russian companies and infrastructure monopolies such as Gazprom, Russian Railways, the Federal Network Company and others have been brought in to implement infrastructure plans. In the energy sector, the RusHydro will complete the Kashkhatau Hydro-Electric Station in Kabardino-Balkaria in 2010. Under the plan, the Zelenchuk Hydro-Electric Power Station in Karachayevo-Circassia and Zaramagskaya Hydro-Electric Power Station in North Ossetia will reach design capacity and the hydro-electric station in Dagestan will be completed. The electricity companies will build or modernise 5,500 kilometres of power transmission lines. All this holds a promise of future economic growth and the creation of new businesses in the Caucasus.

As you know, commercial production of hydrocarbons in the Russian sector of the Caspian began this year. Gas from the northern Caspian will provide the resource base for a major gas and chemical complex in the Stavropol area, which will be environmentally safe and will use state-of-the-art deep processing technologies.

In Chechnya, Rosneft is starting the construction of a major oil refinery that will bring the republic back its status of an advanced centre of the Russian oil and petrochemical industry. The enterprise is scheduled to be launched in 2014.

The total amount of investments in that project is a handsome 17 billion roubles.

Needless to say, hi-tech production facilities must be built in the North Caucasus. So far they are few and far between. But there are some. The Baspik enterprise is developing a micro-and photo-electronic project in Vladikavkaz, of which I think we will hear more today. The company Rosnano is doing some pioneering work in the production of solar
panels in the Stavropol Territory.

Colleagues,

In order to implement these plans we need an effective management system. That applies to government bodies and to providing financial and organisational support to specific projects. That was why a new North Caucasus Federal District has been created and its head has been vested with the powers of the Presidential Envoy to the District and Deputy Prime Minister of the Russian Federation.

Putting government in order is the key task. It should begin with a change of the way regional bodies of federal agencies operate. At present they often distance themselves from the real problems and thus discredit the state, become drawn into turf wars between clans and businesses and often display glaring incompetence.

At the end of the day, it is necessary to review the functions of all the 113 federal bodies in the district to make sure that they work as a bulwark of legality and order and contribute to the development of the regions in a tangible way.

We will create a special unit of the Regional Development Ministry in the district, which will coordinate concerted actions of all the federal bodies on issues within the brief of the government and provide support for the presidential envoy and deputy prime minister.

Development institutions geared to the region will be created. Above all, we intend to set up a North Caucasus branch of Vnesheconombank. It will be in charge of selecting projects and providing them with organisational and engineering support. Its responsibilities will include one of the key tasks we face today, i.e. attracting private investments, scouting for potential investors and working with them, introducing best practices and creating the North Caucasus as an attractive brand for investors.

Major Russian state-controlled banks - Vnesheconombank, Vneshtorgbank, Rosselkhozbank and Sberbank - have already launched programmes to promote private business in the North Caucasus. They have issued over 50 billion roubles in loans to small and medium-sized companies alone.

On the whole, the work on the development strategy for the North Caucasus has shown that there are many interesting business ideas in the region and that the main obstacle is often lack of access to loans. Let us face it: the banks are treading warily, but one can understand them. So we have made the following decision. The Finance Ministry will issue state guarantees of up to 70% of the loans earmarked for projects in the North Caucasus Federal District. Such a solid support, I hope, will reduce the risks and consequently the cost of loans.

In addition, an extra 6 billion roubles will be added to the Investment Fund expressly for the development of the region.

Friends and colleagues, residents of the North Caucasus,

For centuries this land has been inhabited by people of various ethnic groups speaking more than 100 different languages, and their destinies have been linked among themselves and with the Caucasus.

For all the differences of traditions and faiths, the peoples of the North Caucasus have shared values and aspirations. The highlanders and the Cossacks, Christians and Muslims share respect for the elders, for the family, for work and military glory.

We have held on to and defended this land together, and we did so more than once. We have no moral right to retreat now that we have entered the phase of positive development. We all need a peaceful and prosperous Caucasus, where each will be able to build a future for oneself and one's children with his own hands by honest labour.

Thank you very much for your attention.

 * * *

I would like to draw the attention of all those present here, of all my colleagues to the diversity of the projects that were presented here by people working in various areas, such as farm produce processing, high technologies, infrastructure and housing. In my view, it is clear evidence of a wide range of opportunities that the North Caucasus offers.

And this is the key to success. This diversity ensures effectiveness and stability. Why did we find ourselves hit so hard by the global financial and economic crisis? It is because our economy lacks diversity. We haven't been able to achieve it. Our economy is largely based on the production of raw materials. The world markets of energy resources, metals and chemicals have lost steam. And this has instantly dealt a double blow to our economy, driving down prices and sales. A double blow, I repeat. No other economy in the world is likely to have received such a double blow.

If we had a more diversified economy, some sectors would have lost steam while others would have remained buoyant. In this case the overall situation would be more balanced.

The projects that were presented today are an indicator of the region's balanced economic development. We should together proceed in this direction. Let us discuss both these and other projects, and the situation in the North Caucasus.
Go ahead, please.

I am looking forward to hearing your views, ideas, proposals and questions.

Question: My name is Vladimir Kolesnikov, and I'm the chief of medicine at the Stavropol central neurological clinic.

We who live in the North Caucasus think it's one of the most beautiful spots on earth. On top of that, our spa towns are quite close to each other, and we're a mere two hour flight from Moscow. So we think it would be worthwhile to develop tourism and spa treatments here at a rapid rate, despite the public perception of the region as a dangerous place.

You already partly answered my question in your speech, but I will ask it anyway. Would it be possible to create a comprehensive targeted programme for the development of tourism and spa treatments throughout the region? Is anyone considering the possibility of building or modernising major health centres that would offer high-tech medical services, recovery and rehabilitation in our spa towns? If possible, we could expand not only sports and outdoor tourism but also medical tourism here, as they do in Israel and Cuba.

Vladimir Putin: Right, there are no windows in this room, but as soon as you get outside you see what a beautiful place it is. Any spot in the North Caucasus offers huge possibility for these kinds of businesses - tourist clusters, I mean. 

I consider infrastructure development, the construction of roads, airports, seaports and similar things the main federal objective here, and also partly the responsibility of the regional governments.

Practically every region in the North Caucasus has passable or even good projects in this field - let me repeat, every region. I have seen many of these projects myself. They involve ski resorts and recreational facilities, some of which should be located at the Caucasian Mineral Springs.

As I've said in my introductory remarks, I consider it one of the top regional priorities. I have no doubt about this. At the same time, I want to call your attention to a detail of critical importance. It was not a random question I asked the speakers here: Where do you intend to train the staff?

When you set up a high-tech business, it is hard to imagine what might happen if any of its sectors is manned by untrained workers. This could destroy the entire business.

Believe me, tourism and healthcare need experts every bit as skilled as those employed in the high-tech sector. Otherwise you won't get any tourists or patients. You need the ability to train staff and an appreciation for the fact that the key to any business is its staff. You can get whatever chairlifts you want (import Doppelmayr's or some other brand), but if tourists are treated rudely or neglected, or according to some bizarre traditions, you won't get any visitors. So everyone needs to understand that this is the main issue, apart from the physical condition of the facilities.

To invest in such facilities, we need some basic conditions met first - safety, an end to corruption, a pleasant environment, good infrastructure and trained employees. I began on that point, and I'll finish on it now. We will do what we can to support the projects presented to us, provided they are economically viable.

Again, the North Caucasus is the perfect place for these businesses. In addition to its natural beauty, it has several dozen museums. They are all very interesting and possess a total 1.5 million exhibits, though I am not sure everyone knows this.

As for the Caucasian Mineral Springs, the place has made some progress of late, though not nearly enough. There are not enough sport facilities, and the infrastructure is substandard. But, as I have said, we will fund byroad construction and finish the highway to the Elbrus foothills now that an extra 200 or more million roubles have been allocated for road construction under the Russian South federal programme. This is not enough, but if sound business plans are presented to us, we will find a way to support them, I assure you.

Perziyat Bagandova: Mr Prime Minister!

Vladimir Putin: Speak up, please.

Perziyat Bagandova: Mr Prime Minister, I am Perziyat Bagandova, member of the Popular Assembly and head of the Makhachkala municipal executive committee of the United Russia party.

You have said good things about Dagestan and its people. We, too, adore you. I want to say that the developments in Chechnya and my republic's economic blockade have made Dagestan dependent on subsidies. This is because the local defence industry, which dominates our economy, is in a bad state due to those events and the resulting lack of contracts.

Practically every highland locality had production facilities working for the defence industry. Now, workers have nothing to do in the mountains, and ton of people are moving to Makhachkala. Its population has bloated to 800,000 while the municipal infrastructure has been designed for 300 to 350 thousand. Overpopulation is choking the city. Our schools seat only a half of school-age children and there is a shortage of kindergartens, to name just a few of our problems.

As you know, international terrorists and criminals have made Dagestan one of their main targets. We border on five countries. Now, an unemployed woman can get paid merely for wearing the Muslim headscarf. It may go on like that and get worse.

Please think it over. I am not envious of other republics. I'm glad that other North Caucasian republics have plans for rapid social and economic development. I ask United Russia and you as its leader and this country's prime minister to study the situation in Dagestan, and particularly Makhachkala, with a view toward developing social and economic development programmes for it. Many programmes have been mentioned here, and we will continue to work on them, attract investment, develop new industries and so on. But we do need help. Thank you.

Vladimir Putin: I've just met with the newly elected president of Dagestan, and we discussed all these problems. We will certainly pay attention to the development of every entity in the North Caucasus.

Dagestan is, no doubt, one of the key regions in the North Caucasus. We know this, and we will work together with you to solve the acute problems you have mentioned.

You've mentioned the housing problem, healthcare and unemployment, with special attention to unemployed women. I'm pleased to tell you and everyone here that we took another decision last night to address unemployment, which is a huge problem in the North Caucasus, and quite a serious problem for the whole of Russia currently. The decision was to earmark at least three billion roubles for retraining programmes for women whose maternity leave is coming to an end. These allocations will come from the 27 billion roubles earmarked for improving the labour market next year. This will be a pilot programme, and everything will depend on how well it works. The programme will certainly extend to the North Caucasus, including Dagestan.

Please, go ahead.

M. Eldieva: Good afternoon, Mr Putin. I want to ask you a question about education. Life has been improving in Chechnya these last years. The economy is recovering, and order has been restored. Many people have come back ...

Vladimir Putin: Don't be shy. Speak up!

M. Eldieva: For many people life has returned to normal. But education remains a serious concern. We have ... Just a moment ... It's upsetting to talk about it ...

Vladimir Putin: That's okay, no problem. You're among your own, don't worry. We're all United Russia here.

M. Eldieva: Education is a serious concern for us. It's no secret that young people don't have the opportunity to learn many professions in universities and vocational schools in the Caucasus, so they go to central Russia and often stay there to find a job, and they eventually settle down there.  

For example, our republic sends a thousand young people a year to the UK and Germany to study on President Ramzan Kadyrov's order. The arrangement requires that they return home after their studies are completed. There is also a federal targeted programme to fund campus construction, which has begun in Grozny to establish a North Caucasian federal university.

Will the people of our region ever be able to receive a quality education without going far away? Thank you very much.

Vladimir Putin: I understand. Education is among the top priorities of the government and our country. As I have said already, the Southern Federal District has a federal university, and we plan to establish another federal university in the North Caucasus. It will most probably be based around the universities in the Stavropol Territory, which has the necessary equipment and good professors. We can make use of it all. If I‘m not mistaken, 80,000 children have finished school in the North Caucasus this year, 70,000 of which have been given full scholarships to attend federal and regional education institutions, including 30,000 spots in universities. These are encouraging figures, on the whole.

As for young professionals going away and the need for them to return home, there is a way to get young people to return to their republic or region after they get their degree. The idea has been put forward to use contracts, especially when the government pays tuition fees. But you know that cliché about how hundreds and thousands make the law, and millions think about how to find a loophole in it. Legislators are always the losers because a loophole can be found in any piece of legislation.  

How do you make people want to return? A skilled workforce needs to be able to use their skills to the greatest extent possible. This means that local authorities - President Kadyrov, other North Caucasian republic leaders and the Stavropol Territory administration - should create conditions that would encourage these students to come back. They should be given help with soft mortgage loans or service housing, and be able to make good salaries. This is possible, for instance, with regional wage premiums, though we cannot provide them at the federal level yet. But then, federal payments also keep growing.

I think this is the road to take: a) not all obligations should be shifted to the federal government and b) there is no way to force people to do anything. They need incentives. It is a responsibility we all share. I hope we can find an effective solution together, because the future of the North Caucasus and all of Russia depends on how we address this problem.

Question: Elvira Aksiyeva, chairperson of the Nogai youth organisation Novy Stan in a municipal area in the Karachayevo-Circassian Republic. All the regions in the North Caucasus are subsidised. It is difficult for people to find a job even if they have a good education. Is the Government planning any employment programmes? There are large-scale projects in the region which require the hiring of local personnel. What opportunities do you see to cut unemployment in the North Caucasus?

Vladimir Putin: The best thing we can do to improve the situation in the labour market is to develop the economy. We do not want to simply see everyone seek a job in the public sector or budget-supported institutions. Incidentally, this sector is growing excessively, especially in the Caucasus. This is thought to be a way of fighting unemployment: get a job as a public official of any sort, but government staffs are getting fat. What we need are quality workplaces, new skills, and to that end we must develop the economy.

There should be ten times more of the kind of projects that have been presented here. Our job, both at the regional and federal government level, is to promote these projects. I spoke today about what we are going to do: training, timely housing provision and so on. But there are other variables that influence the current situation. And what is the current situation? The world crisis has increased unemployment. The average unemployment figure in Russia today is 8%, but in the North Caucasus it is, to put it mildly, a lot higher. In Dagestan, for example (my colleague is correct in expressing concern) it is 21%. See the difference? It is 8% in Russia and 21% in Dagestan. In other republics it is slightly less. Oddly enough, it is lowest in Chechnya...Oh, excuse me, I got it wrong, it's 30% there. But there are some republics in the North Caucasus where the unemployment rate is less than the country average.

But generally speaking it is a problem. Last year we allocated 11.3 billion roubles to create jobs in the North Caucasus, and we will continue to allocate money for this programme next year. The sum will be a little less, 27 billion roubles nationwide, but we will increase it by 500 million roubles for the North Caucasus. The structure for using this money must be changed. While last year we spent significant amounts to provide temporary jobs, next year, I think, we should invest more in training and retraining.

But I repeat that these are temporary measures in the labour market. The real solution to the problem is to develop production.

Question: Azamat Khadikov, member of the Parliament of North Ossetia. The North Caucasus has for centuries been a holiday destination and it is important to use existing capacity all year round. It is important that people come here for holidays and treatment not only from our country, but from abroad. Something must be done to boost the image of Caucasus health resorts. I would like to suggest that you and the members of the Government come to the Caucasus not only for business or to attend to important matters, like the government ministers do. Come here to rest, to spend part of your holiday here. Permit me to invite you. Your stay in the North Caucasus will set an example. And you can take my word for it, skiing here is as good as at Krasnaya Polyana.

Vladimir Putin: Thank you very much. Speaking of skiing, I learned to ski at Cheget (mountain in the Caucasus near Mount Elbrus, a tourist attraction and ski resort). I put on skis there for the first time and learnt to ski. I liked to ski after that and taking ski holidays. I know Cheget, Dombay and the Elbrus foothills and other areas in the North Caucasus. There are many. We will use them. People should come here more often. Somebody here asked a question about the development of the tourist industry in the North Caucasus. It is important to pursue all these projects and improve the physical infrastructure. Your call will not fall on deaf ears, thank you very much.

Question: Vladimir Bovin, director of the agrarian investment company Agriko. I represent a company that is not local. We came to the North Caucasus, specifically to the Stavropol area, ten years ago and we do not regret it. We engage in a whole range of farming activities: plant growing, livestock breeding, vegetables and processing. We build modern greenfield enterprises. But somehow we are left out of federal programmes, I mean the infrastructure, the roads and communications.

Vladimir Putin: Unbelievable. That is impossible. You did not get a single subsidised loan?

Vladimir Bovin: We do get subsidised loans. But I am talking about concrete matters. A new enterprise is built in a field far from any highways. Can something be done to adjust the current federal road construction programmes and the development of telecommunications with due account of the new enterprises in the North Caucasus? There are many such enterprises, we are not the only ones to launch them here. This is always done in an empty field where there is good soil and good farming, but it is usually in remote areas. Just to give you an idea, we are opening a meat-packing plant in the Stavropol Territory in August, it's the most modern plant of this type in Russia. We invite you to come and see it.

Vladimir Putin: Thank you. How many workers do your enterprises employ?

Vladimir Bovin:  The one that will be launched will create 200 jobs.

Vladimir Putin: No, I mean the total number for your company.

Vladimir Bovin: 3,000.

Vladimir Putin: Quite a large number. And what is the average wage?

Vladimir Bovin: 12,000-15,000 roubles a month.

Vladimir Putin: Not a whole lot so far.

Vladimir Bovin: Not a whole lot. But we have modern enterprises, many of them have not yet hit design capacity. Once we hit full capacity everything will be all right.

Vladimir Putin: What's your turnover?

Vladimir Bovin: The annual turnover for the holding as a whole is about 7-8 billion roubles.

Vladimir Putin: Great. And talking about infrastructure: it will be difficult to build federal highways and tie them to specific enterprises. It is up to the regions to see to it. We should decide together with the regions how to route the federal highways and the regions should adjust the infrastructure, including other roads, to these highways.

This is not to say that there can be no exceptions, large federally important enterprises in agriculture, steel, mining and in high technology would warrant adjusting some of our plans. But I think you all understand that bringing federal roads to every single enterprise is difficult and not really cost-effective.

However, in general, when an enterprise is created and when you present your development plans, this should be taken into account, especially by the regional and municipal authorities. Moreover, every prerequisite should be created in terms of infrastructure because it is this that is holding us back - roads, power, water and gas supply, also sewerage and so on.

I would like to point this out to the heads of all the regions: today the lack of infrastructure is the main thing that holds back our economic growth, and unfortunately, even large companies still have to build infrastructure at their own cost. This is true of all the sectors of the Russian economy. Many have raised this problem. It is a relevant question. But the problem should be tackled jointly both at the federal and regional levels.

Ali Shakhbanov: Good day, Mr Putin, good day everyone.

Vladimir Putin: Good day.

Ali Shakhbanov: My name is Ali Shakhbanov and I am director general of the self regulating organisation, the Builders' Guild of the North Caucasus Federal District and am member of the Parliament of the Republic of Dagestan.

Vladimir Putin: What is your guild? Construction?

Ali Shakhbanov: Construction. You mentioned in your speech that the president often speaks about the development of the housing sector which is a priority in many regions. Currently much of the residential inventory is considered to be unfit for living. More than 70% of housing has a wear factor of 70%-80%. I would like to know if there is any chance to expedite that programme. It is vital for people and, let's face it, for the builders. Thank you.

Vladimir Putin: This is a major problem for the country in general and especially for the North Caucasus where the percent of decrepit housing is much larger than the country's average. Federal programmes are aimed at relocating people from housing deemed unsafe and capital repairs are under way in the North Caucasus. Last year 4,500 people moved out of decrepit and unsafe housing. That is not a very large number, but over 330,000 people have improved their housing conditions as a result of capital repairs at the expense of the Federal Housing and Utilities Fund. We have allocated, I think, over 11 billion roubles for these programmes and we intend to continue with it.

I would like you to note that we will continue the programme of providing housing for World War II veterans. Already 1650 of them, those who joined the waiting list before March 2005, have been provided with housing. However, as it turned out, many more people joined the waiting list after March 2005. We have a waiting list of 100,000 people. It will require a considerable amount of money, 81 billion roubles. Needless to say, that programme will be implemented on a full scale in the North Caucasus. We will continue to provide housing for servicemen and retired servicemen whom the Defence Ministry had not provided with housing, but whom it put on the municipal waiting list in the 1990s and who are still on that municipal waiting list.

I am saying this because substantial federal resources have been earmarked and will continue to be earmarked for housing programmes. This means that the construction industry, the construction companies, including your company, I hope, will have enough work, because if you offer your goods in the form of square metres of proper housing and at the right price, then there is sure to be demand for your services. So, the outlook for the building sector is good.

I can tell you more: although the last year was not the best year for Russia and for its builders, the North Caucasus has seen a slight growth in the building sector, 0.2%. I hope it will grow more this year.

Soslan Kulov: Let me introduce myself. Soslan Kulov, general director of the Vladikavkaz Technology Centre Baspik. I am happy that you liked our project, which is based on my son's idea. When I was your authorised representative in 2004...

Vladimir Putin: Did you see how cleverly he mentioned his son? Well, he should be proud of him. My congratulations.

Soslan Kulov: Well, how could I not mention him? And also, it was proper to do so.

So, when I was your authorised representative in 2004, a delegate from a region - I won't say who exactly - told you: "Mr Putin, what can we do, how can we live if we have no oil or gas or electricity?" You looked at him and, obviously you were tired after a two-hour meeting, said: "Use your head."

We are trying to use our heads now. We are promoting high technology, and we are doing well. You know, that intellectual rent is really paying. We are growing and we are also earning money.

Second, I liked your idea about diversity. Inventor of information theory Claude Shannon said that only diversity can be managed in a variety of ways. You cannot manage diversity in a heavy-handed way, but only in a variety of tailored ways. I think you are leading us to this conclusion absolutely correctly.

There is also a third thing: If you come here on holiday or in the line of duty, we will be happy to see you in the Vladikavkaz Technology Centre Baspik.

Vladimir Putin: Thank you.

Soslan Kulov: You will not regret it, I can assure you.

Vladimir Putin: Thank you very much.

Soslan Kulov: I wish you good health.

Vladimir Putin: Thank you.

Question: Marifa Sultygova, the commissioner on children's rights at the President of Ingushetia' office.

Mr Putin, the North Caucasus is described in many ways, including a demographic melting pot. This is why it was interesting to work in panels yesterday when social projects, primarily healthcare, were presented. I am happy that there are Ingush projects among the projects that have been supported. However, when we address the issue of demography, we see that it needs support in the form of social facilities, legislation, and all other elements which will allow us to create a comfortable environment above all for our children. It goes without saying that my question involves my work. The number of children in Ingushetia has decreased by over 11,000 in the last five years.

Vladimir Putin: Decreased, you said?

Marifa Sultygova: Yes, I did. This is an alarming sign; by year, the figure may seem small, but it is impressive if we look at it this way. The key problem is that we don't have enough children's medical establishments. It is clear from your speech and your project that at last the republic will have its first and so far only multipurpose children's hospital. To continue, we don't have a specialised children's outpatient clinic, or a Children's Home that would fully live up to its name.

This brings me to my question: How will these plans, which take into account regional specifics (for example, some region wants a children's cardiology centre, while we in Ingushetia badly need a perinatal centre), be balanced in a long-term development strategy of the North Caucasus Federal District?

Vladimir Putin: Sorry, what is your post did you say?

Marifa Sultygova: I am the commissioner on children's rights at the President of Ingushetia's office.

Vladimir Putin: I see. Good.

Marifa Sultygova: Thank you.

Vladimir Putin: Frankly speaking, I am surprised that the number of children has decreased in Ingushetia. I thought the Caucasus was leading in the birth rate. Please, all those whose children or grandchildren were born this and last year, raise your hands. First, we congratulate you and wish your kids health and happiness, and second, I'd like to say once again that the Caucasus is leading in the birth rate in the country; these are correct data.

Last year, 1,761, 687 children were born in Russia. I don't know their names of course, but we must know these figures to be able to plan our demographic policy and make plans in healthcare, in the social sphere and the economy. Of that number, 157,573 children were born in the North Caucasus. This is an impressive figure.

Considerable resources are channelled through birth certificates, including in the healthcare system of Ingushetia. This measure, designed to support women, has proved effective; it has improved the operation of doctors, because part of the birth certificate is used to improve a hospitals' financial situation and the staff's wages. We will continue to implement this programme.

As for the project you mentioned, I am aware of the problem. The project has been under construction for years. Yunus-Bek Yevkurov (President of Ingushetia) and I discussed this question. What is the problem there, with the perinatal centre? Its construction has been postponed several times for different reasons. The first is the small number of the urban population, the second is remoteness of the centre from potential patients, and the third is that we lack the required number of specialists for it.

However, I think that if we continue to explain our lack of action with problems, we will never have enough quality specialists or the required number of hospital beds. We will discuss this problem again and resolve it. I think we must do it, especially since there are problems with childbirth in Ingushetia, according to you - which is a complete surprise to me - despite the rapidly growing population of the North Caucasus... This is a unique situation. Are you sure of the figures you cited?

Marifa Sultygova: Yes, absolutely.

Yunus-Bek Yevkurov: The question is: Is the birth rate growing or not, right?

Vladimir Putin: Right.

Yunus-Bek Yevkurov: We have cut the death rate in the past two years, not thanks to the republic's institutions but because of the assistance of neighbouring republics.

Vladimir Putin: I know that your women go to Kislovodsk to give birth to their children, etc. I know that.

Yunus-Bek Yevkurov: The problem is that we don't have such medical establishments; we never had them.

Vladimir Putin: This is part of the problem the Ingush president mentioned: the city was built from scratch and it lacks social facilities. But still, the child mortality rate is decreasing in Russia, including the Caucasus, although, unfortunately, it is higher in the North Caucasus than the average in Russia. I see the problem; I promise to discuss that problem and also a practical project. Next, please.

Zalina Shakarova: Good afternoon. I'm Zalina Shakarova, chairman of the youth government of the Kabardino-Balkarian Republic.

Vladimir Putin: Good afternoon, colleague. You're chairman of the government, aren't you?

Zalina Shakarova: Mr Putin, the counterterrorism operation has been declared over in the North Caucasus, but militants continue to stage attacks in nearly all regions of the North Caucasus Federal District. Here is my question: As a representative of young people, I am concerned about this situation. How could we ensure security in the region?

Vladimir Putin: This is one of our problems. I spoke about security in the opening remarks and later, because security is certainly one of the key elements of investment attractiveness, including security for investors and for people encouraged to come here, especially considering the plans to develop tourism zones.

There are many problems in the Caucasus, including crime-related problems. Unfortunately, the crime rate went up last year, even though insignificantly, by less than 1%, but still.

Half of the 15 terrorist attacks in Russia were staged in the North Caucasus. What should we do to resolve this problem? To begin with, we must resolve socio-economic problems and fight unemployment, in particular among young people.

This is why we are discussing this issue in such great detail today. You know, when I look at events and read information and crime cases and materials, I sometimes feel sorry for these people who are still running around in forests, because they are behaving immaturely. To win a place in this world, you have to be smart, diligent, energetic and, if you want it, aggressive. It is very difficult to break through all these bureaucratic obstacles, all that red tape in financial establishments, but some people manage.

But others take up a gun to prove their worth, while in fact this is only the illusion of competence with nothing but a vacuum behind a facade where nothing can be created. We will certainly do our best to show these people the right way, so that they can return to a normal life. The only exception will be those who have made terrorism and banditry their profession and are trying to make it their living. We liquidated 400 such people last year and 100 this year, and we will continue to go after them.

I'd like to say again that punitive actions alone will not resolve the problem. We should encourage joint action by public organisations, society and economic operators. But this is exactly why we have gathered here today, to outline a master plan for the region's development. If we proceed toward our goals, the problem will be resolved largely without additional interference; I am confident that this will be so, and I am confident of positive results. This will take time, of course, but this problem can be resolved and we will resolve it.

Ruslan Magomedov: Good afternoon, esteemed Prime Minister Putin. My name is Ruslan Magomedov, and I represent a public organisation of small and medium-sized businesses in the Republic of Dagestan. Here is my question. The North Caucasus region is hard pressed for cheap electricity. Soviet-era power-generating facilities have become obsolete and are obviously unable to meet the local population's demand, not to mention facilitate the rapid development of small and medium-sized businesses. You also know that small business has problems hooking up to electricity grids. You know the high cost of this, and how much small businesses have to spend in the process.

It appears that the creation of small power plants, or small hydroelectric power plants which are abundant in the North Caucasus region, is the only way out. Do you plan to draft a comprehensive programme stipulating construction of small hydroelectric power plants? Thank you very much.

Vladimir Putin: We discussed this when my colleague raised the issue of the road network. While replying to his question, I said this was a comprehensive problem implying energy and water supply, drainage, etc. Naturally, energy-linked infrastructure restrictions seriously impede the development and expansion of production facilities.

You are quite right, as far as the North Caucasus is concerned. It is possible to expand relatively small power-generating facilities on small rivers. Several such projects are currently under way. The first North Caucasus project has received 10 billion roubles worth of investment, while the second one has received 12-15 billion roubles. Certainly, we will continue to move in this direction.

The president of Ingushetia has already mentioned some of the projects, and I added that we will continue to expand the energy-grid infrastructure. This is being prioritised, and we will try to do this to fully satisfy the increased current demand and even to create a backlog for future development, primarily that of small and medium-sized businesses.

This is one of our priorities, and we will set the relevant objectives and strive to accomplish them. It is simply impossible to do anything without this. As you know, the government has decided to simplify the procedures for energy-grid connectivity. We need to move on these decisions everywhere in Russia, including the North Caucasus region. Please, next question.

Olga Timofeyeva: Good afternoon. I will continue to ask questions on behalf of the Stavropol Territory. My name is Olga Timofeyeva, and I am a deputy of the Stavropol City Duma. Like those deputies who sometimes work at your reception offices, I also exercise your authority as the leader of the United Russia party in some cases.

Vladimir Putin: That's good, no salary required.

Olga Timofeyeva: No, this work is purely voluntary.

Vladimir Putin: Good, thank you very much.

Olga Timofeyeva: We are dealing the most important issue which was probably not mentioned in this conference room today. To put it simply, half of our tremendous allocations, due to be received by us, will be embezzled. Sorry for this impolite expression. Speaking more formally, this implies that every kopeck worth of private investment will be calculated and accounted for, and everyone will ask about specific results.

Vladimir Putin: Yes, that's true.

Olga Timofeyeva: As for federal allocations, including territorial and even municipal funds, various kickbacks and huge commercial-tender prices will be invented and numerous loopholes will be found to embezzle such funding. No matter what we do, and no matter what legislative norms are passed at the federal level, and no matter what legal framework is approved by the constituent entities, we still face the fact that federal funding is unable to reach the end product and individuals at every state-authority level. Technically speaking, we have gathered here in order to work for these people. What should be done in order to monitor every kopeck of budgetary allocations? What can the state do in this case because we talk a lot but still see excessive corruption levels, including those in the North Caucasus? What should every one of us, United Russia members who are present here, do to do away with this shameful practice? Thank you very much.

Vladimir Putin: What should be done in order to thwart corruption? Although the culprits should probably be hanged, this is not our method. How can we act effectively and resolutely in line with our methods? Russia's President Dmitry Medvedev has initiated the adoption of a national anti-corruption strategy and the relevant national programme. We have passed an entire package of anti-corruption legislation that should be enacted and effectively enforced. As I have already said, 800 billion roubles worth of federal-budget allocations have been channeled into the North Caucasus region. This is quite a substantial amount. Has all of it reached the population of the North Caucasus? Probably not.

If I am not mistaken, somewhere between 100 and 127 corruption-related cases were opened in the North Caucasus region last year. I am confident that their actual number is even larger.

What measures should be implemented? First, all budgetary spending should become absolutely transparent. These issues can be clarified by modern methods, including the Internet and the media. There is nothing to hide here. We even make the federal budget, including defence spending, public. Information about any allocations should be promptly posted online and submitted to the media. There are no secrets. The people deserve to know how much of taxpayers' money is spent by the concerned state-authority bodies and on what projects. We are talking about the budget which is tax-payer money.

I repeat once again: We should facilitate the uniform interpretation of federal legislation, so that such anti-corruption packages can start yielding results.

Of course, law-enforcement agencies should also step up their activity. What's important is that we should create conditions facilitating the public rejection of corrupt behaviour. I am talking about corrupt behaviour rather than crime. Every person should realise that those who prefer this form of implementing state regional business projects and resolving social issues, etc. eventually take the money out of his or her own pockets.

United Russia has an extremely important role to play in this respect because United Russia deputies and those who are not members of regional, municipal or even federal legislatures also live among people. I realise that all those present here can see and hear this and should react accordingly. This does not mean that they should rush to the prosecutors' offices each time or yell at every road crossing. However, if we have a feeling of responsibility for the republic and for the entire country, we should understand that corruption in our country is a serious threat to economic expansion and the sustainability of the entire state.

I do not want to say the North Caucasus is much worse in this respect, but it is no better either. Solving this problem is our common objective. This may be even harder than coping with the terrorist threat. But the people of Russia, including the nations of the North Caucasus, have coped with even more serious threats. I am confident that we will also manage to accomplish this objective, if we act hand in hand, and if we comprehend the importance of the problem facing us.

Yes, please.

Alexander Fedarov: Hello, my name is Alexander Fedarov. I'm the chief doctor of a multi-purpose clinic in Ossetia.

I'm not going to ask anything, just wanted to say a thank you for adopting the healthcare modernisation programme, which will not only increase the funding of hospitals but, what's no less important, introduce a new funding principle, the principle of one channel funding.

This will certainly increase the quality of medical aid in Russia, whose prime purpose is the improvement of the health of every person. Thank you very much for it.

Vladimir Putin: My pleasure. This decision was made following my previous meeting with regular people in Siberia, where your colleague, a doctor, spoke about problems in healthcare, the need for one-channel funding, and some other issues. Following that meeting, we decided to raise the allocations to the Mandatory Medical Insurance Fund to 450 billion roubles, planned to be provided within 24 months.

I'd like to stress that we'll support only those medical establishments and in those regions that are ready for modernisation. I think you'll agree with me that we cannot allot funds to costly projects thoughtlessly, just to be embezzled there, as Olga said today. This is why these funds will go only to modernisation projects.

The Healthcare Ministry is to finalise the blueprint for the modernisation programme within the next two or three weeks and distribute it to regions, including the North Caucasus. And we expect to receive professional feedback promptly. Should you do so, you will receive the necessary funds, really big money, hundreds of millions of roubles.

Natalya Lutsenko: Hello, I'm Natalya Lutsenko, the mayor of the resort town of Kislovodsk.

Mr Prime Minister, first of all, I'd like to thank the United Russia leadership and you personally for choosing Kislovodsk as the host venue of this conference. It's a great honour for us. This conference will promote the image of Kislovodsk as a dynamically developing resort town. I'd like to thank you for peace in the Caucasus and for your help, which is critical to the successful development of Kislovodsk.

The mineral water resorts of the Caucasus have a better development potential than many European resorts. Some very effective treatments have been developed and true professionals have trained here, and their services are in demand in the market.

But we need a comprehensive development programme to focus on critical spheres: the environment, infrastructure and roads. The rest is for private investors. This programme would become a major investment in our main asset, the nation's health. It would also have a positive economic effect, reducing labour incapacity rates and increasing the number of healthy newborns. We can do it today.

To back up my words, I'd like to invite you to Kislovodsk for a holiday to feel the pleasure of mineral water therapy.

Vladimir Putin: Thank you. Excuse me, what's your name again?

Natalya Lutsenko: Natalya Lutsenko.

Vladimir Putin: And you're the mayor of Kislovodsk, right?

Natalya Lutsenko: Yes.

Vladimir Putin: Thank you for the invitation. Please tell me, is there at least one fitness and recreation complex in your town? I love sports you know. Is there a venue to play sports at?

Natalya Lutsenko: We have a sports complex for Olympic team members of the CSKA sports club.

Vladimir Putin: I'm not going to touch on the sports facilities for the Olympic team now.

Natalya Lutsenko: There're no children's fitness and recreation complexes in Kislovodsk, but we're working on this issue. Kislovodsk has perfect climatic conditions for athletic training.

Vladimir Putin: That's true.

Natalya Lutsenko: Kislovodsk sits in middle uplands, and athletes of all levels come to our town to train here. They usually rent private apartments or hotel rooms in town.

We have big plans for the Olympic training complex. Perhaps it would be better to transfer it to the Sports Ministry and make it the Sochi Olympics training base? That could be worth considering.

As far as children are cocerned, we're carrying out a programme for the development of children's sports.

Vladimir Putin: Yes, you have a programme but you have no fitness and recreation complex.

Natalya Lutsenko: I'd be very grateful to you if you helped us with this.

Vladimir Putin: Golly, Ms Nabiullina is here - she'll help you to receive additional funds.

Natalya Lutsenko: Good.

Vladimir Putin: I actually asked it on purpose. People in Kislovodsk have no good fitness and recreation complex. This is your zone of responsibility, yours and the region's leader's. We can certainly help you; we have a specific programme. Mr Gryzlov, what's its name, 1000 FRCs?

Boris Gryzlov: Yes.

Vladimir Putin: How many complexes are on the programme already?

Boris Gryzlov: Over 300.

Vladimir Putin: I'd like every regional leader to understand that you should not sit by and wait for manna from heaven. You should outline priorities. I'm sure you understand that every town and village has specific needs. They need a prenatal centre, a school, a kindergarten... All regions and towns should develop consistently, even more so when it comes to Kislovodsk. How is it possible that its residents have no good fitness complex? What will children and teens do in their leisure time? Go out boozing? What will they do? It's a very serious matter in fact.

I'm speaking about it now, friends, comrades, ladies and gents, because it always happens so that we budget funds for culture and sports after appropriating money for everything else. It's just impossible to fight drug and alcohol abuse and juvenile crime effectively if we plan our spending this way. These sectors are very important, and we cannot put these issues on the back burner. Let's think about it together and try to build a fitness and recreation complex in Kislovodsk with the mayor and the region's leader.

Nikolai Sedykh: Good afternoon, Mr Prime Minister, I'm the head of United Russia's Young Guard branch in the Stavropol Territory.

I'm having a kind of proposal. We've been discussing the Caucasus a great deal today... When the North Caucasus Federal District was formed, the heads of Young Guard branches in the North Caucasus convened for a conference in Grozny. One of our first initiatives was a commitment to involve the Caucasus in national and international cultural life. The Caucasian culture spans a thousand years, and it's beautiful. Let's start with culture. Let's hold a festival to show the whole world that the Caucasus is a nice place to visit.

Vladimir Putin: That's right, thank you. I've just touched on culture, when speaking about sports. You know, we've gotten used to many things in our country, and think them to be ordinary. But the Caucasus is a really unique region, no exaggeration. I just can't figure what it could compare with. Maybe the Balkans... There are also a great number of confessions and ethnicities there. But the Caucasus' culture is richer. There are dozens of ethnicities here, and over a hundred languages! Over a hundred! It's incredible! And in some places, people live side to side but speak different languages and can't understand each other, and Russian becomes the language of interethnic communication in such a situation. And it's good, because it strengthens the nation's cultural coherence.

There could be many proposals here. The Ministry of Culture is planning several big projects, including a big multicultural project, with festivals, exhibitions and performers from Russia and abroad. This must be done of course.

I'm absolutely convinced that the issue you've brought up is one of our key challenges, along with education.

People in the Caucasus have always been distinct for nobility and ambitiousness, which the entire nation has been proud of. It's no wonder that small and medium-sized businesses account for 30% of the region's economy. It shows that people here have a greater need to express themselves and run their own business than anywhere else. It's a manifestation of inner freedom and independence. And this mentality has a vast creative and moving potential, which hasn't been used to its full extent yet. If we learn to benefit from it, we'll spur the development of the region's economy and social sector. We'll be doomed to success if we act this way.

Remark: That's right!

Vladimir Putin: Thank you all very much.